Exhibit 99.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
| ☒ | Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934 |
or
| ☐ | Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 |
| For the fiscal year ended ____________ | Commission File Number _________ |
SolarBank Corporation
(Exact name of Registrant as specified in its charter)
| Ontario, Canada | 221114 | N/A | ||
(Province or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
505 Consumers Rd., Suite 803
Toronto, Ontario, M2J 4Z2
Canada
(Address and telephone number of Registrant’s principal executive offices)
Corporate Creations Network Inc.
1629 K Street, NW, #300 Washington, DC 20006
Telephone (561) 694-8107
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| Common Shares | SUUN | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this Form:
| ☐ Annual information form | ☐ Audited annual financial statements |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: N/A
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☐ No
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
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 13(a) of the Exchange Act. ☐
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
EXPLANATORY NOTE
SolarBank Corporation (the “Company”, the “Registrant”) is a Canadian issuer eligible to file its registration statement pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3.
FORWARD LOOKING STATEMENTS
The Exhibits incorporated by reference into this Registration Statement of the Registrant contain forward-looking statements that reflect our management’s expectations with respect to future events, our financial performance and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of the words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words (including negative and grammatical variations), or statements that certain events or conditions “may” or “will” occur, and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, including, without limitation, those described in the Company’s Revised Annual Information Form for the year ended June 30, 2023 filed as Exhibit 99.57 to this Registration Statement. No assurance can be given that these expectations will prove to be correct and such forward-looking statements in the Exhibits incorporated by reference into this Registration Statement should not be unduly relied upon. The Registrant’s forward-looking statements contained in the Exhibits incorporated by reference into this Registration Statement are made as of the respective dates set forth in such Exhibits. Such forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made. In preparing this Registration Statement, the Registrant has not updated such forward-looking statements to reflect any change in circumstances or in management’s beliefs, expectations or opinions that may have occurred prior to the date hereof, except as required by applicable law. Nor does the Registrant assume any obligation to update such forward-looking statements in the future, except as required by applicable law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Registrant is permitted, under a multijurisdictional disclosure system adopted by the United States Securities and Exchange Commission (the “Commission”), to prepare this report in accordance with Canadian disclosure requirements, which are different from those of the United States. The Registrant prepares its financial statements, which are filed with this report on Form 40-F in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and the audit is subject to Canadian auditing and auditor independence standards. The foregoing differ in certain important respects from United States generally accepted accounting principles (“US GAAP”) and from practices prescribed by the SEC. Therefore, the Registrant’s financial statements filed with this Registration Statement may not be comparable to financial statements prepared in accordance with U.S. GAAP.
PRINCIPAL DOCUMENTS
In accordance with General Instruction B.(1) of Form 40-F, the Registrant hereby incorporates by reference Exhibits 99.1 through 99.122, inclusive, as set forth in the Exhibit Index attached hereto.
In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed the written consent of the experts named in the foregoing Exhibits as Exhibits 99.120, 99.121 and 99.122, as set forth in the Exhibit Index attached hereto.
TAX MATTERS
Purchasing, holding, or disposing of securities of the Registrant may have tax consequences under the laws of the United States and Canada that are not described in this Registration Statement.
DESCRIPTION OF COMMON SHARES
The required disclosure is included under the heading “Description of Capital Structure” in the Registrant’s Revised Annual Information Form for the fiscal year ended June 30, 2023, attached hereto as Exhibit 99.57.
OFF-BALANCE SHEET ARRANGEMENTS
The Registrant has no off-balance sheet arrangements. (as that term is defined in paragraph 11(ii) of General Instruction B to Form 40-F) that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
CURRENCY
Unless otherwise indicated, all dollar amounts in this Registration Statement are in Canadian dollars. The exchange rate of Canadian dollars into United States dollars, on February 26, 2024, based upon the daily exchange rate as quoted by the Bank of Canada was U.S.$1.00 = Cdn.$1.3515.
CONTRACTUAL OBLIGATIONS
The following table summarizes the contractual obligations of the Registrant as of December 31, 2023 (expressed in $000s):
| Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
| Long Term Debt Obligations | $ | 3,157 | $ | 346 | $ | 926 | $ | 1,848 | $ | 37 | ||||||||||
| Capital (Finance) Lease Obligations | 1,628 | 211 | 513 | 311 | 593 | |||||||||||||||
| Operating Lease Obligations | — | — | — | — | — | |||||||||||||||
| Purchase Obligations | — | — | — | — | — | |||||||||||||||
| Other Long-Term Liabilities | 408 | 80 | 171 | 157 | — | |||||||||||||||
| Total | $ | 5,193 | $ | 637 | $ | 1,610 | $ | 2,316 | $ | 630 | ||||||||||
NASDAQ CORPORATE GOVERNANCE
A foreign private issuer that follows home country practices in lieu of certain provisions of the listing rules of the Nasdaq Stock Market LLC (the “Nasdaq Stock Market Rules”) must disclose the ways in which its corporate governance practices differ from those followed by domestic companies. As required by Nasdaq Rule 5615(a)(3), the Registrant will disclose on its website, https://solarbankcorp.com/investors/, as of the listing date, each requirement of the Nasdaq Stock Market Rules that it does not follow and describe the home country practice followed in lieu of such requirements.
UNDERTAKING
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities registered pursuant to Form 40-F or transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Registrant has concurrently filed a Form F-X in connection with the class of securities to which this Registration Statement relates.
Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the Commission by amendment to the Form F-X referencing the file number of the Registrant.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.
| SOLARBANK CORPORATION | ||
| By: | /s/ Richard Lu | |
| Name: | Dr. Richard Lu | |
| Title: | Director, Chief Executive Officer and President | |
Date: March 11, 2024
EXHIBIT INDEX
The following documents are being filed with the Commission as Exhibits to this Registration Statement:
| Exhibit | Description | |
| 99. 1 | ||
| 99.2 | ||
| 99.3 | SolarBank Corporation Share Compensation Plan dated November 4, 2022 | |
| 99.4 | SolarBank Corporation Code of Business Conduct and Ethics dated November 4, 2022 | |
| 99.5 | ||
| 99.6 | Appendix C to National Instrument 41-101 dated February 10, 2023 | |
| 99.7 | ||
| 99.8 | Prospectus for Initial Public Offering of SolarBank Corporation dated February 10, 2023 | |
| 99.9 | ||
| 99.10 | ||
| 99.11 | Undertaking by SolarBank Corporation dated February 10, 2023 | |
| 99.12 | ||
| 99.13 | Receipt of Long Form Prospectus by Ontario Securities Commission dated February 13, 2023 | |
| 99.14 | ||
| 99.15 | ||
| 99.16 | ||
| 99.17 | ||
| 99.18 |
| 99.19 | ||
| 99.20 | Material Change Report of SolarBank Corporation dated March 1 and 2, 2023 | |
| 99.21 | Notice Declaring Intention to be Qualified under National Instrument 44-101 dated March 3, 2023 | |
| 99.22 | ||
| 99.23 | ||
| 99.24 | ||
| 99.25 | ||
| 99.26 | ||
| 99.27 | ||
| 99.28 | ||
| 99.29 | ||
| 99.30 | ||
| 99.31 | ||
| 99.32 | Receipt of Base Shelf Prospectus by Ontario Securities Commission dated May 3, 2023 | |
| 99.33 | ||
| 99.34 | ||
| 99.35 | Material Change Report of SolarBank Corporation dated May 8, 2023 | |
| 99.36 | ||
| 99.37 | ||
| 99.38 | ||
| 99.39 | ||
| 99.40 |
| 99.41 | ||
| 99.42 | ||
| 99.43 | ||
| 99.44 | ||
| 99.45 | ||
| 99.46 | ||
| 99.47 | ||
| 99.48 | ||
| 99.49 | ||
| 99.50 | ||
| 99.51 | ||
| 99.52 | ||
| 99.53 | ||
| 99.54 | Material Change Report of SolarBank Corporation dated June 30, 2023 | |
| 99.55 | ||
| 99.56 | ||
| 99.57 | Revised Annual Information Form of SolarBank Corporation for the year ended June 30, 2023 | |
| 99.58 | Material Change Report of SolarBank Corporation dated July 6, 2023 | |
| 99.59 | ||
| 99.60 | ||
| 99.61 | ||
| 99.62 | ||
| 99.63 |
| 99.64 | ||
| 99.65 | ||
| 99.66 | ||
| 99.67 | ||
| 99.68 | ||
| 99.69 | ||
| 99.70 | Material Change Report of SolarBank Corporation dated September 28, 2023 | |
| 99.71 | ||
| 99.72 | ||
| 99.73 | ||
| 99.74 | ||
| 99.75 | ||
| 99.76 | ||
| 99.77 | ||
| 99.78 | Letter from Endeavor Trust Corporation, as agent for SolarBank Corporation, dated October 13, 2023 | |
| 99.79 | Material Change Report of SolarBank Corporation dated October 13, 2023 | |
| 99.80 | ||
| 99.81 |
Exhibit 99.1
Exhibit 99.2
Exhibit 99.3
SOLARBANK CORPORATION
SHARE COMPENSATION PLAN
| 1. | DEFINITIONS AND INTERPRETATION |
| 1.1 | Definitions: For purposes of the Plan, unless the context requires otherwise, the following words and terms shall have the following meanings: |
| (a) | “1933 Act” means the United States Securities Act of 1933, as amended; | |
| (b) | “Account” has the meaning attributed to that term in section 4.8; | |
| (c) | “Administrators” means the Board or such other persons as may be designated by the Board from time to time; | |
| (d) | “Affiliate” has the meaning attributed to that term in the Securities Act (Ontario); | |
| (e) | “Associate” has the meaning attributed to that term in the Securities Act (Ontario); | |
| (f) | “Award Date” means the date or dates on which an award of Restricted Share Units is made to a Participant in accordance with section 4.1; | |
| (g) | “Blackout Period” means the period during which designated directors, officers and employees of the Corporation cannot trade the Common Shares pursuant to the Corporation’s policy respecting restrictions on directors’, officers’ and employee trading which is in effect at that time (which, for greater certainty, does not include the period during which a cease trade order is in effect to which the Corporation or in respect of an insider, that insider is subject); | |
| (h) | “Board” means the board of directors of the Corporation from time to time; | |
| (i) | “Business Day” means each day other than a Saturday, Sunday or statutory holiday in Toronto, Ontario, Canada; | |
| (j) | “Change of Control” means: |
| (i) | the acceptance of an Offer by a sufficient number of holders of voting shares in the capital of the Corporation to constitute the offeror, together with persons acting jointly or in concert with the offeror, a shareholder of the Corporation being entitled to exercise more than 50% of the voting rights attaching to the outstanding voting shares in the capital of the Corporation (provided that prior to the Offer, the offeror was not entitled to exercise more than 50% of the voting rights attaching to the outstanding voting shares in the capital of the Corporation), | |
| (ii) | the completion of a consolidation, merger or amalgamation of the Corporation with or into any other corporation whereby the voting shareholders of the Corporation immediately prior to the consolidation, merger or amalgamation receive less than 50% of the voting rights attaching to the outstanding voting shares of the consolidated, merged or amalgamated corporation or any parent entity, or |
| -2- |
| (iii) | the completion of a sale whereby all or substantially all of the Corporation’s undertakings and assets become the property of any other entity and the voting shareholders of the Corporation immediately prior to that sale hold less than 50% of the voting rights attaching to the outstanding voting securities of that other entity immediately following that sale; |
Notwithstanding the foregoing, if it is determined that an award hereunder with respect to a U.S. Participant is subject to the requirements of Section 409A of the Code and payable upon a Change of Control, the Corporation will not be deemed to have undergone a Change of Control unless the Corporation is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A of the Code to the extent required for the award to comply with Section 409A of the Code;
| (k) | “Code” means the U.S. Internal Revenue Code of 1986, as amended, and includes the valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder; | |
| (l) | “Common Shares” means the common shares of the Corporation; | |
| (m) | “Consultant” means an individual (other than an employee or a director of the Corporation) or company that: |
| (A) | is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or to an Affiliate of the Corporation, other than services provided in relation to an offer or sale of securities of the Corporation in a capital-raising transaction, or services that promote or maintain a market for the Corporation’s securities; | |
| (B) | provides the services under a written contract between the Corporation or the Affiliate and the individual or the company, as the case may be; | |
| (C) | in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or an Affiliate of the Corporation; and | |
| (D) | has a relationship with the Corporation or an Affiliate of the Corporation that enables the individual to be knowledgeable about the business and affairs of the Corporation; |
| (n) | “Corporation” means SOLARBANK CORPORATION, a corporation existing under the Business Corporations Act (Ontario) and the successors thereof; | |
| (o) | “Corporation’s Broker” has the meaning given to such term in Section 4.6 of the Plan; |
| -3- |
| (p) | “Effective Date” means November 4, 2022; | |
| (q) | “Eligible Person” means: |
| (i) | any officer or employee of the Corporation and/or any officer or employee of any Subsidiary of the Corporation and any director of the Corporation and/or any director of any Subsidiary of the Corporation; and | |
| (ii) | a Consultant; |
| (r) | “Event of Termination” means an event whereby a Participant ceases to be an Eligible Person and shall be deemed to have occurred by the giving of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause), retirement, or any cessation of employment or service for any reason whatsoever, including disability or death; | |
| (s) | “Exchange” means the Canadian Securities Exchange or any other stock exchange or quotation system where the Common Shares are listed on or through which the Common Shares are listed or quoted; | |
| (t) | “Grant Date” means the date on which a grant of Options is made to a Participant in accordance with section 5.1; | |
| (u) | “insider” has the meaning attributed to that term in the Securities Act (Ontario); | |
| (v) | “Insider Participant” means a Participant who is (i) an insider of the Corporation or any of its Subsidiaries, and (ii) an associate of any person who is an insider by virtue of (i); | |
| (w) | “Investor Relations Activities” means any activities, by or on behalf of the Corporation or shareholder of the Corporation, that promote or reasonably could be expected to promote the purchase or sale of securities of the Corporation, but does not include: |
| (i) | the dissemination of information provided, or records prepared, in the ordinary course of business of the Corporation: |
| (A) | to promote the sale of products or services of the Corporation, or | |
| (B) | to raise public awareness of the Corporation, that cannot reasonably be considered to promote the purchase or sale of securities of the Corporation; |
| (ii) | activities or communications necessary to comply with the requirements of: |
| (A) | applicable securities laws; | |
| (B) | the by-laws, rules or other regulatory instruments of the Exchange or any other self-regulatory body or exchange having jurisdiction over the Corporation; |
| -4- |
| (iii) | communications by a publisher of, or writer for, a newspaper, magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, if: |
| (A) | the communication is only through the newspaper, magazine or publication, and | |
| (B) | the publisher or writer receives no commission or other consideration other than for acting in the capacity of publisher or writer; or |
| (iv) | activities or communications that may be otherwise specified by the Exchange. |
| (x) | “Market Price” means, as of any date, the closing price of the Common Shares on the Exchange for the last market trading day prior to the date of grant of the Option or if the Common Shares are not listed on a stock exchange, the Market Price shall be determined in good faith by the Administrators; | |
| (y) | “Market Value” means, on any date, the volume weighted average price of the Common Shares traded on the Exchange for the five (5) consecutive trading days prior to such date; | |
| (z) | “Offer” means a bona fide arm’s length offer made to all holders of voting shares in the capital of the Corporation to purchase, directly or indirectly, voting shares in the capital of the Corporation; | |
| (aa) | “Option” means an option granted to an Eligible Person under the Plan to purchase Common Shares; | |
| (bb) | “Option Agreement” has the meaning ascribed to that term in section 3.2; | |
| (cc) | “Participant” means an Eligible Person selected by the Administrators to participate in the Plan in accordance with section 3.1 hereof; | |
| (dd) | “Payout Date” means the day on which the Corporation pays to a Participant the Market Value of the RSUs that have become vested and payable; | |
| (ee) | “Plan” means this share compensation plan, as amended, replaced or restated from time to time; | |
| (ff) | “reserved for issuance” refers to Common Shares that may be issued in the future upon the vesting of Restricted Share Units which have been awarded and upon the exercise of Options which have been granted; | |
| (gg) | “Restricted Share Unit” means a right granted in accordance with section 4.1 hereof to receive one Common Share that becomes vested in accordance with section 4.3; | |
| (hh) | “Restricted Share Unit Agreement” has the meaning ascribed to that term in section 3.2; |
| -5- |
| (ii) | “Share Compensation Arrangement” means a stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Common Shares to directors, officers and employees of the Corporation and any of its Subsidiaries or to Consultants; | |
| (jj) | “Subsidiary” has the meaning ascribed thereto in the Securities Act (Ontario) and “Subsidiaries” shall have a corresponding meaning; | |
| (kk) | “Substituted Rights” has the meaning given to such term in Section 5.8 of the Plan; | |
| (ll) | “United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia; | |
| (mm) | “U.S. Participant” means a Participant who is a citizen of the United States or a resident of the United States, as defined in section 7701(a)(30)(A) and section 7701(b)(1) of the Code and any other Participant who is subject to tax under the Code with respect to compensatory awards granted pursuant to the Plan; | |
| (nn) | “U.S. Person” means a “U.S. person”, as such term is defined in Rule 902 of Regulation S under the 1933 Act; and | |
| (oo) | “Withholding Obligations” has the meaning ascribed to that term in section 4.6. |
| 1.2 | Headings: The headings of all articles, sections, and paragraphs in the Plan are inserted for convenience of reference only and shall not affect the construction or interpretation of the Plan. |
| 1.3 | Context, Construction: Whenever the singular or masculine are used in the Plan, the same shall be construed as being the plural or feminine or neuter or vice versa where the context so requires. |
| 1.4 | References to this Plan: The words “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and similar expressions mean or refer to the Plan as a whole and not to any particular article, section, paragraph or other part hereof. |
| 1.5 | Currency: All references in this Plan or in any agreement entered into under this Plan to “dollars”, “$” or lawful currency shall be references to Canadian dollars, unless the context otherwise requires. |
| 2. | PURPOSE AND ADMINISTRATION OF THE PLAN |
| 2.1 | Purpose: The purpose of the Plan is to advance the interests of the Corporation and its Subsidiaries, and its shareholders by: (i) ensuring that the interests of Eligible Persons are aligned with the success of the Corporation and its Subsidiaries; (ii) encouraging stock ownership by Eligible Persons; and (iii) providing compensation opportunities to attract, retain and motivate Eligible Persons. |
| -6- |
| 2.2 | Common Shares Subject to the Plan: |
| (a) | The total number of Common Shares reserved and available for grant and issuance pursuant to this Plan, and the total number of Restricted Share Units that may be awarded pursuant to this Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares from time to time; and | |
| (b) | the number of Common Shares issuable pursuant to the exercise of Options under the Plan within a 12 month period to all Eligible Persons retained to provide Investor Relations Activities (together with those Common Shares that are issued pursuant to any other Share Compensation Arrangement) shall not, at any time, exceed 1% of the issued and outstanding Common Shares. |
| 2.3 | Administration of the Plan: The Plan shall be administered by the Administrators, through the recommendation of the Compensation Committee of the Board. Subject to any limitations of the Plan, the Administrators shall have the power and authority to: |
| (a) | adopt rules and regulations for implementing the Plan; | |
| (b) | determine the eligibility of persons to participate in the Plan, when Restricted Share Units and Options to Eligible Persons shall be awarded or granted, the number of Restricted Share Units and Options to be awarded or granted, the vesting criteria for each award of Restricted Share Units and the vesting period for each grant of Options; | |
| (c) | interpret and construe the provisions of the Plan and any agreement or instrument under the Plan; | |
| (d) | subject to regulatory requirements, make exceptions to the Plan in circumstances which they determine to be exceptional; | |
| (e) | require that any Participant provide certain representations, warranties and certifications to the Corporation to satisfy the requirements of applicable laws, including without limitation, the registration requirements of the 1933 Act and applicable state securities laws, or exemptions therefrom; and | |
| (f) | make all other determinations and take all other actions as they determine to be necessary or desirable to implement, administer and give effect to the Plan. |
| 3. | ELIGIBILITY AND PARTICIPATION IN PLAN |
| 3.1 | The Plan and Participation: The Plan is hereby established for Eligible Persons. Restricted Share Units may be awarded and Options may be granted to any Eligible Person as determined by the Administrators in accordance with the provisions hereof. The Corporation and each Participant acknowledge that they are responsible for ensuring and confirming that such Participant is a bona fide Eligible Person entitled to receive Options or Restricted Share Units, as the case may be. |
| 3.2 | Agreements: All Restricted Share Units awarded hereunder shall be evidenced by a restricted share unit agreement (“Restricted Share Unit Agreement”) between the Corporation and the Participant, substantially in the form set out in Exhibit A or in such other form as the Administrators may approve from time to time. All Options granted hereunder shall be evidenced by an option agreement (“Option Agreement”) between the Corporation and the Participant, substantially in the form as set out in Exhibit B or in such other form as the Administrators may approve from time to time. |
| -7- |
| 4. | AWARD OF RESTRICTED SHARE UNITS |
| 4.1 | Award of Restricted Share Units: The Administrators may, at any time and from time to time, award Restricted Share Units to Eligible Persons. In awarding any Restricted Share Units, the Administrators shall determine: |
| (a) | to whom Restricted Share Units pursuant to the Plan will be awarded; | |
| (b) | the number of Restricted Share Units to be awarded and credited to each Participant’s Account; | |
| (c) | the Award Date; and | |
| (d) | subject to section 4.3 hereof, the applicable vesting criteria. | |
| Upon the award of Restricted Share Units, the number of Restricted Share Units awarded to a Participant shall be credited to the Participant’s Account effective as of the Award Date. | ||
| 4.2 | Restricted Share Unit Agreement: Upon the award of each Restricted Share Unit to a Participant, a Restricted Share Unit Agreement shall be delivered by the Administrators to the Participant. |
| 4.3 | Vesting: |
| (a) | Subject to subsections (c) and (d) below, at the time of the award of Restricted Share Units, the Administrators shall determine in their sole discretion the vesting criteria applicable to such Restricted Share Units. | |
| (b) | For greater certainty, the vesting of Restricted Share Units may be determined by the Administrators to include criteria such as performance vesting, in which the number of Common Shares to be delivered to a Participant for each Restricted Share Unit that vests may fluctuate based upon the Corporation’s performance and/or the Market Price of the Common Shares, in such manner as determined by the Administrators in their sole discretion. | |
| (c) | Each Restricted Share Unit shall be subject to vesting in accordance with the terms set out in the Restricted Share Unit Agreement. | |
| (d) | Notwithstanding anything to the contrary in this Plan, all vesting and issuances or payments, as applicable, in respect of a Restricted Share Unit shall be completed no later than December 15 of the third calendar year commencing after the Award Date for such Restricted Share Unit. |
| 4.4 | Blackout Periods: Should the date of vesting of a Restricted Share Unit fall within a Blackout Period or within nine Business Days following the expiration of a Blackout Period, such date of vesting shall be automatically extended without any further act or formality to that date which is the tenth Business Day after the end of the Blackout Period, such tenth Business Day to be considered the date of vesting for such Restricted Share Unit for all purposes under the Plan. Notwithstanding section 6.4 hereof, the ten Business Day period referred to in this section 4.4 may not be extended by the Board. |
| -8- |
| 4.5 | Vesting and Settlement: As soon as practicable after the relevant date of vesting of any Restricted Share Units awarded under the Plan and with respect to a U.S. Participant, no later than 60 days thereafter, but subject to subsection 4.3(d), a Participant shall be entitled to receive and the Corporation shall issue or pay (at its discretion): |
| (a) | a lump sum payment in cash equal to the number of vested Restricted Share Units recorded in the Participant’s Account multiplied by the Market Value of a Common Share on the Payout Date; | |
| (b) | the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s Restricted Share Units in the Participant’s Account, duly issued as fully paid and non-assessable shares and such Participant shall be registered on the books of the Corporation as the holder of the appropriate number of Common Shares; or | |
| (c) | any combination of the foregoing. |
| 4.6 | Taxes and Source Deductions: The Corporation or an affiliate of the Corporation may take such reasonable steps for the deduction and withholding of any taxes and other required source deductions which the Corporation or the affiliate, as the case may be, is required by any law or regulation of any governmental authority whatsoever to remit in connection with this Plan, any Restricted Share Units or any issuance of Common Shares (“Withholding Obligations”). Without limiting the generality of the foregoing, the Corporation may, at its discretion: (i) deduct and withhold those amounts it is required to remit pursuant to the Withholding Obligations from any cash remuneration or other amount payable to the Participant, whether or not related to the Plan, the vesting of any Restricted Share Units or the issue of any Common Shares; (ii) allow the Participant to make a cash payment to the Corporation equal to the amount required to be remitted, pursuant to the Withholding Obligations, which amount shall be remitted by the Corporation to the appropriate governmental authority for the account of the Participant; (iii) settle a portion of vested Restricted Share Units of a Participant in cash equal to the amount the Corporation is required to remit, pursuant to the Withholding Obligations; or (iv) or by selling, or causing the Corporation’s Broker to sell, on behalf of any Participant such number of Common Shares issued to the Participant sufficient to fund the Withholding Obligations (after deducting commissions payable to the broker), in each case which amount shall be remitted by the Corporation to the appropriate governmental authority for the account of the Participant. Where the Corporation considers that the steps undertaken in connection with the foregoing result in inadequate withholding or a late remittance of taxes, the delivery of any Common Shares to be issued to a Participant on vesting of any Restricted Share Units may be made conditional upon the Participant (or other person) reimbursing or compensating the Corporation or making arrangements satisfactory to the Corporation for the payment to it in a timely manner of all taxes required to be remitted, pursuant to the Withholding Obligations, for the account of the Participant. |
| -9- |
| Any Common Shares of a Participant that are sold by a broker engaged by the Corporation (the “Corporation’s Broker”), to fund Withholding Obligations will be sold as soon as practicable in transactions effected on the Exchange. In effecting the sale of any such Common Shares, the Corporation’s Broker will exercise its sole judgement as to the timing and manner of sale and will not be obligated to seek or obtain a minimum price. Neither the Corporation nor the Corporation’s Broker will be liable for any loss arising out of any sale of such Common Shares including any loss relating to the manner or timing of such sales, the prices at which the Common Shares are sold or otherwise. In addition, neither the Corporation nor the Corporation’s Broker will be liable for any loss arising from a delay in transferring any Common Shares to a Participant. The sale price of Common Shares sold on behalf of Participants will fluctuate with the market price of the Corporation’s shares and no assurance can be given that any particular price will be received upon any such sale. | |
| 4.7 | Rights Upon an Event of Termination: |
| (a) | If an Event of Termination has occurred in respect of any Participant, any and all Common Shares corresponding to any vested Restricted Share Units in the Participant’s Account shall be issued as soon as practicable after the Event of Termination to the former Participant in accordance with section 4.5 hereof. With respect to each Restricted Share Unit of a U.S. Participant, such Restricted Share Unit will be settled and shares issued as soon as practicable following the date of vesting of such Restricted Share Unit as set forth in the applicable Restricted Share Unit Agreement, but in all cases within 60 days following such date of vesting. | |
| (b) | If an Event of Termination has occurred in respect of any Participant, any unvested Restricted Share Units in the Participant’s Account shall, unless otherwise determined by the Administrators in their discretion, forthwith and automatically be forfeited by the Participant and cancelled. With respect to any Restricted Share Unit of a U.S. Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to a Restricted Share Unit that is unvested at the time of an Event of Termination, such Restricted Share Unit shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting of such Restricted Share Unit as set forth in the applicable Restricted Share Unit Agreement. | |
| (c) | Notwithstanding the foregoing subsection 4.7(b) and subject to the requirements of the Exchange, if a Participant retires in accordance with the Corporation’s retirement policy, at such time, any unvested performance-based Restricted Share Units in the Participant’s Account shall not be forfeited by the Participant or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable Restricted Share Unit Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, are met on the applicable date. | |
| (d) | For greater certainty, if a Participant’s employment is terminated for just cause, each unvested Restricted Share Unit in the Participant’s Account shall forthwith and automatically be forfeited by the Participant and cancelled. | |
| (e) | For the purposes of this Plan and all matters relating to the Restricted Share Units, the date of the Event of Termination shall be determined without regard to any applicable severance or termination pay, damages, or any claim thereto (whether express, implied, contractual, statutory, or at common law). |
| -10- |
| 4.8 | Restricted Share Unit Accounts: A separate notional account for Restricted Share Units shall be maintained for each Participant (an “Account”). Each Account will be credited with Restricted Share Units awarded to the Participant from time to time pursuant to section 4.1 hereof by way of a bookkeeping entry in the books of the Corporation. On the vesting of the Restricted Share Units pursuant to section 4.3 hereof and the corresponding issuance of Common Shares to the Participant pursuant to section 4.5 hereof, or on the forfeiture and cancellation of the Restricted Share Units pursuant to section 4.7 hereof, the applicable Restricted Share Units credited to the Participant’s Account will be cancelled. |
| 4.9 | Record Keeping: the Corporation shall maintain records in which shall be recorded: |
| (a) | the name and address of each Participant; | |
| (b) | the number of Restricted Share Units credited to each Participant’s Account; | |
| (c) | any and all adjustments made to Restricted Share Units recorded in each Participant’s Account; and | |
| (d) | any other information which the Corporation considers appropriate to record in such records. |
| 5. | GRANT OF OPTIONS |
| 5.1 | Grant of Options: Subject to section 2.2, the total number of Common Shares reserved and available for grant pursuant to this section on exercise of Options (together with those Common Shares issuable pursuant to any other Share Compensation Arrangement, including Restricted Share Units) shall not exceed 20% of the number of issued and outstanding Common Shares from time to time. |
| The Administrators may at any time and from time to time grant Options to Eligible Persons. In granting any Options, the Administrators shall determine: |
| (a) | to whom Options pursuant to the Plan will be granted; | |
| (b) | the number of Options to be granted, the Grant Date and the exercise price of each Option; | |
| (c) | the expiration date of each Option; and | |
| (d) | subject to section 5.3 hereof, the applicable vesting criteria, | |
| provided, however that the exercise price for a Common Share pursuant to any Option shall not be less than the Market Price on the Grant Date in respect of that Option. | ||
| 5.2 | Option Agreement: Upon each grant of Options to a Participant, an Option Agreement shall be delivered by the Administrators to the Participant. |
| 5.3 | Vesting: |
| (a) | Subject to subsection 2.2(b) above with respect to grants to Eligible Persons providing Investor Relations Activities, at the time of the grant of any Options, the Administrators shall determine, in accordance with minimum vesting requirements of the Exchange, the vesting criteria applicable to such Options. |
| -11- |
| (b) | The Administrators may determine when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option Agreement will disclose any vesting conditions prescribed by the Administrators. |
| 5.4 | Term of Option/Blackout Periods: The term of each Option shall be determined by the Administrators; provided that no Option shall be exercisable after ten years from the Grant Date. Should the term of an Option expire on a date that falls within a Blackout Period or within nine Business Days following the expiration of a Blackout Period, such expiration date shall be automatically extended without any further act or formality to that date which is the tenth Business Day after the end of the Blackout Period, such tenth Business Day to be considered the expiration date for such Option for all purposes under the Plan. Notwithstanding section 6.4 hereof, the ten Business Day period referred to in this section 5.4 may not be extended by the Board. |
| 5.5 | Exercise of Option: |
| Options that have vested in accordance with the provisions of this Plan and the applicable Option Agreement may be exercised at any time, or from time to time, during their term and subject to the provisions of Section 5.10 hereof as to any number of whole Common Shares that are then available for purchase thereunder; provided that no partial exercise may be for less than 100 whole Common Shares. Options may be exercised by delivery of a written notice of exercise to the Administrators, substantially in the form attached to this Plan as Exhibit C, with respect to the Options, or by any other form or method of exercise acceptable to the Administrators. | |
| 5.6 | Payment and Issuance: |
| (a) | Upon actual receipt by the Corporation or its agent of the materials required by subsection 5.5 and receipt by the Corporation of cash, a cheque, bank draft or other form of acceptable payment for the aggregate exercise price, the number of Common Shares in respect of which the Options are exercised will be issued as fully paid and non-assessable shares and the Participant exercising the Options shall be registered on the books of the Corporation as the holder of the appropriate number of Common Shares. No person or entity shall enjoy any part of the rights or privileges of a holder of Common Shares which are subject to Options until that person or entity becomes the holder of record of those Common Shares. No Common Shares will be issued by the Corporation prior to the receipt of payment by the Corporation for the aggregate exercise price for the Options being exercised. |
| -12- |
| (b) | Without limiting the foregoing, unless otherwise determined by the Administrators in their sole and absolute discretion or not compliant with any applicable laws or rules of the Exchange, a Participant may elect a cashless exercise in a notice of exercise in accordance with the following: (i) cashless exercise of Options shall only be available to a Participant who intends to immediately sell the Common Shares issuable upon exercise of such Options and the proceeds of sale will be sufficient to satisfy the exercise price of the Options, and (ii) if an eligible Participant elects to exercise the Options through cashless exercise and complies with any relevant protocols approved by the Administrators, a sufficient number of the Common Shares issued upon exercise of the Options will be sold by a designated broker on behalf of the Participant to satisfy the exercise price of the Options, the exercise price of the Options will be delivered to the Corporation and the Participant will receive only the remaining unsold Common Shares from the exercise of the Options and the net proceeds of the sale after deducting the exercise price of the Options, applicable taxes and any applicable fees and commissions, all as determined by the Administrators from time to time. The Corporation shall not deliver the Common Shares issuable upon a cashless exercise of Options until receipt of the exercise price therefor, whether by a designated broker selling the Common Shares issuable upon exercise of such Options through a short position or such other method determined by the Administrators in compliance with applicable laws. | |
| (c) | Without limiting the foregoing, unless otherwise determined by the Administrators in their sole and absolute discretion or not compliant with any applicable laws or rules of the Exchange, a Participant may elect an exchange for Substituted Rights in a notice of exercise in accordance with Section 5.8. | |
| (d) | Notwithstanding the foregoing, prior to a cashless exercise or an exchange for Substituted Rights, the Participant must contact the Corporation to confirm that the Corporation will permit options to be exercised on a cashless basis or exchange for Substituted Rights. |
| 5.7 | Cashless Exercise: Provided that the Common Shares are listed and posted for trading on a stock exchange or market that permits cashless exercise, a Participant may elect a cashless exercise in a notice of exercise, which election will result in all of the Common Shares issuable on the exercise being sold. In such case, the Participant will not be required to deliver to the Administrators a cheque or other form of payment for the aggregate exercise price referred to above. Instead the following provisions will apply: |
| (a) | The Participant will instruct a broker selected by the Participant to sell through the stock exchange or market on which the Common Shares are listed or quoted, the Common Shares issuable on the exercise of Options, as soon as possible upon the issue of such Common Shares to the Participant at the then applicable bid price of the Common Shares. | |
| (b) | Before the relevant trade date, the Participant will deliver the exercise notice including details of the trades to the Corporation electing the cashless exercise and the Corporation will direct its registrar and transfer agent to issue a certificate for such Participant’s Common Shares in the name of the broker (or as the broker may otherwise direct) for the number of Common Shares issued on the exercise of the Options, against payment by the broker to the Corporation of (i) the exercise price for such Common Shares; and (ii) the amount the Corporation determines, in its discretion, is required to satisfy the Withholding Obligations. | |
| (c) | The broker will deliver to the Participant the remaining proceeds of sale, net of any brokerage commission or other expenses. |
| -13- |
| 5.8 | Exchange for Substituted Rights: Provided that the Common Shares are listed and posted for trading on a stock exchange or market that permits an exchange for Substituted Rights, a Participant may elect an exchange for Substituted Rights by the delivery to the Corporation at its registered office the prescribed form of notice of exchange for Substituted Rights specifying the number of Common Shares with respect to which the Participant wishes to exchange options for Substituted Rights (as defined below), together with a certified cheque or bank draft made payable to the Corporation for the amount of the estimated Withholding Obligations. Upon receipt of the foregoing, and without any further action by either the Corporation or the Participant, the following transactions will be deemed to have occurred in the following order: |
| (a) | The Participant shall be deemed to have relinquished all Common Shares and the applicable Options specified in the notice and the Corporation will be deemed to have issued to the Participant, in exchange therefore, rights (the “Substituted Rights”) to acquire from the Corporation, on exercise, a number of Common Shares determined in accordance with the following formula: |
| Substituted Rights = |
(A x MP) – (A x EP) MP |
| A | is the aggregate number of Common Shares with respect to which the Participant has exchanged options for Substituted Rights | |
| MP | is the Market Price | |
| EP | Is the aggregate exercise price of the number of Common Shares with respect to which the Participant has exchanged options for Substituted Rights |
| (b) | Notwithstanding any other provision of this Plan, no fractional Substituted Rights shall be issued to the Participant. If the aggregate number of Substituted Rights to which the Participant would otherwise be entitled is not a whole number, then the number of Substituted Rights, as the case may be, shall be rounded down to the next whole number and no compensation will be paid to the Participant in respect of such fractional Substituted Right. | |
| (c) | Each Substituted Right shall immediately thereafter be deemed to have been exercised to acquire one Common Share for no additional consideration payable by the Participant to the Corporation. | |
| (d) | Thereafter, there will be a binding contract for the issue of the Common Shares calculated as described above. | |
| In the event that a Participant delivers a notice under Section 5.8 and it is later determined that the number of Substituted Rights calculated in accordance with the formula above is less than or equal to zero, such notice shall be deemed to be void in its entirety and of no further force or effect. | ||
| -14- |
| 5.9 | Taxes and Source Deductions: The Corporation or an affiliate of the Corporation may take such reasonable steps for the deduction and withholding of any taxes and other required source deductions which the Corporation or the affiliate, as the case may be, is required by any law or regulation of any governmental authority whatsoever to remit pursuant to the Withholding Obligations in connection with this Plan, any Options or any issuance of Common Shares. Without limiting the generality of the foregoing, the Corporation may, at its discretion: (i) deduct and withhold those amounts it is required to remit, pursuant to the Withholding Obligations, from any cash remuneration or other amount payable to the Participant, whether or not related to the Plan, the exercise of any Options or the issue of any Common Shares; (ii) allow the Participant to make a cash payment to the Corporation equal to the amount required to be remitted, pursuant to the Withholding Obligations; or (iii) by selling, or causing the Corporation’s Broker to sell, on behalf of any Participant such number of Common Shares issued to the Participant sufficient to fund the Withholding Obligations (after deducting commissions payable to the broker), in each case which amount shall be remitted by the Corporation to the appropriate governmental authority for the account of the Participant. Where the Corporation considers that the steps undertaken in connection with the foregoing result in inadequate withholding or a late remittance of taxes, the delivery of any Common Shares to be issued to a Participant on the exercise of Options may be made conditional upon the Participant (or other person) reimbursing or compensating the Corporation or making arrangements satisfactory to the Corporation for the payment in a timely manner of all taxes required to be remitted, pursuant to the Withholding Obligations, for the account of the Participant. |
| Any Common Shares of a Participant that are sold by the Corporation’s Broker, to fund Withholding Obligations will be sold as soon as practicable in transactions effected on the Exchange. In effecting the sale of any such Common Shares, the Corporation’s Broker will exercise its sole judgement as to the timing and manner of sale and will not be obligated to seek or obtain a minimum price. Neither the Corporation nor the Corporation’s Broker will be liable for any loss arising out of any sale of such Common Shares including any loss relating to the manner or timing of such sales, the prices at which the Common Shares are sold or otherwise. In addition, neither the Corporation nor the Corporation’s Broker will be liable for any loss arising from a delay in transferring any Common Shares to a Participant. The sale price of Common Shares sold on behalf of Participants will fluctuate with the market price of the Corporation’s shares and no assurance can be given that any particular price will be received upon any such sale. | |
| 5.10 | Rights Upon an Event of Termination: |
| (a) | If an Event of Termination has occurred in respect of a Participant, any unvested Options, to the extent not available for exercise as of the date of the Event of Termination, shall, unless otherwise determined by the Administrators in their discretion, forthwith and automatically be cancelled, terminated and not available for exercise without further consideration or payment to the Participant. | |
| (b) | Except as otherwise stated herein or otherwise determined by the Administrators in their discretion (provided such determination does not exceed a maximum of one year), upon the occurrence of an Event of Termination in respect of a Participant, any vested Options granted to the Participant that are available for exercise may be exercised only before the earlier of: |
| (i) | the expiry of the Option; and | |
| (ii) | three months after the date of the Event of Termination. |
| -15- |
| (c) | Notwithstanding the foregoing subsections 5.10(a) and (b), if a Participant’s employment is terminated for just cause, each Option held by the Participant, whether or not then exercisable, shall forthwith and automatically be cancelled and may not be exercised by the Participant. | |
| (d) | For the purposes of this Plan and all matters relating to the Options, the date of the Event of Termination shall be determined without regard to any applicable severance or termination pay, damages, or any claim thereto (whether express, implied, contractual, statutory, or at common law). |
| 5.11 | Record Keeping: The Corporation shall maintain an Option register in which shall be recorded: |
| (a) | the name and address of each holder of Options; | |
| (b) | the number of Common Shares subject to Options granted to each holder of Options; | |
| (c) | the term of the Option and exercise price, including adjustments for each Option granted; and | |
| (d) | any other information which the Corporation considers appropriate to record in such register. |
| 6. | GENERAL |
| 6.1 | Effective Date of Plan: The Plan shall be effective as of the Effective Date. |
| 6.2 | Change of Control: If there is a Change of Control transaction then, notwithstanding any other provision of this Plan except subsection 4.3(d) which will continue to apply in all circumstances, the Administrators may, in their sole discretion, determine that any or all unvested Restricted Share Units and any or all Options (whether or not currently exercisable) shall vest or become exercisable, as applicable, at such time and in such manner as may be determined by the Administrators in their sole discretion such that Participants under the Plan shall be able to participate in the Change of Control transaction, including, at the election of the holder thereof, by surrendering such Restricted Share Units and Options to the Corporation or a third party or exchanging such Restricted Share Units or Options, for consideration in the form of cash and/or securities, to be determined by the Administrators in their sole discretion. Notwithstanding the foregoing, with respect to Options of U.S. Participants, any exchange, substitution or amendment of such Options will occur only to the extent and in a manner that will not result in the imposition of taxes under Section 409A of the Code, and with respect to Restricted Share Units of U.S. Participants, any surrender or other modification of Restricted Share Units will occur only to the extent such surrender or other modification will not result in the imposition of taxes under Section 409A of the Code. |
| -16- |
| 6.3 | Reorganization Adjustments: |
| (a) | In the event of any declaration by the Corporation of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Corporation, distribution (other than normal course cash dividends) of company assets to holders of Common Shares, or any other corporate transaction or event involving the Corporation or the Common Shares, the Administrators, in the Administrators’ sole discretion, may, subject to any relevant resolutions of the Board, and without liability to any person, make such changes or adjustments, if any, as the Administrators consider fair or equitable, in such manner as the Administrators may determine, to reflect such change or event including, without limitation, adjusting the number of Options and Restricted Share Units outstanding under this Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under this Plan, provided that the value of any Option or Restricted Share Unit immediately after such an adjustment, as determined by the Administrators, shall not exceed the value of such Option or Restricted Share Unit prior thereto, as determined by the Administrators. | |
| (b) | Notwithstanding the foregoing, with respect to Options and Restricted Share Units of U.S. Participants, such changes or adjustments will be made in a manner so as to not result in the imposition of taxes under Section 409A of the Code and will comply with the requirements in subsection 4.3(d). | |
| (c) | The Corporation shall give notice to each Participant in the manner determined, specified or approved by the Administrators of any change or adjustment made pursuant to this section and, upon such notice, such adjustment shall be conclusive and binding for all purposes. | |
| (d) | The Administrators may from time to time adopt rules, regulations, policies, guidelines or conditions with respect to the exercise of the power or authority to make changes or adjustments pursuant to section 6.2 or section 6.3(a). The Administrators, in making any determination with respect to changes or adjustments pursuant to section 6.2 or section 6.3(a) shall be entitled to impose such conditions as the Administrators consider or determine necessary in the circumstances, including conditions with respect to satisfaction or payment of all applicable taxes (including, but not limited to, withholding taxes). |
| 6.4 | Amendment or Termination of Plan: |
| The Board may amend this Plan or any Restricted Share Unit or any Option at any time without the consent of Participants provided that such amendment shall: |
| (a) | not adversely alter or impair any Restricted Share Unit previously awarded or any Option previously granted except as permitted by the provisions of section 6.3 hereof, and, with respect to Restricted Share Units and Options of U.S. Participants, such amendment will not result in the imposition of taxes under Section 409A; | |
| (b) | be subject to any regulatory approvals including, where required, the approval of the Exchange; and |
| -17- |
| (c) | be subject to shareholder approval, where required by the requirements of the Exchange, provided that shareholder approval shall not be required for the following amendments: |
| (i) | amendments of a “housekeeping nature”, including any amendment to the Plan or a Restricted Share Unit or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority or Exchange and any amendment to the Plan or a Restricted Share Unit or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein; | |
| (ii) | amendments that are necessary or desirable for Restricted Share Units or Options to qualify for favourable treatment under any applicable tax law; | |
| (iii) | a change to the vesting provisions of any Restricted Share Unit or any Option (including any alteration, extension or acceleration thereof); | |
| (iv) | a change to the termination provisions of any Option or Restricted Share Units (for example, relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date (as such date may be extended by virtue of section 5.4); | |
| (v) | the introduction of features to the Plan that would permit the Corporation to, instead of issuing Common Shares from treasury upon the vesting of the Restricted Share Units, retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares in the open market for such Participants; | |
| (vi) | the amendment of this Plan as it relates to making lump sum payments to Participants upon the vesting of the Restricted Share Units; | |
| (vii) | the amendment of the cashless exercise feature set out in this Plan; and |
| (d) | be subject to disinterested shareholder approval in the event of any reduction in the exercise price of any Option granted under the Plan to an Insider Participant. | |
| For greater certainty and subject to approval by the Exchange (if applicable), shareholder approval shall be required in circumstances where an amendment to the Plan would: | ||
| (a) | change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares; | |
| (b) | increase the limits in section 2.2; | |
| (c) | reduce the exercise price of any Option (including any cancellation of an Option for the purpose of reissuance of a new Option at a lower exercise price to the same person); | |
| (d) | extend the term of any Option beyond the original term (except if such period is being extended by virtue of section 5.4 hereof); or |
| -18- |
| (e) | amend this section 6.4. |
| 6.5 | Termination: The Administrators may terminate this Plan at any time in their absolute discretion. If the Plan is so terminated, no further Restricted Share Units shall be awarded and no further Options shall be granted, but the Restricted Shares Units then outstanding and credited to Participants’ Accounts and the Options then outstanding shall continue in full force and effect in accordance with the provisions of this Plan. Any termination of this Plan shall occur in a manner that will not result in the imposition of taxes on a U.S. Participant under Section 409A. |
| 6.6 | Transferability: A Participant shall not be entitled to transfer, assign, charge, pledge or hypothecate, or otherwise alienate, whether by operation of law or otherwise, the Participant’s Restricted Share Units or Options or any rights the Participant has under the Plan. |
| 6.7 | Rights as a Shareholder: Under no circumstances shall the Restricted Share Units or Options be considered Common Shares nor shall they entitle any Participant to exercise voting rights or any other rights attaching to the ownership of Common Shares (including, but not limited to, the right to dividend equivalent payments). |
| 6.8 | Credits for Dividends: Unless otherwise determined by the Administrators, whenever cash or other dividends are paid on Common Shares, additional Restricted Share Units will be automatically granted to each Participant who holds Restricted Share Units on the record date for such dividends. The number of such Restricted Share Units (rounded to the nearest whole Restricted Share Units) to be credited to such Participant as of the date on which the dividend is paid on the Common Shares shall be an amount equal to the quotient obtained when (i) the aggregate value of the cash or other dividends that would have been paid to such Participant if the Participant’s Restricted Share Units as of the record date for the dividend had been Common Shares, is divided by (ii) the Market Value of the Common Shares as of the date on which the dividend is paid on the Common Shares. Restricted Share Units granted to a Participant shall be subject to the same vesting conditions (time and performance (as applicable)) as the Restricted Share Units to which they relate. |
| 6.9 | No Effect on Employment, Rights or Benefits: |
| (a) | The terms of employment shall not be affected by participation in the Plan. | |
| (b) | Nothing contained in the Plan shall confer or be deemed to confer upon any Participant the right to continue as a director, officer, employee or Consultant nor interfere or be deemed to interfere in any way with any right of the Corporation, the Board or the shareholders of the Corporation to remove any Participant from the Board or of the Corporation or any Subsidiary to terminate any Participant’s employment or agreement with a Consultant at any time for any reason whatsoever. | |
| (c) | Under no circumstances shall any person who is or has at any time been a Participant be able to claim from the Corporation or any Subsidiary any sum or other benefit to compensate for the loss of any rights or benefits under or in connection with this Plan or by reason of participation in this Plan. |
| -19- |
| 6.10 | Market Value of Common Shares: The Corporation makes no representation or warranty as to the future market value of any Common Shares. No Participant shall be entitled, either immediately or in the future, either absolutely or contingently, to receive or obtain any amount or benefit granted to or to be granted for the purpose of reducing the impact, in whole or in part, of any reduction in the market value of the shares of the Corporation or a corporation related thereto. |
| 6.11 | Compliance with Applicable Law: |
| (a) | If any provision of the Plan contravenes any law or any order, policy, by-law or regulation of any regulatory body having jurisdiction, then such provision shall be deemed to be amended to the extent necessary to bring such provision into compliance therewith. Notwithstanding the foregoing, the Corporation shall have no obligation to register any securities provided for in this Plan under the 1933 Act. | |
| (b) | The award of Restricted Share Units, the grant of Options and the issuance of Common Shares under this Plan shall be carried out in compliance with applicable statutes and with the regulations of governmental authorities and the Exchange. If the Administrators determine in their discretion that, in order to comply with any such statutes or regulations, certain action is necessary or desirable as a condition of or in connection with the award of a Restricted Share Unit, the grant of an Option or the issue of a Common Share upon the vesting of a Restricted Share Unit or exercise of an Option, as applicable, that Restricted Share Unit may not vest in whole or in part and that Option may not be exercised in whole or in part, as applicable, unless that action shall have been completed in a manner satisfactory to the Administrators. Without limiting the foregoing, any Common Shares issued upon the vesting of Restricted Share Units or exercise of Options granted pursuant to this Plan must be registered under the 1933 Act, and all applicable state securities laws, or must comply with the requirements of an exemption or exclusion therefrom. If the Common Shares issued upon the vesting of Restricted Share Units or exercise of Options are issued in the United States or to a U.S. Person in reliance upon an exemption from the registration requirements of the 1933 Act and applicable state securities laws, such Common Shares will be “restricted securities” (as such term is defined in Rule 144 under the 1933 Act) and the certificate representing such Common Shares will bear a legend restricting the transfer of such securities under the 1933 Act and applicable state securities laws. The Board may require that a Participant provide certain representations, warranties and certifications to the Corporation to satisfy the requirements of applicable securities laws, including without limitation, the registration requirements of the 1933 Act and applicable state securities laws or exemptions or exclusions therefrom. |
| 6.12 | Governing Law: This Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein, and with respect to U.S. Participants, the Code. |
| 6.13 | Subject to Approval: The Plan is adopted subject to required regulatory approvals (if any). To the extent a provision of the Plan requires regulatory approval which is not received, such provision shall be severed from the remainder of the Plan until the approval is received and the remainder of the Plan shall remain in effect. |
| -20- |
| 6.14 | Special Terms and Conditions Applicable to U.S. Participants: Options issued to U.S. Participants are intended to be exempt from Section 409A of the Code pursuant to Treas. Reg. Section 1.409A-1(b)(5)(i)(A) and the Plan and such Options will be construed and administered accordingly. Options may be issued to U.S. Participants under the Plan only if the shares with respect to the Options qualify as “service recipient stock” as defined in Treas. Reg. Section 1.409A-1(b)(5)(E)(iii). Restricted Share Units awarded to U.S. Participants are intended to be either exempt from (e.g., as short-term deferrals) or compliant with Section 409A of the Code and such Restricted Share Units will be construed and administered accordingly. Any waiver or acceleration of vesting under the Plan or any Restricted Share Unit Agreement for a U.S. Participant may occur only to the extent that such acceleration or waiver will not result in the imposition of taxes under Section 409A of the Code. Any payments made under this Plan or any Restricted Share Unit Agreement to a U.S. Participant as a result of a termination of employment that are deemed to be subject to Section 409A of the Code shall occur only if such termination constitutes a “separation from service” as defined in Treas. Reg. 1.409A-1(h). Additionally, any payments resulting from a separation from service made to a U.S. Participant who is a “specified employee” as defined in Treas. Reg. 1.409A-1(i) shall be subject to the six month delay in payments required by Treas. Reg. 1.409A- 1(3)(v) if such payments are deemed to be subject to Section 409A of the Code. Although the Corporation intends Options and Restricted Share Units granted to U.S. Participants to be exempt from or compliant with Section 409A, the Corporation makes no representation or guaranty as to the tax treatment of such Options and Restricted Share Units. Each U.S. Participant (and any beneficiary or the estate of the Participant, as applicable) is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of such U.S. Participant in connection with this Plan. Neither the Corporation nor any affiliate, nor any employee or director of the Corporation or an affiliate, shall have any obligation to indemnify or otherwise hold such U.S. Participant, beneficiary or estate harmless from any or all such taxes or penalties. |
ADOPTED the 4th day of November, 2022.
EXHIBIT A
[Insert of the underlying Common Shares have not been registered under the 1933 Act:
THE RESTRICTED SHARE UNITS AND THE UNDERLYING COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR ANY U.S. STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND ALL APPLICABLE U.S. STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND ALL APPLICABLE U.S. STATE SECURITIES LAWS ARE AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED IN REGULATION S UNDER THE 1933 ACT.]
RESTRICTED SHARE UNIT AGREEMENT
Notice is hereby given that, effective this _____________ day of __________________, _________ (the “Restricted Share Grant Date”) SOLARBANK CORPORATION (the “Corporation”) has granted to ___________________________ (the “Participant”), ___________ Restricted Share Units pursuant to the Corporation’s Share Compensation Plan (the “Plan”), a copy of which has been provided to the Participant.
Restricted Share Units are subject to the following terms:
| (a) | Pursuant to the Plan and as compensation to the Participant, the Corporation hereby grants to the Participant, as of the Restricted Share Grant Date, the number of Restricted Share Units set forth above. | |
| (b) | The granting and vesting of the Restricted Share Units and the payment by the Corporation of any payout in respect of any Vested Restricted Share Units (as defined below) are subject to the terms and conditions of the Plan, all of which are incorporated into and form an integral part of this Restricted Share Unit Agreement. | |
| (c) | The Restricted Share Units shall become vested restricted share units (the “Vested Restricted Share Units”) in accordance with the following schedule: |
| (i) | ● on the 6 month anniversary of the Restricted Share Grant Date; | |
| (ii) | ● on the 12 month anniversary of the Restricted Share Grant Date; | |
| (iii) | ● on the 18 month anniversary of the Restricted Share Grant Date; and | |
| (iv) | ● on the 24 month anniversary of the Restricted Share Grant Date (each a “Vesting Date”). |
| (d) | As soon as reasonably practicable and no later than 60 days following the Vesting Date, or, if the Participant is not a U.S. Participant (as defined in the Plan), such later date mutually agreed to by the Corporation and the Participant, the Participant shall be entitled to receive, and the Corporation shall issue or provide, a payout with respect to those Vested Restricted Share Units in the Participant’s Account to which the Vesting Date relates (each a “Payout Date”): |
| -2- |
| (i) | a lump sum payment in cash equal to the number of vested Restricted Share Units recorded in the Participant’s Account multiplied by the Market Value of a Common Share on the Payout Date; | |
| (ii) | the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s Restricted Share Units in the Participant’s Account, duly issued as fully paid and non-assessable shares and such Participant shall be registered on the books of the Corporation as the holder of the appropriate number of Common Shares; or | |
| (iii) | any combination of the foregoing. | |
| subject to any applicable Withholding Obligations. |
| (e) | The Participant acknowledges that: |
| (i) | he or she has received and reviewed a copy of the Plan; and | |
| (ii) | the Restricted Share Units have been granted to the Participant under the Plan and are subject to all of the terms and conditions of the Plan to the same effect as if all of such terms and conditions were set forth in this Restricted Share Unit Agreement, including with respect to termination and forfeiture as set out in Section 4.7 of the Plan. |
| Notwithstanding anything to the contrary in this Restricted Share Unit Agreement all vesting and issuances or payments, as applicable, in respect of a Restricted Share Unit evidenced hereby shall be completed no later than December 15 of the third calendar year commencing after the Restricted Share Grant Date; | |
| The grant of the Restricted Share Units evidenced hereby is made subject to the terms and conditions of the Plan. The Participant agrees that he/she may suffer tax consequences as a result of the grant of these Restricted Share Units and the vesting of the Restricted Share Units. The Participant acknowledges that he/she is not relying on the Corporation for any tax advice and has had an adequate opportunity to obtain advice of independent tax counsel. | |
| The Participant represents and warrants to the Corporation that (i) under the terms and conditions of the Plan the Participant is a bona fide Eligible Person (as defined in the Plan) entitled to receive Restricted Share Units, and (ii) if the Common Shares issuable pursuant to the Restricted Share Units have not been registered under the 1933 Act, either (A) the Participant is not in the United States or a U.S. Person, nor is the Participant acquiring the Restricted Share Units for the benefit of a person in the United States or a U.S. Person, or (B) an exemption from the registration requirements of the 1933 Act and all applicable state securities laws is available and the Participant has provided evidence satisfactory to the Corporation to such effect. The Corporation may condition awards and elections under the Plan upon receiving from the undersigned such representations and warranties and such evidence of registration or exemption under the 1933 Act and all applicable U.S. state securities laws as is satisfactory to the Corporation, acting in its sole discretion. |
| -3- |
In the event of any inconsistency between the terms of this Restricted Share Unit Agreement and the Plan, the terms of the Plan shall prevail unless otherwise determined in the Plan.
| SOLARBANK CORPORATION | ||
| Authorized Signatory | Signature of Participant | |
| Name of Participant |
EXHIBIT B
[Insert if the underlying Common Shares have not been registered under the 1933 Act:
THE OPTIONS AND THE OPTIONED SHARES HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR ANY U.S. STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND ALL APPLICABLE U.S. STATE SECURITIES LAWS, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND ALL APPLICABLE U.S. STATE SECURITIES LAWS ARE AVAILABLE. THE TERMS “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED IN REGULATION S UNDER THE 1933 ACT.]
OPTION AGREEMENT
Notice is hereby given that, effective this ________ day of ___________________, _____________ (the “Effective Date”) SOLARBANK CORPORATION (the “Corporation”) has granted to _______________________________ (the “Participant”), Options to acquire _________________________________________________ Common Shares (the “Optioned Shares”) up to 4:30 p.m. Pacific Time on the _____________ day of ________________________ , ___________(the “Option Expiry Date”) at an exercise price of Cdn$_______________ per Optioned Share pursuant to the Corporation’s Share Compensation Plan (the “Plan”), a copy of which is attached hereto.
Optioned Shares may be acquired as follows:
| (f) | [insert vesting provisions, if applicable]; and | |
| (g) | [insert hold period when required]. |
The grant of the Options evidenced hereby and the Option Expiry Date thereof, is made subject to the terms and conditions of the Plan. The Participant agrees that he/she may suffer tax consequences as a result of the grant of these Options, the exercise of the Options and the disposition of Optioned Shares. The Participant acknowledges that he/she is not relying on the Corporation for any tax advice and has had an adequate opportunity to obtain advice of independent tax counsel.
The Participant represents and warrants to the Corporation that (i) under the terms and conditions of the Plan the Participant is a bona fide Eligible Person (as defined in the Plan) entitled to receive Options, and (ii) if the Common Shares issuable pursuant to the Restricted Share Units have not been registered under the 1933 Act, either (A) the Participant is not in the United States or a U.S. Person, nor is the Participant acquiring the Options or any Optioned Shares for the benefit of a person in the United States or a U.S. Person, or (B) an exemption from the registration requirements of the 1933 Act and all applicable state securities laws is available and the Participant has provided evidence satisfactory to the Corporation to such effect. The Participant understands that the Options may not be exercised in the United States or by or on behalf of a U.S. Person unless the Options and the Option Shares have been registered under the 1933 Act or are exempt from registration thereunder. The Corporation may condition the exercise of the Options upon receiving from the Participant such representations and warranties and such evidence of registration or exemption under the 1933 Act and all applicable state securities laws as is satisfactory to the Corporation, acting in its sole discretion.
| -2- |
In the event of any inconsistency between the terms of this Option Agreement and the Plan, the terms of the Plan shall prevail.
| SOLARBANK CORPORATION | ||
| Authorized Signatory | Signature of Participant | |
| Name of Participant |
EXHIBIT C
NOTICE OF OPTION EXERCISE
| TO: | SOLARBANK CORPORATION (the “Corporation”) | |
| FROM: | ||
| DATE: | ||
The undersigned hereby irrevocably gives notice, pursuant to the Corporation’s Share Compensation Plan (the “Plan”), of the exercise of the Options to acquire and hereby subscribes for:
[check one]
| ☐ | (a) all of the Optioned Shares; or |
| ☐ | (b) _________________of the Optioned Shares, |
which are the subject of the Option Agreement attached hereto.
Calculation of total Exercise Price:
| (i) | number of Optioned Shares to be acquired on ___________ Optioned Shares exercise |
| (ii) | multiplied by the Exercise Price per Optioned Share: | $ _____________ |
| TOTAL EXERCISE PRICE, enclosed herewith (unless this is a cashless exercise): | $ _____________ |
| A. | ☐ | The undersigned (i) at the time of exercise of these Options is not in the “United States” or a “U.S. Person” (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the “1933 Act”) and is not exercising these Options on behalf of a person in the United States or U.S. Person and (ii) did not execute or deliver this Notice of Option Exercise in the United States. |
| B. | ☐ | The undersigned has delivered an opinion of counsel of recognized standing or other evidence in form and substance satisfactory to the Corporation to the effect that an exemption from the registration requirements of the 1933 Act, and applicable state securities laws is available for the issuance of the Optioned Shares. |
| C. | ☐ | The Optioned Shares have been registered under the 1933 Act. |
| Note: The undersigned understands that unless Box A or C is checked, the certificates representing the Optioned Shares will bear a legend restricting transfer without registration under the 1933 Act and applicable state securities laws unless an exemption from registration is available. |
| -2- |
| Note: Certificates representing Optioned Shares will not be registered or delivered to an address in the United States unless Box B or C above is checked. | |
| Note: If Box B is checked, any opinion or other evidence tendered must be in form and substance satisfactory to the Corporation. Holders planning to deliver an opinion of counsel or other evidence in connection with the exercise of Options should contact the Corporation in advance to determine whether any opinions to be tendered or other evidence will be acceptable to the Corporation. |
I hereby:
| ☐ | (a) | unless this is a cashless exercise or exchange for Substituted Rights, enclose a cheque payable to “SolarBank Corporation” for the aggregate Exercise Price plus the amount of the estimated Withholding Obligations and agree that I will reimburse the Corporation for any amount by which the actual Withholding Obligations exceed the estimated Withholding Obligations; or |
| ☐ | (b) | advise the Corporation that I am exercising the above Options on a cashless exercise basis, in compliance with the procedures established from time to time by the Administrators for cashless exercises of Options under the Plan. I will consult with the Corporation to determine what additional documentation, if any, is required in connection with my cashless exercise of the above Options. I agree to comply with the procedures established by the Corporation for cashless exercises and all terms and conditions of the Plan. |
| ☐ | (c) | advise the Corporation that I am exercising the above Options as an exchange for Substituted Rights, in compliance with the procedures established from time to time by the Administrators for an exchange for Substituted Rights under the Plan. I will consult with the Corporation to determine what additional documentation, if any, is required in connection with my exchange for Substituted Rights of the above Options. I agree to comply with the procedures established by the Corporation for an exchange for Substituted Rights and all terms and conditions of the Plan. |
Please prepare the Optioned Shares certificates, if any, issuable in connection with this exercise in the following name(s):
Notwithstanding the foregoing, prior to selecting an exchange for substituted rights, the undersigned must contact the Corporation to confirm that the Corporation will permit options to be exercised pursuant to a cashless exercise or an exchange for Substituted Rights.
| Signature of Participant |
| -3- |
| Name of Participant |
Letter and consideration/direction received on ___________________, 20 ______.
[●]
| By: | ||
| [Name] | ||
| [Title] |
Exhibit 99.4
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
SOLARBANK CORPORATION
CODE OF BUSINESS CONDUCT
AND ETHICS
November 4, 2022
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
CODE OF BUSINESS CONDUCT AND ETHICS
| 1. | Introduction |
| (a) | It is the policy of Solarbank Corporation (the “Company”) that the conduct of every director, officer, employee, temporary agency employee and consultant (herein referred to as “Employee” or ”Employees”) while acting on behalf of the Company be based upon the highest ethical standards. Also, it is essential that the Company’s interactions and dealings in carrying out these activities are honest, fair and courteous with due regard for the protection of our business relationships. |
| (b) | This Code of Business Conduct and Ethics (the “Code”) affirms and expands upon the mission statement of the Company and is a guideline to: |
| (i) | assure compliance with laws and regulations that govern the Company’s business activities; | |
| (ii) | maintain a corporate climate in which the integrity and dignity of each individual is valued; | |
| (iii) | foster a standard of conduct that reflects positively on the Company; and | |
| (iv) | protect the Company from unnecessary exposure to financial loss. |
| (c) | This Code does not specifically address every potential form of unacceptable conduct, and it is expected that Employees will exercise good judgment in compliance with the principles set out in this Code. Each Employee has a duty to avoid any circumstance that would violate the letter or spirit of this Code. Unscrupulous dealings, non-compliance with this Code or the law or other dishonest or unethical business practices are forbidden and may result in disciplinary action, including termination of employment. |
| (d) | The Company’s Board will be responsible for administering the Code. The day to day responsibility for administering and interpreting the Code will be delegated to the Chief Financial Officer. |
| 2. | Compliance With Laws and Regulations |
Any operating, financial or administrative transaction undertaken in the name of the Company that would violate the Federal, Provincial or State laws of the United States, Canada or any other location where the Company transacts business, or any associated regulations is prohibited. Particular attention is directed to the laws and regulations relating to discrimination, securities, labor and the environment. If any uncertainty arises as to whether a course of action is within the letter and spirit of the law, advice should be obtained in advance from the Company’s counsel directly or with the assistance of the Corporate Secretary.
| (a) | A Non-Discriminatory Environment. The Company fosters a work environment in which all individuals are treated with respect and dignity. The Company is an equal opportunity employer and does not discriminate against Employees or potential employees, officers or directors on the basis of race, color, religion, sex, national origin, age, sexual orientation or disability or any other category protected by Canadian federal or provincial laws and regulations, or any laws or regulations applicable in the jurisdiction where such individuals are located. The Company is committed to actions and policies to assure fair employment, including equal treatment in hiring, promotion, training, compensation, termination and corrective action and will not tolerate discrimination by its Employees. |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| (b) | Discrimination and Sexual Harassment. The Company will not tolerate sexual harassment or discrimination based on race, color, religion, age, sex, national origin or disability, or any other basis prohibited by applicable law. Similarly, offensive or hostile working conditions created by such harassment or discrimination will not be tolerated. Each Employee has a duty to avoid conduct that constitutes discrimination or harassment. |
| Any situation that may reasonably constitute discrimination or sexual harassment must be reported to the Chief Financial Officer or, in the alternative, the Audit Committee (see Appendix “A”). | |
| (c) | Violence in the Workplace. The Company will not tolerate violence in the workplace. Violence means the threatened, attempted or actual conduct of a person that causes or is likely to cause physical injury to person or property. Each employee has a duty to avoid conduct that constitutes violence in the workplace. Offensive, hostile or unsafe working conditions created by such violence in the workplace, are considered a hazard and will not be tolerated and may result in disciplinary action including termination of employment. |
| (d) | Substance Abuse. The Company is committed to maintaining a safe and healthy work environment free of substance abuse. Employees, officers and directors of the Company are expected to perform their responsibilities in a professional manner and, to the degree that job performance or judgment may be hindered, be free from the effects of drugs and/or alcohol. |
| (e) | Health and Safety. The Company is committed to providing a healthy and safe workplace in compliance with applicable laws, rules and regulations. Employees must be aware of the safety issues and policies that affect their job, other employees and the community in general. Managers, upon learning of any circumstance affecting the health and safety of the workplace or the community, must act immediately to address the situation. Employees must immediately advise their managers of any workplace injury or any circumstance presenting a dangerous situation to them, other co-workers or the community in general, so that timely corrective action can be taken. |
| (f) | Insider Trading and Tipping. Employees in possession of undisclosed material information about the Company must abstain from trading in its securities until such information is generally and publicly available. Such material “inside information” relates to facts or changes in business or operations that might reasonably be expected to have a significant effect on the market price or value of the Company’s securities. Such information might include, for example, major contracts, earnings estimates, changes of control or management, pending mergers, dispositions, acquisitions, or other significant business information or developments. Providing such inside information to others (“tipping”) who then trade on it is also strictly prohibited. Trading on inside information is a violation of United States and Canadian securities law. Furthermore, Employees are required to comply with trading restrictions and blackout periods as designated by the Company (see the Company’s “Insider Trading and Reporting Policy”). |
| 2 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| 3. | Confidential Information |
| (a) | Employees may become aware of information regarding actual or potential commercial transactions of the Company, information pertaining to the operations or potential operations of the Company or of other confidential information obtained in the conduct of the Company’s business. Such confidential and proprietary information is the exclusive property of the Company and each Employee is bound to keep such information in the strictest confidence both during and subsequent to the term of his or her employment. Furthermore, such information is to be used solely for the Company’s purposes and never for the private gain of an Employee, any member of his or her immediate family, or any third party. |
| (b) | Special care is required regarding the public release of information concerning the Company’s business, strategies, activities and plans, the disclosure of which could influence investors trading in the Company’s securities. All media contact and public statements and discussions regarding the Company’s business must only be made by the Chief Executive Officer or Chief Financial Officer of the Company or their designees. |
| (c) | The Company may collect, use and store personal information about its Employees and others in the course of its business activities. This collection, use and disclosure of personal information is subject to provincial, federal and international laws. The Company respects the privacy rights of all individuals. |
| 4. | Proprietary Data and Inventions |
| (a) | Every Employee is expected to improve productivity, modify processes and procedures and to develop new systems, devices, methods, etc. Since the Employee is provided with the compensation, staff, consulting advice, material and confidential information to fulfill this expectation, the Company is the beneficial owner of the results or efforts. Accordingly, any proprietary information which an Employee obtains, prepares or develops, while in the employ of the Company is the property of the Company. |
| (b) | For greater clarity, proprietary information includes, but is not limited to reports, analyses, patentable ideas, trademarks, copyright material, industrial designs, charts, drawings, computer systems, etc. |
| 5. | Conflicts of Interest |
| (a) | General Policy. No Employee should enter into any transaction or engage in any practice directly or indirectly which would tend to influence him or her to act in any manner other than in the best interests of the Company. In particular, it is improper for an Employee to take any action or to make any decision or to influence, or to appear to be capable of influencing, any such action or decision, on behalf of the Company if he or she, or any member of his or her immediate family, has any direct or indirect interest which is or may be in actual, potential or apparent conflict with the interests of the Company. Even the appearance of a conflict of interest may be as damaging as an actual conflict and should be avoided. |
| (b) | Other Organizations. Each Employee (except those who serve exclusively in the capacity of Director of the Company) is expected to devote his or her time and efforts during normal working hours to the service of the Company. No Employee shall engage in any business or secondary employment which interferes with his or her obligations and responsibilities to the Company. |
| 3 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| The acquisition or retention by an Employee or by a member of his or her immediate family of a financial interest in any corporation that is selling supplies, furnishing services or otherwise doing business or competing with the Company is prohibited without written prior approval of the Company’s Chief Financial Officer. This provision does not apply to an officer or Employee owning 5 percent or less of the securities of a publicly traded entity. | |
| (c) | Employment of Family Members and Employee Relationships. The Company does not prohibit spouses, parents, children, and other persons related by blood or marriage from working for the Company simultaneously. However, all such Employees must be hired by disinterested personnel strictly on the basis of merit and without regard to family relationships. Reporting relationships between family members are to be avoided to the maximum extent possible, to eliminate even the appearance of possible favoritism based on family ties. |
| (d) | Disclosure. In the event an Employee becomes aware of a potential conflict of interest, an actual conflict of interest or even the possible appearance of a conflict of interest, they must disclose such conflict to the Chief Executive Officer, or, in the case of a Director, to the Board of Directors as a whole. |
| 6. | Gifts and Payments |
| (a) | General Policy. No Employee shall directly or indirectly offer or give any “kickback” or other improper payment or consideration to any customer, government official or employee, or any other person in consideration for, or influence in, the award of a contract to the Company. This prohibition applies to consideration paid to foreign residents as well as residents of the United States and Canada. |
| No Employee or member of his or her immediate family, shall directly or indirectly solicit, accept or retain any gift, entertainment, trip, discount, compensation, service, loan or other benefit from any organization or person doing business or competing with the Company. The only exceptions are: (i) modest gifts or entertainment with nominal value as part of normal business courtesy or hospitality, e.g. meals, occasional tickets, golf green fees and gifts that are not extravagant, expensive or frequent; or (ii) gifts or benefits of significant value where written approval by an officer of the Company has been provided prior to the acceptance. A copy of such written approval shall be provided to the Chief Financial Officer. | |
| (b) | Political Contributions. Corporate funds, credit, property or services may not be used directly or indirectly to support any political party or candidate for public office, or to support or oppose any ballot measure, without the approval of the Chief Financial Officer. Employees are permitted to support political parties and candidates with their personal efforts and money. |
| 7. | Accounting and Financial Reporting |
The Company is committed to achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices. Every Employee is required to follow prescribed accounting and financial reporting procedures. All accounting records should accurately reflect and describe corporate transactions. The recording of such data must not be falsified or altered in any way to conceal or distort assets, liabilities, revenues, expenses or the nature and results of the Company’s activity.
| 4 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| 8. | Compliance and Enforcement |
The Company is committed to providing a work environment based on trust and respect and enabling all Employees to work without fear of intimidation or discrimination. As part of this commitment, the Company encourages an open and frank atmosphere in which problems, concerns or complaints can be raised without fear of retaliation.
Each Employee is responsible for adherence to, and bound as a condition of employment, by this Code. Any suspected violation of this Code should be reported promptly in accordance with this Code and Appendix “A” hereto without regard to the usual lines of reporting.
| (a) | Raising a Complaint or Concern. Any Employee may report a violation or suspected violation of any aspect of this Code in accordance with the procedure set out in Appendix “A” attached to this Code. The person reporting a violation or suspected violation of this Code should use their judgment as to the most appropriate method of raising their complaint or concern. |
| (b) | Activities that must be Reported. The following activities (each a “Reportable Activity”) must be reported by Employees of the Company promptly (see Appendix “A”): |
| (i) | Any concerns or complaints with respect to the Company’s accounting, internal accounting controls, financial reporting or auditing matters including: |
| (A) | Fraud or deliberate error in the preparation, evaluation, review or audit of any financial statement of the Company; | |
| (B) | Fraud or deliberate error in the recording and maintaining of financial records of the Company; | |
| (C) | Deficiencies in or non-compliance with the Company’s internal accounting controls; | |
| (D) | Tampering with, or the deliberate destruction or removal of financial records during the Company’s normal retention period of such financial records; | |
| (E) | Misrepresentation or false statement to or by an officer, Employee, consultant or external accountant regarding a matter contained in the financial records, financial reports or audit reports of the Company; or | |
| (F) | Any effort to mislead, deceive, manipulate, coerce or fraudulently influence any internal or external accountant or auditor in connection with the preparation, examination, audit or review of any financial statement or records of the Company. |
| (ii) | Any evidence of an activity by an Employee of the Company or by any department within the Company that may constitute corporate fraud, a violation of federal or provincial laws, including the misappropriation of any Company property or use of Company funds for any illegal, improper or unethical purpose. |
| 5 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| (iii) | Any threatened, attempted or actual conduct that causes or is likely to cause physical injury. | |
| (iv) | Any violation or suspected violation of the matters covered by this Code. |
| (c) | Interpretation. Questions of interpretation or application of this Code with respect to a particular situation should be raised in a timely manner using the same procedure as the raising of a complaint or concern (see Appendix “A”) as circumstances dictate. Such requests may be made in writing or orally and will be treated confidentially. |
| (d) | Confidentiality. The Company is fully committed to maintain adequate procedures for the confidential, anonymous reporting by an Employee of a Reportable Activity. |
| Any submission made by an Employee regarding a Reportable Activity shall be treated on a confidential and, if desired by the Employee on an anonymous basis. A submission shall only be disclosed to those persons who have a need to know in order to properly carry out an investigation of the Reportable Activity, in accordance with the procedures set out in Appendix “A” for handling such Reportable Activity. | |
| (e) | Retaliation. Any Employee, who in good faith reports what they believe to be a Reportable Activity, will be protected from threats of retaliation, discharge, or other types of adverse action or discrimination including but not limited to, lower compensation or inferior terms and conditions of employment that are directly related to the disclosure of such Reportable Activity. |
| Any Employee who retaliates against another Employee who reports a Reportable Activity in good faith may face disciplinary action, including termination of his or her employment, without notice. | |
| 9. | Exceptions, Changes and Disclaimers |
| (a) | Any exception or waiver in favor of a director or officer of the Company must be approved in writing by the Board of Directors. Exceptions or waivers for other Employees must be approved in writing by the Chief Executive Officer with a copy provided to the Chief Financial Officer. Any change to this policy must be in writing approved by the Board of Directors and signed by the Chief Executive Officer. |
| (b) | The Company reserves the right to amend this Code, in whole or in part, at any time and solely at its discretion. |
| (c) | Where applicable, this Code is not an employment contract between the Company and any of its employees. |
| 6 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
I have read, understand and agree to be bound by, as a condition of employment, this Code of Business Conduct and Ethics.
| Employee Signature | Witness Signature | |
| Employee Name (Please Print) | Date |
SOLARBANK CORPORATION
| 7 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
Appendix A
To The Code of Business Conduct and Ethics
PROCEDURES FOR
REPORTING A REPORTABLE ACTIVITY
Employee Complaint Procedures
Any Employee of Solarbank Corporation or its subsidiaries (the “Company”) may submit a question, concern or complaint regarding any matter covered by this Code to the management of the Company without fear of dismissal or retaliation of any kind. The Company is committed to providing a work environment based on trust, respect and ethical compliance with all applicable laws and regulations, accounting and reporting standards, accounting controls and audit practices. The Corporation’s Audit Committee (the “Committee”) will oversee the receipt, review and follow-up of Employee concerns in this area.
In order to facilitate responses to questions and the reporting of concerns or complaints, the Company has established the following procedures.
Communication regarding a Reportable Activity
Depending on the circumstances, the nature of the Reportable Activity (as defined in The Code of Business Conduct and Ethics) and the desire for confidentiality or anonymity, any Employee of the Company may submit a question, concern or complaint through one or more of the following channels:
| (1) | Their immediate supervisor; |
| (2) | The Chief Financial Officer; and/or |
| (3) | The Chairman of the Committee. |
If bringing a Reportable Activity to the attention of their immediate supervisor is considered inappropriate or does not provide the desired level of confidentiality, the Employee should report the Reportable Activity directly to the Chief Financial Officer who will treat all disclosures in confidence and will involve only those individuals who need to be involved in order to conduct an investigation. If the Employee wishes to remain anonymous, or if they consider it inappropriate to submit the Reportable Activity to a senior officer of the Company, the question, concern or complaint may be submitted to the Chairman of the Committee on an anonymous and confidential basis using the contact information set out below. Anonymous written or telephone communications will be accepted.
Handling the Reporting of a Reportable Activity
| (1) | Any Employee of the Company including the Chief Financial Officer who receives a submission from any person regarding a Reportable Activity shall treat such submission in a confidential manner and shall immediately report such submission to the Chair of the Committee, regardless of the materiality of the allegation. All submissions received by the Chair of the Committee will be investigated. |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
| (2) | Submissions not related to a Reportable Activity will be directed to the Chief Financial Officer who shall deal with such submission in a confidential manner in the normal course of business. |
| (3) | The Chair of the Committee, upon receipt of any submission regarding a Reportable Activity, shall: |
| (a) | review and assess the seriousness of the Reportable Activity with the members of the Committee and together, determine the manner in which and by whom the Reportable Activity will be investigated, including the use of internal and external resources as the Committee determines, in its sole discretion to be appropriate. Confidentiality will be maintained to the fullest extent possible, consistent with the need to conduct an adequate review; | |
| (b) | depending on the nature of a Reportable Activity and its materiality as determined by the Committee, and in particular with respect to submissions that could materially affect the financial statements of the Company or the integrity of the Company’s system of internal controls, the person(s) designated to investigate the alleged Reportable Activity will be instructed to keep the Chief Executive Officer and Chief Financial Officer (except to the extent any such persons are allegedly implicated in the Reportable Activity) apprised of the status of the investigation for purposes of ensuring compliance with regulatory requirements, including timely and continuous disclosure obligations of the Company and certification obligations by the Chief Executive Officer and Chief Financial Officer; | |
| (c) | in the event the Reportable Activity is determined to be material, the Chair of the Committee shall immediately inform the Chairman of the Board and may refer the matter to the full Board for further handling; | |
| (d) | track all Reportable Activities subject to investigation on an ongoing basis; and | |
| (e) | report directly back to the Employee who reported the Reportable Activity (if such Employee has expressly waived anonymity, has provided contact information and wishes an update on the status of the investigation). |
| (4) | Investigations of all submissions relating to Reportable Activities will be made in a timely manner. Executive officers, members of the Committee, external legal counsel and other advisors shall be consulted if necessary. |
| (5) | Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the Committee and with the approval of the Board of Directors. |
| (6) | On a quarterly basis or upon request, the Chair of the Committee shall report to the Board of Directors on all submissions on Reportable Activities received during the previous quarter through all channels of communications, how such submissions related to a Reportable Activity were handled, the results of any investigations and any corrective action taken. |
| 2 |
| SOLARBANK CORPORATION | CODE OF BUSINESS CONDUCT AND ETHICS |
Retention of Complaints and Investigations
All complaints/concerns and investigations with respect to a Reportable Activity shall be fully documented in writing by the person(s) designated to investigate the matter and such documentation will be maintained for six (6) years in the files of the Company’s legal counsel. Each Reportable Activity file will be marked as confidential and will be available for inspection by Committee members and, with written authorization from the Chairman of the Board or the Chairman of the Committee, the external auditors and any outside counsel or other advisors hired in connection with such matters.
Contact Persons
Any questions with respect to the interpretation and general application of this Policy or any report of any Reportable Activity may be made to any of the following persons:
| (1) | Sam Sun, CFO |
| 3 |
Exhibit 99.5
SOLARBANK CORPORATION
SOLARBANK CORPORATION
(Formerly Abundant Solar Energy Inc.)
Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
Three and Six Months Ended December 31,2022 and 2021
| 1 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
| Notes | December 31, 2022 | June 30, 2022 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 1,889,057 | $ | 931,977 | ||||||
| Trade and other receivables | 4 | 3,985,536 | 2,200,226 | |||||||
| Note receivables | 9 | 1,241,309 | - | |||||||
| Prepaid expenses and deposits | 5 | 2,290,439 | 2,060,455 | |||||||
| Contract fulfilment costs | 7 | - | 3,594,531 | |||||||
| Inventory | 8 | 635,279 | 195,920 | |||||||
| 10,041,620 | 8,983,109 | |||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment | 6 | 20,787 | 25,114 | |||||||
| Right-of-use assets | 11 | 167,301 | 186,314 | |||||||
| 188,088 | 211,428 | |||||||||
| Total assets | $ | 10,229,708 | $ | 9,194,537 | ||||||
| Liabilities and Shareholder’s equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 10 | $ | 3,041,934 | $ | 2,602,864 | |||||
| Advance from customer | 16,281 | 16,281 | ||||||||
| Current portion of long-term debt | 13 | 95,556 | 111,111 | |||||||
| Loan payables | 12 | - | 567,664 | |||||||
| Tax payable | 36,894 | 19,225 | ||||||||
| Convertible debentures | 14 | 1,164,773 | - | |||||||
| Current portion of lease liability | 11 | 40,479 | 48,764 | |||||||
| 4,395,917 | 3,365,909 | |||||||||
| Non-current liabilities: | ||||||||||
| Long-term debt | 13 | 870,370 | 1,230,643 | |||||||
| Deferred tax liabilities | 3,430 | 3,430 | ||||||||
| Lease liability | 10 | 151,790 | 153,940 | |||||||
| 1,025,590 | 1,388,013 | |||||||||
| Total liabilities | $ | 5,421,507 | $ | 4,753,922 | ||||||
| Shareholders’ equity: | ||||||||||
| Share capital | 16 | 1,000 | 1,000 | |||||||
| Convertible debentures – equity component | 14 | 113,636 | - | |||||||
| Accumulated other comprehensive income | (24,782 | ) | 73,767 | |||||||
| Retained earnings | 4,763,064 | 4,410,565 | ||||||||
| Equity attributable to shareholders of the company | 4,852,918 | 4,485,332 | ||||||||
| Non-controlling interest | (44,717 | ) | (44,717 | ) | ||||||
| Total equity | 4,808,201 | 4,440,615 | ||||||||
| Total liabilities and shareholders’ equity | $ | 10,229,708 | $ | 9,194,537 | ||||||
Approved and authorized for issuance on behalf of the Board of Directors on February 28, 2023 by:
| “Richard Lu” | “Sam Sun” | |
| Richard Lu, CEO, and Director | Sam Sun, CFO |
See accompanying notes to these condense interim consolidated financial statements.
| 2 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Expressed in Canadian dollars)
(Unaudited)
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||||
| Notes | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Revenue from EPC services | $ | 2,932,635 | $ | 6,107,416 | $ | 8,398,177 | $ | 8,409,473 | ||||||||||
| Revenue from development fees | - | 104,215 | - | 404,215 | ||||||||||||||
| Revenue from O&M services | 32,299 | - | 47,209 | - | ||||||||||||||
| 2,964,934 | 6,211,631 | 8,445,386 | 8,813,688 | |||||||||||||||
| Cost of goods sold | (1,926,479 | ) | (5,488,273 | ) | (6,844,012 | ) | (7,558,278 | ) | ||||||||||
| Gross profit | 1,038,455 | 723,358 | 1,601,374 | 1,255,410 | ||||||||||||||
| Operating expense: | ||||||||||||||||||
| Accounting and legal | (145,246 | ) | (18,341 | ) | (191,049 | ) | (57,434 | ) | ||||||||||
| Advertising and promotion | (38,613 | ) | (675 | ) | (38,613 | ) | (675 | ) | ||||||||||
| Bank charges & interest | (2,495 | ) | (2,196 | ) | (6,149 | ) | (6,085 | ) | ||||||||||
| Depreciation | (13,593 | ) | (2,096 | ) | (23,339 | ) | (4,192 | ) | ||||||||||
| Insurance | (34,002 | ) | (15,760 | ) | (57,788 | ) | (31,520 | ) | ||||||||||
| Office and miscellaneous | (42,017 | ) | (12,153 | ) | (109,926 | ) | (16,872 | ) | ||||||||||
| Rent | (6,920 | ) | (24,024 | ) | (14,079 | ) | (44,474 | ) | ||||||||||
| Repairs and maintenance | (1,181 | ) | (1,734 | ) | (1,850 | ) | (3,468 | ) | ||||||||||
| Salary and Wages | (503,022 | ) | (392,441 | ) | (743,394 | ) | (918,739 | ) | ||||||||||
| Seminars and conferences | (56,812 | ) | - | (58,089 | ) | - | ||||||||||||
| Telephone and utilities | (10,854 | ) | (7,321 | ) | (17,125 | ) | (24,641 | ) | ||||||||||
| Travel and accommodation | (35,207 | ) | (23,649 | ) | (54,813 | ) | (28,529 | ) | ||||||||||
| Total operating expenses | (889,962 | ) | (500,391 | ) | (1,316,214 | ) | (1,136,630 | ) | ||||||||||
| Other income (loss) | ||||||||||||||||||
| Interest expense, net | (9,643 | ) | (36,841 | ) | (42,425 | ) | (79,641 | ) | ||||||||||
| Other income (expense) | (12,308 | ) | 164,230 | 109,764 | 222,995 | |||||||||||||
| Net Income before taxes | $ | 126,542 | $ | 350,357 | $ | 352,499 | $ | 262,135 | ||||||||||
| Current translation adjustments, net of tax of $nil | (37,074 | ) | 48,975 | (98,549 | ) | 194,928 | ||||||||||||
| Net income and comprehensive income | $ | 89,468 | $ | 399,331 | $ | 253,950 | $ | 457,062 | ||||||||||
| Net income attributable to: | ||||||||||||||||||
| Shareholders of the company | 126,542 | 350,357 | 352,499 | 262,135 | ||||||||||||||
| Non-controlling interest | - | - | - | - | ||||||||||||||
| Net Income | $ | 126,542 | $ | 350,357 | $ | 352,499 | $ | 262,135 | ||||||||||
| Total income and comprehensive income attributable to: | ||||||||||||||||||
| Shareholders of the company | 89,468 | 399,331 | 253,950 | 457,062 | ||||||||||||||
| Non-controlling interest | - | - | - | - | ||||||||||||||
| Total income and comprehensive income | $ | 89,468 | $ | 399,331 | $ | 253,950 | $ | 457,062 | ||||||||||
| Net income per share | ||||||||||||||||||
| Basic | 0.01 | 0.02 | 0.02 | 0.02 | ||||||||||||||
| Diluted | 0.01 | 0.02 | 0.02 | 0.02 | ||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||
| Basic | 16,000,000 | 16,000,000 | 16,000,000 | 16,000,000 | ||||||||||||||
| Diluted | 23,255,435 | 16,000,000 | 19,627,717 | 16,000,000 | ||||||||||||||
See accompanying notes to these condensed interim consolidated financial statements
| 3 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian Dollars)
(Unaudited)
| Note | Share Capital | Share Capital | Contributed Surplus | Retained Earnings | Accumulated OCI | Total Shareholders’ Equity | Non-Controlling Interest | Total Equity | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | 16,000,000 | $ | 1,000 | - | $ | 4,598,958 | $ | (145,939 | ) | $ | 4,454,019 | $ | (44,717 | ) | $ | 4,409,302 | ||||||||||||||||||
| Net income for the period | - | - | - | 262,135 | - | 262,135 | - | 262,135 | ||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | 194,928 | 194,928 | - | 194,928 | ||||||||||||||||||||||||||
| Balance at December 31,2021 | 16,000,000 | $ | 1,000 | - | $ | 4,861,093 | $ | 48,989 | $ | 4,911,082 | $ | (44,717 | ) | $ | 4,866,365 | |||||||||||||||||||
| Net loss for the period | - | - | - | (450,528 | ) | - | (450,528 | ) | - | (450,528 | ) | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | 24,778 | 24,778 | - | 24,778 | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | |||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | |||||||||||||||||||
| Net income for the period | - | - | - | 352,499 | - | 352,499 | - | 352,499 | ||||||||||||||||||||||||||
| Convertible debentures – equity component |
113,636 | 113,636 | 113,636 | |||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | (98,549 | ) | (98,549 | ) | - | (98,549 | ) | |||||||||||||||||||||||
| Balance at December 31,2022 | 16,000,000 | $ | 1,000 | $ | 113,636 | $ | 4,763,064 | $ | (24,782 | ) | $ | 4,852,918 | $ | (44,717 | ) | $ | 4,808,201 | |||||||||||||||||
See accompanying notes to condensed interim consolidated financial statements
| 4 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
| Six months ended December 31 | ||||||||
| In Canadian Dollars | 2022 | 2021 | ||||||
| Operating activities: | ||||||||
| Net income | $ | 352,499 | $ | 262,135 | ||||
| Items not involving cash: | ||||||||
| Depreciation | 23,339 | 4,192 | ||||||
| Interest accretion on convertible debentures | 28,409 | - | ||||||
| Interest expenses | 36,562 | 22,182 | ||||||
| Forgiveness of loan receivable | - | - | ||||||
| 440,809 | 288,509 | |||||||
| Changes in non-cash working capital balances: | ||||||||
| Accounts receivable | (2,144,191 | ) | 812,516 | |||||
| Dividends receivable | (1,206,984 | ) | ||||||
| Other receivable | (101,817 | ) | 486,016 | |||||
| Contract fulfilment costs | 3,660,468 | - | ||||||
| Inventory | (348,735 | ) | - | |||||
| Prepaids | (111,511 | ) | 1,216,405 | |||||
| Accounts payable and accrued liabilities | (569,286 | ) | (1,347,107 | ) | ||||
| Other payable | 385,737 | - | ||||||
| Advance from customer | - | (33,413 | ) | |||||
| Income tax payable | 18,363 | (17,374 | ) | |||||
| Deferred taxes | - | - | ||||||
| Changes in due to related parties | 126,474 | (92,756 | ) | |||||
| Cash provided by operating activities | 149,327 | 1,312,796 | ||||||
| Investing activities: | ||||||||
| Acquisition of property, plant and equipment | - | (3,889 | ) | |||||
| Cash used in investing activities | - | (3,889 | ) | |||||
| Financing activities: | ||||||||
| Net proceeds from convertible loan | 1,250,000 | - | ||||||
| Repayment of lease obligation | (8,991 | ) | - | |||||
| Repayment of short-term loans | (595,712 | ) | (907,128 | ) | ||||
| Repayment of long-term debts | (388,666 | ) | - | |||||
| Increase in due to related parties | 623,579 | - | ||||||
| Cash provided by (used in) financing activities | 880,210 | (907,128 | ) | |||||
| Effect of changes in exchange rates on cash | (53,138 | ) | 88,720 | |||||
| Increase (decrease) in cash | 957,080 | 490,499 | ||||||
| Cash and cash equivalents, beginning | 931,977 | 1,400,073 | ||||||
| Cash and cash equivalents, ending | 1,889,057 | 1,890,572 | ||||||
| Interest paid | (19,319 | ) | 22,182 | |||||
| Income tax paid | - | - | ||||||
See accompanying notes to condensed interim consolidated financial statements.
| 5 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 1. | Nature of operations: |
| SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022. | |
| The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2. | |
| On October 17, 2022, the Company completed a share split on a 1:160 basis. The 100,000 pre-split common shares issued and outstanding were adjusted to 16,000,000 post-split common shares. Total number of outstanding common shares after the split became 16,000,000. As required by International Accounting Standards (“IAS”) 33 Earnings per Share, all references to share capital, common shares outstanding, warrants outstanding, options outstanding, and per share amounts in these consolidated financial statements and the accompanying notes for time periods prior to the share split have been restated to reflect the share split on a 1:160 basis. | |
| 2. | Basis of presentation |
| (a) | Statement of compliance: | |
| These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2022. | ||
| The board approved these consolidated financial statements of directors for issue on February 28,2023. | ||
| (b) | Basis of measurement: | |
| These condensed interim consolidated financial statements were prepared on a going concern basis and historical cost basis with the exception of certain financial instruments as disclosed in note 3. | ||
| (c) | Basis of consolidation: |
| (i) | Subsidiaries | |
| These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries. | ||
| Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the |
| 6 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Basis of presentation |
| (i) | Subsidiaries (continue) |
| subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non-controlling interests’ relative interests in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interest and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to equity holders of the Company. There are no changes in ownership interest in subsidiaries for the period end December 31, 2022. Details of the Company’s ownership interests in its subsidiaries are as follows: |
| Name | Method of accounting | Ownership interest | ||
| Abundant Solar Power Inc. | Consolidation | 100% | ||
| Abundant Construction Inc. | Consolidation | 100% | ||
| Abundant Energy Solutions Ltd. | Consolidation | 100% | ||
| 2467264 Ontario Inc. | Consolidation | 49.9% | ||
| Abundant Solar Power (Portland) LLC | Consolidation | 100% | ||
| Abundant Solar Power (G1S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Cameron) LLC | Consolidation | 100% | ||
| Abundant Solar Power (B4S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Steuben) LLC | Consolidation | 100% | ||
| Abundant Solar Power (CNY) LLC | Consolidation | 100% | ||
| Abundant Solar Power (G2S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Richmond) LLC | Consolidation | 100% | ||
| Abundant Solar Power (M1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (B1S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (RP) LLC | Consolidation | 100% | ||
| Abundant Solar Power (G3S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (B2S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (TZ1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Nipher) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Edmond) LLC | Consolidation | 100% | ||
| Abundant Solar Power (R1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Hubbard) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Wheaton) LLC | Consolidation | 100% | ||
| Abundant Solar Power (VC1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (CA1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (US1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (J1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (New York) LLC | Consolidation | 100% | ||
| Abundant Solar Power (A2) LLC | Consolidation | 100% | ||
| Abundant Solar Power (E1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (WL1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (CC3) LLC | Consolidation | 100% |
| 7 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Basis of presentation |
| (i) | Subsidiaries (continue) |
| Name | Method of accounting | Ownership interest | ||
| Abundant Solar Power (CL1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Barnes) LLC | Consolidation | 100% | ||
| Abundant Solar Power (B3S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (B5S) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Deiter) LLC | Consolidation | 100% | ||
| Abundant Solar Power (AD1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (AD2) LLC | Consolidation | 100% | ||
| Abundant Solar Power (LCP) LLC | Consolidation | 100% | ||
| Abundant Solar Power (WB 13N) LLC | Consolidation | 100% | ||
| Abundant Solar Power (WB 13W) LLC | Consolidation | 100% | ||
| Abundant Solar Power (WB 14-4) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Erwin) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Maryland) LLC | Consolidation | 100% |
| (ii) | Functional and presentation currency: | |
| The Company’s condensed interim consolidated financial statements are presented in Canadian dollars. The functional currency of Canadian parent company and its Canadian subsidiaries is the Canadian dollar. The functional currency of its subsidiaries in the United States is the US dollar. |
| 3. | Significant accounting policies |
| (a) | Revenue recognition: | |
| The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services. | ||
| The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer. | ||
| At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations. | ||
| Project development services | ||
| Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction. | ||
| OM services | ||
| OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract. |
| 8 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (a) | Revenue recognition (continued): | |
| EPC services | ||
| The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue. | ||
| (b) | Inventory: | |
| Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs. | ||
| (c) | Foreign currency translation: | |
| The functional currency of the Company is the Canadian Dollar. Functional currencies of the Company’s subsidiaries are the currency of the primary economic environment in which the subsidiary operates. | ||
| Monetary assets and liabilities denominated in foreign currencies are translated to the appropriate functional currency at foreign exchange rates as at the balance sheet date. Foreign exchange differences arising on translation are recognized in the statement of income and loss. Non-monetary assets that are measured in a foreign currency at historical cost are translated using the exchange rate at the date of the transaction. | ||
| In preparing the Company’s consolidated financial statements, the financial statements of each entity are translated into Canadian dollars. The assets and liabilities of foreign operations are translated into Canadian dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. Foreign exchange differences are recognized in other comprehensive income. | ||
| (d) | Financial instruments: | |
| The Company recognizes a financial asset or a financial liability in its consolidated statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability. |
| 9 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (i) | Financial assets: | |
| The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss based on its business model for managing the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are defined as follows: |
| A. | Financial assets at amortized cost: |
| A financial asset is measured at amortized cost if both of the following conditions are met: |
| ● | the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and | |
| ● | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. | |
| ● | The Company’s trade and other receivables and note receivable are measured at amortized cost. |
| B. | Financial assets at fair value through other comprehensive income: | |
| Financial assets are classified and measured at fair value through other comprehensive loss if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The Company does not have any financial assets classified as fair value through other comprehensive loss. | ||
| C. | Financial assets at fair value through profit or loss: | |
| Any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss. The Company’s cash is classified as fair value through profit or loss. |
| (ii) | Financial liabilities: | |
| The Company’s financial liabilities include accounts payable and accruals, advance from vendor, loan payable, and long-term debt. The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. The Company’s accounting policy for each category is as follows: |
| A. | Financial liabilities at fair value through profit or loss: | |
| Financial liabilities are classified at fair value through profit or loss if they are held for trading or are derivative liabilities. The Company does not have any financial liabilities classified as fair value through profit or loss. | ||
| B. | Financial liabilities at amortized cost: | |
| Financial liabilities classified at amortized cost are those that are not classified as financial liabilities at fair value through profit or loss. Subsequent to initial recognition, they are carried at amortized cost using the effective interest method. The Company’s trade and other payables, loan payable, lease liabilities, convertible debenture and long-term debt are classified at amortized cost. |
| (iii) | Finance income and finance costs | |
| Investment income on financial assets at amortized cost and FVOCI are amortized using the effective interest rate method. | ||
| Finance fees and transaction costs on financial assets at FVTPL are expensed as incurred. |
| 10 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (iv) | Expected credit losses: | |
| In accordance with IFRS 9, loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortized cost or at FVOCI are recognized. ECLs are updated at each reporting date on the basis of available information. The Company applies the simplified approach described in IFRS 9 to trade receivables, whereby the amount of the impairment allowance of a receivable is measured subsequent to initial recognition on the basis of lifetime expected credit losses. |
| (e) | Basic and diluted net income (loss) per share | |
| Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. | ||
| (f) | Impairment of non-financial assets: | |
| At each reporting date, the Company reviews the carrying amounts of its non-financial assets including property, plant and equipment (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. | ||
| For impairment testing, assets are grouped together into cash-generating units (“CGUs”) which are the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. | ||
| Impairment losses are recognized in profit or loss. The Company evaluates impairment losses, except goodwill, for potential reversals when events or circumstances warrant such consideration. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. | ||
| (g) | Income taxes: | |
| Income tax represents current tax and deferred tax. The Company and its subsidiaries record current tax based on the taxable income for the period calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income taxes are accounted for using the liability method. The asset-liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference based on enacted or substantially enacted tax rates that are expected to be in effect when the underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as non-capital loss carry forwards, are recognized to the extent it is probable that taxable income will be available against which the asset can be utilized. |
| 11 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (h) | Property, plant and equipment: | |
| Property, plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is computed on a straight-line basis based on the nature and useful lives of the assets. The significant classes of plant and equipment and their estimated useful lives are as follows: |
| Computer equipment | 5 years | |
| Furniture and equipment | 5 years | |
| Leasehold improvement | Lesser of lease term and useful life |
| Subsequent costs that meet the asset recognition criteria are capitalized, while costs incurred that do not extend the economic useful life of an asset are considered repairs and maintenance, which are accounted for as an expense recognized during the year. | ||
| (i) | Leases: | |
| The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option. | ||
| (j) | Government grant: | |
| The government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant, and the grant will be received. The government grant is recognized in profit or loss to offset the related expenses on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset. | ||
| (k) | Significant accounting judgments and estimates: | |
| The preparation of financial statements requires management to use accounting estimates and exercise judgment in the process of applying its accounting policies. Actual results may differ from the estimates and assumptions used in preparing these consolidated financial statements. Estimates and judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the consolidated financial statements: |
| 12 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (i) | Taxes: | |
| The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. | ||
| (ii) | Expected credit loss: | |
| The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected. | ||
| (iii) | Warranties: | |
| The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three and six months ended December 31, 2022, $Nil warranty provision was recorded (3-month and 6-month ended December 31, 2021 - $Nil). | ||
| (iv) | Contract fulfilment costs: | |
| When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15. | ||
| If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable. | ||
| The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets. | ||
| Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable. |
| 13 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (v) | Convertible debenture: | |
| The determination of the fair value of convertible debentures requires the input of highly subjective assumptions, including the expected discount rate. Changes in the input assumptions could materially affect the fair value estimate. |
| (l) | Utilization, derecognition and impairment of contract fulfilment costs: | |
| The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer. | ||
| A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal. | ||
| At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test. | ||
| (m) | Convertible debenture: | |
| The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument. | ||
| (n) | Accounting standards issued but not yet effective: | |
| The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023. | ||
| IFRS 17 Insurance Contracts | ||
| In June 2020, the International Accounting Standards Board (IASB) issued IFRS 17. IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 with earlier adoption permitted as long as IFRS 9 is also applied. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. | ||
| The Company has not early adopted IFRS 17 and determined that the adoption of this standard will not have an impact on the Company’s consolidated financial statements. |
| 14 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 4. | Trade and other receivables |
| December 31, 2022 | June 30, 2022 | |||||||
| Accounts receivable, net (1) | $ | 3,666,781 | $ | 1,857,509 | ||||
| Other receivable | 313,854 | 135,013 | ||||||
| Due from related parties (note 17) | 4,901 | 207,704 | ||||||
| $ | 3,985,536 | $ | 2,200,226 | |||||
| (1) | In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. As at December 31, 2022, there was an outstanding accounts receivable balance of $1,483,908.02 due from SFT. Management expects the accounts receivable is fully collectible once SFT receive the payments from the Ontario government in respect of terminated contracts. Due to the accounts receivable has passed its trade term in the normal course of business, the amount has been discounted by using 10% discount rate and a fair value adjustment of $212,227 has been recognized in the statement of income and comprehensive income for the year ended June 30,2021. No fair value adjustment recognized for the three months and six months ended December 31, 2022. |
| 5. | Prepaid expenses and deposits |
| December 31, 2022 | June 30, 2022 | |||||||
| Interconnection deposits(1) | $ | 2,112,054 | $ | 2,008,441 | ||||
| Security deposits | 12,352 | 14,852 | ||||||
| Other prepaids | 97,972 | 11,530 | ||||||
| Prepaid insurance | 63,770 | 18,335 | ||||||
| Prepaid rent | 4,291 | 7,297 | ||||||
| $ | 2,290,439 | $ | 2,060,455 | |||||
| (1) | Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation. |
| 15 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 6. | Property, Plant and Equipment |
| Computer equipment | Furniture and equipment | Leasehold improvement | Total | |||||||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 49,014 | $ | 83,706 | $ | 10,650 | $ | 143,370 | ||||||||
| Additions | 2,993 | - | - | 2,993 | ||||||||||||
| Balance, December 31, 2021 | $ | 52,007 | $ | 83,706 | $ | 10,650 | $ | 146,363 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 44,629 | $ | 64,364 | $ | 5,857 | $ | 114,850 | ||||||||
| Amortization | 1,750 | 2,442 | - | 4,192 | ||||||||||||
| Balance, December 31, 2021 | $ | 46,379 | $ | 66,806 | $ | 5,857 | $ | 119,042 | ||||||||
| Net Book Value- December 31, 2021 | $ | 5,628 | $ | 16,900 | $ | 4,793 | $ | 27,321 | ||||||||
| Cost: | ||||||||||||||||
| Balance, December 31, 2021 | $ | 52,007 | $ | 83,706 | $ | 10,650 | $ | 146,363 | ||||||||
| Additions/dispositions | 7,977 | - | (10,650 | ) | (2,673 | ) | ||||||||||
| Balance, June 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, December 31, 2021 | $ | 46,379 | $ | 66,806 | $ | 5,857 | $ | 119,042 | ||||||||
| Amortization/reversal | 3,594 | 1,797 | (5,857 | ) | (466 | ) | ||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Net Book Value- June 30, 2022 | $ | 10,011 | $ | 15,103 | $ | - | $ | 25,114 | ||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Additions | $ | - | $ | - | $ | - | $ | - | ||||||||
| Balance, December 31,2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Amortization | 2,838 | 1,489 | - | 4,327 | ||||||||||||
| Balance, December 31, 2022 | $ | 52,811 | $ | 70,092 | $ | - | $ | 122,903 | ||||||||
| Net Book Value, December 31, 2022 | $ | 7,173 | $ | 13,614 | $ | - | $ | 20,787 | ||||||||
| 7. | Contract fulfilment costs |
As of December 31, 2022 and June 30, 2022, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.
| Balance, June 30, 2022 | $ | 3,594,531 | ||
| Utilised during the period | (3,660,468 | ) | ||
| FX Impact | 65,937 | |||
| Balance, December 31, 2022 | $ | - |
| 16 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 8. | Inventory |
| As of December 31, 2022 and June 30, 2022, the Company’s inventory is comprised of development costs for the solar projects. |
| Balance, June 30, 2021 | 593,784 | |||
| Additions: development costs | - | |||
| Minus: development costs expensed to cost of goods sold | - | |||
| FX Impact | 13,855 | |||
| Balance, December 31, 2021 | $ | 607,639 | ||
| Balance, December 31, 2021 | 607,639 | |||
| Additions: development costs | 110,241 | |||
| Minus: development costs expensed to cost of goods sold | (512,832 | ) | ||
| FX Impact | (9,128 | ) | ||
| Balance, June 30, 2022 | $ | 195,920 | ||
| Balance, June 30, 2022 | 195,920 | |||
| Additions: development costs | 428,191 | |||
| Minus: development costs expensed to cost of goods sold | - | |||
| FX Impact | 11,168 | |||
| Balance, December 31, 2022 | $ | 635,279 |
| 9. | Note receivable |
| On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,984 (USD $891,158) since August 2022 to note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note was expected to be repaid in full on February 28, 2023. As at December 31, 2022, an accrued interest of $34,325 (USD $24,619) was receivable from this customer. The Company had not received the payment by February 28, 2023. It is expected to be repaid in March 2023. |
| 10. | Trade and other payables |
| December 31, 2022 | June 30, 2022 | |||||||
| Accounts payable and accrued liabilities | $ | 1,325,028 | $ | 1,950,817 | ||||
| Due to related party | 744,920 | 104,545 | ||||||
| Other payable | 971,986 | 547,502 | ||||||
| $ | 3,041,934 | $ | 2,602,864 | |||||
| 17 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 11. | Right of use assets and lease liabilities |
| The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%. | |
| There was no balance for the right-of-use assets as at December 31, 2021 due to the remaining lease term was within one year and all lease payments were recognized in the statement of income (loss) and comprehensive income (loss). The continuity of the right-of-use as of December 31, 2022 and June 30, 2022 is as follows: |
| Right-of- use assets | Office | |||
| Cost: | ||||
| Balance, December 31 and June 30, 2021 | - | |||
| Addition | 197,719 | |||
| Balance, June 30, 2022 | 197,719 | |||
| Addition | - | |||
| Balance, December 31, 2022 | 197,719 | |||
| Accumulated amortization: | ||||
| Balance, December 31 and June 30, 2021 | - | |||
| Amortization | 11,405 | |||
| Balance, June 30, 2022 | 11,405 | |||
| Amortization: | 19,013 | |||
| Balance, December 31, 2022 | 30,418 | |||
| Net Book Value, June 30, 2021 | 186,314 | |||
| Net Book Value, December 31, 2022 | 167,301 | |||
| The continuity of the lease liabilities as of December 31, 2022 and June 30, 2022 is as follows: |
| Lease liabilities | Office | |||
| Balance, December 31 and June 30, 2021 | - | |||
| New obligations | 197,719 | |||
| Interest accretion | 4,985 | |||
| Balance, June 30, 2022 | 202,704 | |||
| Payments: | (18,786 | ) | ||
| Interest accretion: | 8,351 | |||
| Balance, December 31, 2022 | 192,269 | |||
| Current | 40,479 | |||
| Long term | 151,790 | |||
| Net Book Value, December 31, 2022 | 192,269 | |||
| 18 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 11. | Right of use assets and lease liabilities (continued) |
| The maturity analysis of the Company’s contractual undiscounted lease liabilities as of December 31, 2022 is as follows: |
| 2023 | $ | 28,179 | ||
| 2024 | 60,696 | |||
| 2025 | 64,492 | |||
| 2026 | 68,272 | |||
| 2027 | 5,716 | |||
| Total | $ | 227,355 |
| 12. | Loan payable |
| December 31, 2022 | June 30, 2022 | |||||||
| Shareholder loan (1) | $ | - | $ | 567,664 | ||||
| $ | - | $ | 567,664 | |||||
| (1) | On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The loan has a maturity of January 7, 2022 as well as the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. The balance at June 30, 2022 was $567,664. The Company fully repaid the loan plus interest of $5,677 on September 16, 2022. |
| 13. | Long-term debt |
| December 31, 2022 | June 30, 2022 | |||||||
| Highly Affected Sectors Credit Availability Program (1) | $ | 925,926 | $ | 981,481 | ||||
| Canadian Emergency Business Account (2) | 40,000 | 40,000 | ||||||
| Promissory Note (3) | - | 320,273 | ||||||
| Total | 965,926 | 1,341,754 | ||||||
| Less: current portion | 95,556 | 111,111 | ||||||
| Long-term portion | $ | 870,370 | $ | 1,230,643 | ||||
| (1) | In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months and six months ended December 31, 2022, the interest recorded and paid was $9,803 and $19,325 (3-month and 6-month period ended December 31, 2021 - $10,082 and $20,164). | |
| (2) | The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. |
| 19 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 13. | Long-term debt (continued) |
| The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met. | ||
| (3) | On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 in principal and $13,146 in interest has been fully repaid on October 6, 2022. | |
| Estimated principal repayments are as follows: |
| 2023 | $ | 95,556 | ||
| 2024 | 111,111 | |||
| 2025 | 111,111 | |||
| 2026 | 111,111 | |||
| 2026 onwards | 537,037 | |||
| Total | $ | 965,926 |
| 14. | Convertible debenture |
| During the three months period ended December 31, 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant. | |
| Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. | |
| Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a venture issuer. | |
| Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering. | |
| On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. At December 31, 2022, an interest accretion of $28,409 was recognized. A continuity of the liability portion of the convertible debentures is as follows: |
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 28,409 | |||
| Balance, December 31, 2022 | $ | 1,164,773 |
| 20 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 15. | Financial instruments |
| The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt. |
| (a) | Fair value: | |
| The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows: |
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
| Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument. | ||
| The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest. | ||
| (b) | Financial risk management: |
| (i) | Credit risk and economic dependence: | |
| Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk. | ||
| The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions. | ||
| (ii) | Concentration risk and economic dependence: | |
| The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable. |
| 21 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 15. | Financial instruments (continued) |
Six months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,783,272 | 68 | % | ||||
| Six months ended December 31, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 7,935,169 | 90 | % | ||||
Three months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 1,851,848 | 62 | % | ||||
| Three months ended December 31, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,937,705 | 96 | % | ||||
| December 31, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 1,859,974 | 51 | % | ||||
| Customer B | $ | 1,483,908 | 40 | % | ||||
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
| (iii) | Liquidity risk: | |
| Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms. | ||
| (iv) | Interest rate risk: | |
| Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant. |
| 22 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Share Capital |
| (a) | Authorized | |
| 16,000,000 common shares. | ||
| (b) | Issued and outstanding share capital | |
| On September 23, 2013, 100 common shares were issued at $0.01 per share for total of $1. On May 1, 2014, 99,900 common shares were issued at $0.01 per shares for a total $999. | ||
| On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000. |
| 17. | Related Party Transactions |
| Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand. | |
| As at December 31, 2022, included in trade and other receivable was $4,091 (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company. | |
| As at December 31, 2022, included in trade and other payable was $774,920 (June 30, 2022 - $Nil) due to Sustainable Investment Ltd. One of SIL’s director is also the controlling shareholder of the Company. | |
| As at December 31, 2022, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022. | |
| Compensation of key management personnel | |
| The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended December 31, 2022 and 2021 were as follows: |
| Three Month Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Short-term employee benefits | $ | 504,357 | $ | 217,454 | ||||
| Six Month Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Short-term employee benefits | $ | 740,339 | $ | 481,476 | ||||
Short-term employee benefits solely include consulting fees.
| 23 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 18. | Covid-19 Impact |
| To combat the spread of the COVID-19 pandemic, authorities in all regions where the Company operates have put in place restrictive measures for businesses. Current or future restrictive measures might have an adverse effect on the financial stability of the Company’s suppliers and other partners, or on the Company’s operating results, financial position, liquidity or capital expenditures. The issuance of permits and authorizations, negotiations and finalizations of agreements with regard to development and acquisition projects, construction activities and procurement of equipment have been and could continue to be adversely impacted by the COVID-19 restrictive measures. The full potential impact of COVID-19 on the Company’s business is unknown as it may continue for an extended period and will depend on future developments that are uncertain and cannot be predicted, including, and without limitation, the duration and severity of the pandemic, the duration of government mitigation measures, the effectiveness of the actions taken to contain and treat the disease, and the length of time it takes for normal economic and operating conditions to resume. The Company adopted flexible work arrangement which allow the employees to work from home if needed during the COVID 19 pandemic. The Company participated in specific Canadian government COVID support programs. During the three months and six months period ended December 31, 2022, the Company received $Nil and $Nil of Canada Emergency Rent Subsidy (3-month ended December 31, 2021 - $16,989; 6-months ended December 31, 2022 - $16,989) and $Nil and $Nil of Canada Emergency Wage Subsidy (3-month ended December 31, 2021 - $71,420; 6-month ended December 31, 2021-$116,518) from the Canadian government. | |
| 19. | Capital Management |
| The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following: |
| December 31,2022 | June 30, 2022 | |||||||
| Long-term debt -non-current portion (note 13) | $ | 870,370 | 1,230,643 | |||||
| Shareholder Equity | $ | 4,808,201 | 4,440,615 | |||||
| The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date. |
| There has not been any significant change in capital management from the prior year. | |
| 20. | Segment reporting |
| The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided. | |
| The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three months and six months period ended December 31, 2022 and 2021are as follows: |
| 24 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and six months ended December 31, 2022, and 2021
(Expressed in Canadian Dollars)
(Unaudited)
| 20. | Segment reporting (continued) |
| Revenue from external customers | ||||||||||||||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Canada | $ | 508,351 | 17,963 | $ | 523,261 | 17,963 | ||||||||||
| United States | 2,456,583 | 6,193,668 | 7,922,125 | 8,795,725 | ||||||||||||
| $ | 2,964,934 | 6,211,631 | $ | 8,445,386 | 8,813,688 | |||||||||||
| Non-current assets | ||||||||
| December 31, 2022 | June 30,2021 | |||||||
| Canada | $ | 188,088 | 211,428 | |||||
| United States | - | - | ||||||
| $ | 188,088 | 211,428 | ||||||
| 21. | Subsequent events |
| a) | On March 1, 2023 the Company will close its initial public offering (the “Offering”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consisted of a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Company previously obtained a receipt for its final long form prospectus (the “Final Prospectus”) filed with the securities regulatory authorities in Ontario, British Columbia and Alberta, in connection with the Offering. The Company also has received final approval from the Canadian Securities Exchange (the “CSE”) to list its Common Shares on the CSE. With the completion of the Offering, the Company will commence trading on the CSE under the symbol “SUNN” on March 2, 2023. The Offering was made only by the Final Prospectus. The Final Prospectus contains important detailed information about the Offering. A copy of the Final Prospectus is available on SEDAR at www.sedar.com. |
| ● | The expected cost and deduction are below: | |
| ● | Agent commission: $362,250 | |
| ● | Agent Fees (include tax): $80,235 | |
| ● | As additional compensation, the Company has agreed to issue to the Agent, that number of common share purchase warrants of the Company (the “Broker Warrants”) as is equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option). Each Broker Warrant will entitle the holder thereof to purchase one (1) Common Share (as defined below) (each, a “Broker Warrant Share”) at the Offering Price for a period of 36 months following the Closing Date. |
| b) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. The case does not represent a material threat to the Company. |
| 25 |
Exhibit 99.6
Exhibit 99.7
Form 46-201F1
Escrow Agreement
Table of Contents
| PART | TITLE | |
| PART 1 | ESCROW | |
| 1.1 | Appointment of Escrow Agent | |
| 1.2 | Deposit of Escrow Securities in Escrow | |
| 1.3 | Direction to Escrow Agent | |
| PART 2 | RELEASE OF ESCROW SECURITIES | |
| 2.1 | Release Schedule for an Established Issuer | |
| 2.2 | Release Schedule for an Emerging Issuer | |
| 2.3 | Delivery of Share Certificates for Escrow Securities | |
| 2.4 | Replacement Certificates | |
| 2.5 | Release upon Death | |
| PART 3 | EARLY RELEASE ON CHANGE OF ISSUER STATUS | |
| 3.1 | Becoming an Established Issuer | |
| 3.2 | Release of Escrow Securities | |
| 3.3 | Filing Requirements | |
| 3.4 | Amendment of Release Schedule | |
| PART 4 | DEALING WITH ESCROW SECURITIES | |
| 4.1 | Restriction on Transfer, etc. | |
| 4.2 | Pledge, Mortgage or Charge as Collateral for a Loan | |
| 4.3 | Voting of Escrow Securities | |
| 4.4 | Dividends on Escrow Securities | |
| 4.5 | Exercise of Other Rights Attaching to Escrow Securities | |
| PART 5 | PERMITTED TRANSFERS WITHIN ESCROW | |
| 5.1 | Transfer to Directors and Senior Officers | |
| 5.2 | Transfer to Other Principals | |
| 5.3 | Transfer upon Bankruptcy | |
| 5.4 | Transfer upon Realization of Pledged, Mortgaged or Charged Escrow Securities | |
| 5.5 | Transfer to Certain Plans and Funds | |
| 5.6 | Effect of Transfer Within Escrow | |
| PART 6 | BUSINESS COMBINATIONS | |
| 6.1 | Business Combinations | |
| 6.2 | Delivery to Escrow Agent | |
| 6.3 | Delivery to Depositary | |
| 6.4 | Release of Escrow Securities to Depositary | |
| 6.5 | Escrow of New Securities | |
| 6.6 | Release from Escrow of New Securities | |
| PART 7 | RESIGNATION OF ESCROW AGENT | |
| 7.1 | Resignation of Escrow Agent | |
| PART 8 | OTHER CONTRACTUAL ARRANGEMENTS | |
| PART 9 | NOTICES | |
| 9.1 | Notice to Escrow Agent | |
| 9.2 | Notice to Issuer | |
| 9.3 | Deliveries to Securityholders | |
| 9.4 | Change of Address | |
| 9.5 | Postal Interruption | |
| PART 10 | GENERAL | |
| 10.1 | Interpretation – “holding securities” | |
| 10.2 | Further Assurances | |
| 10.3 | Time | |
| 10.4 | Incomplete IPO | |
| 10.5 | Jurisdiction | |
| 10.6 | Consent of Securities Regulators to Amendment | |
| 10.7 | Governing Laws | |
| 10.8 | Counterparts | |
| 10.9 | Singular and Plural | |
| 10.10 | Language | |
| 10.11 | Benefit and Binding Effect | |
| 10.12 | Entire Agreement | |
| 10.13 | Successor to Escrow Agent | |
| Schedule “A” | ||
| Schedule “B” | ||
ESCROW AGREEMENT
THIS AGREEMENT is made as of the 10th day of February, 2023
AMONG:
SOLARBANK CORPORATION
(the “Issuer”)
AND:
ENDEAVOR TRUST CORPORATION
(the “Escrow Agent”)
AND:
EACH OF THE UNDERSIGNED SECURITYHOLDERS OF THE ISSUER
(a “Securityholder” or “you”)
(collectively, the “Parties”)
This Agreement is being entered into by the Parties under National Policy 46-201 Escrow for Initial Public Offerings (the Policy) in connection with the proposed distribution (the IPO), by the Issuer, an emerging issuer, of common shares by prospectus.
For good and valuable consideration, the Parties agree as follows:
| PART 1 | ESCROW |
| 1.1 | Appointment of Escrow Agent |
The Issuer and the Securityholders appoint the Escrow Agent to act as escrow agent under this Agreement. The Escrow Agent accepts the appointment.
| 1.2 | Deposit of Escrow Securities in Escrow |
(1) You are depositing the securities (escrow securities) listed opposite your name in Schedule “A” with the Escrow Agent to be held in escrow under this Agreement. You will immediately deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of these securities which you have or which you may later receive.
(2) If you receive any other securities (additional escrow securities):
(a) as a dividend or other distribution on escrow securities;
(b) on the exercise of a right of purchase, conversion or exchange attaching to escrow securities, including securities received on conversion of special warrants;
(c) on a subdivision, or compulsory or automatic conversion or exchange of escrow securities; or
| (d) | from a successor issuer in a business combination, if Part 6 of this Agreement applies, |
you will deposit them in escrow with the Escrow Agent. You will deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of those additional escrow securities. When this Agreement refers to escrow securities, it includes additional escrow securities.
(3) You will immediately deliver to the Escrow Agent any replacement share certificates or other evidence of additional escrow securities issued to you.
| 1.3 | Direction to Escrow Agent |
The Issuer and the Securityholders direct the Escrow Agent to hold the escrow securities in escrow until they are released from escrow under this Agreement.
| PART 2 | RELEASE OF ESCROW SECURITIES |
| 2.1 | Release Schedule for an Established Issuer |
| 2.1.1 | Usual case |
If the Issuer is an established issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:
| On the date the Issuer’s securities are listed on a Canadian exchange (the listing date) | 1/4 of your escrow securities | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, then the release schedule outlined above results in the escrow securities being released in equal tranches of 25%.
| 2.1.2 | Alternate meaning of “listing date” |
If the Issuer is an established issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.
| 2.1.3 | If there is a permitted secondary offering |
(1) If the Issuer is an established issuer and you have sold in a permitted secondary offering 25% or more of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3%.
(2) If the Issuer is an established issuer and you have sold in a permitted secondary offering less than 25% of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| On the listing date | 1/4 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3% after completion of the release on the listing date.
| 2.1.4 | Additional escrow securities |
If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities. After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables
| 2.2 | Release Schedule for an Emerging Issuer |
| 2.2.1 | Usual case |
If the Issuer is an emerging issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:
| On the date the Issuer’s securities are listed on a Canadian exchange (the listing date) | 1/10 of your escrow securities | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, the release schedule outlined above results in the escrow securities being released in equal tranches of 15% after completion of the release on the listing date.
| 2.2.2 | Alternate meaning of “listing date” |
If the Issuer is an emerging issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if:
(a) the Issuer’s securities are not listed on a Canadian exchange immediately after its IPO; or
(b) the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.
| 2.2.3 | If there is a permitted secondary offering |
(1) If the Issuer is an emerging issuer and you have sold in a permitted secondary offering 10% or more of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3%.
(2) If the Issuer is an emerging issuer and you have sold in a permitted secondary offering less than 10% of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| On the listing date | 1/10 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3% after completion of the release on the listing date.
| 2.2.4 | Additional escrow securities |
If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities. After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables above.
| 2.3 | Delivery of Share Certificates for Escrow Securities |
The Escrow Agent will send to each Securityholder any share certificates or other evidence of that Securityholder’s escrow securities in the possession of the Escrow Agent released from escrow as soon as reasonably practicable after the release.
| 2.4 | Replacement Certificates |
If, on the date a Securityholder’s escrow securities are to be released, the Escrow Agent holds a share certificate or other evidence representing more escrow securities than are to be released, the Escrow Agent will deliver the share certificate or other evidence to the Issuer or its transfer agent and request replacement share certificates or other evidence. The Issuer will cause replacement share certificates or other evidence to be prepared and delivered to the Escrow Agent. After the Escrow Agent receives the replacement share certificates or other evidence, the Escrow Agent will send to the Securityholder or at the Securityholder’s direction, the replacement share certificate or other evidence of the escrow securities released. The Escrow Agent and Issuer will act as soon as reasonably practicable.
| 2.5 | Release upon Death |
(1) If a Securityholder dies, the Securityholder’s escrow securities will be released from escrow. The Escrow Agent will deliver any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent to the Securityholder’s legal representative.
(2) Prior to delivery the Escrow Agent must receive:
(a) a certified copy of the death certificate; and
(b) any evidence of the legal representative’s status that the Escrow Agent may reasonably require.
| PART 3 | EARLY RELEASE ON CHANGE OF ISSUER STATUS |
3.1 Becoming an Established Issuer
If the Issuer is an emerging issuer on the date of this Agreement and, during this Agreement, the Issuer:
(a) lists its securities on the Toronto Stock Exchange Inc. or Aequitas NEO Exchange Inc.;
(b) becomes a TSX Venture Exchange Inc. (TSX Venture) Tier 1 issuer; or
(c) lists or quotes its securities on an exchange or market outside Canada that its “principal regulator” under National Policy 43-201 Mutual Reliance Review System for Prospectuses and Annual Information Forms (in Quebec under Staff Notice, Mutual Reliance Review System for Prospectuses and Annual Information Forms) or, if the Issuer has only filed its IPO prospectus in one jurisdiction, the securities regulator in that jurisdiction, is satisfied has minimum listing requirements at least equal to those of TSX Venture Tier 1,
then the Issuer becomes an established issuer.
| 3.2 | Release of Escrow Securities |
(1) When an emerging issuer becomes an established issuer, the release schedule for its escrow securities changes provided that the Issuer’s Board of Directors must approve such change to the release schedule in order for it to become applicable.
(2) If an emerging issuer becomes an established issuer 18 months or more after its listing date, all escrow securities will be released immediately (subject to the Issuer’s Board of Directors’ approval).
(3) If an emerging issuer becomes an established issuer within 18 months after its listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately (subject to the Issuer’s Board of Directors’ approval).. Remaining escrow securities will be released in equal installments on the day that is 6 months, 12 months and 18 months after the listing date (subject to the Issuer’s Board of Directors’ approval).
| 3.3 | Filing Requirements |
Escrow securities will not be released under this Part until the Issuer does the following:
(a) at least 20 days before the date of the first release of escrow securities under the new release schedule, files with the securities regulators in the jurisdictions in which it is a reporting issuer
(i) a certificate signed by a director or officer of the Issuer authorized to sign stating
(A) that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition, and
(B) the number of escrow securities to be released on the first release date under the new release schedule, and
(ii) a copy of a letter or other evidence from the exchange or quotation service confirming that the Issuer has satisfied the condition to become an established issuer; and
(b) at least 10 days before the date of the first release of escrow securities under the new release schedule, issues and files with the securities regulators in the jurisdictions in which it is a reporting issuer a news release disclosing details of the first release of the escrow securities and the change in the release schedule, and sends a copy of such filing to the Escrow Agent.
| 3.4 | Amendment of Release Schedule |
The new release schedule will apply 10 days after the Escrow Agent receives a certificate signed by a director or officer of the Issuer authorized to sign
(a) stating that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition;
(b) stating that the release schedule for the Issuer’s escrow securities has changed;
(c) stating that the Issuer has issued a news release at least 10 days before the first release date under the new release schedule and specifying the date that the news release was issued; and
(d) specifying the new release schedule.
| PART 4 | DEALING WITH ESCROW SECURITIES |
| 4.1 | Restriction on Transfer, etc. |
Unless it is expressly permitted in this Agreement, you will not sell, transfer, assign, mortgage, enter into a derivative transaction concerning, or otherwise deal in any way with your escrow securities or any related share certificates or other evidence of the escrow securities. If a Securityholder is a private company controlled by one or more principals (as defined in section 3.5 of the Policy) of the Issuer, the Securityholder may not participate in a transaction that results in a change of its control or a change in the economic exposure of the principals to the risks of holding escrow securities.
| 4.2 | Pledge, Mortgage or Charge as Collateral for a Loan |
You may pledge, mortgage or charge your escrow securities to a financial institution as collateral for a loan, provided that no escrow securities or any share certificates or other evidence of escrow securities will be transferred or delivered by the Escrow Agent to the financial institution for this purpose. The loan agreement must provide that the escrow securities will remain in escrow if the lender realizes on the escrow securities to satisfy the loan.
| 4.3 | Voting of Escrow Securities |
You may exercise any voting rights attached to your escrow securities.
| 4.4 | Dividends on Escrow Securities |
You may receive a dividend or other distribution on your escrow securities, and elect the manner of payment from the standard options offered by the Issuer. If the Escrow Agent receives a dividend or other distribution on your escrow securities, other than additional escrow securities, the Escrow Agent will pay the dividend or other distribution to you on receipt.
| 4.5 | Exercise of Other Rights Attaching to Escrow Securities |
You may exercise your rights to exchange or convert your escrow securities in accordance with this Agreement.
| PART 5 | PERMITTED TRANSFERS WITHIN ESCROW |
| 5.1 | Transfer to Directors and Senior Officers |
(1) You may transfer escrow securities within escrow to existing or, upon their appointment, incoming directors or senior officers of the Issuer or any of its material operating subsidiaries, if the Issuer’s board of directors has approved the transfer.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a certified copy of the resolution of the board of directors of the Issuer approving the transfer;
(b) a certificate signed by a director or officer of the Issuer authorized to sign, stating that the transfer is to a director or senior officer of the Issuer or a material operating subsidiary and that any required approval from the Canadian exchange the Issuer is listed on has been received;
(c) an acknowledgment in the form of Schedule “B” signed by the transferee;
(d) copies of the letters sent to the securities regulators described in subsection (3) accompanying the acknowledgement; and
(e) a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.
(3) At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.
| 5.2 | Transfer to Other Principals |
(1) You may transfer escrow securities within escrow:
(a) to a person or company that before the proposed transfer holds more than 20% of the voting rights attached to the Issuer’s outstanding securities; or
(b) to a person or company that after the proposed transfer
(i) will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and
(ii) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a certificate signed by a director or officer of the Issuer authorized to sign stating that
(i) the transfer is to a person or company that the officer believes, after reasonable investigation, holds more than 20% of the voting rights attached to the Issuer’s outstanding securities before the proposed transfer, or
(ii) the transfer is to a person or company that
(A) the officer believes, after reasonable investigation, will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and
(B) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries
after the proposed transfer, and
(iii) any required approval from the Canadian exchange the Issuer is listed on has been received;
(b) an acknowledgment in the form of Schedule “B” signed by the transferee;
(c) copies of the letters sent to the securities regulators accompanying the acknowledgement; and
(d) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.
(3) At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.
| 5.3 | Transfer upon Bankruptcy |
(1) You may transfer escrow securities within escrow to a trustee in bankruptcy or another person or company entitled to escrow securities on bankruptcy.
(2) Prior to the transfer, the Escrow Agent must receive:
(a) a certified copy of either
(i) the assignment in bankruptcy filed with the Superintendent of Bankruptcy, or
(ii) the receiving order adjudging the Securityholder bankrupt;
(b) a certified copy of a certificate of appointment of the trustee in bankruptcy;
(c) a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(d) an acknowledgment in the form of Schedule “B” signed by:
(i) the trustee in bankruptcy, or
(ii) on direction from the trustee, with evidence of that direction attached to the acknowledgment form, another person or company legally entitled to the escrow securities.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.4 | Transfer Upon Realization of Pledged, Mortgaged or Charged Escrow Securities |
(1) You may transfer within escrow to a financial institution the escrow securities you have pledged, mortgaged or charged under section 4.2 to that financial institution as collateral for a loan on realization of the loan.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a statutory declaration of an officer of the financial institution that the financial institution is legally entitled to the escrow securities;
(b) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(c) an acknowledgement in the form of Schedule “B” signed by the financial institution.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.5 | Transfer to Certain Plans and Funds |
(1) You may transfer escrow securities within escrow to or between a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or other similar registered plan or fund with a trustee, where the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund are limited to you and your spouse, children and parents, or, if you are the trustee of such a registered plan or fund, to the annuitant of the RRSP or RRIF, or a beneficiary of the other registered plan or fund, as applicable, or his or her spouse, children and parents.
(2) Prior to the transfer the Escrow Agent must receive:
(a) evidence from the trustee of the transferee plan or fund, or the trustee’s agent, stating that, to the best of the trustee’s knowledge, the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund do not include any person or company other than you and your spouse, children and parents;
(b) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(c) an acknowledgement in the form of Schedule “B” signed by the trustee of the plan or fund.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.6 | Effect of Transfer Within Escrow |
After the transfer of escrow securities within escrow, the escrow securities will remain in escrow and released from escrow under this Agreement as if no transfer has occurred on the same terms that applied before the transfer. The Escrow Agent will not deliver any share certificates or other evidence of the escrow securities to transferees under this Part 5.
| PART 6 | BUSINESS COMBINATIONS |
| 6.1 | Business Combinations |
This Part applies to the following (business combinations):
(a) a formal take-over bid for all outstanding equity securities of the Issuer or which, if successful, would result in a change of control of the Issuer
(b) a formal issuer bid for all outstanding equity securities of the Issuer
(c) a statutory arrangement
(d) an amalgamation
(e) a merger
(f) a reorganization that has an effect similar to an amalgamation or merger
| 6.2 | Delivery to Escrow Agent |
You may tender your escrow securities to a person or company in a business combination. At least five business days prior to the date the escrow securities must be tendered under the business combination, you must deliver to the Escrow Agent:
(a) a written direction signed by you that directs the Escrow Agent to deliver to the depositary under the business combination any share certificates or other evidence of the escrow securities and a completed and executed cover letter or similar document and, where required, transfer power of attorney completed and executed for transfer in accordance with the requirements of the depositary, and any other documentation specified or provided by you and required to be delivered to the depositary under the business combination; and
(b) any other information concerning the business combination as the Escrow Agent may reasonably request.
| 6.3 | Delivery to Depositary |
As soon as reasonably practicable, and in any event no later than three business days after the Escrow Agent receives the documents and information required under section 6.2, the Escrow Agent will deliver to the depositary, in accordance with the direction, any share certificates or other evidence of the escrow securities, and a letter addressed to the depositary that
(a) identifies the escrow securities that are being tendered;
(b) states that the escrow securities are held in escrow;
(c) states that the escrow securities are delivered only for the purposes of the business combination and that they will be released from escrow only after the Escrow Agent receives the information described in section 6.4;
(d) if any share certificates or other evidence of the escrow securities have been delivered to the depositary, requires the depositary to return to the Escrow Agent, as soon as practicable, any share certificates or other evidence of escrow securities that are not released from escrow into the business combination; and
(e) where applicable, requires the depositary to deliver or cause to be delivered to the Escrow Agent, as soon as practicable, any share certificates or other evidence of additional escrow securities that you acquire under the business combination.
| 6.4 | Release of Escrow Securities to Depositary |
The Escrow Agent will release from escrow the tendered escrow securities when the Escrow Agent receives a declaration signed by the depositary or, if the direction identifies the depositary as acting on behalf of another person or company in respect of the business combination, by that other person or company, that:
(a) the terms and conditions of the business combination have been met or waived; and
(b) the escrow securities have either been taken up and paid for or are subject to an unconditional obligation to be taken up and paid for under the business combination.
| 6.5 | Escrow of New Securities |
If you receive securities (new securities) of another issuer (successor issuer) in exchange for your escrow securities, the new securities will be subject to escrow in substitution for the tendered escrow securities if, immediately after completion of the business combination:
(a) the successor issuer is not an exempt issuer (as defined in section 3.2 of the Policy);
(b) you are a principal (as defined in section 3.5 of the Policy) of the successor issuer; and
(c) you hold more than 1% of the voting rights attached to the successor issuer’s outstanding securities (In calculating this percentage, include securities that may be issued to you under outstanding convertible securities in both your securities and the total securities outstanding.)
| 6.6 | Release from Escrow of New Securities |
(1) As soon as reasonably practicable after the Escrow Agent receives:
(a) a certificate from the successor issuer signed by a director or officer of the successor issuer authorized to sign
(i) stating that it is a successor issuer to the Issuer as a result of a business combination and whether it is an emerging issuer or an established issuer under the Policy, and
(ii) listing the Securityholders whose new securities are subject to escrow under section 6.5,
the escrow securities of the Securityholders whose new securities are not subject to escrow under section 6.5 will be released, and the Escrow Agent will send any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent in accordance with section 2.3.
(2) If your new securities are subject to escrow, unless subsection (3) applies, the Escrow Agent will hold your new securities in escrow on the same terms and conditions, including release dates, as applied to the escrow securities that you exchanged.
(3) If the Issuer is
(a) an emerging issuer, the successor issuer is an established issuer, and the business combination occurs 18 months or more after the Issuer’s listing date, all escrow securities will be released immediately; and
(b) an emerging issuer, the successor issuer is an established issuer, and the business combination occurs within 18 months after the Issuer’s listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately. Remaining escrow securities will be released in equal instalments on the day that is 6 months, 12 months and 18 months after the Issuer’s listing date.
| PART 7 | RESIGNATION OF ESCROW AGENT |
| 7.1 | Resignation of Escrow Agent |
(1) If the Escrow Agent wishes to resign as escrow agent, the Escrow Agent will give written notice to the Issuer.
(2) If the Issuer wishes to terminate the Escrow Agent as escrow agent, the Issuer will give written notice to the Escrow Agent.
(3) If the Escrow Agent resigns or is terminated, the Issuer will be responsible for ensuring that the Escrow Agent is replaced not later than the resignation or termination date by another escrow agent that is acceptable to the securities regulators having jurisdiction in the matter and that has accepted such appointment, which appointment will be binding on the Issuer and the Securityholders.
(4) The resignation or termination of the Escrow Agent will be effective, and the Escrow Agent will cease to be bound by this Agreement, on the date that is 60 days after the date of receipt of the notices referred to above by the Escrow Agent or Issuer, as applicable, or on such other date as the Escrow Agent and the Issuer may agree upon (the “resignation or termination date”), provided that the resignation or termination date will not be less than 10 business days before a release date.
(5) If the Issuer has not appointed a successor escrow agent within 60 days of the resignation or termination date, the Escrow Agent will apply, at the Issuer’s expense, to a court of competent jurisdiction for the appointment of a successor escrow agent, and the duties and responsibilities of the Escrow Agent will cease immediately upon such appointment.
(6) On any new appointment under this section, the successor Escrow Agent will be vested with the same powers, rights, duties and obligations as if it had been originally named herein as Escrow Agent, without any further assurance, conveyance, act or deed. The predecessor Escrow Agent, upon receipt of payment for any outstanding account for its services and expenses then unpaid, will transfer, deliver and pay over to the successor Escrow Agent, who will be entitled to receive, all securities, records or other property on deposit with the predecessor Escrow Agent in relation to this Agreement and the predecessor Escrow Agent will thereupon be discharged as Escrow Agent.
(7) If any changes are made to Part 8 of this Agreement as a result of the appointment of the successor Escrow Agent, those changes must not be inconsistent with the Policy and the terms of this Agreement and the Issuer to this Agreement will file a copy of the new Agreement with the securities regulators with jurisdiction over this Agreement and the escrow securities.
| PART 8 | OTHER CONTRACTUAL ARRANGEMENTS |
| 8.1 | Escrow Agent Not a Trustee |
The Escrow Agent accepts duties and responsibilities under this Agreement, and the escrow securities and any share certificates or other evidence of these securities, solely as a custodian, bailee and agent. No trust is intended to be, or is or will be, created hereby and the Escrow Agent shall owe no duties hereunder as a trustee.
| 8.2 | Escrow Agent Not Responsible for Genuineness |
The Escrow Agent will not be responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of any escrow security deposited with it.
| 8.3 | Escrow Agent Not Responsible for Furnished Information |
The Escrow Agent will have no responsibility for seeking, obtaining, compiling, preparing or determining the accuracy of any information or document, including the representative capacity in which a party purports to act, that the Escrow Agent receives as a condition to a release from escrow or a transfer of escrow securities within escrow under this Agreement.
| 8.4 | Escrow Agent Not Responsible after Release |
The Escrow Agent will have no responsibility for escrow securities that it has released to a Securityholder or at a Securityholder’s direction according to this Agreement.
| 8.5 | Indemnification of Escrow Agent |
The Issuer and each Securityholder hereby jointly and severally agree to indemnify and hold harmless the Escrow Agent, its affiliates, and their current and former directors, officers, employees and agents from and against any and all claims, demands, losses, penalties, costs, expenses, fees and liabilities, including, without limitation, legal fees and expenses, directly or indirectly arising out of, in connection with, or in respect of, this Agreement, except where same result directly and principally from gross negligence, wilful misconduct or bad faith on the part of the Escrow Agent. This indemnity survives the release of the escrow securities, the resignation or termination of the Escrow Agent and the termination of this Agreement.
| 8.6 | Additional Provisions |
(1) The Escrow Agent will be protected in acting and relying reasonably upon any notice, direction, instruction, order, certificate, confirmation, request, waiver, consent, receipt, statutory declaration or other paper or document (collectively referred to as “Documents”) furnished to it and purportedly signed by any officer or person required to or entitled to execute and deliver to the Escrow Agent any such Document in connection with this Agreement, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth or accuracy of any information therein contained, which it in good faith believes to be genuine.
(2) The Escrow Agent will not be bound by any notice of a claim or demand with respect thereto, or any waiver, modification, amendment, termination or rescission of this Agreement unless received by it in writing, and signed by the other Parties and approved by the securities regulators with jurisdiction as set out in section 10.6, and, if the duties or indemnification of the Escrow Agent in this Agreement are affected, unless it has given its prior written consent.
(3) The Escrow Agent may consult with or retain such legal counsel and advisors as it may reasonably require for the purpose of discharging its duties or determining its rights under this Agreement and may rely and act upon the advice of such counsel or advisor. The Escrow Agent will give written notice to the Issuer as soon as practicable that it has retained legal counsel or
other advisors. The Issuer will pay or reimburse the Escrow Agent for any reasonable fees, expenses and disbursements of such counsel or advisors.
(4) In the event of any disagreement arising under the terms of this Agreement, the Escrow Agent will be entitled, at its option, to refuse to comply with any and all demands whatsoever until the dispute is settled either by a written agreement among the Parties or by a court of competent jurisdiction.
(5) The Escrow Agent will have no duties or responsibilities except as expressly provided in this Agreement and will have no duty or responsibility under the Policy or arising under any other agreement, including any agreement referred to in this Agreement, to which the Escrow Agent is not a party.
(6) The Escrow Agent will have the right not to act and will not be liable for refusing to act unless it has received clear and reasonable documentation that complies with the terms of this Agreement. Such documentation must not require the exercise of any discretion or independent judgment.
(7) The Escrow Agent is authorized to cancel any share certificate delivered to it and hold such Securityholder’s escrow securities in electronic, or uncertificated form only, pending release of such securities from escrow.
(8) The Escrow Agent will have no responsibility with respect to any escrow securities in respect of which no share certificate or other evidence or electronic or uncertificated form of these securities has been delivered to it, or otherwise received by it.
(9) Any entity resulting from the merger, amalgamation or continuation of Endeavor Trust Corporation or succeeding to all or substantially all of its transfer agency business (by sale of such business or otherwise), shall thereupon automatically become the Escrow Agent hereunder without further act or formality. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their successors and assigns.
| 8.7 | Limitation of Liability of Escrow Agent |
The Escrow Agent will not be liable to any of the Parties hereunder for any action taken or omitted to be taken by it under or in connection with this Agreement, except for losses directly, principally and immediately caused by its bad faith, wilful misconduct or gross negligence. Under no circumstances will the Escrow Agent be liable for any special, indirect, incidental, consequential, exemplary, aggravated or punitive losses or damages hereunder, including any loss of profits, whether foreseeable or unforeseeable. Notwithstanding the foregoing or any other provision of this Agreement, in no event will the collective liability of the Escrow Agent under or in connection with this Agreement to any one or more Parties, except for losses directly caused by its bad faith or willful misconduct, exceed the amount of its annual fees under this Agreement or the amount of three thousand dollars ($3,000.00), whichever amount shall be greater.
| 8.8 | Remuneration of Escrow Agent |
The Issuer will pay the Escrow Agent reasonable remuneration for its services under this Agreement, which fees are subject to revision from time to time on 30 days’ written notice. The Issuer will reimburse the Escrow Agent for its expenses and disbursements. Any amount due under this section and unpaid 30 days after request for such payment, will bear interest from the expiration of such period at a rate per annum equal to the then current rate charged by the Escrow Agent, payable on demand.
In the event the Issuer or the Securityholders fail to pay the Escrow Agent any amounts owing to the Escrow Agent hereunder, the Escrow Agent shall have the right not to act (including the right not to release any additional securities from escrow) and will not be liable for refusing to act until it has been fully paid all amounts owing to it hereunder. Further, in the event the Issuer fails to pay the Escrow Agent its reasonable remuneration for its services hereunder, the Escrow Agent shall be entitled to charge the Securityholders for any further release of escrowed securities and shall have the right not to act (including the right not to release any additional securities from escrow) until the Securityholders have paid such amounts to the Escrow Agent.
In the event the Issuer or the Securityholders have failed to pay the amounts owing the Escrow Agent hereunder, the Escrow Agent shall not be liable for any loss caused by a delay in the release of the escrowed securities.
| 8.9 | Notice to Escrow Agent |
The Issuer shall forthwith provide a copy of the Exchange Bulletin, confirmation of listing and posting for trading of the subject escrowed shares or such other relevant document to the Escrow Agent as it shall require in order to make the required releases. No duty shall rest with the Escrow Agent to obtain this information independently nor shall it be held liable for any loss, claim, suit or action, howsoever caused by any delay in providing this information to it.
| PART 9 | NOTICES |
| 9.1 | Notice to Escrow Agent |
Documents will be considered to have been delivered to the Escrow Agent on the next business day following the date of transmission, if delivered by email, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:
Endeavor Trust Corporation
702 – 777 Hornby Street, Vancouver, BC, V6Z 1S4
Attention: Manager Corporate Trust
Tel: 604-559-8818
Email: admin@EndeavorTrust.com
| 9.2 | Notice to Issuer |
Documents will be considered to have been delivered to the Issuer on the next business day following the date of transmission, if delivered by email, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:
SolarBank Corporation
Unit 803, 505 Consumers Rd.,
North York, ON, Canada M2J 4V8
Attention: Richard Lu
Email: richard.lu@abundantsolarenergy.com
| 9.3 | Deliveries to Securityholders |
Documents will be considered to have been delivered to a Securityholder on the date of delivery, if delivered by hand or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the address on the Issuer’s share register.
Any share certificates or other evidence of a Securityholder’s escrow securities will be sent to the Securityholder’s address on the Issuer’s share register unless the Securityholder has advised the Escrow Agent in writing otherwise at least ten business days before the escrow securities are released from escrow. The Issuer will provide the Escrow Agent with each Securityholder’s address as listed on the Issuer’s share register.
| 9.4 | Change of Address |
(1) The Escrow Agent may change its address for delivery by delivering notice of the change of address to the Issuer and to each Securityholder.
(2) The Issuer may change its address for delivery by delivering notice of the change of address to the Escrow Agent and to each Securityholder.
(3) A Securityholder may change that Securityholder’s address for delivery by delivering notice of the change of address to the Issuer and to the Escrow Agent.
| 9.5 | Postal Interruption |
A Party to this Agreement will not mail a document it is required to mail under this Agreement if the Party is aware of an actual or impending disruption of postal service.
| PART 10 | GENERAL |
| 10.1 | Interpretation - “holding securities” |
When this Agreement refers to securities that a Securityholder “holds”, it means that the Securityholder has direct or indirect beneficial ownership of, or control or direction over, the securities.
| 10.2 | Further Assurances |
The Parties will execute and deliver any further documents and perform any further acts reasonably requested by any of the Parties to this Agreement which are necessary to carry out the intent of this Agreement.
| 10.3 | Time |
Time is of the essence of this Agreement.
| 10.4 | Incomplete IPO |
If the Issuer does not complete its IPO and has become a reporting issuer in one or more jurisdictions because it has obtained a receipt for its IPO prospectus, this Agreement will remain in effect until the securities regulators in those jurisdictions order that the Issuer has ceased to be a reporting issuer.
| 10.5 | Governing Laws |
The laws of Ontario (the “Principal Regulator”) and the applicable laws of Canada will govern this Agreement.
| 10.6 | Jurisdiction |
The securities regulator in each jurisdiction where the Issuer files its IPO prospectus has jurisdiction over this Agreement and the escrow securities.
| 10.7 | Consent of Securities Regulators to Amendment |
Except for amendments made under Part 3, the securities regulators with jurisdiction must approve any amendment to this Agreement and will apply mutual reliance principles in reviewing any amendments that are filed with them. Therefore, the consent of the Principal Regulator will evidence the consent of all securities regulators with jurisdiction.
| 10.8 | Counterparts |
The Parties may execute this Agreement by electronic means and in counterparts, each of which will be considered an original and all of which will be one agreement.
| 10.9 | Singular and Plural |
Wherever a singular expression is used in this Agreement, that expression is considered as including the plural or the body corporate where required by the context.
| 10.10 | Language |
This Agreement has been drawn up in the English language at the request of all Parties. Cette convention a été rédigé en anglais à la demande de toutes les Parties.
| 10.11 | Benefit and Binding Effect |
This Agreement will benefit and bind the Parties and their heirs, executors, administrators, successors and permitted assigns and all persons claiming through them as if they had been a Party to this Agreement.
| 10.12 | Entire Agreement |
This is the entire agreement among the Parties concerning the subject matter set out in this Agreement and supersedes any and all prior understandings and agreements.
| 10.13 | Successor to Escrow Agent |
Any corporation with which the Escrow Agent may be amalgamated, merged or consolidated, or any corporation succeeding to the business of the Escrow Agent will be the successor of the Escrow Agent under this Agreement without any further act on its part or on the part or any of the Parties, provided that the successor is recognized as a transfer agent by the Canadian exchange the Issuer is listed on (or if the Issuer is not listed on a Canadian exchange, by any Canadian exchange) and notice is given to the securities regulators with jurisdiction.
[Balance of this page intentionally left blank.
Signature page follows.]
The Parties have executed and delivered this Agreement as of the date set out above.
| ENDEAVOR TRUST CORPORATION | ||
|
/s/ “David Eppert” |
||
| Authorized signatory | ||
|
/s/ “Catherine Wang” |
||
| Authorized signatory | ||
| SOLARBANK CORPORATION | ||
/s/ “Dr. Richard Lu” |
||
| Authorized signatory |
| If the Securityholder is an individual: | ||
| Signed, sealed and delivered by | ) | |
| Olen Aasen in the presence of: | ) | |
| ) | ||
/s/ “Billie-Jo Aasen” |
) | |
| Signature of Witness | ) | /s/ “Olen Aasen” |
| ) | Olen Aasen | |
| Billie-Jo Aasen | ) | |
| Name of Witness | ) | |
| ) | ||
| Signed, sealed and delivered by | ) | |
| Billie-Jo Aasen in the presence of: | ) | |
| ) | ||
| /s/ “Olen Aasen” | ) | |
| Signature of Witness | ) | /s/ “Billie-Jo Aasen” |
| ) | Billie-Jo Aasen | |
| Olen Aasen | ) | |
| Name of Witness | ) | |
| ) |
| 2384449 Ontario Inc. | ||
/s/ “Dr. Richard Lu” |
||
| Authorized signatory |
Schedule “A” to Escrow Agreement
Securityholder
Name: 2384449 Ontario Inc.
Securities:
|
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 773,200 |
Schedule “A” to Escrow Agreement
Securityholder
Name: Olen Aasen
Securities:
|
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 150,000 | |||
| Warrants | 925,000 |
Schedule “A” to Escrow Agreement
Securityholder
Name: Billie-Jo Aasen
Securities:
|
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 150,000 | |||
| Warrants | 300,000 |
Schedule “B” to Escrow Agreement
Acknowledgment and Agreement to be Bound
I acknowledge that the securities listed in the attached Schedule “A” (the “escrow securities”) have been or will be transferred to me and that the escrow securities are subject to an Escrow Agreement dated __________________________ (the “Escrow Agreement”).
For other good and valuable consideration, I agree to be bound by the Escrow Agreement in respect of the escrow securities, as if I were an original signatory to the Escrow Agreement.
Dated at ____________________ on ______________.
| Where the transferee is an individual: | ||
| Signed, sealed and delivered by | ) | |
| [Transferee] in the presence of: | ) | |
| ) | ||
| ) | ||
| Signature of Witness | ) | |
| ) | [Transferee] | |
| ) | ||
| ) | ||
| Name of Witness | ) | |
| ) |
| Where the transferee is not an individual: | ||
| [Transferee] | ||
| Authorized signatory | ||
| Authorized signatory |
Exhibit 99.8
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
This Prospectus (as hereinafter defined) constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons unless exemptions from the registration requirement of the U.S. Securities Act and applicable state securities laws are available. This Prospectus does not constitute an offer to sell or a solicitation or an offer to buy any of the securities offered hereby within the United States or to, or for the benefit of, U.S. persons. See “Plan of Distribution”.
PROSPECTUS
| INITIAL PUBLIC OFFERING | February 10, 2023 |
SOLARBANK CORPORATION
Up to 7,000,000 Common Shares
Price: $0.75 per Common Share
This prospectus (this “Prospectus”) qualifies the distribution of up to 7,000,000 common shares (the “Offered Shares”) in the capital of SolarBank Corporation (the “Company” or “SolarBank”) at a price of $0.75 per Offered Share (the “Offering Price”) for total gross proceeds of up to $5,250,000 (the “Offering”).
The Offered Shares are being offered on a “commercially reasonable efforts” basis without underwriter liability pursuant to the terms and conditions of an agency agreement (the “Agency Agreement”) to be entered by and among the Company and Research Capital Corporation, as lead agent and sole bookrunner (the “Agent”). The Offering Price for the Offered Shares was determined based upon arm’s length negotiations between the Company and the Agent, in the context of the market. See “Plan of Distribution”.
| Price to the Public | Agent’s | Net
Proceeds | ||||||||||
| Per Offered Share | $ | 0.75 | $ | 0.045 | $ | 0.705 | ||||||
| Total | $ | 5,250,000 | $ | 315,000 | $ | 4,935,000 | ||||||
Notes:
| (1) | In consideration for the services rendered by the Agent in connection with the Offering, the Company has agreed to pay the Agent a cash fee (the “Agent’s Fee”) equal to 6.0% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option (as defined below)). The Company has also agreed to pay to the Agent a corporate finance fee of $35,000.00 (plus applicable taxes) (the “Corporate Finance Fee”) payable in cash, of which $20,000.00 (including applicable taxes) has been paid as of the date hereof. See “Plan of Distribution”. |
| (2) | As additional compensation, the Company has agreed to issue to the Agent, that number of common share purchase warrants of the Company (the “Broker Warrants”) as is equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option). Each Broker Warrant will entitle the holder thereof to purchase one (1) Common Share (as defined below) (each, a “Broker Warrant Share”) at the Offering Price for a period of 36 months following the Closing Date (as defined below). This Prospectus qualifies the distribution of the Broker Warrants. See “Plan of Distribution”. |
| (3) | The Agent has also been granted an option (the “Over-Allotment Option”), exercisable, in whole or in part, at the sole discretion of the Agent, at any time up to 48 hours prior to the Closing Date, to arrange for the sale of up to an additional 1,050,000 Offered Shares (the “Additional Shares”) at the Offering Price per Additional Share to cover the Agent’s over-allocation position. If the Over-Allotment Option is exercised in full for Additional Shares, the total “Price to the Public”, “Agent’s Fee” and “Net Proceeds to the Company” will be $6,037,500, $362,250 and $5,675,250, respectively. This Prospectus qualifies the grant of the Over-Allotment Option and the distribution of the Additional Shares issuable upon exercise of the Over-Allotment Option. See “Plan of Distribution”. |
| i |
| (4) | After deducting the Agent’s Fee, but before deducting the expenses and costs relating to the Offering which are estimated to be $200,000. The Agent’s Fee and the expenses and costs relating to the Offering will be paid from the gross proceeds of the Offering. See “Use of Proceeds”. |
The following table sets out the number of securities that may be issued by the Company to the Agent in
connection with the Offering:
Agent’s Position |
Number of Securities Available or Maximum Size |
Exercise Period |
Exercise Price | |||
| Broker Warrants | 420,000 Broker Warrant Shares(1) | 36 months following the Closing Date | $0.75
per Broker Warrant Share | |||
| Over-Allotment Option | 1,050,000
Additional Shares |
At any time up to 48 hours prior to the Closing Date | $0.75
per Additional Share |
Notes:
| (1) | Assuming no exercise of the Over-Allotment Option. If the Over-Allotment Option is exercised in full, an aggregate of 483,000 Broker Warrants exercisable to acquire up to 483,000 Broker Warrant Shares will be issued to the Agent. |
There is currently no market through which the Offered Shares may be sold and purchasers may not be able to resell the securities purchased under this Prospectus. This may affect the pricing of the securities offered under this Prospectus in the secondary market, the transparency and availability of trading prices, the liquidity of the such securities, and the extent of issuer regulation. Investment in the Offered Shares is highly speculative due to various factors, including the nature and early stage of the Company’s business. An investment in these securities should only be made by persons who can afford the total loss of their investment. See “Risk Factors”.
Unless the context otherwise requires, in this Prospectus all references to “Offered Shares” include the Additional Shares and to the “Offering” includes the Over-Allotment Option.
The Canadian Securities Exchange (“CSE”) has conditionally approved the listing of the Company’s common shares (“Common Shares”). Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023. See “Plan of Distribution”.
No minimum amount of funds must be raised under the Offering. This means that the Company could complete the Offering after raising only a small proportion of the Offering amount set out above. See “Risk Factors”.
Potential investors are advised to consult their own legal counsel and other professional advisers in order to assess income tax, legal, and other aspects of this investment. Prospective investors should be aware that the acquisition, holding and disposition of the securities described herein may have income and other tax consequences in Canada and in other jurisdictions. Except as expressly noted, this Prospectus does not describe these tax consequences fully. You should consult and rely on your own tax advisor as to any income or tax implications with respect to your own particular circumstances.
The Agent conditionally offers the Offered Shares for sale on a “commercially reasonable efforts” basis and subject to prior sale, if, as and when issued by the Company, in accordance with the conditions contained in the Agency Agreement referred to under “Plan of Distribution”. Subscriptions will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. The Offering is expected to close on or about February 23, 2023 (the “Closing Date”) or such other date as the Company and the Agent may agree.
| ii |
If subscriptions representing the Offering are not received within 90 days of the issuance of a receipt for the final prospectus in respect of the Offering, or if a receipt has been issued for an amendment to the final prospectus, within 90 days of the issuance of such receipt and in any event not later than 180 days from the date of receipt for the final prospectus in respect of the Offering, the Offering will cease. The Agent, pending closing of the Offering, will hold in trust all subscription funds received pursuant to the provisions of the Agency Agreement. If the Offering is not completed, the subscription proceeds received by the Agent in connection with the Offering will be returned to the subscribers without interest or deduction, unless the subscribers have otherwise instructed the Agent. See “Plan of Distribution”.
Other than in respect of the Offered Shares sold to certain purchasers in the United States and to, or for the account or benefit of, certain U.S. persons or certain persons in the United States, which will be represented by individual certificates, and other than pursuant to certain exceptions, it is expected that one or more global certificates for the Offered Shares distributed by this Prospectus will be issued in registered and definitive form to CDS Clearing and Depository Services Inc. (“CDS”) and will be deposited with CDS on the Closing Date. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares, are purchased.
The Company is neither a “connected issuer” nor a “related issuer” of the Agent, as defined in National Instrument 33-105 – Underwriting Conflicts.
Certain legal matters related to the Offering have been reviewed on behalf of the Company by DLA Piper (Canada) LLP and on behalf of the Agent by MLT Aikins LLP.
Paul Pasalic, a director of the Company, resides outside of Canada. This director has appointed DLA Piper (Canada) LLP, Suite 2800, Park Place, 666 Burrard St., Vancouver, British Columbia, V6C 2Z7, Canada, as agent for service of process in Canada. Investors are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
| iii |
TABLE OF CONTENTS
Page
| GLOSSARY OF TERMS | 1 |
| Defined Terms | 1 |
| Table of Abbreviations | 4 |
| GENERAL MATTERS | 6 |
| About this Prospectus | 6 |
| Interpretation | 6 |
| Currency Presentation | 6 |
| FINANCIAL STATEMENT PRESENTATION IN THIS PROSPECTUS | 6 |
| FORWARD-LOOKING STATEMENTS | 7 |
| MARKET AND INDUSTRY DATA | 9 |
| MARKETING MATERIALS | 9 |
| PROSPECTUS SUMMARY | 10 |
| Principal Business of the Company | 10 |
| The Offering | 10 |
| The Listing | 10 |
| Use of Proceeds | 10 |
| Risk Factors | 11 |
| Summary Consolidated Financial Information | 12 |
| CORPORATE STRUCTURE | 13 |
| Name, Address and Incorporation | 13 |
| Intercorporate Relationships | 13 |
| GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY | 14 |
| Overview | 14 |
| Overview of Business and Services | 18 |
| Products and Services | 19 |
| Customers and Sales Channels | 22 |
| Operations Process | 25 |
| Employees, Specialized Skill and Knowledge | 27 |
| Competitive Conditions | 27 |
| Third Party Suppliers | 30 |
| Pricing and Marketing | 31 |
| Regulatory Environment | 32 |
| Impact of Environmental Laws and Regulations | 35 |
| Intellectual Property | 35 |
| Cycles | 35 |
| Foreign Operations | 35 |
| Economic Dependence | 35 |
| Social or Environmental Policies | 36 |
| Reorganizations | 36 |
| USE OF PROCEEDS | 36 |
| Use of Proceeds | 36 |
| Total Funds Available | 37 |
| Business Objectives and Milestones | 38 |
| i |
| DIVIDENDS OR DISTRIBUTIONS | 40 |
| SELECTED FINANCIAL INFORMATION | 40 |
| annual MANAGEMENT’S DISCUSSION AND ANALYSIS | 41 |
| Overall Performance | 41 |
| Selected Annual Information | 41 |
| Discussion of Operations and Outlook | 45 |
| Legal Matters and Contingent Assets | 46 |
| Liquidity | 48 |
| Capital Resources | 48 |
| Transactions Between Related Parties | 49 |
| Key management compensation | 49 |
| Critical Accounting Estimates | 50 |
| Financial Instruments and Other Instruments (Management of Financial Risks) | 52 |
| Subsequent Events | 54 |
| interim MANAGEMENT’S DISCUSSION AND ANALYSIS | 54 |
| DESCRIPTION OF THE SECURITIES | 67 |
| Authorized and Outstanding Securities | 67 |
| Common Shares | 67 |
| Broker Warrants | 67 |
| CONSOLIDATED CAPITALIZATION | 67 |
| RSUS, OPTIONS AND WARRANTS TO PURCHASE SHARES | 68 |
| PRIOR SALES | 69 |
| TRADING PRICE AND VOLUME | 70 |
| ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER | 70 |
| Contractual Escrow Securities | 70 |
| National Policy 46-201 Escrow | 70 |
| PRINCIPAL SHAREHOLDERS | 71 |
| DIRECTORS AND EXECUTIVE OFFICERS | 72 |
| Biographies of Directors and Executive Officers | 73 |
| Corporate Cease Trade Orders and Bankruptcies | 75 |
| Penalties or Sanctions | 75 |
| Personal Bankruptcies | 76 |
| Conflicts of Interest | 76 |
| EXECUTIVE COMPENSATION | 76 |
| Executive Compensation | 76 |
| Compensation of Named Executive Officers | 77 |
| Stock Options and Other Compensation Securities and Instruments | 78 |
| Stock Option Plan and Other Incentive Plans | 78 |
| Employment, Consulting and Management Agreements | 82 |
| Oversight and Description of Director and NEO Compensation | 83 |
| Pension | 85 |
| Changes Subsequent to Year-End | 85 |
| INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS | 86 |
| AUDIT COMMITTEE | 86 |
| Audit Committee Charter | 86 |
| Composition of the Audit Committee | 86 |
| Relevant Education and Experience | 86 |
| Mandate and Responsibilities of the Audit Committee | 86 |
| ii |
| Audit Committee Oversight | 86 |
| Pre-Approval Policies and Procedures | 87 |
| External Auditor Service Fees (By Category) | 87 |
| CORPORATE GOVERNANCE | 87 |
| Board of Directors | 87 |
| Directorships | 88 |
| Orientation and Continuing Education | 88 |
| Ethical Business Conduct | 88 |
| Nomination of Directors | 89 |
| Compensation | 89 |
| Other Board Committees | 89 |
| Assessments | 89 |
| Insider Trading Policy | 89 |
| PLAN OF DISTRIBUTION | 89 |
| Certificates | 90 |
| Commissions and Expenses | 91 |
| RISK FACTORS | 91 |
| Risks Related to Our Company and Our Industry | 91 |
| Risks Associated With the Offering and Common Shares | 104 |
| ELIGIBILITY FOR INVESTMENT | 107 |
| CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS | 108 |
| Holders Resident in Canada | 108 |
| Holders Not Resident in Canada | 110 |
| PROMOTERS | 111 |
| LEGAL PROCEEDINGS | 111 |
| INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 112 |
| AUDITORS | 112 |
| TRANSFER AGENT AND REGISTRAR | 112 |
| MATERIAL CONTRACTS | 112 |
| LEGAL MATTERS | 113 |
| INTERESTS OF EXPERTS | 113 |
| OTHER MATERIAL FACTS | 113 |
| PURCHASERS’ STATUTORY RIGHT OF WITHDRAWAL AND RESCISSION | 113 |
| FINANCIAL STATEMENTS | 113 |
| SCHEDULE A - SOLARBANK FINANCIAL STATEMENTS | |
| SCHEDULE B - AUDIT COMMITTEE CHARTER | |
| SCHEDULE C - DISCLOSURE AND CONFIDENTIALITY POLICY | |
| SCHEDULE D - INSIDER TRADING POLICY |
| iii |
GLOSSARY OF TERMS
The following is a glossary of certain defined terms used throughout this Prospectus. This is not an exhaustive list of defined terms used in this Prospectus and additional terms are defined throughout. Terms and abbreviations used in the financial statements of the Company are defined therein.
Defined Terms
| “Advisory Warrant” | means transferrable Common Share purchase warrants of the Company, with each Advisory Warrant entitling the holder, upon the closing of the Offering, to purchase one Common Share up to the day that is five years from the date of issuance thereof at a price of $0.10 per Common Share. |
| “Agency Agreement” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Agent” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Agent’s Fee” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Audit Committee” | means the audit committee of the Company. |
| “Board” or “Board of Directors” | means the board of directors of the Company. |
| “Broker Warrant” | has the meaning ascribed thereto the cover page of this Prospectus. |
| “Broker Warrant Share” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “CEO” | means Chief Executive Officer. |
| “CFO” | means Chief Financial Officer. |
| “Closing Date” | means the date of closing of the Offering. |
| “Common Shares” | means the common shares without par value in the capital of the Company. |
| “company” | means, unless specifically indicated otherwise, a corporation, incorporated association or organization, body corporate, partnership, trust, association or other entity other than an individual. |
| “Company” or “SolarBank” | means SolarBank Corporation, a corporation existing under the OBCA. |
| “Conversion Unit” | means a unit issuable on the conversion of the Convertible Loan consisting of one Common Share, one Series A Warrant and one Series B Warrant. |
| “Convertible Loan” | has the meaning ascribed thereto under “General Development and Business of the Company – Financings”. |
| “Corporate Finance Fee” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “CRA” | means the Canada Revenue Agency. |
| 1 |
| (a) |
a director or senior officer of the Company; | |
| (b) | a director or senior officer of a company that is itself an Insider or subsidiary of the Company, | |
| (c) | a Person that beneficially owns or controls, directly or indirectly, shares carrying more than 10% of the voting rights attached to all outstanding voting shares of the Company; or | |
| (d) | the Company itself if it holds any of its own securities. |
| “Listing Date” | means date the Common Shares commence trading on the CSE. |
| “MD&A” | means Management’s Discussion and Analysis. |
| “Named Executive Officers” or “NEO” | has the meaning ascribed thereto under “Executive Compensation – Executive Compensation”. |
| “NI 41-101” | means National Instrument 41-101 – General Prospectus Requirements, of the Canadian Securities Administrators. |
| “NI 51-102” | means National Investment 51-102 – Continuous Disclosure, of the Canadian Securities Administrators. |
| “NI 52-110” | means National Investment 52-110 – Audit Committees, of the Canadian Securities Administrators. |
| “NP 46-201” | means National Policy 46-201 – Escrow for Initial Public Offerings, of the Canadian Securities Administrators. |
| “OBCA” | means the Business Corporations Act (Ontario). |
| “Offered Shares” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Offering” | means the distribution of the Offered Shares pursuant to this Prospectus. |
| “Offering Price” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Options” | means stock options to acquire Common Shares issuable pursuant to the Share Compensation Plan. |
| “Over-Allotment Option” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| 2 |
| “Person” | means a company, individual or trust. |
| “Principal” | means, collectively, Richard Lu, Sam Sun, Andrew van Doorn, Tracy Zheng, Olen Aasen, Paul Pasalic and Paul Sparkes. |
| “Principal Regulator” | means the Ontario Securities Commission. |
| “Promoter” | means (a) a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer, or (b) a person or company who, in connection with the founding, organizing or substantial reorganizing of the business of an issuer, directly or indirectly, receives in consideration of services or property, or both services and property, 10% or more of any class of securities of the issuer or 10% or more of the proceeds from the sale of any class of securities of a particular issue, but a person or company who receives such securities or proceeds either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this definition if such person or company does not otherwise take part in founding, organizing, or substantially reorganizing the business. |
| “Regulation S” | means Regulation S promulgated under the U.S. Securities Act. |
| “RSUs” | means restricted share units that upon vesting are redeemed for Common Shares issuable pursuant to the Share Compensation Plan. |
| “Securities Commissions” | means the securities regulatory authorities of the offering jurisdictions, being the provinces of British Columbia, Alberta and Ontario. |
| “SEDAR” | means the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators. |
| “Series A Warrant” | means transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series A Warrant entitling the holder, upon satisfaction of the Series A Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. |
| “Series A Warrant Vesting Condition” | means the Series A Warrants shall become exercisable upon the Company attaining a fully diluted market capitalization of $20 million calculated by multiplying all of the issued and outstanding Common Shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. |
| “Series B Warrant” | means a transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series B Warrant entitling the holder, upon satisfaction of the Series B Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. |
| “Series B Warrant Vesting Condition” | means the Series B Warrants shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer” as defined in NI 51-102. |
| “Shareholders” | means holders from time to time of Common Shares. |
| “Share Compensation Plan” | means the share compensation plan of the Company adopted on November 4, 2022. |
| 3 |
Table of Abbreviations
| “BOS” | means balance-of-system |
| “BTM” | means behind-the-meter |
| “C&I” | means commercial and industrial |
| “COD” | means commercial operations date |
| “CRCE” | means Canadian Renewable Conservation Expenses |
| “EPC” | means engineering, procurement and construction |
| “FIT” | means Feed-In-Tariff |
| “GHG” | means Greenhouse Gas |
| “GW” | means Gigawatt |
| “IEA” | means International Energy Agency |
| “IESO” | means Independent Electricity System Operator |
| “IPP” | means Independent Power Producer |
| “IRA” | means Inflation Reduction Act of 2022 |
| “ITC” | means Investment Tax Credit |
| 4 |
| “kW” | means Kilowatt |
| “kWh” | means Kilowatt hour |
| “kWp” | means Kilowatt peak |
| “MPPT” | means Maximum Power Point tracking |
| “MW” | means Megawatt |
| “MWac” | means Mega-Watt, Alternating Current |
| “MWp” | means Megawatt peak |
| “NMCA” | means Net Metering Credit Agreement |
| “NTP” | means Notice to Proceed |
| “NZ2050” | Means Net-Zero by 2050 |
| “O&M” | means operations and management |
| “PCDC” | means Pre-Construction Development Costs |
| “PO” | means purchase order |
| “PPA” | means Power Purchase Agreement |
| “PTO” | means Permission to Operate |
| “PV” | means photovolatic |
| “QA/QC” | means quality assurance/quality control |
| “REC” | means Renewable Energy Certificate |
| “RPS” | means Renewable Portfolio Standards |
| “VDER” | Means Value of Distributed Energy Resources |
| 5 |
GENERAL MATTERS
About this Prospectus
Investors should rely only on the information contained in this Prospectus and are not entitled to rely
on certain parts of the information contained in this Prospectus to the exclusion of others. Neither the Company nor the Agent have authorized
anyone to provide investors with additional or different information. The information contained on www.abundant.solar or any affiliated
website is not intended to be included in or incorporated by reference into this Prospectus and prospective investors should not rely
on such information when deciding whether or not to purchase the Offered Shares. Any graphs, tables or other information demonstrating
our historical performance contained in this Prospectus are intended only to illustrate past performance and are not necessarily indicative
of the Company’s future performance. Neither the Company nor the Agent are offering 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 the date otherwise indicated, regardless of the time of delivery of this Prospectus or any sale of the Offered Shares. The Company’s
business, financial condition, results of operations and prospects may have changed since the date of this Prospectus.
If, after the date that this Prospectus is filed but before the filing of a final prospectus, a material adverse change occurs, the Company will be required to file an amendment to the Prospectus as soon as practicable, but in any event, within 10 days after the material adverse change occurs. If, after the date that a final prospectus is filed but before the completion of the distribution under the final prospectus, a material change occurs, the Company will be required to file and deliver to investors an amendment to the final prospectus as soon as practicable, but in any event within 10 days after the material change occurs.
The Agent is not offering to sell the Offered Shares in any jurisdiction where the offer or sale of such securities is not permitted. For investors outside Canada, neither the Company nor the Agent have done anything that would permit the Offering or distribution of this Prospectus in any jurisdiction where action for that purpose is required, other than in Canada. Investors are required to inform themselves about and to observe any restrictions relating to the Offering and the distribution of this Prospectus.
Interpretation
Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, “SolarBank” or the “Company” refer to SolarBank Corporation together with its direct and indirect subsidiaries, as the context requires.
Certain capitalized terms and phrases used in this prospectus are defined under “Glossary of Terms”. Words importing the singular number include the plural, and vice versa, and words importing any gender include all genders.
Currency Presentation
Unless stated otherwise or as the context otherwise requires, all references to $, C$ or dollar amounts in this Prospectus are references to the lawful currency of Canada, and all references to US$ or United States Dollars are to the lawful currency of the United States.
FINANCIAL STATEMENT PRESENTATION IN THIS PROSPECTUS
The following financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are included in this Prospectus (see “Financial Statements”):
| 1. | the audited financial statements of the Company for the years ended June 30, 2022 and June 30, 2021, together with the notes thereto and the auditors’ report thereon; and |
| 2. | the unaudited interim financial statements of the Company for the three months ended September 30, 2022 together with the notes thereto. |
| 6 |
FORWARD-LOOKING STATEMENTS
This Prospectus contains “forward-looking statements” or “forward-looking information” (collectively “forward-looking statements”) within the meaning of applicable securities laws. Forward-looking statements contained herein are based on current expectations, estimates, forecasts, projections, beliefs and assumptions made by management of the Company about the industry in which it operates. Such statements include, in particular, statements about the Company’s plans, strategies and prospects under the headings “Summary”, “Risk Factors”, and “Management’s Discussion and Analysis”. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and disclaims any obligation, to update any forward-looking statements after it files this Prospectus, whether as a result of new information, future events or otherwise, except as required by the securities laws. These forward looking statements are made as of the date of this Prospectus.
The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
| ● | the intention to complete the listing of the Common Shares (including the Offered Shares) on the CSE and all transactions related thereto; | |
| ● | the completion, size, Offering Price, expenses and timing of the closing of the Offering; | |
| ● | the use of the net proceeds of the Offering and the use of the available funds following completion of the Offering; | |
| ● | the Company’s expectations regarding its revenue, expenses and operations; | |
| ● | industry trends and overall market growth; | |
| ● | the Company’s growth strategies; | |
| ● | expectations relating to director and executive officer compensation levels; | |
| ● | the Company’s anticipated cash needs and its needs for additional financing; | |
| ● | the Company’s intention to grow the business and its operations; | |
| ● | expectations with respect to future costs; | |
| ● | expectations with respect to hiring of additional professional to increase volume; | |
| ● | the Company’s competitive position and the regulatory environment in which the Company operates; | |
| ● | the Company’s expectation that revenues derived from its operations, together with fund-raising activities, including its initial public offering, will be sufficient to cover its expenses during 2022 and over the next 12 months; | |
| ● | the Company’s expected business objectives for the next 12 months; | |
| ● | the Company’s ability to obtain additional funds through the sale of equity or debt commitments; | |
| ● | the effect of the Novel Coronavirus (“COVID-19”) outbreak on the ability of the Company to carry on business; and | |
| ● | beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the design, production, marketing, distribution and sale of our products. |
| 7 |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this Prospectus, the Company has made various material assumptions, including but not limited to: (i) obtaining the necessary regulatory approvals; (ii) that regulatory requirements will be maintained; (iii) general business and economic conditions; (iv) the Company’s ability to successfully execute its plans and intentions; (v) the availability of financing on reasonable terms; (vi) the Company’s ability to attract and retain skilled staff; (vii) market competition; (viii) the products and services offered by the Company’s competitors; (ix) that the Company’s current good relationships with its service providers and other third parties will be maintained; and (x) government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, prospective purchasers of Offered Shares should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Risk Factors”, which include:
| ● | the Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings; | |
| ● | the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers; | |
| ● | the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; | |
| ● | governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline; | |
| ● | general global economic conditions may have an adverse impact on our operating performance and results of operations; | |
| ● | the Company’s project development and construction activities may not be successful; | |
| ● | developing and operating solar projects exposes the Company to various risks; | |
| ● | the Company faces a number of risks involving PPAs and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms; | |
| ● | the Company is subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where it does business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity; | |
| ● | the markets in which the Company competes are highly competitive and evolving quickly; | |
| ● | an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; | |
| ● | the Company’s quarterly operating results may fluctuate from period to period; | |
| ● | foreign exchange rate fluctuations; | |
| ● | a change in the Company’s effective tax rate can have a significant adverse impact on its business; | |
| ● | seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; | |
| ● | the Company may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; | |
| ● | the Company may incur substantial additional indebtedness in the future; | |
| ● | the Company is subject to risks from supply chain issues; | |
| ● | risks related to inflation; | |
| ● | unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; | |
| ● | if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; | |
| ● | there are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes the Company and its utility scale solar projects to additional risk; | |
| ● | compliance with environmental laws and regulations can be expensive; | |
| ● | corporate responsibility, specifically related to Environmental, Social and Governance matters and unsuccessful management of such matters may adversely impose additional costs and expose the Company to new risks; | |
| ● | the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company; | |
| ● | the Company has limited insurance coverage; | |
| ● | the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; | |
| ● | the Company does not anticipate paying cash dividends; |
| 8 |
| ● | the Company may become subject to litigation; | |
| ● | discretion of the Company on use the net proceeds of the Offering. | |
| ● | no guarantee on how the Company will use its available funds; | |
| ● | the Company will be subject to additional regulatory burden resulting from its public listing on the CSE; | |
| ● | the Company cannot assure you that a market will develop or exist for the Common Shares or what the market price of the Common Shares will be; | |
| ● | the market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control; | |
| ● | future sales of Common Shares by existing shareholders could reduce the market price of the Company’s Common Shares; | |
| ● | the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and | |
| ● | future dilution as a result of financings. |
These factors should not be considered exhaustive. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.
Information contained in forward-looking statements in this Prospectus is provided as of the date of this Prospectus, and we disclaim any obligation to update any forward-looking statements, whether as a result of new information or future events or results, except to the extent required by applicable securities laws. Accordingly, potential investors should not place undue reliance on forward-looking statements or the information contained in those statements.
All of the forward-looking statements contained in this Prospectus are expressly qualified by the foregoing cautionary statements. Investors should read this entire Prospectus and consult their own professional advisors to assess the income tax, legal, risk factors and other aspects of their investment.
MARKET AND INDUSTRY DATA
Unless otherwise indicated, information contained in this Prospectus concerning the Company’s industry and the markets in which it operates, including general expectations and market position, market opportunities and market share, is based on information from independent industry organizations, other third-party sources (including industry publications, surveys and forecasts) and management studies and estimates.
Unless otherwise indicated, the Company’s estimates are derived from publicly available information released by independent industry analysts and third-party sources as well as data from the Company’s internal research and knowledge of the renewable energy market and economy, and include assumptions made by the Company which management believes to be reasonable based on their knowledge of the Company’s industry and markets. The Company’s internal research and assumptions have not been verified by any independent source, and it has not independently verified any third-party information. While the Company believes the market position, market opportunity and market share information included in this Prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the Company’s future performance and the future performance of the industry and markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Forward-Looking Statements” and “Risk Factors”. For the avoidance of doubt, nothing stated in this paragraph operates to relieve any party from liability for any misrepresentation contained in this Prospectus under applicable Canadian securities laws.
MARKETING MATERIALS
A “template version” of the following “marketing materials” (each such term as defined in NI 41-101) for the Offering has been filed with the Securities Commissions, and are specifically incorporated by reference into this Prospectus:
| 1. | the investor presentation of the Company dated February 10, 2023 entitled “Investor Presentation – February 10, 2023” filed on SEDAR on February 10, 2023 (the “Investor Presentation”). |
The Investor Presentation referred to above are available under the Company’s profile on SEDAR at www.sedar.com.
In addition, any template version of any other marketing materials filed in connection with this Offering, after the date hereof but prior to the termination of the distribution of the Offered Shares under this Prospectus (including any amendments to, or an amended version of, any template version of any marketing materials), is deemed to be incorporated by reference herein. Any template version of any marketing materials utilized in connection with this Offering are not part of this Prospectus to the extent that the contents of the template version of the marketing materials have been modified or superseded by a statement contained in this Prospectus.
| 9 |
PROSPECTUS SUMMARY
The following is a summary of the principal features of this Prospectus and the Offering. and does not contain all of the information an investor should consider before investing in the Offered Shares and should be read together with the more detailed information and financial data and statements contained elsewhere in this Prospectus, especially the “Risk Factors” section of this Prospectus. Certain capitalized terms and phrases used in this Prospectus are defined in the “Glossary of Terms” beginning on page 1.
Principal Business of the Company
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in the province of Ontario and the state of New York. The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
The Offering
Pursuant to the Agency Agreement, the Company has appointed the Agent to act as its agent to offer for sale to the public, on a “commercially reasonable efforts” basis, up to 7,000,000 Offered Shares at the Offering Price per Offered Share, for gross proceeds of up to $5,250,000, subject to compliance with all necessary legal requirements and to the conditions of the Agency Agreement. The Company has also granted the Agent the Over-Allotment Option exercisable at any time up to 48 hours prior to the Closing Date to acquire up to 1,050,000 Additional Shares at the Offering Price, representing 15% of the maximum Offering.
The Company has agreed to pay to the Agent: (a) the Agent’s Fee which is equal to 6.0% of the gross proceeds of the Offering, and (b) an aggregate number of Broker Warrants equal to 6.0% of the aggregate number of Offered Shares issued pursuant to the Offering, in each case, including pursuant to any exercise of the Over-Allotment Option. Each Broker Warrant will entitle the Agent to purchase one Broker Warrant Share at the Offering Price for a period of 36 months following the Closing Date. In addition, the Agent shall be paid a Corporate Finance Fee of $35,000 (plus applicable taxes).
See “Plan of Distribution”.
The Listing
The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023.
Use of Proceeds
The net proceeds of the Offering, after deducting the Agent’s Fee, the remaining balance of the Corporate Finance Fee in the amount of $16,750 (inclusive of applicable taxes) and the estimated expenses of the Offering of $200,000, are estimated to be $4,718,250 before giving effect to any exercise of the Over-Allotment Option. The net proceeds of the Offering are currently intended to be used for company expansion and general corporate purposes. Specifically, the Company expects to use the net proceeds of the Offering for the following purposes:
Use of Proceeds |
Amount ($) | |
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | |
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 |
| 10 |
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | |
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | |
| Salaries for new hires. | 418,250 | |
| Total | 4,718,250 |
If the Offering is fully subscribed and the Over-Allotment Option is exercised in full, the net proceeds to the Company from the Offering, after deducting Agent’s Fee, the balance of the Corporate Finance Fee and estimated expenses of the Offering will be $5,458,500. Any additional proceeds received from the exercise of the Over-Allotment Option will be used for working capital.
Risk Factors
An investment in the securities of the Company is speculative and involves a high degree of risk. The following are a summary of certain of the risk factors described elsewhere herein. An investment should only be considered by investors who can afford the total loss of their investment. A prospective investor in Common Shares should be aware that there are various risks that could have a material adverse effect on, among other things, the properties, business and condition (financial or otherwise) of the Company. These risk factors which are listed below, together with all of the other information contained in this Prospectus, including information contained in the section entitled “Forward-Looking Statements”, should be carefully reviewed and considered before an investment in Common Shares is made. The risks listed below do not necessarily comprise all the risks faced by the Company.
Risks include those related to: The volatile solar power market and industry conditions; availability of third-party financing arrangements for us and our customers; tight credit markets; ability to expand the pipeline of our energy business in several key markets; the revision, reduction or elimination of incentives and policy support schemes for solar and battery storage power; general global economic conditions; success and timing of our project development and construction activities; the development and operation of solar projects; PPAs and project-level financing arrangements; laws, regulations and policies at the national, regional and local levels of government; competition; anti-circumvention investigations; the fluctuations in our quarterly operating results; Fluctuations in exchange rates; changes in our effective tax rate; Seasonal variations in demand linked to construction cycles and weather conditions; inability to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; incurring substantial additional indebtedness in the future; supply chain issues; inflation in many countries and regions; unexpected warranty expenses that may not be adequately covered by our insurance policies; inability to attract, train, retain, and successfully integrate key personnel into our management team; limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid; compliance with environmental laws and regulations; corporate responsibility; natural disasters, health epidemics, such as COVID-19, and other catastrophes; limited insurance coverage; information technology systems and data security breaches; the Company having a negative cash flow for the periods ended June 30, 2022 and June 30, 2021; litigation; the fact the Company does not anticipate paying cash dividends; uncertainty and discretion in the use of proceeds; there being no market for Common Shares currently existing; additional regulatory burden resulting from its public listing on the CSE; the market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control; the Company may need to raise additional capital in the future; the Company may be unable to support existing or new business if it does not raise sufficient funds; and dilution of the Common Shares.
| 11 |
See “Risk Factors”.
Summary Consolidated Financial Information
The following selected financial information has been derived from, and is qualified in its entirety by, the SolarBank Financial Statements, and the notes thereto (included at Schedule “A” to this Prospectus), and should be read in conjunction with the respective MD&A thereto (see “Management’s Discussion and Analysis”).
| Item | Interim
Period Ended September 30, 2022 (Unaudited) | Financial
Year Ended June 30, 2022 (Audited) | Financial
Year Ended June 30, 2021 (Audited) | |||||||||
| Revenue | $ | 5,480,452 | $ | 10,197,619 | $ | 7,346,581 | ||||||
| Total Expenses(1) | $ | (5,343,785 | ) | $ | (10,558,165 | ) | $ | (7,209,754 | ) | |||
| Net and Comprehensive Income (Loss) | $ | 164,482 | $ | 31,313 | $ | (199,917 | ) | |||||
| Current Assets | $ | 9,625,976 | $ | 8,983,109 | $ | 10,254,735 | ||||||
| Total Assets | $ | 9,827,628 | $ | 9,194,537 | $ | 10,283,255 | ||||||
| Total Liabilities | $ | 5,222,561 | $ | 4,753,922 | $ | 5,873,953 | ||||||
| Shareholders’ Equity | $ | 4,605,097 | $ | 4,440,615 | $ | 4,409,302 | ||||||
Note:
| (1) | Total Expenses equal Total cost of goods sold plus total operating expenses. |
See “Selected Financial Information”.
| 12 |
CORPORATE STRUCTURE
Name, Address and Incorporation
The Company was incorporated under the OBCA on September 23, 2013 as 2389017 Ontario Inc. On October 11, 2013 its name was changed to Abundant Solar Energy Inc. On October 17, 2022, it amended its Articles to establish an authorized capital consisting of an unlimited number of Common Shares. On October 17, 2022 its name was changed to SolarBank Corporation. On October 7, 2022 it completed a share split on a 1:160 basis.
The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
Intercorporate Relationships
The corporate structure of the Company is outlined in the diagram below and is current as at the date of filing of this Prospectus.
Subsidiaries
The Company’s subsidiary Abundant Solar Power Inc. (“Abundant USA”) was incorporated in the State of Delaware on December 15, 2016. The registered address of Abundant USA is 850 New Burton Road, Suite 201, City of Dover, County of Kent, Delaware, 19904 United States. Abundant USA was incorporated to carry out the Company’s operations in the United States.
The Company’s subsidiary Abundant Construction Inc. (“ACI”) was incorporated in the Province of Ontario on November 8, 2018. The registered address of ACI is 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. ACI was incorporated to act as the counter-party for certain of the Company’s construction agreements.
The Company’s subsidiary 2467264 Ontario Inc. (“246 Ontario”) was incorporated in the Province of Ontario on May 21, 2015. The registered address of 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. ACI was incorporated to develop solar power projects in the Province of Ontario with the support of 2543154 Ontario Inc., an arm’s length third party, who holds the remaining 51.1% of 246 Ontario. 2543154 Ontario Inc. is a corporation that is owned 50% by the MoCreebec Eeyoud and 50% by the Aroland First Nation, both First Nations Communities.
| 13 |
GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY
Overview
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in Canada and the United States. The Company’s mission is to support the energy transition in North America through deployment of clean energy at a distributed scale closer to where consumption occurs. Its objective is to scale-up as a leading developer, owner and operator of a significant fleet of distributed solar power assets that have economic and technical value. The Company originates, develops, designs and builds solar power projects. The Company is also gaining expertise in battery storage, co-generation and other technologies that will enable greater penetration of clean energy.
The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
The Company’s success started with the renewable Feed-In-Tariff (“FIT”) program for rooftop and ground mount solar arrays in Ontario, Canada. Since then, the Company has established itself as a trusted developer, engineer and asset operator that enables the proliferation of renewable and clean energy in the pursuit of Net Zero carbon emission goals in the fight against climate change and global warming.
The Company’s core competency is in deeply understanding and mastering the ‘local playbook’ of standard offer programs in numerous energy markets in North America allowing it to successfully gain market share while maintaining low overhead and capital-at-risk. The Company provides simple, reliable, and energy-resilient solutions to its customers that significantly reduce their carbon footprint. The Company has extensive experience working with 1,000+ customers including municipalities, First Nations, community co-operatives, regional economic planning authorities, commercial and industrial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions.
The Company’s leadership team has over 100 years of combined expertise in the renewable and clean energy industry coupled with a strongly defined philosophy and financial vision for successful growth. The team brings expertise in site origination, utility grid interconnection, permitting, financing, Engineering, Procurement and Construction (“EPC”), Operation & Maintenance, and asset management of solar PV power plants to the renewable and clean energy industry. As a total solution provider, the Company brings certainty at speed and scale in site control, government relations, grid interconnection, global supply chain and project financing to bring grid-connected solar power plants to productive operation.
The Company focuses on grid connected solar PV electricity power plants. With its full in-house development, engineering and construction expertise, the Company’s capabilities span the value chain from development, EPC, financing, and, while not yet an Independent Power Producer (“IPP”), performs asset management which is a core function of an IPP. The Company’s core business consists of:
| ● | Development: The Company identifies, evaluates and secures control of suitable solar development sites; obtains grid interconnection from utilities; acquires permits from government authorities; and engages solar energy subscribers and/or Power Purchase Agreement (“PPA”) clients as off-takers. A PPA, also referred to as an off-take agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer or off-taker). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA requires active management to reconcile monthly deliveries, penalties and payment for electricity. |
| 14 |
| ● | EPC: The Company engineers, procures and constructs efficient, eco-friendly, renewable solar power plants for industrial, commercial, community and utility electricity market, using high engineering standards and the latest technology. | |
| ● | Financing: The Company assists with securing sponsor equity, tax equity, long-term debt, and construction financing to deploy solar power plants. | |
| ● | Independent Power Producer: The Company is not yet an IPP. However, the Company does carry out one of the core functions of an IPP as it operates and maintains solar power plants for maximized production (O&M services described further below) and oversees solar power subscribers through two customer support centers in Boston and Chicago. The Company manages PPA and off-take agreements as an asset manager. |
O&M stands for Operations and Maintenance. It refers to the set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable regulations. It encompasses several ongoing maintenance processes along with the replacement and disabling of broken and damaged system and structural components. O&M is essential to ensuring that solar power plants sustain themselves for their expected system life. O&M consists of three fundamental and principal functions:
| ● | Preventative maintenance. | |
| ● | Reactive maintenance: rapid identification, analysis, and resolution of issues and problems. | |
| ● | Comprehensive and detailed monitoring and reporting with adequate and requisite transparency. |
In the C&I solar segment, most solar companies perform O&M for their own systems, working with local electrical contractors and groundskeepers.
In carrying out its O&M services, the Company’s service standards are set out in its O&M contracts. These service standards have been developed over time based on experience and industry best practices. Referring to government agencies and industry associations such the National Renewable Energy Laboratory in the United States and Solar Power Europe, the standards have been developed based on industry experience, reliability, resilience and maximizing system output. Afterwards experience in the field and the close monitoring of system performance has allowed the standards to develop as to adapt to site specific conditions and achieve the highest system output and up time possible. Some references used in the development of the Company’s service standards are as follows: (i) Best Practices for Operation and Maintenance of Photovoltaic and Energy Storage Systems, 3rd Edition National Renewable Energy Laboratory, Sandia National Laboratory, SunSpec Alliance, and (ii) the SunShot National Laboratory Multiyear Partnership PV O&M Best Practices Working Group Operations and Maintenance Best practices guidelines version 5.0 by Solar power Europe.
The scope of work covers all electrical inspections and preventive measures which are comparable to any other electrical system such as a substation or a commercial or industrial building’s electrical connection infrastructure. The scope of work or service standards involve retorquing of electrical connections, testing of electrical components, testing of transformer oil to determine any degradation and mechanical inspections and adjustment of the racking system.
The O&M contract services standards are negotiated mainly on the preventive and reactive maintenance components. For preventive maintenance the standards or scope of work are common and little negotiation takes place aside from increasing frequency of inspections. For the reactive side, negotiation involves rates and response times to unforeseen operational issues.
The measurement of the O&M provider’s performance is usually verified by the customer through the performance factor of the system, as well as the monthly report which includes system output and allows for a comparison between predicted performance (e.g., through PVsyst simulation) and actual performance. For reactive maintenance the customer will measure response time and remediation time or “up time”. To date there have been no customer complaints under any of the Company’s O&M contracts.
| 15 |
The Company generates revenues via a diverse portfolio of distributed and community solar projects across multiple solar markets including projects with host off-takers, community solar, and net metering projects under programs such as FIT, Value of Distributed Energy Resources (“VDER”), Net Metering Credit Agreements (“NMCAs”), and PPAs. The Company develops solar projects that sell electricity to commercial, industrial, municipal, residential and utility off-takers.
Since incorporation, the Company’s team delivered value in Ontario’s FIT program with the completion of over 150 projects, New York’s Community Solar Program, and an RFP issued by the Maryland Department of Transportation. As a developer, full-service EPC contractor, and asset O&M manager, the Company has been successful in the renewable and clean energy industry working with 1,000 plus stakeholders including property owners, municipalities, indigenous people, co-operatives, electric utilities and regulatory agencies. The Company designed and constructed 100 plus solar power plants, including C&I rooftop installations and ground mount solar farms of varying scale. The Company’s management team has developed, financed and built over 600 C&I projects in Ontario, Minnesota and New York. Through its contracted customer care centers in Boston and Chicago the Company serves more than 5,000 retail electricity customers as community solar subscribers.
The Company’s success in the solar energy market is a result of its creativity, innovation, and ability to think outside of the box, in designing responses to the growing challenges facing the power industry. The Company has managed over $70 million in project financing to-date and has access to low-cost development financing by collaborating with tax-advantaged investment funds seeking CRCE in Canada or federal ITCs in the United States. A tax advantaged investment fund is an investment fund that passes through tax credits to its investors providing investors with tax benefits that allow such funds to offer lower returns to investors. This in turn means that the Company can access funding from such investment funds at a lower cost of capital. An example of a tax-advantaged investment fund is the SFT Group. There is a risk that if tax credits are eliminated or reduced in the future that such investment funds will have difficulty raising capital and as a result the Company may no longer have access to this form of financing.
| 16 |
Three-year history
Financings
On August 1, 2020, the Company entered into a promissory note agreement of $248,081 (US$200,000) with Central New York Enterprise Development Corporation (“CNY”) for a loan with a fixed interest rate of 5% per annum and principal and interest are payable on February 1, 2022. This loan is secured by the following collateral clause: all of the Company’s inventory, equipment, fixtures, accounts, contract rights, chattel paper, security agreements, instruments, deposit accounts, reserves, documents and general intangibles; and all judgements, claims, insurance policies and payments owed or made, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements. Subsequently, the Company has fully repaid the loan in December 2021.
On July 31, 2020, the Company entered into a secured note agreement with TGC Fund III, LP (“TGC”), a customer of the Company, for a loan of $2,483,775 (US$2,000,000). The term loan has an interest rate of 10% per annum to pay for 75% of the interconnection deposits of three projects. Upon TGC purchasing these projects from the Company, the principal and interest amounts are due. TGC purchased two projects as of June 30, 2021 and the third project was expected to close six months after. The third project has been closed subsequently and outstanding term loan has been fully repaid in July 2021.
On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (US$517,017) that comprised of a fixed interest rate of 10% for the first month and 1% for the remaining 11 months, compound monthly. The loan had a maturity date of January 7, 2022 and was secured by the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. In September 2022, the Company fully repaid the shareholder’s loan.
On May 3, 2021, the Company received a Highly Affected Sectors Credit Availability Program loan for a total of $1,000,000 at an interest rate of 4% per annum from the Bank of Montreal. The loan has a ten-year amortization period with interest payments only for the first year. Principal payments commenced in May 2022.
The Company received a Canada Emergency Business Account interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two year term which bears interest at 5% per annum.
On October 3, 2022 the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Each Convertible Loan is convertible at the option of the holder thereof into Conversion Units at a conversion price of $0.50 per Conversion Unit at any time. The Convertible Loans mature on the 12 month anniversary of the date of issuance of the Convertible Loans and do not bear interest at any time. Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Other Developments of the Business
On December 21, 2020, the Company entered into Purchase Order with Honeywell International Inc. for the construction of a solar energy facility in New York State in consideration for cash in the amount of US$1,413,694.52. To date the Company has completed six community and net metering solar projects in collaboration with Honeywell in New York State.
| 17 |
On February 9, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Troupsburg LLC for the construction and operation of 14.0 MW-DC solar energy facilities located in the Town of Richmond, Ontario County, New York and the Town of Portland, Chautauqua County, New York in consideration for cash in the amount of US$16,269,500. This project was placed into service on October 12, 2022.
On November 15, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Abundant Solar Power (VC1) LLC for the construction and operation of 298 kW-DC solar energy facilities located in the Village of Cazenovia, Madison County, New York in consideration for cash in the amount of US$488,321.
On November 15, 2021, the Company entered into a Membership Interest Purchase and Sale Agreement with Solar Alliance Energy DevCo LLC, for the sale of its interest in the Cazenovia Facility. This transaction closed in December 2022.
On January 31 2022, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Alliance Energy DevCo LLC (US1) for construction and operation of 278 kW-DC solar energy facilities located in the Village of Union Springs, New York in consideration for cash in the amount of US$802,383.20.
Changes in current financial year
Building upon its solid core competencies in full-service development, the Company will deliver an integrated growth solution that has the capacity to generate revenue and grow the business in different revenue streams and that is discussed in this paragraph. For C&I end users, the Company will extend its expertise in rooftop solar to behind-the-meter (“BTM”) solar projects, carports, and building-integrated photovoltaics enabling large property management firms and C&I customers like Honeywell International to achieve corporate Net-Zero commitments. The Company has been in negotiations with C&I customers to achieve this goal. The Company also intends to extend its success in FIT ground mount solar gardens and Community Solar farms to large Utility Scale solar farms with a targeted size of up to 100 MWp. In this regard, the Company has site control of a potential 30 MWp utility solar project and is actively searching for suitable sites that could allow for a solar project of up to 100 MWp. The Company’s track record in operations, maintenance, and asset management create a strong foundation for it to become a successful Independent Power Producer (“IPP”) delivering long-term, sustainable, and profitable growth. The Company’s pipeline has been growing in all aspects of what is being discussed above which is the result of an integrated growth solution.
To achieve this strategic growth goal, the Company will strengthen its team of professionals to increase volume. In 2022 it added additional employees with professional credentials in engineering and accounting. An existing team of 12 professionals with experienced and committed core members will be supplemented by outsourcing certain EPC services to meet a growing volume of business as the Company expects to complete projects with more total MWp in the current fiscal year than were completed in the fiscal year ended June 30, 2022. The Company will continue its tradition in project execution with simplicity, focus, and speed to enhance its leading position in cost competitiveness, with time to COD as a key measure of operation excellence.
Overview of Business and Services
Industry Overview
People need energy for nearly everything they do. The majority of the energy sources on earth are still coal and natural gas, representing close to 60% of global electricity supply.1 However, fossil fuel reserves are limited.
Conversely, the sun has all the energy our civilization needs. About 173,000,000 GW of Solar energy continue to reach the Earth’s surface.2 The US Department of Energy revealed that about 430 quintillion Joules (1.19e+14 kWh) of solar energy strikes the earth every hour.3 A single hour of solar energy could provide enough energy to power the planet for a year. Unlike conventional energy sources, it will take 5 billion years for the sun to run out of fuel.4
1 International Energy Agency. Global Energy Review 2020. https://www.iea.org/reports/global-energy-review-2020/renewables
2 Pierce, E.R. (2016). Top 6 Things You Didn’t Know About Solar Energy. U.S. Department of Energy. www.energy.gov/articles/top-6-things-you-didnt-know-about-solar-energy.
3 Ashrafun Nushra Oishi, A.N., Meer Shadman Shafkat Tanjim and M. Tanseer Ali (2019). Loss Analysis of Market Available Solar Cells and Possible Solutions. Journal of Scientific & Engineering Research, Volume 10, Issue 9, September-2019 ISSN 2229-5518.
4 Scudder, J. (2015). The sun won’t die for 5 billion years, so why do humans have only 1 billion years left on Earth? https://phys.org/news/2015-02-sun-wont-die-billion-years.html
| 18 |
93% of the global population lives in countries that have an average daily solar PV potential between 3.0 and 5.0 kWh/kWp.5 Because of this abundance of solar power, we only need a small percentage of the planet’s surface to harvest enough energy to power the planet. For example, in Ethiopia just 0.005% of the country’s land area could generate sufficient power to cover existing needs, and in Mexico that figure is just 0.1%.6
Solar PV potential varies across Canada, with the highest insolation in southern Saskatchewan, Alberta, Manitoba, and Ontario, and the lowest in northern and coastal regions.7 The National Energy Board of Canada expects that by 2040, solar power will generate 13% of the country’s electricity.8
Solar power is more affordable, accessible, and prevalent in the United States than ever before. From just 0.34 GW in 2008, U.S. solar power capacity has grown to an estimated 97.2 GW today.9 This is enough to power the equivalent of 18 million American homes at average consumption.10 Today, over only a small percentage of U.S. electricity comes from solar energy. According to the US Department of Energy, with aggressive cost reductions, enabling policies, and large-scale electrification, solar could account for as much as 40% of the nation’s electricity supply by 2035 and as much as 45% by 2050.11
Products and Services
The Company recognizes revenue from project development service and EPC services. The Company provides solar energy solutions by developing, permitting, designing and building BTM solar power generation and transmission or distribution electricity grid connected community solar gardens and utility scale solar farms. While the Company’s focus is on delivering solar power plants from site origination to commercial operation, and the operation and management of the solar power assets, the Company also provides renewable and clean energy project development, EPC, O&M and asset management services for a fee.
5 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
6 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
7 Market Snapshot: Which cities have the highest solar potential in Canada? (2018) https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2018/market-snapshot-which-cities-have-highest-solar-potential-in-canada.html
8 National Energy Board. Canada’s Energy Future 2017: Energy Supply and Demand Projections to 2040 (2017) https://www.cer-rec.gc.ca/en/data-analysis/canada-energy-future/archive/2017/2017nrgftr-eng.pd
9 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
10 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
11 U.S. Department of Energy. Solar Futures Study (2021) https://www.energy.gov/sites/default/files/2021-09/Solar%20Futures%20Study.pdf
| 19 |
A description of the Company’s three focus areas: BTM solar power generation, community solar and utility scale solar farms are as follows:
Behind-the-Meter (BTM) Solar Power Generation
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with grid electricity coming from renewable sources such as solar (long-term) and BTM solar power plants to generate zero emission renewable solar power onsite for the building’s self-use (immediate).
The term “behind-the-meter” refers to energy production and storage systems that directly supply homes and buildings with electricity. Residential and commercial solar panels are considered to be behind-the-meter, as are residential and commercial solar batteries—the energy that is produced or stored by these systems is separate from the grid and does not need to be counted by a meter before being used, so they are positioned behind the meter. Behind-the-meter, however, is not the same as “off-grid”. Most behind-the-meter solar energy systems are still grid-tied, which means they maintain a connection to the electrical grid. The energy the solar PV systems provide do not pass through an electricity meter before it is used by the home or business, but, when the panels are not in use (when there is no sunlight), energy from the grid is sent to the home or business, and that energy must pass through a meter first so that it can be accounted for by the utility.
All electricity end customers sit behind the meter. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Energy cost savings, | |
| ● | Control over project operations and maintenance, | |
| ● | Self-consumption of distributed generation (usually solar PV), | |
| ● | Visible commitment to sustainability (with solar PV), and | |
| ● | Resiliency (with battery storage). |
All provinces and territories in Canada offer net metering program though the details may differ.12 Forty-one States in the US, in addition to Washington, D.C., American Samoa, U.S. Virgin Islands and Puerto Rico offer net metering programs.13 The BTM solar projects are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems, and could be profitable with a targeted 15% gross margin. The Company can be a turn-key service provider to commercial and industrial (“C&I”) customers for them to own BTM solar power plants on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and third party ownership.
There has been an increased interest in BTM solar projects. Existing buildings are responsible for 18% of Canada’s GHG emissions, BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050.14
12 Alberta: https://www.epcor.com/products-services/power/micro-generation/Pages/net-metering.aspx; British Columbia: https://app.bchydro.com/accounts-billing/electrical-connections/net-metering.html; Saskatchewan: https://www.saskpower.com/Our-Power-Future/Powering-2030/Generating-Power-as-an-Individual/Using-the-Power-You-Make/Net-Metering; Manitoba: https://www.hydro.mb.ca/accounts_and_services/generating_your_own_electricity/?_ga=2.88824211.949710914.1666383471-1665874008.1666383471; Ontario: https://www.hydroone.com/business-services/generators/net-metering; Quebec: http://www.hydroquebec.com/residential/customer-space/account-and-billing/understanding-bill/residential-rates/net-metering-option.html; PEI: https://www.maritimeelectric.com/services/articles/net-metering/; Nova Scotia: https://energy.novascotia.ca/renewables/programs-and-projects/enhanced-net-metering; New Brunswick: https://www.nbpower.com/en/products-services/net-metering/; Newfoundland: https://www.newfoundlandpower.com/My-Account/Usage/Electricity-Rates/Net-Metering; Yukon: https://yukon.ca/en/micro-generation-program; Northwest Territories: https://www.inf.gov.nt.ca/en/NetMetering; Nunavut: https://www.qec.nu.ca/customer-care/generating-power/net-metering-program.
13 National Renewable Energy Laboratory. Net Metering. https://www.nrel.gov/state-local-tribal/basics-net-metering.html
14 Natural Resources Canada. Green Buildings. https://www.nrcan.gc.ca/energy-efficiency/green-buildings/24572
| 20 |
Community Solar Gardens
Solar power can help reduce CO2 emissions mainly by being a clean and renewable source of electricity. Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production at residential or C&I subscribers’ locations. Community Solar farms provide opportunities for the subscribers to do their part in achieving the Net-Zero goal.
Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earn credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
Community solar projects are usually 3 – 7 MWp each in size (see below a Company developed 3 MWp solar farm in Portland, NY, USA) subject to State regulation. Community solar capacity has increased because more projects have come online and because projects have generally become larger over time. Economies of scale enable cost-effective construction of a renewable energy system at a site with optimal renewable resource availability.
Community solar farm projects leverage economies of scale and often offer quick to market solutions for scales of approximately 1,000 homes/7 MWp. Additional advantages include, shared transaction costs often make this procurement option less expensive than self-supply, and customers are generally not responsible for maintenance and upkeep.
Utility Scale Solar Farms
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production. For comparison, the average American household uses approximately 900 kWh. A utility-scale solar power plant can utilize several solar technologies including primary PV, tracking (rotate to track the sun’s movement) or fixed racking (does not track the sun’s movement).
| 21 |
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a PPA with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time. Utility scale systems also participate in monthly and spot auction markets for energy, capacity, and ancillary services.
Utility-scale solar has become a growing source of electricity in the world. Many utility-scale solar designs can also include energy storage capacity that provides power when the sun is not shining and increases grid reliability and resiliency.
To reach NZ2050, every industry requires power and every business needs to decarbonize. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory, and utility scale solar farm is a commercially viable decarbonization solution for reaching the Net-Zero carbon emission goal.
Customers and Sales Channels
The pursuit of Net-Zero carbon emissions comes a rising demand for renewable energy. Customers are increasingly capitalizing on the climate benefits of renewables; they are looking for renewable energy to meet rising energy needs; they want to benefit from the improving economics of renewable energy via subsidies; and they want to move their businesses away from fossil fuel dependency. Based on application, the Company has customers in the following market segments: BTM, Community Solar, Corporate PPA, and Utility solar PPA.
| 22 |
Behind the Meter (BTM) Solar for C&I Customers
Corporate Net-Zero goals boost BTM solar growth. The C&I BTM solar market, which consists of on-site solar power generation primarily for self use has grown rapidly in recent years. Net-Zero adoption by businesses, non-for-profits and governments will help continue to increase the demand for BTM solar segments. Many C&I customers are becoming more interested in making sustainability-focused choices. With little more than 1% of commercial electricity demand served by on-site solar, there remains significant opportunity for growth in the BTM solar segment.
All subnational jurisdictions in Canada and the United States have net metering programs for BTM solar projects.15 The Company delivers BTM projects to C&I customers with in-house expertise, enabling economic progress on Net-Zero goals. A residential BTM market segment also exists; however, the Company sees Community Solar as its strongest opportunity to serve mass market residential customers.
Community Solar for Mass Market Subscribers
A Community solar subscription is tied to an offsite solar farm, or solar garden and allows homeowners, renters, small businesses, religious organizations, and other not-for-profits to purchase solar energy without the need to install panels on their property. Rather than purchasing energy solely sourced from utility-scale generators, such as coal and natural gas power plants, some or all electricity is sourced from the community solar project. Subscribers are billed for the solar energy and are credited on their utility bill. In many cases, this creates a discount over conventional electricity purchases. Community solar is especially appealing to those customers who are unable or unwilling to install a renewable energy generator at their residence or commercial facility but still seek the economic and environmental benefits of solar energy.
As of December 2021, Community solar projects are located in 39 states, plus Washington, D.C. 22 states, plus Washington, D.C., have policies that support community solar. Community solar projects represent more than 3,200 MWac of total installed capacity.16 The Biden Administration wants community solar to reach 5 million households by 2025 and create $1 billion in energy bill savings.17
Community Choice Aggregation (“CCA”) is an alternative to the investor-owned utility energy supply system in which local entities in the United States aggregate the buying power of individual customers within a defined jurisdiction to secure an alternative energy supply contract. The CCA chooses the power generation source on behalf of the consumers; and thus have the potential to be a major source of viable customers for community solar projects, representing very large contracts for community solar generators. The main goals of CCAs have been to either lower costs for consumers or to allow consumers greater control of their energy mix, mainly by offering cleaner generation portfolios than many local utilities.
15 See notes 12 and 13.
16 National Renewable Energy Laboratory. Community Solar. https://www.nrel.gov/state-local-tribal/community-solar.html
17 U.S. Department of Energy. DOE Sets 2025 Community Solar Target to Power 5 Million Homes.https://www.energy.gov/articles/doe-sets-2025-community-solar-target-power-5-million-homes
| 23 |
Seven states in the United States have enacted CCA-enabling laws.18 CCAs have set national green power and climate protection records while reducing power bills. CCAs have won National Renewable Energy Laboratory and Environmental Protection Agency recognition for supplying significantly higher amounts of renewable energy while maintaining rates that are competitive with conventional fossil fuel and nuclear-based utility power.19 CCAs are therefore already conspicuous leaders in green power innovation, receiving the U.S. Environmental Protection Agency’s “green power leadership awards” for achievements in renewable energy. The Company has existing intends to in the future establish relationships with CCAs as a primary method of entry into the Community Solar project market.
Corporate America and IPP Customers
Regulation, investor activism, and rising consumer interest are among the factors pushing companies to benchmark and improve the sustainability performance of their offerings. Both governments and consumers are demanding companies reduce emissions and their environmental footprint. As a result, a growing demand exists for renewable electricity generation from large corporations. Globally, thousands of companies have set or are in the process of setting commitments to emissions reduction. In addition, hundreds of large US-based companies have committed to net-zero targets, many of which have set ambitious emissions reductions targets by 2030 or sooner.
Solar PPAs continue to evolve, with corporations increasingly procuring solar generation offsite. Major customers include renewable investment funds, RE100 corporations, and government administrations. Corporate solar PPAs can be classified as follows:
| ● | Physical PPA: a contract for the purchase of power and associated Renewable Energy Credits from a specific renewable energy generator to a purchaser of renewable electricity. |
| ● | Financial PPA: a financial arrangement between a renewable energy generator and a consumer. A Financial PPA does not include the electricity delivery to the buyer, and so the buyer can be located in a different power market. A Financial PPA involves crediting the consumer for the generator’s production. |
Corporate solar PPA prices vary widely from state to state. From 2020 to 2021, there were reductions in levelized electricity costs for commercial and utility-scale PV plus-storage systems. The levelized cost of electricity of utility-scale stand-alone PV fell from 4.6 cents/kWh in Q1 2020 to 4.1 cents/kWh in Q1 2021.20 State-by-state variance in contract prices is a function of avoided cost, resource availability and state incentives. PPA rates continue to decline, increasing viability and market opportunity in more jurisdictions. Falling component and build costs and attractive financing make solar the lowest-cost generation alternative in many states. Corporate customers are also negotiating shorter PPA terms to maximize future flexibility.
Traditional Energy Utilities as Customers
For the United States, the path to NZ2050 entails a comprehensive and rapid effort to decarbonize the economy. America’s annual GHG emissions come from a variety of sources, spanning every sector. Demand from utilities for renewable energy is expected to continue to grow in line with the broader economy. Utilities form the largest share of demand globally, particularly in the Americas, as they are required by law to meet RPS. They also have increased exposure to the merchant market (non-PPA), which will start to account for a larger share of solar PV installations.
18 National Renewable Energy Laboratory. Community Choice Aggregation (CCA) Helping Communities Reach Renewable Energy Goals. https://www.nrel.gov/state-local-tribal/blog/posts/community-choice-aggregation-cca-helping-communities-reach-renewable-energy-goals.html
19 See note 18.
20 Vignesh Ramasamy, David Feldman, Jal Desai, and Robert Margolis. U.S. Solar Photovoltaic System and Energy Storage Cost Benchmarks: Q1 2021, https://www.nrel.gov/docs/fy22osti/80694.pdf
| 24 |
Customers Buy Solar Renewable Energy Certificate (“REC”) Off-Sets
One way that the decarbonization effort is being pursued by lawmakers is the creation of RPS at the subnational level. An RPS makes it law for utilities to source a certain percentage of the electricity they sell to customers from renewable energy sources. This is done via REC trading systems.
To facilitate compliance with RPS requirements, states have adopted a market-based system of tradable RECs that represent the legal property rights to the environmental benefits of one MWh of renewable electricity generation. A REC is issued for every MWh of electricity generated and delivered to the electric grid from a renewable energy resource.
In the REC state markets, various RPS regimes require electricity suppliers to secure a portion of their electricity from renewable power plants. Utilities must generate RECs themselves via self-owned renewable generation, purchase them from renewable generators, or else pay a penalty that is generally higher than the market rate for RECs.
All green power supply options involve the generation and retirement of RECs. Renewable energy providers can unbundle energy from RECs - selling energy as “brown” power and the RECs on the open market. REC sales involve no physical delivery of electricity to customers. One way to think of RECs is that they represent the “solar” aspect of the electricity that was produced.
REC generation and sales are a key revenue stream for utility-scale renewable projects owned by IPPs. In many cases, it is the value of RECs that make these large projects financially viable. REC markets vary by state in line with RPS requirements. As governments more aggressively pursue their carbon emissions targets in the lead up to 2030 and 2050, the Company expects RPS requirements to escalate accordingly and REC prices to increase.
Operations Process
Leveraging the Company’s development expertise means that it can finish turnkey solar projects in an efficient and timely manner. The Company’s process has five phases: Site Origination; Development; Financing; Engineering, Procurement and Construction; Operation & Maintenance and Asset Management. This process has been tested and verified and has brought the Company success.
Phase 1 - Site Origination to Bankable Lease
| ● | Policy analysis: Political analysis, environmental, permitting, land use. |
| ● | Prioritize low-cost interconnection sites. |
| ● | Financial analysis: Incentive framework, IRR analysis and relevant investment threshold. |
| ● | Site control: identification, evaluation and execute bankable lease to grow its greenfield Pipeline with efficient site acquisitions, affordable land with low property tax rates. |
| ● | Acquisition of development pipelines. |
Phase 2 - Development to Notice To Proceed (NTP)
| ● | Evaluate and prioritize projects with the highest likelihood of success. |
| ● | Grid interconnection studies: detailed discussions with the electrical utilities to determine the most economical methods of connecting the projects to the electrical grid, could result in Connection Impact Assessments, Connection Cost Assessments, Connection Agreements. |
| 25 |
| ● | Permitting: municipal, state and/or federal permits and approvals, site plan optimization and approval, multiple approvals from zoning, planning and town boards and city council are required depending on the type and size of the project. Projects may also involve a county level review. |
| ● | Environmental and required regulatory permits to ensure that the project will not significantly negatively impact the surrounding natural environment. |
| ● | Incentives and PILOT/Tax. |
| ● | PPA rates, off-taker credit, post-contract assumptions. |
Phase 3 - Financing
| ● | Sponsor equity: Draw on sponsor equity commitments from family office and other investors. |
| ● | Investment tax credit: Source tax equity from providers. |
| ● | Long-term debt: Opportunistically add project-level debt or bank leverage to maximize returns. |
| ● | Construction Financing: project cost and budgeting. |
Phase 4 - Delivery: Engineering, Procurement and Construction to COD/PTO
| ● | EPC selection and negotiation, vet EPC partners based on experience and track record, run targeted RFPs with firms that the company has a close relationship with. |
| ● | Further fieldwork such as geotechnical investigation, legal or topographical surveys, and site assessments. |
| ● | Electrical, civil, mechanical and structural engineering design, including erosion and sediment control plan, Issue For Construction drawings. |
| ● | Construction permits such as building permits and entrance and address permits. |
| ● | Procurement: supplier negotiation on price and on-time delivery to the sites (solar panels, racking, inverter and BOS), procurement of electrical equipment is a critical step done as soon as the engineering phase has finalized its design. Some equipment such as transformers can take up to 16 weeks of lead time for delivery. |
| ● | Work closely with local utilities and EPC firms to streamline the construction process. |
| ● | Contracting: installers contracting. |
| ● | Fencing and Safety: Fencing of the project site, coordinating with existing facilities and preparing safety measures. |
| ● | Construction control: on budget, on schedule, regular site visits, QA/QC, PO and change order management. |
| ● | System commissioning, coordination of all jurisdictional inspections and approvals, identification and correction of deficiencies, site commissioning inspections and tests must be passed. These include electrical commissioning and creation of as-built drawings and finalized package, and COD/PTO. |
| ● | Site permits closing, site cleanup, landscaping, financial closing support, and coordinating with the utility to receive a final acceptance letter. |
| 26 |
Phase 5 - O&M, Subscriber Management, and Asset Management
| ● | Project handover, acceptance, and O&M for high production. |
| ● | 100% subscription, 100% credit allocation, and utility reconciliation. |
| ● | Asset management: contract management, financial reporting, regulatory filings. |
Employees, Specialized Skill and Knowledge
As of June 30, 2022, the Company has nine employees and an additional four contracted service providers. The operations of the Company are managed by its directors and officers.
The nature of the Company’s business requires specialized knowledge and technical skill around procurement, construction, management, financing and regulations of the solar industry. The required skills and knowledge to succeed in this industry are available to the Company through certain members of the Company’s management, directors, officers, and advisory teams. The Company’s employees and consultants have extensive experience working with municipalities, First Nations, community co-operatives, regional planning authorities, commercial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions. The Company’s team also has extensive experience developing, financing, building, permitting, commissioning, operating and maintaining renewable and clean power plants in Canada and the US with collectively over 100 years of direct experience profitably originating and executing on projects. Many members of the team have a long track record working together at major North American renewable energy companies such as Potentia, Solar Power Networks, Sky Solar and ARISE Technologies. Most of the team built its track record developing, financing, conducting EPC and O&M, executing both ground mount and rooftop FIT solar projects in Canada and in the US. See “Directors and Executive Officers”.
Competitive Conditions
The global solar market remains highly fragmented. Fragmentation will continue as barriers to entry remain low for residential, community, commercial, and industrial applications and annual installations continue to grow driven by Net-Zero policy initiatives. As a result, the Company predicts significant price competition among solar power competitors.
The Company competes with peers in development, EPC, O&M, and IPP Asset Management. Solar companies are not disrupting or undermining the solar energy industry by selling new products or services that may replace the Company’s. The Company competes on cost and volume via operational excellence. Certain companies in the segment could be vulnerable due to limited scope. The Company addresses this through exposure to the whole renewable energy value chain. Scale may hinder an operator’s ability to meet increasing market demand. Successful solar companies in the Company’s segment are successful because of their ability to access capital markets to fund volume.
Solar Developers
A solar developer is a company that shepherds a solar power plant from ideation to construction readiness, also known as Notice to Proceed (“NTP”) A developer can employ just a few employees or up to thousands. Some developers specialize in certain sizes of projects or in specific regions.
The process of developing a solar power plant can take years. Developers must secure a project site, find an customer for the electricity the power plant will produce (a utility, an electric cooperative in rural areas, a corporation that wants the energy for its own use, or community solar subscribers); conduct technical, geological and other studies on the land, study how the energy generated by the power plant will be connected to the electric grid; apply for a variety of permits from local, state, and sometimes federal agencies; secure financing for the construction of the solar power plant; negotiate equipment purchases; and contract with an EPC firm for the build. All of this must happen before construction begins.
| 27 |
Competitors in solar development in markets relevant to the Company are presented in the table below, with information from Solar Power World. The number one developer in Utah (UT), AES Clean Energy has delivered 526MW utility scale solar in 2020; Nexamp in Massachusetts’ (MA) C&I market delivered 128MW; and Enerlogics in Ohio’s (OH) C&I market delivered 1MW. The Company delivered 12MW in 2020 with more than 100MW delivered since the Company’s founding. The Company could be ranked within the top 20 solar developers on this list.
Solar EPC Companies
Solar EPC companies provide engineering, procurement, and construction of a full solar system. A solar EPC company is more sophisticated and holistic in the products and services they provide compared to a typical solar installer. These include:
| ● | Site surveys for project viability. |
| ● | Determine power generation capacity and equipment selection. |
| ● | Design and install of the PV system. |
| ● | Electric grid interconnection and metering. |
| ● | Facilitate financing including tax incentives and rebates. |
| ● | Commission the solar system to meet the designed production requirement. |
A list of competitors in the Company’s solar EPC segment is presented in the table below based on information from Solar Power World. The number one solar contractor is SOLVE Energy from California (CA), which installed 8.7 GW with 901 employees since founding. The last one in the table, Renewable Energy Outfitters in Colorado (CO), delivered 593 kW with only 3 employees. The Company has installed more than 100MW since its founding.
| 28 |
Solar O&M Service Providers
Many of the large IPPs that own utility-scale solar PV portfolios in the U.S. rely on the plant developer or EPC firm for operations and maintenance, except for those that develop their own projects. Greentech Media (GTM) Research’s O&M and asset management report identified the top 5 O&M providers managing U.S. utility-scale PV plants in the table below. One of the firms, Sempra, is also an IPP.
Asset Management service – an IPP World
GTM Research defines asset management as the ongoing management of financial, commercial, and administrative tasks that are necessary to ensure the financial performance of a solar PV plant or a portfolio of plants. GTM Research and SoliChamba Consulting recently released a report, ‘Megawatt-Scale PV O&M and Asset Management 2016-2021’ which features a list of asset managers of U.S. utility-scale PV plants. The table below identifies the top five players:
| 29 |
IPPs who own solar power plants and typically perform asset management in-house dominate the top of the rankings, and make up four of the top five utility-scale PV asset managers in the U.S (based on reporting by SoliChamba Consulting outlined above). Most IPPs and financial investors; however, only manage the assets they invest in. The market for third-party asset management services remains small in the U.S. and its growth is probably limited by the dominance of IPPs and large portfolio owners who tend to self-service. The top third-party asset managers include project developers like Recurrent Energy and affiliated service providers like Bay4 Energy Services and EDF Renewable Services, as well as independent service providers like Radian Generation and CAMS.
Company Competitive Advantage
The Company has grown through participating in standard offering programs such as the Ontario Feed-In-Tariff program and New York’s NYSERDA NY-Sun Community Solar Program and has completed 70 Community solar projects in collaboration with Central New York Regional Planning and Development Board in New York. It has a good track record in developing and building renewable and clean energy projects in Canada and the USA. The Company has succeeded at delivering value at non-utility solar projects as a developer and a full-service EPC contractor; however, it has been evaluating opportunities for more growth in solar project volumes. Becoming an IPP aiming at long-term sustainable investment returns is the Company’s natural next step. To meet the desire for growth, the Company must re-position itself to deliver integrated growth solutions that expand from developer to an IPP in the C&I, Community, and Utility solar PV market segments.
The Company’s competitive advantage lies in its people, processes and experience. The Company’s team is skilled in translating customer needs into value-add solutions. The Company’s solar power plant delivery process is safe, reliable and low cost; and the Company provides a customer experience that is simple and focused with speed in implementation.
Third Party Suppliers
The Company procures all plant components on the open market. The Company qualifies suppliers’ products based on three factors: bankability, availability, and cost.
Product is considered bankable if lenders are willing to finance it. Component bankability is a key factor in projects being offered non-recourse debt financing by lenders. Products must also be available to meet construction schedules at a competitive price. Though China is the most cost-competitive location for the manufacture of all solar PV system components, Chinese solar products still must be bankable and available in order to be procured for the Company’s solar power plants.
| 30 |
Bloomberg NEF has developed a tiering system for PV module products based on bankability, creating a transparent differentiation between the hundreds of manufacturers of solar modules on the market. Tier 1 solar panels, such as those from Canadian Solar, ZNShine, and Jinko are built to higher standards and have the strongest reputation within the solar industry for quality and service. These panels last longer and produce more energy. Tier 1 manufacturers can be expected to honor product warranties. The Company primarily sources Tier 1 panels.
Solar panel mounts and racks are the equipment that secures solar panels in place. Racking is used to attach solar panels to a rooftop, ground, or another surface. With proper installation, an effective mount secures the solar panels against all weather conditions and ultimately protects the investment. Choosing the right racking system depends on the site, local climate, and installer preference (bankable, available, and low cost). Additional information on the Company’s key supplies are below:
| ● | Fixed Ground Mounts: Fixed ground mounts have lower energy production when compared to tracking systems, however no moving parts means lower O&M costs, and installation and procurement costs are lower. Fixed system suppliers, such as Schletter’s fixed tilt solar racking system, are also more bankable. |
| ● | Single-Axis and Dual-Axis Solar Tracker: Trackers increase the efficiency of solar systems by providing more direct sunlight to the system, moving the solar panels from East to West (single-axis include solutions from RBI Solar and TerraSmart’s) or from East to West and from North to South (dual-axis). The additional mechanical complexity leads to higher O&M costs, and procurement and installation costs are higher compared to fixed systems. |
| ● | Ballasted (Zero Penetration) Mounts: These systems are ideal for sites on roof membranes, landfill caps and industrial brownfields. More space is required to avoid table to table shading, and precast blocks have higher shipping costs and require heavy equipment to move around a site. GameChange Solar has both precast and pour-in-place ballast racking solutions. |
| ● | Solar Inverters: These are an integral part of every system. The Company has used many top brands such as Huawei, SunGrow, and SMA. The inverters perform two key functions: DC to AC conversion; and Maximum Power Point tracking (“MPPT”), where the inverter dynamically selects the voltage and current combination for the highest power production. |
| ● | String Inverters: These have better MPPT capability per string for high production, shorter DC wires for lower power loss, and require special racking for the inverter for each string. In general, these have a higher per Watt cost than central inverters. |
| ● | Central Inverter: Central inverters feature easy system design, installation and O&M trouble shooting. However, they represent a single point of failure for the whole system, with high DC wiring costs and high power loss due to voltage drop. In addition, partial shading and string mismatch drastically reduces power output. |
Pricing and Marketing
The Company strives to ensure its operational excellence. In the pursuit of Net-Zero there is an increasing willingness among customers to purchase renewable and clean energy such as solar power. Commercial customers are price sensitive in that they need to balance Net-Zero preferences and operational costs to remain competitive in their core businesses. Like with all utility economics, regulatory policy is a primary driver of revenue. Electricity prices are set largely by regulatory bodies like Public Service Commissions or Energy Boards. A PPA has to be equal to or lower than the regulated electricity price, in addition to providing renewable energy credits. The Company and its competitors generally have the same electricity price point (economic oligopoly). The Company gains economic value by managing project cost (the larger the project, the lower cost per watt installed), and driving business volume through a portfolio approach with large partners like Honeywell and large property management companies.
| 31 |
The Company prices its community and utility solar project and services competitively, and aligns itself with market pricing forecasts. The Company prices BTM solar projects to offer the host C&I customers a lower electricity cost, while securing a required return to its investors. BTM project pricing works the best in the Northeast USA where the retail electricity prices are high enough to enable a healthy margin in every BTM project the Company does.
With respect to promotion and marketing to secure customers:
Sales Team
| ● | The Company’s sales team must be highly trained, with a financial background, one on one selling skills, and should ideally hold a business credential. |
| ● | One dedicated sales manager per Province/State, with core team support from head office in order to support 50 MWp to 100 MWp annual growth rate at $150k total annual budget per person. |
Marketing Communications Plan with a promotion budget of 5% of gross revenue
| ● | 20% on advertising (online & printed media). |
| ● | 80% public relations and investor relations. |
Messaging customers with key messages
| ● | Community Solar Subscribers: Save on your utility bills while doing good to the environment. |
| ● | Community Choice Aggregation: Let the Company’s PPA be your way to cheaper, greener energy for your community members. |
| ● | Major Corporations: Be the 1st Net-Zero corporation among your peers. |
| ● | Large Utilities: Your state RPS compliance is the Company’s business. |
Regulatory Environment
Achieving Net-Zero by 2050 (“NZ2050”) is widely seen as the best way to halt climate change. “Net zero” means our total carbon dioxide emissions are equal to or less than the emissions we remove from the environment. NZ2050 will require new policies, investments, participation and commitment by government, industry, and individuals. The most feasible pathways to net-zero emissions include four main strategies:
| ● | Generate emission-free electricity using sources like wind, solar, nuclear, and waterpower. |
| ● | Use vehicles and equipment that are powered by electricity instead of fossil fuels. |
| ● | Use energy more efficiently. |
| ● | Remove carbon dioxide from the atmosphere. |
| 32 |
Policymakers are increasingly recognizing that renewable energy is the key to net-zero. Governments must build frameworks and reform bureaucracies to level the playing field for renewables as, in many countries, the bureaucracies still favour fossil fuels, giving the fossil fuel industry large subsidies. To date more than 140 countries have now set or are considering a target of NZ2050.21 United Nations Secretary-General António Guterres called on the world to “end fossil fuel pollution and accelerate the renewable energy transition, before we incinerate our only home”.22
Fighting climate change is good business. Renewables such as wind and solar are readily available and in most cases, are cheaper than coal and other fossil fuels. Solar and battery energy storage costs have plummeted in the past decade. Despite the headwinds presented by ongoing cost inflation and supply chain challenges, demand for clean energy sources has never been higher, and the Company expects that the global energy crisis will continue to act as an accelerant for the clean energy transition.
Since the International Energy Agency’s (“IEA”) last in-depth review in 2015, Canada has made a series of international and domestic commitments, putting it on a path toward achieving an ambitious energy system transformation and climate transition. The Canadian Net-Zero Emissions Accountability Act, which became law on June 29, 2021, enshrines in legislation Canada’s commitment to achieve net-zero emissions by 2050. The majority of Canadians already depend on clean, reliable electricity to power their everyday lives. Canada has accelerated the phase-out of coal, implemented natural gas regulations and put a price on carbon pollution. The Government will connect regions with clean power through Regional Strategic Initiatives.23 The Greenhouse Gas Pollution Pricing Act encourages the reduction of GHG emissions. The Liberal Party of Canada has signaled its intention to continue the annual price increases until the price on emissions reaches $170 per tonne of CO2e by 2030.24
21 Climate Action Tracker. CAT net zero target evaluations. https://climateactiontracker.org/global/cat-net-zero-target-evaluations/#:~:text=As%20of%2020%20September%202022,zero%20goal%20in%20November%202021
22 António Guterres. UN Secretary-General Remarks. https://media.un.org/en/asset/k1q/k1qn00cy8a
23 Government of Canada. Regional Tables Launched to Collaboratively Drive Economic Opportunities in a Prosperous Net-Zero Future. www.canada.ca/en/natural-resources-canada/news/2022/06/regional-tables-launched-to-collaboratively-drive-economic-opportunities-in-a-prosperous-net-zero-future.html
24 Government of Canada. Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030. https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html
| 33 |
With the United States’ announcement of targets to halve US GHG emissions and to reach net-zero emissions by 2050, the world’s largest economy (and second-largest emitter) has joined some 130 nations in its intention to act on climate change.
The Biden infrastructure plan (“American Jobs Plan”) is expected to result in very favorable federal policy environment for renewable energy development in the US with a goal towards a 100% emission free power sector by 2035 and economy wide net zero emissions by 2050.
The Inflation Reduction Act of 2022 (“IRA”) is a bill passed by the 117th United States Congress in August 2022 that aims to curb inflation by reducing the deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean energy solutions. The IRA includes long-term solar and energy storage tax incentives and other critical provisions that will help decarbonize the electric grid with significant clean energy deployment. The legislation earmarks $369 billion for U.S. energy security and fighting climate change. It is expected to cut annual U.S. greenhouse gas emissions by about 1 billion metric tons by 2030 mainly by speeding up the deployment of clean electricity and electric vehicles.25 The IRA extends the solar ITC by 10 years at 30%. The existing federal ITC has been fundamental to incentivizing the growth of American solar. The credit applies to residential, commercial, and utility-scale developers and will create an effective discount of 30% on the capital cost of solar installations for ten years (until 2033). The credit will decline to 26% in 2033 and to 22% in 2034. The reinvigorated ITC will come with a variety of “adders,” which could push the tax credit to as high as 50% for some projects. Additionally, the credit is equipped with a direct pay provision, allowing developers with little to no tax liability to treat it as a tax overpayment, resulting in a cash refund.
The IRA also provides ITCs for Standalone Storage and Interconnection Upgrades. Until now, battery storage was only eligible for the ITC if it was directly charged by solar. With respect to interconnection upgrades, a significant portion of the cost of solar projects is to pay for utilities to upgrade the grid so that the solar project can connect to it. With the IRA, standalone storage and interconnection upgrades are eligible for ITC.
25 Jesse D. Jenkins, Erin N. Mayfield, Jamil Farbes, Ryan Jones, Neha Patankar, Qingyu Xu, and Greg Schivley. Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022. https://repeatproject.org/docs/REPEAT_IRA_Prelminary_Report_2022-09-21.pdf
| 34 |
To promote a diversified resource mix and encourage deployment of renewable energy, most States have established RPS. The policies require that a specified percentage of the electricity sold by utilities comes from renewable resources. RPS policies help drive the United States market for wind, solar and other renewable energy. Roughly half of the growth in U.S. renewable energy generation since the beginning of the 2000s can be attributed to State renewable energy requirements.
In addition, the Company is subject to a variety of laws and regulations in the markets where its does business. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. The Company also faces trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. The Company expects that our solar power projects and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. See “Risk Factors”.
Impact of Environmental Laws and Regulations
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of the Company’s business operations.
The Company is required to comply with all national and local environmental regulations. The Company’s business generates noise, wastewater and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as its business has expanded. The Company believes that it substantially complies with all relevant environmental laws and regulations and has all necessary and material environmental permits to conduct its business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If the Company fails to comply with present or future environmental regulations, it may be required to pay substantial fines, suspend production or cease operations.
The Company’s solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and the Company may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, the Company may lose market share and its financial results may be adversely affected. Any failure by the Company to control its use or to restrict adequately the discharge, of hazardous substances could subject the Company to potentially significant monetary damages, fines or suspensions of its business operations.
Intellectual Property
The Company is not dependent on intellectual property rights for its business. The Company has no registered trademarks, patents or patent applications; however, the Company has applied in Canada and the United States to trademark the term “SOLARBANK”. The Company asserts copyright ownership generally in its written works, but has no formal copyright registration process in place.
Cycles
The Company’s business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
Foreign Operations
Currently the Company’s only foreign operations are in the United States which are detailed above. The Company intends to continue to focus on developing solar projects in Canada and the United States but will evaluate expanding into other countries based on the regulatory environment, demand and financial metrics of opportunities.
Economic Dependence
Except as disclosed under “Management’s Discussion and Analysis - Financial Instruments and Other Instruments (Management of Financial Risks) - Concentration risk and economic dependence” the Company’s business is not substantially dependent on any one contract for the products and services that is provides or the sourcing of the materials, labour and supplies it requires to provide its services.
| 35 |
Social or Environmental Policies
The Company has not yet implemented any formal social or environmental policies that are fundamental to its operations. It is currently evaluating the implementation of such policies based on current trends related to environment, social and governance initiatives.
Reorganizations
There has not been any material reorganization of the Company or any of its subsidiaries within the three most recently completed financial years or completed during or proposed for the current financial year.
USE OF PROCEEDS
Use of Proceeds
The net proceeds of the Offering, after deducting the Agent’s Fee, the remaining balance of the Corporate Finance Fee in the amount of $16,750 (inclusive of applicable taxes) and the estimated expenses of the Offering of $200,000, are estimated to be $4,718,250 before giving effect to any exercise of the Over-Allotment Option. All subscription funds received by the Agent will be held in trust, pending the closing of the Offering. If the Offering is not completed, the Agent shall promptly return the proceeds of the subscription to the purchasers without interest or deduction. There is no minimum amount of funds that must be raised pursuant to the Offering. This means the Company could complete the Offering after raising only a small proportion of the Offering amount set out herein. The net proceeds of the Offering are currently intended to be used for company expansion and general corporate purposes. Specifically, the Company expects to use the net proceeds of the Offering for the following purposes:
| Use of Proceeds | Amount ($) | |||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | |||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 | |||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | |||
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | |||
| Salaries for new hires. | 418,250 | |||
| Total | 4,718,250 | |||
An interconnection study is a study that determines whether a solar project can be connected to an electricity grid. These studies assess the addition of a solar project and its impact on the power system, as well as identify any interconnection facilities or network upgrades needed for interconnecting the solar project safely, in compliance with reliability requirements. Each interconnection study will include a system impact study which is an engineering study that evaluates the impact of the proposed interconnection on the safety and reliability of the transmission system. It is also likely to include a facilities study that determines the equipment and electrical switching configuration necessary to accomplish the interconnection and estimates the cost, construction, and installation times.
An interconnection deposit is provided to a utility after a positive interconnection study determination and in order for a utility to proceed with completing the interconnection of the solar power project to the electricity grid.
If the Offering is fully subscribed and the Over-Allotment Option is exercised in full, the net proceeds to the Company from the Offering, after deducting Agent’s Fee, the balance of the Corporate Finance Fee and estimated expenses of the Offering will be $5,458,500. Any additional proceeds received from the exercise of the Over-Allotment Option will be used for working capital.
Upon completion of the Offering, it is expected that the Company will have sufficient non-contingent financial resources to fund ongoing operations and achieve its business objectives and milestones for at least 12 months. The Company intends to spend the net funds available to it as stated in this Prospectus. However, there may be circumstances where, for sound business reasons, a reallocation of funds may be necessary. The management of the Company will have broad discretion in applying the net proceeds from the Offering. See “Risk Factors”.
The Company has incurred losses since inception. Although the Company expects to become profitable, there is no guarantee that will happen, and the Company may never become profitable. The Company anticipates it will continue to have negative cash flow from operating activities unless and until commercial production is achieved. The Company expects to use proceeds from the Offering to fund negative cash flow from operating activities in future periods. See “Risk Factors”.
| 36 |
Total Funds Available
Assuming completion of the maximum Offering, the Company will have approximately $7,829,046 in available funds (net proceeds of the Offering and approximately $3,110,796 in estimated working capital as at January 31, 2023). Based upon management’s current intentions, the estimated expenditures for which the total available funds will be used in the 12 months after the date hereof are as follows:
| Funds | ||||
| Working capital as of January 31, 2023 | $ | 3,110,796 | (2) | |
| Net proceeds of the Offering(1) | $ | 4,718,250 | ||
| Total Available Funds | $ | 7,829,046 | ||
| Expenditure | ||||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | $ | 1,000,000 | ||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | $ | 900,000 | ||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | $ | 800,000 | ||
| Business development initiatives in the United States involving completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. | $ | 1,600,000 | ||
| Salaries for new hires. | $ | 418,250 | ||
| Salary for existing employees | $ | 980,000 | ||
| General and administrative expenses(3) | $ | 2,130,796 | ||
| Total Use of Funds | $ | 7,829,046 | ||
Notes:
| (1) | Assuming no exercise of the Over-Allotment Option. |
| (2) | Assumes conversion of Convertible Loan. |
| (3) | General and administrative costs are broken down as follows: (i) contractor costs ($700,000), (ii) professional fees ($200,000), and (iii) rent ($80,000), travel and conference ($200,000), insurance ($120,000), investor relations and marketing ($800,000) and general office expenses ($30,796). |
The Company intends to spend the funds available to it as stated in this Prospectus. There may be circumstances however, where, for sound business reasons, a reallocation of funds may be necessary. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.
Pending the use of proceeds outlined above, the net proceeds will be held as cash balances in the Company’s bank account or invested in certificates of deposit and other short-term investment products. The Chief Financial Officer of the Company is responsible for executing the Company’s investment policies. See “Risk Factors”.
| 37 |
Business Objectives and Milestones
The primary business objectives for the Company over the next 12 months are:
| Business Objective | Milestone | Timeline | Expected Cost | ||||
| New United States Projects | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. | January 2023 – March 2023 | $ | 500,000 | |||
| Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. | January 2023 – March 2023 | $ | 500,000 | ||||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for SUNY project located in New York, USA. | January 2023 – September 2023 | $ | 900,000 | ||||
| Existing Canadian Project | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. | January 2023 – June 2023 | $ | 800,000 | |||
| Business Development Initiatives | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. | January 2023 – December 2023 | $ | 1,600,000
| |||
| Human Resources | Salaries for new hires | January 2023 – December 2023 | $ | 418,250 | |||
| Salaries for existing employees | January 2023 – December 2023 | $ | 980,000 | ||||
| General & Administrative Expenditures | General & Administrative Expenditures | January 2023 – December 2023 | $ | 2,130,796 | |||
While the Company believes it has the skills and resources necessary to accomplish these business objections and milestones, there is no guarantee that the Company will be able to do so within the time frames indicated above, or at all. See “Risk Factors”.
Current Status of Business Objectives and Potential Barriers to Completion
New United States Projects
| ● | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. |
The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
| 38 |
| ● | Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. |
The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
| ● | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, procurement bid application fee for SUNY project located in New York, USA. |
The Company has submitted of an interconnection request to New York Independent System Operator. It has secured site control via an executed lease with the landowner. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). The barrier to completion is the timing and result of the interconnection request could delay the progress of engineering, permitting and interconnection deposit.
Existing Canadian Project
| ● | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. |
The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has started and the Company is in discussion with the local utility on net metering interconnection, and with local authority having jurisdiction on the building permit. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
Business Development Initiatives
| ● | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. |
| ● | Three projects in Dutch Hill, New York: |
The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study.
| ● | Three wastebeds projects in New York: |
The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study.
Human Resources and General & Administrative Expenses
These expenditures are to support the completion of the business objectives detailed above. The only relevant barrier related to these items is if the Company is unable to recruit sufficient new hires to support its business objectives.
For additional risks related to all of the business objectives please see “Risk Factors”.
Costs Incurred to Date
New United States Projects
| ● | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. |
$93,540
| ● | Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. |
$59,816
| ● | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, procurement bid application fee for SUNY project located in New York, USA. |
No cost has been incurred so far. All tasks have been finished internally.
| 39 |
Existing Canadian Project
| ● | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. |
No cost has been incurred so far. All tasks have been finished internally.
Business Development Initiatives
| ● | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. |
No cost has been incurred so far. All tasks have been finished internally.
Human Resources and General & Administrative Expenses
The costs associated with these matters will be incurred in the future.
DIVIDENDS OR DISTRIBUTIONS
The Company has not declared dividends on any of their shares in the past and does not intend to pay any in the foreseeable future. Any future determination to pay dividends will be at the discretion of the Board of Directors and will depend on the financial condition, business environment, operating results, capital requirements, tax considerations, any contractual restrictions on the payment of dividends and any other factors that the Board of Directors deems relevant. See “Risk Factors”.
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information for the Company, summarized from the SolarBank Financial Statements, attached as Schedule “A”.
This table is presented and should be read in conjunction with the SolarBank Financial Statements and the related notes and auditor’s reports included in this Prospectus, together with the information included under “General Matters”, “Risk Factors”, “Capitalization”, “Management’s Discussion and Analysis”. The selected historical financial information has been prepared in accordance with IFRS. Investors are cautioned that historical results are not indicative of future results.
| Item | Interim
Period Ended September 30, 2022 (Unaudited) | Financial
Year Ended June 30, 2022 (Audited) | Financial
Year Ended June 30, 2021 (Audited) | |||||||||
| Revenue | $ | 5,480,452 | $ | 10,197,619 | $ | 7,346,581 | ||||||
| Total Expenses(1) | $ | (5,343,785 | ) | $ | (10,558,165 | ) | $ | (7,209,754 | ) | |||
| Net and Comprehensive Income (Loss) | $ | 164,482 | $ | 31,313 | $ | (199,917 | ) | |||||
| Current Assets | $ | 9,625,976 | $ | 8,983,109 | $ | 10,254,735 | ||||||
| Total Assets | $ | 9,827,628 | $ | 9,194,537 | $ | 10,283,255 | ||||||
| Total Liabilities | $ | 5,222,561 | $ | 4,753,922 | $ | 5,873,953 | ||||||
| Shareholders’ Equity | $ | 4,605,097 | $ | 4,440,615 | $ | 4,409,302 | ||||||
Note:
| (1) | Total Expenses equal Total cost of goods sold plus total operating expenses. |
| 40 |
annual MANAGEMENT’S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company for the year ended June 30, 2022 was prepared by management as of November 4, 2022 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended June 30, 2022. See “Risk Factors”. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Certain information included in the MD&A is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” for further details.
Overall Performance
The Company is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement, construction, operation and maintenance, and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth of its close to 1GW solar photovoltaic (“PV”) power plant development and acquisition.
Selected Annual Information
Comparative information for annual periods from June 30, 2020, 2021 and 2022 has been presented in accordance with IFRS.
| 41 |
| Year ended June 30 | 2022 (Audited) ($) | 2021 (Audited) ($) | 2020 (Unaudited) ($) | |||||||||
| Revenue | 10,197,619 | 7,346,581 | 13,474,095 | |||||||||
| Revenue - EPC | 9,791,511 | 3,230,366 | 12,111,441 | |||||||||
| Revenue – Development | 406,108 | 4,116,216 | 1,362,654 | |||||||||
| Cost of goods sold | (8,231,476 | ) | (4,814,144 | ) | (7,502,827 | ) | ||||||
| Net income (loss) | (188,391 | ) | (157,067 | ) | 2,733,508 | |||||||
| Net income (loss) per share | (0.01 | ) | (0.01 | ) | 0.17 | |||||||
| Total assets | 9,194,537 | 10,283,255 | 7,889,295 | |||||||||
| Long-term debt | 1,230,643 | 1,021,481 | 40,000 | |||||||||
| Dividends | - | - | - | |||||||||
The following discussion addresses the operating results and financial condition of the Company for the year ended June 30, 2022 compared with the year ended June 30, 2021. The MD&A should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended June 30, 2022.
Results of operations for the year ended June 30th, 2022 as compared to the year ended June 30th, 2021
In 2022, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. The two large New York-based projects contributed the majority of the revenue there were four smaller-sized projects in New York that started construction in 2022. It is expected that the Company’s revenue will keep growing in 2023 as two projects in the US reached NTP and many projects in the US are approaching NTP.
The net loss for the year ended June 30, 2022 increased by $31,326 compared to the year ended June 30, 2021 with $188,393 net loss recognized in 2022 as compared to a net loss of $157,067 recognized in 2021.
Key business highlights and projects updates in 2022
| ● | Existing Projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 69% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 69% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It started in late June 2022. It’s expected to reach PTO in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It started in late June 2022. It’s expected to reach PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 32% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 82% completion of the project. It’s expected to reach PTO in December 2022. |
| 42 |
| ● | Projects under Development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred | Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA |
6.1 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 | IPO, working capital | The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate the procurement of major equipment. The Company may have to delay the completion of the project to commercial operation if there is not enough funds to procure the components and hire local crews to build the project. |
Revenue
Revenue for the year ended June 30, 2022 was $10,197,619 compared to $7,346,581 in the comparative period. The revenue increase was mainly the result of EPC services provided with respect to two significant projects in New York, USA.
The EPC service revenue for the year ended June 30, 2022 was $9,791,511 compared to $3,230,366 in the comparative period, increasing by $6,561,145, or 203%. The revenue increase was mainly because the significant project started in the fourth quarter of the year ended June 30, 2021 while the Company worked on the project throughout the year ended June 30, 2022.
For the year ended June 30, 2022, the Company generated $406,108 in development revenue from the sales of two small-size projects developed by the Company, compared to $4,116,216 for the year ended June 30, 2021 from the sales of five projects developed by the Company.
Expenses
For the year ended June 30, 2022, the Company incurred cost of goods sold of $8,231,476 compared to $4,814,144 in the comparative period, increasing by $3,417,332, or 71%. The cost of goods sold increased by $3,417,332 is mainly due to two reasons. First, the Company completed more EPC services. The company recognize both revenue and cost based on the complete rate of the projects. Second, the gross margin of development revenue is higher than EPC services revenue.
| 43 |
The operating expenses were $2,326,689 in the year ended June 30, 2022 compared to $2,395,610 in the comparative period. During the year ended June 30, 2022, the Company incurred accounting and legal expenses of $143,937 compared to $79,599 in the comparative period mainly due to the Company required audit services for initial public offering in 2022. The rent expense for the year ended June 30, 2022 was $82,955 compared to $161,704 in the comparative period mainly due to several rent agreements have expired in 2022. The office and miscellaneous expenses for the year ended June 30, 2022 was $123,498 compared to $79,983 in the comparative period mainly due to the Company incurred $34,095 business tax in New York city and $17,500 recruiting expenses in 2022, whereas no such expenses incurred in 2021. The Company incurred $1,774,583 salary and wages for the year ended June 30, 2022 compared to $1,937,458 in the comparative period mainly due to the Company have 8 employees worked full year in 2022, whereas there were 11 employees worked full year in 2021. Overall, general and administrative expenses were consistent in the prior two fiscal years.
Other Income (Expenses)
For the year ended June 30, 2022, the Company had other income of $53,822 compared to other expense of $244,807 for the year ended June 30, 2021. Other income for the year ended June 30, 2022 consisted mainly of interest expense of $150,910 compared to $332,203 in 2021, a fair value adjustment on accounts receivable of $nil compared to $212,779 in 2021, a foreign exchange gain of $87,956 compared to a foreign exchange loss of $51,327 in 2021, and a government Covid subsidy income of $133,506 compared to $386,537 in 2021.
Net Income (Loss)
The net loss for the year ended June 30, 2022 was $188,391 for a loss per share of $0.01 based on 16,000,000 outstanding shares for the year versus $157,067 for a loss per share of $0.01 based on 16,000,000 outstanding shares for the previous year. While revenues increased in the year ended June 30, 2022, the net loss was higher due to increases in cost of goods sold.
Total Assets
Total assets for the year ended June 30, 2022 were $9,194,537 compared to $10,283,255 in the comparative period. The decrease in assets was due to a decrease in cash and trade and other receivables, which was partially offset by an increase in inventory.
Total Liabilities
Total liabilities for the year ended June 30, 2022 were $4,753,922 compared to $5,873,953 in the comparative period. The decrease in liabilities was due to a decrease in trade and other payables and a decrease in loan payables.
Cash flow from operating activities
The Company generated cash of $171,212 from operating activities during the year ended June 30, 2022, while the Company used $2,684,859 cash during the same period ended June 30, 2021. The Company generated cash of $14,830 from the operational activities and generated $156,382 from the change of working capital during the year ended June 30, 2022, while the Company generated cash of $45,020 from the operating activities and used $2,729,879 due to the change of working capital for the same period ended June 30, 2021.
Cash flow from financing activities
The Company used cash of $679,271 in financing activities during the year ended June 30, 2022, while the Company generated $2,323,933 cash during the same period ended June 30, 2021. The cash used in financing activities for the year ended June 30, 2022 was mainly driven by the net proceeds received from long-term debts of $316,450, offset by the repayment of short-term loans of $982,642. The cash generated from financing activities for the year ended June 30, 2021 was mainly driven by the net proceeds received from long-term debt of $1,020,000 and the net proceeds received from short-term loans of $3,495,867, offset by the repayment of short-term loans of $2,147,436.
| 44 |
Cash flow from investing activities
The Company used cash of $10,970 in plant, property and equipment during the year ended June 30, 2022, while the Company used $3,194 in plant, property and equipment during the same period ended June 30, 2021.
Discussion of Operations and Outlook
Solar PV Technology
The Company is in the business of developing solar PV projects. PV devices generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors. Electrons in these materials are freed by solar energy and can be induced to travel through an electrical circuit, powering electrical devices or sending electricity to the grid.
Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production. Most modern solar cells are made from crystalline silicon semiconductor material. Silicon cells are more efficient at converting sunlight to electricity, but generally have higher manufacturing costs.
The cost of PV has dropped dramatically as the industry has scaled up manufacturing and incrementally improved the technology with new materials. Installation costs have come down too with more experienced and trained installers.
Using the PV technology the Company develops, builds, and operates behind-the-meter (BTM) solar power plants, electricity grid connected community solar gardens, and utility scale solar farms
BTM Solar Power Plants
The Company is a turn-key service provider to commercial and industrial customers for them to own BTM solar power plant on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and 3rd party ownership.
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with BTM solar power plants on-site to generate zero emission renewable solar power for the building’s self-use. The BTM solar power plants are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Self-consumption of distributed generation, | |
| ● | Energy cost savings, | |
| ● | Control project operations and maintenance, | |
| ● | Visible commitment to sustainability, and | |
| ● | Resiliency (with battery storage). |
BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050. There has been an increased interest in BTM solar power plants as an effective way to halt climate change. The Company is experienced in BTM solar and currently manages a number of BTM solar power plants. It is anticipated that the Company will be able to develop and build 10 MWp BTM solar power plants in 2023 in Canada and the USA.
Community Solar Farms
Community solar refers to local solar PV facilities shared by multiple community subscribers who receive credit on their electricity bills for their share of the power produced. Community solar provides homeowners, renters, and businesses equal access to the economic and environmental benefits of solar energy generation regardless of the physical attributes or ownership of their home or business. Community solar expands access to solar for all, including in particular low-to-moderate income customers most impacted by a lack of access, all while building a stronger, distributed, and more resilient electric grid. Community solar power plants are usually less than seven (7) megawatts (MWdc) of electrical capacity, and it could power about 1,000 homes (the average American household uses approximately 10,000 kWh per year).
| 45 |
The Company works with 3rd party subscriber organizations in Boston and Chicago to manage its current 4,000 or so community solar subscribers. It is anticipated that the Company will deliver 20 MWp community solar farms with an additional 3,000 subscribers in year 2023.
Utility Solar Farms
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production.
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a power purchase Agreement (PPA) with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time.
Utility-scale solar farm has become a growing source of electricity in the world. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory. The Company is actively advancing its utility scale solar farms pipeline of 200 MWp and anticipates to deliver a 20 MWp utility scale solar farm in 2023.
Battery Energy Storage Systems (BESS)
The Company is actively participating with a development partner in the Ontario IESO Expedited Process Competitive RFP Procurement of Battery Energy Storage Systems (BESS). Up to 20 BESS projects, all located in Ontario, Canada, are expected to be bid on by end of year 2022, with 5 MW and minimum of 20 MWh for each of the BESS projects.26
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| 1. | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over the solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted. |
| 2. | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 contracts where the IESO had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
| 3. | In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. The ultimate amount to be recovered is subject to the IESO’s approval, and there is no certainty as to the actual amount to be recovered from the IESO. Subsequent to June 30, 2022, no amounts have been recovered from IESO. |
26 Independent Electricity System Operator. https://www.ieso.ca/en/Sector-Participants/Resource-Acquisition-and-Contracts/Long-Term-RFP-and-Expedited-Process
| 46 |
| 4. | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| 5. | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| 6. | The Company has $6,486,838 in accounts receivable outstanding from the Solar Flow Through group of companies (“SFT Group”) for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements and as a result is not providing a tabular comparison of the eight most recently completed quarters.
Results of operations for the three months ended June 30, 2022
During the fourth quarter of 2022, the Company generated $196,872 in revenue mainly from the four New York-based projects which represent 2MW capacity. The slowdown of the revenue was due to the change of a major vendor for the two large EPC projects in New York. The change has been completed and the Company expects to complete the two projects in the first half of 2023.
The Company reported a comprehensive loss from operations for the three months ended June 30, 2022 of $369,268
Reviews of the major expenditures items in the fourth quarter of 2022 are as follows:
| ● | Salary and wages: $458,764 |
| ● | Accounting and legal expenses: $72,699 |
| 47 |
| ● | Office expenses: $65,826 |
| ● | Interest expense: $61,292 |
Liquidity
As at June 30, 2022, the Company had a cash balance of $931,977 (June 30, 2021 - $1,400,073) with working capital surplus of $5,617,200 (June 30, 2021 - $5,524,025).
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
Capital Resources
Share Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (US$250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034. The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329. The loan is fully repaid in 8 equal quarterly instalments.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| June 30, 2022 | June 30, 2021 | |||||||
| Long-term debt – non-current portion | $ | 1,230,643 | $ | 1,021,481 | ||||
| Shareholders’ equity | $ | 4,440,615 | $ | 4,409,302 | ||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) 16,000,000 common shares issued and outstanding; and (ii) $1,250,000 principal amount of convertible debt that is convertible into 2,500,000 common shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; and (iii) 2,500,000 Advisory Warrants.
| 48 |
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
At June 30, 2022, included in accounts payable and accrued liabilities was $104,545 (2021 - $211,404) owing to certain officers and director (Richard Lu) of the Company regarding the accrued salary and bonus for services provided to the Company.
At June 30, 2022, included in trade and other receivable was $121,704 (2021 - $57,610) due from Sustainable Investment Ltd., who has a director (Richard Lu) in common, for a short-term bridge funding to cover working capital and project development expenses.
At June 30, 2022, included in trade and other receivables was $86,000 (2021 - $57,610) due from Renewable Sun Energy Co-Op, who has a director (Richard Lu) in common, for the payment made to a vendor on behalf of Renewable Sun Energy Co-Op.
At June 30, 2022, included in loan payable was $567,664 (2021 - $641,309) shareholder loan advance from a shareholder (Richard Lu). This loan is secured and was for short-term bridge funding to cover working capital and project development expenses.
Except as noted above with respect to the loan payable from Richard Lu, the amounts due to related parties are unsecured, non-interest bearing and have no stated terms of repayment. All transactions entered into with related parties are on terms equivalent to those that each related party charges to arm’s length parties.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the year ended June 30, 2022 and 2021 were as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| Short-term employee benefits | $ | 998,511 | 1,049,045 | |||||
Short-term employee benefits include consulting fees and bonus.
| 49 |
Critical Accounting Estimates
Revenue recognition:
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
Inventory:
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
Taxes:
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| 50 |
Expected credit loss:
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
Warranties:
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the year ended June 30, 2022, $Nil warranty provision was recorded (2021 - $Nil).
Contract fulfilment costs:
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
Utilization, derecognition and impairment of contract fulfilment costs:
The Company utilises contract fulfilment costs to cost of good sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| 51 |
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
The Company does note that it has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed. The accounts receivable balance is not yet recognized.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Year ended June 30, 2022 | Amount of Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,925,034 | 88 | % | ||||
| Amount of Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,469,692 | 79 | % | ||||
| Customer C | $ | 371,054 | 20 | % | ||||
| Year ended June 30, 2021 | Amount of Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,091,443 | 42 | % | ||||
| Customer D | 1,320,137 | 18 | % | |||||
| Amount of Account Receivable | % of Account Receivable | |||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % |
| 52 |
The Company also dependent on major service contractors to complete the projects. In January 2022, one major mechanical installation contractor for the two main projects went bankrupt which interrupted the construction and increased the uncertainty regarding when the Company would finish the projects. The contract value of the major contractor is $789,750. The Company is actively looking for the replacement to substitute this major contractor. Due to the bankruptcy and the fact that the Company could not estimate when the installation will be completed and reach COD, the Company is not able to invoice the customer. The cost of $2,932,820 (USD2,316,970) incurred on the projects was recorded as contract fulfilment costs.
Management assessed no impairment is required on contract fulfilment costs due to the projects can be either delivered to the current customer or the Company is able to recover the value by taking the ownership and run the projects by its own.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Commitment of loan for the next five years
Estimated principal repayments are as follows:
| 2023 | $ | 111,111 | ||
| 2024 | 311,247 | |||
| 2025 | 171,247 | |||
| 2026 | 111,111 | |||
| 2026 onwards | 537,037 | |||
| Total | $ | 1,341,754 |
Commitment of lease for the next five years
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of June 30, 2022 is as follows:
| 2023 | $ | 46,965 | ||
| 2024 | 60,302 | |||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 250,839 |
| 53 |
Subsequent Events
Loan repayment
In September 2022, the Company fully repaid the shareholder’s loan in advance in the amount of $567,664 plus interest of $157,245.
Debenture financing
On October 3, 2022 the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Advisory warrant
On October 3, 2022 the Company entered into a corporate and financial advisory agreement with a private equity firm. Pursuant to the agreement, the private equity firm is entitled to 2,500,000 transferable warrants, which will be vested on the closing of the Company’s IPO. The warrants shall entitle the holder to acquire shares for a period of five years at an exercise price equal to $0.10, subject to adjustment for any share consolidations or splits that occur prior to the closing of the IPO.
Name change
On October 7, 2022, the Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation.
Stock split
On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000.
interim MANAGEMENT’S DISCUSSION AND ANALYSIS
The following MD&A of the financial condition and results of operations of the Company for the three months ended September 30, 2022 was prepared by management as of December 8, 2022 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the unaudited interim consolidated financial statements of the Company and notes thereto for the three months ended September 30, 2022. See “Risk Factors”. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Certain information included in the MD&A is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” for further details.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
SBNK is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
| 54 |
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, EPC, O&M, and asset management of a solar power plants, whether electricity grid interconnected or BTM solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their RPS compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth of its close to 1GW solar PV power plant development and acquisition.
Development of the Business
USA
The Company is focused on its key market in New York and Maryland. In New York the Company is constructing a total of 6 solar projects, totaling 12 MWp (see Existing Projects table below), including two Community Solar projects, two with municipal power purchase agreement (PPA), and two net metering projects for Honeywell International Inc. The Company also has two community solar projects reached Notice to Proceed; seven community solar projects under utility interconnection studies. In addition the Company is working on sites origination of potential community solar projects. The Company is working with the Maryland Department of Transportation on eighteen potential solar project sites.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs is improving.
Canada
Over the past few years, the real estate sector has experienced an evolution in the importance of Environmental, Social and Governance (“ESG”) issues. The sector has made tremendous strides in tackling its contribution to Climate Change but despite efforts made so far, there is still a significant amount of work to be done, particularly given real estate’s 40% contribution toward global carbon emissions. Many Canadian real estate companies are set out to achieve its net zero emissions goals for all their operations and new developments. Real estate can be developed and managed to make positive impacts by stopping the growth of carbon emissions from properties and reduce emissions dramatically.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Selected Quarterly Information
The following table set selected condensed interim consolidated financial information for the Company for the three months period ended September 30, 2022 and 2021 and should be read in conjunction with the Company’s consolidated financial statements as at June 30, 2022 and 2021 and related notes thereto for such periods.
| 55 |
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| For the three months ended September 30 | 2022 $ | 2021 $ | ||||||
| Revenue | 5,480,452 | 2,602,057 | ||||||
| Revenue – EPC | 5,465,542 | 2,302,057 | ||||||
| Revenue – development | - | 300,000 | ||||||
| Revenue – O&M | 14,910 | - | ||||||
| Cost of goods sold | 4,917,533 | (2,070,005 | ) | |||||
| Net income (loss) | 225,957 | (88,222 | ) | |||||
| Net income (loss) per share | 0.01 | (0.01 | ) | |||||
| As at | September 30, 2022 $ | June 30, 2022 $ | ||||||
| Total assets | 9,827,628 | 9,194,537 | ||||||
| Total current liabilities | 4,154,821 | 3,365,909 | ||||||
| Total non-current liabilities | 1,067,740 | 1,388,013 | ||||||
The following discussion addresses the operating results and financial condition of the Company for the three months ended September 30th, 2022 compared with the three months ended September 30th, 2021.
Result of Operations
Three months ended September 30, 2022 compared to the three months ended September 30, 2021
During the first quarter of 2023, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. Within the quarter the Company made progress towards completing two large US EPC contracts, which drove the increase in EPC revenue during the quarter compared to the same quarter in 2022. It is expected that the Company’s revenue will keep growing in 2023 as two projects in the US reached NTP and many projects in the US are approaching NTP.
The net income for the three months ended September 30, 2020 increased by $314,179 compared to the net loss for the three month ended September 30, 2021 with $225,957 net income recognized during the first quarter of 2023 as compared to a net loss of $88,222 for the first quarter of 2022.
| 56 |
Key business highlights and projects updates in Q1 2023
| ● | Existing projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 91% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 91% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 86% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 62% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 67% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 82% completion of the project. It’s expected to reach PTO in December 2022. |
| ● | Projects under development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred | Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA |
6.1 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
93,540 |
IPO, working capital | The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project. | ||||||||
| Geddes | New York, USA |
4.0 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
59,816 |
IPO, working capital | |||||||||
| SUNNY | New York, USA |
28.0 | September 2023 |
Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 |
- |
IPO, working capital | The Company has submitted an interconnection request to New York Independent System Operator. It has secured site control via an executed lease with the landowner. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). The barrier to completion is the timing and result of the interconnection request could delay the progress of engineering, permitting and interconnection deposit. | ||||||||
| 261 Township |
Alberta, Canada |
4.5 | June 2023 |
Completion of engineering work and placement of orders for main project components | 800,000 | IPO, working capital | The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has started and the Company is in discussion with the local utility on net metering interconnection, and with local authority having jurisdiction on the building permit. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project. | |||||||||
| Dutch Hill 1 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Dutch Hill 2 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Dutch Hill 3 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | IPO, working capital | ||||||||||
| Wastebeds1 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Wastebeds2 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Wastebeds3 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital |
| 57 |
Revenue
Revenue for the three months ended September 30, 2022 was $5,480,452 compared to $2,602,057 in the comparative period, increasing by $2,878,395, or 111%.
The EPC service revenue for the three months ended September 30, 2022 was $5,465,542 compared to $2,302,057 in the comparative period, increasing by $3,163,485, or 137%. The revenue increase was mainly because the completion rate of the two significant projects in New York, USA in the first quarter of 2023 is higher than the rate in the first quarter of 2022.
For the three months ended September 30, 2022, the Company had $nil development revenue, compared to $300,000 for the three months ended September 30, 2021. The Company had no sales of projects which reach NTP in the first quarter of 2023, compared to one sales in the US in the first quarter of 2022.
The O&M services revenue for the three months ended September 30, 2022 was $14,910, compared to $nil in the comparative period. The Company is growing the O&M services revenue by allocating more resource to this revenue stream.
Expenses
For the three months ended September 30, 2022, the Company incurred cost of good sold of $4,917,533 compared to $2,070,005 for the three months ended September 30, 2021. The cost of goods sold increased by $2,847,528, or 138%, was mainly due to the higher percentage of completion of the two significant projects in the US in the first quarter of 2023. The company recognize both revenue and cost based on the complete rate of the projects.
The operating expenses were $426,252 in the three months ended September 30, 2022 compared to $636,239 in the comparative period. The operating expenses decreased by $209,987, or 33%, was mainly resulted from a decrease of $285,927, or 54% in salary and wages expenses, offset by an increase of $63,191, or 1339%, in office and miscellaneous expenses. The Company incurred $240,372 salary and wages expenses for the three months ended September 30, 2022 compared to $526,299 in the comparative period. The decrease was mainly due to $104,341 of performance based bonus to the CEO of the Company in the three months period ended September 30, 2021 compared to $nil during the three months period ended September 30, 2022. In addition, the Company has 10 employees during the three months period ended September 30, 2022 compared to 13 employees during the same period ended September 30, 2021. The Company incurred $67,909 expenses in office and miscellaneous for the three months ended September 30, 2022 compared to compared to $4,718 in the comparative period. The increase in office and miscellaneous was due the recruiting expense of $59,069 in the three months period ended September 30, 2022, whereas no such recruiting expenses incurred for the same period ended September 30, 2021.
Other Income (Expense)
For the three months ended September 30, 2022, the Company had other income of $89,290 compared to other income of $15,965 for the three months ended September 30, 2021. Other income for the three months ended September 30, 2022 consists mainly of interest expense of $32,782 compared to $42,800 for the same period end September 30, 2021, and a foreign exchange gain of $124,647 compared to $65,934 for the same period ended September 30, 2021.
Net Income (loss)
The net income for the three months ended September 30, 2022 was $225,957 for a income per share of $0.01 based on 16,000,000 outstanding shares versus $88,222 for a loss per share of $0.00 based on 16,000,000 outstanding shares for the comparative period.
| 58 |
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The likelihood of success in these lawsuits cannot be reasonably predicted. |
| (2) | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 contracts where the IESO had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. The ultimate amount to be recovered is subject to the IESO’s approval, and there is no certainty as to the actual amount to be recovered from the IESO. Subsequent to June 30, 2021, no amounts have been recovered from IESO.
| (3) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (4) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| 59 |
| (5) | The Company has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements except for the three months ended September 2022 and 2021. According to item 1.5 (ii) of Form 51-102F1, the Company is not providing a tabular comparison of the eight most recently completed quarters.
Liquidity and Capital Resources
As at September 30, 2022, the Company had a cash balance of $3,864,461 (June 30, 2022 - $931,977) with working capital surplus of $5,471,155 ( June 30, 2022 - $5,617,200).
The following table summarizes the Company’s liquidity position:
| As at | September
30, 2022 $ | June
30, 2022 $ | ||||||
| Cash | 3,864,461 | 931,977 | ||||||
| Working capital | 5,471,155 | 5,617,200 | ||||||
| Total assets | 9,827,628 | 9,194,537 | ||||||
| Total liabilities | 5,222,561 | 4,753,922 | ||||||
| Shareholders’ equity | 4,605,097 | 4,440,615 | ||||||
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
The Company’s cash is held in high liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| For three months ended | September
30, 2022 $ | September
30, 2021 $ | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 2,589,661 | 2,124,426 | ||||||
| Investing activities | - | (3,889 | ) | |||||
| Financing activities | 198,969 | (678,389 | ) | |||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 2,932,483 | 1,396,980 | ||||||
| 60 |
Cash flow from operating activities
The Company generated cash of $2,589,661 from operating activities during the three months ended September 30, 2022, while the Company generated $2,124,426 cash during the same period ended September 30, 2021. The Company generated cash of $267,043 from the operational activities and generated $2,322,618 from the change of working capital during the three months ended September 30, 2022, while the Company used cash of $63,157 from the operating activities and generate $2,187,583 due to the change of working capital for the same period ended September 30, 2021.
Cash flow from financing activities
The Company generated cash of $198,969 from financing activities during the three months ended September 30, 2022, while the Company used $678,389 cash during the same period ended September 30, 2021. The cash generated in financing activities for the three months ended September 30, 2022 was mainly driven by the net proceeds of $825,000 received from debenture financing completed in October 2022, offset by the repayment of short-term loans of $583,756. The cash used in financing activities for the three months ended September 30, 2021 was solely resulted from the repayment of short-term loans of $678,389.
Cash flow from investing activities
The Company used cash of $nil in acquisition of plant, property and equipment during the three months ended September 30, 2022, while the Company used $3,889 in acquisition of plant, property and equipment during the same period ended September 30, 2021.
Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 has been reclassified as current portion due to the Company fully repaid the Energy line Loan in the amount of $343,776 in principal and $13,146 in interest on October 6, 2022.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| September 30, 2022 | June 30,2022 | |||||||
| Long-term debt – non-current portion | $ | 910,370 | $ | 1,230,643 | ||||
| Shareholders’ equity | $ | 4,605,097 | $ | 4,440,615 | ||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) 16,000,000 common shares issued and outstanding; and (ii) $1,250,000 principal amount of convertible debt that is convertible into 2,500,000 common shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; and (iii) 2,500,000 Advisory Warrants.
| 61 |
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
As at September 30, 2022, included in trade and other receivable was $116,884 (June 30, 2022 - $121,704) due from Sustainable Investment Ltd., who has a director (Richard Lu) in common. The purpose was for short-term bridge funding to cover working capital and project development expenses.
As at September 30, 2022, included in trade and other receivable was $86,000 (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op, who has a director (Richard Lu) in common, for the payment made to a vendor on behalf of Renewable Sun Energy Co-Op.
As at September 30, 2022, included in trade and other payable was $977,315 (June 30, 2022 - $Nil) due to Sustainable Investment Ltd., who has a director (Richard Lu) in common, for a collection of a receivable on behalf of Sustainable Investment Ltd. from a customer.
As at September 30, 2022, included in trade and other payable was $Nil (June 30, 2022 - $104,545) owing to officers and director for accrued salary and bonus payments.
As at September 30, 2022, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 (3-month period ended September 30, 2021 - $19,706) on September 16, 2022. The purpose of the loan was for short-term bridge funding to cover working capital and project development expenses.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three months ended September 30, 2022 and 2021 were as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| Short-term employee benefits | $ | 235,982 | $ | 264,022 | ||||
Short-term employee benefits include consulting fees.
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Critical Accounting Estimates
| ● | Revenue recognition: |
The Company recognizes revenue for project development services, engineering, procurement, and construction (EPC) services and operation and maintenance (OM) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
| 62 |
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
| ● | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| ● | Taxes |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| ● | Expected credit loss |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| ● | Warranties |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three months ended September 30, 2022, $Nil warranty provision was recorded (2021 - $Nil).
| 63 |
| ● | Contract fulfilment costs |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| ● | Contract fulfilment costs |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
| 64 |
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Three
months ended September 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,883,451 | 71 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,448,145 | 57 | % | ||||
| Customer C | $ | 900,089 | 36 | % | ||||
| Three
months ended September 30, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 2,251,890 | 87 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer A | $ | 2,232,238 | 52 | % |
| 65 |
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Subsequent Events
Loan repayment
On October 6, 2022 the Company fully repaid the Energy line Loan in the amount of $343,776 plus accrued interest of $13,146.
Debenture financing
On October 3, 2022 the Company completed a the Convertible Loan financing for gross proceeds of $1,250,000. Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Advisory warrant
On October 3, 2022 the Company entered into a corporate and financial advisory agreement with a private equity firm. Pursuant to the agreement, the private equity firm is entitled to 2,500,000 transferable warrants, which will be vested on the closing of the Company’s IPO. The warrants shall entitle the holder to acquire shares for a period of five years at an exercise price equal to $0.10, subject to adjustment for any share consolidations or splits that occur prior to the closing of the IPO.
Stock split
On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000.
| 66 |
DESCRIPTION OF THE SECURITIES
Authorized and Outstanding Securities
The authorized share capital of the Company consists of an unlimited number of common shares without par value. As of the date hereof, 16,000,000 Common Shares were issued and outstanding as fully paid and non-assessable common shares.
Common Shares
The Company is authorized to issue an unlimited number of Common Shares. Holders of Common Shares are entitled to receive notice of any meetings of Shareholders, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to receive on a pro-rata basis such dividends, if any, as and when declared by the Board at its discretion from funds legally available therefor and upon the liquidation, dissolution or winding up of the Company are entitled to receive on a pro-rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro-rata basis with the holders of Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.
Broker Warrants
Each Broker Warrant entitles the holder thereof to purchase one Broker Warrant Shares, at the Offering Price per Broker Warrant, for a period of 36 months following the Closing Date.
The Broker Warrant Shares have the same rights as the Common Shares.
CONSOLIDATED CAPITALIZATION
The following chart sets out the capitalization of the Company as at the dates indicated and after giving effect to the Offering. The chart should be read in conjunction be read in conjunction with information contained in “Use of Proceeds”, “Selected Financial Information” and “Management’s Discussion and Analysis”, as well as the SolarBank Financial Statements and related notes and reports included in this Prospectus.
| As
at September 30, 2022 before giving effect to the Offering | As
at the date of this Prospectus after giving effect to the Offering | As
at the date of this Prospectus after giving effect to the Offering, assuming exercise of the Over-Allotment Option in full | ||||||||||
| Share
Capital (Common Shares – Authorized: unlimited) | 16,000,000 | 25,500,000 | 26,550,000 | |||||||||
| Advisory Warrants | 2,500,000 | 2,500,000 | 2,500,000 | |||||||||
| Series A Warrants | Nil | 2,500,000 | 2,500,000 | |||||||||
| Series B Warrants | Nil | 2,500,000 | 2,500,000 | |||||||||
| Broker Warrants | Nil | 420,000 | 483,000 | |||||||||
| Stock Options | Nil | 2,774,000 | 2,774,000 | |||||||||
| RSUs | Nil | 500,000 | 500,000 | |||||||||
| Shareholders’ Equity | ||||||||||||
| Share Capital | $ | 1,000 | $ | 4,719,250 | $ | 5,459,500 | ||||||
| Accumulated Other Comprehensive Income | $ | 12,292 | $ | 12,292 | $ | 12,292 | ||||||
| Retained Earnings | $ | 4,636,522 | $ | 4,636,522 | $ | 4,636,522 | ||||||
| Non-Controlling Interest | $ | (44,717 | ) | ($ | (44,717 | ) | $ | (44,717 | ) | |||
| Total Shareholder’s Equity | $ | 4,605,097 | $ | 9,323,347 | $ | 10,063,597 | ||||||
| 67 |
Concurrent with the closing of the Offering, the Convertible Loan will convert into 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants, all of which are included for the purposes of calculations in the table above for the purposes of the columns titled “As at the date of this Prospectus after giving effect to the Offering” and “As at the date of this Prospectus after giving effect to the Offering, assuming exercise of the Over-Allotment Option in full”.
Other than as disclosed below, there have been no material changes in the share capitalization or in the indebtedness of the Company since September 30, 2022 other than the issuance of the Convertible Loan, the issuance of 2,774,000 Options on November 4, 2022 each with an exercise price of $0.75 per Share, and the issuance of 500,000 RSUs on November 4, 2022.
RSUS, OPTIONS AND WARRANTS TO PURCHASE SHARES
The Board of Directors has adopted the Share Compensation Plan under which RSUs and Options to purchase Common Shares may be granted to the Company’s directors, officers, employees and consultants. See “Executive Compensation – Compensation Discussion and Analysis – Share Compensation Plan”.
As of the date of this Prospectus, there are 500,000 RSUs and 2,774,000 Options to purchase Common Shares issued and outstanding under the Share Compensation Plan. The following table summarizes the holdings of the Options granted by the Company as of the date of this Prospectus:
| Optionee | Number of Optionees | Number of Options | Exercise Price | Expiry Date | ||||||||||
| Executive Officers and Former Executive Officers | 4 | 1,299,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Directors (other than those who are also executive officers) | 3 | 500,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Other Current and Former Employees | 8 | 330,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Consultants | 4 | 645,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Total: | 2,774,000 | |||||||||||||
| 68 |
The following table summarizes the holdings of the RSUs granted by the Company as of the date of this Prospectus:
| Holder | Number of Holders | Number of RSUs | Exercise Price | Expiry Date | ||||||||||||
| Executive Officers and Former Executive Officers | — | — | — | — | ||||||||||||
| Directors (other than those who are also executive officers) | — | — | — | — | ||||||||||||
| Other Current and Former Employees | — | — | — | — | ||||||||||||
| Consultants | 1 | 500,000 | N/A | Six Months from Closing Date | ||||||||||||
| Total: | 1 | 500,000 | ||||||||||||||
As of the date of this Prospectus there is $975,000 principal amount Convertible Loan outstanding and 2,500,000 Advisory Warrants, each held by three consultants and one director. The following table summarizes the holdings of Warrants that will be outstanding as of the Closing Date:
| Holder | Number of Holders | Number of Securities | Exercise Price | Expiry Date | ||||||||||||
| Executive Officers and Former Executive Officers | — | — | — | — | ||||||||||||
| Directors (other than those who are also executive officers) | 1 | 625,000 Warrants
| $0.10
| June 10, 2027
| ||||||||||||
| Other Current and Former Employees | — | — | — | — | ||||||||||||
| Consultants | 3 | 1,875,000 Warrants
| $0.10
| June 10, 2027
| ||||||||||||
| Total: | 4 | 6,400,000 | ||||||||||||||
PRIOR SALES
In the 12 months prior to the date of this prospectus, the Company issued the following Common Shares and securities convertible into Common Shares:
| Date of Issuance | Security Type | Number of Securities | Issue/Exercise Price | |||||||
| October 3, 2022 | Advisory Warrants | 2,500,000 | $ | 0.10 | ||||||
| October 3, 2022 | Convertible Loan | $ | 1,250,000 | (1) | $ | 0.50 | ||||
| November 4, 2022 | Options | 2,774,000 | $ | 0.75 | ||||||
| November 4, 2022 | RSUs | 500,000 | N/A | |||||||
Note:
| (1) | The principal sum of the Convertible Loan is equal to $1,250,000 and is automatically converted into Conversion Units upon the closing of the Offering. The Convertible Loan is convertible at a price of $0.50 per Conversion Units. The Conversion Units consist of 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants. The Series A Warrants and Series B Warrants, upon the satisfaction of the Series A Warrant Vesting Condition and Series B Warrant Vesting Condition (as applicable) are exercisable into Common Shares at an exercise price of $0.50 per Common Share. |
| 69 |
TRADING PRICE AND VOLUME
The Common Shares were not previously traded on any market or exchange.
ESCROWED
SECURITIES AND SECURITIES SUBJECT TO
CONTRACTUAL RESTRICTION ON TRANSFER
Contractual Escrow Securities
On or prior to the Listing Date, the Company and non-Principal existing holders of Common Shares will enter into an agreement with the Company (the “Voluntary Escrow Agreements”) in the form of escrow agreement provided under National Policy 46-201 Escrow For Initial Public Offerings (the “Voluntary Escrow”) setting out contractual escrow terms, being a 36 month voluntary trading restriction where 10% of each holder’s shares are released at the Listing Date, and 15% of each holder’s shares are released at the six, twelve, eighteen, twenty-four, thirty and thirty-six month anniversaries of the Listing Date. Any Common Shares issuable on the exercise of 6,275,000 Warrants and 975,000 Stock Options are subject to the same terms of the Voluntary Escrow. A copy of the Voluntary Escrow Agreement will be available under the Company’s profile on SEDAR at www.sedar.com.
As at the date of this Prospectus, there are no securities of the Company that are subject to escrow or contractual restrictions on transfer. At the Closing Date the following securities of the Company will be subject to contractual restrictions on transfer as shown in the following table:
| Designation of Class | Total number of securities that are subject to a contractual restriction on transfer (1) | Percentage
of Class After the Offering | ||||||
| Common Shares | 17,426,800 | 79.57 | % | |||||
| Warrants | 6,275,000 | 81.45 | % | |||||
| Stock Options | 975,000 | 35.15 | % | |||||
National Policy 46-201 Escrow
NP 46-201 provides that all securities of an issuer owned or controlled by a Principal must be placed in escrow at the time the issuer distributes its securities or convertible securities to the public by prospectus, unless the securities held by such Principal or issuable to such Principal upon conversion of convertible securities held by the Principal collectively represent less than 1% of the total issued and outstanding securities of the issuer after giving effect to the initial distribution. As such, the securities held by the Principals will be held in escrow pursuant to the policies of NP 46-201.
| 70 |
The following table sets forth the securities of the Principals that, as at the date of Listing, will be subject to escrow and the percentage that number represents of the outstanding securities of that class.
| Designation of Class | Total number of securities that are held in escrow(1) | Percentage
of Class After the Offering | ||||||
| Common Shares | 1,073,200 | 4.90 | % | |||||
| Warrants | 1,225,000 | 15.30 | % | |||||
| Stock Options | 1,799,000 | 63.77 | % | |||||
On or prior to the Listing Date, the Company and the Principals will enter into an escrow agreement (the “Escrow Agreement”) with Endeavor Trust Corporation, as escrow agent (the “Escrow Agent”), pursuant to which the Escrowed Shareholders will collectively deposit the Common Shares and Warrants listed in the table above into escrow (the “Escrowed Securities”) with the Escrow Agent.
Upon the completion of the Listing, it is expected the Company will be an “emerging issuer” pursuant to NP 46-201 and, as such, the Escrowed Securities will be subject to a three year escrow and subject to the following release scheduled:
| Date | Amount of Escrowed Securities Released | ||
| On the Listing Date | 1/10 of the escrow securities | ||
| 6 months after the Listing Date | 1/6 of the remaining escrow securities | ||
| 12 months after the Listing Date | 1/5 of the remaining escrow securities | ||
| 18 months after the Listing Date | 1/4 of the remaining escrow securities | ||
| 24 months after the Listing Date | 1/3 of the remaining escrow securities | ||
| 30 months after the Listing Date | 1/2 of the remaining escrow securities | ||
| 36 months after the Listing Date | the remaining escrow securities |
The release schedule may be accelerated if the Company, after the Listing, establishes itself as an “established issuer” as described in NP 46-201.
A copy of the Escrow Agreement will be available under the Company’s profile on SEDAR at www.sedar.com.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Company, no person or entity beneficially owns, or controls or directs, 10% or more of the outstanding Common Shares as of the date of this Prospectus or immediately after the Offering.
| 71 |
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides the names, municipalities of residence, position and principal occupations as of the date of this Prospectus:
Name and Municipality of Residence |
Director/officer Since and Position with the Company |
Principal Occupation for Last Five Years |
Common Shares Beneficially Owned, Directly or Indirectly, over which Control or Discretion is Exercised(1) | |||
| Dr.
Richard Lu Toronto, ON Canada |
Director, Chief Executive Officer and President since August 1, 2014 | Chief Executive Officer and President of the Company since August 2014. | 773,200(3) | |||
| Sam
Sun Toronto, ON Canada |
Chief Financial Officer since July 1, 2022 | Chief Financial Officer of the Company since July, 2022; Head of Finance for Aucto Canada Inc. from May 2021 to June 2022; Finance Director of NRI Industrial Sales Inc. from November 2020 to April 2021; Head of Finance of Brook Crompton Ltd. from November 2018 to June 2020; VP of Finance and Operation of Lynks Motoplex Inc. from May 2017 to October 2018. | Nil | |||
| Andrew
van Doorn Toronto, ON Canada |
Chief Operating Officer since July 1, 2021 | Chief Operating Officer of the Company since July 2021 and acted in the capacity of Chief Operation Officer of the Company from July 2018 to July 2020; VP Engineering & Construction for Potentia Renewables from April 2012 to June 2018. | Nil | |||
| Xiaohong
(Tracy) Zheng Toronto, ON Canada |
Chief Administrative Officer since July 1, 2021 | Chief Administrative Officer of the Company since July 2021; Vice President of Operations of the Company from August 2017 to June 2021. | Nil | |||
| Olen
Aasen(2) Vancouver, BC Canada |
Director since November 3, 2022 | Practicing lawyer since May 2017. | Nil (4) | |||
| Paul
Pasalic(2) London, UK |
Director since November 3, 2022 | Managing Director, Head of Legal (Europe) – Private Equity Transactions, with Hudson Advisors since 2019; Associate lawyer with Shearman & Sterling LLP from 2012 to 2019. | Nil | |||
| Paul
Sparkes(2) Toronto, ON Canada |
Director since November 3, 2022 | Corporate director and Self-Employed advisor advising growth entities in private and public markets. | Nil |
| 72 |
Notes:
| (1) | Information as to securities of the Company beneficially owned, or over which control or direction is exercised, has been furnished by the respective directors and officers. |
| (2) | Member of the Audit Committee. Mr. Pasalic is the Chair. |
| (3) | Held by 2384449 Ontario Inc., a corporation controlled by Dr. Lu. |
| (4) | Mr. Aasen holds $75,000 principal amount of the Convertible Loan. Upon the closing of the Offering Mr. Aasen will receive 150,000 Common Shares, 150,000 Series A Warrants and 150,000 Series B Warrants on the automatic conversion of the Convertible Loan. Mr. Aasen also holds 625,000 Advisory Warrants. |
Unless otherwise noted above, the term of office of the directors expires on the earlier of the Company’s next annual general meeting, or upon resignation. The term of office of the officers expires at the discretion of the directors.
As of the date of this prospectus, the Company’s directors and officers as a group, beneficially own, directly and indirectly, or exercise control or direction over, 773,200 Common Shares, representing 4.83% of the issued and outstanding Common Shares.
Biographies of Directors and Executive Officers
The following are brief profiles of the Company’s executive officers and directors, including a description of each individual’s principal occupation within the past five years.
Dr. Richard Lu - Director (Age 59)
Dr. Richard Lu has more than 25 years of global experience in the energy industry developing and implementing business strategies for organizations in North America, Europe and Asia. He is the President and CEO of SolarBank Corporation, an established and trusted developer, engineer, asset operator, and manager in the clean and renewable energy space in Canada and the US. He is an Independent Director and Chairman of the Audit Committee at dynaCERT Inc. (TSE:DYA), a high-tech company that specializes in hydrogen application in the transportation industry. He is also a Director at Alkaline Fuel Cell Power Corp. (NEO:PWWR), an advanced hydrogen fuel cell technology company. He was the Managing Director of Sky Solar Holdings Co., Ltd. (SKYS, NASDAQ), and the VP of Business Development at ARISE Technology Corporation (APV-T). Dr. Lu also previously held the position of Chief Conservation Officer and VP of Toronto Hydro Corporation, where he developed and executed a sweeping portfolio of Conservation, Demand Management and Distributed Energy programs. Prior to that he was the Vice-President of Environment, Health and Safety, ensuring Toronto Hydro Corporation’s commitment to providing a safe and healthy workplace for employees and the strategies for achieving sustainable development and growth are successfully met. Dr. Lu has held senior positions with Enbridge Gas Distribution, Husky Injection Molding Systems Ltd., and Dillon Consulting. Dr. Lu is an EMBA from Rotman, and a MSc from the University of Toronto; a MHSc and MD from Tongji Medical University.
Dr. Lu works full time for the Company and his consulting agreement contains non-disclosure, non-competition and non-solicitation provisions in favour of the Company.
Sam Sun – Chief Financial Officer (Age 39)
Mr. Sun is a Chartered Professional Accountant in Canada with more than 15 years of experience in corporate finance, accounting and internal control. He has been the head of finance or finance director at various Canadian, U.S. and Chinese public and private companies in the cleantech, marketplace, manufacturing and mining sectors. Mr. Sun obtained the bachelor and master degrees in management from the Shanghai University of Finance and Economics in 2005 and 2014. Mr. Sun also obtained his MBA from the University of Toronto’s Rotman School of Business in 2018.
Mr. Sun works full time for the Company and his employment agreement contains non-disclosure and non-solicitation provisions in favour of the Company.
| 73 |
Andrew van Doorn, COO (Age 52)
Mr. van Doorn has over 28 years of executive leadership experience in Engineering and Construction in the Renewable Energy and Utility sectors, with over 200MW of solar projects completed. As former Chairman of the Canadian Solar Industries Association (CANSIA), Mr. van Doorn is an expert in the management, operations, and construction of solar photovoltaic systems. He is a Professional Engineer, designated in the province of Ontario. Mr. van Doorn’s solar experience includes 32MW of community solar in Minnesota, 28 MW built or under construction in New York State, and 20 MW of ground mount systems in Ontario. Further experience includes 140MW of rooftop solar spread across 600 sites in Ontario, including at over 500 schools and North America’s largest school rooftop portfolio at the Toronto District School Board, with over 350 sites. Mr. van Doorn was also the founding partner part of the Initial Public Offering of HLT Energies, a solar thermal independent power producer that traded on the TSX-Venture Excahnge. Mr. van Doorn currently oversees the engineering, procurement, construction and operations of all solar projects with the Company.
Mr. van Doorn works full time for the Company and his employment agreement contains non-disclosure and non-solicitation provisions in favour of the Company, but does not contain a non-competition provision.
Tracy Zheng, CAO (Age: 49)
Ms. Zheng is an accomplished business strategist with over 25 years of management experience in brand marketing, investment, business development and solar project operations. Ms. Zheng joined the Company’s executive team after several years at Sky Solar Canada where she was responsible for sales management, financial and project viability analysis, and partnership negotiation. At the Company and Sky, Ms. Zheng played a leading role in securing more than 450 contracts for over 200MW of rooftop and ground mount photovoltaic systems under Ontario’s Feed-In-Tariff program. Her experience also includes a plethora of international business exposure specializing in brand and market strategy in senior marketing positions at companies including Colgate-Palmolive and Clairol as well as firms specialized in market research and e-commerce. She is proficient in developing marketing plans, strategies, identifying and capitalizing on market opportunities, and managing implementation of in-field initiatives. She has successfully led more than 10 new product launches in addition to national marketing and advertising campaigns, and communications programs. She holds a Bachelor of Science in Engineering from Sun Yat-Sen University, and an MBA from the Schulich School of Business, York University.
Ms. Zheng works full time for the Company. Her consulting agreement does not contain non-disclosure, non-competition and non-solicitation provisions in favour of the Company.
Paul Pasalic, Director (Age 42)
Mr. Pasalic is a private equity professional and a corporate lawyer with more than 15 years of experience in corporate, securities and regulatory matters. Mr. Pasalic has advised on a diverse array of complex multi-jurisdictional transactions across various industries and across the capital structure. Mr. Pasalic holds a bachelors of business administration (finance) from Simon Fraser University, and obtained a juris doctor from the University of Calgary in 2007. Mr. Pasalic is a qualified attorney in Canada (Ontario; Alberta), New York State as well as in England and Wales. Mr. Pasalic is also a CFA charterholder.
Mr. Pasalic is expected to devote approximately 10% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Pasalic.
Olen Aasen - Director (Age 40)
Mr. Aasen is an executive and corporate and securities lawyer with more than 16 years of experience in corporate, securities, mining and regulatory matters. He has been the Corporate Secretary, General Counsel or Vice President, Legal at various Canadian and U.S.-listed companies in the mining, transportation and technology sectors. In the past ten years Mr. Aasen has advised on a significant number of debt and equity financings and structured finance packages. Mr. Aasen did his undergraduate studies in the Finance Department of the Sauder School of Business, obtained a J.D. from the University of British Columbia in 2006 and was called to the British Columbia Bar in 2007. Mr. Aasen was also appointed to the 2016 Legal 500 GC Powerlist for Canada.
Mr. Aasen is expected to devote approximately 25% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Aasen.
| 74 |
Paul Sparkes - Director (Age 58)
Mr. Sparkes is an entrepreneur with over 25 years of experience in media, finance, capital markets and Canada’s political arena. He spent a decade in the broadcast and media industry as CTVglobemedia’s Executive Vice President, Corporate Affairs. He also held senior positions in public service, including with the Government of Canada as Director of Operations to Prime Minister Jean Chretien, and as a senior aide to two Premiers of Newfoundland and Labrador. Paul was a co-founder and executive vice chairman at Difference Capital Financial and serves on a number of private and public boards. He is currently President and founder of Otterbury Holdings Inc., Global Alternatives Advisory, and is an advisor and deal maker for growth companies in the private and public markets.
Mr. Sparkes is expected to devote approximately 10% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Sparkes.
Corporate Cease Trade Orders and Bankruptcies
To the Company’s knowledge, other than as disclosed below, no existing or proposed director, officer or promoter of the Company or a securityholder anticipated to hold a sufficient number of securities of the Company to affect materially the control of the Company, within 10 years of the date of this Prospectus, has been a director, officer or promoter of any person or company that, while that person was acting in that capacity,
| (a) | was the subject of a cease trade or similar order, or an order that denied the other issuer access to any exemptions under applicable securities law, for a period of more than 30 consecutive days; or |
| (b) | became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. |
By Order of the Supreme Court of Newfoundland and Labrador dated June 17, 2020, Deloitte Restructuring Inc. was appointed as the receiver and manager of all current and future assets, undertakings, and properties of the Kami Mine Limited Partnership, Kami General Partner Limited, and Alderon Iron Ore Corp. The receivership was initiated by a secured creditor of the Kami Mine Limited Partnership after its failure to refinance the secured debt due to the COVID-19 pandemic. Mr. Aasen was Corporate Secretary of Alderon Iron Ore Corp. and Secretary and Director of Kami General Partner Limited until April 28, 2020.
On February 5, 2016, the British Columbia Securities Commission issued a cease trade order against Ziplocal Inc. for failure to file its annual audited financial statements and MD&A. The required documents were filed and the order was subsequently revoked on March 11, 2016. Mr. Paul Sparkes was a director of Ziplocal Inc. during this period.
Penalties or Sanctions
To the Company’s knowledge, no existing or proposed director, officer or promoter of the Company, or a securityholder anticipated to hold sufficient securities of the Company to affect materially the control of the Company, has:
| (a) | been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or |
| (b) | been subject to any other penalties or sanctions imposed by a court or regulatory body, including a self-regulatory body that would be likely to be considered important to a reasonable securityholder making a decision in regards to the Company. |
| 75 |
Personal Bankruptcies
To the Company’s knowledge, no existing or proposed director, officer or promoter of the Company, or a securityholder anticipated to hold sufficient securities of the Company to affect materially the control of the Company, or a personal holding company of such persons has, within the 10 years before the date of this Prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, officer or promoter.
Conflicts of Interest
Members of Management are, and may in future be, associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. Although the officers and directors are engaged in other business activities, the Company anticipates they will devote an important amount of time to our affairs.
The Company’s officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to the Company’s. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, the Company does not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.
As disclosed in this Prospectus, the SFT Group is a customer of the Company and it has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Chief Executive Officer of the SFT Group is Mr. Matt Wayrynen and the Chief Financial Officer of the SFT Group is Frederick Jung. There is no overlap in the directors or officers of the SFT Group and the Company; however, relatives of Mr. Wayrynen, and Mr. Jung and his relatives, are shareholders of the Company. Mr. Wayrynen and Mr. Jung and their respective relatives, however, have no significant influence over the Company. We also note that the Company is not substantially dependent on the SFT Group and that the SFT Group is not a related party of the Company as per IAS 24 Related Party Disclosure.
Due to these shareholdings in the Company, there is the potential for perceived conflicts of interest in transactions between the Company and the SFT Group. The Company manages these perceived conflicts of interest by entering into transactions with the SFT Group on terms that are consistent with those that are agreed to with its other customers and entering into transactions with the party that offers the best terms.
The Company’s directors and officers are subject to fiduciary obligations to act in the best interest of the Company. Conflicts, if any, will be subject to the procedures and remedies of the OBCA or other applicable corporate legislation.
EXECUTIVE COMPENSATION
Executive Compensation
The following information is provided as required under Form 51-102F6V for Venture Issuers, as such term is defined in National Instrument 51-102 – Continuous Disclosure.
For the purposes of this section, “Named Executive Officer”, or “NEO”, means each of the following individuals:
| (a) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief executive officer (“CEO”), including an individual performing functions similar to a CEO; |
| 76 |
| (b) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief financial officer (“CFO”), including an individual performing functions similar to a CFO; |
| (c) | in respect of the company and its subsidiaries, the most highly compensated executive officer other than the individuals identified in paragraphs (a) and (b) at the end of the most recently completed financial year whose total compensation was more than $150,000, as determined in accordance with subsection 1.3(5) of Form 51-102F6V, for that financial year; |
| (d) | each individual who would be a NEO under paragraph (c) but for the fact that the individual was not an executive officer of the Company, and was not acting in a similar capacity, at the end of that financial year. |
Accordingly, the NEOs of the Company for the fiscal year ended June 30, 2022 are:
| ● | Richard Lu, President & Chief Executive Officer |
| ● | Sam Sun, Chief Financial Officer |
| ● | Andrew van Doorn, Chief Operating Officer |
| ● | Tracy Zheng, Chief Administrative Officer |
Compensation of Named Executive Officers
The following table of compensation, excluding options and compensation securities, provides a summary of the compensation paid by the Company to each NEO and director of the Company for the two most recently completed financial years ended June 30, 2022 and 2021. Options and compensation securities are disclosed under the heading “Stock Options and Other Compensation Securities and Instruments” of this Prospectus.
| Name and Principal Position | Year(1) | Salary, consulting fee, retainer or commission ($)2) | Bonus ($)(2) | Committee or meeting fees ($) | Value of perquisites ($) | Value of all other compensation ($) | Total compensation ($) | |||||||||||||||||||
| Richard Lu(2) President & Chief Executive Officer | 2022 | 469,731 | 100,000 | Nil | Nil | Nil | 569,731 | |||||||||||||||||||
| 2021 | 446,973 | Nil | Nil | Nil | Nil | 446,973 | ||||||||||||||||||||
| Sam Sun(3) Chief Financial Officer | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Andrew van Doorn(4) Chief Operating Officer | 2022 | 249,995 | Nil | Nil | Nil | Nil | 249,995 | |||||||||||||||||||
| 2021 | 230,765 | 100,000 | Nil | Nil | Nil | 330,765 | ||||||||||||||||||||
| Tracy Zheng(5) Chief Operating Officer | 2022 | 188,400 | Nil | Nil | Nil | Nil | 188,400 | |||||||||||||||||||
| 2021 | 181,307 | Nil | Nil | Nil | Nil | 181,307 | ||||||||||||||||||||
| Paul Pasalic(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Olen Aasen(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Paul Sparkes(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
Notes:
| (1) | Financial years ended June 30. |
| (2) | Effective September 1, 2022 Light Voltaic Corporation (“LVC”) entered into a consulting agreement (the “Consulting Agreement”) with the Company to provide the services of Dr. Lu to the Company to act as Chief Executive Officer. LVC is paid annual consulting fees of $469,731 for the services of Dr. Lu. LVC is also eligible to receive a bonus of $100,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. Dr. Lu receives no compensation for his services as a director. |
| 77 |
| (3) | Effective June 10, 2022, Mr. Sun entered into an employment agreement with the Company with an effective start date of July 4, 2022. Mr. Sun is paid an annual salary of $120,000 for his services as CFO. Mr. Sun is also eligible to receive a bonus of $20,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. |
| (4) | Effective October 25, 2022, Mr. van Doorn entered into an employment agreement with the Company. Mr. van Doorn is paid an annual salary of $350,000 for his services as COO. Mr. van Doorn is also eligible to receive a bonus of $90,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation and $20,000 for every 10 MW, DC (cumulative) solar projects achieving NTP. |
| (5) | Effective February 1, 2021 Ms. Zheng, through her personal company, entered into a consulting agreement with the Company. Ms. Zheng is paid annual consulting fees of $188,400 (plus applicable taxes) for her services as Chief Administrative Officer. |
| (6) | Mr. Pasalic, Mr. Aasen and Mr. Sparkes were appointed as directors of the Company on November 3, 2022 and receive no compensation for their services as directors of the Company. |
Stock Options and Other Compensation Securities and Instruments
No compensation securities were granted to or issued by the Company to any NEO or director of the Company during the financial year ended June 30, 2022.
No compensation security has been repriced, cancelled and replaced, had its term extended, or otherwise been modified financial year ended June 30, 2022.
No compensation securities were exercised by any NEO or director of the Company during the financial year ended June 30, 2022.
Stock Option Plan and Other Incentive Plans
The Board of Directors has adopted the Share Compensation Plan under which RSUs and Options may be granted to the Company’s directors, officers, employees and consultants. The Share Compensation Plan provides participants (each, a “Participant”), who may include participants who are citizens or residents of the United States (each, a “US Participant”), with the opportunity, through RSUs and Options, to acquire an ownership interest in the Company. The RSUs will rise and fall in value based on the value of the Common Shares. Unlike the Options, the RSUs will not require the payment of any monetary consideration to the Company. Instead, each RSU represents a right to receive one Common Share following the attainment of vesting criteria determined at the time of the award. See “Restricted Share Units – Vesting Provisions” below. The Options, on the other hand, are rights to acquire Common Shares upon payment of monetary consideration (i.e., the exercise price), subject also to vesting criteria determined at the time of the grant. See “Options – Vesting Provisions” below.
| 1. | Purpose of the Share Compensation Plan |
The stated purpose of the Share Compensation Plan is to advance the interests of the Company and its subsidiaries, and its shareholders by: (a) ensuring that the interests of Participants are aligned with the success of the Company and its subsidiaries; (b) encouraging stock ownership by such persons; and (c) providing compensation opportunities to attract, retain and motivate such persons.
The following people are eligible to participate in the Share Compensation Plan: any officer or employee of the Company or any officer or employee of any subsidiary of the Company and, solely for purposes of the grant of Options, any director of the Company or any director of any subsidiary of the Company, and any Consultant (defined under the Share Compensation Plan as an individual (other than an employee or a director of the Company) or a corporation that is not a U.S. Person that: (A) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to an offer or sale of securities of the Company in a capital raising transaction, or services that promote or maintain a market for the Company securities; (B) provides the services under a written contract between the Company or the affiliate and the individual or the Company, as the case may be; (C) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or an affiliate of the Company; and (D) has a relationship with the Company or an affiliate of the Company that enables the individual to be knowledgeable about the business and affairs of the Company).
| 78 |
| 2. | Administration of the Share Compensation Plan |
The Share Compensation Plan is administered by the Board or such other persons as may be designated by the Board (the “Administrators”) based on the recommendation of the Board or the compensation committee of the Board, if applicable. The Administrators determine the eligibility of persons to participate in the Share Compensation Plan, when RSUs and Options will be awarded or granted, the number of RSUs and Options to be awarded or granted, the vesting criteria for each award of RSUs and grant of Options and all other terms and conditions of each award and grant, in each case in accordance with applicable securities laws and the requirements of the CSE.
| 3. | Restrictions on the Award of RSUs and Grant of Options |
The awards of RSUs and grants of Options under the Share Compensation Plan is subject to a number of restrictions:
| (a) | the total number of Common Shares reserved and available for grant and issuance pursuant to the exercise of Options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares from time to time; and |
| (b) | the number of Common Shares issuable pursuant to the exercise of Options under the Share Compensation Plan within a 12 month period to all eligible persons retained to provide investor relations activities (together with those Common Shares that are issued pursuant to any other Share Compensation Arrangement) shall not, at any time, exceed 1% of the issued and outstanding Common Shares. |
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of the Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may in their sole discretion make such changes or adjustments, if any, as the Administrators consider fair or equitable to reflect such change or event including, without limitation, adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto, as determined by the Administrators.
Mechanics for RSUs
RSUs awarded to Participants under the Share Compensation Plan are credited to an account that is established on their behalf and maintained in accordance with the Share Compensation Plan. After the relevant date of vesting of any RSUs awarded under the Share Compensation Plan, a Participant shall be entitled to receive and the Company shall issue or pay (at its discretion): (i) a lump sum payment in cash equal to the number of vested RSUs recorded in the Participant’s account multiplied by the volume weighted average price of the Common Shares traded on the CSE for the five consecutive trading days prior to the payout date; (ii) the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s RSUs in the Participant’s account will be, duly issued as fully paid and non assessable shares and such Participant shall be registered on the books of the Company as the holder of the appropriate number of Common Shares; or (iii) any combination of thereof.
| 79 |
Vesting Provisions for RSUs
The Share Compensation Plan provides that: (i) at the time of the award of RSUs, the Administrators will determine the vesting criteria applicable to the awarded RSUs; (ii) vesting of RSUs may include criteria such as performance vesting; (iii) each RSU shall be subject to vesting in accordance with the terms set out in an agreement evidencing the award of the RSU attached as Exhibit A to the Share Compensation Plan (or in such form as the Administrators may approve from time to time) (each an “RSU Agreement”); and (iv) all vesting and issuances or payments in respect of a RSU shall be completed no later than December 15 of the third calendar year commencing after the award date for such RSU.
It is the current intention that RSUs may be awarded with both time based vesting provisions as a component of the Company’s annual incentive compensation program, and performance based vesting provisions as a component of the Company’s long term incentive compensation program.
Under the Share Compensation Plan, should the date of vesting of an RSU fall within a blackout period or within nine business days following the expiration of a blackout period, the date of vesting will be automatically extended to the tenth business day after the end of the blackout period.
Termination, Retirement and Other Cessation of Employment in connection with RSUs
A person participating in the Share Compensation Plan will cease to be eligible to participate in the following circumstances: (i) receipt of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause); (ii) retirement; and (iii) any cessation of employment or service for any reason whatsoever, including disability and death (an “Event of Termination”). In such circumstances, any vested RSUs will be issued (and with respect to each RSU of a US Participant, such RSU will be settled and shares issued as soon as practicable following the date of vesting of such RSU as set forth in the applicable RSU Agreement, but in all cases within 60 days following such date of vesting) and unless otherwise determined by the Administrators in their discretion, any unvested RSUs will be automatically forfeited and cancelled (and with respect to any RSU of a US Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to an RSU that is unvested at the time of an Event of Termination, such RSU shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting date of such RSU as set forth in the applicable RSU Agreement). Notwithstanding the above, if a person retires in accordance with the Company’s retirement policy at such time, the pro rata portion of any unvested performance based RSUs will not be forfeited or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable RSU Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, have been met on the applicable date. For greater certainty, if a person is terminated for just cause, all unvested RSUs will be forfeited and cancelled.
Mechanics for Options
Each Option granted pursuant to the Share Compensation Plan will entitle the holder thereof to the issuance of one Common Share upon achievement of the vesting criteria and payment of the applicable exercise price. Options granted under the Share Compensation Plan will be exercisable for Common Shares issued from treasury once the vesting criteria established by the Administrators at the time of the grant have been satisfied. However, the Company will continue to retain the flexibility through the amendment provisions in the Share Compensation Plan to satisfy its obligation to issue Common Shares by making a lump sum cash payment of equivalent value (i.e., pursuant to a cashless exercise), provided there is a full deduction of the number of underlying Common Shares from the Share Compensation Plan’s reserve.
Vesting Provisions for Options
The Share Compensation Plan provides that the Administrators may determine, in accordance with minimum vesting requirements of the CSE, the vesting criteria applicable to any Options, when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option agreement will disclose any vesting conditions prescribed by the Administrators.
| 80 |
Termination, Retirement and Other Cessation of Employment in connection with Options
A person participating in the Share Compensation Plan will cease to be eligible to participate where there is an Event of Termination. In such circumstances, unless otherwise determined by the Administrators in their discretion, any unvested Options will be automatically cancelled, terminated and not available for exercise and any vested Options may be exercised only before the earlier of: (i) the expiry of the Option; and (ii) six months after the date of the Event of Termination. If a person is terminated for just cause, all Options (whether or not then exercisable) will be automatically cancelled.
Other Terms
The Administrators will determine the exercise price and term/expiration date of each Option, provided that the exercise price in respect of that Option shall not be less than the Market Price on the date of grant. “Market Price” is defined in the Share Compensation Plan, as of any date, the price of the Common Shares determined as follows: (A) if the Common Shares are listed on any exchange, the Market Price will be the closing price of the Common Shares on such exchange for the last market trading day prior to the date of grant of the Option. Notwithstanding the foregoing, in the event that the Common Shares are listed on the CSE, for the purposes of establishing the exercise price of any Options, the Market Price shall not be lower than the greater of the closing market price of the Subordinate Voting Shares on the CSE on (i) the trading day prior to the date of grant of the Options, and (ii) the date of grant of the Options; or (B) in the absence of an established market for the Common Shares, the Market Price shall be determined in good faith by the Administrators.
No Option shall be exercisable after ten years from the date the Option is granted. Under the Share Compensation Plan, should the term of an Option expire on a date that falls within a blackout period or within nine business days following the expiration of a blackout period, such expiration date will be automatically extended to the tenth business day after the end of the blackout period.
Unless otherwise determined by the Board, in the event of a change of control, any surviving or acquiring corporation shall assume any Option outstanding under the Share Compensation Plan on substantially the same economic terms and conditions or substitute or replace similar options for those Options outstanding under the Share Compensation Plan on substantially the same economic terms and conditions.
| 4. | Transferability |
RSUs awarded and Options granted under the Share Compensation Plan or any rights of a Participant cannot be transferred, assigned, charged, pledged or hypothecated, or otherwise alienated, whether by operation of law or otherwise.
| 5. | Reorganization and Change of Control Adjustments |
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may make such changes or adjustments, if any, as they consider fair or equitable, to reflect such change or event including adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto.
| 81 |
| 6. | Amendment Provisions in the Share Compensation Plan |
The Board may amend the Share Compensation Plan or any RSU or Option at any time without the consent of any Participant provided that such amendment shall: (i) not adversely alter or impair any RSU previously awarded or any Option previously granted, except as permitted by the adjustment provisions of the Share Compensation Plan and with respect to RSUs and Options of US Participants, such amendment will not result in the imposition of taxes under Section 409A of the U.S. Internal Revenue Code of 1986; (ii) be subject to any regulatory approvals including, where required, the approval of the CSE; and (iii) be subject to shareholder approval, where required, by the requirements of the CSE, provided that shareholder approval shall not be required for the following amendments:
| (a) | amendments of a “housekeeping nature”, including any amendment to the Share Compensation Plan or a RSU or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority, stock exchange or quotation system and any amendment to the Share Compensation Plan or a RSU or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein; |
| (b) | amendments that are necessary or desirable for RSUs or Options to qualify for favourable treatment under any applicable tax law; |
| (c) | amendments to the vesting provisions of any RSU or any Option (including any alteration, extension or acceleration thereof), providing such amendments do not adversely alter or impair such RSU or Option; |
| (d) | amendments to the termination provisions of any Option (e.g., relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date (as such date may be extended by virtue of a blackout period) providing such amendments do not adversely alter or impair such Option; |
| (e) | amendments to the Share Compensation Plan that would permit the Company to retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares for such persons, instead of issuing Common Shares from treasury upon the vesting of the RSUs; |
| (f) | amendments to the Share Compensation Plan that would permit the Company to make lump sum cash payments to Participants, instead of issuing Common Shares from treasury upon the vesting of the RSUs; and |
| (g) | the amendment of the cashless exercise feature set out in the Share Compensation Plan. |
For greater certainty, shareholder approval will be required in circumstances where an amendment to the Share Compensation Plan would: (i) increase the fixed maximum percentage of issued and outstanding Common Shares issuable under the Share Compensation Plan, other than by virtue of the adjustment provisions in the Share Compensation Plan, or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares; (ii) increase the limits referred to above under “Restrictions on the Award of RSUs and Grant of Options”; (iii) reduce the exercise price of any Option (including any cancellation of an option for the purpose of reissuance of a new option at a lower exercise price to the same person); (iv) extend the term of any Option beyond the original term (except if such period is being extend by virtue of a blackout period); or (v) amend the amendment provisions of the Share Compensation Plan.
Employment, Consulting and Management Agreements
The material terms of the employment, consulting and management agreements of the Company are described in the footnotes of the table under the heading “Executive Compensation - Compensation of Named Executive Officers” and as set forth below. Except as disclosed below, as of June 30, 2022, there were no provisions in any contract, agreement, plan or arrangement that provide for payments to a NEO or director at, following, or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control in the Company or a change in the NEO’s responsibilities, except for the minimum required payments under employment standards legislation.
| 82 |
Dr. Richard Lu
Subsequent to June 30, 2022, the Consulting Agreement with LVC provides for six months’ written notice of termination without cause to LVC. In the event of a “Change of Control”, if LVC is terminated or LVC terminates the Consulting Agreement for “Good Reason”, LVC is entitled to a payment equal to two years’ consulting fees.
For the purposes of the Consulting Agreement:
| ● | “Change of Control” will be deemed to have occurred if a transaction results in: (i) the sale of all or substantially all of the Company’s assets; or the Company having a new “Control Person”, where “Control Person” means: a person who holds sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or a person, or combination of persons, who holds more than 35% of the voting rights attached to all outstanding voting securities of the Company, unless there is evidence that that person or combination of persons does not hold a sufficient number of the voting rights to control the Company. |
| ● | “Good Reason” shall be defined as, without the consultant’s written consent, the occurrence of any of the following circumstances: (i) reduction by the Company in the consulting fee; (ii) the failure of the individual to be appointed or re-appointed to the position of Chief Executive Officer of the Company; (iii) a material diminution in the consultant’s duties or the assignment to the consultant of any duties inconsistent with his position and status as Chief Executive Officer of the Company; (iv) a change in the consultant’s reporting relationship such that the consultant no longer reports directly to the Board of Directors of the Company; or (v) a relocation of place of work more than 50 kilometers from the Company’s head office at the relevant time. |
Andrew van Doorn
Subsequent to June 30, 2022, the employment agreement with Mr. van Doorn provides for twelve months’ written notice of termination without cause to Mr. van Doorn. The employment agreement with Mr. van Doorn does not provide for any additional entitlements on a change of control of the Company.
Sam Sun
Subsequent to June 30, 2022, the employment agreement with Mr. Sun provides for written notice of termination without cause to Mr. Sun by providing the minimum notice required under the Employment Standards Act, 2000 (Ontario). The employment agreement with Mr. Sun does not provide for any additional entitlements on a change of control of the Company.
Tracy Zheng
Effective February 1, 2021 Ms. Zheng, through her personal company The Phoenix Trendz Inc., entered into a consulting agreement with the Company. The consulting agreement provides for one month’s written notice of termination without cause to The Phoenix Trendz Inc. The consulting agreement with The Phoenix Trendz Inc. does not provide for any additional entitlements on a change of control of the Company.
Oversight and Description of Director and NEO Compensation
The purpose of this discussion is to provide information about the Company’s executive compensation objectives and processes and to discuss compensation decisions relating to its NEOs listed in the Summary Compensation Table set out above. In accordance with applicable securities legislation, the Company currently has four Named Executive Officers; being Richard Lu, Chief Executive Officer; Sam Sun, Chief Financial Officer; Andrew van Doorn, Chief Operating Officer and Tracy Zheng, Chief Administrative Officer.
| 83 |
The Board assumes responsibility for reviewing and monitoring the long-range compensation strategy for the senior management of the Company although the Compensation Committee guides it in this role. In determining executive compensation, the Board considers the Company’s financial circumstances at the time decisions are made regarding executive compensation, and also the anticipated financial situation of the Company in the mid and long-term.
Compensation Objectives and Principles
The compensation program for the senior management of the Company is designed to ensure that the level and form of compensation achieves certain objectives, including:
| (a) | attracting and retaining qualified executives; |
| (b) | motivating the short and long-term performance of these executives; and |
| (c) | better aligning their interests with those of the Company’s shareholders. |
In compensating its senior management, the Company has employed a combination of base salary, bonus compensation and equity participation through its Share Compensation Plan. The Company does not provide any retirement benefits for its directors or officers.
Elements of Compensation
Base Salary
In the Board’s view, paying base salaries which are reasonable in relation to the level of service expected while remaining competitive in the markets in which the Company operates is a first step to attracting and retaining qualified and effective executives. Competitive salary information on comparable companies within the Company’s industry is compiled from a variety of sources, including national and international publications.
Bonus Incentive Compensation
The Board will consider executive bonus compensation dependent upon the Company meeting its strategic objectives and milestones and sufficient cash resources being available for the granting of bonuses.
Equity Participation
The Company believes that encouraging its executives and employees to become shareholders is the best way of aligning their interests with those of its shareholders. Equity participation is accomplished through the Company’s Share Compensation Plan (as described herein). RSUs and Options may be granted to executives and employees taking into account a number of factors, including the amount and term of options previously granted, base salary and bonuses and competitive factors. The amounts and terms of RSUs and Options granted are determined by the Board.
Compensation Risks
The Board is keenly aware of the fact that compensation practices can have unintended risk consequences. The Board will continually review the Company’s compensation policies to identify any practice that might encourage an employee to expose the Company to unacceptable risk. At the present time the Board is satisfied that the current executive compensation program does not encourage the executives to expose the business to inappropriate risk. The Board takes a conservative approach to executive compensation rewarding individuals for the success of the Company once that success has been demonstrated and incenting them to continue that success through the grant of long-term incentive awards.
| 84 |
Hedging Policy
The Company has no policy on whether an NEO or director is permitted to purchase certain financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars or units of exchange funds which are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director.
Compensation Process
In establishing compensation for executive officers, the Board as a whole seeks to accomplish the following goals:
| ● | to recruit and subsequently retain highly qualified executive officers by offering competitive compensation and benefits; |
| ● | to motivate executives to achieve important corporate and personal performance objectives and reward them when such objectives are met; and |
| ● | to align the interests of executive officers with the long-term interests of shareholders through participation in the Company’s Share Compensation Plan. |
When considering the appropriate executive compensation to be paid to our officers, the Board have regard to a number of factors including: (i) recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and the Company’s shareholders; (iv) rewarding performance, both on an individual basis and with respect to operations generally; and (v) available financial resources.
RSU and Option-Based Awards
Long-term incentives in the form of RSUs and Options are intended to align the interests of our directors and executive officers with those of the Company’s Shareholders and to provide a long-term incentive to reward those individuals for their contribution to the generation of shareholder value, while reducing the burden of cash compensation that would otherwise be payable by the Company.
The Share Compensation Plan is administered by the Board. In determining the number of incentive RSUs or Options to be granted to the Named Executive Officers, the Board has regard to several considerations including previous grants of RSUs and Options and the overall number of outstanding RSUs and Options relative to the number of outstanding Common Shares, as well as the degree of effort, time, responsibility, ability, experience and level of commitment of the executive officer.
Director Compensation
During the fiscal year ended June 30, 2022, the Company had no formal director compensation program. No cash compensation was paid to the directors of the Company in their capacity as directors during the financial year ended June 30, 2022. During the year ended June 30, 2022, no stock options were granted to a director.
Pension
The Company does not have any form of pension plan that provides for payments or benefits to the NEO at, following, or in connection with retirement. The Company does not have any form of deferred compensation plan.
Changes Subsequent to Year-End
Except as otherwise disclosed herein, there have been no significant changes made to the Company’s compensation policies subsequent to the financial year ended June 30, 2022.
| 85 |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As at the date of this Prospectus, none of the directors and executive officers of the Company or Associates of such persons is indebted to the Company or another entity where the indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company.
AUDIT COMMITTEE
Audit Committee Charter
The full text of the charter of the Audit Committee is attached as Schedule “B” to this Prospectus.
Composition of the Audit Committee
Pursuant to applicable laws, the Company is required to have an audit committee comprised of at least three directors, all of whom must not be officers or employees of the Company or an affiliate of the Company.
The following are the members of the Audit Committee effective on the Listing Date:
Member |
Independence(1) |
Financially Literacy | ||
| Paul Pasalic | Independent | Yes | ||
| Paul Sparkes | Independent | Yes | ||
| Olen Aasen | Not Independent | Yes |
Note:
| (1) | Within the meaning of National Instrument 52-110 - Audit Committees (“NI 52-110”). |
Relevant Education and Experience
All members of the Audit Committee have a broad understanding of the accounting principles that are applied to the preparation of financial statements. All members of the Audit Committee are financially literate in accordance with NI 52-110. For details regarding the education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as an Audit Committee member, see “Directors and Executive Officers”.
Mandate and Responsibilities of the Audit Committee
The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and reporting practices of the Company, and such other duties as directed by the Board. The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Company, the audits of the Company’s financial statements, the qualifications of the public accounting firm engaged as the Company’s independent auditor to prepare or issue an audit report on the financial statements of the Company and internal control over financial reporting, and the performance of the Company’s internal audit function and independent auditor. The Audit Committee reviews and assesses the qualitative aspects of financial reporting to shareholders, the Company’s processes to manage business and financial risk, and compliance with significant applicable legal, ethical, and regulatory requirements. The Audit Committee is directly responsible for the appointment (subject to shareholder ratification), compensation, retention, and oversight of the independent auditor.
The Audit Committee meets at least twice a year. Additional meetings may occur as the Audit Committee or its chair deems advisable.
Audit Committee Oversight
At no time since July 1, 2021 was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.
| 86 |
Pre-Approval Policies and Procedures
The Audit Committee is required to approve the engagement of the Company’s external auditors in respect of non-audit services.
External Auditor Service Fees (By Category)
The Audit Committee has reviewed the nature and amount of the non-audit services provided by MSLL CPA LLP, Chartered Professional Accountants to ensure auditor independence. The following table sets out the aggregate fees billed by MSLL CPA LLP for fiscal years indicated and for each category of fees described:
| Time Period | Audit Fees(1) | Audit Related Fees(2) | Tax Fees(3) | All Other Fees(4) | ||||||
| Fiscal year ended June 30, 2022 | $ | 61,000 | Nil | Nil | Nil | |||||
| Fiscal year ended June 30, 2021 | $ | 60,622 | Nil | Nil | Nil | |||||
Notes:
| (1) | “Audit Fees” includes fees necessary to perform the annual audit and quarterly reviews of the Company’s financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits. |
| (2) | “Audit-Related Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation. |
| (3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities. |
| (4) | “All Other Fees” include all other non-audit services. |
CORPORATE GOVERNANCE
The Board believes that good corporate governance improves corporate performance and benefits all shareholders. On June 30, 2005, the Canadian Securities Administrators enacted National Policy 58-201 – Corporate Governance Guidelines (the “Governance Policy”) and National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”). The Governance Policy provides guidelines on corporate governance practices while NI 58-101 requires Canadian reporting Companies to disclose their corporate governance practices in accordance with the disclosure items set out in Form 58-101F1 or Form 58-101F2.
The Company has reviewed its own corporate governance practices in light of the guidelines contained in the Governance Policy. Set out below is a description of the Company’s corporate governance practices as required to be disclosed by NI 58-101. As the Company is an “IPO venture issuer” it is disclosing its corporate governance practices in accordance with the disclosure items set out in Form 58-101F2.
Board of Directors
At the date of this Prospectus and the Listing Date, the Board consists of four directors, two of whom Paul Pasalic and Paul Sparkes are independent. Dr. Richard Lu is the Chief Executive Officer of the Company and therefore not independent. Mr. Olen Aasen is expected to be appointed as General Counsel of the Company and receive consulting fees and therefore is not independent.
Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.
| 87 |
The Board facilitates independent supervision of management through meetings of the Board and through frequent informal discussions among independent members of the Board and management. In addition, the Board has access to the Company’s external auditors, legal counsel and to any of the Company’s officers.
The Board has a stewardship responsibility to supervise the management of and oversee the conduct of the business of the relevant company, provide leadership and direction to management, evaluate management, set policies appropriate for the business of the Company and approve corporate strategies and goals.
The day-to-day management of the business and affairs of the Company is delegated by the Board to the senior officers of the Company. The Board will give direction and guidance through the President to management and will keep management informed of its evaluation of the senior officers in achieving and complying with goals and policies established by the Board.
The Board exercises its independent supervision over management by its policies that (a) periodic meetings of the Board be held to obtain an update on significant corporate activities and plans; and (b) all material transactions of the Company are subject to prior approval of the Board. To facilitate open and candid discussion among its independent directors, such directors are encouraged to communicate with each other directly to discuss ongoing issues pertaining to the Company.
Directorships
Currently, the following directors serve on the following boards of directors of other public companies:
Name of Director, Officer or Promoter |
Name of Reporting Issuer | |
| Richard Lu | dynaCERT Inc.
Alkaline Fuel Cell Power Corp | |
| Olen Aasen | Draganfly Inc.
The Good Flour Corp. | |
| Paul Pasalic | None | |
| Paul Sparkes | The Good Flour Corp.
Antler Gold Inc.
Denarius Silver Corp. |
Orientation and Continuing Education
New directors will participate in a formal orientation program regarding the role of the Board, the Audit Committee, and its directors, and the nature and operations of the Company’s business. Members of the Board will be encouraged to communicate with management of the Company, external legal counsel and auditors, and other external consultants to educate themselves about the Company’s business, the industry, and applicable legal and regulatory developments.
Ethical Business Conduct
The Company intends to adopt a written Code of Business Conduct and Ethics for the Company’s directors, officers and employees after the closing of the Offering. Written copies of the Code will be available from the Company upon request. The Board will monitor compliance with the Code by receiving reports from management as to any actual or alleged violations, as appropriate. In accordance with the provisions of the Code and applicable corporate law, any director or executive officer who holds a material interest in a proposed transaction or agreement involving the Company will be required to disclose that interest to the Board and abstain from voting on approval of such transactions as appropriate.
| 88 |
Nomination of Directors
The Board as a whole is responsible for the annual (or as required) identification and recruitment of individuals qualified to become new Board members and for recommending to the Board of Directors, new director nominees for the Company’s annual general meetings of shareholders. A set of formal directors’ nomination guidelines has not yet been adopted for the identification of new candidates for Board positions. However, the Company intends to establish guidelines to include the specific qualifications required of a potential candidate. The Board is responsible for reviewing a potential candidate’s qualifications, interviewing the potential candidate and evaluating the potential candidate’s suitability for Board membership. An invitation to join the Board is made only where Board consensus regarding the proposed candidate is obtained.
Compensation
Further details about the Company’s compensation practices are disclosed in the Company’s Statement of Executive Compensation for the year ended June 30, 2022 which is disclose under “Statement of Executive Compensation”.
Other Board Committees
The Company does not have any standing committees other than the Audit Committee.
Assessments
The Board will monitor the adequacy of information given to directors, communication between the Board and management and the strategic direction and processes of the Board and committees. On an ongoing annual basis, the Board will assess the performance of the Board as a whole, each of the individual directors and each committee of the Board in order to satisfy itself that each is functioning effectively.
Insider Trading Policy
The Company has established a Confidentiality and Disclosure Policy which is attached as Schedule “C” to this Prospectus and an Insider Trading and Reporting Policy which is attached as Schedule “D” to this Prospectus. The Insider Trading and Reporting Policy provided for trading black-out periods. Currently a trading black-out will be imposed beginning thirty (30) days prior to the scheduled release of financial results for a fiscal quarter or a fiscal year until the second trading day after the financial results have been disclosed by the Company. Trading black-out periods may also be prescribed from time to time as a result of special circumstances relating to the Company.
PLAN OF DISTRIBUTION
Pursuant to the Agency Agreement, the Company has appointed the Agent to act as its agent to offer for sale to the public, on a “commercially reasonable best efforts” basis, the Offered Shares at the Offering Price for aggregate gross proceeds of up to $5,250,000 as provided in this Prospectus if, as and when issued by the Company and accepted by the Agent in accordance with the terms of the Agency Agreement, subject to compliance with all necessary legal requirements and to the conditions of the Agency Agreement. The Company has also granted the Agent the Over-Allotment Option, exercisable, in whole or in part, at the sole discretion of the Agent, at any time up to 48 hours prior to the Closing Date, to arrange for the sale of up to 1,050,000 Additional Shares, at the Offering Price per Additional Share to cover the Agent’s over-allocation position, if any.
Prior to the Offering, there was no public market for the Common Shares. The Offering Price was determined by arm’s length negotiation between the Company and the Agent, and bears no relationship to earnings, book value or other valuation criteria.
| 89 |
The Company’s directors, officers, employees and other investors who have an existing relationship with the Company may purchase Offered Shares pursuant to the Offering.
The Agent may form a selling group including other qualified investment dealers and determine the fee payable to the members of such group, which fee will be paid by the Agent out of its fees. The obligation to pay the sub-agency fee is an obligation of the Agent and the Company is not responsible for ensuring that any dealer receives this payment from the Agent.
The obligations of the Agent under the Agency Agreement are conditional and may be terminated in their sole discretion on the basis of their assessments of the state of the financial markets, their satisfaction with the results of their due diligence investigations and in certain other stated circumstances. While the Agent has agreed to use their “commercially reasonable efforts” to sell the Offered Shares, the Agent is not obligated to purchase any Offered Shares not sold.
Under applicable securities laws in Canada, certain persons and individuals, including the Company, and the Agent, have statutory liability for any misrepresentation in this Prospectus, subject to available defences. Under the Agency Agreement, the Company has agreed to indemnify and save harmless the Agent, its affiliates, directors, officers, employees, agents and shareholders against certain liabilities, including civil liabilities under the Canadian provincial securities legislation, and to contribute to any payments the Agent may be required to make in respect thereof.
Subscriptions for the Offered Shares will be received subject to rejection or allotment in whole or in part and the Agent reserve the right to close the subscription books at any time without notice. All subscription funds received by the Agent will be held in trust, pending the closing of the Offering. If the Offering has not closed on or before 90 days from the issuance of a receipt for the final prospectus, or if a receipt has been issued for an amendment to the final prospectus, within 90 days of the issuance of such receipt and in any event within 180 days from the date of receipt of the final prospectus, the Offering will be discontinued and all subscription monies will be returned to purchasers by the Agent without interest or deduction.
There is currently no market through which the Offered Shares may be sold. This may affect the pricing of the Offered Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. See “Risk Factors”. The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023.
In connection with the Offering, the Agent or certain securities dealers may distribute the Prospectus electronically.
On Closing, assuming the maximum Offering and no exercise of the Over-Allotment Option, the Company expects to have a total of 25,500,000 Common Shares issued and outstanding on a non-diluted basis and, if the Over-Allotment Option is exercised in full, a total of 26,550,000 Common Shares issued and outstanding on a non-diluted basis.
The Offering is being made in Alberta, British Columbia and Ontario. The Offered Shares will be offered in Alberta, British Columbia and Ontario through the Agent or its affiliates who are registered to offer the Offered Shares for sale in such provinces and such other registered dealers as may be designated by the Agent. Subject to applicable law, the Agent may offer the Offered Shares outside of Canada.
As at the date of the prospectus, the Company does not have any of its securities listed or quoted, has not applied to list or quote any of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace, or a marketplace outside of Canada and the United States of America (other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc).
Certificates
Other than pursuant to certain exceptions, it is expected that one or more global certificates for the Offered Shares distributed by this Prospectus will be issued in registered and definitive form to CDS and will be deposited with CDS on the Closing Date. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares are purchased.
| 90 |
Commissions and Expenses
The Company has agreed to pay the Agent’s Fee equal to 6.0% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option, if any). The Company has also agreed to pay to the Agent the Corporate Finance Fee of $35,000.00, plus applicable taxes, payable in cash, of which $20,000.00 has been prepaid. As additional compensation, the Company has agreed to grant to the Agent Broker Warrants that will entitle the Agent to purchase that number of Broker Warrant Shares equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option), at the Offering Price per Broker Warrant, for a period of 36 months following the Closing Date. This Prospectus qualifies the distribution of the Broker Warrants.
RISK FACTORS
Investing in the Company involves significant risks. An investor should carefully consider the risks described below. The risks and uncertainties described below are those that the Company currently believes to be material, but they are not the only ones that the Company faces. If any of the following risks, or any other risks and uncertainties that the Company has not yet identified or that the Company currently consider not to be material, actually occur or become material risks, the Company’s business, prospects, financial condition, results of operations and cash flows could be materially and adversely affected. In that event, the market price of the Company could decline and an investor could lose part or all of such investor’s investment.
Risks Related to Our Company and Our Industry
The Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings.
Our business is affected by conditions in the solar power market and industry. We believe that the solar power market and industry may from time to time experience oversupply. When this occurs, many solar power project developers and solar system installers, may be adversely affected.
The solar power market is still at a relatively early stage of development, and future demand for solar power products and services is uncertain. Market data for the solar power industry is not as readily available as for more established industries, where trends are more reliably assessed from data gathered over a longer period of time. In addition, demand for solar power products and services in our largest end markets, including the U.S, may not develop or may develop to a lesser extent than we anticipate. Many factors may affect the viability of solar power technology and the demand for solar power products, including:
| ● | the cost-effectiveness, performance and reliability of solar power products and services compared to conventional and other renewable energy sources and products and services; |
| ● | the availability of government incentives to support the development of the solar power industry; |
| ● | the availability and cost of capital, including long-term debt and tax equity, for solar projects; |
| ● | the success of other alternative energy technologies, such as wind power, hydroelectric power, clean hydrogen, geothermal power and biomass fuel; |
| ● | fluctuations in economic and market conditions that affect the viability of conventional and other renewable energy sources, such as increases or decreases in the prices of oil, gas and other fossil fuels; |
| ● | capital expenditures by end users of solar power products and services, which tend to decrease when the economy slows; and |
| ● | the availability of favorable regulation for solar power within the electric power industry and the broader energy industry. |
| 91 |
If solar power technology is not suitable for widespread adoption or if sufficient demand for solar products and services does not develop or takes longer to develop than we anticipate, our revenues may suffer and we may be unable to sustain our profitability.
The execution of our growth strategy depends upon the continued availability of third-party financing arrangements for us and our customers, which is affected by general economic conditions. Tight credit markets could depress demand or prices for solar power products and services, hamper our expansion and materially affect our results of operations.
Most solar projects require financing for development and construction with a mixture of equity and third-party funding. The cost of capital affects both the demand and price of solar power systems. A high cost of capital may materially reduce the internal rate of return for solar projects.
Furthermore, solar projects compete for capital with other forms of fixed income investments such as government and corporate bonds. Some classes of investors compare the returns of solar projects with bond yields and expect a similar or higher internal rate of return, adjusted for risk and liquidity. Higher interest rates could increase the cost of existing funding and present an obstacle for future funding that would otherwise spur the growth of the solar power industry. In addition, higher bond yields could result in increased yield expectations for solar projects, which would result in lower system prices. In the event that suitable funding is unavailable, our customers may be unable to pay for services they have agreed to purchase and we may be unable to develop our own solar power projects. It may also be difficult to collect payments from customers facing liquidity challenges due to either customer defaults or financial institution defaults on project loans. Constricted credit markets may impede our expansion plans and materially and adversely affect our results of operations. The cash flow of a solar power project may be derived from government-funded or government-backed Feed-In Tariffs (“FITs”). Consequently, the availability and cost of funding solar projects is determined in part based on the perceived sovereign credit risk of the country where a particular project is located.
In light of the uncertainty in the global credit and lending environment, we cannot make assurances that financial institutions will continue to offer funding to solar project developers at reasonable costs. An increase in interest rates or a decrease in funding of capital projects within the global financial market could make it difficult to fund solar power systems and potentially reduce the demand for solar projects, which may materially and adversely affect our business, results of operations, financial condition and prospects.
Our future success depends partly on our ability to expand the pipeline of our energy business in several key markets, which exposes us to a number of risks and uncertainties.
Historically, our provision of solar power project development services have accounted for the majority of our net revenues. While we plan to continue to monetize our current portfolio of solar projects in operation, we also intend to grow our energy business by developing and selling or operating more solar projects, including those that we develop and those that we acquire from third parties. As we do, we will be increasingly exposed to the risks associated with these activities. Further, our future success largely depends on our ability to expand our solar project pipeline. The risks and uncertainties associated with our energy business, and our ability to expand our solar project pipeline, include:
| ● | the uncertainty of being able to sell the projects, receive full payment for them upon completion, or receive payment in a timely manner; |
| ● | the need to raise significant additional funds to develop greenfield or purchase late stage solar projects, which we may be unable to obtain on commercially reasonable terms or at all; |
| ● | delays and cost overruns as a result of a number of factors, many of which are beyond our control, including construction and procurement price inflation, delays in regulatory approvals, grid connection, supply chain of our suppliers or availability of components, construction and installation, and customer acceptance testing; |
| ● | delays or denial of required regulatory approvals by relevant government authorities, as a result of, among others, poor management of permitting process, including lack or resources and opaqueness of administrative measures; |
| ● | diversion of significant management attention and other resources; and |
| ● | failure to execute our project pipeline expansion plan effectively. |
| 92 |
If we are unable to successfully expand our energy business, and, in particular, our solar project pipeline, we may be unable to expand our business, maintain our competitive position, improve our profitability and generate cash flows.
Governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for our products to decline.
Historically, the market for on-grid applications, where solar power supplements the electricity a customer purchases from the utility network or sells to a utility under a FIT, depends largely on the availability and size of government subsidy programs and economic incentives. Until recently, the cost of solar power exceeded retail electricity rates in many locations. Government incentives vary by geographic market. Governments in many countries provided incentives in the form of FITs, rebates, tax credits, renewable portfolio standards, auctions for Contracts for Difference, Feed-in Premium and other incentives. These governments implemented mandates to end-users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. However, these government mandates and economic incentives in many markets either have been or are scheduled to be reduced or eliminated altogether, and it is likely that eventually incentives for solar and alternative energy technologies will be phased out completely. Over the past few years, the cost of solar energy has declined, and the industry has become less dependent on government incentives. However, governments in some of our largest markets, including the United States, have expressed their intention to continue supporting various forms of “green” energies, including solar power, as part of broader policies towards the reduction of carbon emissions. The governments in many of our largest markets, including the United States, continue to provide incentives and policy support schemes for investments in solar power that will directly benefit the solar industry. We believe that the near-term growth of the market partially depends on the availability and size of such government incentives.
While solar projects may continue to offer attractive internal rates of return, it is unlikely that these rates will be as high as they were in the past. If internal rates of return fall below an acceptable rate for project investors, and governments continue to reduce or eliminate incentives for solar power, this may cause a decrease in demand and considerable downward pressure on solar systems and therefore negatively impact the value of solar projects. The reduction, modification or elimination of government incentives in one or more of our markets could therefore materially and adversely affect the growth of such markets or result in increased price competition, either of which could cause our revenues to decline and harm our financial results.
General global economic conditions may have an adverse impact on our operating performance and results of operations.
The demand for solar products and services is influenced by macroeconomic factors, such as global economic conditions (e.g. interest rates, foreign exchange rates and inflation), demand for electricity, supply and prices of other energy products, such as oil, coal and natural gas, as well as government regulations and policies concerning the electric utility industry, clean and other alternative energy industries and the environment. As a result of global economic conditions, some governments may implement measures that reduce the FITs and other incentives designed to benefit the solar industry. A decrease in solar power tariffs or wholesale electricity in many markets placed downward pressure on the price of solar power in those and other markets. In addition, reductions in oil and coal prices may reduce the demand for and the prices of solar power products and services. Our growth and profitability depend on the demand for and the prices of solar power products and services. If we experience negative market and industry conditions and demand for solar power products and services weakens as a result, our business and results of operations may be adversely affected.
Our project development and construction activities may not be successful, projects under development may not receive required permits, property rights, EPC agreements, interconnection and transmission arrangements, and financing or construction of projects may not commence or continue as scheduled, all of which could increase our costs, delay or cancel a project, and have a material adverse effect on our revenue and profitability.
The development and construction of solar projects involve known and unknown risks, many of which are not under our sole control. For example, we may be required to invest significant amounts of money for land and interconnection rights, preliminary engineering and permitting and may incur legal and other expenses before we can determine whether a project is feasible; we may also need to engage and rely on third parties including, but not limited to, contractors and consultants. Success in developing a particular project is contingent upon, among other things:
| ● | securing land rights and related permits, including satisfactory environmental assessments; |
| 93 |
| ● | receipt of required land use and construction permits and approvals; |
| ● | receipt of rights to interconnect to the electric grid; |
| ● | availability of transmission capacity, potential upgrade costs to the transmission grid and other system constraints; |
| ● | payment of interconnection and other deposits (some of which are non-refundable); |
| ● | negotiation of satisfactory EPC agreements; |
| ● | obtaining construction financing, including debt, equity and tax credits; and |
| ● | timely and satisfactory execution and performance by the third parties that we engage. |
In addition, successful completion of a particular project may be adversely affected by numerous factors, including:
| ● | changes in laws, regulations and policies and shifts in trade barriers and remedies, especially tariffs; |
| ● | delays in obtaining and maintaining required governmental permits and approvals; |
| ● | potential challenges from local residents, environmental organizations, and others who may not support the project; |
| ● | unforeseen engineering problems; subsurface land conditions; construction delays; cost over-runs; labor, equipment and materials supply shortages or disruptions (including labor strikes); |
| ● | failure to enter into PPAs on terms favorable to us, or at all; |
| ● | additional complexities when conducting project development or construction activities in foreign jurisdictions, including compliance with applicable U.S. or local laws and customs; and |
| ● | force majeure events, including adverse weather conditions, pandemics, supply chain disruptions, hostilities and other events beyond our control. |
If we are unable to complete the development of a solar project or we fail to meet any agreed upon system level capacity or energy output guarantees or warranties or other contract terms, or our projects cause grid interference or other damage, the EPC, the PPA or other agreements related to the project may, depending on the specific terms of the agreements, be terminated and/or we may be subject to significant damages, penalties and other obligations relating to the project, including obligations to repair, replace or supplement materials for the project.
We may enter into fixed-price EPC agreements in which we act as the general contractor for our customers in connection with the installation of their solar power projects. All essential costs are estimated at the time of entering into the EPC agreement for a particular project, and these costs are reflected in the overall fixed price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us and the subcontractors, suppliers and other parties involved in the project. In addition, we require qualified, licensed subcontractors to install most of our solar power and battery storage systems. Shortages of components (which may be attributable to the shortage of raw materials or components) or skilled labor could significantly delay a project or otherwise increase our costs. Should miscalculations in planning a project occur, including those due to unexpected increases in commodity prices or labor costs, or delays in execution occur and we are unable to increase the EPC sales price commensurately, we may not achieve our expected margins or our results of operations may be adversely affected.
| 94 |
Developing and operating solar projects exposes us to various risks.
The development of solar projects can take many months or years to complete and may be delayed for reasons beyond our control. It often requires us to make significant up-front payments for, among other things, land rights, interconnection work and permitting in advance of commencing construction, and revenue from these projects may not be recognized for several additional months following contract signing. Any inability or significant delays in entering into sales contracts with customers after making such up-front payments could adversely affect our business and results of operations. Furthermore, we may become constrained in our ability to simultaneously fund our other business operations and invest in other projects.
Developing solar projects requires significant management attention to negotiate the terms of our engagement and monitor the progress of the projects which may divert management’s attention from other matters. Our revenue and liquidity may be adversely affected to the extent the market for solar projects weakens or we are not able to successfully complete the customer acceptance testing due to technical difficulties, equipment failure, or adverse weather, and we are unable to sell our solar projects at prices and on terms and timing that are acceptable to us.
Our energy business also includes operating solar projects and selling electricity to the local or national grid or other power purchasers. As a result, we are subject to a variety of risks associated with intense market competition, changing regulations and policies, insufficient demand for solar or power, technological advancements and the failure of our power generation facilities.
We face a number of risks involving PPAs and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms such as price adjustment, termination, buy-out, acceleration and other clauses, all of which could materially and adversely affect our energy business, financial condition, results of operations and cash flows.
We may not be able to enter into PPAs for our future solar projects due to intense competition, increased supply of electricity from other sources, reduction in wholesale electricity prices, changes in government policies or other factors. There is a limited pool of potential buyers for electricity generated by solar power plants since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions. The willingness of buyers to purchase electricity from an independent power producer may be based on a number of factors and not solely on pricing and surety of supply. Failure to enter into PPAs on terms favorable to us, or at all, would negatively impact our revenue and our decisions regarding the development of power plants. We may experience delays in entering into PPAs for some of our solar projects or may not be able to replace an expiring PPA with a contract on equivalent terms and conditions, or otherwise at prices that permit operation of the related facility on a profitable basis. Any delay in entering into PPAs may adversely affect our ability to finance project construction and to enjoy the cash flows generated by such projects. If we are unable to replace an expiring PPA with an acceptable new PPA, the affected site may temporarily or permanently cease operations, or could be exposed to more uncertain merchant or wholesale electricity pricing, which could materially and adversely affect our financial condition, results of operations and cash flows.
Substantially all of the electric power generated by our solar projects is expected to be sold under long-term PPAs with public utilities, licensed suppliers, corporate offtakers, and commercial, industrial or government end users. Despite possible future alternatives, we expect a substantial number of our future projects to also have long-term PPAs or similar offtake arrangements such as FIT programs. If, for any reason, any of the purchasers of power under these contracts are unable or unwilling to fulfill their related contractual obligations, they refuse to accept delivery of the power delivered thereunder or they otherwise terminate them prior to their expiration, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. Further, to the extent any of our power purchasers are, or are controlled by, governmental entities, our facilities may be subject to legislative or other political action that may impair their contractual performance or contain contractual remedies that do not provide adequate compensation in the event of a counterparty default.
PPAs may be subject to price adjustments over time. If the price under any of our PPAs is reduced below a level that makes a project economically viable, our financial conditions, cash flow and results of operations could be materially and adversely affected. Additionally, certain of the projects that we may acquire in the future may allow, the lenders or investors to accelerate the repayment of the financing arrangement in the event that the related PPA is terminated or if certain operating thresholds or performance measures are not achieved within specified time periods.
We are subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where we do business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity, which may significantly reduce demand for our products and services or otherwise adversely affect our financial performance.
We are subject to a variety of laws and regulations in the markets where we do business, some of which may conflict with each other and all of which are subject to change. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. We also face trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
| 95 |
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation, and could deter further investment in the research and development of alternative energy sources as well as customer purchases of solar power and battery storage technology, which could result in a significant reduction in the potential demand for our solar power services, solar projects and solar electricity.
We expect that our solar power products and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. Any new regulations or policies pertaining to solar power products may result in significant additional expenses to us and our customers, which could cause a significant reduction in demand for our solar power and battery storage products.
In our energy business, we are subject to numerous national, regional and local laws and regulations. Changes in applicable energy laws or regulations, or in the interpretations of these laws and regulations, could result in increased compliance costs or the need for additional capital expenditures. If we fail to comply with these requirements, we could also be subject to civil or criminal liability and the imposition of fines. Further, national, regional or local regulations and policies could be changed to provide for new rate programs that undermine the economic returns for both new and existing projects by charging additional, non-negotiable fixed or demand charges or other fees or reductions in the number of projects allowed under net metering policies. National, regional or local government energy policies, law and regulation supporting the creation of organized merchant or wholesale electricity markets are currently, and may continue to be, subject to challenges, modifications and restructuring proposals, which may result in limitations on the commercial strategies available to us for the sale of our power.
Regulatory changes in a jurisdiction where we are developing a solar project may make the continued development of the project infeasible or economically disadvantageous and any expenditure that we have previously made on the project may be wholly or partially written off. Any of these changes could significantly increase the regulatory related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate any potential revenues that can be generated by one or more of the projects or result in significant additional expenses to us, our offtakers and customers, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We also face regulatory risks imposed by various transmission providers and operators, including regional transmission operators and independent system operators, and their corresponding market rules. These regulations may contain provisions that limit access to the transmission grid or allocate scarce transmission capacity in a particular manner, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We are also subject to the Canadian Corruption of Foreign Public Officials Act (CFPOA), U.S. Foreign Corrupt Practices Act of 1977, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business in countries in which we conduct activities. We may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in the course of our business (for example, to obtain approvals, permits and licenses from applicable government authorities and to sell power to government-owned entities). We would face significant liabilities if we failed to comply with these laws and we could be held liable for the illegal activities of our employees, representatives, contractors, partners, and agents, even if we did not authorize such activities. Any violation of the CFPOA, FCPA or other applicable anticorruption laws could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, which could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, responding to any enforcement action may result in the diversion of management’s attention and resources, significant defense costs and other professional fees.
| 96 |
Because the markets in which we compete are highly competitive and evolving quickly, because many of our competitors have greater resources than we do or are more adaptive, and because we have a limited track record in our energy business, we may not be able to compete successfully and we may not be able to maintain or increase our market share.
In our energy business, we compete in a more diversified and complicated landscape since the commercial and regulatory environments for solar project development and operation vary significantly from region to region and country to country. Our primary competitors are local and international developers and operators of solar projects. Some of our competitors may have advantages over us in terms of greater experience or resources in the operation, capital, financing, technical support and management of solar projects, in any particular markets or in general. As the solar power and renewable energy industry grows and evolves, we will also face new competitors who are not currently in the market. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business and prospects.
An anti-circumvention investigation could adversely affect us.
On August 16, 2021, a group of anonymous entities calling itself the American Solar Manufacturers Against Chinese Circumvention (“A-SMACC”) requested that the U.S. Department of Commerce (“USDOC”) initiate an anti-circumvention inquiry regarding crystalline silicon photovoltaic (“CSPV”) products from Malaysia, Thailand, and Vietnam. A-SMACC alleged that certain CSPV products from Malaysia, Thailand, and Vietnam containing Chinese-origin components were circumventing the Solar 1 antidumping (“AD”) and countervailing duty (“CVD”) orders (i.e., CSPV solar cells manufactured in China). On November 10, 2021, the USDOC rejected A-SMACC’s request and declined to initiate an anti-circumvention inquiry.
On February 8, 2022, U.S. module producer Auxin Solar Inc. (“Auxin”) filed with the USDOC separate circumvention petitions on CSPV products from Cambodia, Malaysia, Thailand, and Vietnam. Canadian Solar entered these proceedings with respect to Thailand and Vietnam and requested that the USDOC reject Auxin’s petition. On April 1, 2022, the USDOC initiated anti-circumvention inquiries on a country-wide basis with respect to all four countries.
U.S. law provides that the USDOC may find that circumvention exists when (among other things) merchandise subject to an AD/CVD order is completed or assembled in third countries with the end result of AD/CVD duty avoidance. Specifically, with respect to the existing Solar 1 China AD/CVD orders, the USDOC may find that (i) certain CSPV cells and/or modules produced in Thailand and Vietnam fall within the scope of the AD/CVD orders; and (ii) the collection of AD and/or CVD deposits is appropriate to prevent evasion of AD/CVD duties. The USDOC’s investigation will examine, inter alia, whether (i) the production process in Thailand and Vietnam is “minor or insignificant”; and (ii) the value of the merchandise produced in China is a significant portion of the value of the product exported to the United States. With respect to affirmative finding by the USDOC, imports of CSPV from Malaysia, Thailand and Vietnam would essentially be treated as if they were of Chinese origin and subject to potentially very high AD/CVD deposit rates. This in turn would significantly increase the cost of CSPV products that are required for our solar projects and risk significant harm to our financial condition and operations.
More recently, on June 6, 2022 the U.S. Federal Government declared a 24-month tariff moratorium on solar panels manufactured in Cambodia, Malaysia, Thailand, and Vietnam, by way of executive action by President Joe Biden. It remains possible that companies may be subject to tariffs after the 24-month period ends; however, the moratorium reportedly will exempt U.S. companies from any retroactive tariffs.
Our quarterly operating results may fluctuate from period to period.
Our quarterly operating results may fluctuate from period to period based on a number of factors, including:
| ● | the timing of completion of construction of solar projects; |
| 97 |
| ● | the timing and pricing of our services; |
| ● | the availability and cost of solar cells and wafers from our suppliers; |
| ● | the availability and cost of raw materials; |
| ● | changes in government incentive programs and regulations, particularly in our key and target markets; |
| ● | the availability and cost of external financing for solar power applications; |
| ● | acquisition, investment and offering costs; |
| ● | geopolitical turmoil and natural disasters within any of the countries in which we operate; |
| ● | foreign currency fluctuations, particularly in United States and Canadian dollars; |
| ● | our ability to establish and expand customer relationships; |
| ● | fluctuations in electricity rates due to changes in fossil fuel prices or other factors; |
| ● | allowances for credit losses; |
| ● | impairment of property, plant and equipment; |
| ● | impairment of project assets; |
| ● | share-based compensation expenses on performance-based share awards under our share incentive plan; |
| ● | income taxes; and |
| ● | construction progress of solar projects and related revenue recognition. |
We base our planned operating expenses in part on our expectations of future revenues. A significant portion of our expenses will be fixed in the short-term. If our revenues for a particular quarter are lower than we expect, we may not be able to reduce our operating expenses proportionately, which would harm our operating results for the quarter. As a result, our results of operations may fluctuate from quarter to quarter and our interim and annual financial results may differ from our historical performance.
Fluctuations in exchange rates could adversely affect our business, including our financial condition and results of operations.
Fluctuations in exchange rates, particularly between the U.S. dollars and Canadian dollars may result in foreign exchange gains or losses. Volatility in foreign exchange rates will hamper, to some extent, our ability to plan our pricing strategy. To the extent that we are unable to pass along increased costs resulting from exchange rate fluctuations to our customers, our profitability may be adversely impacted. As a result, fluctuations in foreign currency exchange rates could have a material and adverse effect on our financial condition and results of operations.
A change in our effective tax rate can have a significant adverse impact on our business.
A number of factors may adversely impact our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to provisional taxes upon finalization of various tax returns; adjustments to the interpretation of transfer pricing standards; changes in available tax credits; changes in stock-based compensation expenses; changes in tax laws or the interpretation of tax laws (e.g., in connection with fundamental U.S. international tax reform); changes in GAAP; and expiration of or the inability to renew tax rulings or tax holiday incentives. A change in our effective tax rate due to any of these factors may adversely influence our future results of operations.
Seasonal variations in demand linked to construction cycles and weather conditions may influence our results of operations.
Our business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
| 98 |
We may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development.
We anticipate that our operating and capital expenditures requirements may increase. To develop new projects, support future growth, achieve operating efficiencies and maintain service standard quality, we may need to make significant capital investments in facilities and capital equipment. We also anticipate that our operating costs may increase as we hire additional personnel, increase our sales and marketing efforts and invest in joint ventures and acquisitions.
Our operations are capital intensive. We cannot guarantee that we will continue to be able to extend existing or obtain new financing on commercially reasonable terms or at all. Also, we may not be able to raise capital via public equity and debt issuances due to market conditions and other factors, many of which are beyond our control. Our ability to obtain external financing is subject to a variety of uncertainties, including:
| ● | our future financial condition, results of operations and cash flows; | |
| ● | general market conditions for financing activities by solar power companies, including, but not limited to interest rates; and | |
| ● | economic, political and other conditions in the U.S. and elsewhere. |
If we are unable to obtain funding in a timely manner and on commercially acceptable terms, our growth prospects and future profitability may be adversely affected.
Construction of our solar projects may require us to obtain financing for our projects, including through project financing, green bond financing or others. If we are unable to obtain financing, or if financing is only available on terms which are not acceptable to us, we may be unable to fully execute our business plan. In addition, we generally expect to sell our projects to tax-oriented, strategic industry and other investors. Such investors may not be available or may only have limited resources, in which case our ability to sell our projects may be hindered or delayed and our business, financial condition, and results of operations may be adversely affected. There can be no assurance that we will be able to generate sufficient cash flows, find other sources of capital to fund our operations and solar projects, make adequate capital investments to remain competitive in terms of technology development and cost efficiency required by our projects. If adequate funds and alternative resources are not available on acceptable terms, our ability to fund our operations, develop and construct solar projects, or otherwise respond to competitive pressures would be significantly impaired. Our inability to do the foregoing could have a material and adverse effect on our business and results of operations.
We may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations.
In the ordinary course of developing solar projects, we may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations. In the future, we may from time to time incur substantial additional indebtedness and contingent liabilities and this could have important consequences to us and our shareholders. For example, it could:
| ● | limit our ability to satisfy our debt obligations; | |
| ● | increase our vulnerability to adverse general economic and industry conditions; | |
| ● | require us to dedicate a substantial portion of our cash flow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; | |
| ● | limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate; | |
| ● | place us at a competitive disadvantage compared with our competitors that have less debt; | |
| ● | limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds; and | |
| ● | increase the cost of additional financing. |
| 99 |
Our ability to generate sufficient cash to satisfy our debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow from operations to support the repayment of our indebtedness. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all. In addition, certain of our financing arrangements may impose operating and financial restrictions on our business, which may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund required capital expenditures, or withstand a continuing or future downturn in our business. Any of these factors could materially and adversely affect our ability to satisfy our debt obligations.
Supply chain issues, including shortages of adequate raw materials, component and equipment supply, cancellation or delay of purchase orders, inflationary pressures and cost escalation could adversely affect our business and results of operations.
We depend mainly on third-party suppliers for raw materials and components, and we also procure certain equipment overseas. Our suppliers may not always be able to meet quantity requirements, or keep pace with the price reductions or quality improvements, necessary for us to price products and projects competitively. Additionally, they may experience manufacturing delays and increased manufacturing cost that could increase the lead time for deliveries or impose price increases.
The failure of a supplier, for whatever reason, to supply the materials, essential components and equipment that meet quality, quantity and cost requirements in a timely manner could impair our ability to develop projects, increase costs, hinder compliance with supply agreements’ terms and may result, ultimately, in cancellation of projects and potential liability for us. The impact could be more severe if we are unable to access alternative sources on a timely basis or on commercially reasonable terms and at prices that are profitable. Supply may be interrupted by government mandates, accidents, disasters or other unforeseen events beyond our control.
Inflation in many countries and regions, especially in those where we operate, may adversely affect our business and our profitability.
As of June 30, 2022, we have facilities and offices in Canada and the United States. We also acquire materials for solar power projects from overseas countries. As such, we are exposed to the inflation risks therein. Recently, on a global basis, countries are experiencing high inflation rates. Inflation could increase the costs of our supplies and labour costs. We may not be able to adjust the pricing of our PPAs or services sufficiently or take appropriate pricing actions to fully offset the effects of inflation on our cost structures, thus we may fail to maintain current levels of gross profit and operating, selling and distribution, general and administrative expenses and maintenance costs as a percentage of total net revenues. As such, rising inflation rates may negatively impact our profitability. In addition, a high inflation environment would also have negative effects on the level of economic activity, employment and adversely affect our business, results of operations and financial conditions. For example, an increase in the inflation rates may result in an increase in market interest rates, which may require us to pay higher interest rates on debt securities that we issue in the financial market from time to time to finance our operations and increase our interest expenses.
We may be subject to unexpected warranty expenses that may not be adequately covered by our insurance policies.
For solar projects built by us, we also provide a limited workmanship or balance of system warranty against defects in engineering, design, installation and construction under normal use, operation and service conditions. In resolving claims under the workmanship or balance of system warranty, we have the option of remedying through repair, refurbishment or replacement of equipment. We have also entered into similar workmanship warranties with our suppliers to back up our warranties.
| 100 |
As part of our energy business, before commissioning solar projects, we conduct performance testing to confirm that the projects meet the operational and capacity expectations set forth in the agreements. In limited cases, we also provide for an energy generation performance test designed to demonstrate that the actual energy generation for up to the first three years meets or exceeds the modeled energy expectation (after adjusting for actual solar irradiation). In the event that the energy generation performance test performs below expectations, the appropriate party (EPC contractor or equipment provider) may incur liquidated damages capped at a percentage of the contract price. Potential warranty claims may exceed the scope or amount of coverage under our insurance and, if they do, they could materially and adversely affect our business.
If we are unable to attract, train, retain, and successfully integrate key personnel into our management team, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train, and retain management, operations, sales, and technical personnel, including personnel in foreign jurisdictions. Recruiting and retaining capable personnel, particularly those with expertise in the solar industry across a variety of technologies, are vital to our success. We are also dependent on the services of our executive officers and other members of our senior management team. The loss of one or more of these key associates or any other member of our senior management team could have a material adverse effect on our business. We may not be able to retain or replace these key associates and may not have adequate succession plans in place. Several of our current key associates, including our executive officers, are subject to employment conditions or arrangements that contain post-employment non-competition provisions. However, these arrangements permit the associates to terminate their employment with us upon little or no notice.
There are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes us and our utility scale solar projects to additional risk.
Since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility-scale quantities of electricity in a given geographic location, normally transmission grid operators, state and investor-owned power companies, public utility districts and cooperatives. As a result, there is a concentrated pool of potential buyers for electricity generated by our solar power plants, which may restrict our ability to negotiate favorable terms under new PPAs and could impact our ability to find new customers for the electricity generated by our solar power plants should this become necessary. Additionally, these possible purchasers may have a role in connecting our projects to the grid to allow the flow of electricity. Furthermore, if the financial condition of these utilities and/or power purchasers deteriorates, or government policies or regulations to which they are subject and which compel them to source renewable energy supplies change, demand for electricity produced by our plants or the ability to connect to the grid could be negatively impacted. In addition, provisions in our PPAs or applicable laws may provide for the curtailment of delivery of electricity for various reasons, including preventing damage to transmission systems, system emergencies, force majeure or economic reasons. Such curtailment could reduce revenues to us from our PPAs. If we cannot enter into PPAs on terms favorable to us, or at all, or if the purchaser under our PPAs were to exercise its curtailment or other rights to reduce purchases or payments under the PPAs, our revenues and our decisions regarding development of additional projects in the energy business may be adversely affected.
Historically, a limited number of customers have accounted for a substantial portion of our revenue.
We derive a significant portion of our revenue from a limited number of existing customers. Our top customer accounted for 88% of our revenue for the fiscal year ended June 30, 2022. It is not possible for us to predict the future level of demand from our largest customer. If our largest customer elects to not do future business with us, or decrease of our services, or if our largest customer otherwise seeks to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations would be adversely affected.
In addition, the Company has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. The accounts receivable balance is not yet recognized. There is a risk that this receivable may not be paid in 2023 or at all.
| 101 |
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of our business operations.
We are required to comply with all national and local environmental regulations. Our business generates noise, wastewater, gaseous wastes and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as our business has expanded. We believe that we substantially comply with all relevant environmental laws and regulations and have all necessary and material environmental permits to conduct our business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations.
Our solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and we may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, we may lose market share and our financial results may be adversely affected. Any failure by us to control our use or to restrict adequately the discharge, of hazardous substances could subject us to potentially significant monetary damages, fines or suspensions of our business operations.
Corporate responsibility, specifically related to Environmental, Social and Governance (“ESG”) matters and unsuccessful management of such matters may adversely impose additional costs and expose us to new risks.
Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. We may face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards set by our investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third party rating services. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks, including increased risk of investigation and litigation, and negative impacts on the value of our products and access to capital, which may put us at a commercial disadvantage relative to our peers.
Furthermore, various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results. We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations may adversely affect our business and results of operations.
We face risks related to natural disasters, health epidemics, such as COVID-19, and other catastrophes, which could significantly disrupt our operations.
Our business could be materially and adversely affected by natural disasters or other catastrophes, such as earthquakes, fire, floods, hail, windstorms, severe weather conditions, environmental accidents, power loss, communications failures, explosions, terrorist attacks and similar events. Our business could also be materially and adversely affected by public health emergencies, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, the 2019 novel coronavirus (COVID-19) or other local health epidemics in jurisdictions where we operate and global pandemics. If any of our employees is suspected of having contracted any contagious disease, we may, under certain circumstances, be required to quarantine those employees and the affected areas of our operations. As a result, we may have to temporarily suspend part or all of our facilities. Furthermore, authorities may impose restrictions on travel and transportation and implement other preventative measures in affected regions to deal with the catastrophe or emergency, which may lead to the temporary closure of our facilities and declining economic activity at large. A prolonged outbreak of any health epidemic or other adverse public health developments, in jurisdictions where we operate, could have a material adverse effect on our business operations.
| 102 |
The COVID-19 pandemic has continued to pose significant challenges to many aspects of our business, including our operations, customers, suppliers and projects. The extent to which the COVID-19 has and may persist to impact our ability to effectively operate continues to be highly uncertain. The outbreak continues to evolve, and the impact that COVID-19, or new variants of COVID-19, will ultimately have on our result of operations, financial condition, liquidity and cash flows cannot be estimated and is impossible to predict. We will continue to monitor and adhere to the policies, lockdowns, restrictions, and preventive measures implemented by the various government authorities, as well as general movement restrictions, social distancing and other measures imposed to slow the spread of COVID-19.
We have limited insurance coverage and may incur significant losses resulting from operating hazards, product liability claims, project construction or business interruptions.
Our operations involve the use, handling, generation, processing, storage, transportation and disposal of hazardous materials, which may result in fires, explosions, spills and other unexpected or dangerous accidents causing personal injuries or death, property damages, environmental damages and business interruption. Although we currently carry third-party liability insurance against property damage, the policies for this insurance are limited in scope and may not cover all claims relating to personal injury, property or environmental damage arising from incidents on our properties or relating to our operations. Any occurrence of these or other incidents which are not insured under our existing insurance policies could have a material adverse effect on our business, financial condition or results of operations.
For projects we construct, we are exposed to risks associated with the design and construction that can create additional liabilities to our operations. We manage these risks by including contingencies to our construction costs, ensuring the appropriate insurance coverages are in place such as professional indemnity and construction all risk as well as obtaining indemnifications from our contractors where possible. However, there is no guarantee that these risk management strategies will always be successful.
Information Technology Systems and Data Security Breaches.
The Company’s operations depend, in part, on how well it and its third party service providers protect networks, equipment, information technology (“IT”) systems and software against damage from a number of threats, including, but not limited to, cable cuts, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
The Company has negative cash flow for the period ended June 30, 2022
The Company had negative cash flow for the period ended June 30, 2022. To the extent that the Company has negative cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that the Company will be able to generate a positive cash flow from its operations, that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company. The Company’s actual financial position and results of operations may differ materially from the expectations of the Company’s management.
| 103 |
The Company does not anticipate paying cash dividends.
The Company’s current policy is to retain earnings to finance the development of its solar power projects and to otherwise reinvest in the Company. Therefore, the Company does not anticipate paying cash dividends on the Company’s shares in the foreseeable future. The Company’s dividend policy will be reviewed from time to time by the Company’s board in the context of its earnings, financial condition and other relevant factors. Until the time that the Company pays dividends, which the Company might never do, Common Shareholders will not be able to receive a return on their Common Shares unless they sell them.
Litigation.
From time to time, we have been and may be subject to disputes and litigation, with and without merit, that may be costly and which may divert the attention of our management and our resources in general, whether or not any dispute actually proceeds to litigation. The results of complex legal proceedings are difficult to predict. Moreover, complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. Even if we are able to estimate losses related to these actions, the ultimate amount of loss may be materially higher than our estimates. Any resolution of litigation, or threatened litigation, could involve the payment of damages or expenses by us, which may be significant or involve an agreement with terms that restrict the operation of our business. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be significant. These costs may exceed the dollar limits of our insurance policies or may not be covered at all by our insurance policies.
Risks Associated With the Offering and Common Shares
Uncertainty and Discretion in the Use of Proceeds.
Although the Company has set out its intended use of proceeds from this Offering, these intended uses are estimates only and subject to change. While management does not contemplate any material variation, management does retain broad discretion in the application of such proceeds. The failure by the Company to apply these funds effectively could have a material adverse effect on the Company’s business, including the Company’s ability to achieve its stated business objectives.
No Market for Common Shares Currently Exists.
The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023. Listing will be subject to the Company fulfilling all of the requirements of the CSE. While the Company will use its reasonable efforts to list the Common Shares on the CSE, there is no assurance that such listing will be obtained. There is currently no market through which the Common Shares may be sold and no market may develop for the Common Shares and purchasers may not be able to resell such Common Shares purchased under this Prospectus. This may affect the pricing of the Common Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Common Shares, and the extent of issuer regulation.
The Company may be subject to additional regulatory burden resulting from its public listing on the CSE.
The Company has not been subject to the continuous and timely disclosure requirements of Canadian securities laws or other rules, regulations and policies of the CSE. The Company is working with its legal, accounting and financial advisors to identify those areas in which changes should be made to the Company’s financial management control systems to manage its obligations as a public company listed on the CSE. These areas include corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. The Company has made, and will continue to make, changes in these and other areas, including the Company’s internal controls over financial reporting. However, the Company cannot assure holders of Company’s shares that these and other measures that the Company might take will be sufficient to allow us to satisfy the Company’s obligations as a public company listed on the CSE on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies listed on the CSE will create additional costs for the Company and will require the time and attention of management. The Company cannot predict the amount of the additional costs that the Company might incur, the timing of such costs or the impact that management’s attention to these matters will have on the Company’s business.
| 104 |
The Company cannot assure you that a market will continue to develop or exist for the Common Shares or what the market price of the Common Shares will be.
The Company cannot assure that a market will continue to develop or be sustained once the Company’s Common Shares are listed on the CSE. If a market does not continue to develop or is not sustained, it may be difficult for investors to sell the Common Shares at an attractive price or at all. The Company cannot predict the prices at which the Common Shares will trade.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control, including the following:
| ● | actual or anticipated fluctuations in the Company’s quarterly results of operations; | |
| ● | recommendations by securities research analysts; | |
| ● | changes in the economic performance or market valuations of companies in the industry in which the Company operates; | |
| ● | addition or departure of the Company’s executive officers and other key personnel; | |
| ● | release or expiration of lock-up or other transfer restrictions on outstanding Common Shares; | |
| ● | sales or perceived sales of additional Common Shares; | |
| ● | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or the Company’s competitors; | |
| ● | operating and share price performance of other companies that investors deem comparable to us; fluctuations to the costs of vital production materials and services; | |
| ● | changes in global financial markets and global economies and general market conditions, such as interest rates; | |
| ● | operating and share price performance of other companies that investors deem comparable to the Company or from a lack of market comparable companies; | |
| ● | news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets; and | |
| ● | regulatory changes in the industry. |
Financial markets have recently experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely affected and the trading price of the Common Shares might be materially adversely affected.
The intentions of the existing shareholders regarding their long-term economic ownership are subject to change. Factors that could cause the existing shareholders’ current intentions to change include changes in each of their personal circumstances, our succession planning or changes in our management, changes in tax laws, market conditions and our financial performance.
Further, we cannot predict the size of future issuances of our Common Shares or the effect, if any, that future issuances and sales of our Common Shares will have on the market price of our Common Shares. Sales of substantial amounts of our Common Shares, or the perception that such sales could occur, may adversely affect prevailing market prices for our Common Shares. See “The Company may need to raise additional capital in the future”.
| 105 |
The Company may need to raise additional capital in the future.
The Company’s capital needs in the future will depend upon factors such as its growth strategy and the success of its solar power projects. None of these factors can be predicted with certainty. The Company may need additional debt or equity financing in the future. The Company cannot assure investors that any additional financing, if required, will be available or, even if it is available that it will be on terms acceptable to the Company. If the Company raises additional funds by selling securities, the ownership of existing shareholders will be diluted. Any inability to obtain required financing could have a material adverse effect on the Company’s business, results of operations and financial condition.
Failure to raise capital in a timely manner will constrain the Company’s growth.
The Company’s growth depends on developing solar power projects, which requires capital. If the Company experiences difficulty or delays in raising the funds it needs, it will delay its ability to develop solar power projects. Additional future delays in obtaining funding may be caused by a combination of factors. Future delays in obtaining funding in a timely manner will constrain or prevent the Company’s growth.
The Company may be unable to support existing or new business if it does not raise sufficient funds.
Unless the Company can obtain adequate financing from the sale of its securities, the Company will not have sufficient funds and may be unable to support existing operations, expand operations, or operate its expanded operations, and it will be unable to carry out its business plans. Without adequate financing the Company may be unable to carry on its business. There is no assurance that the Company will raise adequate funds in future financings.
Dilution.
The offering price of Common Shares may significantly exceed the net tangible book value per share of the Common Shares. Accordingly, a purchaser of Common Shares may incur immediate and substantial dilution of his, her or its investment. If outstanding RSUs, options and warrants to purchase Common Shares are exercised or securities convertible into Common Shares are converted, additional dilution will occur. The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in subsequent offerings or may issue additional Common Shares or other securities to finance future acquisitions. The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s RSUs, Options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares on the CSE may decrease due to the additional amount of Common Shares available in the market.
Impact of securities or industry analysts’ reports.
The trading market for our Common Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence covering us, the trading price for our Common Shares would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrade our Common Shares or publish inaccurate or unfavourable research about our business, our trading price may decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common Shares could decrease, which could cause our trading price and volume to decline.
| 106 |
Risks related to the book-based system
Unless and until certificated Common Shares are issued in exchange for book-entry interests in the Common Shares, owners of the book-entry interests will not be considered owners or holders of Common Shares. Instead, the depository or its nominee will be the sole holder of the Common Shares. Unlike holders of the Common Shares themselves, owners of book-based interests will not have the direct right to act upon the Company’s solicitations or requests or other actions from holders of the Common Shares. Instead, holders of beneficial interests in the Common Shares will be permitted to act only to the extent such holders have received appropriate proxies to do so from CDS or, if applicable, a CDS participant. There is no assurance that procedures implemented for the granting of such proxies will be sufficient to enable holders of beneficial interests in the Common Shares to vote on any requested actions on a timely basis.
ELIGIBILITY FOR INVESTMENT
In the opinion of DLA Piper (Canada) LLP, counsel to the Company, and MLT Aikins LLP, counsel to the Agent, based on the current provisions of the Tax Act in force on the date hereof, the Offered Shares would each be a “qualified investment” for a trust governed by a “registered retirement savings plan” (“RRSP”), “registered retirement income fund” (“RRIF”), “tax-free savings account” (“TFSA”), “registered education savings plan” (“RESP”), “registered disability savings plan” (“RDSP”) and “deferred profit sharing plan”, as those terms are defined in the Tax Act (collectively, the “Plans”) if and provided that the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE) at the relevant time or the Company qualifies as a “public corporation” other than a “mortgage investment corporation” for the purposes of the Tax Act. However, the Company is not currently a “public corporation” and the Offered Shares are not currently listed on a “designated stock exchange”, and the timing of such a listing, if any, cannot be guaranteed.
The CRA’s published policy is that in order for a security to qualify for this purpose, the listing must be full and unconditional, and that a mere approval or conditional approval is insufficient. It is our understanding that the Company has applied to list the Offered Shares on the CSE as of a time that is shortly before the Closing of the Offering. However, listing will be subject to the Company fulfilling all of the requirements of the CSE. In addition, there can be no guarantee that CSE approval of a listing (if at all) as of a time that is shortly before the Closing of the Offering would be granted or would be in a form that is, or is acceptable to the CRA as, a full and unconditional listing. No legal opinion or advance tax ruling has been sought or obtained in respect of the listing application or the status of the Offered Shares as listed on a designated stock exchange as of any particular time. If the Offered Shares are not appropriately listed on the CSE at the time of their issuance (and the Company is not otherwise a “public corporation” other than a “mortgage investment corporation” at that time for purposes of the Tax Act), the Offered Shares will not be qualified investments for the Plans at that time. In general terms, adverse consequences under the Tax Act, not discussed in this summary, apply to a Plan and/or its annuitant, subscriber or holder (as the case may be) where a Plan acquires or holds a non-qualified investment.
Notwithstanding that the Offered Shares may become a qualified investment for a TFSA, RDSP, RESP, RRSP or RRIF, the holder, subscriber or annuitant of such Plan, as the case may be, will be subject to a penalty tax as set out in the Tax Act if such Offered Shares are a “prohibited investment” for the TFSA, RDSP, RESP, RRSP or RRIF for purposes of the Tax Act. An Offered Share will generally be a “prohibited investment” for a TFSA, RDSP, RESP, RRSP or RRIF if the holder, subscriber or annuitant, as the case may be, does not deal at arm’s length with the Company for the purposes of the Tax Act or has a “significant interest” (as defined in subsection 207.01(4) of the Tax Act) in the Company. However, the Offered Shares will not be prohibited investments if such Offered Shares are “excluded property” (as defined in subsection 207.01(1) of the Tax Act) for a TFSA, RDSP, RESP, RRSP or RRIF, as the case may be.
Investors who are considering holding Offered Shares within a Plan should consult their own tax advisors in regard to the application of these rules in their particular circumstances.
| 107 |
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of DLA Piper (Canada) LLP, counsel to the Company, and MLT Aikins LLP, counsel to the Agent, the following is, as at the date of this Prospectus, a general summary of the principal Canadian federal income tax considerations under the Tax Act generally applicable to an investor who acquires Offered Shares pursuant to the Offering and who, for the purposes of the Tax Act and at all relevant times, (i) deals at arm’s length with the Company and the Agent, (ii) is not affiliated (as defined in the Tax Act) with the Company or the Agent, and (iii) acquires and holds the Offered Shares as capital property. A holder who meets all of the foregoing requirements is referred to as a “Holder” in this summary, and this summary only addresses such Holders. Generally, the Offered Shares will be considered as capital property of a Holder thereof provided that the Holder does not use the Offered Shares in the course of carrying on a business of trading or dealing in securities and such Holder has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary does not apply to a Holder (i) that is a “financial institution” for the purposes of the mark-to-market rules contained in the Tax Act; (ii) that is a “specified financial institution” (as defined in the Tax Act); (iii) an interest in which would be a “tax shelter investment” (as defined in the Tax Act); (iv) that has made a functional currency reporting election under the Tax Act; (v) that is exempt from tax under Part I of the Tax Act; (vi) that is a “foreign affiliate” (as defined in the Tax Act) of a taxpayer resident in Canada; (vii) that is a partnership; (viii) that receives dividends on the Offered Shares under or as part of a “dividend rental arrangement” (as defined in the Tax Act); or (ix) that has entered into or will enter into a “derivative forward agreement” or “synthetic disposition arrangement” (as those terms are defined in the Tax Act) with respect to an Offered Share. Such Holders should consult their own tax advisors with respect to an investment in the Offered Shares.
Additional considerations, not discussed herein, may be applicable to a Holder that is a corporation resident in Canada and is (or does not deal at arm’s length with a corporation resident in Canada for purposes of the Tax Act that is), or becomes, controlled by a non-resident person, or a group of non-resident persons not dealing with each other at arm’s length, for purposes of the ”foreign affiliate dumping” rules in section 212.3 of the Tax Act. Such Holders should consult their tax advisors with respect to the consequences of acquiring the Offered Shares.
This summary does not address the deductibility of interest by a Holder who has borrowed money or otherwise incurred debt in connection with the acquisition of Offered Shares.
This summary is based on the current provisions of the Tax Act in force as of the date hereof and our understanding of the current published administrative policies and assessing practices of the CRA. This summary takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that the Tax Proposals will be enacted in the form proposed. However, no assurance can be given that the Tax Proposals will be enacted in their current form or at all. This summary does not otherwise take into account any changes in law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental or judicial decision or action, nor does it take into account or consider any provincial, territorial or foreign tax considerations, which considerations may differ significantly from the Canadian federal income tax considerations discussed in this summary.
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder. All investors, including Holders, should consult their own tax advisors with respect to their particular circumstances.
Holders Resident in Canada
The following section of this summary applies to Holders who, for the purposes of the Tax Act, are or are deemed to be resident in Canada at all relevant times (“Resident Holders”). Certain Resident Holders whose Offered Shares might not otherwise constitute capital property may make, in certain circumstances, an irrevocable election permitted by subsection 39(4) of the Tax Act to deem the Offered Shares, and every other “Canadian security” (as defined in the Tax Act) held by such persons, in the taxation year of the election and each subsequent taxation year, to be capital property. Resident Holders should consult their own tax advisors regarding this election.
| 108 |
Dividends
Dividends received or deemed to be received on the Offered Shares, if any, will be included in computing a Resident Holder’s income. In the case of an individual (other than certain trusts), such dividends will be subject to the gross-up and dividend tax credit rules normally applicable in respect of “taxable dividends” received from a “taxable Canadian corporation” (as defined in the Tax Act), including the enhanced gross-up and dividend tax credit in respect of “eligible dividends”, if any, so designated by the Company to the Resident Holder in accordance with the provisions of the Tax Act. There may be restrictions on the Company’s ability to designate any dividends as “eligible dividends”, and the Company has made no commitments in this regard.
Dividends received or deemed to be received by a Resident Holder that is a corporation must be included in computing its income, but such dividends will generally be deductible in computing the corporation’s taxable income for that taxation year. A Resident Holder that is a “private corporation” (as defined in the Tax Act) and certain other corporations controlled by or for the benefit of an individual (other than a trust) or related group of individuals (other than trusts) generally will be liable to pay tax under Part IV of the Tax Act (refundable in certain circumstances) on dividends received or deemed to be received on the Offered Shares to the extent such dividends are deductible in computing taxable income. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received or deemed to be received by a Resident Holder that is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors in this regard.
Dispositions of Offered Shares
Upon a disposition (or a deemed disposition) of an Offered Share (other than a disposition to the Company in a transaction that is not a sale in the open market), a Resident Holder generally will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition are greater (or are less) than the aggregate adjusted cost base of such security to the Resident Holder immediately before the disposition and any reasonable costs of disposition. The adjusted cost base of an Offered Share to a Resident Holder will be determined in accordance with the Tax Act by averaging the cost to the Resident Holder of an Offered Share with the adjusted cost base of all other Common Shares held by the Resident Holder as capital property. The tax treatment of capital gains and capital losses is discussed in greater detail below under the subheading “Capital Gains and Capital Losses”.
Capital Gains and Capital Losses
Generally, a Resident Holder is required to include in computing income for a taxation year one-half of the amount of any capital gain (a “taxable capital gain”) realized in the year. Subject to and in accordance with the provisions of the Tax Act, a Resident Holder is required to deduct one-half of the amount of any capital loss (an “allowable capital loss”) realized in a taxation year from taxable capital gains realized in the year by such Resident Holder. Allowable capital losses in excess of taxable capital gains realized in a year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any following taxation year against net taxable capital gains realized in such year, to the extent and under the circumstances described in the Tax Act.
The amount of any capital loss realized on the disposition or deemed disposition of Offered Shares by a Resident Holder that is a corporation may, in certain circumstances, be reduced by the amount of dividends received or deemed to have been received by it on such Offered Shares. Similar rules may apply where a Resident Holder that is a corporation is a member of a partnership or a beneficiary of a trust that owns Offered Shares or where a partnership or trust, of which a corporation is a member or a beneficiary, is a member of a partnership or a beneficiary of a trust that owns Offered Shares. Resident Holders to whom these rules may be relevant should consult their own tax advisors.
A Resident Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) also may be liable to pay an additional tax (refundable in certain circumstances) on its “aggregate investment income” (as defined in the Tax Act) for the year, which will generally include taxable capital gains. Tax Proposals released by the Minister of Finance (Canada) on August 9, 2022 are intended to extend this additional tax and refund mechanism in respect of aggregate investment income to ”substantive CCPCs” as defined in the Tax Proposals. Resident Holders should consult their own tax advisors with regard to this additional tax and refund mechanism.
| 109 |
Minimum Tax
Capital gains realized (or deemed to be realized), and dividends received (or deemed to be received) by a Resident Holder that is an individual or a trust, other than certain specified trusts, may give rise to minimum tax under the Tax Act. Resident Holders should consult their own advisors with respect to the application of the minimum tax.
Holders Not Resident in Canada
The following section of this summary is applicable to Holders who, for the purposes of the Tax Act, and at all relevant times (i) are not, and will not be deemed to be, resident in Canada at any time while they hold the Offered Shares, and (ii) do not use or hold, and are not deemed to use or hold, the Offered Shares in carrying on a business in Canada (“Non-Resident Holders”).
Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that carries on, or is deemed to carry on, an insurance business in Canada and elsewhere or that is an “authorized foreign bank” (as defined in the Tax Act). Holders should consult their own tax advisors.
Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Resident Holder by the Company are subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend unless such rate is reduced by the terms of an applicable tax treaty. Under the Canada-United States Tax Convention (1980), as amended (the “Treaty”), for example, the rate of withholding tax on dividends paid or credited to a Non-Resident Holder that is the beneficial owner of the dividend, who is resident in the U.S. for purposes of the Treaty and entitled to benefits under the Treaty (a “U.S. Holder”) is generally limited to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Holder that is a company beneficially owning at least 10% of the Company’s voting shares). The Company will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Resident Holder’s account.
Dispositions of Offered Shares
A Non-Resident Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of an Offered Share, nor will capital losses arising therefrom be recognized under the Tax Act, unless the Offered Share constitutes or is deemed to constitute “taxable Canadian property” to the Non-Resident Holder for purposes of the Tax Act at the time of disposition and the gain is not exempt from tax pursuant to the terms of an applicable tax treaty.
If and provided that the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE) at the time of disposition, the Offered Shares generally will not constitute taxable Canadian property of a Non-Resident Holder at that time unless, at any time during the 60 month period ending at the time of the disposition, the following two conditions are simultaneously met: (i) one or any combination of (i) the Non-Resident Holder, (ii) persons with whom the Non-Resident Holder did not deal at arm’s length, or (iii) partnerships in which the Non-Resident Holder or such non-arm’s length person holds a membership interest (either directly or indirectly through one or more partnerships), owned 25% or more of the issued shares of any class or series of shares of the Company; and (ii) more than 50% of the fair market value of such shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, “Canadian resource property” (as defined in the Tax Act), “timber resource property” (as defined in the Tax Act) or an option in respect of, an interest in or for civil law a right in or to such property, whether or not such property exists. Notwithstanding the foregoing, an Offered Share may also be deemed to be taxable Canadian property to a Non-Resident Holder under other provisions of the Tax Act.
A Non-Resident Holder’s capital gain (or capital loss) in respect of Offered Shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected property” as defined in the Tax Act) will generally be computed in the manner described above under the subheading “Holders Resident in Canada – Dispositions of Offered Shares”.
| 110 |
Non-Resident Holders who may hold Offered Shares as taxable Canadian property should consult their own tax advisors.
PROMOTERS
Except for Dr. Richard Lu, the Chief Executive Officer of the Company, no person or company has, within the two years immediately preceding the date of this Prospectus, been a promoter of the Company, within the meaning of applicable securities laws.
Other than as disclosed in this section or elsewhere in this Prospectus, no person who was a Promoter of the Company within the last two years:
| ● | received anything of value directly or indirectly from the Company or a subsidiary; | |
| ● | sold or otherwise transferred any asset to the Company or a subsidiary within the last two years; | |
| ● | has been a director, chief executive officer or chief financial officer of any company that during the past 10 years was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation for a period of more than 30 consecutive days or became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets; | |
| ● | has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; | |
| ● | has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision; or | |
| ● | has within the past 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets. |
LEGAL PROCEEDINGS
Except as disclosed below, there are no legal proceedings material to the Company to which the Company is a party or of which any of its property is the subject matter, and there are no such proceedings known to the Company to be contemplated.
First legal claim for the improper termination of FIT Contracts
On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “First Claim Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “First Claim Defendants”). First Claim Plaintiffs seek damages from the First Claim Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions.
| 111 |
Second legal claim for the improper termination of FIT Contracts
On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Second Claim Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Second Claim Defendants”). The Second Claim Plaintiffs seek damages from the Second Claim Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action.
Claim against town of Manlius, New York
In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property that is being developed by the Company. The lawsuit was filed challenging the approval of the Manlius landfill. The Company is not named in the lawsuit; however, in cooperation with the town, the Company is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted.
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as disclosed herein, no director, officer, Insider or Promoter of the Company has had any material interest, direct or indirect, in any transaction within the three years before the date of this Prospectus, or any proposed transaction, that has materially affected or is reasonably expected to materially affect the Company or any of its subsidiaries.
AUDITORS
The auditor for the Company is MSLL CPA LLP, Chartered Professional Accountants at its principal offices located at 1177 W Hastings St Suite 2110, Vancouver, British Columbia, Canada V6E 2K3. MSLL CPA LLP has confirmed that they are independent of the Company within the meaning of the “CPABC Code of Professional Conduct” of the Chartered Professional Accountants of British Columbia.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company’s Common Shares is Endeavor Trust Corporation at its principal offices located in Vancouver, British Columbia.
MATERIAL CONTRACTS
Other than contracts entered into in the ordinary course of business, the following are the only material contracts entered into by the Company or its Subsidiaries since July 1, 2021, being the beginning of the last financial year ending before the date of the Prospectus, or before July 1, 2021 but still in effect and considered to be currently material:
| 1. | Master Services Agreement dated February 9, 2018 between Abundant Solar Power Inc. and the State of Maryland, acting through the Maryland Department of Transportation. Pursuant to the agreement, Abundant Solar Power Inc. provides deliverables, programs, good and services for renewable energy development projects that are awarded in accordance with the terms of the agreement. The agreement has a term of thirty years commencing on February 22, 2018. However, the Maryland Department of Transportation may terminate the agreement if it shall determine such termination is in the best interest of the State of Maryland. The State will pay all reasonable costs incurred up to the date of termination, and all reasonable costs associated with termination; however, the Company will not be reimbursed for any anticipatory profits that have not been earned up to the date of termination. |
| 2. | Engineering, Procurement, and Construction Agreement dated February 9, 2021 with Solar Troupsburg LLC as described under “General Development and Business of the Company – Three Year History – Other Development of the Business.” |
| 112 |
Copies of the above material contracts can be inspected at the Company’s head office during regular business hours for a period of 30 days after a final receipt is issued for this Prospectus and are also available electronically at www.sedar.com.
LEGAL MATTERS
Certain Canadian legal matters in connection with this Prospectus will be passed upon by DLA Piper (Canada) LLP, on behalf of the Company, and by MLT Aikins LLP, on behalf of the Agent. As at the date hereof, each of: (i) the partners and associates of DLA Piper (Canada) LLP, as a group; and (ii) the partners and associates of MLT Aikins LLP, as a group, beneficially own, directly or indirectly, less than one percent of the outstanding Common Shares of the Company.
INTERESTS OF EXPERTS
The following are persons or companies whose profession or business gives authority to a statement made in this Prospectus as having prepared or certified a part of that document or report described in this Prospectus:
| ● | DLA Piper (Canada) LLP is the Company’s counsel with respect to Canadian legal matters herein; | |
| ● | MLT Aikins LLP is the Agent’s counsel with respect to Canadian legal matters herein; and | |
| ● | MSLL CPA LLP, Chartered Professional Accountants is the external auditor of the Company. |
To the knowledge of management of the Company, as of the date hereof, no expert, nor any associate or affiliate of such person has any beneficial interest, direct or indirect, in the securities or property of the Company or of an associate or affiliate of any of them, and no such person is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of an associate or affiliate thereof.
OTHER MATERIAL FACTS
To the knowledge of management, there are no other material facts relating to the Company that are not otherwise disclosed in this Prospectus or are necessary for this Prospectus to contain full, true and plain disclosure of all material facts relating to the Company.
PURCHASERS’ STATUTORY RIGHT OF WITHDRAWAL AND RESCISSION
Securities legislation in the provinces British Columbia, Alberta and Ontario provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights or consult with a legal adviser.
FINANCIAL STATEMENTS
Attached hereto as Schedule “A” and forming a part of this Prospectus are the following financial statements:
| 1. | the audited financial statements of the Company for the years ended June 30, 2022 and June 30, 2021, together with the notes thereto and the auditors’ report thereon; and |
| 2. | the unaudited interim financial statements of the Company for the three months ended September 30, 2022 together with the notes thereto. |
| 113 |
Schedule A - SOLARBANK FINANCIAL STATEMENTS
Schedule B - AUDIT COMMITTEE CHARTER
Schedule C – DISCLOSURE AND CONFIDENTIALITY POLICY
DISCLOSURE AND CONFIDENTIALITY POLICY
(November 4, 2022)
| 1. | Adoption |
This policy (the “Policy”) was approved and amended by the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) on the dates noted at the conclusion hereof. This Policy is intended to complement the Company’s Insider Trading and Reporting Policy (the “Insider Trading Policy”). This Policy, together with the Insider Trading Policy, is intended to assist the Company in complying with securities laws governing corporate disclosure, confidentiality and insider trading.
| 2. | Purpose |
It is the policy of the Company that all Material Information (as defined below) relating to the Company be disclosed to the investing public in a timely, factual and accurate fashion and that the Company’s directors, executive officers (corporate officers and all Vice Presidents) and each of their direct reports; the staff of the financial, accounting, legal and investor relations departments; and any other employee(s) or other third parties with access to material undisclosed information (collectively, ”Corporate Actors”) conduct themselves in accordance with applicable legal and regulatory requirements.
| 3. | Responsibility |
| (a) | Individual Responsibility. Every officer, director and employee of the Company will be held responsible for their compliance with this Policy. The individual who breaches this Policy may find himself or herself personally exposed to a wide range of penalties, fines and penal sanctions as well as civil actions for damages and administrative sanctions by securities commissions and other regulatory bodies. Breaches of this Policy by employees may also expose the Company to regulatory and civil actions and the censure of the investing public. | |
| If appropriate, the Company will report violations of this Policy to the appropriate regulatory authorities and will assist such authorities in investigating, and even prosecuting, violations of this Policy by the Company’s directors, officers and employees. | ||
| (b) | Direct Supervision. The Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (collectively the “Designated Officers”) shall jointly be responsible for ensuring that the Company complies with this Policy and that Corporate Actors are familiar with its contents. | |
| (c) | Board Oversight. Subject to the Audit Committee’s responsibility in relation to financial disclosure as set out in the Audit Committee Charter, the Corporate Governance and Nominating Committee shall have general oversight over the adherence by the Company to the terms of this Policy and the adequacy of this Policy in light of changes to the Company’s circumstances and regulatory environment. | |
| The Corporate Governance and Nominating Committee shall annually review compliance with this Policy as well as the substance of this Policy, itself, and recommend any necessary changes to the Board of Directors. |
| 4. | Review of Disclosure. |
| (a) | Basic Rule. Every written public disclosure relating to or concerning the Company provided to third parties by a Corporate Actor shall be reviewed and approved by both of the Designated Officers. | |
| In the event that one of the Designated Officers is unavailable during the requisite time period, the written disclosure shall be reviewed and approved by one of the Designated Officers and one other senior officer of the Company. | ||
| (b) | Disagreements and Ambiguities. In the event there is a disagreement between the two officers reviewing written disclosure, or if there is any uncertainty on the part of either of the officers as to whether information should be disclosed or when a material change has occurred, such question shall be referred to the Company’s regular corporate counsel. | |
| (c) | Financial Matters. Notwithstanding Section 4(b) above, if a disagreement or ambiguity relates to the financial reporting obligations of the Company, the issue shall be raised immediately with the Audit Committee (which, if it wishes, may seek the assistance of legal counsel or the Company’s auditors). |
| 5. | Disclosure of Material Information |
| (a) | What is Disclosed? The Company shall, subject only to the provisions relating to confidentiality described in Section 6, promptly disclose all material information. “Material Information” is any information relating to the business, operations or capital of the Company that would reasonably be expected to have a significant effect on either the market price or the value of, any of the securities of the Company. | |
| (b) | When is Material Information Disclosed? Subject to Confidential Material Information, which shall be disclosed in accordance with Section 6, Material Information shall be disclosed as promptly as possible in accordance with the provisions of this Section 5. | |
| A change in Material Information (which must be reported immediately) shall be deemed to occur: (i) when a decision to implement the change is made by the Board; or (ii) the decision is made by senior management of the Company in the belief that confirmation of the decision by the Board is probable. | ||
| Disagreements or uncertainty as to whether a change of Material Information has occurred shall be resolved in accordance with Section 4(b) herein. |
| (c) | Material Information. Examples of potentially Material Information include the following: |
Changes in Corporate Structure
| ● | change of name in the Company |
| ● | changes in share ownership that may affect control of the Company |
| ● | major reorganizations, amalgamations, or mergers |
| ● | take-over bids, issuer bids, or insider bids |
Changes in Capital Structure
| ● | the public or private sale of additional securities |
| ● | planned repurchases or redemptions of securities |
| ● | planned splits of common shares or offerings of warrants or rights to buy shares |
| ● | any share consolidation, share exchange, or stock dividend |
| ● | changes in a Company’s dividend payments or policies and the declaration or omission of dividends (either securities or cash) |
| ● | the possible initiation of a proxy contest |
| ● | material modifications to rights of security holders |
Changes in Financial Results
| ● | firm evidence of a significant increase or decrease in near-term earnings prospects |
| ● | unexpected changes in the financial results for any periods |
| ● | shifts in financial circumstances, such as cash flow reductions, major asset write offs or write-downs |
| ● | changes in the value or composition of the Company’s assets |
Changes in Business and Operations
| ● | any development that affects the Company’s resources, technology, products or markets |
| ● | a significant change in capital investment plans or corporate objectives |
| ● | major labour disputes or disputes with a major contractor or supplier |
| ● | significant new contracts, products, patents, or services or significant losses of contracts or business |
| ● | changes to the Board or executive management, including the departure of the Company’s CEO, President or CFO (or persons in equivalent positions) |
| ● | any oral or written employment, consulting or other compensation arrangements between the Company and/or its subsidiaries and any director or officer of the Company and/or its subsidiaries or their associates, for their services as directors or officers, or in any other capacity |
| ● | the commencement of, or developments in, material legal proceedings or regulatory matters |
| ● | waivers of corporate ethics and conduct rules for officers, directors, and other key employees |
| ● | any notice that reliance on a prior audit is no longer permissible |
| ● | de-listing of the Company’s securities or their movement from one quotation system or exchange to another |
| ● | notice of suspension review or suspension of trading of the Company’s securities |
Acquisitions and Dispositions
| ● | significant acquisitions or dispositions of assets, property or joint venture interests |
| ● | acquisitions of other companies, including a take-over bid for, or merger with, another Company |
Changes in Credit Arrangements
| ● | the borrowing or lending of a significant amount of money |
| ● | any mortgaging, hypothecating or encumbering of the Company’s assets |
| ● | defaults under debt obligations, agreements to restructure debt, or planned enforcement procedures by a bank or any other creditors |
| ● | changes in rating agency decisions |
| ● | significant new credit arrangements |
The above list is not exhaustive and will be reviewed and amended by the Company on a regular basis.
| (d) | Principles of Disclosure. The following principles shall be observed by the Company in disseminating changes in Material Information: |
| (i) | Changes in Material Information shall be disclosed by way of a press release disseminated through a newswire service approved by the Company’s corporate counsel. Any such press release shall be filed on SEDAR. |
| (ii) | If it appears that there will be significant delays in issuing a press release, whether occasioned by the Company or a third party, the issue of the delay shall be raised with the Company’s corporate counsel and, if necessary, the Investment Industry Regulatory Organization of Canada (“IIROC”) to determine whether trading in the Company’s shares should be halted pending release of the Material Information. |
| (iii) | In any event, the news release containing the Material Information in question may be faxed to IIROC for its review prior to dissemination of the news release. |
| (iv) | The Company will not, except in exceptional circumstances, delay a news release containing changes in Material Information because of a need for third party approval. In those exceptional circumstances, the Company shall follow the procedure for disseminating confidential information described in Section 6. To prevent this situation from arising, the officers of the Company shall ensure: |
| (A) | that where a contract provides that the other party has the right to review or approve any public disclosure, there is provision in the contract for the Company to make public disclosure on reasonable notice to the third party if the Company is obliged to do so under applicable law; |
| (B) | news releases are drafted well ahead of changes in Material Information, particularly the entering into of material contracts, so that these releases may be reviewed and approved in advance of the change occurring; and |
| (C) | provided that the identity of the third party does not, itself, constitute Material Information, a news release is issued immediately without identifying the third party, if its permission is not forthcoming. |
| (v) | News releases describing Material Information shall be posted on the Company’s website following their dissemination by newswire and filing on SEDAR. |
| (vi) | Disclosure should not contain half-truths or any information which requires additional information not to be misleading. |
| (vii) | The Company shall disclose unfavourable Material Information as promptly and completely as it discloses favourable Material Information. |
| (viii) | Material Information that has been disclosed must be updated if earlier disclosure has become misleading due to intervening events. |
| (ix) | In addition to issuing a news release as set out herein, changes to Material Information shall be reflected in a material change report and filed on SEDAR within ten (10) days of its occurrence. Material contracts outside of the Company’s ordinary course of business shall be filed on SEDAR. |
| 6. | Disclosure of Confidential Material Information |
| (a) | General. Securities legislation permits the Company to delay disclosure of a change of Material Information and to keep it confidential temporarily, when immediate release of the information would be unduly detrimental to the Company’s interests. This can arise, for example, when immediate disclosure might interfere with the Company’s pursuit of a specific objective or strategy, with ongoing negotiations, or with its ability to complete a transaction. |
| (b) | Determining When to Keep Changes Confidential. The test provided by Canadian securities regulators is that changes to Material Information may be kept confidential when harm to the Company’s business from disclosing outweighs the general benefit to the market of immediate disclosure. A factor in this test is whether there is reasonable likelihood of market participants, not subject to obligations of confidentiality, becoming aware of the change in Material Information before it is disseminated in accordance with Section 5. |
Any question as to whether it is appropriate for a change in Material Information to be kept confidential shall be resolved as set out in Section 4(b).
| (c) | Procedure. If the Designated Officers of the Company determine in accordance with this Policy that it is appropriate for a change or pending change in Material Information to be kept confidential, the Company shall file a confidential material change report with the appropriate securities commissions, the TSX Venture Exchange and IIROC. This confidential filing, and the Company’s evaluation of the need for confidentiality, must be renewed every ten (10) days, if the Company wants the change in Material Information to remain confidential. |
| (d) | Leaks. One of the Designated Officers or a person nominated by them shall, during the period the Company has confidential Material Information, carefully monitor market activity in the Company’s securities. If the confidential Material Information, or rumours about it, have leaked or appear to be impacting the Company’s share price, the Company will review the situation and may be required to immediately disclose the confidential Material Information in accordance with Section 5. |
| 7. | Earnings Guidance and Future-Oriented Information |
| (a) | General Policy. It is the Company’s policy not to provide earnings guidance to the public or to persons, such as analysts, whose work is to make the results of such guidance available to the public. Future-oriented financial information can, of course, be provided to third parties in other circumstances, provided that a Non-Disclosure Agreement is in place or the third party is subject to professional obligations of confidentiality, there is a reasonable expectation of confidentiality on the part of the officer and such disclosure is made in the necessary course of the Company’s business. |
| (b) | Future-Oriented Information Generally. Forward-looking information (financial or otherwise) may be provided to market participants if it is general and does not touch upon material, bottom-line financial results and is accompanied by the following: |
| (i) | The information is clearly identified as forward-looking; |
| (ii) | The Company identifies all material assumptions in the forward-looking information; |
| (iii) | The forward-looking information is expressed as clearly conditional; |
| (iv) | The information is accompanied by a statement that identifies, in very specific terms, the risks or uncertainties that may cause the actual results to differ materially from those projected in the statement, and puts market participants on notice that they should not rely on such forward-looking statements; |
| (v) | Officers are aware at the time they make forward-looking statements that, if material, those statements will need to be publicly revised or corrected if subsequent events make them misleading; and |
| (vi) | The forward-looking information, if financial in nature, either refers to performance in the next quarter, or has been approved for dissemination by the Audit Committee. |
| (c) | Managing Expectations. Notwithstanding the general policy set out in Section 7(a), if the Company determines that it will be reporting results materially below or above widely-held public expectations, it will review the need to disclose this fact in a news release. |
| 8. | Selective Disclosure and Tipping |
| (a) | What is Selective Disclosure or Tipping? Securities legislation prohibits Corporate Actors from providing undisclosed Material Information to third parties, other than in the necessary course of business. The prohibition applies whether the Company or the person providing selective disclosure gains a benefit from the disclosure or not. |
| (b) | General Prohibition. No Corporate Actor shall engage in selective disclosure. Any question of whether anticipated disclosure is in the necessary course of business shall be resolved by appealing to the Designated Officers. |
| (c) | Inadvertent Selective Disclosure. In the event a Corporate Actor inadvertently discloses Material Information to a market participant that has not been generally disseminated, the Corporate Actor shall immediately report the selective disclosure to one of the Designated Officers and the Company shall immediately disclose the Material Information in question in accordance with Section 5 or Section 6. |
| (d) | Equality of Treatment. It is understood that in individual or small-group communications, certain non-Material Information may be provided that has not been generally disclosed to the public. Such information, usually supplied in response to the questions of analysts or other investors, must be provided to any person who makes similar inquiries of the Company. Market participants shall be treated equally by Corporate Actors with respect to non-Material Information. |
| 9. | Prohibition on Certain Uses of the Internet |
Corporate Actors are prohibited from disclosing information, material or not, in internet chatrooms, newsgroups, blogs or the website of any third party. Corporate Actors that participate in such forums and write on other subjects may not, without the written permission of a Designated Officer, identify himself or herself as a representative of, or affiliated with, the Company.
| 10. | Maintaining Confidential Information |
| (a) | Corporate Information. Corporate Actors are reminded that they have common law and/or contractual duties prohibiting them from releasing any information not generally known concerning the Company or its affairs, other than as is necessary to discharge their responsibilities to the Company. This Policy relies upon Corporate Actors adhering to their duties in this regard. |
| (b) | Third Party Information. The Company is generally under contractual and common law duties with respect to confidential information it receives from various third parties such as its customers, suppliers, or business partners. This third party information shall be kept confidential by Corporate Actors. In particular, Corporate Actors should take the same measures with respect to the confidential information of third parties as they take with respect to confidential information of the Company. |
| (c) | Rules of Thumb. While not intended to be comprehensive, the following are basic rules that should be followed to preserve the confidential information of the Company and third parties: |
| (i) | Confidential papers or electronic media should have “CONFIDENTIAL” or a stronger term clearly written or stamped on them. |
| (ii) | Documents and files, including electronic files, should be kept in a safe place to which access is restricted to individuals who need to know the information for the purpose of carrying out their responsibilities on behalf of the Company. |
| (iii) | Confidential matters should not be discussed in places where the discussion may be overheard such as elevators, hallways, restaurants, airplanes or taxis. |
| (iv) | Confidential information should not be read or displayed in public places and should not be discarded where others can easily retrieve them. |
| (v) | Transmission of documents by electronic means, such as by fax or directly from one computer to another, should be made only when it is reasonable to believe that the transmission can be made or received under secure conditions. |
| 11. | Public Communications |
| (a) | What are Public Communications? For the purpose of this section, “Public Communications” include all press releases, material change reports, financial statements, annual information forms, information circulars, other legislative or regulatory disclosure documents, conference calls, shareholder meetings, analyst meetings, telephone calls to or from shareholders or other market participants, emails to or from shareholders or other market participants, as well as any other means by which the Company provides information to participants or potential participants in the market for the Company’s securities. |
| (b) | Who is Authorized to Make Public Communications? Only the CEO and CFO are authorized to make or approve Public Communications. Any conference calls with shareholders, investors and analysts will be held by either the CEO or CFO. Only the CEO and CFO are permitted to communicate with analysts concerning the Company. Other executives and staff may speak to analysts only with the pre-authorization of the CEO or CFO. The Company observes “quiet periods” which means that there will be no discussion with analysts, investors or other market participants during a blackout period or during a time where the Company may be involved in a take-over bid, issuer bid, business combination, prospectus offering, private placement, amalgamation, arrangement, capital reorganization or similar transaction except (i) where, in the course of such discussions, no information is imparted by the Company that has not been in the public domain for at least 24 hours; (ii) where each party to such discussions (other than the Company) is acting in its capacity as a professional advisor; and (iii) in exceptional circumstances as determined by the Board or the CEO. Any speaking engagement by an employee of the Company that falls under the definition of Public Communications as defined below must have prior approval from the CEO, CFO or a divisional Vice President. They may delegate this responsibility in certain circumstances to other employees, directors or agents, but the Designated Officers are responsible for reviewing the form and substance of the proposed Public Communication. |
The Designated Officers may not delegate responsibility for reviewing and approving formal disclosure documents required by Canadian securities legislation or policies, other than press releases which may be handled as set out in 4(a) if one of the Designated Officers is unavailable.
| (c) | Non-Authorized Personnel. Any Corporate Actor approached to make a Public Communication, such as speaking at an industry conference, shall refer interested persons to one of the Designated Officers. |
| (d) | Conference Calls. Calls with shareholders, investors and analysts should be handled as follows: |
| (i) | at least one of the Designated Officers shall have general responsibility for supervising the conference call and the information to be provided in it; |
| (ii) | several days prior to the conference call, the Company shall disseminate a press release announcing that the conference call will be held, along with the conference call numbers and the date and time; |
| (iii) | the conference operator will be provided with a script containing the Company’s cautionary statement regarding any forward-looking information provided in the course of a call; |
| (iv) | presentations of any officer or employee speaking in the call must be scripted and contain limited forward-looking information in conformity with Section 7. The provision of earnings guidance must be avoided pursuant to Section 7(a); |
| (v) | previously undisclosed Material Information may not be provided in the course of a call, pursuant to Section 8; |
| (vi) | in the event that undisclosed Material Information is inadvertently disclosed during a conference call, such Material Information must be immediately disseminated by news release in conformity with Section 5; |
| (vii) | there shall always be at least two officers of the Company present on a conference call so that the officer not making the presentation or answering the questions may determine whether un disclosed Material Information is being inadvertently communicated; |
| (viii) | the conference call may conclude with a question and answer period and at the Company’s option, general callers may be provided with a listen-only service, while analysts are provided with the ability to ask questions; and |
| (ix) | an audio recording of the conference call shall be made available to those unable to attend the conference call and shall remain available for at least 14 days. |
| (e) | Communication with Analysts. Only a Designated Officer or a person designated in writing by one of them may communicate with analysts. The Company’s policy with respect to interactions with analysts are as follows: |
| (i) | selective disclosure must be avoided pursuant to Section 8; |
| (ii) | no information may be provided to analysts that will not be provided to any person who makes similar inquiry pursuant to Section 8(d); |
| (iii) | Corporate Actors shall not become involved in approving or influencing analyst opinions or conclusions, aside from merely correcting factual errors, provided that such corrections are based on non-Material Information or Material Information that has been publicly disseminated; |
| (iv) | no Corporate Actor shall distribute analyst reports to persons outside the Company or publicly endorse such a report; |
| (v) | the Company will not post analyst reports on its website as set out in Section 14(d). |
| (f) | Quiet Periods. During a blackout period the Company shall not engage in discussions with analysts, investors or other market participants, except (i) where, in the course of such discussions, no information is imparted by the Company that has not been in the public domain for at least 24 hours; (ii) where each party to such discussions (other than the Company) is acting in its capacity as a professional advisor; and (iii) in exceptional circumstances. In addition, in connection with a take over bid, issuer bid or business combination or a prospectus offering, private placement, amalgamation, arrangement, capital reorganization or similar transaction, subject to certain limited exemptions (such as exercise of previously granted options, warrants or similar rights), neither the Company nor any director or officer or other insider of the Company shall bid for or purchase a “restricted security” for their own account or for an account over which they exercise control or direction or attempt to induce or cause any person or company to purchase a restricted security (see Ontario Securities Commission Rule 48-501). A restricted security for this purpose is any security offered pursuant to the prospectus or private placement offer or offered by the Company pursuant to any securities exchange take over bid, any security of the Company subject to an issuer bid or a security of the Company issuable pursuant to a business combination. These restrictions shall apply: (i) in the case of a private placement or public offering commencing on the date that is two trading days prior to the date that the offering price of the offered securities is determined and ending on the date that the selling process in respect of the offering ends and all stabilizations relating to the offered security are terminated; (ii) in the case of a take over bid or issuer bid, commencing on the date of dissemination of the take over bid or issuer bid circular and ending on the termination of the period during which the securities may be deposited under the bid; and (iii) in the case of another type of business combination, commencing on the date that the information circular for such transaction is disseminated and ending on the date of approval of the transaction by securityholders. A member of the Corporate Governance and Nominating Committee should be consulted if there is any question as to when these restrictions shall have ceased to apply in any particular circumstance. |
| 12. | Liability to Investors in the Secondary Market |
| (a) | Legislation now enacted in various Canadian provinces (and applicable to the Company by virtue of its participation in the capital markets of such provinces) gives investors in the secondary market the right to sue any public Company and key related people for making public misrepresentations about the Company or for failing to make timely disclosure as required by law. |
| (b) | The legislation provides secondary market investors with limited right of action against an issuer of securities, its directors, responsible senior officers, “influential persons” (ie. large shareholders with influence over disclosure), auditors and other responsible experts. Secondary market investors have the right to seek limited compensation for damages suffered at a time when the issuer had made, and not corrected, public disclosure (either written or oral) that contained an untrue statement of a material fact or failed to make required material disclosure. |
| (c) | Investors have the right to sue whether or not they actually relied on the misrepresentation or failure to make timely disclosure. |
| (d) | The issuer and other possible defendants are afforded varying defences based on the responsibility for the disclosure. For some types of disclosure, a person has a defence if that person conducted due diligence. For other types of disclosure, the person is not liable unless the plaintiff proves that the person knew the information would have been discovered about the misrepresentation, deliberately avoided acquiring knowledge or was guilty of gross misconduct in making the misrepresentation. |
| (e) | In order to limit potential exposure, the Designated Officers will conduct or cause to be conducted a reasonable investigation of the disclosure to be released such that the Designated Officers would be satisfied that there would be no reasonable grounds to believe that the document or oral statement contains any misrepresentation. Similarly the Designated Officers will conduct or cause to be conducted a reasonable investigation to ensure that there would be no reasonable grounds to believe that a failure to make timely disclosure would occur. |
| (f) | Strict adherence to this Policy will assist to minimize exposure to potential liabilities under current and proposed legislation. |
| 13. | Website |
| (a) | General Rule. The Company’s website should not contain any disclosure that would, whether through website architecture, overt statement or omission, materially misrepresent the Company, its business prospects or financial status. |
| (b) | Regular Review. One of the Designated Officers or an employee delegated by that officer shall review the Company’s website every quarter to ensure that disclosure on the website is accurate, complete and up to date. Annually, counsel to the Company shall review the corporate website for the same purpose. |
| (c) | Links to Third Party Sites. Unless approved by the Corporate Governance and Nominating Committee, the Company’s website may not link to a third party website. In the event such a link is permitted, it should be clear to visitors that they leaving the Company’s website when clicking on the link. |
| (d) | Analyst Reports. The Company may provide on its website a list of the investment firms that provide coverage of the Company, along with relevant contact information. The Company may not, however, provide links to those firms or the analyst reports themselves. |
| (e) | Investor Relations Material. Investor relations material shall be contained within a separate section of the Company’s website and will include a notice that advises the reader that the information posted was accurate at the time of posting, but may be superseded by subsequent disclosures. All data posted to the website, including text and audiovisual material, shall show the date such material was issued. |
| 14. | Disclosure Record |
Designated Officers or an employee they designate, shall maintain a four year file containing all public information provided about the Company, including continuous disclosure documents, news releases, analyst reports, transcripts or recordings of conference calls, notes of meetings with analysts or investors, notes from telephone conversations with analysts and investors, and newspaper or other media articles.
Amended and approved by the Board November 4, 2022
Schedule D – INSIDER TRADING POLICY
INSIDER TRADING AND REPORTING POLICY
(November 4, 2022)
The purpose of the Insider Trading and Reporting Policy (the “Policy”) is to summarize the insider trading restrictions to which directors, officers and employees are subject under applicable securities legislation, and to set forth a policy governing investments in the securities of SolarBank Corporation (“Company”) and the reporting thereof which is consistent with the applicable legislation.
This Policy is not intended to discourage investment in the Company’s securities. Rather, it is intended to highlight the obligations and the restrictions imposed on insiders by relevant securities legislation.
| 1. | Summary of Legislation |
| (a) | Securities legislation prohibits any person in a “special relationship” with the Company from either: |
| (i) | purchasing or selling the Company’s shares with the knowledge of a material fact or material change concerning the Company that has not been generally disclosed; or |
| (ii) | informing (or “tipping”), other than when necessary in the course of business, another person or Company of a material fact or material change concerning the Company before the material fact or material change has been generally disclosed. |
| (b) | A material change to the business or affairs of the Company or a material fact is one which would reasonably be expected to have an effect on the market price or value of any securities of a public issuer. A material change is specifically defined to include any decision by a board of directors to implement a material change, as well as any decision made to implement such a change by senior management, if board of director approval is probable. |
| (c) | This prohibition applies to persons who are deemed to have a “special relationship” with the Company, which include: |
| (i) | directors, officers, employees and consultants of the Company; and |
| (ii) | persons or corporations who learn of a material fact or material change concerning the Company. |
| (d) | While the penalties for a breach of this prohibition vary among jurisdictions, a breach may render you personally liable to prosecution and, upon conviction, to a fine not exceeding CAD$5,000,000 or five years in jail, or both. Further, you may be subject to civil actions at the instance of all or any of security holders, the companies whose securities were traded, and regulators. |
| (e) | You should note that any person who is associated with you, including any member of your family, your spouse or any person living with you, is also deemed to be a person in a special relationship with the Company, and is subject to the same legal obligations and duties. |
| 2. | Trading Prohibitions |
| (a) | In light of the foregoing, all directors, officers and employees of the Company will be subject to the following prohibitions relating to investments in the Company’s securities and securities of other public issuers: |
| (i) | If one has knowledge of a material fact or material change related to the affairs of the Company or any public issuer involved in a transaction with the Company which is not generally known, no purchase or sale may be made until the information has been generally disclosed to the public and the blackout periods set forth below have expired; |
| (ii) | Knowledge of a material fact or material change must not be conveyed to any other person other than in the necessary course of business until the information has been generally disclosed to the public and the blackout periods set forth below have expired; |
| (iii) | Any hedging activities, including the practice of selling “short” securities of the Company at any time, are not permitted; |
| (iv) | The practice of buying or selling financial instruments, including a “call” or “put” or any other prepaid forward contracts, equity swaps, collars, units of exchange funds or derivative security in respect of any securities of the Company is not permitted; and |
| (v) | Trading is prohibited in the event that the Company has provided notice of a pending material fact or material change until the information has been generally disclosed to the public and the blackout periods set forth below have expired. |
| (b) | For purposes of this Policy, public issuer includes any issuer, whether the Company or otherwise, whose securities are traded in a public market, whether on a stock exchange or “over the counter”. |
| (c) | The above prohibitions and the insider reporting obligations provided below apply equally to the trading or exercising of options to acquire shares or other securities of the public issuer. |
| (d) | Notwithstanding the above prohibitions in subsection 2(c) but subject to any other applicable sections of this Policy and any other applicable policies of the Company, the Company’s directors, officers and employees will be able to sell a security which such person does not own if such person owns another security convertible into the security sold or an option or right to acquire the security sold and, within 10 days after the sale, such person: (i) exercises the conversion privilege, option or right and delivers the security so associated to the purchaser; or (ii) transfers the convertible security, option or right, if transferable, to the purchaser. The Company requires that anyone subject to this Policy provide advance written notice to the Chief Financial Officer of such activity at least two days prior to such activity. |
| 3. | Insider Reporting Obligations |
| (a) | A person or corporation who becomes a “reporting insider” of the Company must file an insider report within 10 calendar days of the date of becoming a “reporting insider”. Furthermore, securities legislation requires reporting insiders to prepare and file a report of every trade they make in securities of the Company. This includes the granting and exercise of stock options or any other rights to acquire securities. Under securities legislation, reporting insiders are personally responsible for ensuring that insider reports are filed within five (5) calendar days of the trade. Assistance with filing these reports on the SEDI website may be obtained from the Chief Financial Officer. In order to allow the Company to comply with its reporting obligations, reporting insiders must also advise the Company immediately of any trade in securities of the Company. In addition, a reporting insider whose direct or indirect beneficial ownership of or control or direction over securities of the Company changes, must file an insider report of the change within five (5) calendar days of the date of the change. |
| (b) | National Instrument 55-104 - Insider Reporting Requirements and Exemptions (“NI 55-104”) defines a ”reporting insider” to include, among others, an insider of the issuer if the insider is: |
| (i) | the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer and each director of the issuer, of a significant shareholder of the issuer or of a major subsidiary of the issuer; |
| (ii) | a person or corporation responsible for a principal business unit, division or function of the issuer; |
| (iii) | a significant shareholder of the issuer; and |
| (iv) | any other insider that in the ordinary course receives or has access to information as to material facts or material changes concerning the issuer before the material facts or material changes are generally disclosed and directly or indirectly, exercises, or has the ability to exercise, significant power or influence over the business, operations, capital or development of the issuer. |
| (c) | It is each insider’s personal responsibility to determine if they are a “reporting insider” as defined in NI 55-104 and they should review the complete definition of such term in NI 55-104 in making such determination. It is each reporting insider’s responsibility to ensure that all requisite insider trading reports are filed with the appropriate securities commissions within the statutory time limits. |
| (d) | A copy of the insider report may be obtained from the Company and is required to be filed electronically on SEDI. |
| 4. | Additional Restrictions for Directors, Officers and Employees |
Blackout Periods
| (a) | No trades or other transactions in securities of the Company (including the exercise of stock options or transactions involving other forms of equity-based compensation) shall be carried out by: |
| (i) | directors of the Company; |
| (ii) | officers of the Company; and |
| (iii) | any employees of the Company who receive notice from the Company’s CFO, |
during the period of time beginning thirty (30) days prior to the scheduled release of financial results for a fiscal quarter or a fiscal year until the second trading day after the financial results have been disclosed by the Company.
| (b) | Trading black-out periods may also be prescribed from time to time as a result of special circumstances relating to the Company. All directors and officers and employees with knowledge of such special circumstances will be covered by the black-out. |
CERTIFICATE Of THE COMPANY
Dated: February 10, 2023
This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
| “Dr. Richard Lu” | “Sam Sun” | |
| Dr.
Richard Lu Chief Executive Officer |
Sam
Sun Chief Financial Officer |
On Behalf of the Board of Directors
| “Paul Pasalic” | “Paul Sparkes” | |
| Paul
Pasalic Director |
Paul
Sparkes Director |
| C-1 |
CERTIFICATE Of THE PROMOTER
Dated: February 10, 2023
This prospectus, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
| “Dr. Richard Lu” |
| Dr. Richard Lu |
| C-2 |
CERTIFICATE Of THE AGENTS
Dated: February 10, 2023
To the best of our knowledge, information and belief, this prospectus, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
RESEARCH CAPITAL CORPORATION |
| “Jovan Stupar” |
| Jovan Stupar |
| Managing Director |
Exhibit 99.9
Voluntary
Escrow Agreement
Table of Contents
| PART | TITLE | ||
| PART 1 | ESCROW | ||
| 1.1 | Appointment of Escrow Agent | ||
| 1.2 | Deposit of Escrow Securities in Escrow | ||
| 1.3 | Direction to Escrow Agent | ||
| PART 2 | RELEASE OF ESCROW SECURITIES | ||
| 2.1 | Release Schedule for an Established Issuer | ||
| 2.2 | Release Schedule for an Emerging Issuer | ||
| 2.3 | Delivery of Share Certificates for Escrow Securities | ||
| 2.4 | Replacement Certificates | ||
| 2.5 | Release upon Death | ||
| PART 3 | EARLY RELEASE ON CHANGE OF ISSUER STATUS | ||
| 3.1 | Becoming an Established Issuer | ||
| 3.2 | Release of Escrow Securities | ||
| 3.3 | Filing Requirements | ||
| 3.4 | Amendment of Release Schedule | ||
| PART 4 | DEALING WITH ESCROW SECURITIES | ||
| 4.1 | Restriction on Transfer, etc. | ||
| 4.2 | Pledge, Mortgage or Charge as Collateral for a Loan | ||
| 4.3 | Voting of Escrow Securities | ||
| 4.4 | Dividends on Escrow Securities | ||
| 4.5 | Exercise of Other Rights Attaching to Escrow Securities | ||
| PART 5 | PERMITTED TRANSFERS WITHIN ESCROW | ||
| 5.1 | Transfer to Directors and Senior Officers | ||
| 5.2 | Transfer to Other Principals | ||
| 5.3 | Transfer upon Bankruptcy | ||
| 5.4 | Transfer upon Realization of Pledged, Mortgaged or Charged Escrow Securities | ||
| 5.5 | Transfer to Certain Plans and Funds | ||
| 5.6 | Effect of Transfer Within Escrow | ||
| PART 6 | BUSINESS COMBINATIONS | ||
| 6.1 | Business Combinations | ||
| 6.2 | Delivery to Escrow Agent | ||
| 6.3 | Delivery to Depositary | ||
| 6.4 | Release of Escrow Securities to Depositary | ||
| 6.5 | Escrow of New Securities | ||
| 6.6 | Release from Escrow of New Securities | ||
| PART 7 | RESIGNATION OF ESCROW AGENT | ||
| 7.1 | Resignation of Escrow Agent | ||
| PART 8 | OTHER CONTRACTUAL ARRANGEMENTS | ||
| PART 9 | NOTICES | ||
| 9.1 | Notice to Escrow Agent | ||
| 9.2 | Notice to Issuer | ||
| 9.3 | Deliveries to Securityholders | ||
| 9.4 | Change of Address | ||
| 9.5 | Postal Interruption | ||
| PART 10 | GENERAL | ||
| 10.1 | Interpretation – “holding securities” | ||
| 10.2 | Further Assurances | ||
| 10.3 | Time | ||
| 10.4 | Incomplete IPO | ||
| 10.5 | Jurisdiction | ||
| 10.6 | Consent of Securities Regulators to Amendment | ||
| 10.7 | Governing Laws | ||
| 10.8 | Counterparts | ||
| 10.9 | Singular and Plural | ||
| 10.10 | Language | ||
| 10.11 | Benefit and Binding Effect | ||
| 10.12 | Entire Agreement | ||
| 10.13 | Successor to Escrow Agent | ||
| Schedule “A” |
| Schedule “B” |
VOLUNTARY ESCROW AGREEMENT
THIS AGREEMENT is made as of the 10th day of February, 2023
AMONG:
SOLARBANK CORPORATION
(the “Issuer”)
AND:
ENDEAVOR TRUST CORPORATION
(the “Escrow Agent”)
AND:
EACH OF THE UNDERSIGNED SECURITYHOLDERS OF THE ISSUER
(a “Securityholder” or “you”)
(collectively, the “Parties”)
This Agreement is being entered into by the Parties under National Policy 46-201 Escrow for Initial Public Offerings (the Policy) in connection with the proposed distribution (the IPO), by the Issuer, an emerging issuer, of common shares by prospectus.
For good and valuable consideration, the Parties agree as follows:
| PART 1 | ESCROW |
| 1.1 | Appointment of Escrow Agent |
The Issuer and the Securityholders appoint the Escrow Agent to act as escrow agent under this Agreement. The Escrow Agent accepts the appointment.
| 1.2 | Deposit of Escrow Securities in Escrow |
(1) You are depositing the securities (escrow securities) listed opposite your name in Schedule “A” with the Escrow Agent to be held in escrow under this Agreement. You will immediately deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of these securities which you have or which you may later receive.
(2) If you receive any other securities (additional escrow securities):
(a) as a dividend or other distribution on escrow securities;
(b) on the exercise of a right of purchase, conversion or exchange attaching to escrow securities, including securities received on conversion of special warrants;
(c) on a subdivision, or compulsory or automatic conversion or exchange of escrow securities; or
(d) from a successor issuer in a business combination, if Part 6 of this Agreement applies, you will deposit them in escrow with the Escrow Agent. You will deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of those additional escrow securities. When this Agreement refers to escrow securities, it includes additional escrow securities.
(3) You will immediately deliver to the Escrow Agent any replacement share certificates or other evidence of additional escrow securities issued to you.
| 1.3 | Direction to Escrow Agent |
The Issuer and the Securityholders direct the Escrow Agent to hold the escrow securities in escrow until they are released from escrow under this Agreement.
| PART 2 | RELEASE OF ESCROW SECURITIES |
| 2.1 | Release Schedule for an Established Issuer |
| 2.1.1 | Usual case |
If the Issuer is an established issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:
| On the date the Issuer’s securities are listed on a Canadian exchange (the listing date) | 1/4 of your escrow securities | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, then the release schedule outlined above results in the escrow securities being released in equal tranches of 25%.
| 2.1.2 | Alternate meaning of “listing date” |
If the Issuer is an established issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.
| 2.1.3 | If there is a permitted secondary offering |
(1) If the Issuer is an established issuer and you have sold in a permitted secondary offering 25% or more of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3%.
(2) If the Issuer is an established issuer and you have sold in a permitted secondary offering less than 25% of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| On the listing date | 1/4 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/3 of your remaining escrow securities | |
| 12 months after the listing date | 1/2 of your remaining escrow securities | |
| 18 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3% after completion of the release on the listing date.
| 2.1.4 | Additional escrow securities |
If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities. After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables
| 2.2 | Release Schedule for an Emerging Issuer |
| 2.2.1 | Usual case |
If the Issuer is an emerging issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:
| On the date the Issuer’s securities are listed on a Canadian exchange (the listing date) | 1/10 of your escrow securities | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, the release schedule outlined above results in the escrow securities being released in equal tranches of 15% after completion of the release on the listing date.
| 2.2.2 | Alternate meaning of “listing date” |
If the Issuer is an emerging issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if:
(a) the Issuer’s securities are not listed on a Canadian exchange immediately after its IPO; or
(b) the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.
| 2.2.3 | If there is a permitted secondary offering |
(1) If the Issuer is an emerging issuer and you have sold in a permitted secondary offering 10% or more of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3%.
(2) If the Issuer is an emerging issuer and you have sold in a permitted secondary offering less than 10% of your escrow securities, your escrow securities will be released as follows:
| For delivery to complete the IPO | All escrow securities sold by you in the permitted secondary offering | |
| On the listing date | 1/10 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering | |
| 6 months after the listing date | 1/6 of your remaining escrow securities | |
| 12 months after the listing date | 1/5 of your remaining escrow securities | |
| 18 months after the listing date | 1/4 of your remaining escrow securities | |
| 24 months after the listing date | 1/3 of your remaining escrow securities | |
| 30 months after the listing date | 1/2 of your remaining escrow securities | |
| 36 months after the listing date | your remaining escrow securities |
*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3% after completion of the release on the listing date.
| 2.2.4 | Additional escrow securities |
If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities. After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables above.
| 2.3 | Delivery of Share Certificates for Escrow Securities |
The Escrow Agent will send to each Securityholder any share certificates or other evidence of that Securityholder’s escrow securities in the possession of the Escrow Agent released from escrow as soon as reasonably practicable after the release.
| 2.4 | Replacement Certificates |
If, on the date a Securityholder’s escrow securities are to be released, the Escrow Agent holds a share certificate or other evidence representing more escrow securities than are to be released, the Escrow Agent will deliver the share certificate or other evidence to the Issuer or its transfer agent and request replacement share certificates or other evidence. The Issuer will cause replacement share certificates or other evidence to be prepared and delivered to the Escrow Agent. After the Escrow Agent receives the replacement share certificates or other evidence, the Escrow Agent will send to the Securityholder or at the Securityholder’s direction, the replacement share certificate or other evidence of the escrow securities released. The Escrow Agent and Issuer will act as soon as reasonably practicable.
| 2.5 | Release upon Death |
(1) If a Securityholder dies, the Securityholder’s escrow securities will be released from escrow. The Escrow Agent will deliver any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent to the Securityholder’s legal representative.
(2) Prior to delivery the Escrow Agent must receive:
(a) a certified copy of the death certificate; and
(b) any evidence of the legal representative’s status that the Escrow Agent may reasonably require.
| PART 3 | EARLY RELEASE ON CHANGE OF ISSUER STATUS |
| 3.1 | Becoming an Established Issuer |
If the Issuer is an emerging issuer on the date of this Agreement and, during this Agreement, the Issuer:
(a) lists its securities on the Toronto Stock Exchange Inc. or Aequitas NEO Exchange Inc.;
(b) becomes a TSX Venture Exchange Inc. (TSX Venture) Tier 1 issuer; or
(c) lists or quotes its securities on an exchange or market outside Canada that its “principal regulator” under National Policy 43-201 Mutual Reliance Review System for Prospectuses and Annual Information Forms (in Quebec under Staff Notice, Mutual Reliance Review System for Prospectuses and Annual Information Forms) or, if the Issuer has only filed its IPO prospectus in one jurisdiction, the securities regulator in that jurisdiction, is satisfied has minimum listing requirements at least equal to those of TSX Venture Tier 1, then the Issuer becomes an established issuer.
| 3.2 | Release of Escrow Securities |
(1) When an emerging issuer becomes an established issuer, the release schedule for its escrow securities changes provided that the Issuer’s Board of Directors must approve such change to the release schedule in order for it to become applicable.
(2) If an emerging issuer becomes an established issuer 18 months or more after its listing date, all escrow securities will be released immediately (subject to the Issuer’s Board of Directors’ approval).
(3) If an emerging issuer becomes an established issuer within 18 months after its listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately (subject to the Issuer’s Board of Directors’ approval).. Remaining escrow securities will be released in equal installments on the day that is 6 months, 12 months and 18 months after the listing date (subject to the Issuer’s Board of Directors’ approval).
| 3.3 | Filing Requirements |
Escrow securities will not be released under this Part until the Issuer does the following:
(a) at least 20 days before the date of the first release of escrow securities under the new release schedule, files with the securities regulators in the jurisdictions in which it is a reporting issuer
(i) a certificate signed by a director or officer of the Issuer authorized to sign stating
(A) that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition, and
(B) the number of escrow securities to be released on the first release date under the new release schedule, and
(ii) a copy of a letter or other evidence from the exchange or quotation service confirming that the Issuer has satisfied the condition to become an established issuer; and
(b) at least 10 days before the date of the first release of escrow securities under the new release schedule, issues and files with the securities regulators in the jurisdictions in which it is a reporting issuer a news release disclosing details of the first release of the escrow securities and the change in the release schedule, and sends a copy of such filing to the Escrow Agent.
| 3.4 | Amendment of Release Schedule |
The new release schedule will apply 10 days after the Escrow Agent receives a certificate signed by a director or officer of the Issuer authorized to sign
(a) stating that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition;
(b) stating that the release schedule for the Issuer’s escrow securities has changed;
(c) stating that the Issuer has issued a news release at least 10 days before the first release date under the new release schedule and specifying the date that the news release was issued; and
(d) specifying the new release schedule.
| PART 4 | DEALING WITH ESCROW SECURITIES |
| 4.1 | Restriction on Transfer, etc. |
Unless it is expressly permitted in this Agreement, you will not sell, transfer, assign, mortgage, enter into a derivative transaction concerning, or otherwise deal in any way with your escrow securities or any related share certificates or other evidence of the escrow securities. If a Securityholder is a private company controlled by one or more principals (as defined in section 3.5 of the Policy) of the Issuer, the Securityholder may not participate in a transaction that results in a change of its control or a change in the economic exposure of the principals to the risks of holding escrow securities.
| 4.2 | Pledge, Mortgage or Charge as Collateral for a Loan |
You may pledge, mortgage or charge your escrow securities to a financial institution as collateral for a loan, provided that no escrow securities or any share certificates or other evidence of escrow securities will be transferred or delivered by the Escrow Agent to the financial institution for this purpose. The loan agreement must provide that the escrow securities will remain in escrow if the lender realizes on the escrow securities to satisfy the loan.
| 4.3 | Voting of Escrow Securities |
You may exercise any voting rights attached to your escrow securities.
| 4.4 | Dividends on Escrow Securities |
You may receive a dividend or other distribution on your escrow securities, and elect the manner of payment from the standard options offered by the Issuer. If the Escrow Agent receives a dividend or other distribution on your escrow securities, other than additional escrow securities, the Escrow Agent will pay the dividend or other distribution to you on receipt.
| 4.5 | Exercise of Other Rights Attaching to Escrow Securities |
You may exercise your rights to exchange or convert your escrow securities in accordance with this Agreement.
| PART 5 | PERMITTED TRANSFERS WITHIN ESCROW |
| 5.1 | Transfer to Directors and Senior Officers |
(1) You may transfer escrow securities within escrow to existing or, upon their appointment, incoming directors or senior officers of the Issuer or any of its material operating subsidiaries, if the Issuer’s board of directors has approved the transfer.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a certified copy of the resolution of the board of directors of the Issuer approving the transfer;
(b) a certificate signed by a director or officer of the Issuer authorized to sign, stating that the transfer is to a director or senior officer of the Issuer or a material operating subsidiary and that any required approval from the Canadian exchange the Issuer is listed on has been received;
(c) an acknowledgment in the form of Schedule “B” signed by the transferee;
(d) copies of the letters sent to the securities regulators described in subsection (3) accompanying the acknowledgement; and
(e) a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.
(3) At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.
| 5.2 | Transfer to Other Principals |
(1) You may transfer escrow securities within escrow:
(a) to a person or company that before the proposed transfer holds more than 20% of the voting rights attached to the Issuer’s outstanding securities; or
(b) to a person or company that after the proposed transfer
(i) will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and
(ii) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a certificate signed by a director or officer of the Issuer authorized to sign stating that
(i) the transfer is to a person or company that the officer believes, after reasonable investigation, holds more than 20% of the voting rights attached to the Issuer’s outstanding securities before the proposed transfer, or
(ii) the transfer is to a person or company that
(A) the officer believes, after reasonable investigation, will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and
(B) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries
after the proposed transfer, and
(iii) any required approval from the Canadian exchange the Issuer is listed on has been received;
(b) an acknowledgment in the form of Schedule “B” signed by the transferee;
(c) copies of the letters sent to the securities regulators accompanying the acknowledgement; and
(d) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.
(3) At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.
| 5.3 | Transfer upon Bankruptcy |
(1) You may transfer escrow securities within escrow to a trustee in bankruptcy or another person or company entitled to escrow securities on bankruptcy.
(2) Prior to the transfer, the Escrow Agent must receive:
(a) a certified copy of either
(i) the assignment in bankruptcy filed with the Superintendent of Bankruptcy, or
(ii) the receiving order adjudging the Securityholder bankrupt;
(b) a certified copy of a certificate of appointment of the trustee in bankruptcy;
(c) a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(d) an acknowledgment in the form of Schedule “B” signed by:
(i) the trustee in bankruptcy, or
(ii) on direction from the trustee, with evidence of that direction attached to the acknowledgment form, another person or company legally entitled to the escrow securities.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.4 | Transfer Upon Realization of Pledged, Mortgaged or Charged Escrow Securities |
(1) You may transfer within escrow to a financial institution the escrow securities you have pledged, mortgaged or charged under section 4.2 to that financial institution as collateral for a loan on realization of the loan.
(2) Prior to the transfer the Escrow Agent must receive:
(a) a statutory declaration of an officer of the financial institution that the financial institution is legally entitled to the escrow securities;
(b) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(c) an acknowledgement in the form of Schedule “B” signed by the financial institution.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.5 | Transfer to Certain Plans and Funds |
(1) You may transfer escrow securities within escrow to or between a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or other similar registered plan or fund with a trustee, where the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund are limited to you and your spouse, children and parents, or, if you are the trustee of such a registered plan or fund, to the annuitant of the RRSP or RRIF, or a beneficiary of the other registered plan or fund, as applicable, or his or her spouse, children and parents.
(2) Prior to the transfer the Escrow Agent must receive:
(a) evidence from the trustee of the transferee plan or fund, or the trustee’s agent, stating that, to the best of the trustee’s knowledge, the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund do not include any person or company other than you and your spouse, children and parents;
(b) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and
(c) an acknowledgement in the form of Schedule “B” signed by the trustee of the plan or fund.
(3) Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.
| 5.6 | Effect of Transfer Within Escrow |
After the transfer of escrow securities within escrow, the escrow securities will remain in escrow and released from escrow under this Agreement as if no transfer has occurred on the same terms that applied before the transfer. The Escrow Agent will not deliver any share certificates or other evidence of the escrow securities to transferees under this Part 5.
| PART 6 | BUSINESS COMBINATIONS |
| 6.1 | Business Combinations |
This Part applies to the following (business combinations):
(a) a formal take-over bid for all outstanding equity securities of the Issuer or which, if successful, would result in a change of control of the Issuer
(b) a formal issuer bid for all outstanding equity securities of the Issuer
(c) a statutory arrangement
(d) an amalgamation
(e) a merger
(f) a reorganization that has an effect similar to an amalgamation or merger
| 6.2 | Delivery to Escrow Agent |
You may tender your escrow securities to a person or company in a business combination. At least five business days prior to the date the escrow securities must be tendered under the business combination, you must deliver to the Escrow Agent:
(a) a written direction signed by you that directs the Escrow Agent to deliver to the depositary under the business combination any share certificates or other evidence of the escrow securities and a completed and executed cover letter or similar document and, where required, transfer power of attorney completed and executed for transfer in accordance with the requirements of the depositary, and any other documentation specified or provided by you and required to be delivered to the depositary under the business combination; and
(b) any other information concerning the business combination as the Escrow Agent may reasonably request.
| 6.3 | Delivery to Depositary |
As soon as reasonably practicable, and in any event no later than three business days after the Escrow Agent receives the documents and information required under section 6.2, the Escrow Agent will deliver to the depositary, in accordance with the direction, any share certificates or other evidence of the escrow securities, and a letter addressed to the depositary that
(a) identifies the escrow securities that are being tendered;
(b) states that the escrow securities are held in escrow;
(c) states that the escrow securities are delivered only for the purposes of the business combination and that they will be released from escrow only after the Escrow Agent receives the information described in section 6.4;
(d) if any share certificates or other evidence of the escrow securities have been delivered to the depositary, requires the depositary to return to the Escrow Agent, as soon as practicable, any share certificates or other evidence of escrow securities that are not released from escrow into the business combination; and
(e) where applicable, requires the depositary to deliver or cause to be delivered to the Escrow Agent, as soon as practicable, any share certificates or other evidence of additional escrow securities that you acquire under the business combination.
| 6.4 | Release of Escrow Securities to Depositary |
The Escrow Agent will release from escrow the tendered escrow securities when the Escrow Agent receives a declaration signed by the depositary or, if the direction identifies the depositary as acting on behalf of another person or company in respect of the business combination, by that other person or company, that:
(a) the terms and conditions of the business combination have been met or waived; and
(b) the escrow securities have either been taken up and paid for or are subject to an unconditional obligation to be taken up and paid for under the business combination.
| 6.5 | Escrow of New Securities |
If you receive securities (new securities) of another issuer (successor issuer) in exchange for your escrow securities, the new securities will be subject to escrow in substitution for the tendered escrow securities if, immediately after completion of the business combination:
(a) the successor issuer is not an exempt issuer (as defined in section 3.2 of the Policy);
(b) you are a principal (as defined in section 3.5 of the Policy) of the successor issuer; and
(c) you hold more than 1% of the voting rights attached to the successor issuer’s outstanding securities (In calculating this percentage, include securities that may be issued to you under outstanding convertible securities in both your securities and the total securities outstanding.)
| 6.6 | Release from Escrow of New Securities |
(1) As soon as reasonably practicable after the Escrow Agent receives:
(a) a certificate from the successor issuer signed by a director or officer of the successor issuer authorized to sign
(i) stating that it is a successor issuer to the Issuer as a result of a business combination and whether it is an emerging issuer or an established issuer under the Policy, and
(ii) listing the Securityholders whose new securities are subject to escrow under section 6.5,
the escrow securities of the Securityholders whose new securities are not subject to escrow under section 6.5 will be released, and the Escrow Agent will send any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent in accordance with section 2.3.
(2) If your new securities are subject to escrow, unless subsection (3) applies, the Escrow Agent will hold your new securities in escrow on the same terms and conditions, including release dates, as applied to the escrow securities that you exchanged.
(3) If the Issuer is
(a) an emerging issuer, the successor issuer is an established issuer, and the business combination occurs 18 months or more after the Issuer’s listing date, all escrow securities will be released immediately; and
(b) an emerging issuer, the successor issuer is an established issuer, and the business combination occurs within 18 months after the Issuer’s listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately. Remaining escrow securities will be released in equal instalments on the day that is 6 months, 12 months and 18 months after the Issuer’s listing date.
| PART 7 | RESIGNATION OF ESCROW AGENT |
| 7.1 | Resignation of Escrow Agent |
(1) If the Escrow Agent wishes to resign as escrow agent, the Escrow Agent will give written notice to the Issuer.
(2) If the Issuer wishes to terminate the Escrow Agent as escrow agent, the Issuer will give written notice to the Escrow Agent.
(3) If the Escrow Agent resigns or is terminated, the Issuer will be responsible for ensuring that the Escrow Agent is replaced not later than the resignation or termination date by another escrow agent that is acceptable to the securities regulators having jurisdiction in the matter and that has accepted such appointment, which appointment will be binding on the Issuer and the Securityholders.
(4) The resignation or termination of the Escrow Agent will be effective, and the Escrow Agent will cease to be bound by this Agreement, on the date that is 60 days after the date of receipt of the notices referred to above by the Escrow Agent or Issuer, as applicable, or on such other date as the Escrow Agent and the Issuer may agree upon (the “resignation or termination date”), provided that the resignation or termination date will not be less than 10 business days before a release date.
(5) If the Issuer has not appointed a successor escrow agent within 60 days of the resignation or termination date, the Escrow Agent will apply, at the Issuer’s expense, to a court of competent jurisdiction for the appointment of a successor escrow agent, and the duties and responsibilities of the Escrow Agent will cease immediately upon such appointment.
(6) On any new appointment under this section, the successor Escrow Agent will be vested with the same powers, rights, duties and obligations as if it had been originally named herein as Escrow Agent, without any further assurance, conveyance, act or deed. The predecessor Escrow Agent, upon receipt of payment for any outstanding account for its services and expenses then unpaid, will transfer, deliver and pay over to the successor Escrow Agent, who will be entitled to receive, all securities, records or other property on deposit with the predecessor Escrow Agent in relation to this Agreement and the predecessor Escrow Agent will thereupon be discharged as Escrow Agent.
(7) If any changes are made to Part 8 of this Agreement as a result of the appointment of the successor Escrow Agent, those changes must not be inconsistent with the Policy and the terms of this Agreement and the Issuer to this Agreement will file a copy of the new Agreement with the securities regulators with jurisdiction over this Agreement and the escrow securities.
| PART 8 | OTHER CONTRACTUAL ARRANGEMENTS |
| 8.1 | Escrow Agent Not a Trustee |
The Escrow Agent accepts duties and responsibilities under this Agreement, and the escrow securities and any share certificates or other evidence of these securities, solely as a custodian, bailee and agent. No trust is intended to be, or is or will be, created hereby and the Escrow Agent shall owe no duties hereunder as a trustee.
| 8.2 | Escrow Agent Not Responsible for Genuineness |
The Escrow Agent will not be responsible or liable in any manner whatever for the sufficiency, correctness, genuineness or validity of any escrow security deposited with it.
| 8.3 | Escrow Agent Not Responsible for Furnished Information |
The Escrow Agent will have no responsibility for seeking, obtaining, compiling, preparing or determining the accuracy of any information or document, including the representative capacity in which a party purports to act, that the Escrow Agent receives as a condition to a release from escrow or a transfer of escrow securities within escrow under this Agreement.
| 8.4 | Escrow Agent Not Responsible after Release |
The Escrow Agent will have no responsibility for escrow securities that it has released to a Securityholder or at a Securityholder’s direction according to this Agreement.
| 8.5 | Indemnification of Escrow Agent |
The Issuer and each Securityholder hereby jointly and severally agree to indemnify and hold harmless the Escrow Agent, its affiliates, and their current and former directors, officers, employees and agents from and against any and all claims, demands, losses, penalties, costs, expenses, fees and liabilities, including, without limitation, legal fees and expenses, directly or indirectly arising out of, in connection with, or in respect of, this Agreement, except where same result directly and principally from gross negligence, wilful misconduct or bad faith on the part of the Escrow Agent. This indemnity survives the release of the escrow securities, the resignation or termination of the Escrow Agent and the termination of this Agreement.
| 8.6 | Additional Provisions |
(1) The Escrow Agent will be protected in acting and relying reasonably upon any notice, direction, instruction, order, certificate, confirmation, request, waiver, consent, receipt, statutory declaration or other paper or document (collectively referred to as “Documents”) furnished to it and purportedly signed by any officer or person required to or entitled to execute and deliver to the Escrow Agent any such Document in connection with this Agreement, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth or accuracy of any information therein contained, which it in good faith believes to be genuine.
(2) The Escrow Agent will not be bound by any notice of a claim or demand with respect thereto, or any waiver, modification, amendment, termination or rescission of this Agreement unless received by it in writing, and signed by the other Parties and approved by the securities regulators with jurisdiction as set out in section 10.6, and, if the duties or indemnification of the Escrow Agent in this Agreement are affected, unless it has given its prior written consent.
(3) The Escrow Agent may consult with or retain such legal counsel and advisors as it may reasonably require for the purpose of discharging its duties or determining its rights under this Agreement and may rely and act upon the advice of such counsel or advisor. The Escrow Agent will give written notice to the Issuer as soon as practicable that it has retained legal counsel or
other advisors. The Issuer will pay or reimburse the Escrow Agent for any reasonable fees, expenses and disbursements of such counsel or advisors.
(4) In the event of any disagreement arising under the terms of this Agreement, the Escrow Agent will be entitled, at its option, to refuse to comply with any and all demands whatsoever until the dispute is settled either by a written agreement among the Parties or by a court of competent jurisdiction.
(5) The Escrow Agent will have no duties or responsibilities except as expressly provided in this Agreement and will have no duty or responsibility under the Policy or arising under any other agreement, including any agreement referred to in this Agreement, to which the Escrow Agent is not a party.
(6) The Escrow Agent will have the right not to act and will not be liable for refusing to act unless it has received clear and reasonable documentation that complies with the terms of this Agreement. Such documentation must not require the exercise of any discretion or independent judgment.
(7) The Escrow Agent is authorized to cancel any share certificate delivered to it and hold such Securityholder’s escrow securities in electronic, or uncertificated form only, pending release of such securities from escrow.
(8) The Escrow Agent will have no responsibility with respect to any escrow securities in respect of which no share certificate or other evidence or electronic or uncertificated form of these securities has been delivered to it, or otherwise received by it.
(9) Any entity resulting from the merger, amalgamation or continuation of Endeavor Trust Corporation or succeeding to all or substantially all of its transfer agency business (by sale of such business or otherwise), shall thereupon automatically become the Escrow Agent hereunder without further act or formality. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their successors and assigns.
| 8.7 | Limitation of Liability of Escrow Agent |
The Escrow Agent will not be liable to any of the Parties hereunder for any action taken or omitted to be taken by it under or in connection with this Agreement, except for losses directly, principally and immediately caused by its bad faith, wilful misconduct or gross negligence. Under no circumstances will the Escrow Agent be liable for any special, indirect, incidental, consequential, exemplary, aggravated or punitive losses or damages hereunder, including any loss of profits, whether foreseeable or unforeseeable. Notwithstanding the foregoing or any other provision of this Agreement, in no event will the collective liability of the Escrow Agent under or in connection with this Agreement to any one or more Parties, except for losses directly caused by its bad faith or willful misconduct, exceed the amount of its annual fees under this Agreement or the amount of three thousand dollars ($3,000.00), whichever amount shall be greater.
| 8.8 | Remuneration of Escrow Agent |
The Issuer will pay the Escrow Agent reasonable remuneration for its services under this Agreement, which fees are subject to revision from time to time on 30 days’ written notice. The Issuer will reimburse the Escrow Agent for its expenses and disbursements. Any amount due under this section and unpaid 30 days after request for such payment, will bear interest from the expiration of such period at a rate per annum equal to the then current rate charged by the Escrow Agent, payable on demand.
In the event the Issuer or the Securityholders fail to pay the Escrow Agent any amounts owing to the Escrow Agent hereunder, the Escrow Agent shall have the right not to act (including the right not to release any additional securities from escrow) and will not be liable for refusing to act until it has been fully paid all amounts owing to it hereunder. Further, in the event the Issuer fails to pay the Escrow Agent its reasonable remuneration for its services hereunder, the Escrow Agent shall be entitled to charge the Securityholders for any further release of escrowed securities and shall have the right not to act (including the right not to release any additional securities from escrow) until the Securityholders have paid such amounts to the Escrow Agent.
In the event the Issuer or the Securityholders have failed to pay the amounts owing the Escrow Agent hereunder, the Escrow Agent shall not be liable for any loss caused by a delay in the release of the escrowed securities.
| 8.9 | Notice to Escrow Agent |
The Issuer shall forthwith provide a copy of the Exchange Bulletin, confirmation of listing and posting for trading of the subject escrowed shares or such other relevant document to the Escrow Agent as it shall require in order to make the required releases. No duty shall rest with the Escrow Agent to obtain this information independently nor shall it be held liable for any loss, claim, suit or action, howsoever caused by any delay in providing this information to it.
| PART 9 | NOTICES |
| 9.1 | Notice to Escrow Agent |
Documents will be considered to have been delivered to the Escrow Agent on the next business day following the date of transmission, if delivered by email, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:
Endeavor Trust Corporation
702 – 777 Hornby Street, Vancouver, BC, V6Z 1S4
Attention: Manager Corporate Trust
Tel: 604-559-8818
Email: admin@EndeavorTrust.com
| 9.2 | Notice to Issuer |
Documents will be considered to have been delivered to the Issuer on the next business day following the date of transmission, if delivered by email, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:
SolarBank Corporation
Unit
803, 505 Consumers Rd.,
North York, ON, Canada M2J 4V8
Attention:
Richard Lu
Email: richard.lu@abundantsolarenergy.com
| 9.3 | Deliveries to Securityholders |
Documents will be considered to have been delivered to a Securityholder on the date of delivery, if delivered by hand or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the address on the Issuer’s share register.
Any share certificates or other evidence of a Securityholder’s escrow securities will be sent to the Securityholder’s address on the Issuer’s share register unless the Securityholder has advised the Escrow Agent in writing otherwise at least ten business days before the escrow securities are released from escrow. The Issuer will provide the Escrow Agent with each Securityholder’s address as listed on the Issuer’s share register.
| 9.4 | Change of Address |
(1) The Escrow Agent may change its address for delivery by delivering notice of the change of address to the Issuer and to each Securityholder.
(2) The Issuer may change its address for delivery by delivering notice of the change of address to the Escrow Agent and to each Securityholder.
(3) A Securityholder may change that Securityholder’s address for delivery by delivering notice of the change of address to the Issuer and to the Escrow Agent.
| 9.5 | Postal Interruption |
A Party to this Agreement will not mail a document it is required to mail under this Agreement if the Party is aware of an actual or impending disruption of postal service.
| PART 10 | GENERAL |
| 10.1 | Interpretation - “holding securities” |
When this Agreement refers to securities that a Securityholder “holds”, it means that the Securityholder has direct or indirect beneficial ownership of, or control or direction over, the securities.
| 10.2 | Further Assurances |
The Parties will execute and deliver any further documents and perform any further acts reasonably requested by any of the Parties to this Agreement which are necessary to carry out the intent of this Agreement.
| 10.3 | Time |
Time is of the essence of this Agreement.
| 10.4 | Incomplete IPO |
If the Issuer does not complete its IPO and has become a reporting issuer in one or more jurisdictions because it has obtained a receipt for its IPO prospectus, this Agreement will remain in effect until the securities regulators in those jurisdictions order that the Issuer has ceased to be a reporting issuer.
| 10.5 | Governing Laws |
The laws of Ontario (the “Principal Regulator”) and the applicable laws of Canada will govern this Agreement.
| 10.6 | Jurisdiction |
The securities regulator in each jurisdiction where the Issuer files its IPO prospectus has jurisdiction over this Agreement and the escrow securities.
| 10.7 | Consent of Securities Regulators to Amendment |
Except for amendments made under Part 3, the securities regulators with jurisdiction must approve any amendment to this Agreement and will apply mutual reliance principles in reviewing any amendments that are filed with them. Therefore, the consent of the Principal Regulator will evidence the consent of all securities regulators with jurisdiction.
| 10.8 | Counterparts |
The Parties may execute this Agreement by electronic means and in counterparts, each of which will be considered an original and all of which will be one agreement.
| 10.9 | Singular and Plural |
Wherever a singular expression is used in this Agreement, that expression is considered as including the plural or the body corporate where required by the context.
| 10.10 | Language |
This Agreement has been drawn up in the English language at the request of all Parties. Cette convention a été rédigé en anglais à la demande de toutes les Parties.
| 10.11 | Benefit and Binding Effect |
This Agreement will benefit and bind the Parties and their heirs, executors, administrators, successors and permitted assigns and all persons claiming through them as if they had been a Party to this Agreement.
| 10.12 | Entire Agreement |
This is the entire agreement among the Parties concerning the subject matter set out in this Agreement and supersedes any and all prior understandings and agreements.
| 10.13 | Successor to Escrow Agent |
Any corporation with which the Escrow Agent may be amalgamated, merged or consolidated, or any corporation succeeding to the business of the Escrow Agent will be the successor of the Escrow Agent under this Agreement without any further act on its part or on the part or any of the Parties, provided that the successor is recognized as a transfer agent by the Canadian exchange the Issuer is listed on (or if the Issuer is not listed on a Canadian exchange, by any Canadian exchange) and notice is given to the securities regulators with jurisdiction.
[Balance
of this page intentionally left blank.
Signature page follows.]
The Parties have executed and delivered this Agreement as of the date set out above.
| ENDEAVOR TRUST CORPORATION | |
| /s/ “David Eppert” | |
| Authorized signatory | |
| /s/ “Catherine Wang” | |
| Authorized signatory | |
| SOLARBANK CORPORATION | |
| /s/ “Dr. Richard Lu” | |
| Authorized signatory |
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 550,000 | |||
| Warrants | 1,725,000 |
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 550,000 | |||
| Warrants | 1,725,000 |
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 550,000 | |||
| Warrants | 1,725,000 |
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,174,517 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,174,517 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,174,518 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,174,518 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,346,280 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 494,520 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,588,603 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 550,000 | |||
| Warrants | 1,100,000 |
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,278,613 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,599,990 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,237,120 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,483,604 | |||
Schedule “A” to Escrow Agreement
Securityholder
Name: [Redacted]
Securities: |
||||
| Class or description | Number | Certificate(s) (if applicable) | ||
| Common Shares | 1,500,000 | |||
Schedule “B” to Escrow Agreement
Acknowledgment and Agreement to be Bound
I acknowledge that the securities listed in the attached Schedule “A” (the “escrow securities”) have been or will be transferred to me and that the escrow securities are subject to an Escrow Agreement dated __________________________ (the “Escrow Agreement”).
For other good and valuable consideration, I agree to be bound by the Escrow Agreement in respect of the escrow securities, as if I were an original signatory to the Escrow Agreement.
Dated at ____________________ on ______________.
| Where the transferee is an individual: | ||
| Signed, sealed and delivered by | ) | |
| [Transferee] in the presence of: | ) | |
| ) | ||
| ) | ||
| Signature of Witness | ) | |
| ) | [Transferee] | |
| ) | ||
| ) | ||
| Name of Witness | ) | |
| ) |
| Where the transferee is not an individual: | |
| [Transferee] | |
| Authorized signatory | |
| Authorized signatory |
Exhibit 99.10
AGENCY AGREEMENT
February 10, 2023
SolarBank Corporation
505 Consumers Road, Suite 803
Toronto, ON M5J 4Z2
| Attention: | Dr. Richard Lu, CEO & President |
Dear Sir:
Research Capital Corporation (“RCC” or the “Agent”) hereby agrees to offer for sale on a ‘commercially reasonable efforts’ agency basis, and SolarBank Corporation (“SolarBank” or the “Corporation”) upon and subject to the terms hereof, agrees to issue and sell through the Agent, up to 7,000,000 common shares of the Corporation (the “Offered Shares”) at a price of $0.75 per Offered Share (the “Offering Price”) for gross proceeds of up to $5,250,000.
The Corporation also hereby grants the Agent the option (the “Over-Allotment Option”) to acquire up to an additional 1,050,000 Common Shares (as hereinafter defined) (the “Additional Shares”), upon the same terms as the Offered Shares, exercisable in whole or in part at any time up to 48 hours prior to the Closing Date (as hereinafter defined) of the Offering (as hereinafter defined) at a price of $0.75 per Additional Share for additional proceeds of up to $787,500. If the Agent elects to exercise the Over-Allotment Option, the Agent shall notify the Corporation in writing not later than 48 hours before the Closing Date, which notice shall specify the number of Additional Shares to be purchased. The closing of the Over-Allotment Option shall occur on the Closing Date. References to Offered Shares includes the Additional Shares issuable upon exercise of the Over-Allotment Option, unless the context requires otherwise.
The offering of the Offered Shares by the Corporation described in this Agreement is hereinafter referred to as the “Offering”.
It is further understood and agreed that the Corporation may provide a list of certain subscribers on a president’s list (the “President’s List Subscribers”) which list may be comprised of subscriptions of up to 100% of the Offering (including the Over-Allotment Option), provided that the Cash Fee (as defined below) and Agent’s Warrants (as defined below) shall be payable in full on the subscription amounts for all President’s List Subscribers.
The net proceeds of the Offering shall be used by the Corporation substantially in accordance with the disclosure set out under the heading “Use of Proceeds” in the Final Prospectus (as defined herein), subject to the qualifications set out therein.
The Agent understands that the Corporation has prepared and, concurrently with or immediately after the execution hereof, will file a final long form prospectus and all necessary documents relating thereto and will take all commercially reasonable steps necessary to qualify the Offered Shares and the Agent’s Warrants (as hereinafter defined) for distribution in each of the Provinces of Alberta, British Columbia and Ontario (collectively, the “Qualifying Jurisdictions”). The Agent intends to make a public offering of the Offered Shares in the Qualifying Jurisdictions upon the terms set forth herein and in the Prospectus (as hereinafter defined). The Corporation acknowledges and agrees that the Agent may offer and sell the Offered Shares to or through any affiliate of the Agent or other selling group participant appointed by the Agent, and that any such affiliate or selling group participant may offer and sell the Offered Shares.
The parties acknowledge that the Offered Shares have not been and will not be registered under the U.S. Securities Act (as hereinafter defined) or the securities laws of any state of the United States (as hereinafter defined) and may not be offered or sold in the United States except pursuant to exemptions from the registration requirements of the U.S. Securities Act and the applicable laws of any state of the United States.
In consideration of the Agent’s services to be rendered in connection with the Offering, at Closing, the Corporation shall:
| (i) | pay to the Agent a cash commission (the “Cash Fee”) equal to 6.0% of the aggregate gross proceeds realized by the Corporation in respect of the sale of the Offered Shares, including those sold to President’s List Subscribers; |
| (ii) | issue, as may be directed by the Agent, that number of non-transferable Common Share purchase warrants of the Corporation (the “Agent’s Warrants”) as is equal to 6.0% of the number of Offered Shares issued under the Offering, including those sold to President’s List Subscribers with each Agent’s Warrant exercisable to acquire one (1) Common Share (each an “Agent’s Warrant Share”) for a period of 36 months from the date of issuance thereof at an exercise price equal to the Offering Price; and |
| (iii) | pay to the Agent the remaining cash balance of its corporate finance fee of $35,000.00 (plus applicable taxes) (being, $20,000 plus applicable taxes on the entirety of the Corporate Finance Fee) (the “Corporate Finance Fee”). |
The obligation of the Corporation to pay the Cash Fee and the Corporate Finance Fee and to issue the Agent’s Warrants shall arise at the Closing Time (as defined herein) against payment for the Offered Shares, and at such time the Cash Fee, the Agent’s Warrants, and the Corporate Finance Fee shall be fully earned by the Agent.
The following are the schedules attached to this Agreement, which schedules are deemed to be a part hereof and are hereby incorporated by reference herein:
| Schedule “A” | – | Matters to be Addressed in the Canadian Counsel Opinion |
| Schedule “B” | – | Material Subsidiaries |
DEFINITIONS AND INTERPRETATION
In this Agreement, in addition to the terms defined above or elsewhere in this Agreement, the following terms shall have the following meanings:
“Additional Shares” has the meaning ascribed thereto on the first page hereof;
“Advisory Warrant” means the non-transferable Common Share purchase warrants of the Corporation with each Advisory Warrant entitling the holder, upon Closing, to purchase one Common Share up to the day that it is five years from the date of issuance thereof at a price of $0.10 per Common Share, as more fully described in the Final Prospectus;
“Agent” or “RCC” has the meaning ascribed thereto on the first page hereof;
“Agent’s Warrants” has the meaning ascribed thereto on the second page hereof;
“Agent’s Warrant Shares” has the meaning ascribed thereto on the second page hereof;
“Agent’s Expenses” has the meaning ascribed thereto in Section 22 hereof;
“Agreement” means this agency agreement, including the Schedules hereto;
“Anti-Money Laundering Laws” has the meaning ascribed thereto in Section 10(tt)(i) hereof;
“Applicable Laws” means all applicable laws, rules, regulations, policies, statutes, ordinances, codes, orders, consents, decrees, judgments, decisions, rulings, awards, or guidelines, the terms and conditions of any permits, including any judicial or administrative interpretation thereof, of any Governmental Authority;
“Business Day” means a day which is not a Saturday, Sunday or statutory or civic holiday in the City of Vancouver, British Columbia or the City of Toronto, Ontario;
“Canadian Securities Regulators” means the applicable securities commission or securities regulatory authority in each of the Qualifying Jurisdictions, including the OSC;
“Cash Fee” has the meaning ascribed thereto on the second page hereof;
“CDS” means CDS Clearing and Depository Services Inc.;
“Closing” means the completion of the issue and sale by the Corporation of the Offered Shares and any Additional Shares as contemplated by this Agreement;
“Closing Date” means such date of Closing as the Corporation and the Agent may agree;
“Closing Time” means 9:00 a.m. (Vancouver time) on the Closing Date, or such other time as the Corporation and the Agent may agree;
“Common Shares” means the common shares without par value in the capital of Corporation which the Corporation is authorized to issue, as constituted on the date hereof;
“Confidential Information” means financial, operating, technical, and other information and materials concerning the Corporation and its properties, which is furnished to the Agent or to any of its respective directors, officers, or employees or to the Agent’s accounting and legal advisors by the Corporation or any director, officer, employee, financial or accounting advisor, legal advisor, representative or other agent of the Corporation, to the extent that such information would be construed by a reasonable business person in comparable circumstances to be proprietary in nature. Notwithstanding the foregoing, Confidential Information does not include information which: (a) is or becomes generally available to the public other than as a result of a disclosure by the Agent not permitted hereunder; (b) was available to the Agent on a non-confidential basis prior to its disclosure to the Agent by the Corporation; (c) becomes available to the Agent on a non-confidential basis from a source other than the Corporation, provided that such source is not, to the knowledge of the Agent, bound by a confidentiality agreement with, or other confidentiality obligation to the Corporation; or (d) is independently developed by the Agent without reference to any Confidential Information;
“Conversion Unit” means a unit issuable on the conversion of the Convertible Loan consisting of one Common Share, one Series A Warrant and one Series B Warrant;
“Conversion Unit Warrant Expiry Date” means the date that is sixty (60) months following the Closing Date;
“Convertible Loan” means the non-interest bearing convertible bridge loan financing completed by the Corporation on October 3, 2022, for aggregate gross proceeds of $1,250,000, convertible: (a) at the option of the holder thereof into Conversion Units at a conversion price of $0.50 per Conversion Unit at any time until the maturity date, being the 12 month anniversary of the date of issuance of the Convertible Loan, or (b) upon Closing, automatically into Conversion Units at a conversion price of $0.50 per Conversion Unit, as more fully described in the Final Prospectus;
“Corporate Finance Fee” has the meaning ascribed thereto on the second page hereof;
“Corporation” or “SolarBank” has the meaning ascribed thereto on the first page hereof and includes the subsidiaries of SolarBank, if the context permits;
“Corporation’s Auditors” means MSLL CPA LLP, Chartered Professional Accountants, or such other firm of chartered professional accountants as the Corporation may have duly appointed or may from time to time appoint as auditors of the Corporation;
“COVID-19” has the meaning ascribed thereto in Section 10(aaa) hereof;
“CSE” means the Canadian Securities Exchange;
“Disclosure Documents” means any and all documents, reports, presentations or information made available to the Agent by the Corporation, together with all other publicly disclosed or available documents, reports, presentations or information relating to the Corporation, including the Prospectus;
“Encumbrance” means any encumbrance, lien, charge, hypothec, pledge, mortgage, title retention agreement, security interest of any nature, adverse claim, exception, reservation, easement, restriction, right of occupation, any matter capable of registration against title, option, right of pre-emption, privilege or any contract to create any of the foregoing;
“Engagement Letter” means the letter agreement dated September 26, 2022, between the Corporation and the Agent relating to the Offering;
“Final Prospectus” means the (final) long form prospectus prepared by the Corporation in accordance with NI 41-101 relating to the distribution of the Offered Shares and for which a receipt will be issued by the OSC on its own behalf and, as principal regulator, on behalf of each of the other Canadian Securities Regulators;
“Financial Statements” means the financial statements of the Corporation included in the Prospectus, including the notes to such statements and the related auditors’ report on such statements, if any;
“Governmental Authority” means any (a) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, ministry, central bank, court, tribunal, arbitral body, bureau or agency, domestic or foreign, (b) any subdivision, agent, commission, board, or authority of any of the foregoing, or (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any foregoing, and any stock exchange or self-regulatory authority and, for greater certainty, includes the Securities Regulators;
“Infringe” has the meaning ascribed thereto in Section 10(ccc) hereof;
“Intellectual Property” means intellectual property rights, including: (i) patents and inventions; (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works in whatever form or medium; (iv) registrations, applications and renewals for any of the foregoing; (v) proprietary computer software (including but not limited to data, data bases and documentation); (vi) trade secrets, Confidential Information and know-how; and (vii) all licenses, agreements and other contracts and commitments relating to any of the foregoing;
“Listing Date” means the date that the Common Shares are listed on the CSE;
“Losses” has the meaning ascribed thereto in Section 20(a) hereof;
“Marketing Materials” has the meaning ascribed to “marketing materials” in NI 41-101 (including any template version, revised template version or limited use version thereof) provided to a potential investor in connection with the Offering;
“Material Adverse Effect” or “Material Adverse Change” means any effect or change on the Corporation or its business that is or is reasonably likely to be materially adverse to the results of operations, affairs, financial condition, assets, properties, capital, liabilities (contingent or otherwise), cash flow, prospects, income or business operations of the Corporation or its business, taken as a whole, after giving effect to this Agreement and the transactions contemplated hereby or that is or is reasonably likely to prevent the completion of the transactions contemplated by this Agreement;
“Material Contracts” means a contract described under the heading “Material Contracts” in the Final Prospectus;
“Material Subsidiaries” means each of the subsidiaries of the Corporation listed in Schedule “B” hereto;
“misrepresentation”, “material fact”, “material change”, “affiliate”, “associate”, and “distribution” shall have the respective meanings ascribed thereto in the Securities Act (Ontario);
“MI 11-102” means Multilateral Instrument 11-102 – Passport System and its companion policy;
“NI 41-101” means National Instrument 41-101 – General Prospectus Requirements;
“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations;
“NP 11-202” means National Policy 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions;
“OFAC” has the meaning ascribed thereto in Section 10(uu) hereof;
“OFAC Person” has the meaning ascribed thereto in Section 10(uu) hereof;
“Offered Shares” has the meaning ascribed thereto on the first page hereof;
“Offering” has the meaning ascribed thereto on the first page hereof;
“Offering Documents” means the Preliminary Prospectus, the Final Prospectus, the Marketing Materials and any Supplementary Material;
“Offering Price” has the meaning ascribed thereto on the first page hereof;
“Options” means stock options to acquire Common Shares issuable pursuant to the Share Compensation Plan;
“OSC” means the Ontario Securities Commission;
“Over-Allotment Option” has the meaning ascribed thereto on the first page hereof;
“Passport System” means the system and process for prospectus reviews provided for under MI 11-102 and NP 11-202;
“person” shall be broadly interpreted and shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust or other legal entity;
“Preliminary Prospectus” means the preliminary prospectus dated November 4, 2022, for which a receipt was issued by the OSC on its own behalf and, as principal regulator, on behalf of each of the other Canadian Securities Regulators;
“President’s List Subscribers” has the meaning ascribed thereto on the first page hereof;
“Prospectus” means, collectively, the Preliminary Prospectus and the Final Prospectus and any amendments thereto;
“Qualifying Jurisdictions” has the meaning ascribed thereto on the first page hereof;
“Representatives” means, collectively, the directors, officers, employees and consultants of the Corporation and the Material Subsidiaries, together with any other parties which the Corporation or a Material Subsidiary has engaged to operate or conduct any part of its business;
“RSUs” means restricted share units issued or issuable pursuant to the Share Compensation Plan, which, upon vesting, are redeemed for Common Shares;
“Sales Tax” has the meaning ascribed thereto in Section 23(b) hereof;
“Sanctioned Country” has the meaning ascribed thereto in Section 10(uu) hereof;
“Sanctions” has the meaning ascribed thereto in Section 10(uu) hereof;
“SEC” means the United States Securities and Exchange Commission;
“Securities” means the Offered Shares, the Agent’s Warrants, the Agent’s Warrant Shares and the Additional Shares;
“Securities Laws” means, unless the context otherwise requires, all applicable securities laws in each of the Qualifying Jurisdictions and the respective regulations made thereunder, together with applicable published fee schedules, prescribed forms, policy statements, orders, blanket rulings and other regulatory instruments of the securities regulatory authorities in such jurisdictions and includes the rules and policies of the CSE;
“Securities Regulators” means, collectively, the CSE and the Canadian Securities Regulators;
“Selling Firm” has the meaning ascribed thereto in Section 4(a) hereof;
“Series A Warrant” means a transferrable Common Share purchase warrant of the Corporation forming part of the Conversion Units, with each Series A Warrant entitling the holder, upon satisfaction of the Series A Warrant Vesting Condition, to purchase one (1) Common Share until the Conversion Unit Warrant Expiry Date at a price of $0.50 per Common Share;
“Series A Warrant Vesting Condition” means the Corporation attaining a fully diluted market capitalization of $20,000,000 calculated by multiplying all of the issued and outstanding Common Shares and convertible securities of the Corporation by its closing price on the stock exchange where its primary trading occurs;
“Series B Warrant” means a transferrable Common Share purchase warrant of the Corporation forming part of the Conversion Units, with each Series B Warrant entitling the holder, upon satisfaction of the Series B Warrant Vesting Condition, to purchase one (1) Common Share until the Conversion Unit Warrant Expiry Date at a price of $0.50 per Common Share;
“Series B Warrant Vesting Condition” means the Corporation completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a “venture issuer”, as such term is defined in NI 51-102;
“Share Compensation Plan” means the share compensation plan of the Corporation adopted on November 4, 2022;
“Shareholders’ Agreement” has the meaning ascribed thereto in Section 10(g) hereof;
“Standard Listing Conditions” has the meaning ascribed thereto in Section 6(a)(iv) hereof;
“Standard Term Sheet” has the meaning ascribed to “standard term sheet” in NI 41-101;
“subsidiary” has the meaning ascribed thereto in the Securities Act (Ontario);
“Supplementary Material” means, collectively, any amendment to the Prospectus, any amendment or supplemental prospectus or ancillary materials that may be filed by or on behalf of the Corporation under the Securities Laws relating to the distribution of the Securities hereunder;
“Transfer Agent” means the registrar and transfer agent of the Corporation, namely Endeavor Trust Corporation;
“U.S.” or “United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended;
“U.S. Securities Act” means the United States Securities Act of 1933, as amended; and
“U.S. Securities Laws” means all applicable securities laws in the United States, including without limitation, the U.S. Securities Act, the U.S. Exchange Act and the rules and regulations promulgated thereunder, including the rules and policies of the SEC, and any applicable state securities laws.
In this Agreement, “to the best of the knowledge of” means, unless otherwise expressly stated, a statement of the declarant’s knowledge of the facts or circumstances to which such phrase related, after having made due and applicable inquiries and investigations in connection with such facts and circumstances; and “to the knowledge of the Corporation”, “to the Corporation’s knowledge”, “to the best of the knowledge of the Corporation” or “to the best of the Corporation’s knowledge” means, unless otherwise expressly stated, a statement as to the best knowledge of each of the chief executive officer and the chief financial officer of the Corporation about the facts or circumstances to which such phrase related, after having made due and applicable inquiries and investigations in connection with such facts and circumstances that would ordinarily be made in the discharge of each such officer’s duties.
TERMS AND CONDITIONS
| 1. | Appointment of Agent. The Corporation appoints the Agent as its exclusive agent in respect of the Offering and the Agent accepts the appointment and agrees to act as the exclusive agent of the Corporation in respect of the Offering and to use commercially reasonable efforts to sell the Offered Shares in the Qualifying Jurisdictions on the terms and conditions set out herein. It is hereby understood and agreed that the Agent shall act as agent only and is under no obligation to purchase any of the Offered Shares, although the Agent may subscribe for the Offered Shares in its sole discretion. |
| 2. | Compliance with Securities Laws. |
| (a) | The Corporation represents and warrants to the Agent that the Corporation has prepared and filed the Preliminary Prospectus and other related documents required by applicable Securities Laws with the Securities Regulators, that the “head office” of the Corporation is in the Province of Ontario and that the Corporation has obtained a receipt from the OSC for the Preliminary Prospectus which also evidences that a receipt has been issued or is deemed to have been issued for the Preliminary Prospectus by the other Canadian Securities Regulators. |
| (b) | The Corporation will use commercially reasonable efforts to resolve as soon as possible any comments of the Securities Regulators relating to the Preliminary Prospectus, and in any event no later than February 13, 2023 (or, in any case, by such later date or dates as may be determined by the Agent and the Corporation acting reasonably), file the Final Prospectus, which shall be in form and substance satisfactory to the Agent, acting reasonably, and obtain, pursuant to the Passport System, a receipt from the OSC (as principal regulator) evidencing the issuance or deemed issuance by the Canadian Securities Regulators of receipts for the Final Prospectus in respect of the proposed distribution of the Offered Shares and the Agent’s Warrants and the grant of the Over-Allotment Option. | |
| (c) | The Corporation will promptly fulfil and comply with, to the satisfaction of the Agent, applicable Securities Laws required to be fulfilled or complied with by the Corporation to enable the Offered Shares to be lawfully distributed to the public in the Qualifying Jurisdictions through the Agent or any Selling Firm. | |
| (d) | Until the date on which the distribution of the Offered Shares is completed, the Corporation will promptly take, or cause to be taken, all additional steps and proceedings that may from time to time be required or desirable under applicable Securities Laws to continue to qualify the distribution of the Offered Shares and the Agent’s Warrants and the grant of the Over-Allotment Option in the Qualifying Jurisdictions. |
| 3. | Due Diligence. |
Prior to the filing of the Final Prospectus and continuing until the Closing, the Corporation shall have permitted the Agent to review each of the Preliminary Prospectus and the Final Prospectus, including the documents incorporated by reference therein, and shall allow the Agent to conduct any due diligence investigations which it reasonably requires in order to fulfill its obligations as agent under the Securities Laws and in order to enable it to responsibly execute the certificates in the Preliminary Prospectus and the Final Prospectus required to be executed by it. Following the filing of the Final Prospectus and until the later of the Closing Date and the date of completion of the distribution of the Offered Shares, the Corporation shall allow the Agent to conduct any due diligence investigations that it reasonably requires to confirm as at any date that it continues to have reasonable grounds for the belief that the Final Prospectus and any Supplementary Material does not contain a misrepresentation as at such date or as at the date of such Final Prospectus or any Supplementary Material and to otherwise fulfill its obligations as an agent under applicable Securities Laws. The Corporation also covenants to use commercially reasonably efforts to secure the cooperation of the Corporation’s professional advisors (including its legal advisors and auditors) to participate in any due diligence conference calls required by the Agent, and the Corporation consents to the use and the disclosure of information obtained during the course of the due diligence investigation (including during any due diligence conference call) where such disclosure is required by law or required by the Agent to maintain a defense to any regulatory or other civil action. The Corporation further covenants, during the term of this Agreement, to keep the Agent informed of all material changes relating to the Corporation, whether or not requested by the Agent.
| 4. | Distribution and Certain Obligations of the Agent. |
| (a) | The Agent shall, and shall use commercially reasonable efforts to require any investment dealer or broker (other than the Agent) with which the Agent has a contractual relationship with in respect of the distribution of the Offered Shares (each, a “Selling Firm”) to agree to comply with Securities Laws in connection with the distribution of the Offered Shares and shall offer the Offered Shares for sale to the public directly and through Selling Firms upon the terms and conditions set out in the Final Prospectus and this Agreement. The Agent shall, and shall require any Selling Firm to, offer for sale to the public and sell the Offered Shares only in those jurisdictions where they may be lawfully offered for sale or sold. The Agent shall: (i) use reasonable efforts to complete and cause each Selling Firm to complete the distribution of the Offered Shares as soon as reasonably practicable; and (ii) promptly notify the Corporation when, in its opinion, the Agent and the Selling Firms have ceased distribution of the Offered Shares and provide a breakdown of the number of Offered Shares distributed in each of the Qualifying Jurisdictions where such breakdown is required for the purpose of calculating fees payable to the Securities Regulators. |
| (b) | The Agent shall, and shall require any Selling Firm to agree to, distribute the Offered Shares in a manner which complies with and observes all Applicable Laws and regulations in each jurisdiction into and from which they may offer to sell the Offered Shares, or distribute the Prospectus or any Supplementary Material in connection with the distribution of the Offered Shares in all material respects, and will not, directly or indirectly, offer, sell or deliver any Offered Shares or deliver the Prospectus or any Supplementary Material to any person in any jurisdiction other than in the Qualifying Jurisdictions except in a manner which will not require the Corporation to comply with the registration, prospectus, filing, continuous disclosure or other similar requirements under the applicable securities laws of such other jurisdictions or pay any additional governmental filing fees which relate to such other jurisdictions. Subject to the foregoing and with the prior written agreement of the Corporation, the Agent and any Selling Firm shall be entitled to offer and sell the Offered Shares in such other jurisdictions in accordance with any applicable securities and other laws in such jurisdictions in which the Agent and/or Selling Firms offer the Offered Shares provided that the Corporation is not required to file a prospectus or other disclosure document or become subject to continuing obligations in such other jurisdictions, in accordance with the provisions of this Agreement. |
| (c) | For the purposes of this Section 4, the Agent shall be entitled to assume that the Offered Shares are qualified for distribution in any Qualifying Jurisdiction where a receipt or similar document for the Final Prospectus shall have been obtained from the applicable Canadian Securities Regulators (including a receipt for the Final Prospectus issued under the Passport System) following the filing of the Final Prospectus unless otherwise notified in writing. |
| (d) | The Agent shall use commercially reasonable efforts to cause the distribution of the Offered Shares to occur in such a manner that the minimum distribution requirements for the initial listing and posting for trading of the Common Shares on the CSE are satisfied. |
| 5. | Marketing Materials. |
| (a) | During the distribution of the Offered Shares: |
| (i) | the Corporation will comply with all applicable Securities Laws in all material respects during the period of distribution of the Offered Shares; |
| (ii) | the Corporation and the Agent shall approve in writing, prior to the time Marketing Materials are provided to potential investors, a template version of any Marketing Materials reasonably requested to be provided by the Agent to any such potential investor, such Marketing Materials to comply with Securities Laws. The Corporation shall file a template version of such Marketing Materials with the Canadian Securities Regulators as soon as reasonably practicable after such Marketing Materials are so approved in writing by the Corporation and the Agent, and in any event on or before the day the Marketing Materials are first provided to any potential investor of Offered Shares, and such filing shall constitute the Agent’s authority to use such Marketing Materials in connection with the Offering. Any comparables shall be redacted from the template version in accordance with NI 41-101 prior to filing such template version with the Canadian Securities Regulators and a complete template version containing such comparables and any disclosure relating to the comparables, if any, shall be delivered to the Canadian Securities Regulators by the Corporation. The Corporation shall prepare and file with the Canadian Securities Regulators a revised template version of any Marketing Materials provided to potential investors of Offered Shares where required under Securities Laws; and |
| (iii) | the Corporation and the Agent covenant and agree: |
| (1) | not to provide any potential investor of Offered Shares with any Marketing Materials unless a template version of such Marketing Materials has been filed by the Corporation with the Canadian Securities Regulators on or before the day such Marketing Materials are first provided to any potential investor of Offered Shares; and |
| (2) | not to provide any potential investor with any materials or information in relation to the distribution of the Offered Shares or the Corporation other than: (A) such Marketing Materials that have been approved and filed in accordance with this Section 5 and that are otherwise in compliance with applicable Securities Laws; (B) the Prospectus; and (C) any Standard Term Sheets approved in writing by the Corporation and the Agent. |
| 6. | Deliveries on Filing and Related Matters. |
| (a) | The Corporation shall deliver to the Agent and its counsel: |
| (i) | at the time of filing of the Final Prospectus, a copy of the Final Prospectus in the English language signed and certified by the Corporation and any promoter(s) as required by Securities Laws; |
| (ii) | prior to the filing of the Final Prospectus with the Canadian Securities Regulators, a “long form” comfort letter dated the date of the Final Prospectus, in form and substance satisfactory to the Agent, acting reasonably, addressed to the Agent, the Agent’s counsel, and the Corporation from the Corporation’s Auditors with respect to financial and accounting information relating to the Corporation contained in the Final Prospectus, which letter shall be based on a review by the Corporation’s Auditors within a cut-off date of not more than two (2) Business Days prior to the date of the letter, which letter shall be in addition to any auditors’ report contained in the Final Prospectus and any auditors’ consent letter or comfort letter addressed to the Canadian Securities Regulators; |
| (iii) | prior to the filing of the Final Prospectus with the Canadian Securities Regulators, a consent of DLA Piper (Canada) LLP dated as of the date of the Final Prospectus with respect to the tax commentary included in the sections of the Prospectus entitled “Eligibility for Investment” and “Certain Canadian Federal Income Tax Considerations” addressed to the Canadian Securities Regulators, in form and content acceptable to the Agent, acting reasonably; |
| (iv) | prior to the filing of the Final Prospectus with the Canadian Securities Regulators, copies of correspondence indicating that the application for the listing and posting for trading on the CSE of the Common Shares, including the Offered Shares, the Agent’s Warrant Shares and any Additional Shares, has been approved for listing subject only to satisfaction by the Corporation of customary post-closing conditions imposed by the CSE (the “Standard Listing Conditions”); and |
| (v) | prior to the filing of the Final Prospectus with the Canadian Securities Regulators, a copy of any other document required to be filed by the Corporation under Securities Laws, including without limitation any Marketing Materials and template versions thereof. |
| (b) | The Corporation shall also prepare and deliver promptly to the Agent signed copies of all Supplementary Material required to be filed by the Corporation in compliance with the Securities Laws. Any Supplementary Material shall be in form and substance satisfactory to the Agent, acting reasonably. Concurrently with the delivery of any Supplementary Material, the Corporation shall deliver to the Agent, with respect to such Supplementary Material, documents similar to those referred to in Section 6(a). |
| (c) | Delivery of the Offering Documents by the Corporation shall constitute the representation and warranty of the Corporation to the Agent that, as at their respective dates of filing: |
| (i) | all information and statements (except information and statements relating solely to the Agent and provided by the Agent in writing) contained in the Offering Documents, as the case may be, are true and correct, in all material respects , and contain no misrepresentation and constitute full, true and plain disclosure of all material facts relating to the Corporation, the Offering and the Offered Shares; |
| (ii) | no material fact or information has been omitted therefrom (except facts or information relating solely to the Agent) which is required to be stated in such disclosure or is necessary to make the statements or information contained in such disclosure not misleading in light of the circumstances under which they were made; and |
| (iii) | except with respect to any information relating solely to the Agent and provided by the Agent in writing, such documents comply with the requirements of the Securities Laws, |
and such deliveries shall also constitute the Corporation’s consent to the Agent’s use of the Offering Documents in connection with the distribution of the Offered Shares in the Qualifying Jurisdictions.
| (d) | The Corporation shall cause commercial copies of the Final Prospectus and any Supplementary Material to be delivered to the Agent, without charge in such numbers and in such cities as the Agent may reasonably request, the Final Prospectus and any Supplementary Material given forthwith after the Agent has been advised that the Corporation has complied with the Securities Laws in the Qualifying Jurisdictions. Such delivery shall be effected as soon as practicable and, in any event, on or before the date which is the later of: (i) in relation to the Final Prospectus, (A) two (2) Business Days after the Canadian Securities Regulators have issued a receipt for the Final Prospectus and (B) two (2) Business Days after the date on which the Agent provides print and delivery instructions and, (ii) in relation to any Supplementary Material, on or before the date which is the later of: (i) two (2) Business Days after the Canadian Securities Regulators have issued a receipt for the Supplementary Material, if applicable and (ii) two (2) Business Days after the date on which the Agent provides print and delivery instructions for such Supplementary Material. |
| (e) | The Agent shall deliver to each purchaser of the Offered Shares a copy of the Final Prospectus in compliance with Securities Laws. The Agent shall send a copy of any amendment to the Prospectus to all persons to whom copies of the Prospectus are sent. |
| 7. | Material Changes. |
| (a) | During the period prior to the Agent notifying the Corporation of the completion of the distribution of the Offered Shares, the Corporation shall promptly inform the Agent in writing of the full particulars of: |
| (i) | any of the representations or warranties made by the Corporation in this Agreement no longer being true and correct in all material respects at any particular time; |
| (ii) | any material change (actual, anticipated, contemplated, threatened, financial or otherwise) or any event or the discovery of any fact or circumstance which the Corporation believes is material to the business, affairs, operations, securities, assets, liabilities (contingent or otherwise), financial condition or prospects of the Corporation or any of its affiliates taken as a whole, which the Corporation receives notice of, or discovers; |
| (iii) | any material fact which has arisen or has been discovered and would have been required to have been stated in the Preliminary Prospectus or the Final Prospectus had the fact arisen or been discovered on, or prior to, the date of such documents; |
| (iv) | any change in any material fact contained in the Offering Documents or whether any event or state of facts has occurred after the date hereof, which, in any case, is, or may be, of such a nature as to render any of the Offering Documents untrue or misleading in any material respect or to result in any misrepresentation in any of the Offering Documents, or which would result in the Final Prospectus or any Supplementary Material not complying with Securities Laws; and |
| (v) | any actual or threatened hearing, proceeding, litigation or investigation or any communication to or request made of the Corporation or, to the Corporation’s knowledge, of any other person from any Securities Regulators, stock exchange or regulatory authority, domestic or foreign, which might reasonably be considered relevant to this Agreement or the Offering, in each case relating to the Corporation, any of its affiliates, the Offering, any other transaction or any opinion. |
| (b) | The Corporation will comply with Securities Laws and prepare and file promptly any Supplementary Material which may be necessary and will otherwise comply with all legal requirements necessary to continue to qualify the distribution of the Offered Shares and the Agent’s Warrants and the grant of the Over-Allotment Option in each of the Qualifying Jurisdictions. |
| (c) | In addition to the provisions of Sections 7(a) and 7(b), the Corporation shall in good faith discuss with the Agent any change, event or fact contemplated in Sections 7(a) and 7(b) which is of such a nature that there is or could be reasonable doubt as to whether notice should be given to the Agent under Section 7(a) hereof and shall consult with the Agent with respect to the form and content of any amendment or other Supplementary Material proposed to be filed by the Corporation, it being understood and agreed that no such amendment or other Supplementary Material shall be filed with any Securities Regulator prior to the review and sign-off thereof by the Agent and its counsel, acting reasonably and without undue delay. |
| (d) | If, during the period of distribution of the Offered Shares, there shall be any change in Securities Laws which, in the opinion of the Agent, acting reasonably, requires the filing of any Supplementary Material, upon written notice from the Agent, the Corporation shall, to the satisfaction of the Agent, acting reasonably, promptly prepare and file any such Supplementary Material with the appropriate Securities Regulators where such filing is required. |
| 8. | Covenants of the Corporation. The Corporation hereby covenants to the Agent that the Corporation: |
| (a) | will advise the Agent, promptly after receiving notice thereof, of the time when the Final Prospectus and any Supplementary Material has been filed and receipts therefor have been obtained pursuant to the Passport System and will provide evidence reasonably satisfactory to the Agent of each such filing and copies of such receipts; |
| (b) | will advise the Agent, promptly after receiving notice or obtaining knowledge thereof, of: |
| (i) | the issuance by any Canadian Securities Regulator of any order suspending or preventing the use of any of the Offering Documents; |
| (ii) | the institution, threatening or contemplation of any proceeding for any such purposes; |
| (iii) | any order, ruling, or determination having the effect of suspending the sale or ceasing the trading in any securities of the Corporation (including the Offered Shares) has been issued by any Securities Regulator or the institution, threatening or contemplation of any proceeding for any such purposes; or |
| (iv) | any requests made by any Canadian Securities Regulator for amending or supplementing the Preliminary Prospectus or the Final Prospectus, or for additional information, and will use commercially reasonable efforts to prevent the issuance of any order referred to in Section 8(b)(i) and, if any such order is issued, to obtain the withdrawal thereof promptly; |
| (c) | will, if during the period of distribution of the Offered Shares there shall be any change in applicable Securities Laws or the occurrence of any other event which requires the filing of any Supplementary Material, to the satisfaction of the Agent, acting reasonably, promptly prepare and file such Supplementary Material with the appropriate Canadian Securities Regulator in each of the Qualifying Jurisdictions where such filing is required; |
| (d) | will direct all enquiries from any person or entity expressing interest in participating in the Offering to the Agent; |
| (e) | will use best efforts to promptly do, make, execute, deliver or cause to be done, made, executed or delivered, all such acts, documents and things as the Agent may reasonably require from time to time for the purpose of giving effect to this Agreement and take all such steps as may be reasonably within its power to implement to its full extent the provisions of this Agreement; |
| (f) | will use commercially reasonable efforts to maintain its status as a “reporting issuer” (or the equivalent thereof) not in default of the requirements of the Securities Laws of each of the Qualifying Jurisdictions to the date which is 36 months following the Listing Date; provided that the Company shall not be prohibited from completing any transaction which would result in the Company ceasing to be a reporting issuer so long as the Company’s shareholders: (a) receive cash or securities of an entity which is a reporting issuer in Canada; or (b) have approved the transaction in accordance with Applicable Laws; |
| (g) | will use commercially reasonable efforts to maintain the listing of the Common Shares on the CSE or such other recognized stock exchange or quotation system as the Agent may approve, acting reasonably, such approval not to be unreasonably withheld, conditioned, or delayed (and the Agent agrees that the Toronto Stock Exchange, Neo Exchange Inc. and TSX Venture Exchange are approved stock exchanges), to the date that is 36 months following the Closing Date; provided that, the Company shall not be prohibited from completing any transaction which would result in the Company ceasing to be listed so long as the Company’s shareholders: (a) receive cash or securities of an entity which is listed on a stock exchange in Canada; or (b) have approved the transaction in accordance with Applicable Laws; |
| (h) | will use commercially reasonable efforts to remain, and to cause each Material Subsidiary to remain, a corporation validly subsisting under the laws of its jurisdiction of incorporation, licensed, registered or qualified as an extra-provincial or foreign corporation in all jurisdictions where the character of its properties owned or leased or the nature of the activities conducted by it make such licensing, registration or qualification necessary and will carry on its business in the ordinary course and in compliance in all material respects with all Applicable Laws, rules and regulations of each such jurisdiction; |
| (i) | during the distribution of the Offered Shares, the Corporation will consult with the Agent and promptly provide to the Agent drafts of any press releases of the Corporation for review by the Agent and the Agent’s counsel prior to dissemination, and will consider, acting reasonably and in good faith, any proposed changes to any such documents as the other party may reasonably require provided that the Agent shall use commercially reasonable efforts to cause any such review to be completed within one (1) Business Day; and |
| (j) | will use the net proceeds of the Offering contemplated herein in the manner and subject to the qualifications described in the Final Prospectus under the heading “Use of Proceeds”. |
| 9. | Representations as to the Offering Documents and the Marketing Materials. |
| (a) | The Corporation has prepared and delivered, or will prepare an deliver, to the Agent copies of the Offering Documents and Marketing Materials each for use by the Agent in connection with their solicitation of purchase of, or offering of, the Offered Shares. |
| (b) | Filing of the Offering Documents and the Marketing Materials shall constitute a representation and warranty by the Corporation to the Agent that: |
| (i) | as at their respective dates and as at their respective dates of filing, as applicable, the information and statements (excluding any information or statement relating solely to the Agent furnished in writing by the Agent) contained in the Offering Documents and the Marketing Materials (A) contain no misrepresentation and (B) constitute full, true and plain disclosure of all material facts relating to the Corporation the Offered Shares and the Offering as required by applicable Securities Laws; |
| (ii) | as at their respective dates and as at their respective dates of filing, as applicable, except with respect to any information or statement relating solely to the Agent furnished in writing by the Agent, such documents comply in all material respects with the requirements of applicable Securities Laws; and |
| (iii) | as at their respective dates and as at their respective dates of filing, the statistical and market-related data included in the Offering Documents and the Marketing Materials are based on or derived from sources that are, to the knowledge of the Corporation, are reputable, reliable and accurate in all material respects, |
and such filings shall also constitute the Corporation’s consent to the Agent’s use of the Offering Documents and the Marketing Materials in connection with the distribution of the Offered Shares in the Qualifying Jurisdictions in compliance with this Agreement and applicable Securities Laws.
| 10. | Representations and Warranties of the Corporation. The Corporation represents and warrants to the Agent that each of the following representations and warranties is true and correct on the date of this Agreement: |
| (a) | Incorporation and Organization: The Corporation is a corporation duly incorporated and valid existing under the laws of the Business Corporations Act (Ontario) and has all requisite corporate power and capacity to carry on its business as now conducted or proposed to be conducted and to own or lease and operate its property and assets. The Corporation is not in violation of any material provision of its constating documents. |
| (b) | Capacity: The Corporation has all requisite corporate power, authority and capacity to: (i) enter into and deliver this Agreement and the Material Contracts and to perform its obligations hereunder (including the execution and delivery of the Offering Documents and the filing of each Prospectus with the Canadian Securities Regulators in accordance with this Agreement) and thereunder; and (ii) create, offer, issue, grant and sell, as applicable, the Securities and the Over-Allotment Option in accordance with the provisions of this Agreement. |
| (c) | Authorized Capital: The authorized capital of the Corporation consists of an unlimited number of Common Shares, of which, as of the date hereof, 16,000,000 Common Shares are issued and outstanding as fully paid and non-assessable. As of the date hereof, no person has or will have any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any securities of the Corporation, other than: (i) 2,774,000 Options, each exercisable to acquire one Common Share at a price of $0.75 per Common Share until November 27, 2027; (ii) the Conversion Units granted to the Convertible Loan holders, which shall automatically convert, concurrent with Closing, into 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; (iii) 2,500,000 Advisory Warrants; and (iv) 500,000 RSUs. |
| (d) | Subsidiaries: The Corporation has no subsidiaries that are required to be disclosed by Section 4.2 of Form 41-101F1 other than the Material Subsidiaries as set forth in Schedule “B” hereto. The Corporation does not beneficially own or exercise control or direction over any of the outstanding securities of any company that holds any assets or conducts any operations material to the Corporation other than the Material Subsidiaries and the Corporation beneficially owns, directly or indirectly, the percentage indicated in Schedule “B” hereto of the issued and outstanding shares in the capital of the Material Subsidiaries, all of which are free and clear of any Encumbrances of any kind whatsoever, all of such shares have been duly authorized and are validly issued and are outstanding as fully paid and non-assessable shares and no person has any right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the purchase from the Corporation of any interest in any of such shares or for the issue or allotment of any unissued shares in the capital of the Material Subsidiaries or any other security convertible into or exchangeable for any such shares. The Material Subsidiaries are validly existing and in good standing under the laws of their respective jurisdictions of incorporation in all material respects and have the requisite power and authority to own their assets and conduct their business as currently owned and conducted and as presently proposed to be conducted. The Material Subsidiaries are duly qualified or licensed to do business and are in good standing in each jurisdiction in which the nature of their business as presently carried on or the ownership or leasing of their property and assets makes such qualification or licensing necessary, in each case, in all material respects. No Material Subsidiary is in violation of any material provision of its constating documents. |
| (e) | Listing: The Corporation has made an application to the CSE so that, at the time of issue of the Offered Shares and the Agent’s Warrant Shares, the Common Shares will have been conditionally approved for listing on the CSE, subject only to the Standard Listing Conditions. |
| (f) | Certain Securities Law Matters: The Common Shares are not listed or posted for trading on any stock exchange and the Corporation is not a reporting issuer or the equivalent thereof in any jurisdiction and is not in default of any material requirement of the Securities Laws. The Corporation is not required to file reports with the SEC pursuant to Section 13(a) or Section 15(d) of the U.S. Exchange Act. In relation to the Offering, distribution, sales and marketing of the Offered Shares offered under the Prospectus, the Corporation has complied with all applicable corporate and securities laws and administrative policies including without limitation, the Securities Laws and applicable laws of foreign jurisdictions. |
| (g) | Unanimous Shareholders Agreement: The Corporation is a party to a unanimous shareholder’s agreement dated December 1, 2020, between the Corporation, 1276156 B.C. Ltd., 1275203 B.C. Ltd., and 2384449 Ontario Inc., as amended by the foregoing parties and J.L. Holdco Inc. in an amendment agreement to the unanimous shareholder agreement dated October 3, 2022 (the “Shareholders’ Agreement”). The Shareholders’ Agreement contains various provisions affecting the business, affairs and governance of the Corporation, and includes a termination provision which provides that the Shareholders’ Agreement shall terminate on the Closing Date. |
| (h) | Rights to Acquire Securities: No person has any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any of the unissued Common Shares or other securities of the Corporation or any Material Subsidiary, except as disclosed by the Corporation in the Prospectus. |
| (i) | No Pre-emptive Rights: The issue of the Offered Shares will not be subject to any pre-emptive right or other contractual right to purchase securities granted by the Corporation or to which the Corporation is subject. |
| (j) | Prospectus: The Preliminary Prospectus contains full, true and plain disclosure of all material facts in relation to the Corporation, the Corporation’s business and its securities, contains no misrepresentations, is accurate in all material respects and omits no fact, the omission of which makes such representations misleading or incorrect in any material respect. The Final Prospectus will contain full, true and plain disclosure of all material facts in relation to the Corporation, the Corporation’s business and its securities, will contain no misrepresentations, will be accurate in all material respects and will omit no fact, the omission of which will make such representations misleading or incorrect in any material respect. There is no fact known to the Corporation which the Corporation has not disclosed in the Preliminary Prospectus and will not disclose in the Final Prospectus which results or will result in a Material Adverse Effect or, so far as the Corporation can reasonably foresee, could reasonably be expected to either have a Material Adverse Effect or materially adversely affect the ability of the Corporation to perform its obligations under this Agreement. The Corporation has a reasonable basis for disclosing any forward-looking information in the Prospectus and is not, as of the date hereof, required to update any such forward-looking statements pursuant to NI 51-102. |
| (k) | No Significant Acquisition: The Corporation has not completed a ‘significant acquisition’ (as such term is defined in NI 51-102) requiring disclosure in the Prospectus. The Corporation is not engaged in any proposed acquisition of a business or related business that has progressed to a state where a reasonable person would believe that the likelihood of the Corporation completing the acquisition is high, and that, if completed by the Corporation, would be a ‘significant acquisition’ (as such term is defined in NI 51-102). |
| (l) | Transfer Agent: The Transfer Agent has been appointed by the Corporation as the registrar and transfer agent for the Common Shares. |
| (m) | Issue of Securities: All necessary corporate action has been taken, or will be taken before Closing, to authorize the valid creation, issue, grant, sale of and the delivery of certificates (whether in definitive form or electronic form) representing the Offered Shares, the Agent’s Warrants and the Agent’s Warrant Shares, and at Closing, the Offered Shares will be validly created and issued as fully paid and non-assessable Common Shares and the Agent’s Warrants will be validly created and issued. Upon the exercise of the Agent’s Warrants in accordance with the terms thereof, including payment of the exercise price therefor, the Agent’s Warrant Shares will be validly issued as fully paid and non-assessable Common Shares. |
| (n) | Consents, Approvals and Conflicts: None of the offering, sale, creation, grant and delivery of the Securities, as applicable, the grant of the Over-Allotment Option, the execution and delivery of this Agreement or the Prospectus, the compliance by the Corporation with the provisions of this Agreement or the consummation of the transactions contemplated herein and therein including, without limitation, the issue of the Offered Shares upon the terms and conditions as set forth herein, do or will (i) subject to compliance by the Agent with the provisions of this Agreement, require the consent, approval, authorization, order or agreement of, or registration or qualification with, any governmental agency, body or authority, court, stock exchange, securities regulatory authority or other person, except (A) such as have been, or will by the Closing Date, be obtained, or (B) such as may be required under the Securities Laws of any of the Qualifying Jurisdictions and the policies of the CSE and will be obtained by the Closing Date, or (ii) conflict with or result in any breach or violation of any of the provisions of, or constitute a default under, any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Corporation is a party or by which it or any of its properties or assets is bound, or the notice of articles, by-laws or articles or any other constating document of the Corporation or any resolution passed by the directors (or any committee thereof) or shareholders of the Corporation or any statute or any judgment, decree, order, rule, policy or regulation of any court, Governmental Authority, arbitrator, stock exchange or securities regulatory authority applicable to the Corporation or any of its properties or assets which could have a Material Adverse Effect. |
| (o) | Authority and Authorization: The Corporation has all requisite corporate power and capacity to enter into this Agreement and to do all acts and things and execute and deliver all documents as are required hereunder and thereunder to be done, observed, performed or executed and delivered by it in accordance with the terms hereof and thereunder and the Corporation has taken, or will have taken before Closing, all necessary corporate action to authorize the execution, and delivery of, and performance of its obligations under this Agreement including, without limitation, the issue of the Offered Shares and creation and issue of the Agent’s Warrants upon the terms and conditions set forth herein. |
| (p) | Eligibility for Investment: The Offered Shares will, on the Closing Date, be qualified investments under the Income Tax Act (Canada) and the regulations thereunder, as in effect on the date hereof and thereof. |
| (q) | No Material Adverse Change: Subsequent to the date of the most recent Financial Statements included or incorporated by reference in the Offering Documents, there has not been any Material Adverse Change and there has been no event or occurrence that could reasonably be expected to result in a Material Adverse Change except as disclosed in the Offering Documents. |
| (r) | Validity and Enforceability: This Agreement has been authorized, executed and delivered by the Corporation and constitutes a valid and legally binding obligation of the Corporation enforceable against the Corporation in accordance with the terms hereof, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought, and by the fact that rights to indemnity, contribution and waiver, and the ability to sever unenforceable terms, may be limited by Applicable Law. |
| (s) | Disclosure: Each of the Disclosure Documents does not, as of the date thereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and such documents collectively disclose all material facts relating to the Corporation and do not omit to state a material fact relating to the Corporation. There is no fact known to the Corporation that the Corporation has not disclosed to the Agent that would result in a Material Adverse Effect or, so far as the Corporation can reasonably foresee, will have a Material Adverse Effect or materially adversely affect the ability of the Corporation to perform its obligations under this Agreement. The Corporation has disclosed any and all matters which it is required to disclose to the Agent hereunder in a timely manner. |
| (t) | No Cease Trade Order: No order preventing, ceasing or suspending trading in any securities (including the Offered Shares) of the Corporation or prohibiting the issue and sale of securities by the Corporation is issued and outstanding and no proceedings for either of such purposes have been instituted or, to the best of the knowledge of the Corporation, are pending, contemplated or threatened. |
| (u) | Accounting Controls: The Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurance: (i) that transactions are completed in accordance with the general or a specific authorization of management or directors of the Corporation; (ii) that transactions are recorded as necessary to permit the preparation of consolidated financial statements for the Corporation in conformity with International Financial Reporting Standards and to maintain asset accountability; (iii) that access to assets of the Corporation is permitted only in accordance with the general or a specific authorization of management or directors of the Corporation; (iv) that the recorded accountability for assets of the Corporation is compared with the existing assets of the Corporation at reasonable intervals and appropriate action is taken with respect to any differences therein; and (v) regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on its financial statements or interim financial statements. |
| (v) | Financial Statements: The Corporation’s consolidated audited financial statements for the years ended June 30, 2022 and June 30, 2021 (the “Audited Financial Statements”), and the Corporation’s unaudited, reviewed consolidated financial statements for the three months ended September 30, 2022 (the “Interim Financial Statements”), and all notes to the Audited Financial Statements and Interim Financial Statements (i) comply as to form in all material respects with the requirements of the applicable Securities Laws; (ii) present fairly, in all material respects, the financial position, the results of operations and cash flows and the shareholders’ equity and other information purported to be shown therein at the respective dates and for the respective periods to which they apply, (iii) have been prepared in conformity with International Financial Reporting Standards, consistently applied throughout the period covered thereby, and all adjustments necessary for a fair presentation of the results for such periods have been made in all material respects and (iv) contain and reflect adequate provision or allowance for all reasonably anticipated liabilities, expenses and losses of the Corporation, and, except as disclosed in the Prospectus of the Financial Statements there has been no change in accounting policies of practices of the Corporation since the date of the most recent Financial Statements included or incorporated by reference in the Offering Documents. |
| (w) | Auditors: The Corporation’s Auditors who audited the Audited Financial Statements and who provided their audit report thereon, and who reviewed the Interim Financial Statements as well as any subsequent Financial Statements included or incorporated by reference in the Offering Documents, are independent public accountants as required under applicable Securities Laws and there has not, since incorporation of the Corporation, been a reportable event (within the meaning of NI 51-102) between the Corporation and any such auditor. |
| (x) | Audit Committee: The audit committee of the Corporation is comprised and operates in accordance with the requirements of National Instrument 52-110 – Audit Committees. |
| (y) | Changes in Financial Position: Other than as disclosed in the Offering Documents, since June 30, 2020, the Corporation has not: |
| (i) | paid or declared any dividend or incurred any material capital expenditure or made any commitment therefor; |
| (ii) | incurred any obligation or liability, direct or indirect, contingent or otherwise, except in the ordinary course of business; and |
| (iii) | entered into any material transaction or made any significant acquisition. |
| (z) | Insolvency: None of the Corporation nor any Material Subsidiary has committed an act of bankruptcy or sought protection from the creditors thereof before any court or pursuant to any legislation, proposed a compromise or arrangement to the creditors thereof generally, taken any proceeding with respect to a compromise or arrangement, taken any proceeding to be declared bankrupt or wound up, taken any proceeding to have a receiver appointed of any of the assets thereof, had any person holding any Encumbrance, lien, charge, hypothec, pledge, mortgage, title retention agreement or other security interest or receiver take possession of any of the property thereof, had an execution or distress become enforceable or levied upon any portion of the property thereof or had any petition for a receiving order in bankruptcy filed against it. |
| (aa) | Applicable Laws: To the knowledge of the Corporation, the Corporation and each Material Subsidiary has materially complied and will comply with the requirements of all Applicable Laws (including, without limitation, Securities Laws and applicable corporate laws) and administrative policies and directions, including, without limitation, in all matters relating to: (i) the conduct of the Corporation’s business; and (ii) the Offering and the issuance of the Securities. |
| (bb) | No Contemplated Changes: Except as disclosed in the Offering Documents and the Disclosure Documents, since the date of the most recent Financial Statements included or incorporated by reference in the Offering Documents, none of the Corporation nor any Material Subsidiary has approved and has not entered into any agreement in respect of, or has any knowledge of: |
| (i) | the purchase of any material property or assets or any interest therein or the sale, transfer or other disposition of any material property or assets or any interest therein currently owned, directly or indirectly, by the Corporation or a Material Subsidiary whether by asset sale, transfer of shares or otherwise; |
| (ii) | a change of control (by sale or transfer of shares or sale of all or substantially all of the property and assets of the Corporation or a Material Subsidiary or otherwise) of the Corporation; or |
| (iii) | to the knowledge of the Corporation, a proposed or planned disposition of shares by any shareholder who owns, directly or indirectly, 10% or more of the shares of the Corporation. |
| (cc) | Ten Percent Disclosure: Except as disclosed in the Offering Documents, none of the directors, officers or employees of the Corporation or the Material Subsidiaries, and, to its knowledge, no person who owns, directly or indirectly, more than 10% of any class of securities of the Corporation, or any other person exchangeable for more than 10% of any class of securities of Corporation, and no associate or affiliate of any of the foregoing, has or had any interest, direct or indirect, in any material transaction or any proposed material transaction with the Corporation or the Material Subsidiaries which materially affected, or could reasonably be expected to materially affect, the Corporation and the Material Subsidiaries, taken as a whole. |
| (dd) | Taxes and Tax Returns: The Corporation and each Material Subsidiary has filed in a timely manner all necessary tax returns and notices that are due and has paid all applicable taxes of whatsoever nature for all tax years prior to the date hereof to the extent that such taxes have become due or have been alleged to be due and the Corporation is not aware of any tax deficiencies or interest or penalties accrued or accruing, or alleged to be accrued or accruing, thereon where, in any of the above cases, it might reasonably be expected to have a Material Adverse Effect and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any tax return by any of them or the payment of any material tax, governmental charge, penalty, interest or fine against any of them. There are no material actions, suits, proceedings, investigations or claims now threatened or, to the knowledge of the Corporation, pending against the Corporation or any Material Subsidiary which could result in a material liability in respect of taxes, charges or levies of any Governmental Authority, penalties, interest, fines, assessments or reassessments or any matters under discussion with any Governmental Authority relating to taxes, governmental charges, penalties, interest, fines, assessments or reassessments asserted by any such authority and the Corporation has withheld (where applicable) from each payment to each of the present and former Representatives the amount of all taxes and other amounts, including, but not limited to, income tax and other deductions, required to be withheld therefrom, and has paid the same or will pay the same when due to the proper tax or other receiving authority within the time required under applicable tax legislation. |
| (ee) | Compliance with Laws, Licenses and Permits: The Corporation, each Material Subsidiary and, to the knowledge of the Corporation, each Representative, has conducted and is conducting, in each case, in all material respects, its business in compliance with all Applicable Laws, rules, regulations, tariffs, orders and directives of each jurisdiction in which it carries on business and which would reasonably be expected to materially affect the Corporation or any of the Material Subsidiaries, taken as a whole, and, possesses all material approvals, consents, certificates, registrations, authorizations, permits and licenses issued by the appropriate provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business currently carried on by it, is in material compliance with the terms and conditions of all such approvals, consents, certificates, authorizations, permits and licenses and with all laws, regulations, tariffs, rules, orders and directives material to the operations thereof, and to enable its assets to be owned or to be licensed and operated, in all material respects, as currently licensed and operated, and all such approvals, consents, certificates, authorizations, qualifications, permits and licenses held are valid and existing and in good standing, in each case, in all material respects, and the Corporation has not received any notice of the modification, revocation or cancellation of, or any intention to modify, revoke, or cancel any proceeding relating to the modifications, revocation, or cancellation of any such approval, consent, certificate, authorization, permit or license, nor has the Corporation received a notice of non-compliance, nor know of, nor have reasonable grounds to know of, any facts that could give rise to a notice of material non-compliance with any such laws, regulations and statutes that would materially affect the business of the Corporation or the Material Subsidiaries, taken a whole or the business or legal environment under which the Corporation or any of Material the Subsidiaries operates. |
| (ff) | No Notice of Non-Compliance: No notice with respect to any of the matters referred to in Section 10(ee) including any alleged violations by the Corporation or any Material Subsidiary with respect thereto has been received by the Corporation or, to the knowledge of the Corporation, any Material Subsidiary, and to the knowledge of the Corporation, no writ, injunction, order or judgement is outstanding, and no legal proceeding under or pursuant to any laws or relating to the ownership, use, maintenance or operation of the property and assets of the Corporation, or any Material Subsidiary, is in progress, pending or threatened, which could reasonably be expected to have a Material Adverse Effect on the Corporation, or any Material Subsidiary, and to the knowledge of the Corporation, there are no grounds or conditions which exist, on or under any property now or previously owned, operated or leased by the Corporation, or any Material Subsidiary, on which any such legal proceeding might be commenced with any reasonable likelihood of success or with the passage of time, or the giving of notice or both, would give rise. |
| (gg) | Agreements and Actions: The Corporation and each Material Subsidiary is not in material violation of any term of any of its constating documents. The Corporation and each Material Subsidiary is not in material violation of any term or provision of any material agreement, indenture or other instrument to which it is a party or which is otherwise applicable to it which would, or could, reasonably be expected to, result in any Material Adverse Effect. The Corporation and each Material Subsidiary is not in default in the payment of any material obligation owed which is over thirty (30) days past due, if any, and there is no action, suit, proceeding or investigation commenced or, to the knowledge of the Corporation, threatened or pending which, either in any case or in the aggregate, would result in any Material Adverse Effect or which places, or would reasonably be expected to place, in question the validity or enforceability of this Agreement or any document or instrument delivered, or to be delivered, by the Corporation pursuant hereto. |
| (hh) | Legislation: The Corporation is not aware of any proposed material changes to existing legislation, or proposed legislation published by a legislative body, which it anticipates will materially and adversely affect the business, affairs, operations, assets, liabilities (contingent or otherwise) of the Corporation or any Material Subsidiary. |
| (ii) | No Defaults: The Corporation and each Material Subsidiary is not in material default of any material term, covenant or condition under or in respect of any judgement, order, agreement, license or instrument to which it is a party or to which it or any of its assets are or may be subject, and no event has occurred and is continuing, and no circumstance exists which has not been waived, which constitutes a material default in respect of any commitment, agreement, document or other instrument to which the Corporation or a Material Subsidiary is a party or by which it is otherwise bound entitling any other party thereto to accelerate the maturity of any material amount owing thereunder or which would have a Material Adverse Effect. |
| (jj) | Compliance with Employment Laws: The Corporation and its Material Subsidiaries are in compliance, in all material respects, with all Applicable Laws respecting employment and employment practices, terms and conditions of employment, pay equity and wages, except where such non-compliance would not constitute an adverse material fact concerning the Corporation or its Material Subsidiaries or result in a Material Adverse Effect, and neither the Corporation nor any Material Subsidiary has engaged in any unfair labour practice; there is no labour strike, dispute, slowdown, stoppage, complaint or grievance pending or, to the Corporation’s knowledge, threatened against the Corporation or a Material Subsidiary; no union representation question exists respecting the employees of the Corporation or a Subsidiary and no collective bargaining agreement is in place or currently being negotiated by the Corporation or a Material Subsidiary; neither the Corporation nor a Material Subsidiary has received any notice of any material unresolved matter and there are no outstanding orders under the Employment Standards Act (Ontario), the Human Rights Code (Ontario), the Occupational Health and Safety Act (Ontario) or the Workers’ Compensation Act (Ontario) or any other similar legislation in any jurisdiction in which the Corporation or a Subsidiary carries on business; no employee has any agreement as to the length of notice required to terminate his or her employment with the Corporation or a Material Subsidiary in excess of 24 months or equivalent compensation; and all benefit or pension plans of the Corporation and the Material Subsidiaries are funded in accordance with Applicable Laws and no past service funding liability exist thereunder. |
| (kk) | Employee Plans: Each material plan for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drugs, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, pension, incentive or otherwise contributed to, or required to be contributed to, by the Corporation or a subsidiary for the benefit of any current or former employee, consultant, officer or director has been disclosed in the Prospectus, as may be required pursuant to the Securities Laws, and has been maintained in material compliance with the terms thereof and with the requirements prescribed by any and all statutes, orders, rules, policies and regulations that are applicable to any such plan. |
| (ll) | Key Person Compensation: The directors, officers and key employees of the Corporation and the compensation arrangements with respect to such individuals are as disclosed or consistent with the disclosure in the Prospectus and except as disclosed in the Prospectus there are no pensions, profit sharing, group insurance or similar plans or other deferred compensation plans of any kind whatsoever affecting the Corporation. |
| (mm) | Accruals: All material accruals for unpaid vacation pay, premiums for unemployment insurance, health premiums, federal or provincial pension plan premiums, accrued wages, salaries and commissions and payments for any plan for any Representative have been accurately reflected in the books and records of the Corporation or such Material Subsidiary, as applicable. |
| (nn) | Work Stoppage: There has not been, and there is not currently, any labour trouble which is having a Material Adverse Effect or would reasonably be expected to have a Material Adverse Effect. |
| (oo) | Litigation: Other than as disclosed in Offering Documents, there are no actions, suits, proceedings, inquiries or investigations existing, pending or, to the knowledge of the Corporation, threatened against any of the property or assets of the Corporation or a Material Subsidiary, at law or equity, or before or by any court, federal, provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would result in a Material Adverse Effect or materially adversely affects the ability of any of them to perform the obligations thereof and the Corporation is not subject to any judgment, order, writ, injunction, decree, award, rule, policy or regulation of any Governmental Authority which, either separately or in the aggregate, would result in a Material Adverse Effect or materially adversely affects the ability of the Corporation and each Material Subsidiary to perform its obligations under this Agreement, and to its knowledge, and there are no events or circumstances that the Corporation would reasonably expect to form the basis of any such action, suit, proceeding or investigation. |
| (pp) | Proceedings: To the knowledge of the Corporation, none of the directors or officers of the Corporation is or has ever been subject to prior regulatory, criminal or bankruptcy proceedings in Canada or elsewhere. |
| (qq) | Good Standing with Regulators: The Corporation, each Material Subsidiary and, to the knowledge of the Corporation, each Representative, has conducted and is conducting it affairs and communications, in each case, in all material respects, in a responsive, cooperative and courteous manner with all provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business carried on by the Corporation and the Material Subsidiary, as applicable, and the Corporation, each Material Subsidiary and to the knowledge of the Corporation, each Representative, has had and continues to have a good standing relationship with all provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business in the relevant jurisdictions in which the Corporation and each Material Subsidiary operates. For the avoidance of doubt, except as disclosed to the Agent, the Corporation is not aware of any material disagreement, issue of non-compliance or complaint, past or present, between the Corporation or any of the Material Subsidiaries and any provincial, state, municipal, federal or other regulatory agency or body in any jurisdiction where the Corporation or its Material Subsidiaries has or continues to carry on its business. |
| (rr) | Business Activities: All product research and development activities, including quality assurance, quality control, testing, and research and analysis activities, conducted by, or on behalf of, the Corporation and any Material Subsidiary, as applicable, in connection with their business is in compliance, in all material respects, with all industry, laboratory safety, management and training standards and Applicable Laws and regulations applicable to the Corporation’s current and proposed business, and all such processes, procedures and practices, required in connection with such activities are in place as necessary and are being complied with, in all material respects. |
| (ss) | Unlawful Payments: The Corporation has not nor, to the best knowledge of the Corporation, has any director, officer, agent, employee or other person acting on behalf of the Corporation, (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (iii) violated or is in violation of any provision of the Corruption of Foreign Officials Act (Canada) or the Foreign Corrupt Practices Act (United States), or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. |
| (tt) | Anti-Money Laundering: |
| (i) | The operations of the Corporation and each Material Subsidiary are and have been conducted, at all times, in material compliance with all applicable financial recordkeeping and reporting requirements of applicable anti-money laundering statutes of the jurisdictions in which the Corporation and each Material Subsidiary is incorporated and in which it conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Corporation or any Material Subsidiary with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Corporation, threatened; |
| (ii) | the Corporation and each Material Subsidiary has not, directly or indirectly: (A) made or authorized any contribution, payment or gift of funds or property to any official, employee or agent of any governmental agency, authority or instrumentality of any jurisdiction; or (B) made any contribution to any candidate for public office, in either case where either the payment or the purpose of such contribution, payment or gift was, is or would be prohibited under the Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (United States) or the rules and regulations promulgated thereunder or under any other legislation of any relevant jurisdiction covering a similar subject matter applicable to the Corporation or a Material Subsidiary and its operations, and will not use any portion of the proceeds of the Offering, in contravention of such legislation; and |
| (iii) | the Corporation and each Material Subsidiary or, to the knowledge of the Corporation, any Representative has not been or is not currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department and the Corporation will not directly or indirectly use any proceeds of the distribution of the Offered Shares or lend, contribute or otherwise make available such proceeds to the Corporation or to any affiliated entity, joint venture partner or other person or entity, to finance any investments in, or make any payments to, any country or person targeted by any of the sanctions of the United States. |
| (uu) | Designated Persons: None of the Corporation, any Material Subsidiary, any Representative or affiliate of the Corporation or a Material Subsidiary is an individual or entity (an “OFAC Person”), or is owned or controlled by an OFAC Person, that is currently the subject or target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Corporation located, organized or resident in a country or territory that is the subject or the target of Sanctions (each, a “Sanctioned Country”); and the Corporation will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other OFAC Person: |
| (i) | to fund or facilitate any activities of or business with any OFAC Person that, at the time of such funding or facilitation, is the subject or the target of Sanctions; |
| (ii) | to fund or facilitate any activities or business in any Sanctioned Country in violation of Sanctions; or |
| (iii) | in any other manner that will result in a violation by any OFAC Person (including any OFAC Person participating in the transaction, whether as Agent, advisor, investor or otherwise) of Sanctions. Since incorporation, the Corporation and its Material Subsidiaries have not knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any OFAC Person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country in violation of Sanctions. |
| (vv) | Non-Arm’s Length Transactions: Except as disclosed in the Prospectus, the Corporation and each Material Subsidiary does not owe any amount to, nor has the Corporation or any Material Subsidiary any present loans to, or borrowed any amount from or is otherwise indebted to, any officer, director, employee or securityholder of any of them or any person not dealing at “arm’s length” (as such term is defined in the ITA) with any of them except for usual employee reimbursements and compensation paid or other advances of funds in the ordinary and normal course of the business of the Corporation and the Material Subsidiaries. Except employee or consulting arrangements made in the ordinary and normal course of business, the Corporation and each Material Subsidiary is not a party to any contract, agreement or understanding with any officer, director, employee or securityholder of any of them or any other person not dealing at arm’s length with the Corporation. Except as disclosed in the Prospectus and the Disclosure Documents, to the knowledge of the Corporation, no Representative or securityholder of the Corporation or any Material Subsidiary has any cause of action or other claim whatsoever against, or owes any amount to, the Corporation or any Material Subsidiary except for claims in the ordinary and normal course of the business of the Corporation and each Material Subsidiary such as for accrued vacation pay or other amounts or matters which would not be material to the Corporation or any such Material Subsidiary. |
| (ww) | Underwriting Conflict: Except as may be disclosed in the Prospectus, the Corporation is not a “related issuer” or a “connected issuer” to the Agent within the meaning of National Instrument 33-105 – Underwriting Conflicts of the Canadian Securities Regulators. |
| (xx) | Minute Books: The minute books of the Corporation and each Material Subsidiary that have been or will be made available to the Agent or counsel to the Agent, are complete and accurate in all material respects, except for minutes of board meetings or resolutions of the board of directors that have not been formally approved by the board of directors. |
| (yy) | Commission: Other than the Agent, there is no person acting or purporting to act at the request or on behalf of the Corporation that is entitled to any brokerage or finder’s fee in connection with the transactions contemplated by this Agreement. |
| (zz) | No Withholding of Public Information: The Corporation has not withheld from the Agent any fact or information relating to the Corporation or any Material Subsidiary or to the Offering that would reasonably be expected to be material to the Agent, and has proactively provided and will continue to provide the Agent and its representatives with all materials that may reasonably be required to conduct all due diligence regarding the Corporation and the Material Subsidiaries which the Agent may reasonably require, and has made known to the Agent and its representatives all material facts which may reasonably be required by the Agent to conduct their due diligence procedures. |
| (aaa) | COVID-19: Other than as mandated by a Governmental Authority, as at the date of this Agreement, there has been no closure or suspension to the operations of the Corporation or any Material Subsidiary as a result of the coronavirus (“COVID-19”) pandemic. The Corporation and each Material Subsidiary has been monitoring the COVID-19 pandemic and the potential impact at all of its operations and has put in place control measures consistent with evolving industry standards to support health and safety of all of its employees and residents. |
| (bbb) | Insurance: The assets of the Corporation and its Material Subsidiaries, and their respective business operations carry certain third-party liability insurance against property damage and injury. The Corporation also caries certain insurance policies for its assets and its respective business operations except where the failure to carry such insurance could not have a Material Adverse Effect on the Corporation, including: director and officer insurance, errors and omissions insurance, umbrella liability insurance, excess liability insurance, and automobile insurance. |
| (ccc) | Intellectual Property: The Corporation and each Material Subsidiary owns or has the valid rights to use all of the Intellectual Property necessary for the conduct of its respective business as currently conducted except where the failure to have such right could not have a Material Adverse Effect on the Corporation. The Corporation and each Material Subsidiary has a valid and enforceable right to use all third party Intellectual Property used or held for use in the business of the Corporation or a Material Subsidiary as currently conducted, as applicable except where the failure to have such right could not have a Material Adverse Effect on the Corporation. All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property that are material to the conduct of the business of the Corporation or a Material Subsidiary as currently conducted to which the Corporation or a Material Subsidiary, as applicable, is a party are valid and binding obligations of the Corporation or a Material Subsidiary, as applicable, enforceable in accordance with their terms, and, to the knowledge of the Corporation, there exists no event or condition that will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Corporation or a Material Subsidiary, as applicable, under any such license agreement. To the Corporation’s knowledge, the conduct of the Corporation’s and each Material Subsidiary’s business as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, and the Intellectual Property of the Corporation and the Material Subsidiaries which is material to the conduct of the business of the Corporation and the Material Subsidiaries as currently conducted or as currently proposed to be conducted is not, to the Corporation’s knowledge, being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Corporation’s knowledge, threatened or pending that seeks to limit or challenge the ownership, use, validity or enforceability of any Intellectual Property of the Corporation or any Material Subsidiary and the Corporation’s and each Material Subsidiaries’ use of any Intellectual Property owned by a third party. None the Corporation or any Material Subsidiary has received any communications alleging that the Corporation or a Material Subsidiary has violated or, by conducting its business as presently proposed, could violate any Intellectual Property or other proprietary rights of any other person, nor, without undertaking an investigation, is the Corporation or any Material Subsidiary aware of any basis therefor. |
| (ddd) | Security Measures: The Corporation and each Material Subsidiary has security measures and safeguards in place, consistent with generally accepted industry practice and Applicable Laws, to protect all personal information and data it may collect and that is also created, obtained or kept by any person receiving access to any of such client information and data from the Corporation or a Material Subsidiary, or permitted by the Corporation or a Material Subsidiary to use, sell, handle or in any way deal with, including, but not limited to, subcontractors, bodies corporate, and researchers, from illegal or unauthorized access or use by them, their personnel or third parties, or access or use by them, their personnel or third parties in a manner that violates the privacy rights of such parties. The Corporation and each Material Subsidiary has complied, in all material respects, with all privacy legislation under Applicable Laws, and has not collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized access to any information protected by applicable privacy legislation, whether collected directly or from third parties, in an unlawful manner. The Corporation and each Material Subsidiary has taken all reasonable steps to protect personal information against loss or theft and against unauthorized access, copying, use, modification, disclosure or other misuse. |
| (eee) | Forecasts, Budgets and Market Data: The forecasts, budgets or projections provided by or on behalf of the Corporation to the Agent were prepared in good faith, disclosed all relevant material assumptions and contain reasonable estimates of the prospects of the business. Any statistical and market-related data included in the Final Prospectus is based on or derived from sources that the Corporation believes are reliable and accurate, and the Corporation has obtained the consent to the use of such data from such sources to the extent required. |
| (fff) | Third Party Partners: No third-party partners of the Corporation have notified the Corporation that such partner does not intend to continue dealing with the Corporation on substantially the same terms as presently conducted, subject to changes in pricing and volume in the ordinary course of business. |
| (ggg) | Employee Bonuses: Other than as disclosed in the Final Prospectus, there are no material bonuses, distributions, commissions, excess salary payments and other amounts owing to employees which will be payable outside the ordinary course of business by the Corporation to any employee of the Corporation after the Closing Date relating to their employment with the Corporation prior to the Closing Date. |
| (hhh) | Freedom to Operate: Neither the Corporation nor any Material Subsidiary is a party to any agreement restricting the Corporation’s or any Material Subsidiary’s freedom to operate within a particular area. |
| (iii) | Manipulation of Price: The Corporation has not taken, nor will the Corporation take, directly or indirectly, any action which is designed to or which constitutes or might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Corporation to facilitate the sale or resale of the Common Shares. |
| (jjj) | Environmental Laws: The Corporation or its Subsidiaries are not in violation of any federal, provincial, state, local, municipal or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemical pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”). The Corporation and its Subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws for the conduct of its business are presently carried on and is in material compliance with their requirements except where the failure to have such permits, authorizations or approvals or such non-compliance could not have a Material Adverse Effect on the Corporation. There are no pending or, to the knowledge of the Corporation, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Laws against the Corporation or any of its Subsidiaries. There are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit, or proceeding by any private party or governmental body or agency, against or affecting the Corporation or any of its Subsidiaries relating to Hazardous Materials or any Environmental Laws. |
| (kkk) | Insider Sales: To the knowledge of the Corporation, no insider (as such term is defined in Securities Laws) of the Corporation has a present intention to sell any securities of the Corporation held by it. |
| (lll) | Profit Sharing: There are no profit sharing arrangements in place that provide for any additional payments by the Corporation. |
| (mmm) | Cross Border Transfers: The Corporation and its Material Subsidiaries are able to contemporaneously transfer funds to the United States from Canada and to Canada from the United States in order to meet the business needs and liabilities of the Corporation and its Material Subsidiaries including those arising pursuant to this Agreement. For greater certainty, the Corporation and each Material Subsidiary have no restrictions which would impede their ability to transfer funds to and from the United States in order to pay the liabilities of the Corporation and Material Subsidiaries generally as they become due. |
| 11. | Representations and Warranties of the Agent. The Agent represents, warrants and covenants to and with the Corporation that the Agent: |
| (a) | is a valid and subsisting corporation, duly incorporated and in good standing under the law of the jurisdiction in which it was incorporated; |
| (b) | has good and sufficient right and authority to enter into this Agreement and complete the transactions contemplated under this Agreement on the terms and conditions set forth herein; |
| (c) | this Agreement has been authorized, executed and delivered by the Agent and constitutes a valid and legally binding obligation of the Agent enforceable against the Agent in accordance with the terms hereof, except in any case as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought, and by the fact that rights to indemnity, contribution and waiver, and the ability to sever unenforceable terms, may be limited by Applicable Law. |
| (d) | it will not make any representation or warranty with respect to the Corporation other than as set forth in this Agreement, and the Offering Documents without the prior approval of the Corporation; |
| (e) | is a dealer registered under the Securities Laws in each of the Qualifying Jurisdictions; and |
| (f) | has complied with and fulfilled and will comply with and fulfil all legal requirements (including, without limitation, compliance with applicable Securities Laws) to be fulfilled by it to act as the Corporation’s agent in undertaking the Offering in the Qualifying Jurisdictions. |
| 12. | Closing Deliveries. |
| (a) | The purchase and sale of the Offered Shares shall be completed at the Closing Time at such place as the Agent and the Corporation may agree. At the Closing Time, the Corporation shall duly and validly cause the “instant” deposit of the Offered Shares, in uncertificated form to the CDS account of the Agent, or in the manner directed by the Agent in writing, registered in the name of “CDS & Co.” or in such other name or names as the Agent may direct the Corporation in writing prior to the Closing Time. Alternatively, if requested by the Agent, at the Closing Time, the Corporation shall duly and validly deliver to the Agent one or more definitive share certificates) representing the Offered Shares registered in the name of “CDS & Co.” or in such other name or names as the Agent may direct the Corporation in writing prior to the Closing Time. In the event that the Corporation and the Agent, each acting reasonably, agree to procedures for the direct settlement by the Corporation with the subscribers of certain Offered Shares, the Corporation shall complete the sale of such Offered Shares in accordance with such procedures. |
| (b) | Delivery by the Corporation of the Offered Shares shall be against payment by the Agent to the Corporation, at the direction of the Corporation, in lawful money of Canada by certified cheque or wire transfer an amount equal to the aggregate purchase price for the Offered Shares, as the case may be, being issued and sold hereunder less the Cash Fee and the remaining balance of the Corporate Finance Fee and all of the estimated Agent’s Expenses payable by the Corporation to the Agent in accordance with Section 23 hereof. |
| (c) | In addition, at or prior to the applicable Closing Time, the Corporation shall duly and validly deliver to the Agent, or as otherwise directed by the Agent, one or more certificates (whether in definitive form or electronic form) representing the Agent’s Warrants registered in such name or names as the Agent may notify the Corporation in writing prior to Closing. |
| 13. | Agent’s Conditions. The obligation of the Agent to complete the transactions contemplated by this Agreement at the Closing Time, shall be subject to the representations and warranties of the Corporation contained in this Agreement being accurate as of the date of this Agreement and as of the Closing Time, and to the following conditions (it being understood that the Agent may waive in whole or in part or extend the time for compliance with any of such terms and conditions without prejudice to its rights in respect of any other of the following terms and conditions or any other or subsequent breach or non- compliance, provided that to be binding on the Agent any such waiver or extension must be in writing): |
| (a) | the Agent shall have received legal opinions addressed to the Agent, dated the Closing Date and subject to certain customary qualifications of DLA Piper (Canada) LLP, the Corporation’s legal counsel, as to the legal matters relating to the Corporation and the creation, issuance and sale of the Offered Shares substantially in the form as set out in Schedule “A”, or, instead of rendering opinions relating to the laws of the Qualifying Jurisdictions, the Corporation’s solicitors may engage one or more legal counsel in the Qualifying Jurisdictions or elsewhere to provide such local counsel opinions as may be necessary; |
| (b) | the Agent shall have received in respect of each Material Subsidiary, legal opinions from legal counsel to, and duly qualified to practice law in the jurisdiction of existence of, each such Material Subsidiary addressed to the Agent and Agent’s legal counsel dated the Closing Date and subject to customary qualifications as to all legal matters reasonably requested by the Agent relating to such Material Subsidiary, including, but not limited to: (i) the existence of the Material Subsidiary; (ii) the issued and outstanding securities of the Material Subsidiary and the securities thereof held by the Corporation or a subsidiary of the Corporation; and (iii) the corporate power and capacity of the Material Subsidiary to carry on its business and activities and to own and lease its property and assets under applicable corporate law and its constating documents; each such opinion to be in form and substance, acceptable in all reasonable respects to the Agent and the Agent’s legal counsel; |
| (c) | the Agent shall have received a certificate, dated the Closing Date, of such two senior officers of the Corporation as are acceptable to the Agent, acting reasonably, addressed to the Agent and the Agent’s counsel, in a form satisfactory to the Agent, acting reasonably, certifying for and on behalf of the Corporation, without personal liability, to the best of their knowledge, information and belief, after due enquiry, with respect to: |
| (i) | the notice of articles, by-laws and articles of the Corporation; |
| (ii) | the constating documents of the Material Subsidiaries; |
| (iii) | the minutes, resolutions or other records of various proceedings and actions of the Corporation’s board of directors relating to the Offering, this Agreement and the Offering Documents; and |
| (iv) | the incumbency and specimen signatures of signing officers of the Corporation; |
| (d) | the Agent shall have received a certificate, dated the Closing Date, of such two senior officers of the Corporation as are acceptable to the Agent, acting reasonably, addressed to the Agent and the Agent’s counsel, in a form satisfactory to the Agent, acting reasonably, certifying for and on behalf of the Corporation, without personal liability, to the best of their knowledge, information and belief, after due enquiry and after having carefully examined the Offering Documents and the Marketing Materials, that: |
| (i) | the Corporation has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied in all material respects at or prior to the Closing Time; |
| (ii) | the representations and warranties of the Corporation in this Agreement and in any certificates or other documents delivered by the Corporation pursuant to or in connection with this Agreement are true and correct in all material respects (except for such representations which are already qualified as to materiality, in which case, such representations and warrants will be true and correct in all respects) as at the Closing Time, with the same force and effect as if made on and as at the Closing Time (except where such representations and warranties are given at a particular time, which will be true and correct at that time), after giving effect to the transactions contemplated by this Agreement; |
| (iii) | a receipt has been issued by the Canadian Securities Regulators for the Final Prospectus and no order, ruling or determination having the effect of ceasing the trading or suspending or restricting the sale of the Offered Shares or any other securities of the Corporation has been issued or made by any Governmental Authority and is continuing in effect and no proceedings for such purpose have been instituted or are pending or, to the knowledge of such officers, contemplated or threatened by any Governmental Authority; |
| (iv) | since the respective dates as of which information is given in the Final Prospectus: (A) there has been no material change affecting the Corporation or any Material Subsidiary; and (B) no transaction has been entered into by the Corporation or any Material Subsidiary other than in the ordinary course of business, which is material to the Corporation or a Material Subsidiary, other than as disclosed in the Offering Documents; |
| (v) | the Prospectus does not contain a misrepresentation and contains full, true and plain disclosure of all material facts relating to the Offering, including the Offered Shares; and |
| (vi) | except for such information or statements provided by any person or company whose profession or business gives authority to the information or statement made, (A) such officers have carefully examined the Offering Documents and the Marketing Materials and, in their opinion, as of the date of this Agreement and as of the Closing Date, the Offering Documents and Marketing Materials, did not and does not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Offering Documents and Marketing Materials and each amendment thereto, as of the respective date thereof and as of the Closing Date, did not and does not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (B) no event has occurred which should have been set forth in an amendment to the Offering Documents and was not, (C) to their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Corporation in this Agreement are true and correct in all material respects and the Corporation has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and (D) there has not been, subsequent to the date of the most recent Financial Statements included or incorporated by reference in the Offering Documents, any Material Adverse Change which would trigger the requirement to file an amended Prospectus, except as set forth in the Offering Documents; |
| (e) | the Agent shall have received a letter dated as of the Closing Date, in form and substance satisfactory to the Agent, addressed to the Agent and the directors of the Corporation from the Corporation’s Auditors confirming the continued accuracy of the comfort letter to be delivered to the Agent pursuant to Section 6(a)(ii) hereof with such changes as may be necessary to bring the information in such letter forward to a date not more than two (2) Business Days prior to the Closing Date, which changes shall be acceptable to the Agent; |
| (f) | the Common Shares, including the Offered Shares and the Agent’s Warrant Shares shall be approved for listing as of the Closing on the CSE; provided that if the CSE does not issue a bulletin in relation to the listing of the Common Shares at the close of business by the market day prior to the Closing Date, then the Closing may be delayed; |
| (g) | the Agent shall be satisfied, in its sole discretion, with its due diligence review and investigations, and the Agent and the Agent’s counsel shall have been provided with information and documentation, reasonably requested relating to their due diligence inquiries and investigations and shall not have identified any Material Adverse Changes or misrepresentations or any items materially adversely affecting the Corporation’s affairs which exist as of the date hereof but which have not been disclosed in the Prospectus; |
the Agent shall have received a certificate of good standing (or equivalent) dated within two (2) Business Day of the Closing Date in respect of the Corporation and each Material Subsidiary;
| (h) | the Agent shall have received certificates or lists, issued under the Securities Laws of the Qualifying Jurisdictions stating or evidencing that the Corporation is a “reporting issuer” under each of the Qualifying Jurisdictions and not in default under applicable Securities Laws; |
| (i) | the Agent shall have received a certificate from the Transfer Agent as to the number of Common Shares issued and outstanding as at a date no more than one Business Day prior to the Closing Date; |
| (j) | the Agent shall have received the Cash Fee, the balance of the Corporate Finance Fee, reimbursement of the Agent’s Expenses relating to the Offering and the Agent’s Warrants; and |
| (k) | the Agent shall have received such other closing certificates, opinions, receipts, agreements or documents as the Agent may reasonably request. |
| 14. | Change of Closing Date. Subject to the termination provisions contained in Section 17, if a material change or a change in a material fact occurs prior to the Closing Date, the Closing Date shall be, unless the Corporation and the Agent otherwise agree in writing or unless otherwise required under applicable Securities Laws, the fifth (5th) Business Day following the later of: |
| (a) | the date on which all applicable filings or other requirements of applicable Securities Laws with respect to such material change or change in a material fact have been complied with in all Qualifying Jurisdictions and any appropriate receipt(s) obtained for such filings and notice of such filings from the Corporation or its counsel have been received by the Agent; and |
| (b) | the date upon which the commercial copies of any Supplementary Material have been delivered in accordance with Section 6. |
| 15. | Alternative Transaction. The Corporation agrees that until the date on which the distribution of the Offering is completed, none of its directors, officers, agents, accountants, financial advisors or attorneys shall (and the Corporation shall direct and use reasonable best efforts to cause its employees who are not officers or directors not to), directly or indirectly: (i) initiate, solicit, knowingly encourage (including by providing information or assistance) or knowingly facilitate any inquiries, proposals or offers with respect to, or the making or completion of, any proposal that constitutes, or would reasonably be expected to lead to, an alternative financing proposal or a proposal that could prevent the completion of the Offering (an “Alternative Proposal”); (ii) provide or cause to be provided any non-public information or data relating to the Corporation in connection with, or have any discussions with, any person or its representatives (other than the Corporation and its representatives) relating to or in connection with an actual or proposed Alternative Proposal; (iii) engage in any discussions or negotiations with any person (other than the Corporation and its representatives) concerning an actual or proposed Alternative Proposal; (iv) approve, endorse or recommend, agree to or accept any actual or proposed Alternative Proposal; (v) approve, endorse or recommend, agree to or accept or execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option agreement or other similar agreement related to any actual or proposed Alternative Proposal; or (vi) agree to do any of the foregoing. Without limiting the foregoing, the Corporation agrees that any violation of the restrictions set forth in this Section by the Corporation, or any affiliate or representative of the Corporation, shall constitute a breach of this Agreement by the Corporation and shall result in the immediate payment to the Agent of an amount equal to the Cash Fee assuming the Offering was fully completed, such amount representing a termination fee from the Corporation to the Agent. |
| 16. | All Terms to be Conditions. The Corporation agrees that the conditions contained in Section 13 will be complied with insofar as the same relate to acts to be performed or caused to be performed by the Corporation and that it will use its commercially reasonable efforts to cause all such conditions to be complied with. Any breach or failure to comply with any of the conditions set out in Section 13 shall entitle the Agent to terminate its obligations under this Agreement, by written notice to that effect given to the Corporation at or prior to the Closing Time. It is understood that the Agent may waive, in whole or in part, or extend the time for compliance with, any of such terms and conditions without prejudice to the rights of the Agent in respect of any such terms and conditions or any other or subsequent breach or non-compliance, provided that to be binding on the Agent any such waiver or extension must be in writing. |
| 17. | Termination Events. In addition to any other remedies which may be available to the Agent, the Agent may terminate and cancel, without any liability on the Agent’s part, the Agent’s obligations under this Agreement by delivering written notice to that effect to the Corporation at or prior to the Closing Time, if: |
| (a) | any inquiry, action, suit, investigation or other proceeding (whether formal or informal) is instituted, announced or threatened or any order is issued by any Governmental Authority in respect of the Corporation or any of its directors and officers (other than an inquiry, investigation, proceeding or order based solely upon the activities or alleged activities of the Agent); or there is any change of law, or the interpretation or administration thereof; or any order to cease trading (including communicating with persons in order to obtain expressions of interest) in any securities of the Corporation is made by a Governmental Authority and that order is still in effect, which in the opinion of the Agent operates to prevent or restrict the trading in the Offered Shares or the distribution of the Offered Shares or which in the opinion of the Agent, could be expected to have a Materially Adverse Effect on the market price or value of the Offered Shares; |
| (b) | there shall occur any material change or any change in the business, financial condition, assets, liabilities (contingent or otherwise), results of operations or prospects of the Corporation, or any material fact or a new material fact shall arise, or there should be discovered any previously undisclosed material fact required to be disclosed in the Prospectus or the Final Prospectus or any amendment thereto in each case which, in the reasonable opinion of the Agent, has or would be expected to have a Material Adverse Effect on the Corporation or a Material Adverse Effect on the market price or value of the Common Share; |
| (c) | there should develop, occur or come into effect or existence any event, action, state, condition or occurrence of national or international consequence (including any natural catastrophe, act of war, terrorism, pandemic, including, without limitation, matters caused by, related to or resulting from the COVID-19 pandemic, to the extent that there is any adverse development related thereto after the date hereof or the escalation thereof), acts of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions or any action, law, regulation or inquiry which, in the opinion of the Agent, materially adversely affects or involves, or may adversely affect or involve, the financial markets in Canada or the United States, or the business, operations or affairs of the Corporation; |
| (d) | after the date hereof and prior to Closing, the state of financial markets whether national or international is such that, in the opinion of the Agent, the Offered Shares cannot be marketed profitably; |
| (e) | the Agent, in its sole discretion, is not satisfied with the results of its due diligence investigations; or |
| (f) | the Corporation is in material breach of any term, condition or covenant of this Agreement or any of the representations and warranties made by the Corporation in this Agreement is false or becomes false, and cannot be cured by the Corporation within ten (10) Business Days of such material breach. |
| 18. | Exercise of Termination Right. If this Agreement is terminated by the Agent pursuant to Section 17, there shall be no further liability to the Corporation on the part of the Agent or of the Corporation to the Agent, except in respect of any liability which may have arisen or may thereafter arise under Sections Error! Reference source not found., 19, 20, 22, 23 and 27. The right of the Agent to terminate its obligations under this Agreement is in addition to such other remedies as it may have in respect of any default, act or failure to act of the Corporation in respect of any of the matters contemplated by this Agreement. |
| 19. | Survival of Representations and Warranties. Except as expressly set out herein, all warranties, representations, covenants and agreements of the Corporation and the Agent herein contained or contained in documents submitted or required to be submitted pursuant to this Agreement shall survive the purchase of the Offered Shares and shall continue in full force and effect for the benefit of the Agent or the Corporation, as the case may be, for a period of two years from the date hereof, regardless of the Closing of the sale of the Offered Shares, any subsequent disposition of the Offered Shares by the Agent or the termination of the Agent’s obligations under this Agreement and shall not be limited or prejudiced by any investigation made by or on behalf of the Agent in accordance with the preparation of the Offering Documents or the distribution of the Offered Shares or otherwise, and the Corporation agrees that the Agent shall not be presumed to know of the existence of a claim against the Corporation under this Agreement or any certificate delivered pursuant to this Agreement or in connection with the purchase and sale of the Offered Shares as a result of any investigation made by or on behalf of the Agent in accordance with the preparation of the Offering Documents or the distribution of the Offered Shares or otherwise. Notwithstanding the foregoing, the provisions contained in this Agreement in any way related to indemnification or contribution obligations shall survive and continue in full force and effect, indefinitely. |
| 20. | Indemnity. |
| (a) | The Corporation hereby agrees to indemnify and save harmless the Agent, its affiliates and their respective directors, officers, employees, partners, agents, advisors and shareholders (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) from and against any and all losses (other than loss of profit), expenses, claims, actions, suits, investigations, proceedings, damages, liabilities, obligations, fines, penalties or expenses of whatsoever nature or kind, including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, disbursements and taxes of their counsel (collectively, “Losses”) in connection with any action, suit, proceeding, investigation or claim (including, without limitation, security holder or derivative actions, arbitration proceedings or otherwise) that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) to, which an Indemnified Party may become subject or otherwise involved in (in any capacity) insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly: |
| (i) | any breach by the Corporation of its representations, warranties, covenants or obligations to be complied with under this Agreement or under any other document delivered pursuant to this Agreement; |
| (ii) | any information or statement (except any information or statement relating solely to the Agent furnished in writing by the Agent) contained in the Prospectus or any other Offering Documents, any Marketing Materials, or in any certificate of the Corporation delivered pursuant to this Agreement that at the time and in light of the circumstances under which it was made contains or is alleged to contain: (A) a misrepresentation; or (B) an untrue statement of a material fact or an omission to state a material fact that is required to be stated therein or that is necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; |
| (iii) | any order made or enquiry, investigation or proceedings commenced or threatened by any securities commission, stock exchange, court or other competent authority, or any change of law or interpretation of administration thereof which prevents or restricts the trading in or the sale or distribution of the Offered Shares in the Qualifying Jurisdictions; |
| (iv) | the non-compliance or alleged non-compliance or a breach or violation or alleged breach or violation, by the Corporation of any of its obligations under Securities Laws; or |
| (v) | the services provided pursuant to this Agreement, whether performed before or after the Corporation’s execution of the Agreement, |
and to reimburse each Indemnified Party forthwith, upon demand, for any and all legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim.
| (b) | The Corporation hereby waives any right that the Corporation may have of first requiring an Indemnified Party to proceed against or enforce any other right, power, remedy or security or claim payment from any other person before claiming under this indemnity. |
| (c) | The Corporation agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Corporation or any person asserting Claims on behalf of or in right of the Corporation for or in connection with 20(a)(i) to (v) above, except and only to the extent any Losses suffered by the Corporation are determined by a court of competent jurisdiction in a final judgment that has become non-appealable to have resulted directly and solely from the material breach of this Agreement, material breach of Applicable Laws, gross negligence, willful misconduct or fraud of such Indemnified Party. |
| (d) | The Corporation shall not, without the Agent’s prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any Claim in respect of which indemnification may be sought hereunder (whether or not any Indemnified Party is a party thereto) unless the Corporation has acknowledged in writing that the Indemnified Parties are entitled to be indemnified in respect of such Claim and such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Party from any liabilities arising out of such Claim without any admission of negligence, misconduct, liability or responsibility by or on behalf of any Indemnified Party. |
| (e) | Promptly after receiving notice of a Claim against the Agent or any other Indemnified Party or receipt of notice of the commencement of any investigation which is based, directly or indirectly, upon any matter in respect of which indemnification may be sought from the Corporation, the Agent or any such other Indemnified Party shall notify the Corporation in writing of the particulars thereof, provided that any delay or omission so to notify the Corporation shall not relieve the Corporation of any liability which the Corporation may have to the Agent or any other Indemnified Party except and only to the extent that any such delay in or failure to give notice as herein required materially prejudices the defense of such Claim or results in any material increase in the liability which the Corporation may have under this indemnity. The Corporation shall have fourteen (14) calendar days after receipt of the notice to undertake, conduct and control, through counsel of its own choosing and at its own sole expense, the settlement or defense of the Claim. If the Corporation undertakes, conducts and controls the settlement or defense of the Claim, the relevant Indemnified Parties shall have the right to participate in the settlement or defense of the Claim. |
| (f) | If for any reason the foregoing indemnity is unavailable to the Agent or any other Indemnified Party or insufficient to hold the Agent or any other Indemnified Party harmless in respect of a Claim, the Corporation shall contribute to the amount paid or payable by the Agent or the other Indemnified Party as a result of such Claim in such proportion as is appropriate to reflect not only the relative benefits received by the Corporation on the one hand and the Agent or any other Indemnified Party on the other hand but also the relative fault of the Corporation, the Agent or any other Indemnified Party as well as any relevant equitable considerations; provided that the Corporation shall in any event contribute to the amount paid or payable by the Agent or any other Indemnified Party as a result of such Claim any excess of such amount over the amount of the fees actually received by the Agent under this Agreement. |
| (g) | The Corporation hereby constitutes the Agent as trustee for each of the other Indemnified Parties of the Corporation’s covenants under this indemnity with respect to those persons and the Agent agree to accept that trust and to hold and enforce those covenants on behalf of those persons. |
| (h) | The Agent may retain counsel to separately represent themselves in the defense of a Claim and the Corporation shall pay the reasonable fees and disbursements of such counsel if: (i) the Corporation does not promptly assume the defense of the Claim no later than fourteen (14) calendar days after receiving actual notice of the Claim; (ii) the Corporation agrees to separate representation; (iii) the Corporation fails to diligently pursue the defenses of the Claim; or (iv) the Agent is advised in writing by counsel that there is an actual or potential conflict in the Corporation’s and the Agent’s respective interests, or additional defenses are available to the Agent which makes representation by the same counsel inappropriate. Nothing in this Section will require the Corporation to pay the fees or expenses of more than one counsel for all the Indemnified Parties in any one jurisdiction. |
| (i) | The obligations of the Corporation hereunder are in addition to any liabilities which the Corporation may otherwise have to the Agent or any other Indemnified Party. |
| 21. | Selling Group Participation. The Agent may offer syndicate participation in the normal course of the brokerage business to selling groups of other licensed dealers, brokers and investments dealers, who may or who may not be offered part of the commissions or warrants to be received by the Agent pursuant to this Agreement. |
| 22. | Expenses. Whether or not the Offering is completed, the Corporation shall pay all reasonable expenses and fees in connection with the Offering contemplated by this Agreement, including, without limitation, all expenses of or incidental to the creation, issue, sale or distribution of the Offered Shares, the filing of the Offering Documents and the Marketing Materials, the fees and expenses payable in connection with the distribution of the Offered Shares, the fees and expenses of the Corporation’s counsel and of local counsel to the Corporation, the fees and expenses of the auditors and the Transfer Agent for the Common Shares, all costs incurred in connection with the preparation and printing of the Offering Documents, the Marketing Materials and certificates representing the Offered Shares and the Agent’s Warrants and all expenses and fees incurred by the Agent which shall include “out of pocket” expenses and the reasonable fees and disbursements of the Agent’s counsel (including taxes and disbursements, such fees not to exceed an amount as agreed between the Corporation and the Agent), which fees, taxes and disbursements shall be payable whether or not the Offering is completed (the “Agent’s Expenses”). The Agent’s counsel shall be entitled to the full benefit of the foregoing covenant and shall be entitled to directly enforce the same against the Corporation as if it was a direct party and original signatory to this Agreement and the Corporation hereby waives any and all defences that it may have to such enforcement. The Corporation acknowledges that the $15,000 retainer advanced to the Agent may be applied towards such fees, disbursements and taxes of the Agent’s counsel without the prior written consent of the Corporation. All fees and the Agent’s Expenses shall be payable by the Corporation immediately upon receiving an invoice therefor from the Agent and shall be payable whether or not the Offering is completed. At the option of the Agent, such fees and Agent’s Expenses may be deducted from the gross proceeds of the Offering otherwise payable to the Corporation at Closing. |
| 23. | Agent’s Compensation and Tax Matters. |
| (a) | In consideration of the Agent’s agreement to sell the Offered Shares, the Corporation agrees to: (i) pay the Cash Fee to the Agent’s; (ii) issue to the Agent the Agent’s Warrants; (iii) pay the balance of the Corporate Finance Fee to the Agent in cash at the Closing Time; and (iv) pay the Agent’s Expenses, as set out in Section 22. |
| (b) | Fees and other amounts payable under this Agreement may be subject to goods and services tax, harmonized sales tax, value added tax, sales tax or other similar tax (“Sales Tax”). If Sales Tax is applicable, an additional amount equal to the Sales Tax will be charged to and will be payable by the Corporation. If any fee or other amount payable under this Agreement is deemed by the Excise Tax Act (Canada) or similar federal or provincial legislation to include Sales Tax, the fee or other amount payable shall be increased accordingly. |
| 24. | Advertisements. |
| (a) | The Corporation acknowledges that the Agent shall have the right, subject always to Sections 4(a) of this Agreement, at its own expense, subject to the prior consent of the Corporation, such consent not to be unreasonably withheld, to place such advertisement or advertisements relating to the sale of the Offered Shares contemplated herein as the Agent may consider desirable or appropriate and as may be permitted by Applicable Law. The Corporation and the Agent each agree that they will not make or publish any advertisement in any media whatsoever relating to, or otherwise publicize, the transaction provided for herein so as to result in any exemption from the prospectus and registration or other similar requirements under applicable securities legislation in any of the Provinces of Canada or any other jurisdiction in which the Offered Shares shall be offered and sold being unavailable in respect of the sale of the Offered Shares to prospective purchasers. |
| (b) | The Corporation agrees that the Agent may make public its involvement with the Corporation in the Offering, including the right of the Agent at its own expense to, following completion of the Offering, place advertisements describing its services to the Corporation, in financial, news or business publications. If requested by the Agent, the Corporation will include a mutually acceptable reference to the Agent in any press release or other public announcement made by the Corporation regarding the matters described in this Agreement. |
| 25. | Compliance with United States Securities Laws. Any press release in respect of the Offering shall contain a legend in substantially the following form at the top of the first page: “NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.”; and any such press release shall also contain disclosure substantially in the following form in accordance with Rule 135e under the U.S. Securities Act: |
“The securities referred to herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, persons within the United States absent registration or available exemptions from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. ‘United States’ are as defined in Regulation S under the U.S. Securities Act.”
| 26. | Agent’s Activities. |
| (a) | The Corporation acknowledges that the Agent and its affiliates acts as principal and agent in the financial banking and investment banking industries in financial markets and, in such capacities, may, in the ordinary course of their activities, hold long or short positions, and may trade or otherwise effect or recommend transactions, for their own account or the accounts of their customers, in debt, equity or derivative securities of the Corporation or their affiliates or any other issuer that may be involved in the transactions contemplated by this Agreement or their affiliates. The Corporation agrees not to seek to restrict or challenge the ability of any of the Agent to carry out such activities. |
| (b) | The Corporation acknowledges that the Agent is not advising the Corporation or any other person related to it as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Corporation should consult with its own advisors concerning such matters and be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Agent has no liability to Corporation with respect thereto. |
| (c) | In performing its responsibilities under this Agreement, the Agent may use the services of its affiliates provided that it will be responsible for ensuring that such affiliates comply with the terms of this Agreement. |
| 27. | Confidentiality. |
| (a) | The Agent undertakes to keep confidential all Confidential Information received from the Corporation and shall not disclose such Confidential Information without the prior written approval of the Corporation except as may be required by law or in connection with legal or regulatory proceedings. If the Agent is requested to disclose Confidential Information as a legal requirement or as part of a legal or regulatory process, the Agent shall, to the extent not prohibited by law, provide the Corporation with prompt notice of such request so that the Corporation can take whatever action it wishes to take in relation to the request at its own cost. The Agent undertakes not to use any Confidential Information received from the Corporation for any other purpose, except as contemplated in this Agreement. |
| (b) | The obligations of the Agent in this Section 27 shall terminate 24 months following the Closing Date or the termination of this Agreement, as applicable. |
| (c) | The Corporation shall keep confidential all advice and opinions provided by the Agent, except as provided herein or as required to be disclosed by Applicable Law or in connection with legal or regulatory proceedings. If the Corporation is requested to disclose any such advice or opinions as a legal requirement or as part of a legal or regulatory process, the Corporation shall provide the Agent with prompt written notice of such request so that the Agent can take whatever action it wishes to take in relation to the request. |
| 28. | Additional Services. If the Agent is requested to provide any other services to the Corporation in addition to those to be provided under this Agreement, the terms and conditions relating to such additional services will be outlined in a separate letter of agreement and the fees for such services will be negotiated separately and in good faith and will be consistent with fees paid to North American investment bankers for similar services. However, for greater certainty, the Agent will not provide any legal, tax or accounting advice, either pursuant to this Agreement or otherwise. |
| 29. | Notices. Unless otherwise expressly provided in this Agreement, any notice or other communication to be given under this Agreement (a “notice”) shall be in writing addressed as follows: |
| (a) | If to the Corporation, to: |
SolarBank Corporation
803 – 505 Consumers Road
Toronto, ON M5J 4Z2
| Attention: | Richard Lu, Chief Executive Officer | |
| E-mail: | [Redacted] |
With a copy (for information purposes only and not constituting notice) to:
DLA Piper (Canada) LLP
2800 – 666 Burrard St,
Vancouver, BC V6C 2Z7
| Attention: | Denis Silva, Partner | |
| E-mail: | [Redacted] |
| (b) | to the Agent, to: |
Research Capital Corporation
1920 – 1075 West Georgia Street
Vancouver, BC V6E 3C9
| Attention: | Jovan Stupar, Managing Director | |
| E-mail: | [Redacted] |
With a copy (for information purposes only and not constituting notice) to:
MLT Aikins LLP
2600 – 1066 West Hastings Street
Vancouver, BC V6E 3X1
| Attention: | Mahdi Shams, Partner | |
| E-mail: | [Redacted] |
or to such other address as any of the parties may designate by giving notice to the others in accordance with this Section 29. Each notice shall be personally delivered to the addressee or sent by e-mail to the addressee. A notice which is personally delivered or delivered by e-mail shall, if delivered prior to 5:00 p.m. (Vancouver time) on a Business Day, be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the first Business Day following the day on which it is delivered.
| 30. | Time of the Essence. Time shall, in all respects, be of the essence hereof. |
| 31. | Canadian Dollars. All references herein to dollar amounts are to lawful money of Canada. |
| 32. | Headings. The headings contained herein are for convenience or reference only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision of this Agreement. |
| 33. | Singular and Plural, etc. Where the context so requires, words importing the singular number include the plural and vice versa, and words importing gender shall include the masculine, feminine and neuter genders. |
| 34. | Entire Agreement. This Agreement constitutes the only agreement between the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings, including, without limitation, the Engagement Letter. This Agreement may be amended or modified in any respect by written instrument only signed by each of the parties hereto. |
| 35. | Severability. If one or more provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein. |
| 36. | Governing Law. This Agreement shall be governed and construed in accordance with the laws of British Columbia and federal laws of Canada applicable therein, without regard to principles of conflicts of laws and the parties hereto irrevocably attorn and submit to the jurisdiction of the courts of British Columbia with respect to any dispute related to this Agreement. Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either our engagement or any matter referred to in this Agreement is hereby waived by the parties hereto. |
| 37. | No Fiduciary Duty. The Corporation hereby acknowledges that (i) the transactions contemplated hereunder are arm’s-length commercial transactions between the Corporation, on the one hand, and the Agent and any affiliate through which the Agent may be acting, on the other, (ii) the Agent is acting as agent but not as a fiduciary of the Corporation; and (iii) the Corporation’s engagement of the Agent in connection with the Offering and the process leading up to the Offering is as agent and not in any other capacity. Furthermore, the Corporation agrees that it is solely responsible for making its own judgments in connection with the Offering (irrespective of whether the Agent has advised or is currently advising the Corporation on related or other matters). The Agent has not rendered advisory services beyond those, if any, required of an investment dealer by Securities Laws in respect of an offering of the nature contemplated by this Agreement and the Corporation agrees that it will not claim that the Agent has rendered advisory services beyond those, if any, required of an investment dealer by Securities Laws in respect of the Offering, or that the Agent owes a fiduciary or similar duty to the Corporation, in connection with such transaction or the process leading thereto. |
| 38. | Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and enure to the benefit of the Corporation and the Agent and their respective successors and permitted assigns. This Agreement shall not be assignable by any party hereto without the prior written consent of the other party. |
| 39. | Further Assurances. Each of the parties hereto shall do or cause to be done all such acts and things and shall execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement. |
| 40. | Effective Date. This Agreement is intended to and shall take effect as of the date first set forth above, notwithstanding its actual date of execution or delivery. |
| 41. | Counterparts. This Agreement may be executed in two or more counterparts and may be delivered by facsimile transmission or other means of electronic transmission (including portable document format), each of which will be deemed to be an original and all of which will constitute one agreement, effective as of the reference date given above. |
[Remainder of page intentionally left blank.]
If the Corporation is in agreement with the foregoing terms and conditions, please so indicate by executing a copy of this Agreement where indicated below and delivering the same to the Agent.
| Yours very truly, | ||
| RESEARCH CAPITAL CORPORATION | ||
| “Jovan Stupar” | ||
| Name: | Jovan Stupar | |
| Title: | Managing Director | |
The foregoing is hereby accepted on the terms and conditions therein set forth.
| SOLARBANK CORPORATION | ||
| “Richard Lu” | ||
| Name: | Richard Lu | |
| Title: | Chief Executive Officer | |
SCHEDULE “A”
MATTERS TO BE ADDRESSED IN THE CANADIAN COUNSEL OPINION
| (a) | that the Corporation has been duly incorporated and is existing under the laws of the Province of Ontario and has the corporate power and authority to carry on its business as presently carried on and to own, lease and operate its property and assets; |
| (b) | that the Corporation is a “reporting issuer” not included on the list of issuers in default in the Qualifying Jurisdictions; |
| (c) | as to the authorized and issued share capital of the Corporation; |
| (d) | that the Corporation has all necessary corporate power and authority to: (i) execute, deliver and perform its obligations under the Agency Agreement; (ii) to create, issue, sell, grant and deliver, as applicable, the Securities; and (iii) to grant the Over-Allotment Option and create, issue, sell, grant and deliver, as applicable, the Securities issuable on account of the exercise of the Over-Allotment Option; |
| (e) | that all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of the Agency Agreement and the performance of its obligations hereunder, and the Agency Agreement has been duly executed and delivered by the Corporation and constitutes a legal, valid and binding obligation of the Corporation enforceable against it in accordance with its terms, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally and subject to such other standard assumptions and qualifications including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in the Agency Agreement may be limited by applicable law; |
| (f) | that the execution and delivery, as applicable, of the Agency Agreement and the fulfillment of the terms thereof by the Corporation, and the creation, issuance, sale, grant and delivery, as applicable, of the Securities do not and will not conflict with or result in any breach or violation of any of the terms, conditions or provisions of, or constitute a default under, whether after notice or lapse of time or both, (i) the articles or by-laws of the Corporation, (ii) the Business Corporations Act (Ontario), or (iii) any Securities Laws; |
| (g) | that all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of each of the Offering Documents and the filing thereof with the Canadian Securities Regulators; |
| (h) | that the statements in the Final Prospectus under the heading “Eligibility for Investment” are accurate, subject to the assumptions, qualifications, limitations and restrictions set out therein; |
| (i) | that the statements in the Final Prospectus under the heading “Certain Canadian Federal Income Tax Considerations”, to the extent that such statements summarize matters of law or legal conclusion, fairly summarize the matters described therein in all material respects, subject to the assumptions, qualifications, limitations and restrictions set out therein; |
| (j) | that the provisions of the Common Shares in the capital of the Corporation conform, in all material respects, with the descriptions of the Common Shares in the Final Prospectus under the heading “Description of the Securities”; |
| (k) | that, upon receipt of full payment of the issue price thereof, the Offered Shares (including any Offered Shares issued in respect of the Over-Allotment Option) will be validly issued as fully paid and non-assessable common shares in the capital of the Corporation; |
| (l) | that the Agent’s Warrants (including any Agent’s Warrants issued in respect of the Over-Allotment Option) have been validly created and authorized for issuance by the Corporation; |
| (m) | that the Agent’s Warrant Shares issuable upon exercise of the Agent’s Warrants (including any Agent’s Warrants issued in respect of the Over-Allotment Option) have been duly authorized and validly allotted for issuance by the Corporation and, when issued in accordance with the terms of the certificates governing the Agent’s Warrants, will be validly issued and outstanding as fully paid and non-assessable Common Shares; |
| (n) | that the forms of the certificates or other electronic confirmation representing the Offered Shares, Agent’s Warrants, and Agent’s Warrant Shares have been duly approved by the board of directors of the Corporation and comply with the requirements of the Business Corporations Act (Ontario), the constating documents of the Corporation and the applicable requirements of the CSE, and constitute legal, valid and binding obligations of the Corporation enforceable against the Corporation in accordance with their terms, subject to certain qualifications; |
| (o) | that all necessary documents have been filed, all necessary proceedings have been taken and all necessary authorizations, approvals, permits, consents and orders have been obtained by the Corporation under Securities Laws to qualify: (i) the distribution of the Offered Shares to the public in the Qualifying Jurisdictions by or through persons who are duly registered under the applicable Securities Laws and who have complied with the relevant provisions of such applicable Securities Laws; (ii) the issue of the Agent’s Warrants to or as directed by the Agent; and (iii) the grant of the Over-Allotment Option; |
| (p) | that no prospectus will be required, no other document will be required to be filed, no proceeding will be required to be taken by the Corporation under the Securities Laws and no approval, permit, consent, order or authorization of any regulatory authority in the Qualifying Jurisdictions will be required to be obtained by the Corporation under the Securities Laws to permit the issue and delivery by the Corporation of Agent’s Warrant Shares upon the valid exercise of the Agent’s Warrants in accordance with the terms and conditions thereof; |
| (q) | the first trade in Agent’s Warrants Shares issued upon exercise of Agent’s Warrants is exempt from the prospectus requirements of the applicable Securities Laws in the applicable Qualifying Jurisdictions and no prospectus or other document is required to be filed, no proceeding is required to be taken and no approval, permit, consent or authorization of regulatory authorities is required to be obtained by the Corporation under applicable Securities Laws of the applicable Qualifying Jurisdictions to permit such trade through registrants registered under such applicable Securities Laws who have complied with such laws and the terms and conditions of their registration, provided that (A) such trade is not a “control distribution” as that term is defined in National Instrument 45-102 – Resale of Securities at the time of such trade, (B) the Corporation is a reporting issuer (as defined under Securities Laws of the Qualifying Jurisdictions) at the time of such first trade, and (C) such first trade is not a transaction or series of transactions involving a purchase and sale or a repurchase and resale in the course of or incidental to a distribution; |
| (r) | that, subject only to the Standard Listing Conditions, the Common Shares outstanding immediately after the Closing Date and the Agent’s Warrant Shares have been conditionally approved for listing on the CSE; and |
| (s) | that Endeavour Trust Corporation has been duly appointed as the transfer agent and registrar for the Common Shares. |
SCHEDULE “B”
MATERIAL SUBSIDIARIES
The following table sets out all Material Subsidiaries of the Corporation:
| Name of Material Subsidiary | Jurisdiction of Existence of Material Subsidiary | Date of Acquisition of Interest | Interest Held in Material Subsidiary (%) | Notes | ||||
| Abundant Solar Power Inc. | Delaware | December 15, 2016 | 100% | Abundant Solar Power Inc. was incorporated to carry out the Corporation’s operations in the United States. | ||||
| Abundant Construction Inc. | Ontario | November 8, 2018 | 100% | Abundant Construction Inc. was incorporated to act as the counter-party for certain of the Corporation’s construction agreements. | ||||
| 2467264 Ontario Inc. | Ontario | May 21, 2015 | 49.9% | 2467264 Ontario Inc. was incorporated to develop solar power projects in the Province of Ontario with the support of 2543154 Ontario Inc., an arm’s length third party who holds the remaining 51.1% of 2467264 Ontario Inc. |
| C-1 |
Exhibit 99.11
Exhibit 99.12
Exhibit 99.13
Exhibit 99.14
Exhibit 99.15
FORM 2A
LISTING STATEMENT
SOLARBANK
CORPORATION
February 24, 2023
NOTE TO READER
This Listing Statement contains a copy of the long form prospectus of SolarBank Corporation (“SolarBank” or the “Corporation”) dated February 10, 2023 (the “Prospectus”). Certain sections of the Canadian Securities Exchange (the “Exchange”) form of Listing Statement have been included following the Prospectus to provide additional disclosure on the Corporation required by the Exchange, as well as updating certain information contained in the Prospectus.
TABLE OF CONTENTS
| 1. | Table of Concordance |
| 2. | Schedule A – Long Form Prospectus of the Corporation dated February 10, 2023 |
| 3. | Schedule B – Listing Statement Disclosure – Additional Information regarding Item 14 – Capitalization |
TABLE OF CONCORDANCE
| Information Required by Form 2A Listing Statement | Corresponding Item(s) in the Prospectus | Prospectus Page Numbers(s) | ||||
| 1. | Table of Contents | Table of Contents | i | |||
| 2. | Corporate Structure | Corporate Structure | 14 | |||
| 3. | General Development of the Business | Description of the Business | 15 | |||
| 4. | Narrative Description of the Business | Description of the Business; Three-year history; Regulatory Overview; Use of Available Funds | 18 | |||
| 5. | Selected Consolidated Financial Information | Schedule “A” Corporation Financial Statements and MD&A; Dividend Policy; Selected Financial Information | 44 | |||
| 6. | Management’s Discussion and Analysis | Schedule “A” Corporation Financial Statements and MD&A; Management’s Discussion and Analysis | 45, 58 | |||
| 7. | Market for Securities | Trading Price and Volume | 75 | |||
| 8. | Consolidated Capitalization | Consolidated Capitalization | 72 | |||
| 9. | Options to Purchase Securities | RSUs, Options and Warrants to Purchase Common Shares | 73 | |||
| 10. | Descriptions of the Securities | Description of the Securities Being Qualified for Distribution; Description of Share Capital; Prior Sales; Plan of Distribution | 72, 94 | |||
| 11. | Escrowed Securities | Escrowed Securities and Securities Subject to Contractual Restrictions on Transfer | 75 | |||
| 12. | Principal Shareholders | Principal Shareholders | 76 | |||
| 13. | Directors and Officers | Directors and Executive Officers; Audit Committee; Corporate Governance | 76 | |||
| 14. | Capitalization | N/A | - | |||
| 15. | Executive Compensation | Executive Compensation | 81 | |||
| 16. | Indebtedness of Directors and Executive Officers | Indebtedness of Directors and Executive Officers | 90 | |||
| 17. | Risk Factors | Risk Factors | 96 | |||
| 18. | Promoters | N/A | 115 | |||
| 19. | Legal Proceedings | Legal Proceedings | 116 | |||
| 20. | Interest of Management and Others in Material Transactions | Interest of Management and Others in Material Transactions | 117 | |||
| 21. | Auditors, Transfer Agents and Registrars | Auditors, Transfer Agents and Registrar | 117 | |||
| 22. | Material Contracts | Material Contracts | 117 | |||
| 23. | Interest of Experts | Experts | 118 | |||
| 24. | Other Material Facts | Other Material Facts | 118 | |||
| 25. | Financial Statements | Schedule “A” SolarBank Financial Statements; Dividend Policy; Selected Financial Information | 44, 118
|
SCHEDULE “A” – Long Form Prospectus dated February 10, 2023
SCHEDULE “B” – Form 2A, Section 14 – Capitalization Tables
SCHEDULE A
Long Form Prospectus dated February 10, 2023
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
This Prospectus (as hereinafter defined) constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons unless exemptions from the registration requirement of the U.S. Securities Act and applicable state securities laws are available. This Prospectus does not constitute an offer to sell or a solicitation or an offer to buy any of the securities offered hereby within the United States or to, or for the benefit of, U.S. persons. See “Plan of Distribution”.
PROSPECTUS
| INITIAL PUBLIC OFFERING | February 10, 2023 |
SOLARBANK CORPORATION
Up to 7,000,000 Common Shares
Price: $0.75 per Common Share
This prospectus (this “Prospectus”) qualifies the distribution of up to 7,000,000 common shares (the “Offered Shares”) in the capital of SolarBank Corporation (the “Company” or “SolarBank”) at a price of $0.75 per Offered Share (the “Offering Price”) for total gross proceeds of up to $5,250,000 (the “Offering”).
The Offered Shares are being offered on a “commercially reasonable efforts” basis without underwriter liability pursuant to the terms and conditions of an agency agreement (the “Agency Agreement”) to be entered by and among the Company and Research Capital Corporation, as lead agent and sole bookrunner (the “Agent”). The Offering Price for the Offered Shares was determined based upon arm’s length negotiations between the Company and the Agent, in the context of the market. See “Plan of Distribution”.
| Price to the Public | Agent’s | Net
Proceeds | ||||||||||
| Per Offered Share | $ | 0.75 | $ | 0.045 | $ | 0.705 | ||||||
| Total | $ | 5,250,000 | $ | 315,000 | $ | 4,935,000 | ||||||
Notes:
| (1) | In consideration for the services rendered by the Agent in connection with the Offering, the Company has agreed to pay the Agent a cash fee (the “Agent’s Fee”) equal to 6.0% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option (as defined below)). The Company has also agreed to pay to the Agent a corporate finance fee of $35,000.00 (plus applicable taxes) (the “Corporate Finance Fee”) payable in cash, of which $20,000.00 (including applicable taxes) has been paid as of the date hereof. See “Plan of Distribution”. |
| (2) | As additional compensation, the Company has agreed to issue to the Agent, that number of common share purchase warrants of the Company (the “Broker Warrants”) as is equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option). Each Broker Warrant will entitle the holder thereof to purchase one (1) Common Share (as defined below) (each, a “Broker Warrant Share”) at the Offering Price for a period of 36 months following the Closing Date (as defined below). This Prospectus qualifies the distribution of the Broker Warrants. See “Plan of Distribution”. |
| (3) | The Agent has also been granted an option (the “Over-Allotment Option”), exercisable, in whole or in part, at the sole discretion of the Agent, at any time up to 48 hours prior to the Closing Date, to arrange for the sale of up to an additional 1,050,000 Offered Shares (the “Additional Shares”) at the Offering Price per Additional Share to cover the Agent’s over-allocation position. If the Over-Allotment Option is exercised in full for Additional Shares, the total “Price to the Public”, “Agent’s Fee” and “Net Proceeds to the Company” will be $6,037,500, $362,250 and $5,675,250, respectively. This Prospectus qualifies the grant of the Over-Allotment Option and the distribution of the Additional Shares issuable upon exercise of the Over-Allotment Option. See “Plan of Distribution”. |
| i |
| (4) | After deducting the Agent’s Fee, but before deducting the expenses and costs relating to the Offering which are estimated to be $200,000. The Agent’s Fee and the expenses and costs relating to the Offering will be paid from the gross proceeds of the Offering. See “Use of Proceeds”. |
The following table sets out the number of securities that may be issued by the Company to the Agent in
connection with the Offering:
Agent’s Position |
Number of Securities Available or Maximum Size |
Exercise Period |
Exercise Price | |||
| Broker Warrants | 420,000 Broker Warrant Shares(1) | 36 months following the Closing Date | $0.75
per Broker Warrant Share | |||
| Over-Allotment Option | 1,050,000
Additional Shares |
At any time up to 48 hours prior to the Closing Date | $0.75
per Additional Share |
Notes:
| (1) | Assuming no exercise of the Over-Allotment Option. If the Over-Allotment Option is exercised in full, an aggregate of 483,000 Broker Warrants exercisable to acquire up to 483,000 Broker Warrant Shares will be issued to the Agent. |
There is currently no market through which the Offered Shares may be sold and purchasers may not be able to resell the securities purchased under this Prospectus. This may affect the pricing of the securities offered under this Prospectus in the secondary market, the transparency and availability of trading prices, the liquidity of the such securities, and the extent of issuer regulation. Investment in the Offered Shares is highly speculative due to various factors, including the nature and early stage of the Company’s business. An investment in these securities should only be made by persons who can afford the total loss of their investment. See “Risk Factors”.
Unless the context otherwise requires, in this Prospectus all references to “Offered Shares” include the Additional Shares and to the “Offering” includes the Over-Allotment Option.
The Canadian Securities Exchange (“CSE”) has conditionally approved the listing of the Company’s common shares (“Common Shares”). Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023. See “Plan of Distribution”.
No minimum amount of funds must be raised under the Offering. This means that the Company could complete the Offering after raising only a small proportion of the Offering amount set out above. See “Risk Factors”.
Potential investors are advised to consult their own legal counsel and other professional advisers in order to assess income tax, legal, and other aspects of this investment. Prospective investors should be aware that the acquisition, holding and disposition of the securities described herein may have income and other tax consequences in Canada and in other jurisdictions. Except as expressly noted, this Prospectus does not describe these tax consequences fully. You should consult and rely on your own tax advisor as to any income or tax implications with respect to your own particular circumstances.
The Agent conditionally offers the Offered Shares for sale on a “commercially reasonable efforts” basis and subject to prior sale, if, as and when issued by the Company, in accordance with the conditions contained in the Agency Agreement referred to under “Plan of Distribution”. Subscriptions will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. The Offering is expected to close on or about February 23, 2023 (the “Closing Date”) or such other date as the Company and the Agent may agree.
| ii |
If subscriptions representing the Offering are not received within 90 days of the issuance of a receipt for the final prospectus in respect of the Offering, or if a receipt has been issued for an amendment to the final prospectus, within 90 days of the issuance of such receipt and in any event not later than 180 days from the date of receipt for the final prospectus in respect of the Offering, the Offering will cease. The Agent, pending closing of the Offering, will hold in trust all subscription funds received pursuant to the provisions of the Agency Agreement. If the Offering is not completed, the subscription proceeds received by the Agent in connection with the Offering will be returned to the subscribers without interest or deduction, unless the subscribers have otherwise instructed the Agent. See “Plan of Distribution”.
Other than in respect of the Offered Shares sold to certain purchasers in the United States and to, or for the account or benefit of, certain U.S. persons or certain persons in the United States, which will be represented by individual certificates, and other than pursuant to certain exceptions, it is expected that one or more global certificates for the Offered Shares distributed by this Prospectus will be issued in registered and definitive form to CDS Clearing and Depository Services Inc. (“CDS”) and will be deposited with CDS on the Closing Date. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares, are purchased.
The Company is neither a “connected issuer” nor a “related issuer” of the Agent, as defined in National Instrument 33-105 – Underwriting Conflicts.
Certain legal matters related to the Offering have been reviewed on behalf of the Company by DLA Piper (Canada) LLP and on behalf of the Agent by MLT Aikins LLP.
Paul Pasalic, a director of the Company, resides outside of Canada. This director has appointed DLA Piper (Canada) LLP, Suite 2800, Park Place, 666 Burrard St., Vancouver, British Columbia, V6C 2Z7, Canada, as agent for service of process in Canada. Investors are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
| iii |
TABLE OF CONTENTS
Page
| GLOSSARY OF TERMS | 1 |
| Defined Terms | 1 |
| Table of Abbreviations | 4 |
| GENERAL MATTERS | 6 |
| About this Prospectus | 6 |
| Interpretation | 6 |
| Currency Presentation | 6 |
| FINANCIAL STATEMENT PRESENTATION IN THIS PROSPECTUS | 6 |
| FORWARD-LOOKING STATEMENTS | 7 |
| MARKET AND INDUSTRY DATA | 9 |
| MARKETING MATERIALS | 9 |
| PROSPECTUS SUMMARY | 10 |
| Principal Business of the Company | 10 |
| The Offering | 10 |
| The Listing | 10 |
| Use of Proceeds | 10 |
| Risk Factors | 11 |
| Summary Consolidated Financial Information | 12 |
| CORPORATE STRUCTURE | 13 |
| Name, Address and Incorporation | 13 |
| Intercorporate Relationships | 13 |
| GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY | 14 |
| Overview | 14 |
| Overview of Business and Services | 18 |
| Products and Services | 19 |
| Customers and Sales Channels | 22 |
| Operations Process | 25 |
| Employees, Specialized Skill and Knowledge | 27 |
| Competitive Conditions | 27 |
| Third Party Suppliers | 30 |
| Pricing and Marketing | 31 |
| Regulatory Environment | 32 |
| Impact of Environmental Laws and Regulations | 35 |
| Intellectual Property | 35 |
| Cycles | 35 |
| Foreign Operations | 35 |
| Economic Dependence | 35 |
| Social or Environmental Policies | 36 |
| Reorganizations | 36 |
| USE OF PROCEEDS | 36 |
| Use of Proceeds | 36 |
| Total Funds Available | 37 |
| Business Objectives and Milestones | 38 |
| i |
| DIVIDENDS OR DISTRIBUTIONS | 40 |
| SELECTED FINANCIAL INFORMATION | 40 |
| annual MANAGEMENT’S DISCUSSION AND ANALYSIS | 41 |
| Overall Performance | 41 |
| Selected Annual Information | 41 |
| Discussion of Operations and Outlook | 45 |
| Legal Matters and Contingent Assets | 46 |
| Liquidity | 48 |
| Capital Resources | 48 |
| Transactions Between Related Parties | 49 |
| Key management compensation | 49 |
| Critical Accounting Estimates | 50 |
| Financial Instruments and Other Instruments (Management of Financial Risks) | 52 |
| Subsequent Events | 54 |
| interim MANAGEMENT’S DISCUSSION AND ANALYSIS | 54 |
| DESCRIPTION OF THE SECURITIES | 67 |
| Authorized and Outstanding Securities | 67 |
| Common Shares | 67 |
| Broker Warrants | 67 |
| CONSOLIDATED CAPITALIZATION | 67 |
| RSUS, OPTIONS AND WARRANTS TO PURCHASE SHARES | 68 |
| PRIOR SALES | 69 |
| TRADING PRICE AND VOLUME | 70 |
| ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER | 70 |
| Contractual Escrow Securities | 70 |
| National Policy 46-201 Escrow | 70 |
| PRINCIPAL SHAREHOLDERS | 71 |
| DIRECTORS AND EXECUTIVE OFFICERS | 72 |
| Biographies of Directors and Executive Officers | 73 |
| Corporate Cease Trade Orders and Bankruptcies | 75 |
| Penalties or Sanctions | 75 |
| Personal Bankruptcies | 76 |
| Conflicts of Interest | 76 |
| EXECUTIVE COMPENSATION | 76 |
| Executive Compensation | 76 |
| Compensation of Named Executive Officers | 77 |
| Stock Options and Other Compensation Securities and Instruments | 78 |
| Stock Option Plan and Other Incentive Plans | 78 |
| Employment, Consulting and Management Agreements | 82 |
| Oversight and Description of Director and NEO Compensation | 83 |
| Pension | 85 |
| Changes Subsequent to Year-End | 85 |
| INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS | 86 |
| AUDIT COMMITTEE | 86 |
| Audit Committee Charter | 86 |
| Composition of the Audit Committee | 86 |
| Relevant Education and Experience | 86 |
| Mandate and Responsibilities of the Audit Committee | 86 |
| ii |
| Audit Committee Oversight | 86 |
| Pre-Approval Policies and Procedures | 87 |
| External Auditor Service Fees (By Category) | 87 |
| CORPORATE GOVERNANCE | 87 |
| Board of Directors | 87 |
| Directorships | 88 |
| Orientation and Continuing Education | 88 |
| Ethical Business Conduct | 88 |
| Nomination of Directors | 89 |
| Compensation | 89 |
| Other Board Committees | 89 |
| Assessments | 89 |
| Insider Trading Policy | 89 |
| PLAN OF DISTRIBUTION | 89 |
| Certificates | 90 |
| Commissions and Expenses | 91 |
| RISK FACTORS | 91 |
| Risks Related to Our Company and Our Industry | 91 |
| Risks Associated With the Offering and Common Shares | 104 |
| ELIGIBILITY FOR INVESTMENT | 107 |
| CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS | 108 |
| Holders Resident in Canada | 108 |
| Holders Not Resident in Canada | 110 |
| PROMOTERS | 111 |
| LEGAL PROCEEDINGS | 111 |
| INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 112 |
| AUDITORS | 112 |
| TRANSFER AGENT AND REGISTRAR | 112 |
| MATERIAL CONTRACTS | 112 |
| LEGAL MATTERS | 113 |
| INTERESTS OF EXPERTS | 113 |
| OTHER MATERIAL FACTS | 113 |
| PURCHASERS’ STATUTORY RIGHT OF WITHDRAWAL AND RESCISSION | 113 |
| FINANCIAL STATEMENTS | 113 |
| SCHEDULE A - SOLARBANK FINANCIAL STATEMENTS | |
| SCHEDULE B - AUDIT COMMITTEE CHARTER | |
| SCHEDULE C - DISCLOSURE AND CONFIDENTIALITY POLICY | |
| SCHEDULE D - INSIDER TRADING POLICY |
| iii |
GLOSSARY OF TERMS
The following is a glossary of certain defined terms used throughout this Prospectus. This is not an exhaustive list of defined terms used in this Prospectus and additional terms are defined throughout. Terms and abbreviations used in the financial statements of the Company are defined therein.
Defined Terms
| “Advisory Warrant” | means transferrable Common Share purchase warrants of the Company, with each Advisory Warrant entitling the holder, upon the closing of the Offering, to purchase one Common Share up to the day that is five years from the date of issuance thereof at a price of $0.10 per Common Share. |
| “Agency Agreement” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Agent” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Agent’s Fee” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Audit Committee” | means the audit committee of the Company. |
| “Board” or “Board of Directors” | means the board of directors of the Company. |
| “Broker Warrant” | has the meaning ascribed thereto the cover page of this Prospectus. |
| “Broker Warrant Share” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “CEO” | means Chief Executive Officer. |
| “CFO” | means Chief Financial Officer. |
| “Closing Date” | means the date of closing of the Offering. |
| “Common Shares” | means the common shares without par value in the capital of the Company. |
| “company” | means, unless specifically indicated otherwise, a corporation, incorporated association or organization, body corporate, partnership, trust, association or other entity other than an individual. |
| “Company” or “SolarBank” | means SolarBank Corporation, a corporation existing under the OBCA. |
| “Conversion Unit” | means a unit issuable on the conversion of the Convertible Loan consisting of one Common Share, one Series A Warrant and one Series B Warrant. |
| “Convertible Loan” | has the meaning ascribed thereto under “General Development and Business of the Company – Financings”. |
| “Corporate Finance Fee” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “CRA” | means the Canada Revenue Agency. |
| 1 |
| (a) |
a director or senior officer of the Company; | |
| (b) | a director or senior officer of a company that is itself an Insider or subsidiary of the Company, | |
| (c) | a Person that beneficially owns or controls, directly or indirectly, shares carrying more than 10% of the voting rights attached to all outstanding voting shares of the Company; or | |
| (d) | the Company itself if it holds any of its own securities. |
| “Listing Date” | means date the Common Shares commence trading on the CSE. |
| “MD&A” | means Management’s Discussion and Analysis. |
| “Named Executive Officers” or “NEO” | has the meaning ascribed thereto under “Executive Compensation – Executive Compensation”. |
| “NI 41-101” | means National Instrument 41-101 – General Prospectus Requirements, of the Canadian Securities Administrators. |
| “NI 51-102” | means National Investment 51-102 – Continuous Disclosure, of the Canadian Securities Administrators. |
| “NI 52-110” | means National Investment 52-110 – Audit Committees, of the Canadian Securities Administrators. |
| “NP 46-201” | means National Policy 46-201 – Escrow for Initial Public Offerings, of the Canadian Securities Administrators. |
| “OBCA” | means the Business Corporations Act (Ontario). |
| “Offered Shares” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Offering” | means the distribution of the Offered Shares pursuant to this Prospectus. |
| “Offering Price” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| “Options” | means stock options to acquire Common Shares issuable pursuant to the Share Compensation Plan. |
| “Over-Allotment Option” | has the meaning ascribed thereto on the cover page of this Prospectus. |
| 2 |
| “Person” | means a company, individual or trust. |
| “Principal” | means, collectively, Richard Lu, Sam Sun, Andrew van Doorn, Tracy Zheng, Olen Aasen, Paul Pasalic and Paul Sparkes. |
| “Principal Regulator” | means the Ontario Securities Commission. |
| “Promoter” | means (a) a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer, or (b) a person or company who, in connection with the founding, organizing or substantial reorganizing of the business of an issuer, directly or indirectly, receives in consideration of services or property, or both services and property, 10% or more of any class of securities of the issuer or 10% or more of the proceeds from the sale of any class of securities of a particular issue, but a person or company who receives such securities or proceeds either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this definition if such person or company does not otherwise take part in founding, organizing, or substantially reorganizing the business. |
| “Regulation S” | means Regulation S promulgated under the U.S. Securities Act. |
| “RSUs” | means restricted share units that upon vesting are redeemed for Common Shares issuable pursuant to the Share Compensation Plan. |
| “Securities Commissions” | means the securities regulatory authorities of the offering jurisdictions, being the provinces of British Columbia, Alberta and Ontario. |
| “SEDAR” | means the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators. |
| “Series A Warrant” | means transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series A Warrant entitling the holder, upon satisfaction of the Series A Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. |
| “Series A Warrant Vesting Condition” | means the Series A Warrants shall become exercisable upon the Company attaining a fully diluted market capitalization of $20 million calculated by multiplying all of the issued and outstanding Common Shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. |
| “Series B Warrant” | means a transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series B Warrant entitling the holder, upon satisfaction of the Series B Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. |
| “Series B Warrant Vesting Condition” | means the Series B Warrants shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer” as defined in NI 51-102. |
| “Shareholders” | means holders from time to time of Common Shares. |
| “Share Compensation Plan” | means the share compensation plan of the Company adopted on November 4, 2022. |
| 3 |
Table of Abbreviations
| “BOS” | means balance-of-system |
| “BTM” | means behind-the-meter |
| “C&I” | means commercial and industrial |
| “COD” | means commercial operations date |
| “CRCE” | means Canadian Renewable Conservation Expenses |
| “EPC” | means engineering, procurement and construction |
| “FIT” | means Feed-In-Tariff |
| “GHG” | means Greenhouse Gas |
| “GW” | means Gigawatt |
| “IEA” | means International Energy Agency |
| “IESO” | means Independent Electricity System Operator |
| “IPP” | means Independent Power Producer |
| “IRA” | means Inflation Reduction Act of 2022 |
| “ITC” | means Investment Tax Credit |
| 4 |
| “kW” | means Kilowatt |
| “kWh” | means Kilowatt hour |
| “kWp” | means Kilowatt peak |
| “MPPT” | means Maximum Power Point tracking |
| “MW” | means Megawatt |
| “MWac” | means Mega-Watt, Alternating Current |
| “MWp” | means Megawatt peak |
| “NMCA” | means Net Metering Credit Agreement |
| “NTP” | means Notice to Proceed |
| “NZ2050” | Means Net-Zero by 2050 |
| “O&M” | means operations and management |
| “PCDC” | means Pre-Construction Development Costs |
| “PO” | means purchase order |
| “PPA” | means Power Purchase Agreement |
| “PTO” | means Permission to Operate |
| “PV” | means photovolatic |
| “QA/QC” | means quality assurance/quality control |
| “REC” | means Renewable Energy Certificate |
| “RPS” | means Renewable Portfolio Standards |
| “VDER” | Means Value of Distributed Energy Resources |
| 5 |
GENERAL MATTERS
About this Prospectus
Investors should rely only on the information contained in this Prospectus and are not entitled to rely
on certain parts of the information contained in this Prospectus to the exclusion of others. Neither the Company nor the Agent have authorized
anyone to provide investors with additional or different information. The information contained on www.abundant.solar or any affiliated
website is not intended to be included in or incorporated by reference into this Prospectus and prospective investors should not rely
on such information when deciding whether or not to purchase the Offered Shares. Any graphs, tables or other information demonstrating
our historical performance contained in this Prospectus are intended only to illustrate past performance and are not necessarily indicative
of the Company’s future performance. Neither the Company nor the Agent are offering 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 the date otherwise indicated, regardless of the time of delivery of this Prospectus or any sale of the Offered Shares. The Company’s
business, financial condition, results of operations and prospects may have changed since the date of this Prospectus.
If, after the date that this Prospectus is filed but before the filing of a final prospectus, a material adverse change occurs, the Company will be required to file an amendment to the Prospectus as soon as practicable, but in any event, within 10 days after the material adverse change occurs. If, after the date that a final prospectus is filed but before the completion of the distribution under the final prospectus, a material change occurs, the Company will be required to file and deliver to investors an amendment to the final prospectus as soon as practicable, but in any event within 10 days after the material change occurs.
The Agent is not offering to sell the Offered Shares in any jurisdiction where the offer or sale of such securities is not permitted. For investors outside Canada, neither the Company nor the Agent have done anything that would permit the Offering or distribution of this Prospectus in any jurisdiction where action for that purpose is required, other than in Canada. Investors are required to inform themselves about and to observe any restrictions relating to the Offering and the distribution of this Prospectus.
Interpretation
Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, “SolarBank” or the “Company” refer to SolarBank Corporation together with its direct and indirect subsidiaries, as the context requires.
Certain capitalized terms and phrases used in this prospectus are defined under “Glossary of Terms”. Words importing the singular number include the plural, and vice versa, and words importing any gender include all genders.
Currency Presentation
Unless stated otherwise or as the context otherwise requires, all references to $, C$ or dollar amounts in this Prospectus are references to the lawful currency of Canada, and all references to US$ or United States Dollars are to the lawful currency of the United States.
FINANCIAL STATEMENT PRESENTATION IN THIS PROSPECTUS
The following financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are included in this Prospectus (see “Financial Statements”):
| 1. | the audited financial statements of the Company for the years ended June 30, 2022 and June 30, 2021, together with the notes thereto and the auditors’ report thereon; and |
| 2. | the unaudited interim financial statements of the Company for the three months ended September 30, 2022 together with the notes thereto. |
| 6 |
FORWARD-LOOKING STATEMENTS
This Prospectus contains “forward-looking statements” or “forward-looking information” (collectively “forward-looking statements”) within the meaning of applicable securities laws. Forward-looking statements contained herein are based on current expectations, estimates, forecasts, projections, beliefs and assumptions made by management of the Company about the industry in which it operates. Such statements include, in particular, statements about the Company’s plans, strategies and prospects under the headings “Summary”, “Risk Factors”, and “Management’s Discussion and Analysis”. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and disclaims any obligation, to update any forward-looking statements after it files this Prospectus, whether as a result of new information, future events or otherwise, except as required by the securities laws. These forward looking statements are made as of the date of this Prospectus.
The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
| ● | the intention to complete the listing of the Common Shares (including the Offered Shares) on the CSE and all transactions related thereto; | |
| ● | the completion, size, Offering Price, expenses and timing of the closing of the Offering; | |
| ● | the use of the net proceeds of the Offering and the use of the available funds following completion of the Offering; | |
| ● | the Company’s expectations regarding its revenue, expenses and operations; | |
| ● | industry trends and overall market growth; | |
| ● | the Company’s growth strategies; | |
| ● | expectations relating to director and executive officer compensation levels; | |
| ● | the Company’s anticipated cash needs and its needs for additional financing; | |
| ● | the Company’s intention to grow the business and its operations; | |
| ● | expectations with respect to future costs; | |
| ● | expectations with respect to hiring of additional professional to increase volume; | |
| ● | the Company’s competitive position and the regulatory environment in which the Company operates; | |
| ● | the Company’s expectation that revenues derived from its operations, together with fund-raising activities, including its initial public offering, will be sufficient to cover its expenses during 2022 and over the next 12 months; | |
| ● | the Company’s expected business objectives for the next 12 months; | |
| ● | the Company’s ability to obtain additional funds through the sale of equity or debt commitments; | |
| ● | the effect of the Novel Coronavirus (“COVID-19”) outbreak on the ability of the Company to carry on business; and | |
| ● | beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the design, production, marketing, distribution and sale of our products. |
| 7 |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this Prospectus, the Company has made various material assumptions, including but not limited to: (i) obtaining the necessary regulatory approvals; (ii) that regulatory requirements will be maintained; (iii) general business and economic conditions; (iv) the Company’s ability to successfully execute its plans and intentions; (v) the availability of financing on reasonable terms; (vi) the Company’s ability to attract and retain skilled staff; (vii) market competition; (viii) the products and services offered by the Company’s competitors; (ix) that the Company’s current good relationships with its service providers and other third parties will be maintained; and (x) government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, prospective purchasers of Offered Shares should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Risk Factors”, which include:
| ● | the Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings; | |
| ● | the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers; | |
| ● | the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; | |
| ● | governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline; | |
| ● | general global economic conditions may have an adverse impact on our operating performance and results of operations; | |
| ● | the Company’s project development and construction activities may not be successful; | |
| ● | developing and operating solar projects exposes the Company to various risks; | |
| ● | the Company faces a number of risks involving PPAs and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms; | |
| ● | the Company is subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where it does business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity; | |
| ● | the markets in which the Company competes are highly competitive and evolving quickly; | |
| ● | an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; | |
| ● | the Company’s quarterly operating results may fluctuate from period to period; | |
| ● | foreign exchange rate fluctuations; | |
| ● | a change in the Company’s effective tax rate can have a significant adverse impact on its business; | |
| ● | seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; | |
| ● | the Company may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; | |
| ● | the Company may incur substantial additional indebtedness in the future; | |
| ● | the Company is subject to risks from supply chain issues; | |
| ● | risks related to inflation; | |
| ● | unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; | |
| ● | if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; | |
| ● | there are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes the Company and its utility scale solar projects to additional risk; | |
| ● | compliance with environmental laws and regulations can be expensive; | |
| ● | corporate responsibility, specifically related to Environmental, Social and Governance matters and unsuccessful management of such matters may adversely impose additional costs and expose the Company to new risks; | |
| ● | the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company; | |
| ● | the Company has limited insurance coverage; | |
| ● | the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; | |
| ● | the Company does not anticipate paying cash dividends; |
| 8 |
| ● | the Company may become subject to litigation; | |
| ● | discretion of the Company on use the net proceeds of the Offering. | |
| ● | no guarantee on how the Company will use its available funds; | |
| ● | the Company will be subject to additional regulatory burden resulting from its public listing on the CSE; | |
| ● | the Company cannot assure you that a market will develop or exist for the Common Shares or what the market price of the Common Shares will be; | |
| ● | the market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control; | |
| ● | future sales of Common Shares by existing shareholders could reduce the market price of the Company’s Common Shares; | |
| ● | the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and | |
| ● | future dilution as a result of financings. |
These factors should not be considered exhaustive. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.
Information contained in forward-looking statements in this Prospectus is provided as of the date of this Prospectus, and we disclaim any obligation to update any forward-looking statements, whether as a result of new information or future events or results, except to the extent required by applicable securities laws. Accordingly, potential investors should not place undue reliance on forward-looking statements or the information contained in those statements.
All of the forward-looking statements contained in this Prospectus are expressly qualified by the foregoing cautionary statements. Investors should read this entire Prospectus and consult their own professional advisors to assess the income tax, legal, risk factors and other aspects of their investment.
MARKET AND INDUSTRY DATA
Unless otherwise indicated, information contained in this Prospectus concerning the Company’s industry and the markets in which it operates, including general expectations and market position, market opportunities and market share, is based on information from independent industry organizations, other third-party sources (including industry publications, surveys and forecasts) and management studies and estimates.
Unless otherwise indicated, the Company’s estimates are derived from publicly available information released by independent industry analysts and third-party sources as well as data from the Company’s internal research and knowledge of the renewable energy market and economy, and include assumptions made by the Company which management believes to be reasonable based on their knowledge of the Company’s industry and markets. The Company’s internal research and assumptions have not been verified by any independent source, and it has not independently verified any third-party information. While the Company believes the market position, market opportunity and market share information included in this Prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the Company’s future performance and the future performance of the industry and markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Forward-Looking Statements” and “Risk Factors”. For the avoidance of doubt, nothing stated in this paragraph operates to relieve any party from liability for any misrepresentation contained in this Prospectus under applicable Canadian securities laws.
MARKETING MATERIALS
A “template version” of the following “marketing materials” (each such term as defined in NI 41-101) for the Offering has been filed with the Securities Commissions, and are specifically incorporated by reference into this Prospectus:
| 1. | the investor presentation of the Company dated February 10, 2023 entitled “Investor Presentation – February 10, 2023” filed on SEDAR on February 10, 2023 (the “Investor Presentation”). |
The Investor Presentation referred to above are available under the Company’s profile on SEDAR at www.sedar.com.
In addition, any template version of any other marketing materials filed in connection with this Offering, after the date hereof but prior to the termination of the distribution of the Offered Shares under this Prospectus (including any amendments to, or an amended version of, any template version of any marketing materials), is deemed to be incorporated by reference herein. Any template version of any marketing materials utilized in connection with this Offering are not part of this Prospectus to the extent that the contents of the template version of the marketing materials have been modified or superseded by a statement contained in this Prospectus.
| 9 |
PROSPECTUS SUMMARY
The following is a summary of the principal features of this Prospectus and the Offering. and does not contain all of the information an investor should consider before investing in the Offered Shares and should be read together with the more detailed information and financial data and statements contained elsewhere in this Prospectus, especially the “Risk Factors” section of this Prospectus. Certain capitalized terms and phrases used in this Prospectus are defined in the “Glossary of Terms” beginning on page 1.
Principal Business of the Company
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in the province of Ontario and the state of New York. The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
The Offering
Pursuant to the Agency Agreement, the Company has appointed the Agent to act as its agent to offer for sale to the public, on a “commercially reasonable efforts” basis, up to 7,000,000 Offered Shares at the Offering Price per Offered Share, for gross proceeds of up to $5,250,000, subject to compliance with all necessary legal requirements and to the conditions of the Agency Agreement. The Company has also granted the Agent the Over-Allotment Option exercisable at any time up to 48 hours prior to the Closing Date to acquire up to 1,050,000 Additional Shares at the Offering Price, representing 15% of the maximum Offering.
The Company has agreed to pay to the Agent: (a) the Agent’s Fee which is equal to 6.0% of the gross proceeds of the Offering, and (b) an aggregate number of Broker Warrants equal to 6.0% of the aggregate number of Offered Shares issued pursuant to the Offering, in each case, including pursuant to any exercise of the Over-Allotment Option. Each Broker Warrant will entitle the Agent to purchase one Broker Warrant Share at the Offering Price for a period of 36 months following the Closing Date. In addition, the Agent shall be paid a Corporate Finance Fee of $35,000 (plus applicable taxes).
See “Plan of Distribution”.
The Listing
The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023.
Use of Proceeds
The net proceeds of the Offering, after deducting the Agent’s Fee, the remaining balance of the Corporate Finance Fee in the amount of $16,750 (inclusive of applicable taxes) and the estimated expenses of the Offering of $200,000, are estimated to be $4,718,250 before giving effect to any exercise of the Over-Allotment Option. The net proceeds of the Offering are currently intended to be used for company expansion and general corporate purposes. Specifically, the Company expects to use the net proceeds of the Offering for the following purposes:
Use of Proceeds |
Amount ($) | |
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | |
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 |
| 10 |
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | |
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | |
| Salaries for new hires. | 418,250 | |
| Total | 4,718,250 |
If the Offering is fully subscribed and the Over-Allotment Option is exercised in full, the net proceeds to the Company from the Offering, after deducting Agent’s Fee, the balance of the Corporate Finance Fee and estimated expenses of the Offering will be $5,458,500. Any additional proceeds received from the exercise of the Over-Allotment Option will be used for working capital.
Risk Factors
An investment in the securities of the Company is speculative and involves a high degree of risk. The following are a summary of certain of the risk factors described elsewhere herein. An investment should only be considered by investors who can afford the total loss of their investment. A prospective investor in Common Shares should be aware that there are various risks that could have a material adverse effect on, among other things, the properties, business and condition (financial or otherwise) of the Company. These risk factors which are listed below, together with all of the other information contained in this Prospectus, including information contained in the section entitled “Forward-Looking Statements”, should be carefully reviewed and considered before an investment in Common Shares is made. The risks listed below do not necessarily comprise all the risks faced by the Company.
Risks include those related to: The volatile solar power market and industry conditions; availability of third-party financing arrangements for us and our customers; tight credit markets; ability to expand the pipeline of our energy business in several key markets; the revision, reduction or elimination of incentives and policy support schemes for solar and battery storage power; general global economic conditions; success and timing of our project development and construction activities; the development and operation of solar projects; PPAs and project-level financing arrangements; laws, regulations and policies at the national, regional and local levels of government; competition; anti-circumvention investigations; the fluctuations in our quarterly operating results; Fluctuations in exchange rates; changes in our effective tax rate; Seasonal variations in demand linked to construction cycles and weather conditions; inability to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; incurring substantial additional indebtedness in the future; supply chain issues; inflation in many countries and regions; unexpected warranty expenses that may not be adequately covered by our insurance policies; inability to attract, train, retain, and successfully integrate key personnel into our management team; limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid; compliance with environmental laws and regulations; corporate responsibility; natural disasters, health epidemics, such as COVID-19, and other catastrophes; limited insurance coverage; information technology systems and data security breaches; the Company having a negative cash flow for the periods ended June 30, 2022 and June 30, 2021; litigation; the fact the Company does not anticipate paying cash dividends; uncertainty and discretion in the use of proceeds; there being no market for Common Shares currently existing; additional regulatory burden resulting from its public listing on the CSE; the market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control; the Company may need to raise additional capital in the future; the Company may be unable to support existing or new business if it does not raise sufficient funds; and dilution of the Common Shares.
| 11 |
See “Risk Factors”.
Summary Consolidated Financial Information
The following selected financial information has been derived from, and is qualified in its entirety by, the SolarBank Financial Statements, and the notes thereto (included at Schedule “A” to this Prospectus), and should be read in conjunction with the respective MD&A thereto (see “Management’s Discussion and Analysis”).
| Item | Interim
Period Ended September 30, 2022 (Unaudited) | Financial
Year Ended June 30, 2022 (Audited) | Financial
Year Ended June 30, 2021 (Audited) | |||||||||
| Revenue | $ | 5,480,452 | $ | 10,197,619 | $ | 7,346,581 | ||||||
| Total Expenses(1) | $ | (5,343,785 | ) | $ | (10,558,165 | ) | $ | (7,209,754 | ) | |||
| Net and Comprehensive Income (Loss) | $ | 164,482 | $ | 31,313 | $ | (199,917 | ) | |||||
| Current Assets | $ | 9,625,976 | $ | 8,983,109 | $ | 10,254,735 | ||||||
| Total Assets | $ | 9,827,628 | $ | 9,194,537 | $ | 10,283,255 | ||||||
| Total Liabilities | $ | 5,222,561 | $ | 4,753,922 | $ | 5,873,953 | ||||||
| Shareholders’ Equity | $ | 4,605,097 | $ | 4,440,615 | $ | 4,409,302 | ||||||
Note:
| (1) | Total Expenses equal Total cost of goods sold plus total operating expenses. |
See “Selected Financial Information”.
| 12 |
CORPORATE STRUCTURE
Name, Address and Incorporation
The Company was incorporated under the OBCA on September 23, 2013 as 2389017 Ontario Inc. On October 11, 2013 its name was changed to Abundant Solar Energy Inc. On October 17, 2022, it amended its Articles to establish an authorized capital consisting of an unlimited number of Common Shares. On October 17, 2022 its name was changed to SolarBank Corporation. On October 7, 2022 it completed a share split on a 1:160 basis.
The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
Intercorporate Relationships
The corporate structure of the Company is outlined in the diagram below and is current as at the date of filing of this Prospectus.
Subsidiaries
The Company’s subsidiary Abundant Solar Power Inc. (“Abundant USA”) was incorporated in the State of Delaware on December 15, 2016. The registered address of Abundant USA is 850 New Burton Road, Suite 201, City of Dover, County of Kent, Delaware, 19904 United States. Abundant USA was incorporated to carry out the Company’s operations in the United States.
The Company’s subsidiary Abundant Construction Inc. (“ACI”) was incorporated in the Province of Ontario on November 8, 2018. The registered address of ACI is 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. ACI was incorporated to act as the counter-party for certain of the Company’s construction agreements.
The Company’s subsidiary 2467264 Ontario Inc. (“246 Ontario”) was incorporated in the Province of Ontario on May 21, 2015. The registered address of 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. ACI was incorporated to develop solar power projects in the Province of Ontario with the support of 2543154 Ontario Inc., an arm’s length third party, who holds the remaining 51.1% of 246 Ontario. 2543154 Ontario Inc. is a corporation that is owned 50% by the MoCreebec Eeyoud and 50% by the Aroland First Nation, both First Nations Communities.
| 13 |
GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY
Overview
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in Canada and the United States. The Company’s mission is to support the energy transition in North America through deployment of clean energy at a distributed scale closer to where consumption occurs. Its objective is to scale-up as a leading developer, owner and operator of a significant fleet of distributed solar power assets that have economic and technical value. The Company originates, develops, designs and builds solar power projects. The Company is also gaining expertise in battery storage, co-generation and other technologies that will enable greater penetration of clean energy.
The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
The Company’s success started with the renewable Feed-In-Tariff (“FIT”) program for rooftop and ground mount solar arrays in Ontario, Canada. Since then, the Company has established itself as a trusted developer, engineer and asset operator that enables the proliferation of renewable and clean energy in the pursuit of Net Zero carbon emission goals in the fight against climate change and global warming.
The Company’s core competency is in deeply understanding and mastering the ‘local playbook’ of standard offer programs in numerous energy markets in North America allowing it to successfully gain market share while maintaining low overhead and capital-at-risk. The Company provides simple, reliable, and energy-resilient solutions to its customers that significantly reduce their carbon footprint. The Company has extensive experience working with 1,000+ customers including municipalities, First Nations, community co-operatives, regional economic planning authorities, commercial and industrial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions.
The Company’s leadership team has over 100 years of combined expertise in the renewable and clean energy industry coupled with a strongly defined philosophy and financial vision for successful growth. The team brings expertise in site origination, utility grid interconnection, permitting, financing, Engineering, Procurement and Construction (“EPC”), Operation & Maintenance, and asset management of solar PV power plants to the renewable and clean energy industry. As a total solution provider, the Company brings certainty at speed and scale in site control, government relations, grid interconnection, global supply chain and project financing to bring grid-connected solar power plants to productive operation.
The Company focuses on grid connected solar PV electricity power plants. With its full in-house development, engineering and construction expertise, the Company’s capabilities span the value chain from development, EPC, financing, and, while not yet an Independent Power Producer (“IPP”), performs asset management which is a core function of an IPP. The Company’s core business consists of:
| ● | Development: The Company identifies, evaluates and secures control of suitable solar development sites; obtains grid interconnection from utilities; acquires permits from government authorities; and engages solar energy subscribers and/or Power Purchase Agreement (“PPA”) clients as off-takers. A PPA, also referred to as an off-take agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer or off-taker). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA requires active management to reconcile monthly deliveries, penalties and payment for electricity. |
| 14 |
| ● | EPC: The Company engineers, procures and constructs efficient, eco-friendly, renewable solar power plants for industrial, commercial, community and utility electricity market, using high engineering standards and the latest technology. | |
| ● | Financing: The Company assists with securing sponsor equity, tax equity, long-term debt, and construction financing to deploy solar power plants. | |
| ● | Independent Power Producer: The Company is not yet an IPP. However, the Company does carry out one of the core functions of an IPP as it operates and maintains solar power plants for maximized production (O&M services described further below) and oversees solar power subscribers through two customer support centers in Boston and Chicago. The Company manages PPA and off-take agreements as an asset manager. |
O&M stands for Operations and Maintenance. It refers to the set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable regulations. It encompasses several ongoing maintenance processes along with the replacement and disabling of broken and damaged system and structural components. O&M is essential to ensuring that solar power plants sustain themselves for their expected system life. O&M consists of three fundamental and principal functions:
| ● | Preventative maintenance. | |
| ● | Reactive maintenance: rapid identification, analysis, and resolution of issues and problems. | |
| ● | Comprehensive and detailed monitoring and reporting with adequate and requisite transparency. |
In the C&I solar segment, most solar companies perform O&M for their own systems, working with local electrical contractors and groundskeepers.
In carrying out its O&M services, the Company’s service standards are set out in its O&M contracts. These service standards have been developed over time based on experience and industry best practices. Referring to government agencies and industry associations such the National Renewable Energy Laboratory in the United States and Solar Power Europe, the standards have been developed based on industry experience, reliability, resilience and maximizing system output. Afterwards experience in the field and the close monitoring of system performance has allowed the standards to develop as to adapt to site specific conditions and achieve the highest system output and up time possible. Some references used in the development of the Company’s service standards are as follows: (i) Best Practices for Operation and Maintenance of Photovoltaic and Energy Storage Systems, 3rd Edition National Renewable Energy Laboratory, Sandia National Laboratory, SunSpec Alliance, and (ii) the SunShot National Laboratory Multiyear Partnership PV O&M Best Practices Working Group Operations and Maintenance Best practices guidelines version 5.0 by Solar power Europe.
The scope of work covers all electrical inspections and preventive measures which are comparable to any other electrical system such as a substation or a commercial or industrial building’s electrical connection infrastructure. The scope of work or service standards involve retorquing of electrical connections, testing of electrical components, testing of transformer oil to determine any degradation and mechanical inspections and adjustment of the racking system.
The O&M contract services standards are negotiated mainly on the preventive and reactive maintenance components. For preventive maintenance the standards or scope of work are common and little negotiation takes place aside from increasing frequency of inspections. For the reactive side, negotiation involves rates and response times to unforeseen operational issues.
The measurement of the O&M provider’s performance is usually verified by the customer through the performance factor of the system, as well as the monthly report which includes system output and allows for a comparison between predicted performance (e.g., through PVsyst simulation) and actual performance. For reactive maintenance the customer will measure response time and remediation time or “up time”. To date there have been no customer complaints under any of the Company’s O&M contracts.
| 15 |
The Company generates revenues via a diverse portfolio of distributed and community solar projects across multiple solar markets including projects with host off-takers, community solar, and net metering projects under programs such as FIT, Value of Distributed Energy Resources (“VDER”), Net Metering Credit Agreements (“NMCAs”), and PPAs. The Company develops solar projects that sell electricity to commercial, industrial, municipal, residential and utility off-takers.
Since incorporation, the Company’s team delivered value in Ontario’s FIT program with the completion of over 150 projects, New York’s Community Solar Program, and an RFP issued by the Maryland Department of Transportation. As a developer, full-service EPC contractor, and asset O&M manager, the Company has been successful in the renewable and clean energy industry working with 1,000 plus stakeholders including property owners, municipalities, indigenous people, co-operatives, electric utilities and regulatory agencies. The Company designed and constructed 100 plus solar power plants, including C&I rooftop installations and ground mount solar farms of varying scale. The Company’s management team has developed, financed and built over 600 C&I projects in Ontario, Minnesota and New York. Through its contracted customer care centers in Boston and Chicago the Company serves more than 5,000 retail electricity customers as community solar subscribers.
The Company’s success in the solar energy market is a result of its creativity, innovation, and ability to think outside of the box, in designing responses to the growing challenges facing the power industry. The Company has managed over $70 million in project financing to-date and has access to low-cost development financing by collaborating with tax-advantaged investment funds seeking CRCE in Canada or federal ITCs in the United States. A tax advantaged investment fund is an investment fund that passes through tax credits to its investors providing investors with tax benefits that allow such funds to offer lower returns to investors. This in turn means that the Company can access funding from such investment funds at a lower cost of capital. An example of a tax-advantaged investment fund is the SFT Group. There is a risk that if tax credits are eliminated or reduced in the future that such investment funds will have difficulty raising capital and as a result the Company may no longer have access to this form of financing.
| 16 |
Three-year history
Financings
On August 1, 2020, the Company entered into a promissory note agreement of $248,081 (US$200,000) with Central New York Enterprise Development Corporation (“CNY”) for a loan with a fixed interest rate of 5% per annum and principal and interest are payable on February 1, 2022. This loan is secured by the following collateral clause: all of the Company’s inventory, equipment, fixtures, accounts, contract rights, chattel paper, security agreements, instruments, deposit accounts, reserves, documents and general intangibles; and all judgements, claims, insurance policies and payments owed or made, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements. Subsequently, the Company has fully repaid the loan in December 2021.
On July 31, 2020, the Company entered into a secured note agreement with TGC Fund III, LP (“TGC”), a customer of the Company, for a loan of $2,483,775 (US$2,000,000). The term loan has an interest rate of 10% per annum to pay for 75% of the interconnection deposits of three projects. Upon TGC purchasing these projects from the Company, the principal and interest amounts are due. TGC purchased two projects as of June 30, 2021 and the third project was expected to close six months after. The third project has been closed subsequently and outstanding term loan has been fully repaid in July 2021.
On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (US$517,017) that comprised of a fixed interest rate of 10% for the first month and 1% for the remaining 11 months, compound monthly. The loan had a maturity date of January 7, 2022 and was secured by the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. In September 2022, the Company fully repaid the shareholder’s loan.
On May 3, 2021, the Company received a Highly Affected Sectors Credit Availability Program loan for a total of $1,000,000 at an interest rate of 4% per annum from the Bank of Montreal. The loan has a ten-year amortization period with interest payments only for the first year. Principal payments commenced in May 2022.
The Company received a Canada Emergency Business Account interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two year term which bears interest at 5% per annum.
On October 3, 2022 the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Each Convertible Loan is convertible at the option of the holder thereof into Conversion Units at a conversion price of $0.50 per Conversion Unit at any time. The Convertible Loans mature on the 12 month anniversary of the date of issuance of the Convertible Loans and do not bear interest at any time. Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Other Developments of the Business
On December 21, 2020, the Company entered into Purchase Order with Honeywell International Inc. for the construction of a solar energy facility in New York State in consideration for cash in the amount of US$1,413,694.52. To date the Company has completed six community and net metering solar projects in collaboration with Honeywell in New York State.
| 17 |
On February 9, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Troupsburg LLC for the construction and operation of 14.0 MW-DC solar energy facilities located in the Town of Richmond, Ontario County, New York and the Town of Portland, Chautauqua County, New York in consideration for cash in the amount of US$16,269,500. This project was placed into service on October 12, 2022.
On November 15, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Abundant Solar Power (VC1) LLC for the construction and operation of 298 kW-DC solar energy facilities located in the Village of Cazenovia, Madison County, New York in consideration for cash in the amount of US$488,321.
On November 15, 2021, the Company entered into a Membership Interest Purchase and Sale Agreement with Solar Alliance Energy DevCo LLC, for the sale of its interest in the Cazenovia Facility. This transaction closed in December 2022.
On January 31 2022, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Alliance Energy DevCo LLC (US1) for construction and operation of 278 kW-DC solar energy facilities located in the Village of Union Springs, New York in consideration for cash in the amount of US$802,383.20.
Changes in current financial year
Building upon its solid core competencies in full-service development, the Company will deliver an integrated growth solution that has the capacity to generate revenue and grow the business in different revenue streams and that is discussed in this paragraph. For C&I end users, the Company will extend its expertise in rooftop solar to behind-the-meter (“BTM”) solar projects, carports, and building-integrated photovoltaics enabling large property management firms and C&I customers like Honeywell International to achieve corporate Net-Zero commitments. The Company has been in negotiations with C&I customers to achieve this goal. The Company also intends to extend its success in FIT ground mount solar gardens and Community Solar farms to large Utility Scale solar farms with a targeted size of up to 100 MWp. In this regard, the Company has site control of a potential 30 MWp utility solar project and is actively searching for suitable sites that could allow for a solar project of up to 100 MWp. The Company’s track record in operations, maintenance, and asset management create a strong foundation for it to become a successful Independent Power Producer (“IPP”) delivering long-term, sustainable, and profitable growth. The Company’s pipeline has been growing in all aspects of what is being discussed above which is the result of an integrated growth solution.
To achieve this strategic growth goal, the Company will strengthen its team of professionals to increase volume. In 2022 it added additional employees with professional credentials in engineering and accounting. An existing team of 12 professionals with experienced and committed core members will be supplemented by outsourcing certain EPC services to meet a growing volume of business as the Company expects to complete projects with more total MWp in the current fiscal year than were completed in the fiscal year ended June 30, 2022. The Company will continue its tradition in project execution with simplicity, focus, and speed to enhance its leading position in cost competitiveness, with time to COD as a key measure of operation excellence.
Overview of Business and Services
Industry Overview
People need energy for nearly everything they do. The majority of the energy sources on earth are still coal and natural gas, representing close to 60% of global electricity supply.1 However, fossil fuel reserves are limited.
Conversely, the sun has all the energy our civilization needs. About 173,000,000 GW of Solar energy continue to reach the Earth’s surface.2 The US Department of Energy revealed that about 430 quintillion Joules (1.19e+14 kWh) of solar energy strikes the earth every hour.3 A single hour of solar energy could provide enough energy to power the planet for a year. Unlike conventional energy sources, it will take 5 billion years for the sun to run out of fuel.4
1 International Energy Agency. Global Energy Review 2020. https://www.iea.org/reports/global-energy-review-2020/renewables
2 Pierce, E.R. (2016). Top 6 Things You Didn’t Know About Solar Energy. U.S. Department of Energy. www.energy.gov/articles/top-6-things-you-didnt-know-about-solar-energy.
3 Ashrafun Nushra Oishi, A.N., Meer Shadman Shafkat Tanjim and M. Tanseer Ali (2019). Loss Analysis of Market Available Solar Cells and Possible Solutions. Journal of Scientific & Engineering Research, Volume 10, Issue 9, September-2019 ISSN 2229-5518.
4 Scudder, J. (2015). The sun won’t die for 5 billion years, so why do humans have only 1 billion years left on Earth? https://phys.org/news/2015-02-sun-wont-die-billion-years.html
| 18 |
93% of the global population lives in countries that have an average daily solar PV potential between 3.0 and 5.0 kWh/kWp.5 Because of this abundance of solar power, we only need a small percentage of the planet’s surface to harvest enough energy to power the planet. For example, in Ethiopia just 0.005% of the country’s land area could generate sufficient power to cover existing needs, and in Mexico that figure is just 0.1%.6
Solar PV potential varies across Canada, with the highest insolation in southern Saskatchewan, Alberta, Manitoba, and Ontario, and the lowest in northern and coastal regions.7 The National Energy Board of Canada expects that by 2040, solar power will generate 13% of the country’s electricity.8
Solar power is more affordable, accessible, and prevalent in the United States than ever before. From just 0.34 GW in 2008, U.S. solar power capacity has grown to an estimated 97.2 GW today.9 This is enough to power the equivalent of 18 million American homes at average consumption.10 Today, over only a small percentage of U.S. electricity comes from solar energy. According to the US Department of Energy, with aggressive cost reductions, enabling policies, and large-scale electrification, solar could account for as much as 40% of the nation’s electricity supply by 2035 and as much as 45% by 2050.11
Products and Services
The Company recognizes revenue from project development service and EPC services. The Company provides solar energy solutions by developing, permitting, designing and building BTM solar power generation and transmission or distribution electricity grid connected community solar gardens and utility scale solar farms. While the Company’s focus is on delivering solar power plants from site origination to commercial operation, and the operation and management of the solar power assets, the Company also provides renewable and clean energy project development, EPC, O&M and asset management services for a fee.
5 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
6 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
7 Market Snapshot: Which cities have the highest solar potential in Canada? (2018) https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2018/market-snapshot-which-cities-have-highest-solar-potential-in-canada.html
8 National Energy Board. Canada’s Energy Future 2017: Energy Supply and Demand Projections to 2040 (2017) https://www.cer-rec.gc.ca/en/data-analysis/canada-energy-future/archive/2017/2017nrgftr-eng.pd
9 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
10 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
11 U.S. Department of Energy. Solar Futures Study (2021) https://www.energy.gov/sites/default/files/2021-09/Solar%20Futures%20Study.pdf
| 19 |
A description of the Company’s three focus areas: BTM solar power generation, community solar and utility scale solar farms are as follows:
Behind-the-Meter (BTM) Solar Power Generation
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with grid electricity coming from renewable sources such as solar (long-term) and BTM solar power plants to generate zero emission renewable solar power onsite for the building’s self-use (immediate).
The term “behind-the-meter” refers to energy production and storage systems that directly supply homes and buildings with electricity. Residential and commercial solar panels are considered to be behind-the-meter, as are residential and commercial solar batteries—the energy that is produced or stored by these systems is separate from the grid and does not need to be counted by a meter before being used, so they are positioned behind the meter. Behind-the-meter, however, is not the same as “off-grid”. Most behind-the-meter solar energy systems are still grid-tied, which means they maintain a connection to the electrical grid. The energy the solar PV systems provide do not pass through an electricity meter before it is used by the home or business, but, when the panels are not in use (when there is no sunlight), energy from the grid is sent to the home or business, and that energy must pass through a meter first so that it can be accounted for by the utility.
All electricity end customers sit behind the meter. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Energy cost savings, | |
| ● | Control over project operations and maintenance, | |
| ● | Self-consumption of distributed generation (usually solar PV), | |
| ● | Visible commitment to sustainability (with solar PV), and | |
| ● | Resiliency (with battery storage). |
All provinces and territories in Canada offer net metering program though the details may differ.12 Forty-one States in the US, in addition to Washington, D.C., American Samoa, U.S. Virgin Islands and Puerto Rico offer net metering programs.13 The BTM solar projects are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems, and could be profitable with a targeted 15% gross margin. The Company can be a turn-key service provider to commercial and industrial (“C&I”) customers for them to own BTM solar power plants on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and third party ownership.
There has been an increased interest in BTM solar projects. Existing buildings are responsible for 18% of Canada’s GHG emissions, BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050.14
12 Alberta: https://www.epcor.com/products-services/power/micro-generation/Pages/net-metering.aspx; British Columbia: https://app.bchydro.com/accounts-billing/electrical-connections/net-metering.html; Saskatchewan: https://www.saskpower.com/Our-Power-Future/Powering-2030/Generating-Power-as-an-Individual/Using-the-Power-You-Make/Net-Metering; Manitoba: https://www.hydro.mb.ca/accounts_and_services/generating_your_own_electricity/?_ga=2.88824211.949710914.1666383471-1665874008.1666383471; Ontario: https://www.hydroone.com/business-services/generators/net-metering; Quebec: http://www.hydroquebec.com/residential/customer-space/account-and-billing/understanding-bill/residential-rates/net-metering-option.html; PEI: https://www.maritimeelectric.com/services/articles/net-metering/; Nova Scotia: https://energy.novascotia.ca/renewables/programs-and-projects/enhanced-net-metering; New Brunswick: https://www.nbpower.com/en/products-services/net-metering/; Newfoundland: https://www.newfoundlandpower.com/My-Account/Usage/Electricity-Rates/Net-Metering; Yukon: https://yukon.ca/en/micro-generation-program; Northwest Territories: https://www.inf.gov.nt.ca/en/NetMetering; Nunavut: https://www.qec.nu.ca/customer-care/generating-power/net-metering-program.
13 National Renewable Energy Laboratory. Net Metering. https://www.nrel.gov/state-local-tribal/basics-net-metering.html
14 Natural Resources Canada. Green Buildings. https://www.nrcan.gc.ca/energy-efficiency/green-buildings/24572
| 20 |
Community Solar Gardens
Solar power can help reduce CO2 emissions mainly by being a clean and renewable source of electricity. Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production at residential or C&I subscribers’ locations. Community Solar farms provide opportunities for the subscribers to do their part in achieving the Net-Zero goal.
Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earn credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
Community solar projects are usually 3 – 7 MWp each in size (see below a Company developed 3 MWp solar farm in Portland, NY, USA) subject to State regulation. Community solar capacity has increased because more projects have come online and because projects have generally become larger over time. Economies of scale enable cost-effective construction of a renewable energy system at a site with optimal renewable resource availability.
Community solar farm projects leverage economies of scale and often offer quick to market solutions for scales of approximately 1,000 homes/7 MWp. Additional advantages include, shared transaction costs often make this procurement option less expensive than self-supply, and customers are generally not responsible for maintenance and upkeep.
Utility Scale Solar Farms
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production. For comparison, the average American household uses approximately 900 kWh. A utility-scale solar power plant can utilize several solar technologies including primary PV, tracking (rotate to track the sun’s movement) or fixed racking (does not track the sun’s movement).
| 21 |
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a PPA with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time. Utility scale systems also participate in monthly and spot auction markets for energy, capacity, and ancillary services.
Utility-scale solar has become a growing source of electricity in the world. Many utility-scale solar designs can also include energy storage capacity that provides power when the sun is not shining and increases grid reliability and resiliency.
To reach NZ2050, every industry requires power and every business needs to decarbonize. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory, and utility scale solar farm is a commercially viable decarbonization solution for reaching the Net-Zero carbon emission goal.
Customers and Sales Channels
The pursuit of Net-Zero carbon emissions comes a rising demand for renewable energy. Customers are increasingly capitalizing on the climate benefits of renewables; they are looking for renewable energy to meet rising energy needs; they want to benefit from the improving economics of renewable energy via subsidies; and they want to move their businesses away from fossil fuel dependency. Based on application, the Company has customers in the following market segments: BTM, Community Solar, Corporate PPA, and Utility solar PPA.
| 22 |
Behind the Meter (BTM) Solar for C&I Customers
Corporate Net-Zero goals boost BTM solar growth. The C&I BTM solar market, which consists of on-site solar power generation primarily for self use has grown rapidly in recent years. Net-Zero adoption by businesses, non-for-profits and governments will help continue to increase the demand for BTM solar segments. Many C&I customers are becoming more interested in making sustainability-focused choices. With little more than 1% of commercial electricity demand served by on-site solar, there remains significant opportunity for growth in the BTM solar segment.
All subnational jurisdictions in Canada and the United States have net metering programs for BTM solar projects.15 The Company delivers BTM projects to C&I customers with in-house expertise, enabling economic progress on Net-Zero goals. A residential BTM market segment also exists; however, the Company sees Community Solar as its strongest opportunity to serve mass market residential customers.
Community Solar for Mass Market Subscribers
A Community solar subscription is tied to an offsite solar farm, or solar garden and allows homeowners, renters, small businesses, religious organizations, and other not-for-profits to purchase solar energy without the need to install panels on their property. Rather than purchasing energy solely sourced from utility-scale generators, such as coal and natural gas power plants, some or all electricity is sourced from the community solar project. Subscribers are billed for the solar energy and are credited on their utility bill. In many cases, this creates a discount over conventional electricity purchases. Community solar is especially appealing to those customers who are unable or unwilling to install a renewable energy generator at their residence or commercial facility but still seek the economic and environmental benefits of solar energy.
As of December 2021, Community solar projects are located in 39 states, plus Washington, D.C. 22 states, plus Washington, D.C., have policies that support community solar. Community solar projects represent more than 3,200 MWac of total installed capacity.16 The Biden Administration wants community solar to reach 5 million households by 2025 and create $1 billion in energy bill savings.17
Community Choice Aggregation (“CCA”) is an alternative to the investor-owned utility energy supply system in which local entities in the United States aggregate the buying power of individual customers within a defined jurisdiction to secure an alternative energy supply contract. The CCA chooses the power generation source on behalf of the consumers; and thus have the potential to be a major source of viable customers for community solar projects, representing very large contracts for community solar generators. The main goals of CCAs have been to either lower costs for consumers or to allow consumers greater control of their energy mix, mainly by offering cleaner generation portfolios than many local utilities.
15 See notes 12 and 13.
16 National Renewable Energy Laboratory. Community Solar. https://www.nrel.gov/state-local-tribal/community-solar.html
17 U.S. Department of Energy. DOE Sets 2025 Community Solar Target to Power 5 Million Homes.https://www.energy.gov/articles/doe-sets-2025-community-solar-target-power-5-million-homes
| 23 |
Seven states in the United States have enacted CCA-enabling laws.18 CCAs have set national green power and climate protection records while reducing power bills. CCAs have won National Renewable Energy Laboratory and Environmental Protection Agency recognition for supplying significantly higher amounts of renewable energy while maintaining rates that are competitive with conventional fossil fuel and nuclear-based utility power.19 CCAs are therefore already conspicuous leaders in green power innovation, receiving the U.S. Environmental Protection Agency’s “green power leadership awards” for achievements in renewable energy. The Company has existing intends to in the future establish relationships with CCAs as a primary method of entry into the Community Solar project market.
Corporate America and IPP Customers
Regulation, investor activism, and rising consumer interest are among the factors pushing companies to benchmark and improve the sustainability performance of their offerings. Both governments and consumers are demanding companies reduce emissions and their environmental footprint. As a result, a growing demand exists for renewable electricity generation from large corporations. Globally, thousands of companies have set or are in the process of setting commitments to emissions reduction. In addition, hundreds of large US-based companies have committed to net-zero targets, many of which have set ambitious emissions reductions targets by 2030 or sooner.
Solar PPAs continue to evolve, with corporations increasingly procuring solar generation offsite. Major customers include renewable investment funds, RE100 corporations, and government administrations. Corporate solar PPAs can be classified as follows:
| ● | Physical PPA: a contract for the purchase of power and associated Renewable Energy Credits from a specific renewable energy generator to a purchaser of renewable electricity. |
| ● | Financial PPA: a financial arrangement between a renewable energy generator and a consumer. A Financial PPA does not include the electricity delivery to the buyer, and so the buyer can be located in a different power market. A Financial PPA involves crediting the consumer for the generator’s production. |
Corporate solar PPA prices vary widely from state to state. From 2020 to 2021, there were reductions in levelized electricity costs for commercial and utility-scale PV plus-storage systems. The levelized cost of electricity of utility-scale stand-alone PV fell from 4.6 cents/kWh in Q1 2020 to 4.1 cents/kWh in Q1 2021.20 State-by-state variance in contract prices is a function of avoided cost, resource availability and state incentives. PPA rates continue to decline, increasing viability and market opportunity in more jurisdictions. Falling component and build costs and attractive financing make solar the lowest-cost generation alternative in many states. Corporate customers are also negotiating shorter PPA terms to maximize future flexibility.
Traditional Energy Utilities as Customers
For the United States, the path to NZ2050 entails a comprehensive and rapid effort to decarbonize the economy. America’s annual GHG emissions come from a variety of sources, spanning every sector. Demand from utilities for renewable energy is expected to continue to grow in line with the broader economy. Utilities form the largest share of demand globally, particularly in the Americas, as they are required by law to meet RPS. They also have increased exposure to the merchant market (non-PPA), which will start to account for a larger share of solar PV installations.
18 National Renewable Energy Laboratory. Community Choice Aggregation (CCA) Helping Communities Reach Renewable Energy Goals. https://www.nrel.gov/state-local-tribal/blog/posts/community-choice-aggregation-cca-helping-communities-reach-renewable-energy-goals.html
19 See note 18.
20 Vignesh Ramasamy, David Feldman, Jal Desai, and Robert Margolis. U.S. Solar Photovoltaic System and Energy Storage Cost Benchmarks: Q1 2021, https://www.nrel.gov/docs/fy22osti/80694.pdf
| 24 |
Customers Buy Solar Renewable Energy Certificate (“REC”) Off-Sets
One way that the decarbonization effort is being pursued by lawmakers is the creation of RPS at the subnational level. An RPS makes it law for utilities to source a certain percentage of the electricity they sell to customers from renewable energy sources. This is done via REC trading systems.
To facilitate compliance with RPS requirements, states have adopted a market-based system of tradable RECs that represent the legal property rights to the environmental benefits of one MWh of renewable electricity generation. A REC is issued for every MWh of electricity generated and delivered to the electric grid from a renewable energy resource.
In the REC state markets, various RPS regimes require electricity suppliers to secure a portion of their electricity from renewable power plants. Utilities must generate RECs themselves via self-owned renewable generation, purchase them from renewable generators, or else pay a penalty that is generally higher than the market rate for RECs.
All green power supply options involve the generation and retirement of RECs. Renewable energy providers can unbundle energy from RECs - selling energy as “brown” power and the RECs on the open market. REC sales involve no physical delivery of electricity to customers. One way to think of RECs is that they represent the “solar” aspect of the electricity that was produced.
REC generation and sales are a key revenue stream for utility-scale renewable projects owned by IPPs. In many cases, it is the value of RECs that make these large projects financially viable. REC markets vary by state in line with RPS requirements. As governments more aggressively pursue their carbon emissions targets in the lead up to 2030 and 2050, the Company expects RPS requirements to escalate accordingly and REC prices to increase.
Operations Process
Leveraging the Company’s development expertise means that it can finish turnkey solar projects in an efficient and timely manner. The Company’s process has five phases: Site Origination; Development; Financing; Engineering, Procurement and Construction; Operation & Maintenance and Asset Management. This process has been tested and verified and has brought the Company success.
Phase 1 - Site Origination to Bankable Lease
| ● | Policy analysis: Political analysis, environmental, permitting, land use. |
| ● | Prioritize low-cost interconnection sites. |
| ● | Financial analysis: Incentive framework, IRR analysis and relevant investment threshold. |
| ● | Site control: identification, evaluation and execute bankable lease to grow its greenfield Pipeline with efficient site acquisitions, affordable land with low property tax rates. |
| ● | Acquisition of development pipelines. |
Phase 2 - Development to Notice To Proceed (NTP)
| ● | Evaluate and prioritize projects with the highest likelihood of success. |
| ● | Grid interconnection studies: detailed discussions with the electrical utilities to determine the most economical methods of connecting the projects to the electrical grid, could result in Connection Impact Assessments, Connection Cost Assessments, Connection Agreements. |
| 25 |
| ● | Permitting: municipal, state and/or federal permits and approvals, site plan optimization and approval, multiple approvals from zoning, planning and town boards and city council are required depending on the type and size of the project. Projects may also involve a county level review. |
| ● | Environmental and required regulatory permits to ensure that the project will not significantly negatively impact the surrounding natural environment. |
| ● | Incentives and PILOT/Tax. |
| ● | PPA rates, off-taker credit, post-contract assumptions. |
Phase 3 - Financing
| ● | Sponsor equity: Draw on sponsor equity commitments from family office and other investors. |
| ● | Investment tax credit: Source tax equity from providers. |
| ● | Long-term debt: Opportunistically add project-level debt or bank leverage to maximize returns. |
| ● | Construction Financing: project cost and budgeting. |
Phase 4 - Delivery: Engineering, Procurement and Construction to COD/PTO
| ● | EPC selection and negotiation, vet EPC partners based on experience and track record, run targeted RFPs with firms that the company has a close relationship with. |
| ● | Further fieldwork such as geotechnical investigation, legal or topographical surveys, and site assessments. |
| ● | Electrical, civil, mechanical and structural engineering design, including erosion and sediment control plan, Issue For Construction drawings. |
| ● | Construction permits such as building permits and entrance and address permits. |
| ● | Procurement: supplier negotiation on price and on-time delivery to the sites (solar panels, racking, inverter and BOS), procurement of electrical equipment is a critical step done as soon as the engineering phase has finalized its design. Some equipment such as transformers can take up to 16 weeks of lead time for delivery. |
| ● | Work closely with local utilities and EPC firms to streamline the construction process. |
| ● | Contracting: installers contracting. |
| ● | Fencing and Safety: Fencing of the project site, coordinating with existing facilities and preparing safety measures. |
| ● | Construction control: on budget, on schedule, regular site visits, QA/QC, PO and change order management. |
| ● | System commissioning, coordination of all jurisdictional inspections and approvals, identification and correction of deficiencies, site commissioning inspections and tests must be passed. These include electrical commissioning and creation of as-built drawings and finalized package, and COD/PTO. |
| ● | Site permits closing, site cleanup, landscaping, financial closing support, and coordinating with the utility to receive a final acceptance letter. |
| 26 |
Phase 5 - O&M, Subscriber Management, and Asset Management
| ● | Project handover, acceptance, and O&M for high production. |
| ● | 100% subscription, 100% credit allocation, and utility reconciliation. |
| ● | Asset management: contract management, financial reporting, regulatory filings. |
Employees, Specialized Skill and Knowledge
As of June 30, 2022, the Company has nine employees and an additional four contracted service providers. The operations of the Company are managed by its directors and officers.
The nature of the Company’s business requires specialized knowledge and technical skill around procurement, construction, management, financing and regulations of the solar industry. The required skills and knowledge to succeed in this industry are available to the Company through certain members of the Company’s management, directors, officers, and advisory teams. The Company’s employees and consultants have extensive experience working with municipalities, First Nations, community co-operatives, regional planning authorities, commercial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions. The Company’s team also has extensive experience developing, financing, building, permitting, commissioning, operating and maintaining renewable and clean power plants in Canada and the US with collectively over 100 years of direct experience profitably originating and executing on projects. Many members of the team have a long track record working together at major North American renewable energy companies such as Potentia, Solar Power Networks, Sky Solar and ARISE Technologies. Most of the team built its track record developing, financing, conducting EPC and O&M, executing both ground mount and rooftop FIT solar projects in Canada and in the US. See “Directors and Executive Officers”.
Competitive Conditions
The global solar market remains highly fragmented. Fragmentation will continue as barriers to entry remain low for residential, community, commercial, and industrial applications and annual installations continue to grow driven by Net-Zero policy initiatives. As a result, the Company predicts significant price competition among solar power competitors.
The Company competes with peers in development, EPC, O&M, and IPP Asset Management. Solar companies are not disrupting or undermining the solar energy industry by selling new products or services that may replace the Company’s. The Company competes on cost and volume via operational excellence. Certain companies in the segment could be vulnerable due to limited scope. The Company addresses this through exposure to the whole renewable energy value chain. Scale may hinder an operator’s ability to meet increasing market demand. Successful solar companies in the Company’s segment are successful because of their ability to access capital markets to fund volume.
Solar Developers
A solar developer is a company that shepherds a solar power plant from ideation to construction readiness, also known as Notice to Proceed (“NTP”) A developer can employ just a few employees or up to thousands. Some developers specialize in certain sizes of projects or in specific regions.
The process of developing a solar power plant can take years. Developers must secure a project site, find an customer for the electricity the power plant will produce (a utility, an electric cooperative in rural areas, a corporation that wants the energy for its own use, or community solar subscribers); conduct technical, geological and other studies on the land, study how the energy generated by the power plant will be connected to the electric grid; apply for a variety of permits from local, state, and sometimes federal agencies; secure financing for the construction of the solar power plant; negotiate equipment purchases; and contract with an EPC firm for the build. All of this must happen before construction begins.
| 27 |
Competitors in solar development in markets relevant to the Company are presented in the table below, with information from Solar Power World. The number one developer in Utah (UT), AES Clean Energy has delivered 526MW utility scale solar in 2020; Nexamp in Massachusetts’ (MA) C&I market delivered 128MW; and Enerlogics in Ohio’s (OH) C&I market delivered 1MW. The Company delivered 12MW in 2020 with more than 100MW delivered since the Company’s founding. The Company could be ranked within the top 20 solar developers on this list.
Solar EPC Companies
Solar EPC companies provide engineering, procurement, and construction of a full solar system. A solar EPC company is more sophisticated and holistic in the products and services they provide compared to a typical solar installer. These include:
| ● | Site surveys for project viability. |
| ● | Determine power generation capacity and equipment selection. |
| ● | Design and install of the PV system. |
| ● | Electric grid interconnection and metering. |
| ● | Facilitate financing including tax incentives and rebates. |
| ● | Commission the solar system to meet the designed production requirement. |
A list of competitors in the Company’s solar EPC segment is presented in the table below based on information from Solar Power World. The number one solar contractor is SOLVE Energy from California (CA), which installed 8.7 GW with 901 employees since founding. The last one in the table, Renewable Energy Outfitters in Colorado (CO), delivered 593 kW with only 3 employees. The Company has installed more than 100MW since its founding.
| 28 |
Solar O&M Service Providers
Many of the large IPPs that own utility-scale solar PV portfolios in the U.S. rely on the plant developer or EPC firm for operations and maintenance, except for those that develop their own projects. Greentech Media (GTM) Research’s O&M and asset management report identified the top 5 O&M providers managing U.S. utility-scale PV plants in the table below. One of the firms, Sempra, is also an IPP.
Asset Management service – an IPP World
GTM Research defines asset management as the ongoing management of financial, commercial, and administrative tasks that are necessary to ensure the financial performance of a solar PV plant or a portfolio of plants. GTM Research and SoliChamba Consulting recently released a report, ‘Megawatt-Scale PV O&M and Asset Management 2016-2021’ which features a list of asset managers of U.S. utility-scale PV plants. The table below identifies the top five players:
| 29 |
IPPs who own solar power plants and typically perform asset management in-house dominate the top of the rankings, and make up four of the top five utility-scale PV asset managers in the U.S (based on reporting by SoliChamba Consulting outlined above). Most IPPs and financial investors; however, only manage the assets they invest in. The market for third-party asset management services remains small in the U.S. and its growth is probably limited by the dominance of IPPs and large portfolio owners who tend to self-service. The top third-party asset managers include project developers like Recurrent Energy and affiliated service providers like Bay4 Energy Services and EDF Renewable Services, as well as independent service providers like Radian Generation and CAMS.
Company Competitive Advantage
The Company has grown through participating in standard offering programs such as the Ontario Feed-In-Tariff program and New York’s NYSERDA NY-Sun Community Solar Program and has completed 70 Community solar projects in collaboration with Central New York Regional Planning and Development Board in New York. It has a good track record in developing and building renewable and clean energy projects in Canada and the USA. The Company has succeeded at delivering value at non-utility solar projects as a developer and a full-service EPC contractor; however, it has been evaluating opportunities for more growth in solar project volumes. Becoming an IPP aiming at long-term sustainable investment returns is the Company’s natural next step. To meet the desire for growth, the Company must re-position itself to deliver integrated growth solutions that expand from developer to an IPP in the C&I, Community, and Utility solar PV market segments.
The Company’s competitive advantage lies in its people, processes and experience. The Company’s team is skilled in translating customer needs into value-add solutions. The Company’s solar power plant delivery process is safe, reliable and low cost; and the Company provides a customer experience that is simple and focused with speed in implementation.
Third Party Suppliers
The Company procures all plant components on the open market. The Company qualifies suppliers’ products based on three factors: bankability, availability, and cost.
Product is considered bankable if lenders are willing to finance it. Component bankability is a key factor in projects being offered non-recourse debt financing by lenders. Products must also be available to meet construction schedules at a competitive price. Though China is the most cost-competitive location for the manufacture of all solar PV system components, Chinese solar products still must be bankable and available in order to be procured for the Company’s solar power plants.
| 30 |
Bloomberg NEF has developed a tiering system for PV module products based on bankability, creating a transparent differentiation between the hundreds of manufacturers of solar modules on the market. Tier 1 solar panels, such as those from Canadian Solar, ZNShine, and Jinko are built to higher standards and have the strongest reputation within the solar industry for quality and service. These panels last longer and produce more energy. Tier 1 manufacturers can be expected to honor product warranties. The Company primarily sources Tier 1 panels.
Solar panel mounts and racks are the equipment that secures solar panels in place. Racking is used to attach solar panels to a rooftop, ground, or another surface. With proper installation, an effective mount secures the solar panels against all weather conditions and ultimately protects the investment. Choosing the right racking system depends on the site, local climate, and installer preference (bankable, available, and low cost). Additional information on the Company’s key supplies are below:
| ● | Fixed Ground Mounts: Fixed ground mounts have lower energy production when compared to tracking systems, however no moving parts means lower O&M costs, and installation and procurement costs are lower. Fixed system suppliers, such as Schletter’s fixed tilt solar racking system, are also more bankable. |
| ● | Single-Axis and Dual-Axis Solar Tracker: Trackers increase the efficiency of solar systems by providing more direct sunlight to the system, moving the solar panels from East to West (single-axis include solutions from RBI Solar and TerraSmart’s) or from East to West and from North to South (dual-axis). The additional mechanical complexity leads to higher O&M costs, and procurement and installation costs are higher compared to fixed systems. |
| ● | Ballasted (Zero Penetration) Mounts: These systems are ideal for sites on roof membranes, landfill caps and industrial brownfields. More space is required to avoid table to table shading, and precast blocks have higher shipping costs and require heavy equipment to move around a site. GameChange Solar has both precast and pour-in-place ballast racking solutions. |
| ● | Solar Inverters: These are an integral part of every system. The Company has used many top brands such as Huawei, SunGrow, and SMA. The inverters perform two key functions: DC to AC conversion; and Maximum Power Point tracking (“MPPT”), where the inverter dynamically selects the voltage and current combination for the highest power production. |
| ● | String Inverters: These have better MPPT capability per string for high production, shorter DC wires for lower power loss, and require special racking for the inverter for each string. In general, these have a higher per Watt cost than central inverters. |
| ● | Central Inverter: Central inverters feature easy system design, installation and O&M trouble shooting. However, they represent a single point of failure for the whole system, with high DC wiring costs and high power loss due to voltage drop. In addition, partial shading and string mismatch drastically reduces power output. |
Pricing and Marketing
The Company strives to ensure its operational excellence. In the pursuit of Net-Zero there is an increasing willingness among customers to purchase renewable and clean energy such as solar power. Commercial customers are price sensitive in that they need to balance Net-Zero preferences and operational costs to remain competitive in their core businesses. Like with all utility economics, regulatory policy is a primary driver of revenue. Electricity prices are set largely by regulatory bodies like Public Service Commissions or Energy Boards. A PPA has to be equal to or lower than the regulated electricity price, in addition to providing renewable energy credits. The Company and its competitors generally have the same electricity price point (economic oligopoly). The Company gains economic value by managing project cost (the larger the project, the lower cost per watt installed), and driving business volume through a portfolio approach with large partners like Honeywell and large property management companies.
| 31 |
The Company prices its community and utility solar project and services competitively, and aligns itself with market pricing forecasts. The Company prices BTM solar projects to offer the host C&I customers a lower electricity cost, while securing a required return to its investors. BTM project pricing works the best in the Northeast USA where the retail electricity prices are high enough to enable a healthy margin in every BTM project the Company does.
With respect to promotion and marketing to secure customers:
Sales Team
| ● | The Company’s sales team must be highly trained, with a financial background, one on one selling skills, and should ideally hold a business credential. |
| ● | One dedicated sales manager per Province/State, with core team support from head office in order to support 50 MWp to 100 MWp annual growth rate at $150k total annual budget per person. |
Marketing Communications Plan with a promotion budget of 5% of gross revenue
| ● | 20% on advertising (online & printed media). |
| ● | 80% public relations and investor relations. |
Messaging customers with key messages
| ● | Community Solar Subscribers: Save on your utility bills while doing good to the environment. |
| ● | Community Choice Aggregation: Let the Company’s PPA be your way to cheaper, greener energy for your community members. |
| ● | Major Corporations: Be the 1st Net-Zero corporation among your peers. |
| ● | Large Utilities: Your state RPS compliance is the Company’s business. |
Regulatory Environment
Achieving Net-Zero by 2050 (“NZ2050”) is widely seen as the best way to halt climate change. “Net zero” means our total carbon dioxide emissions are equal to or less than the emissions we remove from the environment. NZ2050 will require new policies, investments, participation and commitment by government, industry, and individuals. The most feasible pathways to net-zero emissions include four main strategies:
| ● | Generate emission-free electricity using sources like wind, solar, nuclear, and waterpower. |
| ● | Use vehicles and equipment that are powered by electricity instead of fossil fuels. |
| ● | Use energy more efficiently. |
| ● | Remove carbon dioxide from the atmosphere. |
| 32 |
Policymakers are increasingly recognizing that renewable energy is the key to net-zero. Governments must build frameworks and reform bureaucracies to level the playing field for renewables as, in many countries, the bureaucracies still favour fossil fuels, giving the fossil fuel industry large subsidies. To date more than 140 countries have now set or are considering a target of NZ2050.21 United Nations Secretary-General António Guterres called on the world to “end fossil fuel pollution and accelerate the renewable energy transition, before we incinerate our only home”.22
Fighting climate change is good business. Renewables such as wind and solar are readily available and in most cases, are cheaper than coal and other fossil fuels. Solar and battery energy storage costs have plummeted in the past decade. Despite the headwinds presented by ongoing cost inflation and supply chain challenges, demand for clean energy sources has never been higher, and the Company expects that the global energy crisis will continue to act as an accelerant for the clean energy transition.
Since the International Energy Agency’s (“IEA”) last in-depth review in 2015, Canada has made a series of international and domestic commitments, putting it on a path toward achieving an ambitious energy system transformation and climate transition. The Canadian Net-Zero Emissions Accountability Act, which became law on June 29, 2021, enshrines in legislation Canada’s commitment to achieve net-zero emissions by 2050. The majority of Canadians already depend on clean, reliable electricity to power their everyday lives. Canada has accelerated the phase-out of coal, implemented natural gas regulations and put a price on carbon pollution. The Government will connect regions with clean power through Regional Strategic Initiatives.23 The Greenhouse Gas Pollution Pricing Act encourages the reduction of GHG emissions. The Liberal Party of Canada has signaled its intention to continue the annual price increases until the price on emissions reaches $170 per tonne of CO2e by 2030.24
21 Climate Action Tracker. CAT net zero target evaluations. https://climateactiontracker.org/global/cat-net-zero-target-evaluations/#:~:text=As%20of%2020%20September%202022,zero%20goal%20in%20November%202021
22 António Guterres. UN Secretary-General Remarks. https://media.un.org/en/asset/k1q/k1qn00cy8a
23 Government of Canada. Regional Tables Launched to Collaboratively Drive Economic Opportunities in a Prosperous Net-Zero Future. www.canada.ca/en/natural-resources-canada/news/2022/06/regional-tables-launched-to-collaboratively-drive-economic-opportunities-in-a-prosperous-net-zero-future.html
24 Government of Canada. Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030. https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html
| 33 |
With the United States’ announcement of targets to halve US GHG emissions and to reach net-zero emissions by 2050, the world’s largest economy (and second-largest emitter) has joined some 130 nations in its intention to act on climate change.
The Biden infrastructure plan (“American Jobs Plan”) is expected to result in very favorable federal policy environment for renewable energy development in the US with a goal towards a 100% emission free power sector by 2035 and economy wide net zero emissions by 2050.
The Inflation Reduction Act of 2022 (“IRA”) is a bill passed by the 117th United States Congress in August 2022 that aims to curb inflation by reducing the deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean energy solutions. The IRA includes long-term solar and energy storage tax incentives and other critical provisions that will help decarbonize the electric grid with significant clean energy deployment. The legislation earmarks $369 billion for U.S. energy security and fighting climate change. It is expected to cut annual U.S. greenhouse gas emissions by about 1 billion metric tons by 2030 mainly by speeding up the deployment of clean electricity and electric vehicles.25 The IRA extends the solar ITC by 10 years at 30%. The existing federal ITC has been fundamental to incentivizing the growth of American solar. The credit applies to residential, commercial, and utility-scale developers and will create an effective discount of 30% on the capital cost of solar installations for ten years (until 2033). The credit will decline to 26% in 2033 and to 22% in 2034. The reinvigorated ITC will come with a variety of “adders,” which could push the tax credit to as high as 50% for some projects. Additionally, the credit is equipped with a direct pay provision, allowing developers with little to no tax liability to treat it as a tax overpayment, resulting in a cash refund.
The IRA also provides ITCs for Standalone Storage and Interconnection Upgrades. Until now, battery storage was only eligible for the ITC if it was directly charged by solar. With respect to interconnection upgrades, a significant portion of the cost of solar projects is to pay for utilities to upgrade the grid so that the solar project can connect to it. With the IRA, standalone storage and interconnection upgrades are eligible for ITC.
25 Jesse D. Jenkins, Erin N. Mayfield, Jamil Farbes, Ryan Jones, Neha Patankar, Qingyu Xu, and Greg Schivley. Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022. https://repeatproject.org/docs/REPEAT_IRA_Prelminary_Report_2022-09-21.pdf
| 34 |
To promote a diversified resource mix and encourage deployment of renewable energy, most States have established RPS. The policies require that a specified percentage of the electricity sold by utilities comes from renewable resources. RPS policies help drive the United States market for wind, solar and other renewable energy. Roughly half of the growth in U.S. renewable energy generation since the beginning of the 2000s can be attributed to State renewable energy requirements.
In addition, the Company is subject to a variety of laws and regulations in the markets where its does business. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. The Company also faces trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. The Company expects that our solar power projects and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. See “Risk Factors”.
Impact of Environmental Laws and Regulations
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of the Company’s business operations.
The Company is required to comply with all national and local environmental regulations. The Company’s business generates noise, wastewater and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as its business has expanded. The Company believes that it substantially complies with all relevant environmental laws and regulations and has all necessary and material environmental permits to conduct its business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If the Company fails to comply with present or future environmental regulations, it may be required to pay substantial fines, suspend production or cease operations.
The Company’s solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and the Company may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, the Company may lose market share and its financial results may be adversely affected. Any failure by the Company to control its use or to restrict adequately the discharge, of hazardous substances could subject the Company to potentially significant monetary damages, fines or suspensions of its business operations.
Intellectual Property
The Company is not dependent on intellectual property rights for its business. The Company has no registered trademarks, patents or patent applications; however, the Company has applied in Canada and the United States to trademark the term “SOLARBANK”. The Company asserts copyright ownership generally in its written works, but has no formal copyright registration process in place.
Cycles
The Company’s business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
Foreign Operations
Currently the Company’s only foreign operations are in the United States which are detailed above. The Company intends to continue to focus on developing solar projects in Canada and the United States but will evaluate expanding into other countries based on the regulatory environment, demand and financial metrics of opportunities.
Economic Dependence
Except as disclosed under “Management’s Discussion and Analysis - Financial Instruments and Other Instruments (Management of Financial Risks) - Concentration risk and economic dependence” the Company’s business is not substantially dependent on any one contract for the products and services that is provides or the sourcing of the materials, labour and supplies it requires to provide its services.
| 35 |
Social or Environmental Policies
The Company has not yet implemented any formal social or environmental policies that are fundamental to its operations. It is currently evaluating the implementation of such policies based on current trends related to environment, social and governance initiatives.
Reorganizations
There has not been any material reorganization of the Company or any of its subsidiaries within the three most recently completed financial years or completed during or proposed for the current financial year.
USE OF PROCEEDS
Use of Proceeds
The net proceeds of the Offering, after deducting the Agent’s Fee, the remaining balance of the Corporate Finance Fee in the amount of $16,750 (inclusive of applicable taxes) and the estimated expenses of the Offering of $200,000, are estimated to be $4,718,250 before giving effect to any exercise of the Over-Allotment Option. All subscription funds received by the Agent will be held in trust, pending the closing of the Offering. If the Offering is not completed, the Agent shall promptly return the proceeds of the subscription to the purchasers without interest or deduction. There is no minimum amount of funds that must be raised pursuant to the Offering. This means the Company could complete the Offering after raising only a small proportion of the Offering amount set out herein. The net proceeds of the Offering are currently intended to be used for company expansion and general corporate purposes. Specifically, the Company expects to use the net proceeds of the Offering for the following purposes:
| Use of Proceeds | Amount ($) | |||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | |||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 | |||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | |||
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | |||
| Salaries for new hires. | 418,250 | |||
| Total | 4,718,250 | |||
An interconnection study is a study that determines whether a solar project can be connected to an electricity grid. These studies assess the addition of a solar project and its impact on the power system, as well as identify any interconnection facilities or network upgrades needed for interconnecting the solar project safely, in compliance with reliability requirements. Each interconnection study will include a system impact study which is an engineering study that evaluates the impact of the proposed interconnection on the safety and reliability of the transmission system. It is also likely to include a facilities study that determines the equipment and electrical switching configuration necessary to accomplish the interconnection and estimates the cost, construction, and installation times.
An interconnection deposit is provided to a utility after a positive interconnection study determination and in order for a utility to proceed with completing the interconnection of the solar power project to the electricity grid.
If the Offering is fully subscribed and the Over-Allotment Option is exercised in full, the net proceeds to the Company from the Offering, after deducting Agent’s Fee, the balance of the Corporate Finance Fee and estimated expenses of the Offering will be $5,458,500. Any additional proceeds received from the exercise of the Over-Allotment Option will be used for working capital.
Upon completion of the Offering, it is expected that the Company will have sufficient non-contingent financial resources to fund ongoing operations and achieve its business objectives and milestones for at least 12 months. The Company intends to spend the net funds available to it as stated in this Prospectus. However, there may be circumstances where, for sound business reasons, a reallocation of funds may be necessary. The management of the Company will have broad discretion in applying the net proceeds from the Offering. See “Risk Factors”.
The Company has incurred losses since inception. Although the Company expects to become profitable, there is no guarantee that will happen, and the Company may never become profitable. The Company anticipates it will continue to have negative cash flow from operating activities unless and until commercial production is achieved. The Company expects to use proceeds from the Offering to fund negative cash flow from operating activities in future periods. See “Risk Factors”.
| 36 |
Total Funds Available
Assuming completion of the maximum Offering, the Company will have approximately $7,829,046 in available funds (net proceeds of the Offering and approximately $3,110,796 in estimated working capital as at January 31, 2023). Based upon management’s current intentions, the estimated expenditures for which the total available funds will be used in the 12 months after the date hereof are as follows:
| Funds | ||||
| Working capital as of January 31, 2023 | $ | 3,110,796 | (2) | |
| Net proceeds of the Offering(1) | $ | 4,718,250 | ||
| Total Available Funds | $ | 7,829,046 | ||
| Expenditure | ||||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | $ | 1,000,000 | ||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | $ | 900,000 | ||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | $ | 800,000 | ||
| Business development initiatives in the United States involving completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. | $ | 1,600,000 | ||
| Salaries for new hires. | $ | 418,250 | ||
| Salary for existing employees | $ | 980,000 | ||
| General and administrative expenses(3) | $ | 2,130,796 | ||
| Total Use of Funds | $ | 7,829,046 | ||
Notes:
| (1) | Assuming no exercise of the Over-Allotment Option. |
| (2) | Assumes conversion of Convertible Loan. |
| (3) | General and administrative costs are broken down as follows: (i) contractor costs ($700,000), (ii) professional fees ($200,000), and (iii) rent ($80,000), travel and conference ($200,000), insurance ($120,000), investor relations and marketing ($800,000) and general office expenses ($30,796). |
The Company intends to spend the funds available to it as stated in this Prospectus. There may be circumstances however, where, for sound business reasons, a reallocation of funds may be necessary. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.
Pending the use of proceeds outlined above, the net proceeds will be held as cash balances in the Company’s bank account or invested in certificates of deposit and other short-term investment products. The Chief Financial Officer of the Company is responsible for executing the Company’s investment policies. See “Risk Factors”.
| 37 |
Business Objectives and Milestones
The primary business objectives for the Company over the next 12 months are:
| Business Objective | Milestone | Timeline | Expected Cost | ||||
| New United States Projects | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. | January 2023 – March 2023 | $ | 500,000 | |||
| Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. | January 2023 – March 2023 | $ | 500,000 | ||||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for SUNY project located in New York, USA. | January 2023 – September 2023 | $ | 900,000 | ||||
| Existing Canadian Project | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. | January 2023 – June 2023 | $ | 800,000 | |||
| Business Development Initiatives | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. | January 2023 – December 2023 | $ | 1,600,000
| |||
| Human Resources | Salaries for new hires | January 2023 – December 2023 | $ | 418,250 | |||
| Salaries for existing employees | January 2023 – December 2023 | $ | 980,000 | ||||
| General & Administrative Expenditures | General & Administrative Expenditures | January 2023 – December 2023 | $ | 2,130,796 | |||
While the Company believes it has the skills and resources necessary to accomplish these business objections and milestones, there is no guarantee that the Company will be able to do so within the time frames indicated above, or at all. See “Risk Factors”.
Current Status of Business Objectives and Potential Barriers to Completion
New United States Projects
| ● | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. |
The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
| 38 |
| ● | Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. |
The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
| ● | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, procurement bid application fee for SUNY project located in New York, USA. |
The Company has submitted of an interconnection request to New York Independent System Operator. It has secured site control via an executed lease with the landowner. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). The barrier to completion is the timing and result of the interconnection request could delay the progress of engineering, permitting and interconnection deposit.
Existing Canadian Project
| ● | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. |
The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has started and the Company is in discussion with the local utility on net metering interconnection, and with local authority having jurisdiction on the building permit. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project.
Business Development Initiatives
| ● | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. |
| ● | Three projects in Dutch Hill, New York: |
The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study.
| ● | Three wastebeds projects in New York: |
The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study.
Human Resources and General & Administrative Expenses
These expenditures are to support the completion of the business objectives detailed above. The only relevant barrier related to these items is if the Company is unable to recruit sufficient new hires to support its business objectives.
For additional risks related to all of the business objectives please see “Risk Factors”.
Costs Incurred to Date
New United States Projects
| ● | Completion of engineering and permitting, along with procurement deposit, for Manlius project located in New York, USA. |
$93,540
| ● | Completion of engineering and permitting, along with procurement deposit, for Geddes project located in New York, USA. |
$59,816
| ● | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, procurement bid application fee for SUNY project located in New York, USA. |
No cost has been incurred so far. All tasks have been finished internally.
| 39 |
Existing Canadian Project
| ● | Completion of engineering work and placement of orders for main project components for one project in Alberta, Canada. |
No cost has been incurred so far. All tasks have been finished internally.
Business Development Initiatives
| ● | Completion of design and submission of zoning and interconnection documents to regulatory agencies to advance six projects to the notice to proceed stage. |
No cost has been incurred so far. All tasks have been finished internally.
Human Resources and General & Administrative Expenses
The costs associated with these matters will be incurred in the future.
DIVIDENDS OR DISTRIBUTIONS
The Company has not declared dividends on any of their shares in the past and does not intend to pay any in the foreseeable future. Any future determination to pay dividends will be at the discretion of the Board of Directors and will depend on the financial condition, business environment, operating results, capital requirements, tax considerations, any contractual restrictions on the payment of dividends and any other factors that the Board of Directors deems relevant. See “Risk Factors”.
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information for the Company, summarized from the SolarBank Financial Statements, attached as Schedule “A”.
This table is presented and should be read in conjunction with the SolarBank Financial Statements and the related notes and auditor’s reports included in this Prospectus, together with the information included under “General Matters”, “Risk Factors”, “Capitalization”, “Management’s Discussion and Analysis”. The selected historical financial information has been prepared in accordance with IFRS. Investors are cautioned that historical results are not indicative of future results.
| Item | Interim
Period Ended September 30, 2022 (Unaudited) | Financial
Year Ended June 30, 2022 (Audited) | Financial
Year Ended June 30, 2021 (Audited) | |||||||||
| Revenue | $ | 5,480,452 | $ | 10,197,619 | $ | 7,346,581 | ||||||
| Total Expenses(1) | $ | (5,343,785 | ) | $ | (10,558,165 | ) | $ | (7,209,754 | ) | |||
| Net and Comprehensive Income (Loss) | $ | 164,482 | $ | 31,313 | $ | (199,917 | ) | |||||
| Current Assets | $ | 9,625,976 | $ | 8,983,109 | $ | 10,254,735 | ||||||
| Total Assets | $ | 9,827,628 | $ | 9,194,537 | $ | 10,283,255 | ||||||
| Total Liabilities | $ | 5,222,561 | $ | 4,753,922 | $ | 5,873,953 | ||||||
| Shareholders’ Equity | $ | 4,605,097 | $ | 4,440,615 | $ | 4,409,302 | ||||||
Note:
| (1) | Total Expenses equal Total cost of goods sold plus total operating expenses. |
| 40 |
annual MANAGEMENT’S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company for the year ended June 30, 2022 was prepared by management as of November 4, 2022 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended June 30, 2022. See “Risk Factors”. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Certain information included in the MD&A is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” for further details.
Overall Performance
The Company is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement, construction, operation and maintenance, and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth of its close to 1GW solar photovoltaic (“PV”) power plant development and acquisition.
Selected Annual Information
Comparative information for annual periods from June 30, 2020, 2021 and 2022 has been presented in accordance with IFRS.
| 41 |
| Year ended June 30 | 2022 (Audited) ($) | 2021 (Audited) ($) | 2020 (Unaudited) ($) | |||||||||
| Revenue | 10,197,619 | 7,346,581 | 13,474,095 | |||||||||
| Revenue - EPC | 9,791,511 | 3,230,366 | 12,111,441 | |||||||||
| Revenue – Development | 406,108 | 4,116,216 | 1,362,654 | |||||||||
| Cost of goods sold | (8,231,476 | ) | (4,814,144 | ) | (7,502,827 | ) | ||||||
| Net income (loss) | (188,391 | ) | (157,067 | ) | 2,733,508 | |||||||
| Net income (loss) per share | (0.01 | ) | (0.01 | ) | 0.17 | |||||||
| Total assets | 9,194,537 | 10,283,255 | 7,889,295 | |||||||||
| Long-term debt | 1,230,643 | 1,021,481 | 40,000 | |||||||||
| Dividends | - | - | - | |||||||||
The following discussion addresses the operating results and financial condition of the Company for the year ended June 30, 2022 compared with the year ended June 30, 2021. The MD&A should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended June 30, 2022.
Results of operations for the year ended June 30th, 2022 as compared to the year ended June 30th, 2021
In 2022, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. The two large New York-based projects contributed the majority of the revenue there were four smaller-sized projects in New York that started construction in 2022. It is expected that the Company’s revenue will keep growing in 2023 as two projects in the US reached NTP and many projects in the US are approaching NTP.
The net loss for the year ended June 30, 2022 increased by $31,326 compared to the year ended June 30, 2021 with $188,393 net loss recognized in 2022 as compared to a net loss of $157,067 recognized in 2021.
Key business highlights and projects updates in 2022
| ● | Existing Projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 69% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 69% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It started in late June 2022. It’s expected to reach PTO in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It started in late June 2022. It’s expected to reach PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 32% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 82% completion of the project. It’s expected to reach PTO in December 2022. |
| 42 |
| ● | Projects under Development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred | Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA |
6.1 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 | IPO, working capital | The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate the procurement of major equipment. The Company may have to delay the completion of the project to commercial operation if there is not enough funds to procure the components and hire local crews to build the project. |
Revenue
Revenue for the year ended June 30, 2022 was $10,197,619 compared to $7,346,581 in the comparative period. The revenue increase was mainly the result of EPC services provided with respect to two significant projects in New York, USA.
The EPC service revenue for the year ended June 30, 2022 was $9,791,511 compared to $3,230,366 in the comparative period, increasing by $6,561,145, or 203%. The revenue increase was mainly because the significant project started in the fourth quarter of the year ended June 30, 2021 while the Company worked on the project throughout the year ended June 30, 2022.
For the year ended June 30, 2022, the Company generated $406,108 in development revenue from the sales of two small-size projects developed by the Company, compared to $4,116,216 for the year ended June 30, 2021 from the sales of five projects developed by the Company.
Expenses
For the year ended June 30, 2022, the Company incurred cost of goods sold of $8,231,476 compared to $4,814,144 in the comparative period, increasing by $3,417,332, or 71%. The cost of goods sold increased by $3,417,332 is mainly due to two reasons. First, the Company completed more EPC services. The company recognize both revenue and cost based on the complete rate of the projects. Second, the gross margin of development revenue is higher than EPC services revenue.
| 43 |
The operating expenses were $2,326,689 in the year ended June 30, 2022 compared to $2,395,610 in the comparative period. During the year ended June 30, 2022, the Company incurred accounting and legal expenses of $143,937 compared to $79,599 in the comparative period mainly due to the Company required audit services for initial public offering in 2022. The rent expense for the year ended June 30, 2022 was $82,955 compared to $161,704 in the comparative period mainly due to several rent agreements have expired in 2022. The office and miscellaneous expenses for the year ended June 30, 2022 was $123,498 compared to $79,983 in the comparative period mainly due to the Company incurred $34,095 business tax in New York city and $17,500 recruiting expenses in 2022, whereas no such expenses incurred in 2021. The Company incurred $1,774,583 salary and wages for the year ended June 30, 2022 compared to $1,937,458 in the comparative period mainly due to the Company have 8 employees worked full year in 2022, whereas there were 11 employees worked full year in 2021. Overall, general and administrative expenses were consistent in the prior two fiscal years.
Other Income (Expenses)
For the year ended June 30, 2022, the Company had other income of $53,822 compared to other expense of $244,807 for the year ended June 30, 2021. Other income for the year ended June 30, 2022 consisted mainly of interest expense of $150,910 compared to $332,203 in 2021, a fair value adjustment on accounts receivable of $nil compared to $212,779 in 2021, a foreign exchange gain of $87,956 compared to a foreign exchange loss of $51,327 in 2021, and a government Covid subsidy income of $133,506 compared to $386,537 in 2021.
Net Income (Loss)
The net loss for the year ended June 30, 2022 was $188,391 for a loss per share of $0.01 based on 16,000,000 outstanding shares for the year versus $157,067 for a loss per share of $0.01 based on 16,000,000 outstanding shares for the previous year. While revenues increased in the year ended June 30, 2022, the net loss was higher due to increases in cost of goods sold.
Total Assets
Total assets for the year ended June 30, 2022 were $9,194,537 compared to $10,283,255 in the comparative period. The decrease in assets was due to a decrease in cash and trade and other receivables, which was partially offset by an increase in inventory.
Total Liabilities
Total liabilities for the year ended June 30, 2022 were $4,753,922 compared to $5,873,953 in the comparative period. The decrease in liabilities was due to a decrease in trade and other payables and a decrease in loan payables.
Cash flow from operating activities
The Company generated cash of $171,212 from operating activities during the year ended June 30, 2022, while the Company used $2,684,859 cash during the same period ended June 30, 2021. The Company generated cash of $14,830 from the operational activities and generated $156,382 from the change of working capital during the year ended June 30, 2022, while the Company generated cash of $45,020 from the operating activities and used $2,729,879 due to the change of working capital for the same period ended June 30, 2021.
Cash flow from financing activities
The Company used cash of $679,271 in financing activities during the year ended June 30, 2022, while the Company generated $2,323,933 cash during the same period ended June 30, 2021. The cash used in financing activities for the year ended June 30, 2022 was mainly driven by the net proceeds received from long-term debts of $316,450, offset by the repayment of short-term loans of $982,642. The cash generated from financing activities for the year ended June 30, 2021 was mainly driven by the net proceeds received from long-term debt of $1,020,000 and the net proceeds received from short-term loans of $3,495,867, offset by the repayment of short-term loans of $2,147,436.
| 44 |
Cash flow from investing activities
The Company used cash of $10,970 in plant, property and equipment during the year ended June 30, 2022, while the Company used $3,194 in plant, property and equipment during the same period ended June 30, 2021.
Discussion of Operations and Outlook
Solar PV Technology
The Company is in the business of developing solar PV projects. PV devices generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors. Electrons in these materials are freed by solar energy and can be induced to travel through an electrical circuit, powering electrical devices or sending electricity to the grid.
Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production. Most modern solar cells are made from crystalline silicon semiconductor material. Silicon cells are more efficient at converting sunlight to electricity, but generally have higher manufacturing costs.
The cost of PV has dropped dramatically as the industry has scaled up manufacturing and incrementally improved the technology with new materials. Installation costs have come down too with more experienced and trained installers.
Using the PV technology the Company develops, builds, and operates behind-the-meter (BTM) solar power plants, electricity grid connected community solar gardens, and utility scale solar farms
BTM Solar Power Plants
The Company is a turn-key service provider to commercial and industrial customers for them to own BTM solar power plant on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and 3rd party ownership.
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with BTM solar power plants on-site to generate zero emission renewable solar power for the building’s self-use. The BTM solar power plants are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Self-consumption of distributed generation, | |
| ● | Energy cost savings, | |
| ● | Control project operations and maintenance, | |
| ● | Visible commitment to sustainability, and | |
| ● | Resiliency (with battery storage). |
BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050. There has been an increased interest in BTM solar power plants as an effective way to halt climate change. The Company is experienced in BTM solar and currently manages a number of BTM solar power plants. It is anticipated that the Company will be able to develop and build 10 MWp BTM solar power plants in 2023 in Canada and the USA.
Community Solar Farms
Community solar refers to local solar PV facilities shared by multiple community subscribers who receive credit on their electricity bills for their share of the power produced. Community solar provides homeowners, renters, and businesses equal access to the economic and environmental benefits of solar energy generation regardless of the physical attributes or ownership of their home or business. Community solar expands access to solar for all, including in particular low-to-moderate income customers most impacted by a lack of access, all while building a stronger, distributed, and more resilient electric grid. Community solar power plants are usually less than seven (7) megawatts (MWdc) of electrical capacity, and it could power about 1,000 homes (the average American household uses approximately 10,000 kWh per year).
| 45 |
The Company works with 3rd party subscriber organizations in Boston and Chicago to manage its current 4,000 or so community solar subscribers. It is anticipated that the Company will deliver 20 MWp community solar farms with an additional 3,000 subscribers in year 2023.
Utility Solar Farms
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production.
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a power purchase Agreement (PPA) with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time.
Utility-scale solar farm has become a growing source of electricity in the world. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory. The Company is actively advancing its utility scale solar farms pipeline of 200 MWp and anticipates to deliver a 20 MWp utility scale solar farm in 2023.
Battery Energy Storage Systems (BESS)
The Company is actively participating with a development partner in the Ontario IESO Expedited Process Competitive RFP Procurement of Battery Energy Storage Systems (BESS). Up to 20 BESS projects, all located in Ontario, Canada, are expected to be bid on by end of year 2022, with 5 MW and minimum of 20 MWh for each of the BESS projects.26
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| 1. | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over the solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted. |
| 2. | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 contracts where the IESO had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
| 3. | In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. The ultimate amount to be recovered is subject to the IESO’s approval, and there is no certainty as to the actual amount to be recovered from the IESO. Subsequent to June 30, 2022, no amounts have been recovered from IESO. |
26 Independent Electricity System Operator. https://www.ieso.ca/en/Sector-Participants/Resource-Acquisition-and-Contracts/Long-Term-RFP-and-Expedited-Process
| 46 |
| 4. | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| 5. | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| 6. | The Company has $6,486,838 in accounts receivable outstanding from the Solar Flow Through group of companies (“SFT Group”) for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements and as a result is not providing a tabular comparison of the eight most recently completed quarters.
Results of operations for the three months ended June 30, 2022
During the fourth quarter of 2022, the Company generated $196,872 in revenue mainly from the four New York-based projects which represent 2MW capacity. The slowdown of the revenue was due to the change of a major vendor for the two large EPC projects in New York. The change has been completed and the Company expects to complete the two projects in the first half of 2023.
The Company reported a comprehensive loss from operations for the three months ended June 30, 2022 of $369,268
Reviews of the major expenditures items in the fourth quarter of 2022 are as follows:
| ● | Salary and wages: $458,764 |
| ● | Accounting and legal expenses: $72,699 |
| 47 |
| ● | Office expenses: $65,826 |
| ● | Interest expense: $61,292 |
Liquidity
As at June 30, 2022, the Company had a cash balance of $931,977 (June 30, 2021 - $1,400,073) with working capital surplus of $5,617,200 (June 30, 2021 - $5,524,025).
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
Capital Resources
Share Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (US$250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034. The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329. The loan is fully repaid in 8 equal quarterly instalments.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| June 30, 2022 | June 30, 2021 | |||||||
| Long-term debt – non-current portion | $ | 1,230,643 | $ | 1,021,481 | ||||
| Shareholders’ equity | $ | 4,440,615 | $ | 4,409,302 | ||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) 16,000,000 common shares issued and outstanding; and (ii) $1,250,000 principal amount of convertible debt that is convertible into 2,500,000 common shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; and (iii) 2,500,000 Advisory Warrants.
| 48 |
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
At June 30, 2022, included in accounts payable and accrued liabilities was $104,545 (2021 - $211,404) owing to certain officers and director (Richard Lu) of the Company regarding the accrued salary and bonus for services provided to the Company.
At June 30, 2022, included in trade and other receivable was $121,704 (2021 - $57,610) due from Sustainable Investment Ltd., who has a director (Richard Lu) in common, for a short-term bridge funding to cover working capital and project development expenses.
At June 30, 2022, included in trade and other receivables was $86,000 (2021 - $57,610) due from Renewable Sun Energy Co-Op, who has a director (Richard Lu) in common, for the payment made to a vendor on behalf of Renewable Sun Energy Co-Op.
At June 30, 2022, included in loan payable was $567,664 (2021 - $641,309) shareholder loan advance from a shareholder (Richard Lu). This loan is secured and was for short-term bridge funding to cover working capital and project development expenses.
Except as noted above with respect to the loan payable from Richard Lu, the amounts due to related parties are unsecured, non-interest bearing and have no stated terms of repayment. All transactions entered into with related parties are on terms equivalent to those that each related party charges to arm’s length parties.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the year ended June 30, 2022 and 2021 were as follows:
| June 30, 2022 | June 30, 2021 | |||||||
| Short-term employee benefits | $ | 998,511 | 1,049,045 | |||||
Short-term employee benefits include consulting fees and bonus.
| 49 |
Critical Accounting Estimates
Revenue recognition:
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
Inventory:
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
Taxes:
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| 50 |
Expected credit loss:
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
Warranties:
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the year ended June 30, 2022, $Nil warranty provision was recorded (2021 - $Nil).
Contract fulfilment costs:
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
Utilization, derecognition and impairment of contract fulfilment costs:
The Company utilises contract fulfilment costs to cost of good sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| 51 |
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
The Company does note that it has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed. The accounts receivable balance is not yet recognized.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Year ended June 30, 2022 | Amount of Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,925,034 | 88 | % | ||||
| Amount of Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,469,692 | 79 | % | ||||
| Customer C | $ | 371,054 | 20 | % | ||||
| Year ended June 30, 2021 | Amount of Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,091,443 | 42 | % | ||||
| Customer D | 1,320,137 | 18 | % | |||||
| Amount of Account Receivable | % of Account Receivable | |||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % |
| 52 |
The Company also dependent on major service contractors to complete the projects. In January 2022, one major mechanical installation contractor for the two main projects went bankrupt which interrupted the construction and increased the uncertainty regarding when the Company would finish the projects. The contract value of the major contractor is $789,750. The Company is actively looking for the replacement to substitute this major contractor. Due to the bankruptcy and the fact that the Company could not estimate when the installation will be completed and reach COD, the Company is not able to invoice the customer. The cost of $2,932,820 (USD2,316,970) incurred on the projects was recorded as contract fulfilment costs.
Management assessed no impairment is required on contract fulfilment costs due to the projects can be either delivered to the current customer or the Company is able to recover the value by taking the ownership and run the projects by its own.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Commitment of loan for the next five years
Estimated principal repayments are as follows:
| 2023 | $ | 111,111 | ||
| 2024 | 311,247 | |||
| 2025 | 171,247 | |||
| 2026 | 111,111 | |||
| 2026 onwards | 537,037 | |||
| Total | $ | 1,341,754 |
Commitment of lease for the next five years
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of June 30, 2022 is as follows:
| 2023 | $ | 46,965 | ||
| 2024 | 60,302 | |||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 250,839 |
| 53 |
Subsequent Events
Loan repayment
In September 2022, the Company fully repaid the shareholder’s loan in advance in the amount of $567,664 plus interest of $157,245.
Debenture financing
On October 3, 2022 the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Advisory warrant
On October 3, 2022 the Company entered into a corporate and financial advisory agreement with a private equity firm. Pursuant to the agreement, the private equity firm is entitled to 2,500,000 transferable warrants, which will be vested on the closing of the Company’s IPO. The warrants shall entitle the holder to acquire shares for a period of five years at an exercise price equal to $0.10, subject to adjustment for any share consolidations or splits that occur prior to the closing of the IPO.
Name change
On October 7, 2022, the Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation.
Stock split
On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000.
interim MANAGEMENT’S DISCUSSION AND ANALYSIS
The following MD&A of the financial condition and results of operations of the Company for the three months ended September 30, 2022 was prepared by management as of December 8, 2022 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the unaudited interim consolidated financial statements of the Company and notes thereto for the three months ended September 30, 2022. See “Risk Factors”. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Certain information included in the MD&A is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” for further details.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
SBNK is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
| 54 |
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, EPC, O&M, and asset management of a solar power plants, whether electricity grid interconnected or BTM solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their RPS compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth of its close to 1GW solar PV power plant development and acquisition.
Development of the Business
USA
The Company is focused on its key market in New York and Maryland. In New York the Company is constructing a total of 6 solar projects, totaling 12 MWp (see Existing Projects table below), including two Community Solar projects, two with municipal power purchase agreement (PPA), and two net metering projects for Honeywell International Inc. The Company also has two community solar projects reached Notice to Proceed; seven community solar projects under utility interconnection studies. In addition the Company is working on sites origination of potential community solar projects. The Company is working with the Maryland Department of Transportation on eighteen potential solar project sites.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs is improving.
Canada
Over the past few years, the real estate sector has experienced an evolution in the importance of Environmental, Social and Governance (“ESG”) issues. The sector has made tremendous strides in tackling its contribution to Climate Change but despite efforts made so far, there is still a significant amount of work to be done, particularly given real estate’s 40% contribution toward global carbon emissions. Many Canadian real estate companies are set out to achieve its net zero emissions goals for all their operations and new developments. Real estate can be developed and managed to make positive impacts by stopping the growth of carbon emissions from properties and reduce emissions dramatically.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Selected Quarterly Information
The following table set selected condensed interim consolidated financial information for the Company for the three months period ended September 30, 2022 and 2021 and should be read in conjunction with the Company’s consolidated financial statements as at June 30, 2022 and 2021 and related notes thereto for such periods.
| 55 |
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| For the three months ended September 30 | 2022 $ | 2021 $ | ||||||
| Revenue | 5,480,452 | 2,602,057 | ||||||
| Revenue – EPC | 5,465,542 | 2,302,057 | ||||||
| Revenue – development | - | 300,000 | ||||||
| Revenue – O&M | 14,910 | - | ||||||
| Cost of goods sold | 4,917,533 | (2,070,005 | ) | |||||
| Net income (loss) | 225,957 | (88,222 | ) | |||||
| Net income (loss) per share | 0.01 | (0.01 | ) | |||||
| As at | September 30, 2022 $ | June 30, 2022 $ | ||||||
| Total assets | 9,827,628 | 9,194,537 | ||||||
| Total current liabilities | 4,154,821 | 3,365,909 | ||||||
| Total non-current liabilities | 1,067,740 | 1,388,013 | ||||||
The following discussion addresses the operating results and financial condition of the Company for the three months ended September 30th, 2022 compared with the three months ended September 30th, 2021.
Result of Operations
Three months ended September 30, 2022 compared to the three months ended September 30, 2021
During the first quarter of 2023, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. Within the quarter the Company made progress towards completing two large US EPC contracts, which drove the increase in EPC revenue during the quarter compared to the same quarter in 2022. It is expected that the Company’s revenue will keep growing in 2023 as two projects in the US reached NTP and many projects in the US are approaching NTP.
The net income for the three months ended September 30, 2020 increased by $314,179 compared to the net loss for the three month ended September 30, 2021 with $225,957 net income recognized during the first quarter of 2023 as compared to a net loss of $88,222 for the first quarter of 2022.
| 56 |
Key business highlights and projects updates in Q1 2023
| ● | Existing projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 91% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 91% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 86% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 62% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 67% completion of the project. It’s expected to reach PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. Reached 82% completion of the project. It’s expected to reach PTO in December 2022. |
| ● | Projects under development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred | Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA |
6.1 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
93,540 |
IPO, working capital | The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project. | ||||||||
| Geddes | New York, USA |
4.0 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
59,816 |
IPO, working capital | |||||||||
| SUNNY | New York, USA |
28.0 | September 2023 |
Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 |
- |
IPO, working capital | The Company has submitted an interconnection request to New York Independent System Operator. It has secured site control via an executed lease with the landowner. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). The barrier to completion is the timing and result of the interconnection request could delay the progress of engineering, permitting and interconnection deposit. | ||||||||
| 261 Township |
Alberta, Canada |
4.5 | June 2023 |
Completion of engineering work and placement of orders for main project components | 800,000 | IPO, working capital | The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has started and the Company is in discussion with the local utility on net metering interconnection, and with local authority having jurisdiction on the building permit. The Company may have to delay the completion of the project to commercial operation based on the timing of the closing of the Offering which will provide the funds to procure the components and hire local crews to build the project. | |||||||||
| Dutch Hill 1 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Dutch Hill 2 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Dutch Hill 3 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | IPO, working capital | ||||||||||
| Wastebeds1 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Wastebeds2 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Wastebeds3 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital |
| 57 |
Revenue
Revenue for the three months ended September 30, 2022 was $5,480,452 compared to $2,602,057 in the comparative period, increasing by $2,878,395, or 111%.
The EPC service revenue for the three months ended September 30, 2022 was $5,465,542 compared to $2,302,057 in the comparative period, increasing by $3,163,485, or 137%. The revenue increase was mainly because the completion rate of the two significant projects in New York, USA in the first quarter of 2023 is higher than the rate in the first quarter of 2022.
For the three months ended September 30, 2022, the Company had $nil development revenue, compared to $300,000 for the three months ended September 30, 2021. The Company had no sales of projects which reach NTP in the first quarter of 2023, compared to one sales in the US in the first quarter of 2022.
The O&M services revenue for the three months ended September 30, 2022 was $14,910, compared to $nil in the comparative period. The Company is growing the O&M services revenue by allocating more resource to this revenue stream.
Expenses
For the three months ended September 30, 2022, the Company incurred cost of good sold of $4,917,533 compared to $2,070,005 for the three months ended September 30, 2021. The cost of goods sold increased by $2,847,528, or 138%, was mainly due to the higher percentage of completion of the two significant projects in the US in the first quarter of 2023. The company recognize both revenue and cost based on the complete rate of the projects.
The operating expenses were $426,252 in the three months ended September 30, 2022 compared to $636,239 in the comparative period. The operating expenses decreased by $209,987, or 33%, was mainly resulted from a decrease of $285,927, or 54% in salary and wages expenses, offset by an increase of $63,191, or 1339%, in office and miscellaneous expenses. The Company incurred $240,372 salary and wages expenses for the three months ended September 30, 2022 compared to $526,299 in the comparative period. The decrease was mainly due to $104,341 of performance based bonus to the CEO of the Company in the three months period ended September 30, 2021 compared to $nil during the three months period ended September 30, 2022. In addition, the Company has 10 employees during the three months period ended September 30, 2022 compared to 13 employees during the same period ended September 30, 2021. The Company incurred $67,909 expenses in office and miscellaneous for the three months ended September 30, 2022 compared to compared to $4,718 in the comparative period. The increase in office and miscellaneous was due the recruiting expense of $59,069 in the three months period ended September 30, 2022, whereas no such recruiting expenses incurred for the same period ended September 30, 2021.
Other Income (Expense)
For the three months ended September 30, 2022, the Company had other income of $89,290 compared to other income of $15,965 for the three months ended September 30, 2021. Other income for the three months ended September 30, 2022 consists mainly of interest expense of $32,782 compared to $42,800 for the same period end September 30, 2021, and a foreign exchange gain of $124,647 compared to $65,934 for the same period ended September 30, 2021.
Net Income (loss)
The net income for the three months ended September 30, 2022 was $225,957 for a income per share of $0.01 based on 16,000,000 outstanding shares versus $88,222 for a loss per share of $0.00 based on 16,000,000 outstanding shares for the comparative period.
| 58 |
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The likelihood of success in these lawsuits cannot be reasonably predicted. |
| (2) | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 contracts where the IESO had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. The ultimate amount to be recovered is subject to the IESO’s approval, and there is no certainty as to the actual amount to be recovered from the IESO. Subsequent to June 30, 2021, no amounts have been recovered from IESO.
| (3) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (4) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| 59 |
| (5) | The Company has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements except for the three months ended September 2022 and 2021. According to item 1.5 (ii) of Form 51-102F1, the Company is not providing a tabular comparison of the eight most recently completed quarters.
Liquidity and Capital Resources
As at September 30, 2022, the Company had a cash balance of $3,864,461 (June 30, 2022 - $931,977) with working capital surplus of $5,471,155 ( June 30, 2022 - $5,617,200).
The following table summarizes the Company’s liquidity position:
| As at | September
30, 2022 $ | June
30, 2022 $ | ||||||
| Cash | 3,864,461 | 931,977 | ||||||
| Working capital | 5,471,155 | 5,617,200 | ||||||
| Total assets | 9,827,628 | 9,194,537 | ||||||
| Total liabilities | 5,222,561 | 4,753,922 | ||||||
| Shareholders’ equity | 4,605,097 | 4,440,615 | ||||||
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
The Company’s cash is held in high liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| For three months ended | September
30, 2022 $ | September
30, 2021 $ | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 2,589,661 | 2,124,426 | ||||||
| Investing activities | - | (3,889 | ) | |||||
| Financing activities | 198,969 | (678,389 | ) | |||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 2,932,483 | 1,396,980 | ||||||
| 60 |
Cash flow from operating activities
The Company generated cash of $2,589,661 from operating activities during the three months ended September 30, 2022, while the Company generated $2,124,426 cash during the same period ended September 30, 2021. The Company generated cash of $267,043 from the operational activities and generated $2,322,618 from the change of working capital during the three months ended September 30, 2022, while the Company used cash of $63,157 from the operating activities and generate $2,187,583 due to the change of working capital for the same period ended September 30, 2021.
Cash flow from financing activities
The Company generated cash of $198,969 from financing activities during the three months ended September 30, 2022, while the Company used $678,389 cash during the same period ended September 30, 2021. The cash generated in financing activities for the three months ended September 30, 2022 was mainly driven by the net proceeds of $825,000 received from debenture financing completed in October 2022, offset by the repayment of short-term loans of $583,756. The cash used in financing activities for the three months ended September 30, 2021 was solely resulted from the repayment of short-term loans of $678,389.
Cash flow from investing activities
The Company used cash of $nil in acquisition of plant, property and equipment during the three months ended September 30, 2022, while the Company used $3,889 in acquisition of plant, property and equipment during the same period ended September 30, 2021.
Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 has been reclassified as current portion due to the Company fully repaid the Energy line Loan in the amount of $343,776 in principal and $13,146 in interest on October 6, 2022.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| September 30, 2022 | June 30,2022 | |||||||
| Long-term debt – non-current portion | $ | 910,370 | $ | 1,230,643 | ||||
| Shareholders’ equity | $ | 4,605,097 | $ | 4,440,615 | ||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) 16,000,000 common shares issued and outstanding; and (ii) $1,250,000 principal amount of convertible debt that is convertible into 2,500,000 common shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; and (iii) 2,500,000 Advisory Warrants.
| 61 |
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
As at September 30, 2022, included in trade and other receivable was $116,884 (June 30, 2022 - $121,704) due from Sustainable Investment Ltd., who has a director (Richard Lu) in common. The purpose was for short-term bridge funding to cover working capital and project development expenses.
As at September 30, 2022, included in trade and other receivable was $86,000 (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op, who has a director (Richard Lu) in common, for the payment made to a vendor on behalf of Renewable Sun Energy Co-Op.
As at September 30, 2022, included in trade and other payable was $977,315 (June 30, 2022 - $Nil) due to Sustainable Investment Ltd., who has a director (Richard Lu) in common, for a collection of a receivable on behalf of Sustainable Investment Ltd. from a customer.
As at September 30, 2022, included in trade and other payable was $Nil (June 30, 2022 - $104,545) owing to officers and director for accrued salary and bonus payments.
As at September 30, 2022, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 (3-month period ended September 30, 2021 - $19,706) on September 16, 2022. The purpose of the loan was for short-term bridge funding to cover working capital and project development expenses.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three months ended September 30, 2022 and 2021 were as follows:
| September 30, 2022 | September 30, 2021 | |||||||
| Short-term employee benefits | $ | 235,982 | $ | 264,022 | ||||
Short-term employee benefits include consulting fees.
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Critical Accounting Estimates
| ● | Revenue recognition: |
The Company recognizes revenue for project development services, engineering, procurement, and construction (EPC) services and operation and maintenance (OM) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
| 62 |
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
| ● | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| ● | Taxes |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| ● | Expected credit loss |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| ● | Warranties |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three months ended September 30, 2022, $Nil warranty provision was recorded (2021 - $Nil).
| 63 |
| ● | Contract fulfilment costs |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| ● | Contract fulfilment costs |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
| 64 |
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Three
months ended September 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,883,451 | 71 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,448,145 | 57 | % | ||||
| Customer C | $ | 900,089 | 36 | % | ||||
| Three
months ended September 30, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 2,251,890 | 87 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer A | $ | 2,232,238 | 52 | % |
| 65 |
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Subsequent Events
Loan repayment
On October 6, 2022 the Company fully repaid the Energy line Loan in the amount of $343,776 plus accrued interest of $13,146.
Debenture financing
On October 3, 2022 the Company completed a the Convertible Loan financing for gross proceeds of $1,250,000. Upon the closing of the Offering, the proceeds of the Convertible Loan shall covert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
Advisory warrant
On October 3, 2022 the Company entered into a corporate and financial advisory agreement with a private equity firm. Pursuant to the agreement, the private equity firm is entitled to 2,500,000 transferable warrants, which will be vested on the closing of the Company’s IPO. The warrants shall entitle the holder to acquire shares for a period of five years at an exercise price equal to $0.10, subject to adjustment for any share consolidations or splits that occur prior to the closing of the IPO.
Stock split
On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000.
| 66 |
DESCRIPTION OF THE SECURITIES
Authorized and Outstanding Securities
The authorized share capital of the Company consists of an unlimited number of common shares without par value. As of the date hereof, 16,000,000 Common Shares were issued and outstanding as fully paid and non-assessable common shares.
Common Shares
The Company is authorized to issue an unlimited number of Common Shares. Holders of Common Shares are entitled to receive notice of any meetings of Shareholders, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to receive on a pro-rata basis such dividends, if any, as and when declared by the Board at its discretion from funds legally available therefor and upon the liquidation, dissolution or winding up of the Company are entitled to receive on a pro-rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro-rata basis with the holders of Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.
Broker Warrants
Each Broker Warrant entitles the holder thereof to purchase one Broker Warrant Shares, at the Offering Price per Broker Warrant, for a period of 36 months following the Closing Date.
The Broker Warrant Shares have the same rights as the Common Shares.
CONSOLIDATED CAPITALIZATION
The following chart sets out the capitalization of the Company as at the dates indicated and after giving effect to the Offering. The chart should be read in conjunction be read in conjunction with information contained in “Use of Proceeds”, “Selected Financial Information” and “Management’s Discussion and Analysis”, as well as the SolarBank Financial Statements and related notes and reports included in this Prospectus.
| As
at September 30, 2022 before giving effect to the Offering | As
at the date of this Prospectus after giving effect to the Offering | As
at the date of this Prospectus after giving effect to the Offering, assuming exercise of the Over-Allotment Option in full | ||||||||||
| Share
Capital (Common Shares – Authorized: unlimited) | 16,000,000 | 25,500,000 | 26,550,000 | |||||||||
| Advisory Warrants | 2,500,000 | 2,500,000 | 2,500,000 | |||||||||
| Series A Warrants | Nil | 2,500,000 | 2,500,000 | |||||||||
| Series B Warrants | Nil | 2,500,000 | 2,500,000 | |||||||||
| Broker Warrants | Nil | 420,000 | 483,000 | |||||||||
| Stock Options | Nil | 2,774,000 | 2,774,000 | |||||||||
| RSUs | Nil | 500,000 | 500,000 | |||||||||
| Shareholders’ Equity | ||||||||||||
| Share Capital | $ | 1,000 | $ | 4,719,250 | $ | 5,459,500 | ||||||
| Accumulated Other Comprehensive Income | $ | 12,292 | $ | 12,292 | $ | 12,292 | ||||||
| Retained Earnings | $ | 4,636,522 | $ | 4,636,522 | $ | 4,636,522 | ||||||
| Non-Controlling Interest | $ | (44,717 | ) | ($ | (44,717 | ) | $ | (44,717 | ) | |||
| Total Shareholder’s Equity | $ | 4,605,097 | $ | 9,323,347 | $ | 10,063,597 | ||||||
| 67 |
Concurrent with the closing of the Offering, the Convertible Loan will convert into 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants, all of which are included for the purposes of calculations in the table above for the purposes of the columns titled “As at the date of this Prospectus after giving effect to the Offering” and “As at the date of this Prospectus after giving effect to the Offering, assuming exercise of the Over-Allotment Option in full”.
Other than as disclosed below, there have been no material changes in the share capitalization or in the indebtedness of the Company since September 30, 2022 other than the issuance of the Convertible Loan, the issuance of 2,774,000 Options on November 4, 2022 each with an exercise price of $0.75 per Share, and the issuance of 500,000 RSUs on November 4, 2022.
RSUS, OPTIONS AND WARRANTS TO PURCHASE SHARES
The Board of Directors has adopted the Share Compensation Plan under which RSUs and Options to purchase Common Shares may be granted to the Company’s directors, officers, employees and consultants. See “Executive Compensation – Compensation Discussion and Analysis – Share Compensation Plan”.
As of the date of this Prospectus, there are 500,000 RSUs and 2,774,000 Options to purchase Common Shares issued and outstanding under the Share Compensation Plan. The following table summarizes the holdings of the Options granted by the Company as of the date of this Prospectus:
| Optionee | Number of Optionees | Number of Options | Exercise Price | Expiry Date | ||||||||||
| Executive Officers and Former Executive Officers | 4 | 1,299,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Directors (other than those who are also executive officers) | 3 | 500,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Other Current and Former Employees | 8 | 330,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Consultants | 4 | 645,000 | $ | 0.75 | November 4, 2027 | |||||||||
| Total: | 2,774,000 | |||||||||||||
| 68 |
The following table summarizes the holdings of the RSUs granted by the Company as of the date of this Prospectus:
| Holder | Number of Holders | Number of RSUs | Exercise Price | Expiry Date | ||||||||||||
| Executive Officers and Former Executive Officers | — | — | — | — | ||||||||||||
| Directors (other than those who are also executive officers) | — | — | — | — | ||||||||||||
| Other Current and Former Employees | — | — | — | — | ||||||||||||
| Consultants | 1 | 500,000 | N/A | Six Months from Closing Date | ||||||||||||
| Total: | 1 | 500,000 | ||||||||||||||
As of the date of this Prospectus there is $975,000 principal amount Convertible Loan outstanding and 2,500,000 Advisory Warrants, each held by three consultants and one director. The following table summarizes the holdings of Warrants that will be outstanding as of the Closing Date:
| Holder | Number of Holders | Number of Securities | Exercise Price | Expiry Date | ||||||||||||
| Executive Officers and Former Executive Officers | — | — | — | — | ||||||||||||
| Directors (other than those who are also executive officers) | 1 | 625,000 Warrants
| $0.10
| June 10, 2027
| ||||||||||||
| Other Current and Former Employees | — | — | — | — | ||||||||||||
| Consultants | 3 | 1,875,000 Warrants
| $0.10
| June 10, 2027
| ||||||||||||
| Total: | 4 | 6,400,000 | ||||||||||||||
PRIOR SALES
In the 12 months prior to the date of this prospectus, the Company issued the following Common Shares and securities convertible into Common Shares:
| Date of Issuance | Security Type | Number of Securities | Issue/Exercise Price | |||||||
| October 3, 2022 | Advisory Warrants | 2,500,000 | $ | 0.10 | ||||||
| October 3, 2022 | Convertible Loan | $ | 1,250,000 | (1) | $ | 0.50 | ||||
| November 4, 2022 | Options | 2,774,000 | $ | 0.75 | ||||||
| November 4, 2022 | RSUs | 500,000 | N/A | |||||||
Note:
| (1) | The principal sum of the Convertible Loan is equal to $1,250,000 and is automatically converted into Conversion Units upon the closing of the Offering. The Convertible Loan is convertible at a price of $0.50 per Conversion Units. The Conversion Units consist of 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants. The Series A Warrants and Series B Warrants, upon the satisfaction of the Series A Warrant Vesting Condition and Series B Warrant Vesting Condition (as applicable) are exercisable into Common Shares at an exercise price of $0.50 per Common Share. |
| 69 |
TRADING PRICE AND VOLUME
The Common Shares were not previously traded on any market or exchange.
ESCROWED
SECURITIES AND SECURITIES SUBJECT TO
CONTRACTUAL RESTRICTION ON TRANSFER
Contractual Escrow Securities
On or prior to the Listing Date, the Company and non-Principal existing holders of Common Shares will enter into an agreement with the Company (the “Voluntary Escrow Agreements”) in the form of escrow agreement provided under National Policy 46-201 Escrow For Initial Public Offerings (the “Voluntary Escrow”) setting out contractual escrow terms, being a 36 month voluntary trading restriction where 10% of each holder’s shares are released at the Listing Date, and 15% of each holder’s shares are released at the six, twelve, eighteen, twenty-four, thirty and thirty-six month anniversaries of the Listing Date. Any Common Shares issuable on the exercise of 6,275,000 Warrants and 975,000 Stock Options are subject to the same terms of the Voluntary Escrow. A copy of the Voluntary Escrow Agreement will be available under the Company’s profile on SEDAR at www.sedar.com.
As at the date of this Prospectus, there are no securities of the Company that are subject to escrow or contractual restrictions on transfer. At the Closing Date the following securities of the Company will be subject to contractual restrictions on transfer as shown in the following table:
| Designation of Class | Total number of securities that are subject to a contractual restriction on transfer (1) | Percentage
of Class After the Offering | ||||||
| Common Shares | 17,426,800 | 79.57 | % | |||||
| Warrants | 6,275,000 | 81.45 | % | |||||
| Stock Options | 975,000 | 35.15 | % | |||||
National Policy 46-201 Escrow
NP 46-201 provides that all securities of an issuer owned or controlled by a Principal must be placed in escrow at the time the issuer distributes its securities or convertible securities to the public by prospectus, unless the securities held by such Principal or issuable to such Principal upon conversion of convertible securities held by the Principal collectively represent less than 1% of the total issued and outstanding securities of the issuer after giving effect to the initial distribution. As such, the securities held by the Principals will be held in escrow pursuant to the policies of NP 46-201.
| 70 |
The following table sets forth the securities of the Principals that, as at the date of Listing, will be subject to escrow and the percentage that number represents of the outstanding securities of that class.
| Designation of Class | Total number of securities that are held in escrow(1) | Percentage
of Class After the Offering | ||||||
| Common Shares | 1,073,200 | 4.90 | % | |||||
| Warrants | 1,225,000 | 15.30 | % | |||||
| Stock Options | 1,799,000 | 63.77 | % | |||||
On or prior to the Listing Date, the Company and the Principals will enter into an escrow agreement (the “Escrow Agreement”) with Endeavor Trust Corporation, as escrow agent (the “Escrow Agent”), pursuant to which the Escrowed Shareholders will collectively deposit the Common Shares and Warrants listed in the table above into escrow (the “Escrowed Securities”) with the Escrow Agent.
Upon the completion of the Listing, it is expected the Company will be an “emerging issuer” pursuant to NP 46-201 and, as such, the Escrowed Securities will be subject to a three year escrow and subject to the following release scheduled:
| Date | Amount of Escrowed Securities Released | ||
| On the Listing Date | 1/10 of the escrow securities | ||
| 6 months after the Listing Date | 1/6 of the remaining escrow securities | ||
| 12 months after the Listing Date | 1/5 of the remaining escrow securities | ||
| 18 months after the Listing Date | 1/4 of the remaining escrow securities | ||
| 24 months after the Listing Date | 1/3 of the remaining escrow securities | ||
| 30 months after the Listing Date | 1/2 of the remaining escrow securities | ||
| 36 months after the Listing Date | the remaining escrow securities |
The release schedule may be accelerated if the Company, after the Listing, establishes itself as an “established issuer” as described in NP 46-201.
A copy of the Escrow Agreement will be available under the Company’s profile on SEDAR at www.sedar.com.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Company, no person or entity beneficially owns, or controls or directs, 10% or more of the outstanding Common Shares as of the date of this Prospectus or immediately after the Offering.
| 71 |
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides the names, municipalities of residence, position and principal occupations as of the date of this Prospectus:
Name and Municipality of Residence |
Director/officer Since and Position with the Company |
Principal Occupation for Last Five Years |
Common Shares Beneficially Owned, Directly or Indirectly, over which Control or Discretion is Exercised(1) | |||
| Dr.
Richard Lu Toronto, ON Canada |
Director, Chief Executive Officer and President since August 1, 2014 | Chief Executive Officer and President of the Company since August 2014. | 773,200(3) | |||
| Sam
Sun Toronto, ON Canada |
Chief Financial Officer since July 1, 2022 | Chief Financial Officer of the Company since July, 2022; Head of Finance for Aucto Canada Inc. from May 2021 to June 2022; Finance Director of NRI Industrial Sales Inc. from November 2020 to April 2021; Head of Finance of Brook Crompton Ltd. from November 2018 to June 2020; VP of Finance and Operation of Lynks Motoplex Inc. from May 2017 to October 2018. | Nil | |||
| Andrew
van Doorn Toronto, ON Canada |
Chief Operating Officer since July 1, 2021 | Chief Operating Officer of the Company since July 2021 and acted in the capacity of Chief Operation Officer of the Company from July 2018 to July 2020; VP Engineering & Construction for Potentia Renewables from April 2012 to June 2018. | Nil | |||
| Xiaohong
(Tracy) Zheng Toronto, ON Canada |
Chief Administrative Officer since July 1, 2021 | Chief Administrative Officer of the Company since July 2021; Vice President of Operations of the Company from August 2017 to June 2021. | Nil | |||
| Olen
Aasen(2) Vancouver, BC Canada |
Director since November 3, 2022 | Practicing lawyer since May 2017. | Nil (4) | |||
| Paul
Pasalic(2) London, UK |
Director since November 3, 2022 | Managing Director, Head of Legal (Europe) – Private Equity Transactions, with Hudson Advisors since 2019; Associate lawyer with Shearman & Sterling LLP from 2012 to 2019. | Nil | |||
| Paul
Sparkes(2) Toronto, ON Canada |
Director since November 3, 2022 | Corporate director and Self-Employed advisor advising growth entities in private and public markets. | Nil |
| 72 |
Notes:
| (1) | Information as to securities of the Company beneficially owned, or over which control or direction is exercised, has been furnished by the respective directors and officers. |
| (2) | Member of the Audit Committee. Mr. Pasalic is the Chair. |
| (3) | Held by 2384449 Ontario Inc., a corporation controlled by Dr. Lu. |
| (4) | Mr. Aasen holds $75,000 principal amount of the Convertible Loan. Upon the closing of the Offering Mr. Aasen will receive 150,000 Common Shares, 150,000 Series A Warrants and 150,000 Series B Warrants on the automatic conversion of the Convertible Loan. Mr. Aasen also holds 625,000 Advisory Warrants. |
Unless otherwise noted above, the term of office of the directors expires on the earlier of the Company’s next annual general meeting, or upon resignation. The term of office of the officers expires at the discretion of the directors.
As of the date of this prospectus, the Company’s directors and officers as a group, beneficially own, directly and indirectly, or exercise control or direction over, 773,200 Common Shares, representing 4.83% of the issued and outstanding Common Shares.
Biographies of Directors and Executive Officers
The following are brief profiles of the Company’s executive officers and directors, including a description of each individual’s principal occupation within the past five years.
Dr. Richard Lu - Director (Age 59)
Dr. Richard Lu has more than 25 years of global experience in the energy industry developing and implementing business strategies for organizations in North America, Europe and Asia. He is the President and CEO of SolarBank Corporation, an established and trusted developer, engineer, asset operator, and manager in the clean and renewable energy space in Canada and the US. He is an Independent Director and Chairman of the Audit Committee at dynaCERT Inc. (TSE:DYA), a high-tech company that specializes in hydrogen application in the transportation industry. He is also a Director at Alkaline Fuel Cell Power Corp. (NEO:PWWR), an advanced hydrogen fuel cell technology company. He was the Managing Director of Sky Solar Holdings Co., Ltd. (SKYS, NASDAQ), and the VP of Business Development at ARISE Technology Corporation (APV-T). Dr. Lu also previously held the position of Chief Conservation Officer and VP of Toronto Hydro Corporation, where he developed and executed a sweeping portfolio of Conservation, Demand Management and Distributed Energy programs. Prior to that he was the Vice-President of Environment, Health and Safety, ensuring Toronto Hydro Corporation’s commitment to providing a safe and healthy workplace for employees and the strategies for achieving sustainable development and growth are successfully met. Dr. Lu has held senior positions with Enbridge Gas Distribution, Husky Injection Molding Systems Ltd., and Dillon Consulting. Dr. Lu is an EMBA from Rotman, and a MSc from the University of Toronto; a MHSc and MD from Tongji Medical University.
Dr. Lu works full time for the Company and his consulting agreement contains non-disclosure, non-competition and non-solicitation provisions in favour of the Company.
Sam Sun – Chief Financial Officer (Age 39)
Mr. Sun is a Chartered Professional Accountant in Canada with more than 15 years of experience in corporate finance, accounting and internal control. He has been the head of finance or finance director at various Canadian, U.S. and Chinese public and private companies in the cleantech, marketplace, manufacturing and mining sectors. Mr. Sun obtained the bachelor and master degrees in management from the Shanghai University of Finance and Economics in 2005 and 2014. Mr. Sun also obtained his MBA from the University of Toronto’s Rotman School of Business in 2018.
Mr. Sun works full time for the Company and his employment agreement contains non-disclosure and non-solicitation provisions in favour of the Company.
| 73 |
Andrew van Doorn, COO (Age 52)
Mr. van Doorn has over 28 years of executive leadership experience in Engineering and Construction in the Renewable Energy and Utility sectors, with over 200MW of solar projects completed. As former Chairman of the Canadian Solar Industries Association (CANSIA), Mr. van Doorn is an expert in the management, operations, and construction of solar photovoltaic systems. He is a Professional Engineer, designated in the province of Ontario. Mr. van Doorn’s solar experience includes 32MW of community solar in Minnesota, 28 MW built or under construction in New York State, and 20 MW of ground mount systems in Ontario. Further experience includes 140MW of rooftop solar spread across 600 sites in Ontario, including at over 500 schools and North America’s largest school rooftop portfolio at the Toronto District School Board, with over 350 sites. Mr. van Doorn was also the founding partner part of the Initial Public Offering of HLT Energies, a solar thermal independent power producer that traded on the TSX-Venture Excahnge. Mr. van Doorn currently oversees the engineering, procurement, construction and operations of all solar projects with the Company.
Mr. van Doorn works full time for the Company and his employment agreement contains non-disclosure and non-solicitation provisions in favour of the Company, but does not contain a non-competition provision.
Tracy Zheng, CAO (Age: 49)
Ms. Zheng is an accomplished business strategist with over 25 years of management experience in brand marketing, investment, business development and solar project operations. Ms. Zheng joined the Company’s executive team after several years at Sky Solar Canada where she was responsible for sales management, financial and project viability analysis, and partnership negotiation. At the Company and Sky, Ms. Zheng played a leading role in securing more than 450 contracts for over 200MW of rooftop and ground mount photovoltaic systems under Ontario’s Feed-In-Tariff program. Her experience also includes a plethora of international business exposure specializing in brand and market strategy in senior marketing positions at companies including Colgate-Palmolive and Clairol as well as firms specialized in market research and e-commerce. She is proficient in developing marketing plans, strategies, identifying and capitalizing on market opportunities, and managing implementation of in-field initiatives. She has successfully led more than 10 new product launches in addition to national marketing and advertising campaigns, and communications programs. She holds a Bachelor of Science in Engineering from Sun Yat-Sen University, and an MBA from the Schulich School of Business, York University.
Ms. Zheng works full time for the Company. Her consulting agreement does not contain non-disclosure, non-competition and non-solicitation provisions in favour of the Company.
Paul Pasalic, Director (Age 42)
Mr. Pasalic is a private equity professional and a corporate lawyer with more than 15 years of experience in corporate, securities and regulatory matters. Mr. Pasalic has advised on a diverse array of complex multi-jurisdictional transactions across various industries and across the capital structure. Mr. Pasalic holds a bachelors of business administration (finance) from Simon Fraser University, and obtained a juris doctor from the University of Calgary in 2007. Mr. Pasalic is a qualified attorney in Canada (Ontario; Alberta), New York State as well as in England and Wales. Mr. Pasalic is also a CFA charterholder.
Mr. Pasalic is expected to devote approximately 10% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Pasalic.
Olen Aasen - Director (Age 40)
Mr. Aasen is an executive and corporate and securities lawyer with more than 16 years of experience in corporate, securities, mining and regulatory matters. He has been the Corporate Secretary, General Counsel or Vice President, Legal at various Canadian and U.S.-listed companies in the mining, transportation and technology sectors. In the past ten years Mr. Aasen has advised on a significant number of debt and equity financings and structured finance packages. Mr. Aasen did his undergraduate studies in the Finance Department of the Sauder School of Business, obtained a J.D. from the University of British Columbia in 2006 and was called to the British Columbia Bar in 2007. Mr. Aasen was also appointed to the 2016 Legal 500 GC Powerlist for Canada.
Mr. Aasen is expected to devote approximately 25% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Aasen.
| 74 |
Paul Sparkes - Director (Age 58)
Mr. Sparkes is an entrepreneur with over 25 years of experience in media, finance, capital markets and Canada’s political arena. He spent a decade in the broadcast and media industry as CTVglobemedia’s Executive Vice President, Corporate Affairs. He also held senior positions in public service, including with the Government of Canada as Director of Operations to Prime Minister Jean Chretien, and as a senior aide to two Premiers of Newfoundland and Labrador. Paul was a co-founder and executive vice chairman at Difference Capital Financial and serves on a number of private and public boards. He is currently President and founder of Otterbury Holdings Inc., Global Alternatives Advisory, and is an advisor and deal maker for growth companies in the private and public markets.
Mr. Sparkes is expected to devote approximately 10% of his working time to the affairs of the Company. The Company does not expect to enter into a non-disclosure or non-competition agreement with Mr. Sparkes.
Corporate Cease Trade Orders and Bankruptcies
To the Company’s knowledge, other than as disclosed below, no existing or proposed director, officer or promoter of the Company or a securityholder anticipated to hold a sufficient number of securities of the Company to affect materially the control of the Company, within 10 years of the date of this Prospectus, has been a director, officer or promoter of any person or company that, while that person was acting in that capacity,
| (a) | was the subject of a cease trade or similar order, or an order that denied the other issuer access to any exemptions under applicable securities law, for a period of more than 30 consecutive days; or |
| (b) | became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. |
By Order of the Supreme Court of Newfoundland and Labrador dated June 17, 2020, Deloitte Restructuring Inc. was appointed as the receiver and manager of all current and future assets, undertakings, and properties of the Kami Mine Limited Partnership, Kami General Partner Limited, and Alderon Iron Ore Corp. The receivership was initiated by a secured creditor of the Kami Mine Limited Partnership after its failure to refinance the secured debt due to the COVID-19 pandemic. Mr. Aasen was Corporate Secretary of Alderon Iron Ore Corp. and Secretary and Director of Kami General Partner Limited until April 28, 2020.
On February 5, 2016, the British Columbia Securities Commission issued a cease trade order against Ziplocal Inc. for failure to file its annual audited financial statements and MD&A. The required documents were filed and the order was subsequently revoked on March 11, 2016. Mr. Paul Sparkes was a director of Ziplocal Inc. during this period.
Penalties or Sanctions
To the Company’s knowledge, no existing or proposed director, officer or promoter of the Company, or a securityholder anticipated to hold sufficient securities of the Company to affect materially the control of the Company, has:
| (a) | been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or |
| (b) | been subject to any other penalties or sanctions imposed by a court or regulatory body, including a self-regulatory body that would be likely to be considered important to a reasonable securityholder making a decision in regards to the Company. |
| 75 |
Personal Bankruptcies
To the Company’s knowledge, no existing or proposed director, officer or promoter of the Company, or a securityholder anticipated to hold sufficient securities of the Company to affect materially the control of the Company, or a personal holding company of such persons has, within the 10 years before the date of this Prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, officer or promoter.
Conflicts of Interest
Members of Management are, and may in future be, associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. Although the officers and directors are engaged in other business activities, the Company anticipates they will devote an important amount of time to our affairs.
The Company’s officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to the Company’s. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, the Company does not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.
As disclosed in this Prospectus, the SFT Group is a customer of the Company and it has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Chief Executive Officer of the SFT Group is Mr. Matt Wayrynen and the Chief Financial Officer of the SFT Group is Frederick Jung. There is no overlap in the directors or officers of the SFT Group and the Company; however, relatives of Mr. Wayrynen, and Mr. Jung and his relatives, are shareholders of the Company. Mr. Wayrynen and Mr. Jung and their respective relatives, however, have no significant influence over the Company. We also note that the Company is not substantially dependent on the SFT Group and that the SFT Group is not a related party of the Company as per IAS 24 Related Party Disclosure.
Due to these shareholdings in the Company, there is the potential for perceived conflicts of interest in transactions between the Company and the SFT Group. The Company manages these perceived conflicts of interest by entering into transactions with the SFT Group on terms that are consistent with those that are agreed to with its other customers and entering into transactions with the party that offers the best terms.
The Company’s directors and officers are subject to fiduciary obligations to act in the best interest of the Company. Conflicts, if any, will be subject to the procedures and remedies of the OBCA or other applicable corporate legislation.
EXECUTIVE COMPENSATION
Executive Compensation
The following information is provided as required under Form 51-102F6V for Venture Issuers, as such term is defined in National Instrument 51-102 – Continuous Disclosure.
For the purposes of this section, “Named Executive Officer”, or “NEO”, means each of the following individuals:
| (a) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief executive officer (“CEO”), including an individual performing functions similar to a CEO; |
| 76 |
| (b) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief financial officer (“CFO”), including an individual performing functions similar to a CFO; |
| (c) | in respect of the company and its subsidiaries, the most highly compensated executive officer other than the individuals identified in paragraphs (a) and (b) at the end of the most recently completed financial year whose total compensation was more than $150,000, as determined in accordance with subsection 1.3(5) of Form 51-102F6V, for that financial year; |
| (d) | each individual who would be a NEO under paragraph (c) but for the fact that the individual was not an executive officer of the Company, and was not acting in a similar capacity, at the end of that financial year. |
Accordingly, the NEOs of the Company for the fiscal year ended June 30, 2022 are:
| ● | Richard Lu, President & Chief Executive Officer |
| ● | Sam Sun, Chief Financial Officer |
| ● | Andrew van Doorn, Chief Operating Officer |
| ● | Tracy Zheng, Chief Administrative Officer |
Compensation of Named Executive Officers
The following table of compensation, excluding options and compensation securities, provides a summary of the compensation paid by the Company to each NEO and director of the Company for the two most recently completed financial years ended June 30, 2022 and 2021. Options and compensation securities are disclosed under the heading “Stock Options and Other Compensation Securities and Instruments” of this Prospectus.
| Name and Principal Position | Year(1) | Salary, consulting fee, retainer or commission ($)2) | Bonus ($)(2) | Committee or meeting fees ($) | Value of perquisites ($) | Value of all other compensation ($) | Total compensation ($) | |||||||||||||||||||
| Richard Lu(2) President & Chief Executive Officer | 2022 | 469,731 | 100,000 | Nil | Nil | Nil | 569,731 | |||||||||||||||||||
| 2021 | 446,973 | Nil | Nil | Nil | Nil | 446,973 | ||||||||||||||||||||
| Sam Sun(3) Chief Financial Officer | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Andrew van Doorn(4) Chief Operating Officer | 2022 | 249,995 | Nil | Nil | Nil | Nil | 249,995 | |||||||||||||||||||
| 2021 | 230,765 | 100,000 | Nil | Nil | Nil | 330,765 | ||||||||||||||||||||
| Tracy Zheng(5) Chief Operating Officer | 2022 | 188,400 | Nil | Nil | Nil | Nil | 188,400 | |||||||||||||||||||
| 2021 | 181,307 | Nil | Nil | Nil | Nil | 181,307 | ||||||||||||||||||||
| Paul Pasalic(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Olen Aasen(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
| Paul Sparkes(6) Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||||||
| 2021 | Nil | Nil | Nil | Nil | Nil | Nil | ||||||||||||||||||||
Notes:
| (1) | Financial years ended June 30. |
| (2) | Effective September 1, 2022 Light Voltaic Corporation (“LVC”) entered into a consulting agreement (the “Consulting Agreement”) with the Company to provide the services of Dr. Lu to the Company to act as Chief Executive Officer. LVC is paid annual consulting fees of $469,731 for the services of Dr. Lu. LVC is also eligible to receive a bonus of $100,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. Dr. Lu receives no compensation for his services as a director. |
| 77 |
| (3) | Effective June 10, 2022, Mr. Sun entered into an employment agreement with the Company with an effective start date of July 4, 2022. Mr. Sun is paid an annual salary of $120,000 for his services as CFO. Mr. Sun is also eligible to receive a bonus of $20,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. |
| (4) | Effective October 25, 2022, Mr. van Doorn entered into an employment agreement with the Company. Mr. van Doorn is paid an annual salary of $350,000 for his services as COO. Mr. van Doorn is also eligible to receive a bonus of $90,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation and $20,000 for every 10 MW, DC (cumulative) solar projects achieving NTP. |
| (5) | Effective February 1, 2021 Ms. Zheng, through her personal company, entered into a consulting agreement with the Company. Ms. Zheng is paid annual consulting fees of $188,400 (plus applicable taxes) for her services as Chief Administrative Officer. |
| (6) | Mr. Pasalic, Mr. Aasen and Mr. Sparkes were appointed as directors of the Company on November 3, 2022 and receive no compensation for their services as directors of the Company. |
Stock Options and Other Compensation Securities and Instruments
No compensation securities were granted to or issued by the Company to any NEO or director of the Company during the financial year ended June 30, 2022.
No compensation security has been repriced, cancelled and replaced, had its term extended, or otherwise been modified financial year ended June 30, 2022.
No compensation securities were exercised by any NEO or director of the Company during the financial year ended June 30, 2022.
Stock Option Plan and Other Incentive Plans
The Board of Directors has adopted the Share Compensation Plan under which RSUs and Options may be granted to the Company’s directors, officers, employees and consultants. The Share Compensation Plan provides participants (each, a “Participant”), who may include participants who are citizens or residents of the United States (each, a “US Participant”), with the opportunity, through RSUs and Options, to acquire an ownership interest in the Company. The RSUs will rise and fall in value based on the value of the Common Shares. Unlike the Options, the RSUs will not require the payment of any monetary consideration to the Company. Instead, each RSU represents a right to receive one Common Share following the attainment of vesting criteria determined at the time of the award. See “Restricted Share Units – Vesting Provisions” below. The Options, on the other hand, are rights to acquire Common Shares upon payment of monetary consideration (i.e., the exercise price), subject also to vesting criteria determined at the time of the grant. See “Options – Vesting Provisions” below.
| 1. | Purpose of the Share Compensation Plan |
The stated purpose of the Share Compensation Plan is to advance the interests of the Company and its subsidiaries, and its shareholders by: (a) ensuring that the interests of Participants are aligned with the success of the Company and its subsidiaries; (b) encouraging stock ownership by such persons; and (c) providing compensation opportunities to attract, retain and motivate such persons.
The following people are eligible to participate in the Share Compensation Plan: any officer or employee of the Company or any officer or employee of any subsidiary of the Company and, solely for purposes of the grant of Options, any director of the Company or any director of any subsidiary of the Company, and any Consultant (defined under the Share Compensation Plan as an individual (other than an employee or a director of the Company) or a corporation that is not a U.S. Person that: (A) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to an offer or sale of securities of the Company in a capital raising transaction, or services that promote or maintain a market for the Company securities; (B) provides the services under a written contract between the Company or the affiliate and the individual or the Company, as the case may be; (C) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or an affiliate of the Company; and (D) has a relationship with the Company or an affiliate of the Company that enables the individual to be knowledgeable about the business and affairs of the Company).
| 78 |
| 2. | Administration of the Share Compensation Plan |
The Share Compensation Plan is administered by the Board or such other persons as may be designated by the Board (the “Administrators”) based on the recommendation of the Board or the compensation committee of the Board, if applicable. The Administrators determine the eligibility of persons to participate in the Share Compensation Plan, when RSUs and Options will be awarded or granted, the number of RSUs and Options to be awarded or granted, the vesting criteria for each award of RSUs and grant of Options and all other terms and conditions of each award and grant, in each case in accordance with applicable securities laws and the requirements of the CSE.
| 3. | Restrictions on the Award of RSUs and Grant of Options |
The awards of RSUs and grants of Options under the Share Compensation Plan is subject to a number of restrictions:
| (a) | the total number of Common Shares reserved and available for grant and issuance pursuant to the exercise of Options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares from time to time; and |
| (b) | the number of Common Shares issuable pursuant to the exercise of Options under the Share Compensation Plan within a 12 month period to all eligible persons retained to provide investor relations activities (together with those Common Shares that are issued pursuant to any other Share Compensation Arrangement) shall not, at any time, exceed 1% of the issued and outstanding Common Shares. |
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of the Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may in their sole discretion make such changes or adjustments, if any, as the Administrators consider fair or equitable to reflect such change or event including, without limitation, adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto, as determined by the Administrators.
Mechanics for RSUs
RSUs awarded to Participants under the Share Compensation Plan are credited to an account that is established on their behalf and maintained in accordance with the Share Compensation Plan. After the relevant date of vesting of any RSUs awarded under the Share Compensation Plan, a Participant shall be entitled to receive and the Company shall issue or pay (at its discretion): (i) a lump sum payment in cash equal to the number of vested RSUs recorded in the Participant’s account multiplied by the volume weighted average price of the Common Shares traded on the CSE for the five consecutive trading days prior to the payout date; (ii) the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s RSUs in the Participant’s account will be, duly issued as fully paid and non assessable shares and such Participant shall be registered on the books of the Company as the holder of the appropriate number of Common Shares; or (iii) any combination of thereof.
| 79 |
Vesting Provisions for RSUs
The Share Compensation Plan provides that: (i) at the time of the award of RSUs, the Administrators will determine the vesting criteria applicable to the awarded RSUs; (ii) vesting of RSUs may include criteria such as performance vesting; (iii) each RSU shall be subject to vesting in accordance with the terms set out in an agreement evidencing the award of the RSU attached as Exhibit A to the Share Compensation Plan (or in such form as the Administrators may approve from time to time) (each an “RSU Agreement”); and (iv) all vesting and issuances or payments in respect of a RSU shall be completed no later than December 15 of the third calendar year commencing after the award date for such RSU.
It is the current intention that RSUs may be awarded with both time based vesting provisions as a component of the Company’s annual incentive compensation program, and performance based vesting provisions as a component of the Company’s long term incentive compensation program.
Under the Share Compensation Plan, should the date of vesting of an RSU fall within a blackout period or within nine business days following the expiration of a blackout period, the date of vesting will be automatically extended to the tenth business day after the end of the blackout period.
Termination, Retirement and Other Cessation of Employment in connection with RSUs
A person participating in the Share Compensation Plan will cease to be eligible to participate in the following circumstances: (i) receipt of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause); (ii) retirement; and (iii) any cessation of employment or service for any reason whatsoever, including disability and death (an “Event of Termination”). In such circumstances, any vested RSUs will be issued (and with respect to each RSU of a US Participant, such RSU will be settled and shares issued as soon as practicable following the date of vesting of such RSU as set forth in the applicable RSU Agreement, but in all cases within 60 days following such date of vesting) and unless otherwise determined by the Administrators in their discretion, any unvested RSUs will be automatically forfeited and cancelled (and with respect to any RSU of a US Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to an RSU that is unvested at the time of an Event of Termination, such RSU shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting date of such RSU as set forth in the applicable RSU Agreement). Notwithstanding the above, if a person retires in accordance with the Company’s retirement policy at such time, the pro rata portion of any unvested performance based RSUs will not be forfeited or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable RSU Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, have been met on the applicable date. For greater certainty, if a person is terminated for just cause, all unvested RSUs will be forfeited and cancelled.
Mechanics for Options
Each Option granted pursuant to the Share Compensation Plan will entitle the holder thereof to the issuance of one Common Share upon achievement of the vesting criteria and payment of the applicable exercise price. Options granted under the Share Compensation Plan will be exercisable for Common Shares issued from treasury once the vesting criteria established by the Administrators at the time of the grant have been satisfied. However, the Company will continue to retain the flexibility through the amendment provisions in the Share Compensation Plan to satisfy its obligation to issue Common Shares by making a lump sum cash payment of equivalent value (i.e., pursuant to a cashless exercise), provided there is a full deduction of the number of underlying Common Shares from the Share Compensation Plan’s reserve.
Vesting Provisions for Options
The Share Compensation Plan provides that the Administrators may determine, in accordance with minimum vesting requirements of the CSE, the vesting criteria applicable to any Options, when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option agreement will disclose any vesting conditions prescribed by the Administrators.
| 80 |
Termination, Retirement and Other Cessation of Employment in connection with Options
A person participating in the Share Compensation Plan will cease to be eligible to participate where there is an Event of Termination. In such circumstances, unless otherwise determined by the Administrators in their discretion, any unvested Options will be automatically cancelled, terminated and not available for exercise and any vested Options may be exercised only before the earlier of: (i) the expiry of the Option; and (ii) six months after the date of the Event of Termination. If a person is terminated for just cause, all Options (whether or not then exercisable) will be automatically cancelled.
Other Terms
The Administrators will determine the exercise price and term/expiration date of each Option, provided that the exercise price in respect of that Option shall not be less than the Market Price on the date of grant. “Market Price” is defined in the Share Compensation Plan, as of any date, the price of the Common Shares determined as follows: (A) if the Common Shares are listed on any exchange, the Market Price will be the closing price of the Common Shares on such exchange for the last market trading day prior to the date of grant of the Option. Notwithstanding the foregoing, in the event that the Common Shares are listed on the CSE, for the purposes of establishing the exercise price of any Options, the Market Price shall not be lower than the greater of the closing market price of the Subordinate Voting Shares on the CSE on (i) the trading day prior to the date of grant of the Options, and (ii) the date of grant of the Options; or (B) in the absence of an established market for the Common Shares, the Market Price shall be determined in good faith by the Administrators.
No Option shall be exercisable after ten years from the date the Option is granted. Under the Share Compensation Plan, should the term of an Option expire on a date that falls within a blackout period or within nine business days following the expiration of a blackout period, such expiration date will be automatically extended to the tenth business day after the end of the blackout period.
Unless otherwise determined by the Board, in the event of a change of control, any surviving or acquiring corporation shall assume any Option outstanding under the Share Compensation Plan on substantially the same economic terms and conditions or substitute or replace similar options for those Options outstanding under the Share Compensation Plan on substantially the same economic terms and conditions.
| 4. | Transferability |
RSUs awarded and Options granted under the Share Compensation Plan or any rights of a Participant cannot be transferred, assigned, charged, pledged or hypothecated, or otherwise alienated, whether by operation of law or otherwise.
| 5. | Reorganization and Change of Control Adjustments |
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may make such changes or adjustments, if any, as they consider fair or equitable, to reflect such change or event including adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto.
| 81 |
| 6. | Amendment Provisions in the Share Compensation Plan |
The Board may amend the Share Compensation Plan or any RSU or Option at any time without the consent of any Participant provided that such amendment shall: (i) not adversely alter or impair any RSU previously awarded or any Option previously granted, except as permitted by the adjustment provisions of the Share Compensation Plan and with respect to RSUs and Options of US Participants, such amendment will not result in the imposition of taxes under Section 409A of the U.S. Internal Revenue Code of 1986; (ii) be subject to any regulatory approvals including, where required, the approval of the CSE; and (iii) be subject to shareholder approval, where required, by the requirements of the CSE, provided that shareholder approval shall not be required for the following amendments:
| (a) | amendments of a “housekeeping nature”, including any amendment to the Share Compensation Plan or a RSU or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority, stock exchange or quotation system and any amendment to the Share Compensation Plan or a RSU or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein; |
| (b) | amendments that are necessary or desirable for RSUs or Options to qualify for favourable treatment under any applicable tax law; |
| (c) | amendments to the vesting provisions of any RSU or any Option (including any alteration, extension or acceleration thereof), providing such amendments do not adversely alter or impair such RSU or Option; |
| (d) | amendments to the termination provisions of any Option (e.g., relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date (as such date may be extended by virtue of a blackout period) providing such amendments do not adversely alter or impair such Option; |
| (e) | amendments to the Share Compensation Plan that would permit the Company to retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares for such persons, instead of issuing Common Shares from treasury upon the vesting of the RSUs; |
| (f) | amendments to the Share Compensation Plan that would permit the Company to make lump sum cash payments to Participants, instead of issuing Common Shares from treasury upon the vesting of the RSUs; and |
| (g) | the amendment of the cashless exercise feature set out in the Share Compensation Plan. |
For greater certainty, shareholder approval will be required in circumstances where an amendment to the Share Compensation Plan would: (i) increase the fixed maximum percentage of issued and outstanding Common Shares issuable under the Share Compensation Plan, other than by virtue of the adjustment provisions in the Share Compensation Plan, or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares; (ii) increase the limits referred to above under “Restrictions on the Award of RSUs and Grant of Options”; (iii) reduce the exercise price of any Option (including any cancellation of an option for the purpose of reissuance of a new option at a lower exercise price to the same person); (iv) extend the term of any Option beyond the original term (except if such period is being extend by virtue of a blackout period); or (v) amend the amendment provisions of the Share Compensation Plan.
Employment, Consulting and Management Agreements
The material terms of the employment, consulting and management agreements of the Company are described in the footnotes of the table under the heading “Executive Compensation - Compensation of Named Executive Officers” and as set forth below. Except as disclosed below, as of June 30, 2022, there were no provisions in any contract, agreement, plan or arrangement that provide for payments to a NEO or director at, following, or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control in the Company or a change in the NEO’s responsibilities, except for the minimum required payments under employment standards legislation.
| 82 |
Dr. Richard Lu
Subsequent to June 30, 2022, the Consulting Agreement with LVC provides for six months’ written notice of termination without cause to LVC. In the event of a “Change of Control”, if LVC is terminated or LVC terminates the Consulting Agreement for “Good Reason”, LVC is entitled to a payment equal to two years’ consulting fees.
For the purposes of the Consulting Agreement:
| ● | “Change of Control” will be deemed to have occurred if a transaction results in: (i) the sale of all or substantially all of the Company’s assets; or the Company having a new “Control Person”, where “Control Person” means: a person who holds sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of the Company to affect materially the control of the Company; or a person, or combination of persons, who holds more than 35% of the voting rights attached to all outstanding voting securities of the Company, unless there is evidence that that person or combination of persons does not hold a sufficient number of the voting rights to control the Company. |
| ● | “Good Reason” shall be defined as, without the consultant’s written consent, the occurrence of any of the following circumstances: (i) reduction by the Company in the consulting fee; (ii) the failure of the individual to be appointed or re-appointed to the position of Chief Executive Officer of the Company; (iii) a material diminution in the consultant’s duties or the assignment to the consultant of any duties inconsistent with his position and status as Chief Executive Officer of the Company; (iv) a change in the consultant’s reporting relationship such that the consultant no longer reports directly to the Board of Directors of the Company; or (v) a relocation of place of work more than 50 kilometers from the Company’s head office at the relevant time. |
Andrew van Doorn
Subsequent to June 30, 2022, the employment agreement with Mr. van Doorn provides for twelve months’ written notice of termination without cause to Mr. van Doorn. The employment agreement with Mr. van Doorn does not provide for any additional entitlements on a change of control of the Company.
Sam Sun
Subsequent to June 30, 2022, the employment agreement with Mr. Sun provides for written notice of termination without cause to Mr. Sun by providing the minimum notice required under the Employment Standards Act, 2000 (Ontario). The employment agreement with Mr. Sun does not provide for any additional entitlements on a change of control of the Company.
Tracy Zheng
Effective February 1, 2021 Ms. Zheng, through her personal company The Phoenix Trendz Inc., entered into a consulting agreement with the Company. The consulting agreement provides for one month’s written notice of termination without cause to The Phoenix Trendz Inc. The consulting agreement with The Phoenix Trendz Inc. does not provide for any additional entitlements on a change of control of the Company.
Oversight and Description of Director and NEO Compensation
The purpose of this discussion is to provide information about the Company’s executive compensation objectives and processes and to discuss compensation decisions relating to its NEOs listed in the Summary Compensation Table set out above. In accordance with applicable securities legislation, the Company currently has four Named Executive Officers; being Richard Lu, Chief Executive Officer; Sam Sun, Chief Financial Officer; Andrew van Doorn, Chief Operating Officer and Tracy Zheng, Chief Administrative Officer.
| 83 |
The Board assumes responsibility for reviewing and monitoring the long-range compensation strategy for the senior management of the Company although the Compensation Committee guides it in this role. In determining executive compensation, the Board considers the Company’s financial circumstances at the time decisions are made regarding executive compensation, and also the anticipated financial situation of the Company in the mid and long-term.
Compensation Objectives and Principles
The compensation program for the senior management of the Company is designed to ensure that the level and form of compensation achieves certain objectives, including:
| (a) | attracting and retaining qualified executives; |
| (b) | motivating the short and long-term performance of these executives; and |
| (c) | better aligning their interests with those of the Company’s shareholders. |
In compensating its senior management, the Company has employed a combination of base salary, bonus compensation and equity participation through its Share Compensation Plan. The Company does not provide any retirement benefits for its directors or officers.
Elements of Compensation
Base Salary
In the Board’s view, paying base salaries which are reasonable in relation to the level of service expected while remaining competitive in the markets in which the Company operates is a first step to attracting and retaining qualified and effective executives. Competitive salary information on comparable companies within the Company’s industry is compiled from a variety of sources, including national and international publications.
Bonus Incentive Compensation
The Board will consider executive bonus compensation dependent upon the Company meeting its strategic objectives and milestones and sufficient cash resources being available for the granting of bonuses.
Equity Participation
The Company believes that encouraging its executives and employees to become shareholders is the best way of aligning their interests with those of its shareholders. Equity participation is accomplished through the Company’s Share Compensation Plan (as described herein). RSUs and Options may be granted to executives and employees taking into account a number of factors, including the amount and term of options previously granted, base salary and bonuses and competitive factors. The amounts and terms of RSUs and Options granted are determined by the Board.
Compensation Risks
The Board is keenly aware of the fact that compensation practices can have unintended risk consequences. The Board will continually review the Company’s compensation policies to identify any practice that might encourage an employee to expose the Company to unacceptable risk. At the present time the Board is satisfied that the current executive compensation program does not encourage the executives to expose the business to inappropriate risk. The Board takes a conservative approach to executive compensation rewarding individuals for the success of the Company once that success has been demonstrated and incenting them to continue that success through the grant of long-term incentive awards.
| 84 |
Hedging Policy
The Company has no policy on whether an NEO or director is permitted to purchase certain financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars or units of exchange funds which are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director.
Compensation Process
In establishing compensation for executive officers, the Board as a whole seeks to accomplish the following goals:
| ● | to recruit and subsequently retain highly qualified executive officers by offering competitive compensation and benefits; |
| ● | to motivate executives to achieve important corporate and personal performance objectives and reward them when such objectives are met; and |
| ● | to align the interests of executive officers with the long-term interests of shareholders through participation in the Company’s Share Compensation Plan. |
When considering the appropriate executive compensation to be paid to our officers, the Board have regard to a number of factors including: (i) recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and the Company’s shareholders; (iv) rewarding performance, both on an individual basis and with respect to operations generally; and (v) available financial resources.
RSU and Option-Based Awards
Long-term incentives in the form of RSUs and Options are intended to align the interests of our directors and executive officers with those of the Company’s Shareholders and to provide a long-term incentive to reward those individuals for their contribution to the generation of shareholder value, while reducing the burden of cash compensation that would otherwise be payable by the Company.
The Share Compensation Plan is administered by the Board. In determining the number of incentive RSUs or Options to be granted to the Named Executive Officers, the Board has regard to several considerations including previous grants of RSUs and Options and the overall number of outstanding RSUs and Options relative to the number of outstanding Common Shares, as well as the degree of effort, time, responsibility, ability, experience and level of commitment of the executive officer.
Director Compensation
During the fiscal year ended June 30, 2022, the Company had no formal director compensation program. No cash compensation was paid to the directors of the Company in their capacity as directors during the financial year ended June 30, 2022. During the year ended June 30, 2022, no stock options were granted to a director.
Pension
The Company does not have any form of pension plan that provides for payments or benefits to the NEO at, following, or in connection with retirement. The Company does not have any form of deferred compensation plan.
Changes Subsequent to Year-End
Except as otherwise disclosed herein, there have been no significant changes made to the Company’s compensation policies subsequent to the financial year ended June 30, 2022.
| 85 |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As at the date of this Prospectus, none of the directors and executive officers of the Company or Associates of such persons is indebted to the Company or another entity where the indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company.
AUDIT COMMITTEE
Audit Committee Charter
The full text of the charter of the Audit Committee is attached as Schedule “B” to this Prospectus.
Composition of the Audit Committee
Pursuant to applicable laws, the Company is required to have an audit committee comprised of at least three directors, all of whom must not be officers or employees of the Company or an affiliate of the Company.
The following are the members of the Audit Committee effective on the Listing Date:
Member |
Independence(1) |
Financially Literacy | ||
| Paul Pasalic | Independent | Yes | ||
| Paul Sparkes | Independent | Yes | ||
| Olen Aasen | Not Independent | Yes |
Note:
| (1) | Within the meaning of National Instrument 52-110 - Audit Committees (“NI 52-110”). |
Relevant Education and Experience
All members of the Audit Committee have a broad understanding of the accounting principles that are applied to the preparation of financial statements. All members of the Audit Committee are financially literate in accordance with NI 52-110. For details regarding the education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as an Audit Committee member, see “Directors and Executive Officers”.
Mandate and Responsibilities of the Audit Committee
The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and reporting practices of the Company, and such other duties as directed by the Board. The Audit Committee’s purpose is to oversee the accounting and financial reporting processes of the Company, the audits of the Company’s financial statements, the qualifications of the public accounting firm engaged as the Company’s independent auditor to prepare or issue an audit report on the financial statements of the Company and internal control over financial reporting, and the performance of the Company’s internal audit function and independent auditor. The Audit Committee reviews and assesses the qualitative aspects of financial reporting to shareholders, the Company’s processes to manage business and financial risk, and compliance with significant applicable legal, ethical, and regulatory requirements. The Audit Committee is directly responsible for the appointment (subject to shareholder ratification), compensation, retention, and oversight of the independent auditor.
The Audit Committee meets at least twice a year. Additional meetings may occur as the Audit Committee or its chair deems advisable.
Audit Committee Oversight
At no time since July 1, 2021 was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.
| 86 |
Pre-Approval Policies and Procedures
The Audit Committee is required to approve the engagement of the Company’s external auditors in respect of non-audit services.
External Auditor Service Fees (By Category)
The Audit Committee has reviewed the nature and amount of the non-audit services provided by MSLL CPA LLP, Chartered Professional Accountants to ensure auditor independence. The following table sets out the aggregate fees billed by MSLL CPA LLP for fiscal years indicated and for each category of fees described:
| Time Period | Audit Fees(1) | Audit Related Fees(2) | Tax Fees(3) | All Other Fees(4) | ||||||
| Fiscal year ended June 30, 2022 | $ | 61,000 | Nil | Nil | Nil | |||||
| Fiscal year ended June 30, 2021 | $ | 60,622 | Nil | Nil | Nil | |||||
Notes:
| (1) | “Audit Fees” includes fees necessary to perform the annual audit and quarterly reviews of the Company’s financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits. |
| (2) | “Audit-Related Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation. |
| (3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities. |
| (4) | “All Other Fees” include all other non-audit services. |
CORPORATE GOVERNANCE
The Board believes that good corporate governance improves corporate performance and benefits all shareholders. On June 30, 2005, the Canadian Securities Administrators enacted National Policy 58-201 – Corporate Governance Guidelines (the “Governance Policy”) and National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”). The Governance Policy provides guidelines on corporate governance practices while NI 58-101 requires Canadian reporting Companies to disclose their corporate governance practices in accordance with the disclosure items set out in Form 58-101F1 or Form 58-101F2.
The Company has reviewed its own corporate governance practices in light of the guidelines contained in the Governance Policy. Set out below is a description of the Company’s corporate governance practices as required to be disclosed by NI 58-101. As the Company is an “IPO venture issuer” it is disclosing its corporate governance practices in accordance with the disclosure items set out in Form 58-101F2.
Board of Directors
At the date of this Prospectus and the Listing Date, the Board consists of four directors, two of whom Paul Pasalic and Paul Sparkes are independent. Dr. Richard Lu is the Chief Executive Officer of the Company and therefore not independent. Mr. Olen Aasen is expected to be appointed as General Counsel of the Company and receive consulting fees and therefore is not independent.
Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.
| 87 |
The Board facilitates independent supervision of management through meetings of the Board and through frequent informal discussions among independent members of the Board and management. In addition, the Board has access to the Company’s external auditors, legal counsel and to any of the Company’s officers.
The Board has a stewardship responsibility to supervise the management of and oversee the conduct of the business of the relevant company, provide leadership and direction to management, evaluate management, set policies appropriate for the business of the Company and approve corporate strategies and goals.
The day-to-day management of the business and affairs of the Company is delegated by the Board to the senior officers of the Company. The Board will give direction and guidance through the President to management and will keep management informed of its evaluation of the senior officers in achieving and complying with goals and policies established by the Board.
The Board exercises its independent supervision over management by its policies that (a) periodic meetings of the Board be held to obtain an update on significant corporate activities and plans; and (b) all material transactions of the Company are subject to prior approval of the Board. To facilitate open and candid discussion among its independent directors, such directors are encouraged to communicate with each other directly to discuss ongoing issues pertaining to the Company.
Directorships
Currently, the following directors serve on the following boards of directors of other public companies:
Name of Director, Officer or Promoter |
Name of Reporting Issuer | |
| Richard Lu | dynaCERT Inc.
Alkaline Fuel Cell Power Corp | |
| Olen Aasen | Draganfly Inc.
The Good Flour Corp. | |
| Paul Pasalic | None | |
| Paul Sparkes | The Good Flour Corp.
Antler Gold Inc.
Denarius Silver Corp. |
Orientation and Continuing Education
New directors will participate in a formal orientation program regarding the role of the Board, the Audit Committee, and its directors, and the nature and operations of the Company’s business. Members of the Board will be encouraged to communicate with management of the Company, external legal counsel and auditors, and other external consultants to educate themselves about the Company’s business, the industry, and applicable legal and regulatory developments.
Ethical Business Conduct
The Company intends to adopt a written Code of Business Conduct and Ethics for the Company’s directors, officers and employees after the closing of the Offering. Written copies of the Code will be available from the Company upon request. The Board will monitor compliance with the Code by receiving reports from management as to any actual or alleged violations, as appropriate. In accordance with the provisions of the Code and applicable corporate law, any director or executive officer who holds a material interest in a proposed transaction or agreement involving the Company will be required to disclose that interest to the Board and abstain from voting on approval of such transactions as appropriate.
| 88 |
Nomination of Directors
The Board as a whole is responsible for the annual (or as required) identification and recruitment of individuals qualified to become new Board members and for recommending to the Board of Directors, new director nominees for the Company’s annual general meetings of shareholders. A set of formal directors’ nomination guidelines has not yet been adopted for the identification of new candidates for Board positions. However, the Company intends to establish guidelines to include the specific qualifications required of a potential candidate. The Board is responsible for reviewing a potential candidate’s qualifications, interviewing the potential candidate and evaluating the potential candidate’s suitability for Board membership. An invitation to join the Board is made only where Board consensus regarding the proposed candidate is obtained.
Compensation
Further details about the Company’s compensation practices are disclosed in the Company’s Statement of Executive Compensation for the year ended June 30, 2022 which is disclose under “Statement of Executive Compensation”.
Other Board Committees
The Company does not have any standing committees other than the Audit Committee.
Assessments
The Board will monitor the adequacy of information given to directors, communication between the Board and management and the strategic direction and processes of the Board and committees. On an ongoing annual basis, the Board will assess the performance of the Board as a whole, each of the individual directors and each committee of the Board in order to satisfy itself that each is functioning effectively.
Insider Trading Policy
The Company has established a Confidentiality and Disclosure Policy which is attached as Schedule “C” to this Prospectus and an Insider Trading and Reporting Policy which is attached as Schedule “D” to this Prospectus. The Insider Trading and Reporting Policy provided for trading black-out periods. Currently a trading black-out will be imposed beginning thirty (30) days prior to the scheduled release of financial results for a fiscal quarter or a fiscal year until the second trading day after the financial results have been disclosed by the Company. Trading black-out periods may also be prescribed from time to time as a result of special circumstances relating to the Company.
PLAN OF DISTRIBUTION
Pursuant to the Agency Agreement, the Company has appointed the Agent to act as its agent to offer for sale to the public, on a “commercially reasonable best efforts” basis, the Offered Shares at the Offering Price for aggregate gross proceeds of up to $5,250,000 as provided in this Prospectus if, as and when issued by the Company and accepted by the Agent in accordance with the terms of the Agency Agreement, subject to compliance with all necessary legal requirements and to the conditions of the Agency Agreement. The Company has also granted the Agent the Over-Allotment Option, exercisable, in whole or in part, at the sole discretion of the Agent, at any time up to 48 hours prior to the Closing Date, to arrange for the sale of up to 1,050,000 Additional Shares, at the Offering Price per Additional Share to cover the Agent’s over-allocation position, if any.
Prior to the Offering, there was no public market for the Common Shares. The Offering Price was determined by arm’s length negotiation between the Company and the Agent, and bears no relationship to earnings, book value or other valuation criteria.
| 89 |
The Company’s directors, officers, employees and other investors who have an existing relationship with the Company may purchase Offered Shares pursuant to the Offering.
The Agent may form a selling group including other qualified investment dealers and determine the fee payable to the members of such group, which fee will be paid by the Agent out of its fees. The obligation to pay the sub-agency fee is an obligation of the Agent and the Company is not responsible for ensuring that any dealer receives this payment from the Agent.
The obligations of the Agent under the Agency Agreement are conditional and may be terminated in their sole discretion on the basis of their assessments of the state of the financial markets, their satisfaction with the results of their due diligence investigations and in certain other stated circumstances. While the Agent has agreed to use their “commercially reasonable efforts” to sell the Offered Shares, the Agent is not obligated to purchase any Offered Shares not sold.
Under applicable securities laws in Canada, certain persons and individuals, including the Company, and the Agent, have statutory liability for any misrepresentation in this Prospectus, subject to available defences. Under the Agency Agreement, the Company has agreed to indemnify and save harmless the Agent, its affiliates, directors, officers, employees, agents and shareholders against certain liabilities, including civil liabilities under the Canadian provincial securities legislation, and to contribute to any payments the Agent may be required to make in respect thereof.
Subscriptions for the Offered Shares will be received subject to rejection or allotment in whole or in part and the Agent reserve the right to close the subscription books at any time without notice. All subscription funds received by the Agent will be held in trust, pending the closing of the Offering. If the Offering has not closed on or before 90 days from the issuance of a receipt for the final prospectus, or if a receipt has been issued for an amendment to the final prospectus, within 90 days of the issuance of such receipt and in any event within 180 days from the date of receipt of the final prospectus, the Offering will be discontinued and all subscription monies will be returned to purchasers by the Agent without interest or deduction.
There is currently no market through which the Offered Shares may be sold. This may affect the pricing of the Offered Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. See “Risk Factors”. The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023.
In connection with the Offering, the Agent or certain securities dealers may distribute the Prospectus electronically.
On Closing, assuming the maximum Offering and no exercise of the Over-Allotment Option, the Company expects to have a total of 25,500,000 Common Shares issued and outstanding on a non-diluted basis and, if the Over-Allotment Option is exercised in full, a total of 26,550,000 Common Shares issued and outstanding on a non-diluted basis.
The Offering is being made in Alberta, British Columbia and Ontario. The Offered Shares will be offered in Alberta, British Columbia and Ontario through the Agent or its affiliates who are registered to offer the Offered Shares for sale in such provinces and such other registered dealers as may be designated by the Agent. Subject to applicable law, the Agent may offer the Offered Shares outside of Canada.
As at the date of the prospectus, the Company does not have any of its securities listed or quoted, has not applied to list or quote any of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., a U.S. marketplace, or a marketplace outside of Canada and the United States of America (other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc).
Certificates
Other than pursuant to certain exceptions, it is expected that one or more global certificates for the Offered Shares distributed by this Prospectus will be issued in registered and definitive form to CDS and will be deposited with CDS on the Closing Date. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares are purchased.
| 90 |
Commissions and Expenses
The Company has agreed to pay the Agent’s Fee equal to 6.0% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option, if any). The Company has also agreed to pay to the Agent the Corporate Finance Fee of $35,000.00, plus applicable taxes, payable in cash, of which $20,000.00 has been prepaid. As additional compensation, the Company has agreed to grant to the Agent Broker Warrants that will entitle the Agent to purchase that number of Broker Warrant Shares equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option), at the Offering Price per Broker Warrant, for a period of 36 months following the Closing Date. This Prospectus qualifies the distribution of the Broker Warrants.
RISK FACTORS
Investing in the Company involves significant risks. An investor should carefully consider the risks described below. The risks and uncertainties described below are those that the Company currently believes to be material, but they are not the only ones that the Company faces. If any of the following risks, or any other risks and uncertainties that the Company has not yet identified or that the Company currently consider not to be material, actually occur or become material risks, the Company’s business, prospects, financial condition, results of operations and cash flows could be materially and adversely affected. In that event, the market price of the Company could decline and an investor could lose part or all of such investor’s investment.
Risks Related to Our Company and Our Industry
The Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings.
Our business is affected by conditions in the solar power market and industry. We believe that the solar power market and industry may from time to time experience oversupply. When this occurs, many solar power project developers and solar system installers, may be adversely affected.
The solar power market is still at a relatively early stage of development, and future demand for solar power products and services is uncertain. Market data for the solar power industry is not as readily available as for more established industries, where trends are more reliably assessed from data gathered over a longer period of time. In addition, demand for solar power products and services in our largest end markets, including the U.S, may not develop or may develop to a lesser extent than we anticipate. Many factors may affect the viability of solar power technology and the demand for solar power products, including:
| ● | the cost-effectiveness, performance and reliability of solar power products and services compared to conventional and other renewable energy sources and products and services; |
| ● | the availability of government incentives to support the development of the solar power industry; |
| ● | the availability and cost of capital, including long-term debt and tax equity, for solar projects; |
| ● | the success of other alternative energy technologies, such as wind power, hydroelectric power, clean hydrogen, geothermal power and biomass fuel; |
| ● | fluctuations in economic and market conditions that affect the viability of conventional and other renewable energy sources, such as increases or decreases in the prices of oil, gas and other fossil fuels; |
| ● | capital expenditures by end users of solar power products and services, which tend to decrease when the economy slows; and |
| ● | the availability of favorable regulation for solar power within the electric power industry and the broader energy industry. |
| 91 |
If solar power technology is not suitable for widespread adoption or if sufficient demand for solar products and services does not develop or takes longer to develop than we anticipate, our revenues may suffer and we may be unable to sustain our profitability.
The execution of our growth strategy depends upon the continued availability of third-party financing arrangements for us and our customers, which is affected by general economic conditions. Tight credit markets could depress demand or prices for solar power products and services, hamper our expansion and materially affect our results of operations.
Most solar projects require financing for development and construction with a mixture of equity and third-party funding. The cost of capital affects both the demand and price of solar power systems. A high cost of capital may materially reduce the internal rate of return for solar projects.
Furthermore, solar projects compete for capital with other forms of fixed income investments such as government and corporate bonds. Some classes of investors compare the returns of solar projects with bond yields and expect a similar or higher internal rate of return, adjusted for risk and liquidity. Higher interest rates could increase the cost of existing funding and present an obstacle for future funding that would otherwise spur the growth of the solar power industry. In addition, higher bond yields could result in increased yield expectations for solar projects, which would result in lower system prices. In the event that suitable funding is unavailable, our customers may be unable to pay for services they have agreed to purchase and we may be unable to develop our own solar power projects. It may also be difficult to collect payments from customers facing liquidity challenges due to either customer defaults or financial institution defaults on project loans. Constricted credit markets may impede our expansion plans and materially and adversely affect our results of operations. The cash flow of a solar power project may be derived from government-funded or government-backed Feed-In Tariffs (“FITs”). Consequently, the availability and cost of funding solar projects is determined in part based on the perceived sovereign credit risk of the country where a particular project is located.
In light of the uncertainty in the global credit and lending environment, we cannot make assurances that financial institutions will continue to offer funding to solar project developers at reasonable costs. An increase in interest rates or a decrease in funding of capital projects within the global financial market could make it difficult to fund solar power systems and potentially reduce the demand for solar projects, which may materially and adversely affect our business, results of operations, financial condition and prospects.
Our future success depends partly on our ability to expand the pipeline of our energy business in several key markets, which exposes us to a number of risks and uncertainties.
Historically, our provision of solar power project development services have accounted for the majority of our net revenues. While we plan to continue to monetize our current portfolio of solar projects in operation, we also intend to grow our energy business by developing and selling or operating more solar projects, including those that we develop and those that we acquire from third parties. As we do, we will be increasingly exposed to the risks associated with these activities. Further, our future success largely depends on our ability to expand our solar project pipeline. The risks and uncertainties associated with our energy business, and our ability to expand our solar project pipeline, include:
| ● | the uncertainty of being able to sell the projects, receive full payment for them upon completion, or receive payment in a timely manner; |
| ● | the need to raise significant additional funds to develop greenfield or purchase late stage solar projects, which we may be unable to obtain on commercially reasonable terms or at all; |
| ● | delays and cost overruns as a result of a number of factors, many of which are beyond our control, including construction and procurement price inflation, delays in regulatory approvals, grid connection, supply chain of our suppliers or availability of components, construction and installation, and customer acceptance testing; |
| ● | delays or denial of required regulatory approvals by relevant government authorities, as a result of, among others, poor management of permitting process, including lack or resources and opaqueness of administrative measures; |
| ● | diversion of significant management attention and other resources; and |
| ● | failure to execute our project pipeline expansion plan effectively. |
| 92 |
If we are unable to successfully expand our energy business, and, in particular, our solar project pipeline, we may be unable to expand our business, maintain our competitive position, improve our profitability and generate cash flows.
Governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for our products to decline.
Historically, the market for on-grid applications, where solar power supplements the electricity a customer purchases from the utility network or sells to a utility under a FIT, depends largely on the availability and size of government subsidy programs and economic incentives. Until recently, the cost of solar power exceeded retail electricity rates in many locations. Government incentives vary by geographic market. Governments in many countries provided incentives in the form of FITs, rebates, tax credits, renewable portfolio standards, auctions for Contracts for Difference, Feed-in Premium and other incentives. These governments implemented mandates to end-users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. However, these government mandates and economic incentives in many markets either have been or are scheduled to be reduced or eliminated altogether, and it is likely that eventually incentives for solar and alternative energy technologies will be phased out completely. Over the past few years, the cost of solar energy has declined, and the industry has become less dependent on government incentives. However, governments in some of our largest markets, including the United States, have expressed their intention to continue supporting various forms of “green” energies, including solar power, as part of broader policies towards the reduction of carbon emissions. The governments in many of our largest markets, including the United States, continue to provide incentives and policy support schemes for investments in solar power that will directly benefit the solar industry. We believe that the near-term growth of the market partially depends on the availability and size of such government incentives.
While solar projects may continue to offer attractive internal rates of return, it is unlikely that these rates will be as high as they were in the past. If internal rates of return fall below an acceptable rate for project investors, and governments continue to reduce or eliminate incentives for solar power, this may cause a decrease in demand and considerable downward pressure on solar systems and therefore negatively impact the value of solar projects. The reduction, modification or elimination of government incentives in one or more of our markets could therefore materially and adversely affect the growth of such markets or result in increased price competition, either of which could cause our revenues to decline and harm our financial results.
General global economic conditions may have an adverse impact on our operating performance and results of operations.
The demand for solar products and services is influenced by macroeconomic factors, such as global economic conditions (e.g. interest rates, foreign exchange rates and inflation), demand for electricity, supply and prices of other energy products, such as oil, coal and natural gas, as well as government regulations and policies concerning the electric utility industry, clean and other alternative energy industries and the environment. As a result of global economic conditions, some governments may implement measures that reduce the FITs and other incentives designed to benefit the solar industry. A decrease in solar power tariffs or wholesale electricity in many markets placed downward pressure on the price of solar power in those and other markets. In addition, reductions in oil and coal prices may reduce the demand for and the prices of solar power products and services. Our growth and profitability depend on the demand for and the prices of solar power products and services. If we experience negative market and industry conditions and demand for solar power products and services weakens as a result, our business and results of operations may be adversely affected.
Our project development and construction activities may not be successful, projects under development may not receive required permits, property rights, EPC agreements, interconnection and transmission arrangements, and financing or construction of projects may not commence or continue as scheduled, all of which could increase our costs, delay or cancel a project, and have a material adverse effect on our revenue and profitability.
The development and construction of solar projects involve known and unknown risks, many of which are not under our sole control. For example, we may be required to invest significant amounts of money for land and interconnection rights, preliminary engineering and permitting and may incur legal and other expenses before we can determine whether a project is feasible; we may also need to engage and rely on third parties including, but not limited to, contractors and consultants. Success in developing a particular project is contingent upon, among other things:
| ● | securing land rights and related permits, including satisfactory environmental assessments; |
| 93 |
| ● | receipt of required land use and construction permits and approvals; |
| ● | receipt of rights to interconnect to the electric grid; |
| ● | availability of transmission capacity, potential upgrade costs to the transmission grid and other system constraints; |
| ● | payment of interconnection and other deposits (some of which are non-refundable); |
| ● | negotiation of satisfactory EPC agreements; |
| ● | obtaining construction financing, including debt, equity and tax credits; and |
| ● | timely and satisfactory execution and performance by the third parties that we engage. |
In addition, successful completion of a particular project may be adversely affected by numerous factors, including:
| ● | changes in laws, regulations and policies and shifts in trade barriers and remedies, especially tariffs; |
| ● | delays in obtaining and maintaining required governmental permits and approvals; |
| ● | potential challenges from local residents, environmental organizations, and others who may not support the project; |
| ● | unforeseen engineering problems; subsurface land conditions; construction delays; cost over-runs; labor, equipment and materials supply shortages or disruptions (including labor strikes); |
| ● | failure to enter into PPAs on terms favorable to us, or at all; |
| ● | additional complexities when conducting project development or construction activities in foreign jurisdictions, including compliance with applicable U.S. or local laws and customs; and |
| ● | force majeure events, including adverse weather conditions, pandemics, supply chain disruptions, hostilities and other events beyond our control. |
If we are unable to complete the development of a solar project or we fail to meet any agreed upon system level capacity or energy output guarantees or warranties or other contract terms, or our projects cause grid interference or other damage, the EPC, the PPA or other agreements related to the project may, depending on the specific terms of the agreements, be terminated and/or we may be subject to significant damages, penalties and other obligations relating to the project, including obligations to repair, replace or supplement materials for the project.
We may enter into fixed-price EPC agreements in which we act as the general contractor for our customers in connection with the installation of their solar power projects. All essential costs are estimated at the time of entering into the EPC agreement for a particular project, and these costs are reflected in the overall fixed price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us and the subcontractors, suppliers and other parties involved in the project. In addition, we require qualified, licensed subcontractors to install most of our solar power and battery storage systems. Shortages of components (which may be attributable to the shortage of raw materials or components) or skilled labor could significantly delay a project or otherwise increase our costs. Should miscalculations in planning a project occur, including those due to unexpected increases in commodity prices or labor costs, or delays in execution occur and we are unable to increase the EPC sales price commensurately, we may not achieve our expected margins or our results of operations may be adversely affected.
| 94 |
Developing and operating solar projects exposes us to various risks.
The development of solar projects can take many months or years to complete and may be delayed for reasons beyond our control. It often requires us to make significant up-front payments for, among other things, land rights, interconnection work and permitting in advance of commencing construction, and revenue from these projects may not be recognized for several additional months following contract signing. Any inability or significant delays in entering into sales contracts with customers after making such up-front payments could adversely affect our business and results of operations. Furthermore, we may become constrained in our ability to simultaneously fund our other business operations and invest in other projects.
Developing solar projects requires significant management attention to negotiate the terms of our engagement and monitor the progress of the projects which may divert management’s attention from other matters. Our revenue and liquidity may be adversely affected to the extent the market for solar projects weakens or we are not able to successfully complete the customer acceptance testing due to technical difficulties, equipment failure, or adverse weather, and we are unable to sell our solar projects at prices and on terms and timing that are acceptable to us.
Our energy business also includes operating solar projects and selling electricity to the local or national grid or other power purchasers. As a result, we are subject to a variety of risks associated with intense market competition, changing regulations and policies, insufficient demand for solar or power, technological advancements and the failure of our power generation facilities.
We face a number of risks involving PPAs and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms such as price adjustment, termination, buy-out, acceleration and other clauses, all of which could materially and adversely affect our energy business, financial condition, results of operations and cash flows.
We may not be able to enter into PPAs for our future solar projects due to intense competition, increased supply of electricity from other sources, reduction in wholesale electricity prices, changes in government policies or other factors. There is a limited pool of potential buyers for electricity generated by solar power plants since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions. The willingness of buyers to purchase electricity from an independent power producer may be based on a number of factors and not solely on pricing and surety of supply. Failure to enter into PPAs on terms favorable to us, or at all, would negatively impact our revenue and our decisions regarding the development of power plants. We may experience delays in entering into PPAs for some of our solar projects or may not be able to replace an expiring PPA with a contract on equivalent terms and conditions, or otherwise at prices that permit operation of the related facility on a profitable basis. Any delay in entering into PPAs may adversely affect our ability to finance project construction and to enjoy the cash flows generated by such projects. If we are unable to replace an expiring PPA with an acceptable new PPA, the affected site may temporarily or permanently cease operations, or could be exposed to more uncertain merchant or wholesale electricity pricing, which could materially and adversely affect our financial condition, results of operations and cash flows.
Substantially all of the electric power generated by our solar projects is expected to be sold under long-term PPAs with public utilities, licensed suppliers, corporate offtakers, and commercial, industrial or government end users. Despite possible future alternatives, we expect a substantial number of our future projects to also have long-term PPAs or similar offtake arrangements such as FIT programs. If, for any reason, any of the purchasers of power under these contracts are unable or unwilling to fulfill their related contractual obligations, they refuse to accept delivery of the power delivered thereunder or they otherwise terminate them prior to their expiration, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. Further, to the extent any of our power purchasers are, or are controlled by, governmental entities, our facilities may be subject to legislative or other political action that may impair their contractual performance or contain contractual remedies that do not provide adequate compensation in the event of a counterparty default.
PPAs may be subject to price adjustments over time. If the price under any of our PPAs is reduced below a level that makes a project economically viable, our financial conditions, cash flow and results of operations could be materially and adversely affected. Additionally, certain of the projects that we may acquire in the future may allow, the lenders or investors to accelerate the repayment of the financing arrangement in the event that the related PPA is terminated or if certain operating thresholds or performance measures are not achieved within specified time periods.
We are subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where we do business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity, which may significantly reduce demand for our products and services or otherwise adversely affect our financial performance.
We are subject to a variety of laws and regulations in the markets where we do business, some of which may conflict with each other and all of which are subject to change. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. We also face trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
| 95 |
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation, and could deter further investment in the research and development of alternative energy sources as well as customer purchases of solar power and battery storage technology, which could result in a significant reduction in the potential demand for our solar power services, solar projects and solar electricity.
We expect that our solar power products and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. Any new regulations or policies pertaining to solar power products may result in significant additional expenses to us and our customers, which could cause a significant reduction in demand for our solar power and battery storage products.
In our energy business, we are subject to numerous national, regional and local laws and regulations. Changes in applicable energy laws or regulations, or in the interpretations of these laws and regulations, could result in increased compliance costs or the need for additional capital expenditures. If we fail to comply with these requirements, we could also be subject to civil or criminal liability and the imposition of fines. Further, national, regional or local regulations and policies could be changed to provide for new rate programs that undermine the economic returns for both new and existing projects by charging additional, non-negotiable fixed or demand charges or other fees or reductions in the number of projects allowed under net metering policies. National, regional or local government energy policies, law and regulation supporting the creation of organized merchant or wholesale electricity markets are currently, and may continue to be, subject to challenges, modifications and restructuring proposals, which may result in limitations on the commercial strategies available to us for the sale of our power.
Regulatory changes in a jurisdiction where we are developing a solar project may make the continued development of the project infeasible or economically disadvantageous and any expenditure that we have previously made on the project may be wholly or partially written off. Any of these changes could significantly increase the regulatory related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate any potential revenues that can be generated by one or more of the projects or result in significant additional expenses to us, our offtakers and customers, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We also face regulatory risks imposed by various transmission providers and operators, including regional transmission operators and independent system operators, and their corresponding market rules. These regulations may contain provisions that limit access to the transmission grid or allocate scarce transmission capacity in a particular manner, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We are also subject to the Canadian Corruption of Foreign Public Officials Act (CFPOA), U.S. Foreign Corrupt Practices Act of 1977, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business in countries in which we conduct activities. We may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in the course of our business (for example, to obtain approvals, permits and licenses from applicable government authorities and to sell power to government-owned entities). We would face significant liabilities if we failed to comply with these laws and we could be held liable for the illegal activities of our employees, representatives, contractors, partners, and agents, even if we did not authorize such activities. Any violation of the CFPOA, FCPA or other applicable anticorruption laws could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, which could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, responding to any enforcement action may result in the diversion of management’s attention and resources, significant defense costs and other professional fees.
| 96 |
Because the markets in which we compete are highly competitive and evolving quickly, because many of our competitors have greater resources than we do or are more adaptive, and because we have a limited track record in our energy business, we may not be able to compete successfully and we may not be able to maintain or increase our market share.
In our energy business, we compete in a more diversified and complicated landscape since the commercial and regulatory environments for solar project development and operation vary significantly from region to region and country to country. Our primary competitors are local and international developers and operators of solar projects. Some of our competitors may have advantages over us in terms of greater experience or resources in the operation, capital, financing, technical support and management of solar projects, in any particular markets or in general. As the solar power and renewable energy industry grows and evolves, we will also face new competitors who are not currently in the market. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business and prospects.
An anti-circumvention investigation could adversely affect us.
On August 16, 2021, a group of anonymous entities calling itself the American Solar Manufacturers Against Chinese Circumvention (“A-SMACC”) requested that the U.S. Department of Commerce (“USDOC”) initiate an anti-circumvention inquiry regarding crystalline silicon photovoltaic (“CSPV”) products from Malaysia, Thailand, and Vietnam. A-SMACC alleged that certain CSPV products from Malaysia, Thailand, and Vietnam containing Chinese-origin components were circumventing the Solar 1 antidumping (“AD”) and countervailing duty (“CVD”) orders (i.e., CSPV solar cells manufactured in China). On November 10, 2021, the USDOC rejected A-SMACC’s request and declined to initiate an anti-circumvention inquiry.
On February 8, 2022, U.S. module producer Auxin Solar Inc. (“Auxin”) filed with the USDOC separate circumvention petitions on CSPV products from Cambodia, Malaysia, Thailand, and Vietnam. Canadian Solar entered these proceedings with respect to Thailand and Vietnam and requested that the USDOC reject Auxin’s petition. On April 1, 2022, the USDOC initiated anti-circumvention inquiries on a country-wide basis with respect to all four countries.
U.S. law provides that the USDOC may find that circumvention exists when (among other things) merchandise subject to an AD/CVD order is completed or assembled in third countries with the end result of AD/CVD duty avoidance. Specifically, with respect to the existing Solar 1 China AD/CVD orders, the USDOC may find that (i) certain CSPV cells and/or modules produced in Thailand and Vietnam fall within the scope of the AD/CVD orders; and (ii) the collection of AD and/or CVD deposits is appropriate to prevent evasion of AD/CVD duties. The USDOC’s investigation will examine, inter alia, whether (i) the production process in Thailand and Vietnam is “minor or insignificant”; and (ii) the value of the merchandise produced in China is a significant portion of the value of the product exported to the United States. With respect to affirmative finding by the USDOC, imports of CSPV from Malaysia, Thailand and Vietnam would essentially be treated as if they were of Chinese origin and subject to potentially very high AD/CVD deposit rates. This in turn would significantly increase the cost of CSPV products that are required for our solar projects and risk significant harm to our financial condition and operations.
More recently, on June 6, 2022 the U.S. Federal Government declared a 24-month tariff moratorium on solar panels manufactured in Cambodia, Malaysia, Thailand, and Vietnam, by way of executive action by President Joe Biden. It remains possible that companies may be subject to tariffs after the 24-month period ends; however, the moratorium reportedly will exempt U.S. companies from any retroactive tariffs.
Our quarterly operating results may fluctuate from period to period.
Our quarterly operating results may fluctuate from period to period based on a number of factors, including:
| ● | the timing of completion of construction of solar projects; |
| 97 |
| ● | the timing and pricing of our services; |
| ● | the availability and cost of solar cells and wafers from our suppliers; |
| ● | the availability and cost of raw materials; |
| ● | changes in government incentive programs and regulations, particularly in our key and target markets; |
| ● | the availability and cost of external financing for solar power applications; |
| ● | acquisition, investment and offering costs; |
| ● | geopolitical turmoil and natural disasters within any of the countries in which we operate; |
| ● | foreign currency fluctuations, particularly in United States and Canadian dollars; |
| ● | our ability to establish and expand customer relationships; |
| ● | fluctuations in electricity rates due to changes in fossil fuel prices or other factors; |
| ● | allowances for credit losses; |
| ● | impairment of property, plant and equipment; |
| ● | impairment of project assets; |
| ● | share-based compensation expenses on performance-based share awards under our share incentive plan; |
| ● | income taxes; and |
| ● | construction progress of solar projects and related revenue recognition. |
We base our planned operating expenses in part on our expectations of future revenues. A significant portion of our expenses will be fixed in the short-term. If our revenues for a particular quarter are lower than we expect, we may not be able to reduce our operating expenses proportionately, which would harm our operating results for the quarter. As a result, our results of operations may fluctuate from quarter to quarter and our interim and annual financial results may differ from our historical performance.
Fluctuations in exchange rates could adversely affect our business, including our financial condition and results of operations.
Fluctuations in exchange rates, particularly between the U.S. dollars and Canadian dollars may result in foreign exchange gains or losses. Volatility in foreign exchange rates will hamper, to some extent, our ability to plan our pricing strategy. To the extent that we are unable to pass along increased costs resulting from exchange rate fluctuations to our customers, our profitability may be adversely impacted. As a result, fluctuations in foreign currency exchange rates could have a material and adverse effect on our financial condition and results of operations.
A change in our effective tax rate can have a significant adverse impact on our business.
A number of factors may adversely impact our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to provisional taxes upon finalization of various tax returns; adjustments to the interpretation of transfer pricing standards; changes in available tax credits; changes in stock-based compensation expenses; changes in tax laws or the interpretation of tax laws (e.g., in connection with fundamental U.S. international tax reform); changes in GAAP; and expiration of or the inability to renew tax rulings or tax holiday incentives. A change in our effective tax rate due to any of these factors may adversely influence our future results of operations.
Seasonal variations in demand linked to construction cycles and weather conditions may influence our results of operations.
Our business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
| 98 |
We may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development.
We anticipate that our operating and capital expenditures requirements may increase. To develop new projects, support future growth, achieve operating efficiencies and maintain service standard quality, we may need to make significant capital investments in facilities and capital equipment. We also anticipate that our operating costs may increase as we hire additional personnel, increase our sales and marketing efforts and invest in joint ventures and acquisitions.
Our operations are capital intensive. We cannot guarantee that we will continue to be able to extend existing or obtain new financing on commercially reasonable terms or at all. Also, we may not be able to raise capital via public equity and debt issuances due to market conditions and other factors, many of which are beyond our control. Our ability to obtain external financing is subject to a variety of uncertainties, including:
| ● | our future financial condition, results of operations and cash flows; | |
| ● | general market conditions for financing activities by solar power companies, including, but not limited to interest rates; and | |
| ● | economic, political and other conditions in the U.S. and elsewhere. |
If we are unable to obtain funding in a timely manner and on commercially acceptable terms, our growth prospects and future profitability may be adversely affected.
Construction of our solar projects may require us to obtain financing for our projects, including through project financing, green bond financing or others. If we are unable to obtain financing, or if financing is only available on terms which are not acceptable to us, we may be unable to fully execute our business plan. In addition, we generally expect to sell our projects to tax-oriented, strategic industry and other investors. Such investors may not be available or may only have limited resources, in which case our ability to sell our projects may be hindered or delayed and our business, financial condition, and results of operations may be adversely affected. There can be no assurance that we will be able to generate sufficient cash flows, find other sources of capital to fund our operations and solar projects, make adequate capital investments to remain competitive in terms of technology development and cost efficiency required by our projects. If adequate funds and alternative resources are not available on acceptable terms, our ability to fund our operations, develop and construct solar projects, or otherwise respond to competitive pressures would be significantly impaired. Our inability to do the foregoing could have a material and adverse effect on our business and results of operations.
We may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations.
In the ordinary course of developing solar projects, we may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations. In the future, we may from time to time incur substantial additional indebtedness and contingent liabilities and this could have important consequences to us and our shareholders. For example, it could:
| ● | limit our ability to satisfy our debt obligations; | |
| ● | increase our vulnerability to adverse general economic and industry conditions; | |
| ● | require us to dedicate a substantial portion of our cash flow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; | |
| ● | limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate; | |
| ● | place us at a competitive disadvantage compared with our competitors that have less debt; | |
| ● | limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds; and | |
| ● | increase the cost of additional financing. |
| 99 |
Our ability to generate sufficient cash to satisfy our debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow from operations to support the repayment of our indebtedness. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all. In addition, certain of our financing arrangements may impose operating and financial restrictions on our business, which may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund required capital expenditures, or withstand a continuing or future downturn in our business. Any of these factors could materially and adversely affect our ability to satisfy our debt obligations.
Supply chain issues, including shortages of adequate raw materials, component and equipment supply, cancellation or delay of purchase orders, inflationary pressures and cost escalation could adversely affect our business and results of operations.
We depend mainly on third-party suppliers for raw materials and components, and we also procure certain equipment overseas. Our suppliers may not always be able to meet quantity requirements, or keep pace with the price reductions or quality improvements, necessary for us to price products and projects competitively. Additionally, they may experience manufacturing delays and increased manufacturing cost that could increase the lead time for deliveries or impose price increases.
The failure of a supplier, for whatever reason, to supply the materials, essential components and equipment that meet quality, quantity and cost requirements in a timely manner could impair our ability to develop projects, increase costs, hinder compliance with supply agreements’ terms and may result, ultimately, in cancellation of projects and potential liability for us. The impact could be more severe if we are unable to access alternative sources on a timely basis or on commercially reasonable terms and at prices that are profitable. Supply may be interrupted by government mandates, accidents, disasters or other unforeseen events beyond our control.
Inflation in many countries and regions, especially in those where we operate, may adversely affect our business and our profitability.
As of June 30, 2022, we have facilities and offices in Canada and the United States. We also acquire materials for solar power projects from overseas countries. As such, we are exposed to the inflation risks therein. Recently, on a global basis, countries are experiencing high inflation rates. Inflation could increase the costs of our supplies and labour costs. We may not be able to adjust the pricing of our PPAs or services sufficiently or take appropriate pricing actions to fully offset the effects of inflation on our cost structures, thus we may fail to maintain current levels of gross profit and operating, selling and distribution, general and administrative expenses and maintenance costs as a percentage of total net revenues. As such, rising inflation rates may negatively impact our profitability. In addition, a high inflation environment would also have negative effects on the level of economic activity, employment and adversely affect our business, results of operations and financial conditions. For example, an increase in the inflation rates may result in an increase in market interest rates, which may require us to pay higher interest rates on debt securities that we issue in the financial market from time to time to finance our operations and increase our interest expenses.
We may be subject to unexpected warranty expenses that may not be adequately covered by our insurance policies.
For solar projects built by us, we also provide a limited workmanship or balance of system warranty against defects in engineering, design, installation and construction under normal use, operation and service conditions. In resolving claims under the workmanship or balance of system warranty, we have the option of remedying through repair, refurbishment or replacement of equipment. We have also entered into similar workmanship warranties with our suppliers to back up our warranties.
| 100 |
As part of our energy business, before commissioning solar projects, we conduct performance testing to confirm that the projects meet the operational and capacity expectations set forth in the agreements. In limited cases, we also provide for an energy generation performance test designed to demonstrate that the actual energy generation for up to the first three years meets or exceeds the modeled energy expectation (after adjusting for actual solar irradiation). In the event that the energy generation performance test performs below expectations, the appropriate party (EPC contractor or equipment provider) may incur liquidated damages capped at a percentage of the contract price. Potential warranty claims may exceed the scope or amount of coverage under our insurance and, if they do, they could materially and adversely affect our business.
If we are unable to attract, train, retain, and successfully integrate key personnel into our management team, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train, and retain management, operations, sales, and technical personnel, including personnel in foreign jurisdictions. Recruiting and retaining capable personnel, particularly those with expertise in the solar industry across a variety of technologies, are vital to our success. We are also dependent on the services of our executive officers and other members of our senior management team. The loss of one or more of these key associates or any other member of our senior management team could have a material adverse effect on our business. We may not be able to retain or replace these key associates and may not have adequate succession plans in place. Several of our current key associates, including our executive officers, are subject to employment conditions or arrangements that contain post-employment non-competition provisions. However, these arrangements permit the associates to terminate their employment with us upon little or no notice.
There are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes us and our utility scale solar projects to additional risk.
Since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility-scale quantities of electricity in a given geographic location, normally transmission grid operators, state and investor-owned power companies, public utility districts and cooperatives. As a result, there is a concentrated pool of potential buyers for electricity generated by our solar power plants, which may restrict our ability to negotiate favorable terms under new PPAs and could impact our ability to find new customers for the electricity generated by our solar power plants should this become necessary. Additionally, these possible purchasers may have a role in connecting our projects to the grid to allow the flow of electricity. Furthermore, if the financial condition of these utilities and/or power purchasers deteriorates, or government policies or regulations to which they are subject and which compel them to source renewable energy supplies change, demand for electricity produced by our plants or the ability to connect to the grid could be negatively impacted. In addition, provisions in our PPAs or applicable laws may provide for the curtailment of delivery of electricity for various reasons, including preventing damage to transmission systems, system emergencies, force majeure or economic reasons. Such curtailment could reduce revenues to us from our PPAs. If we cannot enter into PPAs on terms favorable to us, or at all, or if the purchaser under our PPAs were to exercise its curtailment or other rights to reduce purchases or payments under the PPAs, our revenues and our decisions regarding development of additional projects in the energy business may be adversely affected.
Historically, a limited number of customers have accounted for a substantial portion of our revenue.
We derive a significant portion of our revenue from a limited number of existing customers. Our top customer accounted for 88% of our revenue for the fiscal year ended June 30, 2022. It is not possible for us to predict the future level of demand from our largest customer. If our largest customer elects to not do future business with us, or decrease of our services, or if our largest customer otherwise seeks to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations would be adversely affected.
In addition, the Company has $6,486,838 in accounts receivable outstanding from the SFT Group for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. The accounts receivable balance is not yet recognized. There is a risk that this receivable may not be paid in 2023 or at all.
| 101 |
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of our business operations.
We are required to comply with all national and local environmental regulations. Our business generates noise, wastewater, gaseous wastes and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as our business has expanded. We believe that we substantially comply with all relevant environmental laws and regulations and have all necessary and material environmental permits to conduct our business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations.
Our solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and we may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, we may lose market share and our financial results may be adversely affected. Any failure by us to control our use or to restrict adequately the discharge, of hazardous substances could subject us to potentially significant monetary damages, fines or suspensions of our business operations.
Corporate responsibility, specifically related to Environmental, Social and Governance (“ESG”) matters and unsuccessful management of such matters may adversely impose additional costs and expose us to new risks.
Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. We may face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards set by our investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third party rating services. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks, including increased risk of investigation and litigation, and negative impacts on the value of our products and access to capital, which may put us at a commercial disadvantage relative to our peers.
Furthermore, various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results. We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations may adversely affect our business and results of operations.
We face risks related to natural disasters, health epidemics, such as COVID-19, and other catastrophes, which could significantly disrupt our operations.
Our business could be materially and adversely affected by natural disasters or other catastrophes, such as earthquakes, fire, floods, hail, windstorms, severe weather conditions, environmental accidents, power loss, communications failures, explosions, terrorist attacks and similar events. Our business could also be materially and adversely affected by public health emergencies, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, the 2019 novel coronavirus (COVID-19) or other local health epidemics in jurisdictions where we operate and global pandemics. If any of our employees is suspected of having contracted any contagious disease, we may, under certain circumstances, be required to quarantine those employees and the affected areas of our operations. As a result, we may have to temporarily suspend part or all of our facilities. Furthermore, authorities may impose restrictions on travel and transportation and implement other preventative measures in affected regions to deal with the catastrophe or emergency, which may lead to the temporary closure of our facilities and declining economic activity at large. A prolonged outbreak of any health epidemic or other adverse public health developments, in jurisdictions where we operate, could have a material adverse effect on our business operations.
| 102 |
The COVID-19 pandemic has continued to pose significant challenges to many aspects of our business, including our operations, customers, suppliers and projects. The extent to which the COVID-19 has and may persist to impact our ability to effectively operate continues to be highly uncertain. The outbreak continues to evolve, and the impact that COVID-19, or new variants of COVID-19, will ultimately have on our result of operations, financial condition, liquidity and cash flows cannot be estimated and is impossible to predict. We will continue to monitor and adhere to the policies, lockdowns, restrictions, and preventive measures implemented by the various government authorities, as well as general movement restrictions, social distancing and other measures imposed to slow the spread of COVID-19.
We have limited insurance coverage and may incur significant losses resulting from operating hazards, product liability claims, project construction or business interruptions.
Our operations involve the use, handling, generation, processing, storage, transportation and disposal of hazardous materials, which may result in fires, explosions, spills and other unexpected or dangerous accidents causing personal injuries or death, property damages, environmental damages and business interruption. Although we currently carry third-party liability insurance against property damage, the policies for this insurance are limited in scope and may not cover all claims relating to personal injury, property or environmental damage arising from incidents on our properties or relating to our operations. Any occurrence of these or other incidents which are not insured under our existing insurance policies could have a material adverse effect on our business, financial condition or results of operations.
For projects we construct, we are exposed to risks associated with the design and construction that can create additional liabilities to our operations. We manage these risks by including contingencies to our construction costs, ensuring the appropriate insurance coverages are in place such as professional indemnity and construction all risk as well as obtaining indemnifications from our contractors where possible. However, there is no guarantee that these risk management strategies will always be successful.
Information Technology Systems and Data Security Breaches.
The Company’s operations depend, in part, on how well it and its third party service providers protect networks, equipment, information technology (“IT”) systems and software against damage from a number of threats, including, but not limited to, cable cuts, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
The Company has negative cash flow for the period ended June 30, 2022
The Company had negative cash flow for the period ended June 30, 2022. To the extent that the Company has negative cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that the Company will be able to generate a positive cash flow from its operations, that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company. The Company’s actual financial position and results of operations may differ materially from the expectations of the Company’s management.
| 103 |
The Company does not anticipate paying cash dividends.
The Company’s current policy is to retain earnings to finance the development of its solar power projects and to otherwise reinvest in the Company. Therefore, the Company does not anticipate paying cash dividends on the Company’s shares in the foreseeable future. The Company’s dividend policy will be reviewed from time to time by the Company’s board in the context of its earnings, financial condition and other relevant factors. Until the time that the Company pays dividends, which the Company might never do, Common Shareholders will not be able to receive a return on their Common Shares unless they sell them.
Litigation.
From time to time, we have been and may be subject to disputes and litigation, with and without merit, that may be costly and which may divert the attention of our management and our resources in general, whether or not any dispute actually proceeds to litigation. The results of complex legal proceedings are difficult to predict. Moreover, complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. Even if we are able to estimate losses related to these actions, the ultimate amount of loss may be materially higher than our estimates. Any resolution of litigation, or threatened litigation, could involve the payment of damages or expenses by us, which may be significant or involve an agreement with terms that restrict the operation of our business. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be significant. These costs may exceed the dollar limits of our insurance policies or may not be covered at all by our insurance policies.
Risks Associated With the Offering and Common Shares
Uncertainty and Discretion in the Use of Proceeds.
Although the Company has set out its intended use of proceeds from this Offering, these intended uses are estimates only and subject to change. While management does not contemplate any material variation, management does retain broad discretion in the application of such proceeds. The failure by the Company to apply these funds effectively could have a material adverse effect on the Company’s business, including the Company’s ability to achieve its stated business objectives.
No Market for Common Shares Currently Exists.
The CSE has conditionally approved the listing of the Common Shares. Listing is subject to the Company fulfilling all of the requirements of the CSE on or before August 2, 2023. Listing will be subject to the Company fulfilling all of the requirements of the CSE. While the Company will use its reasonable efforts to list the Common Shares on the CSE, there is no assurance that such listing will be obtained. There is currently no market through which the Common Shares may be sold and no market may develop for the Common Shares and purchasers may not be able to resell such Common Shares purchased under this Prospectus. This may affect the pricing of the Common Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the Common Shares, and the extent of issuer regulation.
The Company may be subject to additional regulatory burden resulting from its public listing on the CSE.
The Company has not been subject to the continuous and timely disclosure requirements of Canadian securities laws or other rules, regulations and policies of the CSE. The Company is working with its legal, accounting and financial advisors to identify those areas in which changes should be made to the Company’s financial management control systems to manage its obligations as a public company listed on the CSE. These areas include corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. The Company has made, and will continue to make, changes in these and other areas, including the Company’s internal controls over financial reporting. However, the Company cannot assure holders of Company’s shares that these and other measures that the Company might take will be sufficient to allow us to satisfy the Company’s obligations as a public company listed on the CSE on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies listed on the CSE will create additional costs for the Company and will require the time and attention of management. The Company cannot predict the amount of the additional costs that the Company might incur, the timing of such costs or the impact that management’s attention to these matters will have on the Company’s business.
| 104 |
The Company cannot assure you that a market will continue to develop or exist for the Common Shares or what the market price of the Common Shares will be.
The Company cannot assure that a market will continue to develop or be sustained once the Company’s Common Shares are listed on the CSE. If a market does not continue to develop or is not sustained, it may be difficult for investors to sell the Common Shares at an attractive price or at all. The Company cannot predict the prices at which the Common Shares will trade.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control, including the following:
| ● | actual or anticipated fluctuations in the Company’s quarterly results of operations; | |
| ● | recommendations by securities research analysts; | |
| ● | changes in the economic performance or market valuations of companies in the industry in which the Company operates; | |
| ● | addition or departure of the Company’s executive officers and other key personnel; | |
| ● | release or expiration of lock-up or other transfer restrictions on outstanding Common Shares; | |
| ● | sales or perceived sales of additional Common Shares; | |
| ● | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or the Company’s competitors; | |
| ● | operating and share price performance of other companies that investors deem comparable to us; fluctuations to the costs of vital production materials and services; | |
| ● | changes in global financial markets and global economies and general market conditions, such as interest rates; | |
| ● | operating and share price performance of other companies that investors deem comparable to the Company or from a lack of market comparable companies; | |
| ● | news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets; and | |
| ● | regulatory changes in the industry. |
Financial markets have recently experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely affected and the trading price of the Common Shares might be materially adversely affected.
The intentions of the existing shareholders regarding their long-term economic ownership are subject to change. Factors that could cause the existing shareholders’ current intentions to change include changes in each of their personal circumstances, our succession planning or changes in our management, changes in tax laws, market conditions and our financial performance.
Further, we cannot predict the size of future issuances of our Common Shares or the effect, if any, that future issuances and sales of our Common Shares will have on the market price of our Common Shares. Sales of substantial amounts of our Common Shares, or the perception that such sales could occur, may adversely affect prevailing market prices for our Common Shares. See “The Company may need to raise additional capital in the future”.
| 105 |
The Company may need to raise additional capital in the future.
The Company’s capital needs in the future will depend upon factors such as its growth strategy and the success of its solar power projects. None of these factors can be predicted with certainty. The Company may need additional debt or equity financing in the future. The Company cannot assure investors that any additional financing, if required, will be available or, even if it is available that it will be on terms acceptable to the Company. If the Company raises additional funds by selling securities, the ownership of existing shareholders will be diluted. Any inability to obtain required financing could have a material adverse effect on the Company’s business, results of operations and financial condition.
Failure to raise capital in a timely manner will constrain the Company’s growth.
The Company’s growth depends on developing solar power projects, which requires capital. If the Company experiences difficulty or delays in raising the funds it needs, it will delay its ability to develop solar power projects. Additional future delays in obtaining funding may be caused by a combination of factors. Future delays in obtaining funding in a timely manner will constrain or prevent the Company’s growth.
The Company may be unable to support existing or new business if it does not raise sufficient funds.
Unless the Company can obtain adequate financing from the sale of its securities, the Company will not have sufficient funds and may be unable to support existing operations, expand operations, or operate its expanded operations, and it will be unable to carry out its business plans. Without adequate financing the Company may be unable to carry on its business. There is no assurance that the Company will raise adequate funds in future financings.
Dilution.
The offering price of Common Shares may significantly exceed the net tangible book value per share of the Common Shares. Accordingly, a purchaser of Common Shares may incur immediate and substantial dilution of his, her or its investment. If outstanding RSUs, options and warrants to purchase Common Shares are exercised or securities convertible into Common Shares are converted, additional dilution will occur. The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in subsequent offerings or may issue additional Common Shares or other securities to finance future acquisitions. The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s RSUs, Options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares on the CSE may decrease due to the additional amount of Common Shares available in the market.
Impact of securities or industry analysts’ reports.
The trading market for our Common Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence covering us, the trading price for our Common Shares would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrade our Common Shares or publish inaccurate or unfavourable research about our business, our trading price may decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common Shares could decrease, which could cause our trading price and volume to decline.
| 106 |
Risks related to the book-based system
Unless and until certificated Common Shares are issued in exchange for book-entry interests in the Common Shares, owners of the book-entry interests will not be considered owners or holders of Common Shares. Instead, the depository or its nominee will be the sole holder of the Common Shares. Unlike holders of the Common Shares themselves, owners of book-based interests will not have the direct right to act upon the Company’s solicitations or requests or other actions from holders of the Common Shares. Instead, holders of beneficial interests in the Common Shares will be permitted to act only to the extent such holders have received appropriate proxies to do so from CDS or, if applicable, a CDS participant. There is no assurance that procedures implemented for the granting of such proxies will be sufficient to enable holders of beneficial interests in the Common Shares to vote on any requested actions on a timely basis.
ELIGIBILITY FOR INVESTMENT
In the opinion of DLA Piper (Canada) LLP, counsel to the Company, and MLT Aikins LLP, counsel to the Agent, based on the current provisions of the Tax Act in force on the date hereof, the Offered Shares would each be a “qualified investment” for a trust governed by a “registered retirement savings plan” (“RRSP”), “registered retirement income fund” (“RRIF”), “tax-free savings account” (“TFSA”), “registered education savings plan” (“RESP”), “registered disability savings plan” (“RDSP”) and “deferred profit sharing plan”, as those terms are defined in the Tax Act (collectively, the “Plans”) if and provided that the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE) at the relevant time or the Company qualifies as a “public corporation” other than a “mortgage investment corporation” for the purposes of the Tax Act. However, the Company is not currently a “public corporation” and the Offered Shares are not currently listed on a “designated stock exchange”, and the timing of such a listing, if any, cannot be guaranteed.
The CRA’s published policy is that in order for a security to qualify for this purpose, the listing must be full and unconditional, and that a mere approval or conditional approval is insufficient. It is our understanding that the Company has applied to list the Offered Shares on the CSE as of a time that is shortly before the Closing of the Offering. However, listing will be subject to the Company fulfilling all of the requirements of the CSE. In addition, there can be no guarantee that CSE approval of a listing (if at all) as of a time that is shortly before the Closing of the Offering would be granted or would be in a form that is, or is acceptable to the CRA as, a full and unconditional listing. No legal opinion or advance tax ruling has been sought or obtained in respect of the listing application or the status of the Offered Shares as listed on a designated stock exchange as of any particular time. If the Offered Shares are not appropriately listed on the CSE at the time of their issuance (and the Company is not otherwise a “public corporation” other than a “mortgage investment corporation” at that time for purposes of the Tax Act), the Offered Shares will not be qualified investments for the Plans at that time. In general terms, adverse consequences under the Tax Act, not discussed in this summary, apply to a Plan and/or its annuitant, subscriber or holder (as the case may be) where a Plan acquires or holds a non-qualified investment.
Notwithstanding that the Offered Shares may become a qualified investment for a TFSA, RDSP, RESP, RRSP or RRIF, the holder, subscriber or annuitant of such Plan, as the case may be, will be subject to a penalty tax as set out in the Tax Act if such Offered Shares are a “prohibited investment” for the TFSA, RDSP, RESP, RRSP or RRIF for purposes of the Tax Act. An Offered Share will generally be a “prohibited investment” for a TFSA, RDSP, RESP, RRSP or RRIF if the holder, subscriber or annuitant, as the case may be, does not deal at arm’s length with the Company for the purposes of the Tax Act or has a “significant interest” (as defined in subsection 207.01(4) of the Tax Act) in the Company. However, the Offered Shares will not be prohibited investments if such Offered Shares are “excluded property” (as defined in subsection 207.01(1) of the Tax Act) for a TFSA, RDSP, RESP, RRSP or RRIF, as the case may be.
Investors who are considering holding Offered Shares within a Plan should consult their own tax advisors in regard to the application of these rules in their particular circumstances.
| 107 |
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of DLA Piper (Canada) LLP, counsel to the Company, and MLT Aikins LLP, counsel to the Agent, the following is, as at the date of this Prospectus, a general summary of the principal Canadian federal income tax considerations under the Tax Act generally applicable to an investor who acquires Offered Shares pursuant to the Offering and who, for the purposes of the Tax Act and at all relevant times, (i) deals at arm’s length with the Company and the Agent, (ii) is not affiliated (as defined in the Tax Act) with the Company or the Agent, and (iii) acquires and holds the Offered Shares as capital property. A holder who meets all of the foregoing requirements is referred to as a “Holder” in this summary, and this summary only addresses such Holders. Generally, the Offered Shares will be considered as capital property of a Holder thereof provided that the Holder does not use the Offered Shares in the course of carrying on a business of trading or dealing in securities and such Holder has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary does not apply to a Holder (i) that is a “financial institution” for the purposes of the mark-to-market rules contained in the Tax Act; (ii) that is a “specified financial institution” (as defined in the Tax Act); (iii) an interest in which would be a “tax shelter investment” (as defined in the Tax Act); (iv) that has made a functional currency reporting election under the Tax Act; (v) that is exempt from tax under Part I of the Tax Act; (vi) that is a “foreign affiliate” (as defined in the Tax Act) of a taxpayer resident in Canada; (vii) that is a partnership; (viii) that receives dividends on the Offered Shares under or as part of a “dividend rental arrangement” (as defined in the Tax Act); or (ix) that has entered into or will enter into a “derivative forward agreement” or “synthetic disposition arrangement” (as those terms are defined in the Tax Act) with respect to an Offered Share. Such Holders should consult their own tax advisors with respect to an investment in the Offered Shares.
Additional considerations, not discussed herein, may be applicable to a Holder that is a corporation resident in Canada and is (or does not deal at arm’s length with a corporation resident in Canada for purposes of the Tax Act that is), or becomes, controlled by a non-resident person, or a group of non-resident persons not dealing with each other at arm’s length, for purposes of the ”foreign affiliate dumping” rules in section 212.3 of the Tax Act. Such Holders should consult their tax advisors with respect to the consequences of acquiring the Offered Shares.
This summary does not address the deductibility of interest by a Holder who has borrowed money or otherwise incurred debt in connection with the acquisition of Offered Shares.
This summary is based on the current provisions of the Tax Act in force as of the date hereof and our understanding of the current published administrative policies and assessing practices of the CRA. This summary takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes that the Tax Proposals will be enacted in the form proposed. However, no assurance can be given that the Tax Proposals will be enacted in their current form or at all. This summary does not otherwise take into account any changes in law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental or judicial decision or action, nor does it take into account or consider any provincial, territorial or foreign tax considerations, which considerations may differ significantly from the Canadian federal income tax considerations discussed in this summary.
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder. All investors, including Holders, should consult their own tax advisors with respect to their particular circumstances.
Holders Resident in Canada
The following section of this summary applies to Holders who, for the purposes of the Tax Act, are or are deemed to be resident in Canada at all relevant times (“Resident Holders”). Certain Resident Holders whose Offered Shares might not otherwise constitute capital property may make, in certain circumstances, an irrevocable election permitted by subsection 39(4) of the Tax Act to deem the Offered Shares, and every other “Canadian security” (as defined in the Tax Act) held by such persons, in the taxation year of the election and each subsequent taxation year, to be capital property. Resident Holders should consult their own tax advisors regarding this election.
| 108 |
Dividends
Dividends received or deemed to be received on the Offered Shares, if any, will be included in computing a Resident Holder’s income. In the case of an individual (other than certain trusts), such dividends will be subject to the gross-up and dividend tax credit rules normally applicable in respect of “taxable dividends” received from a “taxable Canadian corporation” (as defined in the Tax Act), including the enhanced gross-up and dividend tax credit in respect of “eligible dividends”, if any, so designated by the Company to the Resident Holder in accordance with the provisions of the Tax Act. There may be restrictions on the Company’s ability to designate any dividends as “eligible dividends”, and the Company has made no commitments in this regard.
Dividends received or deemed to be received by a Resident Holder that is a corporation must be included in computing its income, but such dividends will generally be deductible in computing the corporation’s taxable income for that taxation year. A Resident Holder that is a “private corporation” (as defined in the Tax Act) and certain other corporations controlled by or for the benefit of an individual (other than a trust) or related group of individuals (other than trusts) generally will be liable to pay tax under Part IV of the Tax Act (refundable in certain circumstances) on dividends received or deemed to be received on the Offered Shares to the extent such dividends are deductible in computing taxable income. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received or deemed to be received by a Resident Holder that is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors in this regard.
Dispositions of Offered Shares
Upon a disposition (or a deemed disposition) of an Offered Share (other than a disposition to the Company in a transaction that is not a sale in the open market), a Resident Holder generally will realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition are greater (or are less) than the aggregate adjusted cost base of such security to the Resident Holder immediately before the disposition and any reasonable costs of disposition. The adjusted cost base of an Offered Share to a Resident Holder will be determined in accordance with the Tax Act by averaging the cost to the Resident Holder of an Offered Share with the adjusted cost base of all other Common Shares held by the Resident Holder as capital property. The tax treatment of capital gains and capital losses is discussed in greater detail below under the subheading “Capital Gains and Capital Losses”.
Capital Gains and Capital Losses
Generally, a Resident Holder is required to include in computing income for a taxation year one-half of the amount of any capital gain (a “taxable capital gain”) realized in the year. Subject to and in accordance with the provisions of the Tax Act, a Resident Holder is required to deduct one-half of the amount of any capital loss (an “allowable capital loss”) realized in a taxation year from taxable capital gains realized in the year by such Resident Holder. Allowable capital losses in excess of taxable capital gains realized in a year may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any following taxation year against net taxable capital gains realized in such year, to the extent and under the circumstances described in the Tax Act.
The amount of any capital loss realized on the disposition or deemed disposition of Offered Shares by a Resident Holder that is a corporation may, in certain circumstances, be reduced by the amount of dividends received or deemed to have been received by it on such Offered Shares. Similar rules may apply where a Resident Holder that is a corporation is a member of a partnership or a beneficiary of a trust that owns Offered Shares or where a partnership or trust, of which a corporation is a member or a beneficiary, is a member of a partnership or a beneficiary of a trust that owns Offered Shares. Resident Holders to whom these rules may be relevant should consult their own tax advisors.
A Resident Holder that is throughout the relevant taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) also may be liable to pay an additional tax (refundable in certain circumstances) on its “aggregate investment income” (as defined in the Tax Act) for the year, which will generally include taxable capital gains. Tax Proposals released by the Minister of Finance (Canada) on August 9, 2022 are intended to extend this additional tax and refund mechanism in respect of aggregate investment income to ”substantive CCPCs” as defined in the Tax Proposals. Resident Holders should consult their own tax advisors with regard to this additional tax and refund mechanism.
| 109 |
Minimum Tax
Capital gains realized (or deemed to be realized), and dividends received (or deemed to be received) by a Resident Holder that is an individual or a trust, other than certain specified trusts, may give rise to minimum tax under the Tax Act. Resident Holders should consult their own advisors with respect to the application of the minimum tax.
Holders Not Resident in Canada
The following section of this summary is applicable to Holders who, for the purposes of the Tax Act, and at all relevant times (i) are not, and will not be deemed to be, resident in Canada at any time while they hold the Offered Shares, and (ii) do not use or hold, and are not deemed to use or hold, the Offered Shares in carrying on a business in Canada (“Non-Resident Holders”).
Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that carries on, or is deemed to carry on, an insurance business in Canada and elsewhere or that is an “authorized foreign bank” (as defined in the Tax Act). Holders should consult their own tax advisors.
Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Resident Holder by the Company are subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend unless such rate is reduced by the terms of an applicable tax treaty. Under the Canada-United States Tax Convention (1980), as amended (the “Treaty”), for example, the rate of withholding tax on dividends paid or credited to a Non-Resident Holder that is the beneficial owner of the dividend, who is resident in the U.S. for purposes of the Treaty and entitled to benefits under the Treaty (a “U.S. Holder”) is generally limited to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Holder that is a company beneficially owning at least 10% of the Company’s voting shares). The Company will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Resident Holder’s account.
Dispositions of Offered Shares
A Non-Resident Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of an Offered Share, nor will capital losses arising therefrom be recognized under the Tax Act, unless the Offered Share constitutes or is deemed to constitute “taxable Canadian property” to the Non-Resident Holder for purposes of the Tax Act at the time of disposition and the gain is not exempt from tax pursuant to the terms of an applicable tax treaty.
If and provided that the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE) at the time of disposition, the Offered Shares generally will not constitute taxable Canadian property of a Non-Resident Holder at that time unless, at any time during the 60 month period ending at the time of the disposition, the following two conditions are simultaneously met: (i) one or any combination of (i) the Non-Resident Holder, (ii) persons with whom the Non-Resident Holder did not deal at arm’s length, or (iii) partnerships in which the Non-Resident Holder or such non-arm’s length person holds a membership interest (either directly or indirectly through one or more partnerships), owned 25% or more of the issued shares of any class or series of shares of the Company; and (ii) more than 50% of the fair market value of such shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, “Canadian resource property” (as defined in the Tax Act), “timber resource property” (as defined in the Tax Act) or an option in respect of, an interest in or for civil law a right in or to such property, whether or not such property exists. Notwithstanding the foregoing, an Offered Share may also be deemed to be taxable Canadian property to a Non-Resident Holder under other provisions of the Tax Act.
A Non-Resident Holder’s capital gain (or capital loss) in respect of Offered Shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected property” as defined in the Tax Act) will generally be computed in the manner described above under the subheading “Holders Resident in Canada – Dispositions of Offered Shares”.
| 110 |
Non-Resident Holders who may hold Offered Shares as taxable Canadian property should consult their own tax advisors.
PROMOTERS
Except for Dr. Richard Lu, the Chief Executive Officer of the Company, no person or company has, within the two years immediately preceding the date of this Prospectus, been a promoter of the Company, within the meaning of applicable securities laws.
Other than as disclosed in this section or elsewhere in this Prospectus, no person who was a Promoter of the Company within the last two years:
| ● | received anything of value directly or indirectly from the Company or a subsidiary; | |
| ● | sold or otherwise transferred any asset to the Company or a subsidiary within the last two years; | |
| ● | has been a director, chief executive officer or chief financial officer of any company that during the past 10 years was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation for a period of more than 30 consecutive days or became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets; | |
| ● | has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; | |
| ● | has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision; or | |
| ● | has within the past 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets. |
LEGAL PROCEEDINGS
Except as disclosed below, there are no legal proceedings material to the Company to which the Company is a party or of which any of its property is the subject matter, and there are no such proceedings known to the Company to be contemplated.
First legal claim for the improper termination of FIT Contracts
On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “First Claim Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “First Claim Defendants”). First Claim Plaintiffs seek damages from the First Claim Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions.
| 111 |
Second legal claim for the improper termination of FIT Contracts
On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Second Claim Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Second Claim Defendants”). The Second Claim Plaintiffs seek damages from the Second Claim Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action.
Claim against town of Manlius, New York
In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property that is being developed by the Company. The lawsuit was filed challenging the approval of the Manlius landfill. The Company is not named in the lawsuit; however, in cooperation with the town, the Company is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted.
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as disclosed herein, no director, officer, Insider or Promoter of the Company has had any material interest, direct or indirect, in any transaction within the three years before the date of this Prospectus, or any proposed transaction, that has materially affected or is reasonably expected to materially affect the Company or any of its subsidiaries.
AUDITORS
The auditor for the Company is MSLL CPA LLP, Chartered Professional Accountants at its principal offices located at 1177 W Hastings St Suite 2110, Vancouver, British Columbia, Canada V6E 2K3. MSLL CPA LLP has confirmed that they are independent of the Company within the meaning of the “CPABC Code of Professional Conduct” of the Chartered Professional Accountants of British Columbia.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company’s Common Shares is Endeavor Trust Corporation at its principal offices located in Vancouver, British Columbia.
MATERIAL CONTRACTS
Other than contracts entered into in the ordinary course of business, the following are the only material contracts entered into by the Company or its Subsidiaries since July 1, 2021, being the beginning of the last financial year ending before the date of the Prospectus, or before July 1, 2021 but still in effect and considered to be currently material:
| 1. | Master Services Agreement dated February 9, 2018 between Abundant Solar Power Inc. and the State of Maryland, acting through the Maryland Department of Transportation. Pursuant to the agreement, Abundant Solar Power Inc. provides deliverables, programs, good and services for renewable energy development projects that are awarded in accordance with the terms of the agreement. The agreement has a term of thirty years commencing on February 22, 2018. However, the Maryland Department of Transportation may terminate the agreement if it shall determine such termination is in the best interest of the State of Maryland. The State will pay all reasonable costs incurred up to the date of termination, and all reasonable costs associated with termination; however, the Company will not be reimbursed for any anticipatory profits that have not been earned up to the date of termination. |
| 2. | Engineering, Procurement, and Construction Agreement dated February 9, 2021 with Solar Troupsburg LLC as described under “General Development and Business of the Company – Three Year History – Other Development of the Business.” |
| 112 |
Copies of the above material contracts can be inspected at the Company’s head office during regular business hours for a period of 30 days after a final receipt is issued for this Prospectus and are also available electronically at www.sedar.com.
LEGAL MATTERS
Certain Canadian legal matters in connection with this Prospectus will be passed upon by DLA Piper (Canada) LLP, on behalf of the Company, and by MLT Aikins LLP, on behalf of the Agent. As at the date hereof, each of: (i) the partners and associates of DLA Piper (Canada) LLP, as a group; and (ii) the partners and associates of MLT Aikins LLP, as a group, beneficially own, directly or indirectly, less than one percent of the outstanding Common Shares of the Company.
INTERESTS OF EXPERTS
The following are persons or companies whose profession or business gives authority to a statement made in this Prospectus as having prepared or certified a part of that document or report described in this Prospectus:
| ● | DLA Piper (Canada) LLP is the Company’s counsel with respect to Canadian legal matters herein; | |
| ● | MLT Aikins LLP is the Agent’s counsel with respect to Canadian legal matters herein; and | |
| ● | MSLL CPA LLP, Chartered Professional Accountants is the external auditor of the Company. |
To the knowledge of management of the Company, as of the date hereof, no expert, nor any associate or affiliate of such person has any beneficial interest, direct or indirect, in the securities or property of the Company or of an associate or affiliate of any of them, and no such person is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of an associate or affiliate thereof.
OTHER MATERIAL FACTS
To the knowledge of management, there are no other material facts relating to the Company that are not otherwise disclosed in this Prospectus or are necessary for this Prospectus to contain full, true and plain disclosure of all material facts relating to the Company.
PURCHASERS’ STATUTORY RIGHT OF WITHDRAWAL AND RESCISSION
Securities legislation in the provinces British Columbia, Alberta and Ontario provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights or consult with a legal adviser.
FINANCIAL STATEMENTS
Attached hereto as Schedule “A” and forming a part of this Prospectus are the following financial statements:
| 1. | the audited financial statements of the Company for the years ended June 30, 2022 and June 30, 2021, together with the notes thereto and the auditors’ report thereon; and |
| 2. | the unaudited interim financial statements of the Company for the three months ended September 30, 2022 together with the notes thereto. |
| 113 |
Schedule A - SOLARBANK FINANCIAL STATEMENTS
SCHEDULE B - AUDIT COMMITTEE CHARTER
AUDIT COMMITTEE CHARTER
| 1. | PURPOSE |
The main purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) is to assist the Board in fulfilling its statutory responsibilities in relation to internal control and financial reporting, and to carry out certain oversight functions on behalf of the Board, including the oversight of:
| (a) | the integrity of the Company’s financial statements and other financial information provided by the Company to securities regulators, governmental bodies and the public to ensure that the Company’s financial disclosures are complete, accurate, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations by the International Financial Reporting Interpretations Committee (“IFRIC”), and fairly present the financial position and risks of the Company; |
| (b) | assessing the independence, qualifications and performance of the Company’s independent auditor (the “Auditor”), appointing and replacing the Auditor, overseeing the audit and non- audit services provided by the Auditor, and approving the compensation of the Auditor; |
| (c) | Senior Management (as defined below) responsibility for assessing and reporting on the effectiveness of internal controls; |
| (d) | financial matters and management of financial risks; |
| (e) | the prevention and detection of fraudulent activities; and |
| (f) | investigation of complaints and submissions regarding accounting or auditing matters and unethical or illegal behavior. |
The Committee provides an avenue for communication between the Auditor, the Company’s executive officers and other senior managers (“Senior Management”) and the Board, and has the authority to communicate directly with the Auditor. The Committee shall have a clear understanding with the Auditor that they must maintain an open and transparent relationship with the Committee. The Auditor is ultimately accountable to the Committee and the Board, as representatives of the Company’s shareholders.
| 2. | COMPOSITION |
The Committee shall be comprised of three directors. Each Committee member shall:
| (a) | satisfy the laws governing the Company; |
| (b) | be “independent” in accordance with Sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees (“NI 52-110”) (subject to the exceptions set forth in Part 3 and Part 6 of NI 52-110, as applicable), which sections are reproduced in Appendix A of this charter; and |
| (c) | be “financially literate” in accordance with the definition set out in Section 1.6 of NI 52-110, which definition is reproduced in Appendix A of this charter. |
For purposes of subparagraph (b) above, the position of non-executive Chair of the Board is considered to be an executive officer of the Company.
Committee members and the chair of the Committee (the “Committee Chair”) shall be appointed annually by the Board at the first Board meeting that is held after every annual general meeting of the Company’s shareholders. The Board may remove a Committee member at any time in its sole discretion by a resolution of the Board.
If a Committee member simultaneously serves on the audit committees of more than three public companies, the Committee shall seek the Board’s determination as to whether such simultaneous service would impair the ability of such member to effectively serve on the Committee and ensure that such determination is disclosed.
| 3. | MEETINGS |
The Committee shall meet at least once per financial quarter and as many additional times as the Committee deems necessary to carry out its duties effectively.
The Committee shall meet:
| (a) | within 60 days following the end of each of the first three financial quarters to review and discuss the unaudited financial results for the preceding quarter and the related management’s discussion and analysis (“MD&A”); and |
| (b) | within 120 days following the end of the Company’s fiscal year end to review and discuss the audited financial results for the year and related MD&A. |
As part of its job to foster open communication, the Committee shall meet at least once each financial quarter with Senior Management and the Auditor in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.
A majority of the members of the Committee shall constitute a quorum for any Committee meeting. No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present or by unanimous written consent of the Committee members.
The Committee Chair shall preside at each Committee meeting. In the event the Committee Chair is unable to attend or chair a Committee meeting, the Committee will appoint a chair for that meeting from the other Committee members.
The Corporate Secretary of the Company, or such individual as appointed by the Committee, shall act as secretary for a Committee meeting (the “Committee Secretary”) and, upon receiving a request to convene a Committee meeting from any Committee member, shall arrange for such meeting to be held.
The Committee Chair, in consultation with the other Committee members, shall set the agenda of items to be addressed at each Committee meeting. The Committee Secretary shall ensure that the agenda and any supporting materials for each upcoming Committee meeting are circulated to each Committee member in advance of such meeting.
The Committee may invite such officers, directors and employees of the Company, the Auditor, and other advisors as it may see fit from time to time to attend at one or more Committee meetings and assist in the discussion and consideration of any matter. For purposes of performing their duties, members of the Committee shall, upon request, have immediate and full access to all corporate information and shall be permitted to discuss such information and any other matters relating to the duties and responsibilities of the Committee with officers, directors and employees of the Company, with the Auditor, and with other advisors subject to appropriate confidentiality agreements being in place.
Unless otherwise provided herein or as directed by the Board, proceedings of the Committee shall be conducted in accordance with the rules applicable to meetings of the Board.
| 4. | DUTIES AND RESPONSIBILITIES |
Subject to the powers and duties of the Board and the Articles of the Company, in order to carry out its oversight responsibilities, the Committee shall:
| 4.1 | Financial Reporting Process |
| (a) | Review with Senior Management and the Auditor any items of concern, any proposed changes in the selection or application of accounting principles and policies and the reasons for the change, any identified risks and uncertainties, and any issues requiring the judgement of Senior Management, to the extent that the foregoing may be material to financial reporting. |
| (b) | Consider any matter required to be communicated to the Committee by the Auditor under generally accepted auditing standards, applicable law and listing standards, if applicable, including the Auditor’s report to the Committee (and the response of Senior Management thereto) on: |
| (i) | accounting policies and practices used by the Company; |
| (ii) | alternative accounting treatments of financial information that have been discussed with Senior Management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the Auditor; and |
| (iii) | any other material written communications between the Auditor and Senior Management. |
| (c) | Discuss with the Auditor their views about the quality, not just the acceptability, of accounting principles and policies used by the Company, including estimates and judgements made by Senior Management and their selection of accounting principles. |
| (d) | Discuss with Senior Management and the Auditor: |
| (i) | any accounting adjustments that were noted or proposed (immaterial or otherwise) by the Auditor but were not reflected in the financial statements; |
| (ii) | any material correcting adjustments that were identified by the Auditor in accordance with generally accepted accounting principles (“GAAP”) or applicable law; |
| (iii) | any communication reflecting a difference of opinion between the audit team and the Auditor’s national office on material auditing or accounting issues raised by the engagement; and |
| (iv) | any “management” or “internal control” letter issued, or proposed to be issued, by the Auditor to the Company. |
| (e) | Discuss with Senior Management and the Auditor any significant financial reporting issues considered during the fiscal period and the method of resolution, and resolve disagreements between Senior Management and the Auditor regarding financial reporting. |
| (f) | Review with Senior Management and the Auditor: |
| (i) | any off-balance sheet financing mechanisms being used by the Company and their effect on the Company’s financial statements; and |
| (ii) | the effect of regulatory and accounting initiatives on the Company’s financial statements, including the potential impact of proposed initiatives. |
| (g) | Review with Senior Management and the Auditor and legal counsel, if necessary, any litigation, claim or other contingency, including tax assessments, that could have a material effect on the financial position or operating results of the Company, and the manner in which these matters have been disclosed or reflected in the financial statements. |
| (h) | Review with the Auditor any audit problems or difficulties experienced by the Auditor in performing the audit, including any restrictions or limitations imposed by Senior Management, and the response of Senior Management, and resolve any disagreements between Senior Management and the Auditor regarding these matters. |
| (i) | Review the results of the Auditor’s work, including findings and recommendations, Senior Management’s response, and any resulting changes in accounting practices or policies and the impact such changes may have on the financial statements. |
| (j) | Review and discuss with Senior Management the audited annual financial statements and related MD&A and make recommendations to the Board with respect to approval thereof before their release to the public. |
| (k) | Review and discuss with Senior Management and the Auditor all interim unaudited financial statements and related interim MD&A. |
| (l) | Approve interim unaudited financial statements and related interim MD&A prior to their filing and dissemination. |
| (m) | In connection with Sections 4.1 and 5.1 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), obtain confirmation from the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) (and considering the Auditor’s comments, if any, thereon) to their knowledge: |
| (i) | that the audited financial statements, together with any financial information included in the annual MD&A and annual information form, fairly present in all material respects the Company’s financial condition, financial performance and cash flows; and |
| (ii) | that the interim financial statements, together with any financial information included in the interim MD&A, fairly present in all material respects the Company’s financial condition, financial performance and cash flows. |
| (n) | Review news releases to be issued in connection with the audited annual financial statements and related MD&A and the interim unaudited financial statements and related interim MD&A, before being disseminated to the public, if the Company is required to do so under applicable securities laws, paying particular attention to any use of “pro-forma” or “adjusted” non-GAAP, information. |
| (o) | Review any news release containing earnings guidance or financial information based upon the Company’s financial statements prior to the release of such statements, if the Company is required to disseminate such news releases under applicable securities laws. |
| (p) | Review the appointment of the CFO and have the CFO report to the Committee on the qualifications of new key financial personnel involved in the financial reporting process. |
| 4.2 | Internal Controls |
| (a) | Consider and review with Senior Management and the Auditor the adequacy and effectiveness of internal controls over accounting and financial reporting within the Company and any proposed significant changes in them. |
| (b) | Consider and discuss any Auditor’s comments on the Company’s internal controls, together with Senior Management responses thereto. |
| (c) | Discuss, as appropriate, with Senior Management and the Auditor any major issues as to the adequacy of the Company’s internal controls and any special audit steps in light of material internal control deficiencies. |
| (d) | Review annually the disclosure controls and procedures. |
| (e) | Receive confirmation from the CEO and the CFO of the effectiveness of disclosure controls and procedures, and whether there are any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information or any fraud, whether or not material, that involves Senior Management or other employees who have a significant role in the Company’s internal control over financial reporting. In addition, receive confirmation from the CEO and the CFO that they are prepared to sign the annual and quarterly certificates required by Sections 4.1 and 5.1 of NI 52-109, as amended from time to time. |
| 4.3 | The Auditor |
Qualifications and Selection
| (a) | Subject to the requirements of applicable law, be solely responsible to select, retain, compensate, oversee, evaluate and, where appropriate, replace the Auditor. The Committee shall be entitled to adequate funding from the Company for the purpose of compensating the Auditor for authorized services. |
| (b) | Instruct the Auditor that: |
| (i) | they are ultimately accountable to the Board and the Committee, as representatives of shareholders; and |
| (ii) | they must report directly to the Committee. |
| (c) | Ensure that the Auditor have direct and open communication with the Committee and that the Auditor meet with the Committee once each financial quarter without the presence of Senior Management to discuss any matters that the Committee or the Auditor believe should be discussed privately. |
| (d) | Evaluate the Auditor’s qualifications, performance, and independence. As part of that evaluation: |
| (i) | at least annually, request and review a formal report by the Auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; |
| (ii) | annually review and confirm with Senior Management and the Auditor the independence of the Auditor, including all relationships between the Auditor and the Company, including the amount of fees received by the Auditors for the audit services, the extent of non-audit services and fees therefor, the extent to which the compensation of the audit partners of the Auditor is based upon selling non- audit services, the timing and process for implementing the rotation of the lead audit partner, reviewing partner and other partners providing audit services for the Company, and whether there should be a regular rotation of the audit firm itself; and |
| (iii) | annually review and evaluate senior members of the audit team of the Auditor, including their expertise and qualifications. In making this evaluation, the Committee should consider the opinions of Senior Management. |
| (e) | Conclusions on the independence of the Auditor should be reported by the Committee to the Board. |
| (f) | Approve and review, and verify compliance with, the Company’s policies for hiring of employees and former employees of the Auditor and former auditors. Such policies shall include, at minimum, a one-year hiring “cooling off” period. |
Other Matters
| (a) | Meet with the Auditor to review and approve the annual audit plan of the Company’s financial statements prior to the annual audit being undertaken by the Auditor, including reviewing the year-to-year co-ordination of the audit plan and the planning, staffing and extent of the scope of the annual audit. This review should include an explanation from the Auditor of the factors considered by the Auditor in determining their audit scope, including major risk factors. The Auditor shall report to the Committee all significant changes to the approved audit plan. |
| (b) | Review and pre-approve all audit and non-audit services and engagement fees and terms in accordance with applicable law, including those provided to the Company’s subsidiaries by the Auditor or any other person in its capacity as independent auditor of such subsidiary. Between scheduled Committee meetings, the Committee Chair, on behalf of the Committee, is authorized to pre-approve any audit or non-audit services and engagement fees and terms up to $50,000. At the next Committee meeting, the Committee Chair shall report to the Committee any such pre-approval given. |
| (c) | Establish and adopt procedures for such matters. |
| 4.4 | Compliance |
| (a) | Monitor compliance by the Company with all payments and remittances required to be made in accordance with applicable law, where the failure to make such payments could render the Company’s directors personally liable. |
| (b) | Receive regular updates from Senior Management regarding compliance with laws and regulations and the process in place to monitor such compliance, excluding, however, legal compliance matters subject to the oversight of the Corporate Governance and Nominating Committee of the Board, if any. Review the findings of any examination by regulatory authorities and any observations by the Auditor relating to such matters. |
| (c) | Establish and oversee the procedures in the Company’s Whistleblower Policy to address: |
| (i) | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting or auditing matters or unethical or illegal behaviour; and |
| (ii) | confidential, anonymous submissions by employees of concerns regarding questionable accounting and auditing matters or unethical or illegal behaviour. |
| (d) | Ensure that political and charitable donations conform with policies and budgets approved by the Board. |
| (e) | Monitor management of hedging, debt and credit, make recommendations to the Board respecting policies for management of such risks, and review the Company’s compliance therewith. |
| (f) | Approve the review and approval process for the expenses submitted for reimbursement by the CEO. |
| (g) | Oversee Senior Management’s mitigation of material risks within the Committee’s mandate and as otherwise assigned to it by the Board. |
| 4.5 | Financial Oversight |
| (a) | Assist the Board in its consideration and ongoing oversight of matters pertaining to: |
| (i) | capital structure and funding including finance and cash flow planning; |
| (ii) | capital management planning and initiatives; |
| (iii) | property and corporate acquisitions and divestitures including proposals which may have a material impact on the Company’s capital position; |
| (iv) | the Company’s annual budget; |
| (v) | the Company’s insurance program; |
| (vi) | directors’ and officers’ liability insurance and indemnity agreements; and |
| (vii) | matters the Board may refer to the Committee from time to time in connection with the Company’s capital position. |
| 4.6 | Other |
| (a) | Perform such other duties as may be assigned to the Committee by the Board. |
| (b) | Annually review and assess the adequacy of its charter and recommend any proposed changes to the Corporate Governance and Nominating Committee. |
| (c) | Review its own performance annually, and provide the results of such evaluation to the Board for its review. |
| 5. | AUTHORITY |
The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to:
| (a) | select, retain, terminate, set and approve the fees and other retention terms of special or independent counsel, accountants or other experts, as it deems appropriate; and |
| (b) | obtain appropriate funding to pay, or approve the payment of, such approved fees, without seeking approval of the Board or Senior Management. |
| 6. | ACCOUNTABILITY |
The Committee Chair shall make periodic reports to the Board, as requested by the Board, on matters that are within the Committee’s area of responsibility.
The Committee shall maintain minutes of its meetings with the Company’s Corporate Secretary and shall provide an oral report to the Board at the next Board meeting that is held after a Committee meeting.
Appendix A
Definitions from National Instrument 52-110 Audit Committees
Section 1.4 Meaning of Independence
| (1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
| (2) | For the purposes of subsection (1), a “material relationship” is a relationship which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of a member’s independent judgement. |
| (3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
| (a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
| (b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
| (c) | an individual who: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, |
| (ii) | is an employee of that firm, or |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, |
| (ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuer’s current executive officers serves or served at that same time on the entity’s compensation committee; and |
| (f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
| (4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
| (a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
| (b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
| (5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
| (6) | For the purposes of clause (3)(f), direct compensation does not include: |
| (a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
| (b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
| (7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
| (a) | has previously acted as an interim chief executive officer of the issuer, or |
| (b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
| (8) | For the purpose of Section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
Section 1.5 Additional Independence Requirements
| (1) | Despite any determination made under Section 1.4, an individual who |
| (a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
| (b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
| (2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by: |
| (a) | an individual’s spouse, minor child or stepchild, or a child or stepchild who shares the individual’s home; or |
| (b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
| (3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
Section 1.6 Meaning of Financial Literacy
For the purposes of this Instrument, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.
Schedule C – DISCLOSURE AND CONFIDENTIALITY POLICY
DISCLOSURE AND CONFIDENTIALITY POLICY
(November 4, 2022)
| 1. | Adoption |
This policy (the “Policy”) was approved and amended by the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) on the dates noted at the conclusion hereof. This Policy is intended to complement the Company’s Insider Trading and Reporting Policy (the “Insider Trading Policy”). This Policy, together with the Insider Trading Policy, is intended to assist the Company in complying with securities laws governing corporate disclosure, confidentiality and insider trading.
| 2. | Purpose |
It is the policy of the Company that all Material Information (as defined below) relating to the Company be disclosed to the investing public in a timely, factual and accurate fashion and that the Company’s directors, executive officers (corporate officers and all Vice Presidents) and each of their direct reports; the staff of the financial, accounting, legal and investor relations departments; and any other employee(s) or other third parties with access to material undisclosed information (collectively, ”Corporate Actors”) conduct themselves in accordance with applicable legal and regulatory requirements.
| 3. | Responsibility |
| (a) | Individual Responsibility. Every officer, director and employee of the Company will be held responsible for their compliance with this Policy. The individual who breaches this Policy may find himself or herself personally exposed to a wide range of penalties, fines and penal sanctions as well as civil actions for damages and administrative sanctions by securities commissions and other regulatory bodies. Breaches of this Policy by employees may also expose the Company to regulatory and civil actions and the censure of the investing public. | |
| If appropriate, the Company will report violations of this Policy to the appropriate regulatory authorities and will assist such authorities in investigating, and even prosecuting, violations of this Policy by the Company’s directors, officers and employees. | ||
| (b) | Direct Supervision. The Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (collectively the “Designated Officers”) shall jointly be responsible for ensuring that the Company complies with this Policy and that Corporate Actors are familiar with its contents. | |
| (c) | Board Oversight. Subject to the Audit Committee’s responsibility in relation to financial disclosure as set out in the Audit Committee Charter, the Corporate Governance and Nominating Committee shall have general oversight over the adherence by the Company to the terms of this Policy and the adequacy of this Policy in light of changes to the Company’s circumstances and regulatory environment. | |
| The Corporate Governance and Nominating Committee shall annually review compliance with this Policy as well as the substance of this Policy, itself, and recommend any necessary changes to the Board of Directors. |
| 4. | Review of Disclosure. |
| (a) | Basic Rule. Every written public disclosure relating to or concerning the Company provided to third parties by a Corporate Actor shall be reviewed and approved by both of the Designated Officers. | |
| In the event that one of the Designated Officers is unavailable during the requisite time period, the written disclosure shall be reviewed and approved by one of the Designated Officers and one other senior officer of the Company. | ||
| (b) | Disagreements and Ambiguities. In the event there is a disagreement between the two officers reviewing written disclosure, or if there is any uncertainty on the part of either of the officers as to whether information should be disclosed or when a material change has occurred, such question shall be referred to the Company’s regular corporate counsel. | |
| (c) | Financial Matters. Notwithstanding Section 4(b) above, if a disagreement or ambiguity relates to the financial reporting obligations of the Company, the issue shall be raised immediately with the Audit Committee (which, if it wishes, may seek the assistance of legal counsel or the Company’s auditors). |
| 5. | Disclosure of Material Information |
| (a) | What is Disclosed? The Company shall, subject only to the provisions relating to confidentiality described in Section 6, promptly disclose all material information. “Material Information” is any information relating to the business, operations or capital of the Company that would reasonably be expected to have a significant effect on either the market price or the value of, any of the securities of the Company. | |
| (b) | When is Material Information Disclosed? Subject to Confidential Material Information, which shall be disclosed in accordance with Section 6, Material Information shall be disclosed as promptly as possible in accordance with the provisions of this Section 5. | |
| A change in Material Information (which must be reported immediately) shall be deemed to occur: (i) when a decision to implement the change is made by the Board; or (ii) the decision is made by senior management of the Company in the belief that confirmation of the decision by the Board is probable. | ||
| Disagreements or uncertainty as to whether a change of Material Information has occurred shall be resolved in accordance with Section 4(b) herein. |
| (c) | Material Information. Examples of potentially Material Information include the following: |
Changes in Corporate Structure
| ● | change of name in the Company |
| ● | changes in share ownership that may affect control of the Company |
| ● | major reorganizations, amalgamations, or mergers |
| ● | take-over bids, issuer bids, or insider bids |
Changes in Capital Structure
| ● | the public or private sale of additional securities |
| ● | planned repurchases or redemptions of securities |
| ● | planned splits of common shares or offerings of warrants or rights to buy shares |
| ● | any share consolidation, share exchange, or stock dividend |
| ● | changes in a Company’s dividend payments or policies and the declaration or omission of dividends (either securities or cash) |
| ● | the possible initiation of a proxy contest |
| ● | material modifications to rights of security holders |
Changes in Financial Results
| ● | firm evidence of a significant increase or decrease in near-term earnings prospects |
| ● | unexpected changes in the financial results for any periods |
| ● | shifts in financial circumstances, such as cash flow reductions, major asset write offs or write-downs |
| ● | changes in the value or composition of the Company’s assets |
Changes in Business and Operations
| ● | any development that affects the Company’s resources, technology, products or markets |
| ● | a significant change in capital investment plans or corporate objectives |
| ● | major labour disputes or disputes with a major contractor or supplier |
| ● | significant new contracts, products, patents, or services or significant losses of contracts or business |
| ● | changes to the Board or executive management, including the departure of the Company’s CEO, President or CFO (or persons in equivalent positions) |
| ● | any oral or written employment, consulting or other compensation arrangements between the Company and/or its subsidiaries and any director or officer of the Company and/or its subsidiaries or their associates, for their services as directors or officers, or in any other capacity |
| ● | the commencement of, or developments in, material legal proceedings or regulatory matters |
| ● | waivers of corporate ethics and conduct rules for officers, directors, and other key employees |
| ● | any notice that reliance on a prior audit is no longer permissible |
| ● | de-listing of the Company’s securities or their movement from one quotation system or exchange to another |
| ● | notice of suspension review or suspension of trading of the Company’s securities |
Acquisitions and Dispositions
| ● | significant acquisitions or dispositions of assets, property or joint venture interests |
| ● | acquisitions of other companies, including a take-over bid for, or merger with, another Company |
Changes in Credit Arrangements
| ● | the borrowing or lending of a significant amount of money |
| ● | any mortgaging, hypothecating or encumbering of the Company’s assets |
| ● | defaults under debt obligations, agreements to restructure debt, or planned enforcement procedures by a bank or any other creditors |
| ● | changes in rating agency decisions |
| ● | significant new credit arrangements |
The above list is not exhaustive and will be reviewed and amended by the Company on a regular basis.
| (d) | Principles of Disclosure. The following principles shall be observed by the Company in disseminating changes in Material Information: |
| (i) | Changes in Material Information shall be disclosed by way of a press release disseminated through a newswire service approved by the Company’s corporate counsel. Any such press release shall be filed on SEDAR. |
| (ii) | If it appears that there will be significant delays in issuing a press release, whether occasioned by the Company or a third party, the issue of the delay shall be raised with the Company’s corporate counsel and, if necessary, the Investment Industry Regulatory Organization of Canada (“IIROC”) to determine whether trading in the Company’s shares should be halted pending release of the Material Information. |
| (iii) | In any event, the news release containing the Material Information in question may be faxed to IIROC for its review prior to dissemination of the news release. |
| (iv) | The Company will not, except in exceptional circumstances, delay a news release containing changes in Material Information because of a need for third party approval. In those exceptional circumstances, the Company shall follow the procedure for disseminating confidential information described in Section 6. To prevent this situation from arising, the officers of the Company shall ensure: |
| (A) | that where a contract provides that the other party has the right to review or approve any public disclosure, there is provision in the contract for the Company to make public disclosure on reasonable notice to the third party if the Company is obliged to do so under applicable law; |
| (B) | news releases are drafted well ahead of changes in Material Information, particularly the entering into of material contracts, so that these releases may be reviewed and approved in advance of the change occurring; and |
| (C) | provided that the identity of the third party does not, itself, constitute Material Information, a news release is issued immediately without identifying the third party, if its permission is not forthcoming. |
| (v) | News releases describing Material Information shall be posted on the Company’s website following their dissemination by newswire and filing on SEDAR. |
| (vi) | Disclosure should not contain half-truths or any information which requires additional information not to be misleading. |
| (vii) | The Company shall disclose unfavourable Material Information as promptly and completely as it discloses favourable Material Information. |
| (viii) | Material Information that has been disclosed must be updated if earlier disclosure has become misleading due to intervening events. |
| (ix) | In addition to issuing a news release as set out herein, changes to Material Information shall be reflected in a material change report and filed on SEDAR within ten (10) days of its occurrence. Material contracts outside of the Company’s ordinary course of business shall be filed on SEDAR. |
| 6. | Disclosure of Confidential Material Information |
| (a) | General. Securities legislation permits the Company to delay disclosure of a change of Material Information and to keep it confidential temporarily, when immediate release of the information would be unduly detrimental to the Company’s interests. This can arise, for example, when immediate disclosure might interfere with the Company’s pursuit of a specific objective or strategy, with ongoing negotiations, or with its ability to complete a transaction. |
| (b) | Determining When to Keep Changes Confidential. The test provided by Canadian securities regulators is that changes to Material Information may be kept confidential when harm to the Company’s business from disclosing outweighs the general benefit to the market of immediate disclosure. A factor in this test is whether there is reasonable likelihood of market participants, not subject to obligations of confidentiality, becoming aware of the change in Material Information before it is disseminated in accordance with Section 5. |
Any question as to whether it is appropriate for a change in Material Information to be kept confidential shall be resolved as set out in Section 4(b).
| (c) | Procedure. If the Designated Officers of the Company determine in accordance with this Policy that it is appropriate for a change or pending change in Material Information to be kept confidential, the Company shall file a confidential material change report with the appropriate securities commissions, the TSX Venture Exchange and IIROC. This confidential filing, and the Company’s evaluation of the need for confidentiality, must be renewed every ten (10) days, if the Company wants the change in Material Information to remain confidential. |
| (d) | Leaks. One of the Designated Officers or a person nominated by them shall, during the period the Company has confidential Material Information, carefully monitor market activity in the Company’s securities. If the confidential Material Information, or rumours about it, have leaked or appear to be impacting the Company’s share price, the Company will review the situation and may be required to immediately disclose the confidential Material Information in accordance with Section 5. |
| 7. | Earnings Guidance and Future-Oriented Information |
| (a) | General Policy. It is the Company’s policy not to provide earnings guidance to the public or to persons, such as analysts, whose work is to make the results of such guidance available to the public. Future-oriented financial information can, of course, be provided to third parties in other circumstances, provided that a Non-Disclosure Agreement is in place or the third party is subject to professional obligations of confidentiality, there is a reasonable expectation of confidentiality on the part of the officer and such disclosure is made in the necessary course of the Company’s business. |
| (b) | Future-Oriented Information Generally. Forward-looking information (financial or otherwise) may be provided to market participants if it is general and does not touch upon material, bottom-line financial results and is accompanied by the following: |
| (i) | The information is clearly identified as forward-looking; |
| (ii) | The Company identifies all material assumptions in the forward-looking information; |
| (iii) | The forward-looking information is expressed as clearly conditional; |
| (iv) | The information is accompanied by a statement that identifies, in very specific terms, the risks or uncertainties that may cause the actual results to differ materially from those projected in the statement, and puts market participants on notice that they should not rely on such forward-looking statements; |
| (v) | Officers are aware at the time they make forward-looking statements that, if material, those statements will need to be publicly revised or corrected if subsequent events make them misleading; and |
| (vi) | The forward-looking information, if financial in nature, either refers to performance in the next quarter, or has been approved for dissemination by the Audit Committee. |
| (c) | Managing Expectations. Notwithstanding the general policy set out in Section 7(a), if the Company determines that it will be reporting results materially below or above widely-held public expectations, it will review the need to disclose this fact in a news release. |
| 8. | Selective Disclosure and Tipping |
| (a) | What is Selective Disclosure or Tipping? Securities legislation prohibits Corporate Actors from providing undisclosed Material Information to third parties, other than in the necessary course of business. The prohibition applies whether the Company or the person providing selective disclosure gains a benefit from the disclosure or not. |
| (b) | General Prohibition. No Corporate Actor shall engage in selective disclosure. Any question of whether anticipated disclosure is in the necessary course of business shall be resolved by appealing to the Designated Officers. |
| (c) | Inadvertent Selective Disclosure. In the event a Corporate Actor inadvertently discloses Material Information to a market participant that has not been generally disseminated, the Corporate Actor shall immediately report the selective disclosure to one of the Designated Officers and the Company shall immediately disclose the Material Information in question in accordance with Section 5 or Section 6. |
| (d) | Equality of Treatment. It is understood that in individual or small-group communications, certain non-Material Information may be provided that has not been generally disclosed to the public. Such information, usually supplied in response to the questions of analysts or other investors, must be provided to any person who makes similar inquiries of the Company. Market participants shall be treated equally by Corporate Actors with respect to non-Material Information. |
| 9. | Prohibition on Certain Uses of the Internet |
Corporate Actors are prohibited from disclosing information, material or not, in internet chatrooms, newsgroups, blogs or the website of any third party. Corporate Actors that participate in such forums and write on other subjects may not, without the written permission of a Designated Officer, identify himself or herself as a representative of, or affiliated with, the Company.
| 10. | Maintaining Confidential Information |
| (a) | Corporate Information. Corporate Actors are reminded that they have common law and/or contractual duties prohibiting them from releasing any information not generally known concerning the Company or its affairs, other than as is necessary to discharge their responsibilities to the Company. This Policy relies upon Corporate Actors adhering to their duties in this regard. |
| (b) | Third Party Information. The Company is generally under contractual and common law duties with respect to confidential information it receives from various third parties such as its customers, suppliers, or business partners. This third party information shall be kept confidential by Corporate Actors. In particular, Corporate Actors should take the same measures with respect to the confidential information of third parties as they take with respect to confidential information of the Company. |
| (c) | Rules of Thumb. While not intended to be comprehensive, the following are basic rules that should be followed to preserve the confidential information of the Company and third parties: |
| (i) | Confidential papers or electronic media should have “CONFIDENTIAL” or a stronger term clearly written or stamped on them. |
| (ii) | Documents and files, including electronic files, should be kept in a safe place to which access is restricted to individuals who need to know the information for the purpose of carrying out their responsibilities on behalf of the Company. |
| (iii) | Confidential matters should not be discussed in places where the discussion may be overheard such as elevators, hallways, restaurants, airplanes or taxis. |
| (iv) | Confidential information should not be read or displayed in public places and should not be discarded where others can easily retrieve them. |
| (v) | Transmission of documents by electronic means, such as by fax or directly from one computer to another, should be made only when it is reasonable to believe that the transmission can be made or received under secure conditions. |
| 11. | Public Communications |
| (a) | What are Public Communications? For the purpose of this section, “Public Communications” include all press releases, material change reports, financial statements, annual information forms, information circulars, other legislative or regulatory disclosure documents, conference calls, shareholder meetings, analyst meetings, telephone calls to or from shareholders or other market participants, emails to or from shareholders or other market participants, as well as any other means by which the Company provides information to participants or potential participants in the market for the Company’s securities. |
| (b) | Who is Authorized to Make Public Communications? Only the CEO and CFO are authorized to make or approve Public Communications. Any conference calls with shareholders, investors and analysts will be held by either the CEO or CFO. Only the CEO and CFO are permitted to communicate with analysts concerning the Company. Other executives and staff may speak to analysts only with the pre-authorization of the CEO or CFO. The Company observes “quiet periods” which means that there will be no discussion with analysts, investors or other market participants during a blackout period or during a time where the Company may be involved in a take-over bid, issuer bid, business combination, prospectus offering, private placement, amalgamation, arrangement, capital reorganization or similar transaction except (i) where, in the course of such discussions, no information is imparted by the Company that has not been in the public domain for at least 24 hours; (ii) where each party to such discussions (other than the Company) is acting in its capacity as a professional advisor; and (iii) in exceptional circumstances as determined by the Board or the CEO. Any speaking engagement by an employee of the Company that falls under the definition of Public Communications as defined below must have prior approval from the CEO, CFO or a divisional Vice President. They may delegate this responsibility in certain circumstances to other employees, directors or agents, but the Designated Officers are responsible for reviewing the form and substance of the proposed Public Communication. |
The Designated Officers may not delegate responsibility for reviewing and approving formal disclosure documents required by Canadian securities legislation or policies, other than press releases which may be handled as set out in 4(a) if one of the Designated Officers is unavailable.
| (c) | Non-Authorized Personnel. Any Corporate Actor approached to make a Public Communication, such as speaking at an industry conference, shall refer interested persons to one of the Designated Officers. |
| (d) | Conference Calls. Calls with shareholders, investors and analysts should be handled as follows: |
| (i) | at least one of the Designated Officers shall have general responsibility for supervising the conference call and the information to be provided in it; |
| (ii) | several days prior to the conference call, the Company shall disseminate a press release announcing that the conference call will be held, along with the conference call numbers and the date and time; |
| (iii) | the conference operator will be provided with a script containing the Company’s cautionary statement regarding any forward-looking information provided in the course of a call; |
| (iv) | presentations of any officer or employee speaking in the call must be scripted and contain limited forward-looking information in conformity with Section 7. The provision of earnings guidance must be avoided pursuant to Section 7(a); |
| (v) | previously undisclosed Material Information may not be provided in the course of a call, pursuant to Section 8; |
| (vi) | in the event that undisclosed Material Information is inadvertently disclosed during a conference call, such Material Information must be immediately disseminated by news release in conformity with Section 5; |
| (vii) | there shall always be at least two officers of the Company present on a conference call so that the officer not making the presentation or answering the questions may determine whether un disclosed Material Information is being inadvertently communicated; |
| (viii) | the conference call may conclude with a question and answer period and at the Company’s option, general callers may be provided with a listen-only service, while analysts are provided with the ability to ask questions; and |
| (ix) | an audio recording of the conference call shall be made available to those unable to attend the conference call and shall remain available for at least 14 days. |
| (e) | Communication with Analysts. Only a Designated Officer or a person designated in writing by one of them may communicate with analysts. The Company’s policy with respect to interactions with analysts are as follows: |
| (i) | selective disclosure must be avoided pursuant to Section 8; |
| (ii) | no information may be provided to analysts that will not be provided to any person who makes similar inquiry pursuant to Section 8(d); |
| (iii) | Corporate Actors shall not become involved in approving or influencing analyst opinions or conclusions, aside from merely correcting factual errors, provided that such corrections are based on non-Material Information or Material Information that has been publicly disseminated; |
| (iv) | no Corporate Actor shall distribute analyst reports to persons outside the Company or publicly endorse such a report; |
| (v) | the Company will not post analyst reports on its website as set out in Section 14(d). |
| (f) | Quiet Periods. During a blackout period the Company shall not engage in discussions with analysts, investors or other market participants, except (i) where, in the course of such discussions, no information is imparted by the Company that has not been in the public domain for at least 24 hours; (ii) where each party to such discussions (other than the Company) is acting in its capacity as a professional advisor; and (iii) in exceptional circumstances. In addition, in connection with a take over bid, issuer bid or business combination or a prospectus offering, private placement, amalgamation, arrangement, capital reorganization or similar transaction, subject to certain limited exemptions (such as exercise of previously granted options, warrants or similar rights), neither the Company nor any director or officer or other insider of the Company shall bid for or purchase a “restricted security” for their own account or for an account over which they exercise control or direction or attempt to induce or cause any person or company to purchase a restricted security (see Ontario Securities Commission Rule 48-501). A restricted security for this purpose is any security offered pursuant to the prospectus or private placement offer or offered by the Company pursuant to any securities exchange take over bid, any security of the Company subject to an issuer bid or a security of the Company issuable pursuant to a business combination. These restrictions shall apply: (i) in the case of a private placement or public offering commencing on the date that is two trading days prior to the date that the offering price of the offered securities is determined and ending on the date that the selling process in respect of the offering ends and all stabilizations relating to the offered security are terminated; (ii) in the case of a take over bid or issuer bid, commencing on the date of dissemination of the take over bid or issuer bid circular and ending on the termination of the period during which the securities may be deposited under the bid; and (iii) in the case of another type of business combination, commencing on the date that the information circular for such transaction is disseminated and ending on the date of approval of the transaction by securityholders. A member of the Corporate Governance and Nominating Committee should be consulted if there is any question as to when these restrictions shall have ceased to apply in any particular circumstance. |
| 12. | Liability to Investors in the Secondary Market |
| (a) | Legislation now enacted in various Canadian provinces (and applicable to the Company by virtue of its participation in the capital markets of such provinces) gives investors in the secondary market the right to sue any public Company and key related people for making public misrepresentations about the Company or for failing to make timely disclosure as required by law. |
| (b) | The legislation provides secondary market investors with limited right of action against an issuer of securities, its directors, responsible senior officers, “influential persons” (ie. large shareholders with influence over disclosure), auditors and other responsible experts. Secondary market investors have the right to seek limited compensation for damages suffered at a time when the issuer had made, and not corrected, public disclosure (either written or oral) that contained an untrue statement of a material fact or failed to make required material disclosure. |
| (c) | Investors have the right to sue whether or not they actually relied on the misrepresentation or failure to make timely disclosure. |
| (d) | The issuer and other possible defendants are afforded varying defences based on the responsibility for the disclosure. For some types of disclosure, a person has a defence if that person conducted due diligence. For other types of disclosure, the person is not liable unless the plaintiff proves that the person knew the information would have been discovered about the misrepresentation, deliberately avoided acquiring knowledge or was guilty of gross misconduct in making the misrepresentation. |
| (e) | In order to limit potential exposure, the Designated Officers will conduct or cause to be conducted a reasonable investigation of the disclosure to be released such that the Designated Officers would be satisfied that there would be no reasonable grounds to believe that the document or oral statement contains any misrepresentation. Similarly the Designated Officers will conduct or cause to be conducted a reasonable investigation to ensure that there would be no reasonable grounds to believe that a failure to make timely disclosure would occur. |
| (f) | Strict adherence to this Policy will assist to minimize exposure to potential liabilities under current and proposed legislation. |
| 13. | Website |
| (a) | General Rule. The Company’s website should not contain any disclosure that would, whether through website architecture, overt statement or omission, materially misrepresent the Company, its business prospects or financial status. |
| (b) | Regular Review. One of the Designated Officers or an employee delegated by that officer shall review the Company’s website every quarter to ensure that disclosure on the website is accurate, complete and up to date. Annually, counsel to the Company shall review the corporate website for the same purpose. |
| (c) | Links to Third Party Sites. Unless approved by the Corporate Governance and Nominating Committee, the Company’s website may not link to a third party website. In the event such a link is permitted, it should be clear to visitors that they leaving the Company’s website when clicking on the link. |
| (d) | Analyst Reports. The Company may provide on its website a list of the investment firms that provide coverage of the Company, along with relevant contact information. The Company may not, however, provide links to those firms or the analyst reports themselves. |
| (e) | Investor Relations Material. Investor relations material shall be contained within a separate section of the Company’s website and will include a notice that advises the reader that the information posted was accurate at the time of posting, but may be superseded by subsequent disclosures. All data posted to the website, including text and audiovisual material, shall show the date such material was issued. |
| 14. | Disclosure Record |
Designated Officers or an employee they designate, shall maintain a four year file containing all public information provided about the Company, including continuous disclosure documents, news releases, analyst reports, transcripts or recordings of conference calls, notes of meetings with analysts or investors, notes from telephone conversations with analysts and investors, and newspaper or other media articles.
Amended and approved by the Board November 4, 2022
Schedule D – INSIDER TRADING POLICY
INSIDER TRADING AND REPORTING POLICY
(November 4, 2022)
The purpose of the Insider Trading and Reporting Policy (the “Policy”) is to summarize the insider trading restrictions to which directors, officers and employees are subject under applicable securities legislation, and to set forth a policy governing investments in the securities of SolarBank Corporation (“Company”) and the reporting thereof which is consistent with the applicable legislation.
This Policy is not intended to discourage investment in the Company’s securities. Rather, it is intended to highlight the obligations and the restrictions imposed on insiders by relevant securities legislation.
| 1. | Summary of Legislation |
| (a) | Securities legislation prohibits any person in a “special relationship” with the Company from either: |
| (i) | purchasing or selling the Company’s shares with the knowledge of a material fact or material change concerning the Company that has not been generally disclosed; or |
| (ii) | informing (or “tipping”), other than when necessary in the course of business, another person or Company of a material fact or material change concerning the Company before the material fact or material change has been generally disclosed. |
| (b) | A material change to the business or affairs of the Company or a material fact is one which would reasonably be expected to have an effect on the market price or value of any securities of a public issuer. A material change is specifically defined to include any decision by a board of directors to implement a material change, as well as any decision made to implement such a change by senior management, if board of director approval is probable. |
| (c) | This prohibition applies to persons who are deemed to have a “special relationship” with the Company, which include: |
| (i) | directors, officers, employees and consultants of the Company; and |
| (ii) | persons or corporations who learn of a material fact or material change concerning the Company. |
| (d) | While the penalties for a breach of this prohibition vary among jurisdictions, a breach may render you personally liable to prosecution and, upon conviction, to a fine not exceeding CAD$5,000,000 or five years in jail, or both. Further, you may be subject to civil actions at the instance of all or any of security holders, the companies whose securities were traded, and regulators. |
| (e) | You should note that any person who is associated with you, including any member of your family, your spouse or any person living with you, is also deemed to be a person in a special relationship with the Company, and is subject to the same legal obligations and duties. |
| 2. | Trading Prohibitions |
| (a) | In light of the foregoing, all directors, officers and employees of the Company will be subject to the following prohibitions relating to investments in the Company’s securities and securities of other public issuers: |
| (i) | If one has knowledge of a material fact or material change related to the affairs of the Company or any public issuer involved in a transaction with the Company which is not generally known, no purchase or sale may be made until the information has been generally disclosed to the public and the blackout periods set forth below have expired; |
| (ii) | Knowledge of a material fact or material change must not be conveyed to any other person other than in the necessary course of business until the information has been generally disclosed to the public and the blackout periods set forth below have expired; |
| (iii) | Any hedging activities, including the practice of selling “short” securities of the Company at any time, are not permitted; |
| (iv) | The practice of buying or selling financial instruments, including a “call” or “put” or any other prepaid forward contracts, equity swaps, collars, units of exchange funds or derivative security in respect of any securities of the Company is not permitted; and |
| (v) | Trading is prohibited in the event that the Company has provided notice of a pending material fact or material change until the information has been generally disclosed to the public and the blackout periods set forth below have expired. |
| (b) | For purposes of this Policy, public issuer includes any issuer, whether the Company or otherwise, whose securities are traded in a public market, whether on a stock exchange or “over the counter”. |
| (c) | The above prohibitions and the insider reporting obligations provided below apply equally to the trading or exercising of options to acquire shares or other securities of the public issuer. |
| (d) | Notwithstanding the above prohibitions in subsection 2(c) but subject to any other applicable sections of this Policy and any other applicable policies of the Company, the Company’s directors, officers and employees will be able to sell a security which such person does not own if such person owns another security convertible into the security sold or an option or right to acquire the security sold and, within 10 days after the sale, such person: (i) exercises the conversion privilege, option or right and delivers the security so associated to the purchaser; or (ii) transfers the convertible security, option or right, if transferable, to the purchaser. The Company requires that anyone subject to this Policy provide advance written notice to the Chief Financial Officer of such activity at least two days prior to such activity. |
| 3. | Insider Reporting Obligations |
| (a) | A person or corporation who becomes a “reporting insider” of the Company must file an insider report within 10 calendar days of the date of becoming a “reporting insider”. Furthermore, securities legislation requires reporting insiders to prepare and file a report of every trade they make in securities of the Company. This includes the granting and exercise of stock options or any other rights to acquire securities. Under securities legislation, reporting insiders are personally responsible for ensuring that insider reports are filed within five (5) calendar days of the trade. Assistance with filing these reports on the SEDI website may be obtained from the Chief Financial Officer. In order to allow the Company to comply with its reporting obligations, reporting insiders must also advise the Company immediately of any trade in securities of the Company. In addition, a reporting insider whose direct or indirect beneficial ownership of or control or direction over securities of the Company changes, must file an insider report of the change within five (5) calendar days of the date of the change. |
| (b) | National Instrument 55-104 - Insider Reporting Requirements and Exemptions (“NI 55-104”) defines a ”reporting insider” to include, among others, an insider of the issuer if the insider is: |
| (i) | the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer and each director of the issuer, of a significant shareholder of the issuer or of a major subsidiary of the issuer; |
| (ii) | a person or corporation responsible for a principal business unit, division or function of the issuer; |
| (iii) | a significant shareholder of the issuer; and |
| (iv) | any other insider that in the ordinary course receives or has access to information as to material facts or material changes concerning the issuer before the material facts or material changes are generally disclosed and directly or indirectly, exercises, or has the ability to exercise, significant power or influence over the business, operations, capital or development of the issuer. |
| (c) | It is each insider’s personal responsibility to determine if they are a “reporting insider” as defined in NI 55-104 and they should review the complete definition of such term in NI 55-104 in making such determination. It is each reporting insider’s responsibility to ensure that all requisite insider trading reports are filed with the appropriate securities commissions within the statutory time limits. |
| (d) | A copy of the insider report may be obtained from the Company and is required to be filed electronically on SEDI. |
| 4. | Additional Restrictions for Directors, Officers and Employees |
Blackout Periods
| (a) | No trades or other transactions in securities of the Company (including the exercise of stock options or transactions involving other forms of equity-based compensation) shall be carried out by: |
| (i) | directors of the Company; |
| (ii) | officers of the Company; and |
| (iii) | any employees of the Company who receive notice from the Company’s CFO, |
during the period of time beginning thirty (30) days prior to the scheduled release of financial results for a fiscal quarter or a fiscal year until the second trading day after the financial results have been disclosed by the Company.
| (b) | Trading black-out periods may also be prescribed from time to time as a result of special circumstances relating to the Company. All directors and officers and employees with knowledge of such special circumstances will be covered by the black-out. |
CERTIFICATE Of THE COMPANY
Dated: February 10, 2023
This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
| “Dr. Richard Lu” | “Sam Sun” | |
| Dr.
Richard Lu Chief Executive Officer |
Sam
Sun Chief Financial Officer |
On Behalf of the Board of Directors
| “Paul Pasalic” | “Paul Sparkes” | |
| Paul
Pasalic Director |
Paul
Sparkes Director |
| C-1 |
CERTIFICATE Of THE PROMOTER
Dated: February 10, 2023
This prospectus, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
| “Dr. Richard Lu” |
| Dr. Richard Lu |
| C-2 |
CERTIFICATE Of THE AGENTS
Dated: February 10, 2023
To the best of our knowledge, information and belief, this prospectus, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces of Alberta, British Columbia and Ontario.
RESEARCH CAPITAL CORPORATION |
| “Jovan Stupar” |
| Jovan Stupar |
| Managing Director |
SCHEDULE B
Exchange Listing Statement Disclosure—Additional Information
SOLARBANK CORPORATION
(the “Issuer” or “SOLARBANK”)
| 14.1 | Prepare and file the following chart for each class of securities to be listed: |
Note that each of the calculations and disclosures provided in this section 14.1 assume completion of the Offering (as defined in the Prospectus) without the exercise of the Over-Allotment Option (as defined in the Prospectus).
Number of Securities (non-diluted) |
Number of Securities (fully-diluted) | %of Issued (non-diluted) | % of Issued (fully diluted) | |||||
Public Float
|
||||||||
| Total outstanding (A) | 26,550,000 | 37,807,000 | 100% | 100% | ||||
| Held by Related Persons or employees of the Issuer or Related Person of the Issuer, or by persons or companies who beneficially own or control, directly or indirectly, more than a 5% voting position in the Issuer (or who would beneficially own or control, directly or indirectly, more than a 5% voting position in the Issuer upon exercise or conversion of other securities held) (B) | 10,420,290 | 20,019,290 | 39.25% | 52.95% | ||||
| Total Public Float (A-B) | 16,129,710 | 17,787,710 | 60.75% | 47.05% | ||||
Freely-Tradeable Float(1)
|
||||||||
| Number of outstanding securities subject to resale restrictions, including restrictions imposed by pooling or other arrangements or in a shareholder agreement and securities held by control block holders (C) | 16,650,000 | 23,400,000 | 62.71% | 61.89% | ||||
| Total Tradeable Float (A-C) | 9,900,000 | 14,407,000 | 37.29% | 38.11% |
(1) Assumes initial 10% release of securities from escrow on the closing of the Offering.
Public Securityholders (Registered)
Class of Security
|
||||
| Size of Holding | Number of holders | Total number of securities | ||
| 1 – 99 securities | - | - | ||
| 100 – 499 securities | - | - | ||
| 500 – 999 securities | - | - | ||
| 1,000 – 1,999 securities | - | - | ||
| 2,000 – 2,999 securities | - | - | ||
| 3,000 – 3,999 securities | - | - | ||
| 4,000 – 4,999 securities | - | - | ||
| 5,000 or more securities | 10 | 8,079,710 | ||
| Total | 10 | 8,079,710 |
Public Securityholders (Beneficial)
Class of Security
|
||||
| Size of Holding | Number of holders | Total number of securities | ||
| 1 – 99 securities | - | - | ||
| 100 – 499 securities | - | - | ||
| 500 – 999 securities | 4 | 2,000 | ||
| 1,000 – 1,999 securities | 28 | 36,900 | ||
| 2,000 – 2,999 securities | 36 | 73,500 | ||
| 3,000 – 3,999 securities | 13 | 39,000 | ||
| 4,000 – 4,999 securities | 4 | 16,500 | ||
| 5,000 or more securities | 80 | 7,882,100 | ||
| Total | 165 | 8,050,000 |
Non-Public Securityholders (Registered)
Class of Security
|
||||
| Size of Holding | Number of holders | Total number of securities | ||
| 1 – 99 securities | - | - | ||
| 100 – 499 securities | - | - | ||
| 500 – 999 securities | - | - | ||
| 1,000 – 1,999 securities | - | - | ||
| 2,000 – 2,999 securities | - | - | ||
| 3,000 – 3,999 securities | - | - | ||
| 4,000 – 4,999 securities | - | - | ||
| 5,000 or more securities | 11 | 10,420,290 | ||
| Total | 11 | 10,420,290 |
| 14.2 | The following chart sets out details of securities of the Issuer convertible or exchangeable into any class of listed securities: |
Note that each of the calculations and disclosures provided in this section 14.2 assume completion of the Offering (as defined in the Prospectus) without the exercise of the Over-Allotment Option (as defined in the Prospectus) and the conversion of the Convertible Loan (as defined in the Prospectus).
| Description of Security (include conversion / exercise terms, including conversion / exercise price) | Number of convertible / exchangeable securities outstanding | Number of listed securities issuable upon conversion / exercise | ||
| Advisory Warrants(1) | 2,500,000 | 2,500,000 Common Shares | ||
| Broker Warrants(2) | 420,000 | 420,000 Common Shares | ||
| Series A Warrants(3) | 2,500,000 | 2,500,000 Common Shares | ||
| Series B Warrants(3) | 2,500,000 | 2,500,000 Common Shares | ||
| Options(4) | 2,774,000 | 2,774,000 Common Shares | ||
| RSUs | 500,000 | 500,000 Common Shares |
| (1) | Each Advisory Warrant entitling the holder, upon the closing of the Offering, to purchase one Common Share up to the day that is five years from the date of issuance thereof at a price of $0.10 per Common Share. | |
| (2) | Each Broker Warrant entitling the holder, upon the closing of the Offering, to purchase one Common Share up to the day that is three years from the date of issuance thereof at a price of $0.75 per Common Share. | |
| (3) | The Series A Warrants and Series B Warrants, upon the satisfaction of the Series A Warrant Vesting Condition and Series B Warrant Vesting Condition (as applicable) are exercisable into Common Shares at an exercise price of $0.50 per Common Share until the date that is 60 months from the Closing of the Offering. | |
| (4) | Stock options are exercisable for Common Shares at an exercise price of $0.75 per Common Share until November 4, 2027. |
| 14.3 | The following are details of listed securities reserved for issuance that are not included in section 14.2: N/A. |
Exhibit 99.16
SolarBank Corporation to Present at the Gravitas 6th Annual Growth Conference
Toronto, Ontario, February 27, 2023 — SolarBank Corporation (the “Company”), an independent renewable and clean energy project developer, is pleased to announce that it will be presenting at the Gravitas 6th Annual Growth Conference taking place at the Fairmont Pacific Rim Hotel on Thursday, March 2nd, 2023, in Vancouver, British Columbia.
Dr. Richard Lu, Chief Executive Officer of the Company, is scheduled to present on Thursday, March 2nd, 2023, at 9:20 A.M. PST. Dr. Lu will also be fielding questions, hosting individual meetings, and participating on a panel discussion during the one-day in-person conference. “I am excited to be presenting at the Gravitas Growth Conference,” stated Dr Lu. “It will provide an excellent opportunity to introduce SolarBank Corporation and discuss its plans for 2023 and beyond.”
Gravitas’ 6th Annual Growth Conference will feature leaders at the forefront of their industries as well as investors from Canada, the United States, and abroad. For registration details or to submit a 1X1 meeting request, please visit: https://web.cvent.com/event/bccb576f-35ce-4382-99c2-2c4e7c0291c7/summary
Conference Details:
Event: Gravitas 6th Annual Growth Conference
Format: Presentations, Q&A, Panel Discussions, and 1X1 Meetings
Date: Thursday, March 2nd, 2023
Time: 8:30 AM PST – 4:20 PM PST
Venue: Held in-person at the Fairmont Pacific Rim Hotel
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s business plan and strategy. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward- looking statements. Such risks and uncertainties include, but are not limited to, failure to complete the Offering, the impact and progression of the COVID-19 pandemic and other factors set forth under “Forward-Looking Statements” and “Risk Factors” in the Prospectus. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
No securities regulatory authority has either approved or disapproved of the contents of this news release. The securities referred to herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, persons within the United States absent registration or available exemptions from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. ‘United States’ are as defined in Regulation S under the U.S. Securities Act.
NEITHER THE CANADIAN SECURITIES EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE CANADIAN SECURITIES EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Exhibit 99.17
Management’s Discussion and Analysis
For the Three and Six Months End December 31, 2022
| Contact Information: | ||
SolarBank Corporation | ||
| (Formerly Abundant Solar Energy Inc.) | ||
| 505 Consumers Road, Suite 803 | ||
| Toronto, ON M2J 4V8 | ||
| Contact Person: Mr. Sam Sun, CFO | ||
| Email: info@abundantsolarenergy.com |
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of SolarBank Corporation. (“SUNN” or the “Company”) was prepared by management as of February 28, 2023 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the annual audited consolidated financial statements of the Company and notes thereto for the year ended June 30, 2022 and the consolidated interim financial statements of the Company and notes thereto for the three and six months ended December 31, 2022. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
SBNK is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement and construction (“EPC”), operation and maintenance (“O&M”), and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth via organic growth and M&A.
Development of the Business
USA
The Company is focused on its key market in New York and Maryland. In New York the Company is constructing a total of 6 solar projects, totaling 12 MWp (see Existing Projects table below), including two Community Solar projects, two with municipal power purchase agreement (PPA), and two net metering projects for Honeywell International Inc. The Company also has two community solar projects reached Notice to Proceed; seven community solar projects under utility interconnection studies. In addition the Company is working on sites origination of potential community solar projects. The Company is working with the Maryland Department of Transportation on eighteen potential solar project sites.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs is improving.
Canada
Over the past few years, the real estate sector has experienced an evolution in the importance of Environmental, Social and Governance (“ESG”) issues. The sector has made tremendous strides in tackling its contribution to Climate Change but despite efforts made so far, there is still a significant amount of work to be done, particularly given real estate’s 40% contribution toward global carbon emissions. Many Canadian real estate companies are set out to achieve its net zero emissions goals for all their operations and new developments. Real estate can be developed and managed to make positive impacts by stopping the growth of carbon emissions from properties and reduce emissions dramatically.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Selected Quarterly Information
The following table set selected condensed interim consolidated financial information for the Company for the three and six-months period ended December 31, 2022 and 2021 and should be read in conjunction with the Company’s consolidated financial statements as at June 30, 2022 and 2021 and related notes thereto for such periods.
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| For the three months ended December 31 | 2022 $ | 2021 $ | Change | |||||||||
| Revenue | 2,964,934 | 6,211,631 | ||||||||||
| Revenue – EPC | 2,932,635 | 6,107,416 | ||||||||||
| Revenue – development | - | 104,215 | ||||||||||
| Revenue – O&M | 32,299 | - | ||||||||||
| Cost of goods sold | (1,926,479 | ) | (5,488,273 | ) | ||||||||
| Net income | 126,542 | 350,357 | ||||||||||
| Net income per share | 0.01 | 0.02 | ||||||||||
| For the six months ended December 31 | 2022 $ | 2021 $ | Change | |||||||||
| Revenue | 8,445,386 | 8,813,688 | ||||||||||
| Revenue – EPC | 8,398,177 | 8,409,473 | ||||||||||
| Revenue – development | - | 404,215 | ||||||||||
| Revenue – O&M | 47,209 | - | ||||||||||
| Cost of goods sold | (6,844,012 | ) | (7,558,278 | ) | ||||||||
| Net income | 352,499 | 262,135 | ||||||||||
| Net income per share | 0.02 | 0.02 | ||||||||||
| As at | December 31, 2022 $ | June 30, 2022 $ | Change | |||||||||
| Total assets | 10,229,708 | 9,194,537 | ||||||||||
| Total current liabilities | 4,395,917 | 3,365,909 | ||||||||||
| Total non-current liabilities | 1,025,590 | 1,388,013 | ||||||||||
The following discussion addresses the operating results and financial condition of the Company for the three and six months ended December 31th, 2022 compared with the three and six months ended December 31th, 2021.
Result of Operations
Three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021
Trend
In the first half of 2023, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. All existing EPC projects reached PTO or substantial completion in December 2022. It is expected that the Company’s revenue will keep growing in 2023 as two projects in the US reached notice to proceed stage (“NTP”) and many projects in the US are approaching NTP.
The net income for the three months ended December 31, 2022 decreased by $223,815 compared to the net income for the three month ended December 31, 2021 with $126,542 net income recognized during the second quarter of 2023 as compared to a net income of $350,357 for the second quarter of 2022.
The net income for the first half of 2023 increased by $90,364 compared to the net profit for the first half year of 2022, with $352,499 net income recognized in 2023 as compared to net income of $262,135 in 2022.
Key business highlights and projects updates in H1 2023
| ● | Existing projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached substantial completion in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. |
| ● | Projects under development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred | Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA |
6.1 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
93,540 |
IPO, working capital | The project currently has completed an interconnection agreement with the utility, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. | ||||||||
| Geddes | New York, USA |
4.0 | March 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 |
81,870 |
IPO, working capital | |||||||||
| SUNNY | New York, USA |
28.0 | September 2023 |
Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 |
- |
IPO, working capital | The Company has submitted of an interconnection request to New York Independent System Operator. It has secured site control via an executed lease with the landowner. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). The barrier to completion is the timing and result of the interconnection request could delay the progress of engineering, permitting and interconnection deposit. | ||||||||
| 261 Township |
Alberta, Canada |
4.5 | June 2023 |
Completion of engineering work and placement of orders for main project components | 800,000 | IPO, working capital | The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has started and the Company is in discussion with the local utility on net metering interconnection, and with local authority having jurisdiction on the building permit. |
| Dutch Hill 1 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Dutch Hill 2 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Dutch Hill 3 |
New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | IPO, working capital | ||||||||||
| Wastebeds1 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Wastebeds2 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital | |||||||||
| Wastebeds3 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 |
750 |
IPO, working capital |
Revenue
The Company’s revenue is mainly from EPC services, Development fee and O&M services.
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||
| EPC services | 2,932,635 | 6,107,416 | (3,174,781 | ) | 8,398,177 | 8,409,473 | (11,296 | ) | ||||||||||||||||
| Development fees | - | 104,215 | (104,215 | ) | - | 404,215 | (404,215 | ) | ||||||||||||||||
| O&M services | 32,299 | - | 32,299 | 47,209 | - | 47,209 | ||||||||||||||||||
| Total Revenue | 2,964,934 | 6,211,631 | (3,246,697 | ) | 8,445,386 | 8,813,688 | (368,302 | ) | ||||||||||||||||
The following table shows the significant changes in revenue from 2022
| Three months | Six months | Explanation | ||||||||
| EPC services | (3,174,781 | ) | (11,296 | ) | Lower revenue from projects Richmond and Portland as the different stage of the projects. | |||||
| Development fees | (104,215 | ) | (404,215 | ) | No project has been sold at NTP in 2023. There was one project was sold at NTP in 2022 | |||||
| O&M services | 32,299 | 47,209 | The Company is growing the O&M services revenue by allocating more resource to this revenue stream | |||||||
| Total | (3,246,697 | ) | (368,302 | ) | ||||||
Expenses
Expenses consist of expenditures related to cost of services provided and costs to develop new projects, as well as corporate business development and administrative expenses.
| Expenses | Three Months Ended December 31 | Six Months Ended December 31 | ||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||
| Cost of goods sold | (1,926,479 | ) | (5,488,273 | ) | 3,561,794 | (6,844,012 | ) | (7,558,278 | ) | 714,266 | ||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Accounting and legal | (145,246 | ) | (18,341 | ) | (126,905 | ) | (191,049 | ) | (57,434 | ) | (133,615 | ) | ||||||||||||
| Advertising and promotion | (38,613 | ) | (675 | ) | (37,938 | ) | (38,613 | ) | (675 | ) | (37,938 | ) | ||||||||||||
| Bank charges & interest | (2,495 | ) | (2,196 | ) | (299 | ) | (6,149 | ) | (6,085 | ) | (64 | ) | ||||||||||||
| Depreciation | (13,593 | ) | (2,096 | ) | (11,497 | ) | (23,339 | ) | (4,192 | ) | (19,147 | ) | ||||||||||||
| Insurance | (34,002 | ) | (15,760 | ) | (18,242 | ) | (57,788 | ) | (31,520 | ) | (26,268 | ) | ||||||||||||
| Office and miscellaneous | (42,017 | ) | (12,153 | ) | (29,864 | ) | (109,926 | ) | (16,872 | ) | (93,054 | ) | ||||||||||||
| Rent | (6,920 | ) | (24,024 | ) | 17,104 | (14,079 | ) | (44,474 | ) | 30,395 | ||||||||||||||
| Repairs and maintenance | (1,181 | ) | (1,734 | ) | 553 | (1,850 | ) | (3,468 | ) | 1,618 | ||||||||||||||
| Salary and Wages | (503,022 | ) | (392,441 | ) | (110,581 | ) | (743,394 | ) | (918,739 | ) | 176,345 | |||||||||||||
| Seminars and conferences | (56,812 | ) | - | (56,812 | ) | (58,089 | ) | - | (58,089 | ) | ||||||||||||||
| Telephone and utilities | (10,854 | ) | (7,321 | ) | (3,533 | ) | (17,125 | ) | (24,641 | ) | 7,516 | |||||||||||||
| Travel and accommodation | (35,207 | ) | (23,649 | ) | (11,558 | ) | (54,813 | ) | (28,529 | ) | (26,284 | ) | ||||||||||||
| Total operating expenses | (889,962 | ) | (500,391 | ) | (389,571 | ) | (1,316,214 | ) | (1,136,630 | ) | (179,584 | ) | ||||||||||||
| Total Expenses | (2,816,441 | ) | (5,988,664 | ) | 3,172,223 | (8,160,226 | ) | (8,694,908 | ) | 534,682 | ||||||||||||||
The following table shows the significant changes in expenses from 2022:
| Expenses | Three months | Six months | ||||||||
| Cost of goods sold | 3,561,794 | 714,266 | Less cost of goods sold due to less revenue being recognized in this quarter. | |||||||
| Accounting and legal | (126,905 | ) | (133,615 | ) | Full audit and quarterly review were completed in this quarter | |||||
| Salary and Wages | (110,581 | ) | 176,345 | The headcount in 2023 was lower than in 2022. Performance based bonus accruals occurred in December 2022 | ||||||
| Seminars and conferences | (56,812 | ) | (58,089 | ) | Increased travel and seminars activities in 2023 as there are no longer pandemic restriction. | |||||
| Advertising and promotion | (37,938 | ) | (37,938 | ) | Additional advertising and promotion to grow the business. | |||||
| Various others | (57,336 | ) | (126,287 | ) | ||||||
| Total Expenses | 3,172,223 | 534,682 | ||||||||
Other Income (Expense)
For the three months ended December 31, 2022, the Company had other loss of $21,951 compared to other income of $127,389 for the three months ended December 31, 2021. Other loss for the three months ended December 31, 2022 consists mainly of net interest expense of $9,643 and a foreign exchange loss of $9,827. Other income for the three months ended December 31, 2021 consists mainly of Covid subsidy of $106,186 and CESIR of $58,024, offset by interest expenses of $36,841.
For the six months ended December 31, 2022, the Company had other income of $67,339 compared to other income of $143,354 for the six months ended December 31, 2021. Other income for the six months ended December 31, 2022 consists mainly of foreign exchange gain of $114,820, offsetby net interest expense of $42,425. Other income for the six months ended December 31, 2021 consists mainly of Covid subsidy of $133,507, CESIR refund of $58,024 and a foreign exchange gain of $65,975, offsetting by interest expenses of $79,641.
Net Income (loss)
The net income for the three months ended December 31, 2022 was $126,542 for an income per share of $0.01 based on 16,000,000 outstanding shares versus $350,357 for a income per share of $0.02 based on 16,000,000 outstanding shares for the comparative period.
The net income for the six months ended December 31, 2022 was $352,499 for a income per share of $0.02 based on 16,000,000 outstanding shares versus $262,135 for a income per share of $0.02 based on 16,000,000 outstanding shares for the comparative period.
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The case does not represent a material threat to the Company. |
| (2) | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 contracts where the IESO had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. The ultimate amount to be recovered is subject to the IESO’s approval, and there is no certainty as to the actual amount to be recovered from the IESO. Subsequent to June 30, 2021, no amounts have been recovered from IESO.
| (3) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (4) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| (5) | The Company has $6,486,838 in accounts receivable outstanding from the Solar Flow Through group of companies for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. These amounts are expected to be paid in 2023. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements except for the three months and six months ended December 31 2022 and 2021. According to item 1.5 (ii) of Form 51-102F1, the Company is not providing a tabular comparison of the eight most recently completed quarters.
Liquidity and Capital Resources
As at December 31, 2022, the Company had a cash balance of $1,889,057 (June 30, 2022 - $931,977) with working capital surplus of $5,645,703 ( June 30, 2022 - $5,617,200).
The following table summarizes the Company’s liquidity position:
| As at | December 31, 2022 $ | June 30, 2022 $ | ||||||
| Cash | 1,889,057 | 931,977 | ||||||
| Working capital | 5,645,703 | 5,617,200 | ||||||
| Total assets | 10,229,708 | 9,194,537 | ||||||
| Total liabilities | 5,421,507 | 4,753,922 | ||||||
| Shareholders’ equity | 4,808,201 | 4,440,615 | ||||||
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
The Company’s cash is held in high liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| For three months ended | December 31, 2022 $ | December 31, 2021 $ | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 149,327 | 1,312,796 | ||||||
| Investing activities | - | (3,889 | ) | |||||
| Financing activities | 880,210 | (907,128 | ) | |||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 957,080 | 490,499 | ||||||
Cash flow from operating activities
The Company generated cash of $149,327 from operating activities during the six months ended December 31, 2022, while the Company generated $1,312,796 cash during the same period ended December 31, 2021. The Company generated cash of $440,809 from the operational activities and used $291,482 for the change of working capital during the six months ended December 31, 2022, while the Company generated cash of $288,509 from the operating activities and generate $1,024,287 due to the change of working capital for the same period ended December 31, 2021.
Cash flow from financing activities
The Company generated cash of $880,210 from financing activities during the six months ended December 31, 2022, while the Company used $907,128 cash during the same period ended December 31, 2021. The cash generated in financing activities for the six months ended December 31, 2022 was mainly driven by the net proceeds of $1,250,000 received from debenture financing completed in October 2022 and the increase of due to related party by $623,579, offset by the repayment of short-term loans of $595,712, long-term loans of $388,666. The cash used in financing activities for the six months ended December 31, 2021 was solely resulted from the repayment of short-term loans of $907,128.
Cash flow from investing activities
The Company used cash of $nil in acquisition of plant, property and equipment during the six months ended December 31, 2022, while the Company used $3,889 in acquisition of plant, property and equipment during the same period ended December 31, 2021.
Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 has been reclassified as current portion due to the Company fully repaid the Energy line Loan in the amount of $343,776 in principal and $13,146 in interest on October 6, 2022.
On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,984 (USD $891,158) since August 2022 to note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note was expected to be repaid in full on February 28, 2023. As at December 31, 2022, an accrued interest of $34,325 (USD $24,619) was receivable from this customer. The Company had not received the payment by February 28, 2023. It’s expected to be repaid in March 2023.
During the three months period ended December 31, 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.
Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs.
Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a venture issuer.
Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.
On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. At December 31, 2022, an interest accretion of $28,409 was recognized. A continuity of the liability portion of the convertible debentures is as follows:
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 28,409 | |||
| Balance, December 31, 2022 | $ | 1,164,773 | ||
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| December 31, 2022 | June 30, 2022 | |||||||
| Long-term debt -non-current portion (note 13) | $ | 870,370 | 1,230,643 | |||||
| Shareholder Equity | $ | 4,808,201 | 4,440,615 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) [16,000,000] common shares issued and outstanding; and (ii) $1,250,000 principal amount of convertible debt that is convertible into 2,500,000 common shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants; and (iii) 2,500,000 Advisory Warrants.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
As at December 31, 2022, included in trade and other receivable was $4,091 (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company.
As at December 31, 2022, included in trade and other payable was $774,920 (June 30, 2022 - $Nil) due to Sustainable Investment Ltd. One of SIL’s director is also the controlling shareholder of the Company.
As at December 31, 2022, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three and six months ended December 31, 2022 and 2021 were as follows:
| Three Month Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Short-term employee benefits | $ | 504,357 | $ | 217,454 | ||||
| Six Month Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Short-term employee benefits | $ | 740,339 | $ | 481,476 | ||||
Short-term employee benefits include consulting fees.
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Significant Accounting Policies
| ● | Revenue recognition: |
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
| ● | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development and construction costs, borrowing costs, property taxes and other construction overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| ● | Lease |
The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.
| ● | Contract fulfilment cost |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Convertible debenture |
The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument.
| ● | Taxes |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| ● | Expected credit loss |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| ● | Warranties |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three and six months ended December 31, 2022, $Nil and $Nil warranty provision was recorded (2021 - $Nil and $Nil).
| ● | Convertible debenture |
The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. The case does not represent a material threat to the Company.
| ● | Accounting standards issued buy not yet effective |
The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023.
IFRS 17 Insurance Contracts
In June 2020, the International Accounting Standards Board (IASB) issued IFRS 17. IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 with earlier adoption permitted as long as IFRS 9 is also applied. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.
The Company has not early adopted IFRS 17 and determined that the adoption of this standard will not have an impact on the Company’s consolidated financial statements.
Critical Accounting Estimates
Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience regarding past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, there are no critical accounting estimates that affect our financial statements for the three and six months ended December 31, 2022 and 2021.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
Six months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,783,272 | 68 | % | ||||
Six months ended December 31, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 7,935,169 | 90 | % | ||||
Three months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 1,851,848 | 62 | % |
Three months ended December 31, 2021 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,937,705 | 96 | % |
| December 31, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 1,859,974 | 51 | % | ||||
| Customer B | $ | 1,483,908 | 40 | % |
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Capital Structure and Outstanding Shares
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were：
| Common shares issued and outstanding | 16,000,000 | |||
| Advisory Warrants (1) | 2,500,000 | |||
| Stock options authorized to issue (2) | 2,774,000 | |||
| Restricted Share Units authorized to issue (3) | 500,000 | |||
| Convertible Debt issued(4) | 7,500,000 | |||
| 29,274,000 |
| (1) | On October 3, 2022 the Company issued 2,500,000 Advisory Warrants vesting after the completion of IPO. |
| (2) | On November 4, 2022, the Company was authorized to issue 2,774,000 stock options. |
| (3) | On November 4 2022, the Company was authorized to issue 500,000 restricted share units. |
| (4) | Convertible into 2,500,000 common shares, 2,500,000 class A warrants and 2,500,000 class B warrants. |
Subsequent Events
| a) | On March 1, 2023 the Company will close its initial public offering (the “Offering”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consisted of a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Company previously obtained a receipt for its final long form prospectus (the “Final Prospectus”) filed with the securities regulatory authorities in Ontario, British Columbia and Alberta, in connection with the Offering. The Company also has received final approval from the Canadian Securities Exchange (the “CSE”) to list its Common Shares on the CSE. With the completion of the Offering, the Company will commence trading on the CSE under the symbol “SUNN” on March 2, 2023. The Offering was made only by the Final Prospectus. The Final Prospectus contains important detailed information about the Offering. A copy of the Final Prospectus is available on SEDAR at www.sedar.com. |
The expected cost and deduction are below:
| ● | Agent commission: $362,250 |
| ● | Agent Fees (include tax): $80,235 |
| ● | As additional compensation, the Company has agreed to issue to the Agent, that number of common share purchase warrants of the Company (the “Broker Warrants”) as is equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option). Each Broker Warrant will entitle the holder thereof to purchase one (1) Common Share (as defined below) (each, a “Broker Warrant Share”) at the Offering Price for a period of 36 months following the Closing Date. |
| b) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. The case does not represent a material threat to the Company. |
Forward-Looking Information
This MD&A contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this MD&A contains forward-looking statements pertaining to the Company’s expectations regarding its revenue, expenses and operations; industry trends and overall market growth; the Company’s growth strategies; the Company’s intention to become an IPP; the Company’s solutions for its customers; support for local communities; fighting climate change and democratization of clean energy access; future profitable growth; the Company’s competitive position; the megawatt capacity and type of future solar projects; the regulatory environment in which the Company operates; the commencement of trading the Company’s shares on the CSE and the timing thereof. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.18
SolarBank
Corporation Closes $6,037,500 Prospectus Offering,
Including Full Exercise of Over-Allotment Option
NOT
INTENDED FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES
Toronto, Ontario, March 1, 2023 — SolarBank Corporation (the “Company”) is pleased to announce that it has closed its initial public offering (the “Offering”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consisted of a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share.
The Common Shares were offered on a “commercially reasonable efforts” basis pursuant to an agency agreement between the Company and Research Capital Corporation (the “Agent”) dated February 10, 2023, which has been entered into in connection with the Offering. The Agent received a cash commission of $362,250, a corporate finance fee of $35,000 and reimbursement of its expenses in connection with the Offering. In addition, the Agent received an aggregate of 483,000 agent’s warrants exercisable to purchase the same number of Common Shares of the Company at a price of $0.75 per Common Share for a period of 36months from the date of closing of the Offering. The net proceeds of the Offering are currently intended to be used for company expansion and general corporate purposes, all as further outlined in the final long form prospectus of the Company dated February 10, 2023 (the “Final Prospectus”).
The Company previously obtained a receipt for its Final Prospectus filed with the securities regulatory authorities in Ontario, British Columbia and Alberta, in connection with the Offering. The Company also previously announced that it has received conditional approval from the Canadian Securities Exchange (the “CSE”) to list its Common Shares on the CSE, subject to fulfilling customary CSE requirements. With the completion of the Offering, the Company expects to commence trading on the CSE under the symbol “SUNN” on March 2, 2023.
The Offering was made only pursuant to the Final Prospectus. The Final Prospectus contains important detailed information about the Offering. A copy of the Final Prospectus may be obtained from the Agent by contacting Savio Chiu at schiu@researchcapital.com and is available under the Company’s profile on SEDAR at www.sedar.com. Investors should read the Final Prospectus before making an investment decision.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s proposed use of proceeds of the Offering, the CSE listing and the timing thereof. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, failure to complete the Offering, the impact and progression of the COVID-19 pandemic and other factors set forth under “Forward-Looking Statements” and “Risk Factors” in the Final Prospectus. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
No securities regulatory authority has either approved or disapproved of the contents of this news release. The securities referred to herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, persons within the United States absent registration or available exemptions from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. ‘United States’ are as defined in Regulation S under the U.S. Securities Act.
Exhibit 99.19
SolarBank
Corporation Announces Successful IPO,
Shares Commence Trading on the CSE Under the Symbol SUNN
| ● | 100+ solar power plants completed and under management in Canada and U.S. over last decade placing SUNN as a pioneer in design and development of distributed solar power plants | ||
| ● | 100% customer retention rate since inception, 4,000+ community solar subscribers, 90% government contracts, Fortune 500 companies as customers | ||
| ● | 700 megawatts of solar development pipeline, 60 megawatts built; SolarBank is one of North America’s leading solar and storage companies. | ||
| ● | Expansion includes new markets, new technologies, becoming an Independent Power Producer |
NOT
INTENDED FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES
Toronto, Ontario, March 2, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) a developer, owner, and operator of distributed solar power plants across North America, today announces that following the successful completion of its $6,037,500 Initial Public Offering (“IPO”) (please refer to press release dated March 1, 2023), the common shares of the Company (“Common Shares”) will begin trading on the Canadian Securities Exchange effective at open of market today under the ticker symbol “SUNN”.
Completing its first project more than 10 years ago, SolarBank has built a reputation as a trusted developer, engineer, and asset operator specializing in behind-the-meter (“BTM”) solar plants, grid-connected community solar gardens, and utility-scale solar farms. The Company brings a comprehensive solution to its customers, inclusive of ESG (environment, social, governance) best practices, EPC (engineering, procurement and construction) expertise, understanding of incentive packages, and access to low-cost financing.
SolarBank has completed hundreds of solar power plants across an array of applications from rooftop installations to ground-mount solar farms for commercial and industrial (“C&I”) clients, including Fortune 500 companies (including Honeywell International), utilities, municipalities, and more. The Company has completed 70 community solar projects in collaboration with Central New York Regional Planning and Development Board. Approximately 90 percent of SolarBank’s contracts to date have been awarded by governments in the Company’s primary regions of focus so far: Ontario in Canada and New York and Maryland in the U.S.
SolarBank has an experienced management team with over 100 years of combined expertise in the renewable and clean energy industry coupled with a strongly defined philosophy and financial vision for successful growth. The team is led by Dr. Richard Lu who has more than 25 years of global experience in the energy industry developing and implementing business strategies for organizations in North America, Europe and Asia. Dr. Lu has held senior positions with Enbridge Gas Distribution, Husky Injection Molding Systems Ltd., Toronto Hydro Corporation and Dillon Consulting.
“The IPO represents not only a milestone for our company and investors, but an inflection point as well,” said Dr. Richard Lu, President and Chief Executive Officer at SolarBank. “We have grown methodically to galvanize our reputation in our focus markets and now, with thousands of C&I and community solar projects becoming available across North America amid an unprecedented push for decarbonization and surging demand for clean energy, we are in an optimal position for horizontal and vertical expansion. I’d like to welcome all the new investors that have joined us and look forward to frequent updates as we move into this new phase of growth.”
Historically, SolarBank has operated through a “build-and-manage” revenue model, wherein the Company originates, develops, designs, constructs and brings a solar project to the operational phase, at which point the completed project is turned over to the owner (for example investment funds, private equity owners, Fortune 500 company, or similar entity). Subsequently, SolarBank often is contracted for long-term operations/maintenance of the project. The Company is currently operating more than 100 solar plants with a capacity of more that 60 megawatts (“MW”).
SolarBank is deeply committed to job creation and supporting local communities in a unified effort to combat climate change and democratize clean energy access. For every project, the Company recruits and utilizes local companies and contractors throughout the entire process from design and permitting, through construction and maintenance.
Going forward, SolarBank will judiciously fold-in a “build-and-own” revenue model. Rather than transferring ownership and seeking to serve as operator, the Company will retain ownership of select solar projects, subsequently selling the energy to a utility, government, or end user, effectively transitioning the company into an Independent Power Producer (“IPP”).
“Our long track record of success in operations, maintenance, and asset management is a formidable foundation and gateway to become an IPP, which will deliver long-term, profitable growth,” added Dr. Lu. “Previously, we were focused on comprehensive value chain efficiency. Now, we are all about using that experience and resources to scale. We will use our expertise gained from small feed-in tariff (FIT) solar gardens in Ontario and community solar farms in the U.S. to construct and operate utility scale solar farms of more than 100 megawatts peak in the abundance of carbon-intense markets, where price parities make solar the smart environmental and financial choice.”
He continued, “This multi-prong strategy benefits us in many ways, including providing one-time and recurring revenue streams generated across various time frames, as our projects will range from six months to five years from start to finish. We are clearly differentiated and our brand synonymous with quality and professionalism to deliver turnkey products. More than 30 states have implemented Renewable Portfolio Standards and the new Inflation Reduction Act has earmarked $369 billion for energy security and fighting climate change(1), giving us nearly unlimited opportunities to repeat nationwide our successes in Ontario and Eastern U.S.”
| (1) | https://home.treasury.gov/news/press-releases/jy1128 |
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its revenue, expenses and operations; industry trends and overall market growth; the Company’s growth strategies; the Company’s intention to become an IPP; the Company’s solutions for its customers; support for local communities; fighting climate change and democratization of clean energy access; future profitable growth; the Company’s competitive position; the megawatt capacity and type of future solar projects; the regulatory environment in which the Company operates; the commencement of trading the Company’s shares on the CSE and the timing thereof. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
No securities regulatory authority has either approved or disapproved of the contents of this news release. The securities referred to herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, persons within the United States absent registration or available exemptions from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. ‘United States’ are as defined in Regulation S under the U.S. Securities Act.
Exhibit 99.20
Exhibit 99.21
Exhibit 99.22
SolarBank Reaches Commercial Operation on 389.7kW DC Solar Ground Mount System in Union Springs, NY, Signs Power Purchase Agreement Selling Electricity to Municipality via Remote Net Metering
| ● | SolarBank secures more than $175,000 in incentives |
| ● | Solarbank to assume majority ownership of the project |
| ● | SolarBank signs power purchase agreement to sell electricity to municipality via remote net metering |
Toronto, Ontario, March 7, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce the completion of construction on a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. The power plant passed its final New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program inspection and has been placed into commercial operation. SolarBank secured more than $175,000 in NY-Sun incentives for the system.
SolarBank controlled the complete process, including originating the site, taking it through interconnection, permitting, development, negotiating a power purchase agreement (“PPA”), delivering financing, and conducting engineering, procurement, and construction. Upon final closing, SolarBank will assume a majority ownership stake in the system.
Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kWh of clean, renewable energy in its first year of operation.
“This is another milestone for us as we build corporate value through ownership of projects that we complete and the energy they generate,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “We appreciate the Village of Union Springs and its proactive approach to mitigating climate change with our solar systems. Our company is in a position of strength given the initiatives backstopped by the NYSERDA NY-Sun programs and we intend to remain relentless in the pursuit of our goal to become a large-scale independent power provider.”
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and type of future solar projects; and the closing of the acquisition of the majority ownership interest in the project. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.23
SolarBank to Receive $3.1 million in Pre-Construction Development Costs
Toronto, Ontario, March 9, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce that its subsidiary (the “Subsidiary”) has now concluded agreements for the repayment of $3.1 million of Pre-Construction Development Costs (“PCDC”). The PCDC were incurred in connection with certain FIT Contracts in Ontario. PCDC are defined as reasonable costs incurred in development of a project from contract award date to termination date. The Company expects the Subsidiary to conclude agreements for additional recovery of PCDC in the near term and has submitted a total claim of $6.3 million.
The Subsidiary is owned 49.9% by the Company; however, based on an arrangement between the Subsidiary and SolarBank, SolarBank will receive the full amount of the PCDC recoveries from the Subsidiary.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and type of future solar projects; and future recovery of PCDC. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.24
SolarBank Completes 3.5-Megawatt Community Solar Project for Gosh Enterprises
| ● | Community solar project in Portland, N.Y. participates in NY-Sun program, SolarBank secures $1.15 million in incentives for the project. |
| ● | Project completed by SolarBank through development and EPC agreement with Solar Troupsburg LLC, a subsidiary of Gosh Enterprises, Inc. |
| ● | The system will produce approximately 4.6 million kilowatt hours of electricity in its first year of operation, equivalent to reducing more than 100 metric tons of carbon dioxide (CO2) emissions through the system’s 35-year life span. |
Toronto, Ontario, March 14, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce achievement of commercial operation and financial closing on a 3.544-megawatt (“MW”) community solar power project in Portland, New York. The project has been sold to a subsidiary of Columbus, Ohio-based Gosh Enterprises, Inc., the parent company of Charleys Cheesesteaks, Bibibop Asian Grill, Lenny’s Grill and Subs, and non-profit Charley’s Kids.
SolarBank originated the site in western New York and took the project through full permitting and development before selling to Gosh Enterprises, subsequently delivering the turnkey project to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. The solar power project passed its final New York State Energy Research and Development Authority (NYSERDA) NY-Sun Program inspection and has been placed in commercial operation. SolarBank secured more than $1.15 million in NY-Sun incentives for the solar system.
The community solar project, which enrolls local subscribers for the power output, is nearly fully subscribed. The system will produce approximately 4.6 million kilowatt hours of green electricity in its first year of operation.
“This project is a demonstration of the various opportunities available today in the solar market and our diverse strategies to lead projects of different scope and scale from origination to commercial operation,” said Dr. Richard Lu, Chief Executive Officer of SolarBank. “Gosh Enterprises, which has invested hundreds of millions of dollars in solar projects since inception over a decade ago as the brainchild of Gosh founder and serial entrepreneur Charley Shin, is a beacon for sustainability while providing its clients an environmentally friendly ways to lower power costs. We hold their team in the highest regard and look forward to continuing a long relationship as we work collectively to reduce greenhouse gas emissions for a better planet.”
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has developed over 1,000 renewable and clean energy projects with a combined capacity of over 60 megawatts built. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release, the megawatt capacity and type of future solar projects; expectations of a long relationship with Gosh Enterprises and reduction of greenhouse gas emissions. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.25
SolarBank 7-Megawatt Community Solar Project in Richmond, N.Y. Achieves Commercial Operation, Second Recent Project Sold to Gosh Enterprises
| ● | Community solar project in Richmond, N.Y. participates in NY-Sun program, SolarBank secures $2.5 million in incentives for the project. |
| ● | Project completed by SolarBank through a development and EPC agreement with a subsidiary of Gosh Enterprises, Inc. |
| ● | The system will produce approximately 8.2 million kilowatt hours of electricity in its first year of operation, equivalent to reducing more than 5,811 metric tons of carbon dioxide (CO2) emissions. |
Toronto, Ontario, March 16, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce achievement of commercial operation and financial closing on a 7-megawatt (“MW”) community solar power project in Richmond, New York. The project has been sold to a subsidiary of Columbus, Ohio-based Gosh Enterprises, Inc., the parent of Charleys Cheesesteaks, Bibibop Asian Grill, Lenny’s Grill and Subs, and non-profit Charley’s Kids.
SolarBank originated the site south of Rochester, New York and took the project through full permitting and development before selling to Gosh Enterprises, subsequently developing the turnkey project to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. The solar power project passed its final New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program inspection and has been placed in commercial operation. SolarBank secured more than $2.5 million in NY-Sun incentives for the solar system.
The community solar project, which enrolls local subscribers for the power output, is nearly fully subscribed. The system will produce approximately 8.2 million kilowatt hours of green electricity in its first year of operation.
“Between this project in Richmond, N.Y. and another in Portland, N.Y. that we recently announced as completed and sold to Gosh Enterprises, nearly 12.5 million kilowatt hours of new, clean energy will be powering homes and business across the state,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “At first blush, one may not see much in common between solar panels and cheesesteaks, but the gap closes when understanding the entrepreneurial spirit of Gosh Enterprises founder Charley Shin. Charley has assembled a team of venerable solar experts at Gosh Enterprises that are stewards of the renewable energy age with goals that align perfectly with ours to capitalize on the litany of government incentives to accelerate the transition away from fossil fuels.”
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has developed over 1,000 renewable and clean energy projects with a combined capacity of over 60 megawatts built. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the megawatt capacity and type of future solar projects; and the transition away from fossil fuels. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.26
SolarBank Reaches Commercial Operation on New York Solar Project for Honeywell International
Toronto, Ontario, March 21, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce the completion of construction on a turnkey behind-the-meter (“BTM”) solar power project in New York state for Honeywell. SolarBank controlled the complete project from origination through completion. The power plant passed its final New York State Energy Research and Development Authority NY-Sun Program inspection and has been placed in commercial operation. SUNN secured nearly $240,000 in NY-Sun incentives for the system.
The system has an installed capacity of 683.55kWdc, and is expected to generate over 753,000kWh of clean, renewable energy in its first year of operation. The renewable energy generated will support Honeywell water treatment systems associated with the restoration of Onondaga Lake in Syracuse, NY, further advancing Honeywell’s commitment to “green remediation” practices as referred to by the U.S. Environmental Protection Agency. The solar installations also will reduce impacts to the electrical grid and lower greenhouse gas emissions.
SolarBank currently operates more than 100 solar plants with total capacity in excess of 60 megawatts.
“Honeywell has been a tremendous partner to us, and we are thrilled that our first announcement as a public company is commercial production of another BTM solar power plant for them,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “Together, we are creating jobs, supporting local communities, reducing grid strain, and helping to control climate change. With the support of governments throughout North America and initiatives in place for companies to transition away from fossil fuels, we feel the momentum building for solar and are excited about where we are heading.”
ABOUT HONEYWELL
Honeywell (www.honeywell.com) delivers industry-specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Honeywell technologies help aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; fighting climate change; the megawatt capacity and type of future solar projects; and future contracts with Honeywell. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.27
SOLARBANK CORPORATION |
||
| (Formerly Abundant Solar Energy Inc.) | ||
| Condensed Interim Consolidated Financial Statements | ||
| (Expressed in Canadian Dollars) | ||
| (Unaudited) | ||
| Three and Nine Months Ended March 31,2023 and 2022 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
| Notes | March 31, 2023 | June 30, 2022 | ||||||||
| Assets | ||||||||||
| Current assets: | $ | 5,630,599 | $ | 931,977 | ||||||
| Cash | ||||||||||
| Short-term investment | 3(d) | 4,680,000 | - | |||||||
| Trade and other receivables | 4 | 6,902,569 | 2,200,226 | |||||||
| Note receivables | 9 | 1,284,393 | - | |||||||
| Prepaid expenses and deposits | 5 | 2,574,440 | 2,060,455 | |||||||
| Contract fulfilment costs | 7 | - | 3,594,531 | |||||||
| Inventory | 8 | 648,832 | 195,920 | |||||||
| 21,720,833 | 8,983,109 | |||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment | 6 | 19,348 | 25,114 | |||||||
| Right-of-use assets | 12 | 155,894 | 186,314 | |||||||
| 175,242 | 211,428 | |||||||||
| Total assets | $ | 21,896,075 | $ | 9,194,537 | ||||||
| Liabilities and Shareholder’s equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 10 | $ | 3,204,664 | $ | 2,602,864 | |||||
| Unearned revenue | 11 | 287,774 | 16,281 | |||||||
| Current portion of long-term debt | 14 | 151,111 | 111,111 | |||||||
| Loan payables | 13 | - | 567,664 | |||||||
| Tax payable | 36,461 | 19,225 | ||||||||
| Current portion of lease liability | 12 | 42,692 | 48,764 | |||||||
| 3,722,702 | 3,365,909 | |||||||||
| Non-current liabilities: | ||||||||||
| Long-term debt | 14 | 787,037 | 1,230,643 | |||||||
| Deferred tax liabilities | 3,430 | 3,430 | ||||||||
| Lease liability | 12 | 140,216 | 153,940 | |||||||
| 930,683 | 1,388,013 | |||||||||
| Total liabilities | $ | 4,653,385 | $ 4 ,753,922 | |||||||
| Shareholders’ equity: | ||||||||||
| Share capital | 17 | 6,807,727 | 1,000 | |||||||
| Contributed surplus | 15 | 2,676,526 | - | |||||||
| Accumulated other comprehensive income | (34,000 | ) | 73,767 | |||||||
| Retained earnings | 7,837,154 | 4,410,565 | ||||||||
| Equity attributable to shareholders of the company | 17,287,407 | 4,485,332 | ||||||||
| Non-controlling interest | 4(2) | (44,717 | ) | (44,717 | ) | |||||
| Total equity | 17,242,690 | 4,440,615 | ||||||||
| Total liabilities and shareholders’ equity | $ | 21,896,075 | $ | 9,194,537 | ||||||
Approved and authorized for issuance on behalf of the Board of Directors on May 30, 2023 by:
| “Richard Lu” | “Sam Sun” | |
| Richard Lu, CEO, and Director | Sam Sun, CFO |
See accompanying notes to these condense interim consolidated financial statements.
| 2 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Expressed in Canadian dollars)
(Unaudited)
Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||||||||
| Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Revenue from EPC services | $ | 684,296 | $ | 977,562 | $ | 9,082,473 | $ | 9,387,035 | ||||||||||
| Revenue from development fees | - | - | - | 404,215 | ||||||||||||||
| Revenue from O&M services | 22,560 | - | 69,769 | - | ||||||||||||||
| 706,856 | 977,562 | 9,152,242 | 9,791,250 | |||||||||||||||
| Cost of goods sold | (51,601 | ) | (448,548 | ) | (6,895,613 | ) | (8,006,825 | ) | ||||||||||
| Gross profit | 655,255 | 529,014 | 2,256,629 | 1,784,425 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Advertising and promotion | (47,719 | ) | (6,725 | ) | (86,332 | ) | (7,400 | ) | ||||||||||
| Depreciation | (12,846 | ) | (2,096 | ) | (36,185 | ) | (6,288 | ) | ||||||||||
| Insurance | (29,391 | ) | (44,020 | ) | (87,179 | ) | (75,540 | ) | ||||||||||
| Office, rent and utilities | (91,153 | ) | (48,629 | ) | (240,282 | ) | (144,169 | ) | ||||||||||
| Listing fees | (68,517 | ) | - | (99,491 | ) | - | ||||||||||||
| Professional fees | (553,902 | ) | (15,796 | ) | (713,977 | ) | (73,230 | ) | ||||||||||
| Salary and Wages | (538,318 | ) | (397,081 | ) | (1,281,712 | ) | (1,315,820 | ) | ||||||||||
| Stock based compensation | (2,621,451 | ) | - | (2,621,451 | ) | - | ||||||||||||
| Travel and events | (21,022 | ) | (6,675 | ) | (133,924 | ) | (35,204 | ) | ||||||||||
| Total operating expenses | (3,984,319 | ) | (521,022 | ) | (5,300,533 | ) | (1,657,651 | ) | ||||||||||
| Other income (loss) | ||||||||||||||||||
| Interest income (expense) | 56,301 | (9,969 | ) | 13,876 | (89,610 | ) | ||||||||||||
| Other income (expense) | 4(2) | 6,363,363 | 431,865 | 6,473,127 | 654,860 | |||||||||||||
| Net Income before taxes | 3,090,600 | 429,888 | 3,443,099 | 692,024 | ||||||||||||||
| Income tax refund (expense) | (16,510 | ) | - | (16,510 | ) | - | ||||||||||||
| Net income | $ | 3,074,090 | $ | 429,888 | $ | 3,426,589 | $ | 692,024 | ||||||||||
| Current translation adjustments, net of tax of $nil | (9,218 | ) | (194,542 | ) | (107,767 | ) | 386 | |||||||||||
| Net income and comprehensive income | $ | 3,064,872 | $ | 235,346 | $ | 3,318,822 | $ | 692,410 | ||||||||||
| Net income attributable to: | ||||||||||||||||||
| Shareholders of the company | 3,074,090 | 429,888 | 3,426,589 | 692,024 | ||||||||||||||
| Non-controlling interest | - | - | - | - | ||||||||||||||
| Net Income | $ | 3,074,090 | $ | 429,888 | $ | 3,426,589 | $ | 692,024 | ||||||||||
| Total income and comprehensive income attributable to: | ||||||||||||||||||
| Shareholders of the company | 3,064,872 | 235,346 | 3,318,822 | 692,410 | ||||||||||||||
| Non-controlling interest | - | - | - | - | ||||||||||||||
| Total income and comprehensive income | $ | 3,064,872 | $ | 235,346 | $ | 3,318,822 | $ | 692,410 | ||||||||||
| Net income per share | ||||||||||||||||||
| Basic | 0.11 | 0.03 | 0.13 | 0.04 | ||||||||||||||
| Diluted | 0.09 | 0.03 | 0.10 | 0.04 | ||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||
| Basic | 26,800,000 | 16,000,000 | 26,800,000 | 16,000,000 | ||||||||||||||
| Diluted | 35,915,942 | 16,000,000 | 35,915,942 | 16,000,000 | ||||||||||||||
See accompanying notes to these condensed interim consolidated financial statements
| 3 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian Dollars)
(Unaudited)
| Note | Number of shares | Share Capital | Share Option Reserve | Retained Earnings | Accumulated
OCI | Total Shareholders’ Equity | Non-Controlling Interest | Total Equity | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | 16,000,000 | $ | 1,000 | - | $ | 4,598,958 | $ | (145,939 | ) | $ | 4,454,019 | $ | (44,717 | ) | $ | 4,409,302 | ||||||||||||||||||
| Net income for the period | - | - | - | 692,025 | - | 692,025 | - | 692,025 | ||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | 115,362 | 115,362 | - | 115,362 | ||||||||||||||||||||||||||
| Balance at March 31,2022 | 16,000,000 | $ | 1,000 | - | $ | 5,290,983 | $ | (30,577 | ) | $ | 5,261,406 | $ | (44,717 | ) | $ | 5,216,689 | ||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | |||||||||||||||||||
| Net income for the period | - | - | - | 3,426,589 | - | 3,426,589 | - | 3,426,589 | ||||||||||||||||||||||||||
| Conversion of convertible debentures | 15, 17 | 2,500,000 | 1,250,000 | - | - | - | 1,250,000 | - | 1,250,000 | |||||||||||||||||||||||||
| Common shares issued, net of costs | 17(b)(ii) | 8,050,000 | 5,611,802 | - | - | - | 5,611,802 | - | 5,611,802 | |||||||||||||||||||||||||
| Broker warrants issued | - | (242,575 | ) | 242,575 | - | - | - | - | - | |||||||||||||||||||||||||
| RSU granted | 17(e) | 250,000 | 187,500 | 55,666 | - | - | 243,166 | - | 243,166 | |||||||||||||||||||||||||
| Share-based compensation | 17(d) | - | - | 596,842 | - | - | 596,842 | - | 596,842 | |||||||||||||||||||||||||
| Advisory warrants issued | 17(c) | - | - | 1,781,443 | - | - | 1,781,443 | - | 1,781,443 | |||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | (107,767 | ) | (107,767 | ) | - | (107,767 | ) | |||||||||||||||||||||||
| Balance at March 31,2023 | $ | 6,807,727 | $ | 2,676,526 | $ | 7,837,154 | $ | (34,000 | ) | $ | 17,287,407 | $ | (44,717 | ) | $ | 17,242,690 | ||||||||||||||||||
See accompanying notes to condensed interim consolidated financial statements
| 4 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
| Nine months ended March 31 | ||||||||
| In Canadian Dollars | 2023 | 2022 | ||||||
Operating activities: | ||||||||
| Net income | $ | 3,426,589 | $ | 692,024 | ||||
| Items not involving cash: | ||||||||
| Depreciation | 36,185 | 6,288 | ||||||
| Share-based compensation | 596,842 | - | ||||||
| Warrants and RSU vested | 2,024,609 | - | ||||||
| 6,084,225 | 698,312 | |||||||
| Changes in non-cash working capital balances: | ||||||||
| Accounts receivable | (4,876,594 | ) | 3,837,886 | |||||
| Other receivable | (131,048 | ) | 486,016 | |||||
| Contract fulfilment costs | 3,594,531 | - | ||||||
| Inventory | (275,979 | ) | - | |||||
| Prepaids | (395,066 | ) | 1,207,482 | |||||
| Accounts payable and accrued liabilities | (1,740,507 | ) | (2,716,889 | ) | ||||
| Other payable | 2,102,560 | - | ||||||
| Advance from customer | 255,212 | (33,472 | ) | |||||
| Income tax payable | 18,131 | (17,408 | ) | |||||
| Deferred taxes | - | (110,064 | ) | |||||
| Changes in due to related parties | 17,929 | (92,756 | ) | |||||
| Cash provided by operating activities | 4,653,394 | 3,259,107 | ||||||
Investing activities: | ||||||||
| Acquisition of property, plant and equipment | - | (2,994 | ) | |||||
| Cash used in investing activities | - | (2,994 | ) | |||||
Financing activities: | ||||||||
| Net proceeds from convertible loan | 1,250,000 | - | ||||||
| Net proceeds from issuance of common shares, net of transaction costs | 5,611,802 | - | ||||||
| Note receivable | (1,284,393 | ) | - | |||||
| Invest in GIC | (4,680,000 | ) | - | |||||
| Repayment of lease obligation | (19,795 | ) | - | |||||
| Repayment of short-term loans | (593,167 | ) | (1,012,746 | ) | ||||
| Repayment of long-term debts | (417,996 | ) | - | |||||
| Cash provided by (used in) financing activities | (133,549 | ) | (1,012,746 | ) | ||||
Effect of changes in exchange rates on cash | 178,777 | 126,409 | ||||||
| Increase (decrease) in cash | 4,698,622 | 2,369,776 | ||||||
| Cash and cash equivalents, beginning | 931,977 | 1,400,073 | ||||||
| Cash and cash equivalents, ending | 5,630,599 | 3,769,851 | ||||||
Interest paid | 75,823 | 30,027 | ||||||
| Income tax paid | - | - | ||||||
See accompanying notes to condensed interim consolidated financial statements.
| 5 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 1. | Nature of operations: |
SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.
The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.
On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
| 2. | Basis of presentation |
| (a) | Statement of compliance: |
These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2022.
The board approved these consolidated financial statements of directors for issue on May 30,2023.
| (b) | Basis of measurement: |
These condensed interim consolidated financial statements were prepared on a going concern basis and historical cost basis with the exception of certain financial instruments as disclosed in note 3.
| (c) | Basis of consolidation: |
| (i) | Subsidiaries |
These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
| 6 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Basis of presentation |
| (i) | Subsidiaries (continue) |
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non- controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non- controlling interests’ relative interests in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interest and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to equity holders of the Company. There are no changes in ownership interest in subsidiaries for the period end March 31, 2023. Details of the Company’s ownership interests in its subsidiaries are as follows:
| Name | Method of accounting | Ownership interest | ||||
| Abundant Solar Power Inc. | Consolidation | 100 | % | |||
| Abundant Construction Inc. | Consolidation | 100 | % | |||
| Abundant Energy Solutions Ltd. | Consolidation | 100 | % | |||
| 2467264 Ontario Inc. | Consolidation | 49.9 | % | |||
| Abundant Solar Power (Portland) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (G1S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Cameron) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (B4S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Steuben) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (CNY) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (G2S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Richmond) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (M1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (B1S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (RP) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (G3S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (B2S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (TZ1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Nipher) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Edmond) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (R1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Hubbard) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Wheaton) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (VC1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (CA1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (US1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (J1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (New York) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (A2) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (E1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (WL1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (CC3) LLC | Consolidation | 100 | % | |||
| 7 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Basis of presentation |
| (i) | Subsidiaries (continue) |
| Name | Method of accounting | Ownership interest | ||||
| Abundant Solar Power (CL1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Barnes) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (B3S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (B5S) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Deiter) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (AD1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (AD2) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (LCP) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (WB 13N) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (WB 13W) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (WB 14-4) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Erwin) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Maryland) LLC | Consolidation | 100 | % | |||
| (ii) | Functional and presentation currency: |
The Company’s condensed interim consolidated financial statements are presented in Canadian dollars. The functional currency of Canadian parent company and its Canadian subsidiaries is the Canadian dollar. The functional currency of its subsidiaries in the United States is the US dollar.
| 3. | Significant accounting policies |
| (a) | Revenue recognition |
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre- determined hourly rate outline in the contract.
| 8 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (a) | Revenue recognition (continued): |
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
| (b) | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| (c) | Foreign currency translation: |
The functional currency of the Company is the Canadian Dollar. Functional currencies of the Company’s subsidiaries are the currency of the primary economic environment in which the subsidiary operates.
Monetary assets and liabilities denominated in foreign currencies are translated to the appropriate functional currency at foreign exchange rates as at the balance sheet date. Foreign exchange differences arising on translation are recognized in the statement of income and loss. Non-monetary assets that are measured in a foreign currency at historical cost are translated using the exchange rate at the date of the transaction.
In preparing the Company’s consolidated financial statements, the financial statements of each entity are translated into Canadian dollars. The assets and liabilities of foreign operations are translated into Canadian dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. Foreign exchange differences are recognized in other comprehensive income.
| (d) | Short-term investments |
Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase. As at March 31, 2023, the Company has $4,680,000 short-term investment in GIC. The GIC has one year term and with interest rate of 4.7%.
| (e) | Financial instruments: |
The Company recognizes a financial asset or a financial liability in its consolidated statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability.
| 9 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (i) | Financial assets: |
The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss based on its business model for managing the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are defined as follows:
| A. | Financial assets at amortized cost: |
A financial asset is measured at amortized cost if both of the following conditions are met:
| ● | the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and |
| ● | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
The Company’s trade and other receivables and note receivable are measured at amortized cost.
| B. | Financial assets at fair value through other comprehensive income: |
Financial assets are classified and measured at fair value through other comprehensive loss if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The Company does not have any financial assets classified as fair value through other comprehensive loss.
| C. | Financial assets at fair value through profit or loss: |
Any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss. The Company’s cash is classified as fair value through profit or loss.
| (ii) | Financial liabilities: |
The Company’s financial liabilities include accounts payable and accruals, advance from vendor, loan payable, and long-term debt. The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. The Company’s accounting policy for each category is as follows:
| A. | Financial liabilities at fair value through profit or loss: |
Financial liabilities are classified at fair value through profit or loss if they are held for trading or are derivative liabilities. The Company does not have any financial liabilities classified as fair value through profit or loss.
| B. | Financial liabilities at amortized cost: |
Financial liabilities classified at amortized cost are those that are not classified as financial liabilities at fair value through profit or loss. Subsequent to initial recognition, they are carried at amortized cost using the effective interest method. The Company’s trade and other payables, loan payable, lease liabilities, convertible debenture and long- term debt are classified at amortized cost.
| (iii) | Finance income and finance costs |
Investment income on financial assets at amortized cost and FVOCI are amortized using the effective interest rate method.
Finance fees and transaction costs on financial assets at FVTPL are expensed as incurred.
| 10 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (iv) | Expected credit losses: |
In accordance with IFRS 9, loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortized cost or at FVOCI are recognized. ECLs are updated at each reporting date on the basis of available information. The Company applies the simplified approach described in IFRS 9 to trade receivables, whereby the amount of the impairment allowance of a receivable is measured subsequent to initial recognition on the basis of lifetime expected credit losses.
| (f) | Basic and diluted net income (loss) per share |
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
| (g) | Impairment of non-financial assets: |
At each reporting date, the Company reviews the carrying amounts of its non-financial assets including property, plant and equipment (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into cash-generating units (“CGUs”) which are the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
Impairment losses are recognized in profit or loss. The Company evaluates impairment losses, except goodwill, for potential reversals when events or circumstances warrant such consideration. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
| (h) | Income taxes: |
Income tax represents current tax and deferred tax. The Company and its subsidiaries record current tax based on the taxable income for the period calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income taxes are accounted for using the liability method. The asset-liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference based on enacted or substantially enacted tax rates that are expected to be in effect when the underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as non-capital loss carry forwards, are recognized to the extent it is probable that taxable income will be available against which the asset can be utilized.
| 11 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (i) | Property, plant and equipment: |
Property, plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is computed on a declining balance basis based on the nature and useful lives of the assets. The significant classes of plant and equipment and their estimated useful lives are as follows:
| Computer equipment | 55% |
| Furniture and equipment | 20% |
| Leasehold improvement | Lesser of lease term and useful life |
Subsequent costs that meet the asset recognition criteria are capitalized, while costs incurred that do not extend the economic useful life of an asset are considered repairs and maintenance, which are accounted for as an expense recognized during the year.
| (j) | Leases: |
The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.
| (k) | Government grant: |
The government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant, and the grant will be received. The government grant is recognized in profit or loss to offset the related expenses on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset.
| (l) | Significant accounting judgments and estimates: |
The preparation of financial statements requires management to use accounting estimates and exercise judgment in the process of applying its accounting policies. Actual results may differ from the estimates and assumptions used in preparing these consolidated financial statements. Estimates and judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the consolidated financial statements:
| 12 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (i) | Taxes: |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| (ii) | Expected credit loss: |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| (iii) | Warranties: |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three and nine months ended March 31, 2023, $Nil warranty provision was recorded (3-month and 9-month ended March 31, 2022 -$Nil).
| (iv) | Contract fulfilment costs: |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| 13 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Significant accounting policies (continued) |
| (v) | Convertible debenture: |
The determination of the fair value of convertible debentures requires the input of highly subjective assumptions, including the expected discount rate. Changes in the input assumptions could materially affect the fair value estimate.
| (vi) | Stock-based compensation and warrant valuation: |
The fair value of stock options issued and warrants granted are subjective to the limitation of the Black-Scholes option pricing model which incorporates market data, and which involved uncertainty and subjectivity in estimates used by management in the assumptions. The model requires assumptions relating to share price volatility, expected life of options and discount rate. Changes in these assumptions affect the fair value of the options and the amount of stock-based compensation to be recognized in operations over the vesting period.
| (m) | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| (n) | Convertible debenture: |
The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument.
| (o) | Accounting standards issued but not yet effective: |
The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023.
IFRS 17 Insurance Contracts
In June 2020, the International Accounting Standards Board (IASB) issued IFRS 17. IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 with earlier adoption permitted as long as IFRS 9 is also applied. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.
The Company has not early adopted IFRS 17 and determined that the adoption of this standard will not have an impact on the Company’s consolidated financial statements.
| 14 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 4. | Trade and other receivables |
| March 31, 2023 | June 30, 2022 | |||||||
Accounts receivable, net (1) | $ | 1,867,914 | $ | 1,857,509 | ||||
| Recovery of PCDC (2) | $ | 4,923,887 | - | |||||
| Other receivable | 110,668 | 135,013 | ||||||
| Due from related parties (note 18) | 100 | 207,704 | ||||||
| $ | 6,902,569 | $ | 2,200,226 | |||||
| (1) | In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. As at March 31, 2023, there was an outstanding accounts receivable balance of $1,505,083 due from SFT. Management expects the accounts receivable is fully collectible once SFT receive the payments from the Ontario government in respect of terminated contracts. Due to the accounts receivable has passed its trade term in the normal course of business, the amount has been discounted by using 10% discount rate and a fair value adjustment of $212,227 has been recognized in the statement of income and comprehensive income for the year ended June 30,2022. No fair value adjustment recognized for the three months and nine months ended March 31, 2023. | |
| (2) | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all Feed-In Tariff (FIT) 2, 3, 4 and 5 contracts where the Independent Electricity System Operator (IESO) had not issued Notice to Proceed (“NTP”). A NTP was issued for a contract when it was ready for construction. | |
| In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre- NTP FIT contract holders on July 16, 2018 including the Company’s subsidiary, 2467264 Ontario Inc. (“246 Ontario”). However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre- Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by 246 Ontario, is $6.3 million. IESO confirmed the full $6.3 million amount in January 2023. As of March 31, 2023, $1.4 million have been recovered from IESO and the remaining $4.9 million was recorded as receivable. The Company incurred related professional fees of $237,254 in associated with the claims. | ||
| The full $6.3 million is recognized as other income for the three months ended March 31, 2023. Pursuant to the agreement reached with non-controlling shareholder, the Company is entitled to the entire balance of the PCDC claims. As a result, the non-controlling interest amount is not affected for the three and nine months ending March 31, 2023. |
| 15 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 5. | Prepaid expenses and deposits |
| March 31, 2023 | June 30, 2022 | |||||||
Interconnection deposits(1) | $ | 2,119,019 | $ | 2,008,441 | ||||
| Construction in progress deposit(2) | 243,371 | - | ||||||
| Security deposits | 12,352 | 14,852 | ||||||
| Prepaid insurance | 117,026 | 18,335 | ||||||
| Prepaid rent | 731 | 7,297 | ||||||
| Other prepaids and deposits | 81,941 | 11,530 | ||||||
| $ | 2,574,440 | $ | 2,060,455 | |||||
| (1) | Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation. |
| (2) | Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Manlius and Geddes, located in New York, USA. |
| 16 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 6. | Property, Plant and Equipment |
| Computer equipment | Furniture and equipment | Leasehold improvement | Total | |||||||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 49,014 | $ | 83,706 | $ | 10,650 | $ | 143,370 | ||||||||
| Additions | 2,993 | - | - | 2,993 | ||||||||||||
| Balance, March 31, 2022 | $ | 52,007 | $ | 83,706 | $ | 10,650 | $ | 146,363 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 44,629 | $ | 64,364 | $ | 5,857 | $ | 114,850 | ||||||||
| Amortization | 2,971 | 3,317 | - | 6,288 | ||||||||||||
| Balance, March 31, 2022 | $ | 47,600 | $ | 67,681 | $ | 5,857 | $ | 121,138 | ||||||||
| Net Book Value- March 31, 2022 | $ | 4,407 | $ | 16,025 | $ | 4,793 | $ | 25,225 | ||||||||
| Cost: | ||||||||||||||||
| Balance, March 31, 2022 | $ | 52,007 | $ | 83,706 | $ | 10,650 | $ | 146,363 | ||||||||
| Additions/dispositions | 7,977 | - | (10,650 | ) | (2,673 | ) | ||||||||||
| Balance, June 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, March 31, 2022 | $ | 47,600 | $ | 67,681 | $ | 5,857 | $ | 121,138 | ||||||||
| Amortization/reversal | 2,373 | 922 | (5,857 | ) | (2,562 | ) | ||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Net Book Value- June 30, 2022 | $ | 10,011 | $ | 15,103 | $ | - | $ | 25,114 | ||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2022 Additions | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| $ | - | $ | - | $ | - | $ | - | |||||||||
| Balance, March 31,2023 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Amortization | 3,588 | 2,178 | - | 5,766 | ||||||||||||
| Balance, March 31, 2023 | $ | 53,561 | $ | 70,781 | $ | - | $ | 124,342 | ||||||||
| Net Book Value, March 31, 2023 | $ | 6,423 | $ | 12,925 | $ | - | $ | 19,348 | ||||||||
| 7. | Contract fulfilment costs |
As of March 31, 2023 and June 30, 2022, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.
| Balance, June 30, 2022 | $ | 3,594,531 | ||
| Utilised during the period | (3,756,719 | ) | ||
| FX Impact | 162,188 | |||
| Balance, March 31, 2023 | $ | - |
| 17 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 8. | Inventory |
As of March 31, 2023 and June 30, 2022, the Company’s inventory is comprised of development costs for the solar projects.
| Balance, June 30, 2021 | 593,784 | |||
| Additions: development costs | - | |||
| Minus: development costs expensed to cost of goods sold | - | |||
| FX Impact | 5,142 | |||
| Balance, March 31, 2022 | $ | 598,926 | ||
| Balance, March 31, 2022 | 598,926 | |||
| Additions: development costs | 110,241 | |||
| Minus: development costs expensed to cost of goods sold | (512,832 | ) | ||
| FX Impact | (415 | ) | ||
| Balance, June 30, 2022 | $ | 195,920 | ||
| Balance, June 30, 2022 | 195,920 | |||
| Additions: development costs | 455,376 | |||
| Minus: development costs expensed to cost of goods sold | (12,724 | ) | ||
| FX Impact | 10,260 | |||
| Balance, March 31, 2023 | $ | 648,832 |
| 9. | Note receivable |
On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note maturity date was extended to April 2023. As at March 31, 2023, an accrued interest of $78,389 (USD $57,925) was receivable from this customer. The note receivable remains unpaid subsequently. Management is currently in negotiation with this customer to settle the note receivable through obtaining partial ownership of certain solar project back from this customer.
| 10. | Trade and other payables |
| March 31, 2023 | June 30, 2022 | |||||||
| Accounts payable and accrued liabilities | $ | 507,038 | $ | 1,950,817 | ||||
| Due to related party | - | 104,545 | ||||||
| Other payable | 2,697,626 | 547,502 | ||||||
| $ | 3,204,664 | $ | 2,602,864 | |||||
| 18 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 11. | Unearned revenue |
As of March 31, 2023 and June 30, 2022, the Company’s unearned revenue mostly consists of milestone payments received for EPC projects.
| Balance, June 30, 2022 | $ | 16,281 | ||
| Additional payments received | 271,493 | |||
| Recognized to revenue | - | |||
| Balance, March 31, 2023 | $ | 287,774 | ||
| 12. | Right of use assets and lease liabilities |
The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five- year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.
There was no balance for the right-of-use assets as at March 31, 2022 due to the remaining lease term was within one year and all lease payments were recognized in the statement of income (loss) and comprehensive income (loss). The continuity of the right-of-use as of March 31, 2023 and June 30, 2022 is as follows:
| Right-of- use assets | Office | |||
| Cost: | ||||
| Balance, June 30, 2021 and March 31, 2022 | - | |||
| Addition | 197,719 | |||
| Balance, June 30, 2022 | 197,719 | |||
| Addition | - | |||
| Balance, March 31, 2023 | 197,719 | |||
| Accumulated amortization: | ||||
| Balance, June 30, 2021 and March 31, 2022 | - | |||
| Amortization | 11,405 | |||
| Balance, June 30, 2022 | 11,405 | |||
| Amortization: | 30,420 | |||
| Balance, March 31, 2023 | 41,825 | |||
| Net Book Value, June 30, 2022 | 186,314 | |||
| Net Book Value, March 31, 2023 | 155,894 | |||
| 19 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 12. | Right of use assets and lease liabilities (continued) |
The continuity of the lease liabilities as of March 31, 2023 and June 30, 2022 is as follows:
| Lease liabilities | Office | |||
| Balance, June 30, 2021 and March 31, 2022 | - | |||
| New obligations | 197,719 | |||
| Interest accretion | 4,985 | |||
| Balance, June 30, 2022 | 202,704 | |||
| Payments: | (32,876 | ) | ||
| Interest accretion: | 13,080 | |||
| Balance, March 31, 2023 | 182,908 | |||
| Current | 42,692 | |||
| Long term | 140,216 | |||
| Net Book Value, March 31, 2023 | 182,908 | |||
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of March 31, 2023 is as follows:
| 2023 | $ | 14,090 | ||
| 2024 | 60,302 | |||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 217,963 |
| 13. | Loan payable |
| March 31, 2023 | June 30, 2022 | |||||||
Shareholder loan (1) | $ | - | $ | 567,664 | ||||
| $ | - | $ | 567,664 |
| (1) | On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The loan has a maturity of January 7, 2022 as well as the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. The balance at June 30, 2022 was $567,664. The Company fully repaid the loan plus interest of $5,677 on September 16, 2022. |
| 20 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 14. | Long-term debt |
| March 31, 2023 | June 30, 2022 | |||||||
| Highly Affected Sectors Credit Availability Program (1) | $ | 898,148 | $ | 981,481 | ||||
| Canadian Emergency Business Account (2) | 40,000 | 40,000 | ||||||
| Promissory Note (3) | - | 320,273 | ||||||
| Total | 938,148 | 1,341,754 | ||||||
| Less: current portion | 151,111 | 111,111 | ||||||
| Long-term portion | $ | 787,037 | $ | 1,230,643 | ||||
| (1) | In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months and nine months ended March 31, 2023, the interest recorded and paid was $9,038 and $28,354 (3-month and 9-month period ended March 31, 2022 - $9,863 and $30,027). |
| (2) | The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. |
The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.
| (3) | On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 in principal and $13,146 in interest has been fully repaid on October 6, 2022. |
Estimated principal repayments are as follows:
| 2023 | $ | 27,778 | ||
| 2024 | 151,111 | |||
| 2025 | 111,111 | |||
| 2026 | 111,111 | |||
| 2026 onwards | 537,037 | |||
| Total | $ | 938,148 |
| 21 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 15. | Convertible debenture |
In October 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit (or 2,500,000 Conversion Units). Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.
Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. The Series A vesting condition was satisfied on the closing date of Offering. As a result, 2,500,000 Series A warrants vested on March 1, 2023.
Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a venture issuer.
Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.
On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. On March 1, 2023, the full liability portion of the Convertible Loan converted to 2,500,000 Common Shares. A continuity of the liability portion of the convertible debentures is as follows:
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 47,348 | |||
| FV adjustment from conversion | (47,348 | ) | ||
| Conversion of Loan upon IPO | (1,136,364 | ) | ||
| Balance, March 31, 2023 | $ | - | ||
| 22 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Financial instruments |
The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt.
| (a) | Fair value: |
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
| (b) | Financial risk management: |
| (i) | Credit risk and economic dependence: |
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties.The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
| (ii) | Concentration risk and economic dependence: |
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| 23 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Financial instruments (continued) |
Nine months ended March 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,919,270 | 65 | % | ||||
| Nine months ended March 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,898,638 | 91 | % | ||||
Three months ended March 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 105,180 | 15 | % | ||||
| Customer B | $ | 264,572 | 37 | % | ||||
| Customer C | $ | 151,696 | 21 | % | ||||
| Customer D | $ | 100,000 | 14 | % | ||||
| Three months ended March 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 965,074 | 99 | % | ||||
| March 31, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer B | $ | 298,966 | 15 | % | ||||
| Customer E | $ | 1,505,083 | 76 | % | ||||
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
| (iii) | Liquidity risk: |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
| (iv) | Interest rate risk: |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
| 24 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 17. | Share Capital |
| (a) | Authorized |
Unlimited number of common shares with no par value.
| (b) | Issued and outstanding share capital |
At March 31, 2022, the Company had 26,800,000 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity.
During the period ended March 31, 2023, the Company issued the following shares:
| i. | On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000. As required by International Accounting Standards (“IAS”) 33 Earnings per Share, all references to share capital, common shares outstanding, warrants outstanding, options outstanding, and per share amounts in these consolidated financial statements and the accompanying notes for time periods prior to the share consolidation have been restated to reflect the 1:160 share split. |
| ii. | On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consisted of a total of 8,050,000 common shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per common share. The Company paid $362,250 in broker commissions, $63,448 legal fees and issued 483,000 broker warrants to purchase common shares at $0.75 per share until March 1, 2026.The broker warrants were valued using the Black-Scholes model resulting in fair value of $242,575. |
| iii. | On March 1, 2023, upon the closing of the Offering, the proceeds of the Convertible Loan (see Note 15) converted into 2,500,000 common shares, 2,500,000 Series A Warrant and 2,500,000 Series B Warrant. |
| iv. | On February 10, 2023, the Company granted 500,000 Restricted Share Units (“RSUs”) to a consultant in connection with the services provided to assist the Company successfully completed IPO. Pursuant to the agreement, each unit is exercisable into one common share of the Company for a period of 60 days from the vesting date. 50% of the units, or 250,000 units, are vested on the date of closing of the Company’s Offering, which was March 1, 2023, and the remaining 50% vests on the 5-month after the date of closing of the Offering (on August 2, 2023). On March 8, 2023, 250,000 common shares were distributed as a result of the vesting of 250,000 RSUs. |
| 25 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| (c) | Warrants |
The following table reflects the warrants issued and outstanding as of March 31, 2023:
| Date issued | Expiry | Exercise price (CAD) | Balance at July
1, | Issued | Expired | Exercised | Balance at March 31, 2023 | |||||||||||||||||||
| 10-Feb-2023 | 10-Jun-2027 | $ | 0.10 | - | 2,500,000 | - | - | 2,500,000 | ||||||||||||||||||
| 10-Feb-2023 | 01-Mar-2026 | $ | 0.75 | - | 483,000 | - | - | 483,000 | ||||||||||||||||||
| 01-Mar-2023 | 01-Mar-2028 | $ | 0.50 | - | 5,000,000 | - | - | 5,000,000 | ||||||||||||||||||
| - | 7,983,000 | - | - | 7,983,000 | ||||||||||||||||||||||
| Weighted average exercise price | - | $ | 0.39 | |||||||||||||||||||||||
| Weighted average remaining contractual life | - | 4.57 years | ||||||||||||||||||||||||
On February 10, 2023, the Company granted an aggregated of 2,500,000 warrants as compensation to consultants in connection with the advisory services provided to assist the Company to successfully complete IPO. The warrants have been recorded at their estimated fair value of $1,781,443 during the three months period ended March 31, 2023. Each fully vested warrant may be exercised at $0.10 to acquire common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.27% |
| ● | Expected life: 4.69 years; |
| ● | Expected volatility: 124% based on historical five-year trends of industry peers; |
| ● | Forfeiture rate: NIL; |
| ● | Expected dividend yield: 0%; and |
| ● | Weighted average share price: $0.71 |
On February 10, 2023, the Company granted an aggregate of 483,000 warrants to a brokerage firm as commission for the completion of the IPO. The warrants have been recorded at their estimated fair value of $242,575 during the three months period ended March 31, 2023. Each fully vested warrant may be exercised at $0.75 to acquire a common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.85% |
| ● | Expected life: 3 years; |
| ● | Expected volatility: 108% based on historical five-year trends of industry peers; |
| ● | Forfeiture rate: NIL; |
| ● | Expected dividend yield: 0%; and |
| ● | Weighted average share price: $0.50 |
On March 1, 2023, the Company granted an aggregate of 5,000,000 warrants as a result of the Convertible Loan conversion (see Note 15). Each fully vested warrant may be exercised at $0.50 to acquire a common share. The warrants vest 50% at closing of the Offering, which was on March 1, 2023and 50% upon the Company completing a listing on senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer”. These warrants were issued as a result of conversion of convertible loan, thus no additional expenses recorded.
As at March 31, 2023, 5,483,000 warrants were exercisable.
| 26 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| (d) | Stock Options |
The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.
Details of the stock option outstanding as at March 31, 2023 are as follows:
| Date issued | Expiry | Exercise price (CAD) | Balance
at July 1, 2022 | Granted | Exercised | Expired/ Cancelle d | Balance at March 31, 2023 | |||||||||||||||||||
| 01-Mar-2023 | 04-Nov-2027 | $ | 0.75 | 2,774,000 | (15,000 | ) | 2,759,000 | |||||||||||||||||||
| - | 2,774,000 | - | (15,000 | ) | 2,759,000 | |||||||||||||||||||||
On March 1, 2023, the Company granted an aggregate of 2,774,000 stock options to employees and directors at an exercise price of $0.75 per share, exercisable for a period of 5 years. The options vest 50% on November 4, 2023 and 50% on November 4, 2024. The estimated fair value of these options has been measured using the Black-Scholes valuation model. During the three months period ended March 31, 2023, compensation expense related to stock options was $596,842. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.58%; |
| ● | Expected life: 5.0 years; |
| ● | Expected volatility: 124% based on historical five-year trends of industry peers; |
| ● | Forfeiture rate: NIL; |
| ● | Expected dividend yield: 0%; and |
| ● | Weighted average share price: $2.55 |
As at March 31, 2023, no stock options were exercisable.
| (e) | Restricted Stock Units |
Details of the Restricted Stock Units (RSU) outstanding as at March 31, 2023 are as follows:
| Date issued | Vesting Date | Balance at July 1, 2022 | Granted | Distributed | Forfeited | Balance at March 31, 2023 | ||||||||||||||||
| 10-Feb-2023 | 02-Mar-2023 | - | 250,000 | (250,000 | ) | - | - | |||||||||||||||
| 10-Feb-2023 | 02-Aug-2023 | - | 250,000 | - | - | 250,000 | ||||||||||||||||
| 13-Mar-2023 | 01-Mar-2024 | - | 7,500 | - | - | 7,500 | ||||||||||||||||
| 13-Mar-2023 | 01-Mar-2025 | - | 7,500 | - | - | 7,500 | ||||||||||||||||
| - | 515,000 | (250,000 | ) | - | 265,000 | |||||||||||||||||
The weight average grant date price per share is $0.75.
| 27 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 18. | Related Party Transactions |
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
As at March 31, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of SIL.
As at March 31, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op (“RSE”). One of RSE’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of RSE.
As at March 31, 2023, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.
Compensation of key management personnel
The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended March 31, 2023 and 2022 were as follows:
| Three Month Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 280,016 | $ | 170,283 | ||||
| Share-based compensation | 83,531 | - | ||||||
| Advisory warrants | 445,361 | - | ||||||
| Nine Month Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 1,020,355 | $ | 651,759 | ||||
| Share-based compensation | 83,531 | - | ||||||
| Advisory warrants | 445,361 | - | ||||||
Short-term employee benefits solely include consulting fees.
| 28 |
SOLARBANK CORPORATION
Notes to Condensed Consolidate Interim Financial Statements
For the three months and nine months ended March 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 19. | Capital Management |
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| March 31, 2023 | June 30, 2022 | |||||||
| Long-term debt -non-current portion (note 14) | $ | 787,037 | 1,230,643 | |||||
| Shareholders’ Equity | $ | 17,242,690 | 4,440,615 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, issuance of equity, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
Changes to capital management from the prior year includes closing of the Offering on March 1, 2023.
| 20. | Segment reporting |
The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.
The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three months and nine months period ended March 31, 2023 and 2022 are as follows:
| Non-current assets | ||||||||
| March
31, 2023 | June
30, 2022 | |||||||
| Canada | $ | 175,242 | 211,428 | |||||
| United States | - | - | ||||||
| $ | 175,242 | 211,428 | ||||||
| 21. | Subsequent events |
| a) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. A second case against the town and Company by one of the original petitioners was filed in November 2022 largely mirroring the first challenge. On November 30, 2022, the case was dismissed as to all claims against the Company, one claim under the Open Meeting Law against the town remains. Motions for summary judgement on that claim by the town and Company are currently pending. The case does not represent a material threat to the Company. |
| b) | On May 10, 2023, total of $1,905,666 received from IESO relating the PCDC claims (Note 4(2)). |
| 29 |
Exhibit 99.28
Exhibit 99.29
This short form base shelf prospectus has been filed under legislation in each of the provinces of Canada that permits certain information about these securities to be determined after this prospectus has become final and that permits the omission from this prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information within a specified period of time after agreeing to purchase any of these securities, except in cases where an exemption from such delivery requirements is available.
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form base shelf prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell these securities. The securities offered hereby have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the United States, and may not be offered, sold or delivered, directly or indirectly, in the United States of America, its territories and possessions, any state of the United States or the District of Columbia (the “United States”), or to a “U.S. person” (as such term is defined in Regulation S under the U.S. Securities Act) (a “U.S. Person”) unless exemptions from the registration requirements of the U.S. Securities Act and any applicable state securities laws are available. This short form base shelf prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of these securities within the United States or to, or for the account or benefit of, any U.S. Person. See “Plan of Distribution”.
Information has been incorporated by reference in this short form base shelf prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request, without charge from the Corporate Secretary of SolarBank Corporation at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8, telephone (604) 696-4241, and are also available electronically at www.sedar.com.
short form base shelf prospectus
| NEW ISSUE AND/OR SECONDARY OFFERING | May 2, 2023 |
SOLARBANK CORPORATION
C$200,000,000
Common Shares
Debt Securities
Warrants
Subscription Receipts
Share Purchase Contracts
Units
SolarBank Corporation (the “Company” or “SolarBank”) may offer (the “Offerings”) and sell, from time to time, common shares of the Company (the “Common Shares”), debt securities (“Debt Securities”), warrants to purchase securities (“Warrants”), subscription receipts (“Subscription Receipts”), share purchase contracts (“Share Purchase Contracts”), or any combination of such securities (“Units”) (all of the foregoing, collectively, the “Securities”) up to an aggregate initial offering price of C$200,000,000 (or the equivalent thereof, at the date of issue, in any other currency or currencies, as the case may be) at any time during the 25-month period that this short form base shelf prospectus (including any amendments hereto) (the “Prospectus”), remains effective. The Securities may be sold by the Company or certain of the Company’s security holders (“Selling Securityholders” and each, a “Selling Securityholder”). Securities offered hereby may be offered separately or together, in separate series, in amounts, at prices and on terms to be determined based on market conditions at the time of sale, including potentially by way of an “at-the-market distribution” (as defined under applicable Canadian securities legislation), and set forth in one or more prospectus supplements (collectively or individually, as the case may be, “Prospectus Supplements”). In addition, Securities may be offered and issued in consideration for the acquisition of other businesses, assets or securities by the Company or one of its subsidiaries. The consideration for any such acquisition may consist of any of the Securities separately, a combination of Securities or any combination of, among other things, Securities, cash and assumption of liabilities.
The Securities may be sold from time to time in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The prices at which the Securities may be offered and sold may vary as between purchasers and during the period of distribution. If, in connection with the offering of Securities at a fixed price or prices, the underwriters have made a bona fide effort to sell all of the Securities at the initial offering price fixed in the applicable Prospectus Supplement, the public offering price may be decreased and thereafter further changed, from time to time, to an amount not greater than the initial offering price fixed in such Prospectus Supplement, in which case the compensation realized by the underwriters will be decreased by the amount that the aggregate price paid by purchasers for the Securities is less than the gross proceeds paid by the underwriters to the Company or any Selling Securityholder. See “Plan of Distribution”.
The specific terms of the Securities with respect to a particular Offering will be set out in the applicable Prospectus Supplement and may include, where applicable (i) in the case of Common Shares, the number of Common Shares offered, the offering price, whether the Common Shares are being offered for cash, and any other terms specific to the Common Shares being offered, (ii) in the case of Debt Securities, the specific designation, the aggregate principal amount, the currency or the currency unit for which the Debt Securities may be purchased, the maturity, the interest provisions, the authorized denominations, the offering price, where the Debt Securities are being offered for cash, the covenants, the events of default, any terms for redemption or retraction, any exchange or conversion rights attached to the Debt Securities and any other terms specific to the Debt Securities being offered, (iii) in the case of Warrants, the number of such Warrants offered, the offering price, whether the Warrants are being offered for cash, the designation, the number and the terms of the Common Shares or Debt Securities purchasable upon exercise of the Warrants, any procedures that will result in the adjustment of these numbers, the exercise price, the dates and periods of exercise, the currency in which the Warrants are issued and any other terms specific to the Warrants being offered, (iv) in the case of Subscription Receipts, the number of Subscription Receipts being offered, the offering price, whether the Subscription Receipts are being offered for cash, the procedures for the exchange of the Subscription Receipts for Common Shares, Debt Securities or Warrants, as the case may be, and any other terms specific to the Subscription Receipts being offered, (v) in the case of Share Purchase Contracts, the number and terms of the Common Shares subject to such contracts, and (vi) in the case of Units, the designation, number and terms of the Common Shares, Warrants, Subscription Receipts, Share Purchase Contracts or Debt Securities comprising the Units. Where required by statute, regulation or policy, and where Securities are offered in currencies other than Canadian dollars, appropriate disclosure of foreign exchange rates applicable to the Securities will be included in the Prospectus Supplement describing the Securities.
All shelf information permitted under applicable laws to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with this Prospectus, except in cases where an exemption from such delivery requirements has been obtained. Each Prospectus Supplement will be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of the Securities to which the Prospectus Supplement pertains.
This Prospectus constitutes a public offering of the Securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell the Securities in such jurisdictions. We may offer and sell Securities to, or through, underwriters or dealers purchasing as principals, directly to one or more other purchasers, or through agents pursuant to applicable statutory exemptions. A Prospectus Supplement relating to each issue of Securities will set forth the names of any underwriters, dealers or agents involved in the Offering and sale of the Securities and will set forth the terms of the Offering, the method of distribution of the Securities, including, to the extent applicable, the proceeds to us and any fees, discounts, concessions or other compensation payable to the underwriters, dealers or agents, and any other material terms of the plan of distribution.
The Company or any Selling Securityholder may sell the Securities to or through underwriters or dealers purchasing as principals and may also sell the Securities to one or more purchasers directly, through applicable statutory exemptions, or through agents designated by the Company or any Selling Securityholder from time to time. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent engaged in connection with the offering and sale of the Securities, as well as the method of distribution and the terms of the offering of such Securities, including the net proceeds to the Company or any Selling Securityholder and, to the extent applicable, any fees, discounts, concessions or any other compensation payable to underwriters, dealers or agents and any other material terms. See “Plan of Distribution”.
This Prospectus may qualify an “at-the-market distribution”.
In connection with any offering of Securities, other than an “at-the-market distribution”, subject to applicable laws, unless otherwise specified in a Prospectus Supplement, the underwriters, dealers or agents, as the case may be, may over-allot or effect transactions which stabilize, maintain or otherwise affect the market price of the Securities at a level other than those which otherwise might prevail on the open market. Such transactions may be commenced, interrupted or discontinued at any time. A purchaser who acquires Securities forming part of the underwriters’, dealers’ or agents’ over-allocation position acquires those securities under this Prospectus and the Prospectus Supplement relating to the particular offering of Securities, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases. See “Plan of Distribution”.
| -ii- |
The outstanding Common Shares are listed and posted for trading on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN”. The closing price of the Common Shares on the CSE on May 1, 2023, the last trading day of the Common Shares prior to the date of this Prospectus, was $6.35.
Unless otherwise specified in the applicable Prospectus Supplement, the Debt Securities, the Warrants, the Subscription Receipts, the Share Purchase Contracts and the Units will not be listed on any securities exchange. There is no market through which the Securities, other than the Common Shares, may be sold and purchasers may not be able to resell these Securities purchased under this Prospectus. This may affect the pricing of these Securities in the secondary market, the transparency and availability of trading prices, the liquidity of these Securities, and the extent of issuer regulation (see “Risk Factors”).
Prospective investors should be aware that the acquisition of the Securities may have tax consequences that may not be fully described in this Prospectus or in any Prospectus Supplement, and should carefully review the tax discussion, if any, contained in the applicable Prospectus Supplement with respect to a particular Offering and consult their own tax advisors with respect to their own particular circumstances.
Investing in the Securities involves significant risks. Prospective investors should carefully consider the risk factors described under the heading “Risk Factors” in this Prospectus, in the applicable Prospectus Supplement with respect to a particular Offering and in the documents incorporated by reference herein and therein.
No underwriter, dealer or agent has been involved in the preparation of this Prospectus or performed any review of the content of this Prospectus.
This Prospectus does not qualify for issuance Debt Securities, or Securities convertible or exchangeable into Debt Securities, in respect of which the payment of principal or interest may be determined, in whole or in part, by reference to one or more underlying interests, including, for example, an equity or debt security, or a statistical measure of economic or financial performance (including, but not limited to, any currency, consumer price or mortgage index, or the price or value of one or more commodities, indices or other items, or any other item or formula, or any combination or basket of the foregoing items). For greater certainty, this Prospectus may qualify for issuance Debt Securities, or Securities convertible or exchangeable into Debt Securities, in respect of which the payment of principal or interest may be determined, in whole or in part, by reference to published rates of a central banking authority or one or more financial institutions, such as a prime rate or bankers’ acceptance rate, or to recognized market benchmark interest rates such as CORRA (the Canadian Overnight Repo Rate Average), SOFR (Secured Overnight Financing Rate), EURIBOR (the Euro Interbank Offered Rate) or a U.S. federal funds rate.
The Company’s head office and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
Paul Pasalic, a director of the Company, resides outside of Canada. This director has appointed DLA Piper (Canada) LLP, Suite 2800, Park Place, 666 Burrard St., Vancouver, British Columbia, V6C 2Z7, Canada, as agent for service of process in Canada. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
Unless otherwise indicated, all references to “$” or “C$” in this Prospectus refer to Canadian dollars and all references to “US$” in this Prospectus refer to United States dollars. See “Currency Presentation and Exchange Rate Information”. On May 1, 2023, the average exchange rate for Canadian dollars, as quoted by the Bank of Canada was US$1.00 = C$1.3546, or C$1.00 = US$0.7382.
| -iii- |
TABLE OF CONTENTS
| Page | |
| About this Prospectus | 1 |
| CAUTION REGARDING FORWARD-LOOKING STATEMENTS | 1 |
| CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION | 3 |
| market and industry data | 4 |
| DOCUMENTS INCORPORATED BY REFERENCE | 4 |
| BUSINESS OF THE COMPANY | 5 |
| RISK FACTORS | 7 |
| USE OF PROCEEDS | 7 |
| CONSOLIDATED CAPITALIZATION | 8 |
| DESCRIPTION OF MATERIAL INDEBTEDNESS | 8 |
| PLAN OF DISTRIBUTION | 8 |
| SELLING SECURITYHOLDERS | 10 |
| PRIOR SALES | 10 |
| PRICE RANGE AND TRADING VOLUME | 10 |
| DIVIDEND POLICY | 10 |
| DESCRIPTION OF COMMON SHARES | 10 |
| DESCRIPTION OF DEBT SECURITIES | 11 |
| DESCRIPTION OF WARRANTS | 11 |
| DESCRIPTION OF SUBSCRIPTION RECEIPTS | 12 |
| DESCRIPTION OF SHARE PURCHASE CONTRACTS | 13 |
| DESCRIPTION OF UNITS | 14 |
| CERTAIN FEDERAL INCOME TAX CONSIDERATIONS | 14 |
| EXEMPTION FROM TRANSLATION REQUIREMENTS | 14 |
| LEGAL MATTERS | 14 |
| TRANSFER AGENT AND REGISTRAR | 14 |
| INTEREST OF EXPERTS | 15 |
| promoters | 15 |
| PURCHASER’S STATUTORY RIGHTS | 15 |
| PURCHASER’S CONTRACTUAL RIGHTS | 16 |
| CERTIFICATE OF SOLARBANK CORPORATION | C-1 |
| CERTIFICATE OF PROMOTER | C-2 |
| -iv- |
About this Prospectus
In this Prospectus and any Prospectus Supplement, unless the context otherwise requires, the terms “we”, “our”, “us” and the “Company” refer to SolarBank and our direct and indirect subsidiaries.
This Prospectus is a base shelf prospectus that the Company has filed with the securities commissions in each of the provinces in Canada in order to qualify the offering of the Securities described in this Prospectus in accordance with National Instrument 44-102–Shelf Distributions (“NI 44-102”).
Under this shelf registration process, SolarBank may sell any combination of the Securities described in this Prospectus in one or more offerings up to an aggregate offering price of $200,000,000. This Prospectus provides you with a general description of the Securities that the Company may offer. Each time the Company sells Securities under this Prospectus, the Company will provide a Prospectus Supplement that will contain specific information about the terms of that specific offering. The specific terms of the Securities in respect of which this Prospectus is being delivered will be set forth in the Prospectus Supplement. Each shelf prospectus supplement will be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of the securities to which the shelf Prospectus Supplement pertains.
You should rely only on the information contained in or incorporated by reference in this Prospectus and any applicable Prospectus Supplement in connection with an investment in the Securities. We have not authorized anyone to provide you with different information. We are not making an offer of the Securities in any jurisdiction where such offer is not permitted. You should assume that the information appearing in this Prospectus or any Prospectus Supplement is accurate only as of the date on the front of those documents and that information contained in any document incorporated by reference herein or therein is accurate only as of the date of that document unless specified otherwise. Our business, financial condition, financial performance and prospects may have changed since those dates.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference herein, contains “forward-looking information” or “forward-looking statements” within the meaning of applicable securities legislation (collectively, “forward-looking statements”). The forward-looking statements in this Prospectus are provided as of the date of this Prospectus and forward-looking statements incorporated by reference are made as of the date of those documents. The Company does not intend to and does not assume any obligation to update forward-looking statements, except as required by applicable law. For this reason and the reasons set forth below, investors should not place undue reliance on forward-looking statements.
This Prospectus, including the documents incorporated by reference herein, contains “forward-looking statements” or “forward-looking information” (collectively “forward-looking statements”) within the meaning of applicable securities laws. Forward-looking statements contained herein are based on current expectations, estimates, forecasts, projections, beliefs and assumptions made by management of the Company about the industry in which it operates. Such statements include, in particular, statements about the Company’s plans, strategies and prospects. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and disclaims any obligation, to update any forward-looking statements after it files this Prospectus, whether as a result of new information, future events or otherwise, except as required by the securities laws. These forward looking statements are made as of the date of this Prospectus.
The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
| ● | the completion, size, pricing, expenses and timing of the closing of any Offerings; | |
| ● | the Company’s discretion in the use of net proceeds from Offerings; | |
| ● | the Company’s expectations regarding its revenue, expenses and operations; | |
| ● | industry trends and overall market growth; | |
| ● | the Company’s growth strategies; |
| 1 |
| ● | expectations relating to director and executive officer compensation levels; | |
| ● | the Company’s anticipated cash needs and its needs for additional financing; | |
| ● | the Company’s intention to grow the business and its operations; | |
| ● | expectations with respect to future costs; | |
| ● | the Company’s competitive position and the regulatory environment in which the Company operates; | |
| ● | the Company’s expectation that revenues derived from its operations, together with fund-raising activities, will be sufficient to cover its expenses during 2022 and over the next 12 months; | |
| ● | the Company’s expected business objectives for the next 12 months; | |
| ● | the Company’s ability to obtain additional funds through the sale of equity or debt commitments; and | |
| ● | the effect of the Novel Coronavirus (“COVID-19”) outbreak on the ability of the Company to carry on business. |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this Prospectus, the Company has made various material assumptions, including but not limited to: (i) obtaining the necessary regulatory approvals; (ii) that regulatory requirements will be maintained; (iii) general business and economic conditions; (iv) the Company’s ability to successfully execute its plans and intentions; (v) the availability of financing on reasonable terms; (vi) the Company’s ability to attract and retain skilled staff; (vii) market competition; (viii) the products and services offered by the Company’s competitors; (ix) that the Company’s current good relationships with its service providers and other third parties will be maintained; and (x) government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, prospective purchasers of Offered Shares should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Risk Factors”, which include:
| ● | the Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings; | |
| ● | the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers; | |
| ● | the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; | |
| ● | governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline; | |
| ● | general global economic conditions may have an adverse impact on our operating performance and results of operations; | |
| ● | the Company’s project development and construction activities may not be successful; | |
| ● | developing and operating solar projects exposes the Company to various risks; | |
| ● | the Company faces a number of risks involving power purchase agreements (“PPAs”) and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms; | |
| ● | the Company is subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where it does business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity; | |
| ● | the markets in which the Company competes are highly competitive and evolving quickly; | |
| ● | an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; | |
| ● | the Company’s quarterly operating results may fluctuate from period to period; | |
| ● | foreign exchange rate fluctuations; | |
| ● | a change in the Company’s effective tax rate can have a significant adverse impact on its business; | |
| ● | seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; | |
| ● | the Company may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; |
| 2 |
| ● | the Company may incur substantial additional indebtedness in the future; | |
| ● | the Company is subject to risks from supply chain issues; | |
| ● | risks related to inflation; | |
| ● | unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; | |
| ● | if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; | |
| ● | there are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes the Company and its utility scale solar projects to additional risk; | |
| ● | compliance with environmental laws and regulations can be expensive; | |
| ● | corporate responsibility, specifically related to Environmental, Social and Governance matters and unsuccessful management of such matters may adversely impose additional costs and expose the Company to new risks; | |
| ● | the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company; | |
| ● | the Company has limited insurance coverage; | |
| ● | the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; | |
| ● | the Company does not anticipate paying cash dividends; | |
| ● | the Company may become subject to litigation; | |
| ● | discretion of the Company on use the net proceeds of the Offerings; | |
| ● | no guarantee on how the Company will use its available funds; | |
| ● | the Company is subject to additional regulatory burden resulting from its public listing on the CSE; | |
| ● | the market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control; | |
| ● | future sales of Common Shares by existing shareholders could reduce the market price of the Company’s Common Shares; | |
| ● | the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and | |
| ● | future dilution as a result of financings. |
These factors should not be considered exhaustive. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.
Information contained in forward-looking statements in this Prospectus is provided as of the date of this Prospectus, and we disclaim any obligation to update any forward-looking statements, whether as a result of new information or future events or results, except to the extent required by applicable securities laws. Accordingly, potential investors should not place undue reliance on forward-looking statements or the information contained in those statements.
Prospective purchasers of Securities should carefully consider the risk factors described in a document incorporated by reference in this Prospectus (including subsequently filed documents incorporated by reference) and those described in a Prospectus Supplement relating to a specific offering of Securities. Discussions of certain risks affecting the Company in connection with its business are provided in the Company’s disclosure documents filed with the various securities regulatory authorities which are incorporated by reference in this Prospectus.
All of the forward-looking statements contained in this Prospectus are expressly qualified by the foregoing cautionary statements. Investors should read this entire Prospectus and consult their own professional advisors to assess the income tax, legal, risk factors and other aspects of their investment.
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION
Unless stated otherwise or the context otherwise requires, all references to dollar amounts in this Prospectus are references to Canadian dollars. All references to “$” or “C$” are to Canadian dollars and references to “US$” are to United States dollars.
The Company presents its financial statements in Canadian dollars. The audited financial statements of the Company for the year ended June 30, 2022 as well as the unaudited condensed consolidated interim financial statements of the company for the three and six months ended December 31, 2023 have been prepared in accordance with International Financial Reporting Standards. Certain financial information incorporated by reference in this Prospectus is derived from such financial statements.
| 3 |
The following table sets forth the rate of exchange for the Canadian dollar expressed in United States dollars in effect at the end of each of the periods indicated, the average of the exchange rates in effect on the last day of each month during each of the periods indicated, and the high and low exchange rates during each of the periods indicated, in each case based on the daily average rate of exchange as reported by the Bank of Canada for the conversion of Canadian dollars into United States dollars.
Year Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| High for period | 0.8111 | 0.8306 | ||||||
| Low for period | 0.7669 | 0.7344 | ||||||
| Average for period | 0.7901 | 0.7807 | ||||||
| Rate at end of period | 0.7760 | 0.8068 | ||||||
The rate of exchange on May 1, 2023 as reported by the Bank of Canada for the conversion of Canadian dollars into United States dollars was C$1.00 equals US$1.3546.
market and industry data
Unless otherwise indicated, information contained in this Prospectus concerning the Company’s industry and the markets in which it operates, including general expectations and market position, market opportunities and market share, is based on information from independent industry organizations, other third-party sources (including industry publications, surveys and forecasts) and management studies and estimates.
Unless otherwise indicated, the Company’s estimates are derived from publicly available information released by independent industry analysts and third-party sources as well as data from the Company’s internal research and knowledge of the renewable energy market and economy, and include assumptions made by the Company which management believes to be reasonable based on their knowledge of the Company’s industry and markets. The Company’s internal research and assumptions have not been verified by any independent source, and it has not independently verified any third-party information. While the Company believes the market position, market opportunity and market share information included in this Prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the Company’s future performance and the future performance of the industry and markets in which it operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under the heading “Forward-Looking Statements” and “Risk Factors”. For the avoidance of doubt, nothing stated in this paragraph operates to relieve any party from liability for any misrepresentation contained in this Prospectus under applicable Canadian securities laws.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference in this Prospectus from documents filed with securities commissions or similar authorities in the provinces of Canada (collectively, the “Commissions”). Copies of the documents incorporated herein by reference may be obtained on request without charge from the Chief Administrative Officer of the Company at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2, telephone (416) 494-9559. These documents are also available through the internet on SEDAR, which can be accessed online at www.sedar.com.
The following documents of the Company, filed by the Company with the Commissions, are specifically incorporated by reference into, and form an integral part of, this Prospectus:
| (a) | the Company’s long form prospectus for its initial public offering dated February 10, 2023 (the “IPO Prospectus”); |
| 4 |
| (b) | the audited financial statements of the Company for the year ended June 30, 2022 (the “Annual Financial Statements”) which are contained within the IPO Prospectus; | |
| (c) | the management’s discussion and analysis of the Company for the year ended June 30, 2022 which is contained within the IPO Prospectus; | |
| (d) | the unaudited condensed consolidated interim financial statements of the Company for the three and six months ended December 31, 2022 (the “Interim Financial Statements”); | |
| (e) | the management’s discussion and analysis of the Company for the three and six months ended December 31, 2022; and | |
| (f) | the material change report dated March 6, 2023 with respect to the announcement of the completion of the Company’s initial public offering to raise gross proceeds of $6,037,500 and listing on the CSE. |
Any document of the types referred to in the preceding paragraph (excluding press releases and confidential material change reports) or of any other type required to be incorporated by reference into a short form prospectus pursuant to National Instrument 44-101 - Short Form Prospectus Distributions that are filed by us with a Commission after the date of this Prospectus and prior to the termination of the Offering under any Prospectus Supplement shall be deemed to be incorporated by reference in this Prospectus.
Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not constitute a part of this Prospectus, except as so modified or superseded.
A Prospectus Supplement containing the specific terms of an Offering will be delivered to purchasers of such Securities together with this Prospectus and will be deemed to be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement, but only for the purposes of the Offering covered by that Prospectus Supplement.
Any template version of any “marketing materials” (as such term is defined in NI 44-101) filed after the date of a Prospectus Supplement and before the termination of the distribution of the Securities offered pursuant to such Prospectus Supplement (together with this Prospectus) is deemed to be incorporated by reference in such Prospectus Supplement.
Reference to the Company’s website in any documents that are incorporated by reference into this Prospectus do not incorporate by reference the information on such website into this Prospectus, and the Company disclaims any such incorporation by reference.
BUSINESS OF THE COMPANY
Overview of the Company
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in Canada and the United States. The Company’s mission is to support the energy transition in North America through deployment of clean energy at a distributed scale closer to where consumption occurs. Its objective is to scale-up as a leading developer, owner and operator of a significant fleet of distributed solar power assets that have economic and technical value. The Company originates, develops, designs and builds solar power projects. The Company is also gaining expertise in battery storage, co-generation and other technologies that will enable greater penetration of clean energy.
| 5 |
Principal Operations
The Company focuses on grid connected solar PV electricity power plants. With its full in-house development, engineering and construction expertise, the Company’s capabilities span the value chain from development, engineering, procurement and construction (“EPC”), financing, and, while not yet an Independent Power Producer (“IPP”), performs asset management which is a core function of an IPP. The Company’s core business consists of:
| ● | Development: The Company identifies, evaluates and secures control of suitable solar development sites; obtains grid interconnection from utilities; acquires permits from government authorities; and engages solar energy subscribers or PPA clients as off-takers. A PPA, also referred to as an off-take agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer or off-taker). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA requires active management to reconcile monthly deliveries, penalties and payment for electricity. | |
| ● | EPC: The Company engineers, procures and constructs efficient, eco-friendly, renewable solar power plants for industrial, commercial, community and utility electricity market, using high engineering standards and the latest technology. | |
| ● | Financing: The Company assists with securing sponsor equity, tax equity, long-term debt, and construction financing to deploy solar power plants. | |
| ● | Independent Power Producer: The Company is not yet an IPP. However, the Company does carry out one of the core functions of an IPP as it operates and maintains solar power plants for maximized production (O&M services described further below) and oversees solar power subscribers through two customer support centers in Boston and Chicago. The Company manages PPA and off-take agreements as an asset manager. |
O&M stands for Operations and Maintenance. It refers to the set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable regulations. It encompasses several ongoing maintenance processes along with the replacement and disabling of broken and damaged system and structural components. O&M is essential to ensuring that solar power plants sustain themselves for their expected system life. O&M consists of three fundamental and principal functions:
| ● | Preventative maintenance. | |
| ● | Reactive maintenance: rapid identification, analysis, and resolution of issues and problems. | |
| ● | Comprehensive and detailed monitoring and reporting with adequate and requisite transparency. |
Recent Developments
Commercial Operation at Union Springs, NY Solar Project
On March 7, 2023, the Company announced completion of construction on a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. The power plant passed its final New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program inspection and has been placed into commercial operation. Upon final closing, SolarBank will assume a majority ownership stake in the system. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kWh of clean, renewable energy in its first year of operation.
| 6 |
Recovery of Pre-Construction Development Costs
The Company’s subsidiary 2467264 Ontario Inc. (the “Subsidiary”) has now concluded agreements for the repayment of $6.38 million of Pre-Construction Development Costs (“PCDC”). The PCDC were incurred in connection with certain FIT Contracts in Ontario. PCDC are defined as reasonable costs incurred in development of a project from contract award date to termination date. The Subsidiary is owned 49.9% by the Company; however, based on an arrangement between the Subsidiary and the Company, the Company will receive the full amount of the PCDC recoveries from the Subsidiary.
Extension of Promissory Note
On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,984 (USD $891,158) since August 2022 to note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note was expected to be repaid in March 2023 but subsequently the repayment date was ended to April 30, 2023.
RISK FACTORS
Prospective purchasers of Securities should carefully consider the risk factors described in a document incorporated by reference in this Prospectus (including the IPO Prospectus and subsequently filed documents incorporated by reference) and those described in a Prospectus Supplement relating to a specific offering of Securities. Discussions of certain risks affecting the Company in connection with its business are provided in the Company’s disclosure documents filed with the various securities regulatory authorities which are incorporated by reference in this Prospectus.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net proceeds from the sale of Securities will be used to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. At this time, the Company does not have any proposed acquisitions.
As disclosed in the IPO Prospectus, the Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. Under the heading “General Development and Business of the Company – Operations Process” in the IPO Prospectus, the Company described the five phases of its business model:
| ● | Phase 1 – Site Origination to Bankable Lease | |
| ● | Phase 2 – Development to Notice to Proceed (NTP) | |
| ● | Phase 3 – Financing | |
| ● | Phase 4 – Delivery: Engineering, Procurement and Construction to COD/PTO | |
| ● | Phase 5 – O&M, Subscriber Management and Asset Management |
In order to become an Independent Power Producer, the Company would need to make an adjustment in Phase 3. Instead of bringing in a project sponsor to finance and own the relevant project, the Company would be the sponsor by financing the project itself and retaining ownership. The process and costs associated with project ownership are the same as the Company’s existing business model, except for the requirement to fund the development costs. As a result, in order to accomplish this, the Company needs additional capital to cover the equity portion of project development costs. Absent additional capital, the Issuer will continue with its “develop to sell” strategy and take smaller ownership interests in smaller projects. However, the ability to access financing through a Prospectus Supplement will allow the Issuer to retain a larger ownership in larger projects and accelerate its development pipeline. The Company has not identified any specific projects that financing from a Prospectus Supplement would be allocated towards for project ownership purposes and any determination is subject to the availability and amount of any future financing.
| 7 |
The current COVID-19 pandemic as well as future developments in the Company’s solar power projects under development or unforeseen events may also impact the ability of the Company to use the proceeds from the sale of the Securities as intended or disclosed in each Prospectus Supplement. See “Risk Factors”.
Each Prospectus Supplement will contain specific information concerning the use of proceeds from that sale of Securities.
During the most recent financial year ended June 30, 2022, the Company had negative cash flow from operating activities. To the extent that the Company has negative cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. If necessary, proceeds from the sale of Securities may be used to fund negative cash flow from operating activities in future periods which will be indicated in a Prospectus Supplement as applicable. There can be no assurance that the Company will be able to generate a positive cash flow from its operations, that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company. All expenses relating to an Offering and any compensation paid to underwriters, dealers or agents, as the case may be, will be paid out of the proceeds from the sale of such Securities, unless otherwise stated in the applicable Prospectus Supplement.
The Company will not receive any proceeds from any sale of Securities by any Selling Securityholder.
CONSOLIDATED CAPITALIZATION
Since the date of the Interim Financial Statements, which are incorporated by reference in this Prospectus, there has been no material change to the share and loan capital of the Company on a consolidated basis, other than as disclosed in this Prospectus or in any document incorporated by reference herein. See “Prior Sales”.
DESCRIPTION OF MATERIAL INDEBTEDNESS
In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022.
The Company received a Canada Emergency Business Account interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. for a loan of $320,273 (US$250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023. The interest of loan is payable on a quarterly basis beginning July 8, 2022. The full amount in principal and in interest has been fully repaid on October 6, 2022.
PLAN OF DISTRIBUTION
The Company or any Selling Securityholder may sell the Securities, separately or together: (a) to one or more underwriters or dealers; (b) through one or more agents; or (c) directly to one or more other purchasers. Each Prospectus Supplement relating to a particular offering of Securities will set forth the terms of the applicable Offering, including the (a) terms of the Securities to which the Prospectus Supplement relates, including the type of Security being offered, and the method of distribution; (b) the name or names of any underwriters, dealers or agents involved in the offering of Securities; (c) the purchase price or prices of the Securities offered thereby and the proceeds to, and the expenses borne by, the Company from the sale of the Securities; (d) any commission, underwriting discount and other items constituting compensation payable to underwriters, dealers or agents; and (e) any discounts or concessions allowed or re-allowed or paid to underwriters, dealers or agents. In addition, Securities may be offered and issued in consideration for the acquisition (an “Acquisition”) of other businesses, assets or securities by the Company or its subsidiaries. The consideration for any such Acquisition may consist of any of the Securities separately, a combination of Securities or any combination of, among other things, securities, cash and assumption of liabilities.
| 8 |
The Securities may be sold from time to time in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices, including sales in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions, including sales made directly on the CSE or other existing trading markets for the securities, and sales pursuant to a dividend reinvestment plan. The prices at which the Securities may be offered may vary as between purchasers and during the period of distribution. If, in connection with an offering of Securities at a fixed price or prices, the underwriters have made a bona fide effort to sell all of the Securities at the initial offering price fixed in the applicable Prospectus Supplement, the public offering price may be decreased and thereafter further changed, from time to time, to an amount not greater than the initial public offering price fixed in such Prospectus Supplement, in which case the compensation realized by the underwriters will be decreased by the amount that the aggregate price paid by purchasers for the Securities is less than the gross proceeds paid by the underwriters to the Company or any Selling Securityholder. The Selling Securityholders will not engage in any “at-the-market distributions.”
Only underwriters, dealers or agents so named in the Prospectus Supplement are deemed to be underwriters, dealers or agents in connection with the Securities offered thereby. If underwriters are used in an offering, the Securities offered thereby will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase Securities will be subject to the conditions precedent agreed upon by the parties and the underwriters will be obligated to purchase all Securities under that offering if any are purchased. If agents are used in an offering, unless otherwise indicated in the applicable Prospectus Supplement, such agents will be acting on a “best efforts” basis for the period of their appointment. Any public offering price and any discounts or concessions allowed or re-allowed or paid to underwriters, dealers or agents may be changed from time to time.
Underwriters, dealers or agents who participate in the distribution of Securities may be entitled under agreements to be entered into with the Company or any Selling Securityholder to indemnification by the Company or any Selling Securityholder against certain liabilities, including liabilities under securities legislation, or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof. Such underwriters, dealers or agents with whom the Company or any Selling Securityholder enters into agreements may be customers of, engage in transactions with, or perform services for, the Company or any Selling Securityholder in the ordinary course of business.
Any offering of Debt Securities, Subscription Receipts, Share Purchase Contracts, Warrants or Units will be a new issue of securities with no established trading market. Unless otherwise specified in the applicable Prospectus Supplement, the Debt Securities, Subscription Receipts, Share Purchase Contracts, Warrants or Units will not be listed on any securities exchange. Unless otherwise specified in the applicable Prospectus Supplement, there is no market through which the Debt Securities, Subscription Receipts, Share Purchase Contracts, Warrants or Units may be sold and purchasers may not be able to resell Debt Securities, Subscription Receipts, Share Purchase Contracts, Warrants or Units purchased under this Prospectus or any Prospectus Supplement. This may affect the pricing of the Debt Securities, Subscription Receipts, Share Purchase Contracts, Warrants or Units in the secondary market, the transparency and availability of trading prices, the liquidity of the Securities, and the extent of issuer regulation. Subject to applicable laws, certain dealers may make a market in these Securities, but will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given that any dealer will make a market in these Securities or as to the liquidity of the trading market, if any, for these Securities.
No underwriter of the “at-the-market distribution” as defined under applicable Canadian securities legislation, and no person or company acting jointly or in concert with an underwriter, may, in connection with the distribution, enter into any transaction that is intended to stabilize or maintain the market price of the Securities or Securities of the same class as the Securities distributed under the at-the-market prospectus, including selling an aggregate number or principal amount of Securities that would result in the underwriter creating an over-allocation position in the Securities.
In connection with any offering of Securities, other than an “at-the-market distribution”, subject to applicable laws, the underwriters or agents may over-allot or effect transactions that stabilize or maintain the market price of the offered Securities at a level above that which might otherwise prevail in the open market. Such transactions, if commenced, may be interrupted or discontinued at any time.
| 9 |
A purchaser who acquires Common Shares, Debt Securities, Warrants, Subscription Receipts, Share Purchase Contracts, or Units forming part of the underwriters’ over-allocation position acquires those securities under this short form prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the overallotment option or secondary market purchases.
The Securities have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered or sold or otherwise transferred or disposed of, directly or indirectly, in the United States or to or for the account or benefit of U.S. Persons absent registration under the U.S. Securities Act and all applicable state securities laws, or pursuant to applicable exemption therefrom. In addition, until 40 days after closing of an offering of Securities, an offer or sale of the Securities within the United States by any dealer (whether or not participating in such offering) may violate the registration requirement of the U.S. Securities Act if such offer or sale is made other than in accordance with an exemption under the U.S. Securities Act.
SELLING SECURITYHOLDERS
Securities may be sold under this Prospectus by way of secondary offering by Selling Securityholders. The Prospectus Supplement for or including any offering of Securities by Selling Securityholders will include the following information, to the extent required by applicable securities laws: (i) the name or names of the Selling Securityholders (if a Selling Securityholder is not an individual, the name of each individual who is a principal securityholder of the Selling Securityholder); (ii) the number or amount of Securities owned, controlled or directed by each Selling Securityholder; (iii) the number or amount of Securities being distributed for the account of each Selling Securityholder; (iv) the number or amount of Securities to be owned, controlled or directed by the Selling Securityholders after the distribution and the percentage that number or amount represents of the total number of outstanding Securities; (v) whether the Securities are owned by the Selling Securityholders both of record and beneficially, of record only, or beneficially only; (vi) if any Selling Securityholder acquired any Securities in the 12 months preceding the date of the applicable Prospectus Supplement, the date or dates on which such Selling Securityholder acquired such Securities and the cost thereof to such Selling Securityholder in the aggregate and on an average cost per security basis; (vii) if applicable, the disclosure required by Item 1.11 of Form 44-101F1, and, if applicable, the Selling Securityholders will file a non-issuer’s submission to jurisdiction form with the corresponding Prospectus Supplement; and (viii) all other information that is required to be included in the applicable Prospectus Supplement.
PRIOR SALES
Information in respect of the Common Shares issued by the Company within the previous twelve (12) month period, including Common Shares that the Company issued either upon the exercise of options or warrants, will be provided as required in a Prospectus Supplement with respect to the issuance of the Securities pursuant to such Prospectus Supplement.
PRICE RANGE AND TRADING VOLUME
The outstanding Common Shares are traded on the CSE under the trading symbol “SUNN”. Trading price and volume of the Common Shares will be provided in each Prospectus Supplement.
DIVIDEND POLICY
We have not declared any dividends or distributions on the Common Shares since our incorporation. Any future determination to pay dividends or make distributions will be at the discretion of the board of directors and will depend on our capital requirements, financial performance and such other factors as the board of directors considers relevant.
DESCRIPTION OF COMMON SHARES
The Company is authorized to issue an unlimited number of Common Shares. As of the close of business on May 2, 2023, there were 26,800,000 Common Shares issued and outstanding.
All of the issued and outstanding Common Shares have been fully paid for and none are subject to any future call or assessment. Holders of Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders of the Company and to receive all notices and other documents required to be sent to shareholders in accordance with the Company’s articles, corporate law and the rules of any applicable stock exchange. On a poll, every shareholder has one vote for each Common Share. The holders of Common Shares are entitled to dividends if, as and when declared by the board of directors of the Company and, upon the liquidation, dissolution or winding-up of its affairs or other distribution of its assets for the purpose of winding-up its affairs, to receive, on a pro rata basis, all of the remaining assets of the Company. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking fund or purchase fund provisions.
| 10 |
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of Debt Securities. The particular terms and provisions of Debt Securities offered by a Prospectus Supplement, and the extent to which the general terms and provisions described below may apply to such Debt Securities, will be described in such Prospectus Supplement.
The Debt Securities will be issued in series under one or more trust indentures to be entered into between the Company and a financial institution to which the Trust and Loan Companies Act (Canada) applies or a financial institution organized under the laws of any province of Canada and authorized to carry on business as a trustee. Each such trust indenture, as supplemented or amended from time to time, will set out the terms of the applicable series of Debt Securities. The statements in this Prospectus relating to any trust indenture and the Debt Securities to be issued under it are summaries of anticipated provisions of an applicable trust indenture and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of such trust indenture, as applicable.
Each trust indenture may provide that Debt Securities may be issued thereunder up to the aggregate principal amount which may be authorized from time to time by the Company. Any Prospectus Supplement for Debt Securities will contain the terms and other information with respect to the Debt Securities being offered, including (i) the designation, aggregate principal amount and authorized denominations of such Debt Securities, (ii) the currency for which the Debt Securities may be purchased and the currency in which the principal and any interest is payable (in either case, if other than Canadian dollars), (iii) the percentage of the principal amount at which such Debt Securities will be issued, (iv) the date or dates on which such Debt Securities will mature, (v) the rate or rates at which such Debt Securities will bear interest (if any), or the method of determination of such rates (if any), (vi) the dates on which any such interest will be payable and the record dates for such payments, (vii) any redemption term or terms under which such Debt Securities may be defeased, (viii) any exchange or conversion terms, and (ix) any other specific terms.
Each series of Debt Securities may be issued at various times with different maturity dates, may bear interest at different rates and may otherwise vary.
The Debt Securities will be direct obligations of the Company. The Debt Securities will be senior or subordinated indebtedness of the Company as described in the relevant Prospectus Supplement.
DESCRIPTION OF WARRANTS
We may issue Warrants to purchase Common Shares, Debt Securities or other securities of the Company. This section describes the general terms that will apply to any Warrants issued pursuant to this Prospectus.
Warrants may be offered separately or together with other Securities and may be attached to or separate from any other Securities. Unless the applicable Prospectus Supplement otherwise indicates, each series of Warrants will be issued under a separate warrant indenture to be entered into between us and one or more banks or trust companies acting as Warrant agent. The Warrant agent will act solely as our agent and will not assume a relationship of agency with any holders of Warrant certificates or beneficial owners of Warrants. The applicable Prospectus Supplement will include details of the Warrant indentures, if any, governing the Warrants being offered. The specific terms of the Warrants, and the extent to which the general terms described in this section apply to those Warrants, will be set out in the applicable Prospectus Supplement.
Notwithstanding the foregoing, we will not offer Warrants for sale separately to any member of the public in Canada unless the Offering is in connection with and forms part of the consideration for an acquisition or merger transaction or unless the Prospectus Supplement containing the specific terms of the Warrants to be offered separately is first approved for filing by the securities regulators in Canada, if applicable, where the Warrants will be offered for sale.
| 11 |
The Prospectus Supplement relating to any Warrants that we offer will describe the Warrants and the specific terms relating to the Offering. The description will include, where applicable:
| ● | the designation and aggregate number of Warrants; | |
| ● | the price at which the Warrants will be offered; | |
| ● | the currency or currencies in which the Warrants will be offered; | |
| ● | the date on which the right to exercise the Warrants will commence and the date on which the right will expire; | |
| ● | the designation, number and terms of the Common Shares, Debt Securities or other securities, as applicable, that may be purchased upon exercise of the Warrants, and the procedures that will result in the adjustment of those numbers; | |
| ● | the exercise price of the Warrants; | |
| ● | the designation and terms of the Securities, if any, with which the Warrants will be offered, and the number of Warrants that will be offered with each Security; | |
| ● | if the Warrants are issued as a Unit with another Security, the date, if any, on and after which the Warrants and the other Security will be separately transferable; | |
| ● | any minimum or maximum amount of Warrants that may be exercised at any one time; | |
| ● | any terms, procedures and limitations relating to the transferability, exchange or exercise of the Warrants; | |
| ● | whether the Warrants will be subject to redemption or call and, if so, the terms of such redemption or call provisions; | |
| ● | material United States and Canadian federal income tax consequences of owning the Warrants; and | |
| ● | any other material terms or conditions of the Warrants. |
Warrant certificates will be exchangeable for new Warrant certificates of different denominations at the office indicated in the Prospectus Supplement. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the Securities subject to the Warrants. We may amend the Warrant indenture(s) and the Warrants, without the consent of the holders of the Warrants, to cure any ambiguity, to cure, correct or supplement any defective or inconsistent provision or in any other manner that will not prejudice the rights of the holders of outstanding Warrants, as a group.
DESCRIPTION OF SUBSCRIPTION RECEIPTS
We may issue Subscription Receipts, separately or together, with Common Shares, Debt Securities or Warrants, as the case may be. The Subscription Receipts will be issued under a subscription receipt agreement. This section describes the general terms that will apply to any Subscription Receipts that we may offer pursuant to this Prospectus.
The applicable Prospectus Supplement will include details of the subscription receipt agreement covering the Subscription Receipts being offered. We will file a copy of the subscription receipt agreement relating to an Offering with securities regulatory authorities in Canada after we have entered into it. The specific terms of the Subscription Receipts, and the extent to which the general terms described in this section apply to those Subscription Receipts, will be set forth in the applicable Prospectus Supplement. This description will include, where applicable:
| ● | the number of Subscription Receipts; | |
| ● | the price at which the Subscription Receipts will be offered and whether the price is payable in instalments; | |
| ● | conditions to the exchange of Subscription Receipts into Common Shares, Debt Securities or Warrants, as the case may be, and the consequences of such conditions not being satisfied; | |
| ● | the procedures for the exchange of the Subscription Receipts into Common Shares, Debt Securities or Warrants; | |
| ● | the number of Common Shares or Warrants that may be exchanged upon exercise of each Subscription Receipt; |
| 12 |
| ● | the aggregate principal amount, currency or currencies, denominations and terms of the series of Debt Securities that may be exchanged upon exercise of the Subscription Receipts; | |
| ● | the designation and terms of any other Securities with which the Subscription Receipts will be offered, if any, and the number of Subscription Receipts that will be offered with each Security; | |
| ● | the dates or periods during which the Subscription Receipts may be exchanged into Common Shares, Debt Securities or Warrants; | |
| ● | terms applicable to the gross or net proceeds from the sale of the Subscription Receipts plus any interest earned thereon; | |
| ● | material United States and Canadian federal income tax consequences of owning the Subscription Receipts; | |
| ● | any other rights, privileges, restrictions and conditions attaching to the Subscription Receipts; and | |
| ● | any other material terms and conditions of the Subscription Receipts. |
Subscription Receipt certificates will be exchangeable for new Subscription Receipt certificates of different denominations at the office indicated in the Prospectus Supplement. Prior to the exchange of their Subscription Receipts, holders of Subscription Receipts will not have any of the rights of holders of the Securities subject to the Subscription Receipts.
Under the subscription receipt agreement, a Canadian purchaser of Subscription Receipts will have a contractual right of rescission following the issuance of Common Shares, Debt Securities or Warrants, as the case may be, to such purchaser, entitling the purchaser to receive the amount paid for the Subscription Receipts upon surrender of the Common Shares, Debt Securities or Warrants, as the case may be, if this Prospectus, the applicable Prospectus Supplement, and any amendment thereto, contains a misrepresentation, provided such remedy for rescission is exercised within 180 days of the date the Subscription Receipts are issued. This right of rescission does not extend to holders of Subscription Receipts who acquire such Subscription Receipts from an initial purchaser, on the open market or otherwise, or to initial purchasers who acquire Subscription Receipts in the United States or other jurisdictions outside Canada.
Such subscription receipt agreement will also specify that we may amend any subscription receipt agreement and the Subscription Receipts, to cure any ambiguity, to cure, correct or supplement any defective or inconsistent provision or in any other manner that will not materially and adversely affect the interests of the holder.
DESCRIPTION OF SHARE PURCHASE CONTRACTS
The Company may issue share purchase contracts, representing contracts obligating holders to purchase from or sell to the Company, and obligating the Company to purchase from or sell to the holders, a specified number of Common Shares at a future date or dates, and including by way of instalment.
The price per Common Share and the number of Common Shares may be fixed at the time the share purchase contracts are issued or may be determined by reference to a specific formula or method set forth in the share purchase contracts. The Company may issue share purchase contracts in accordance with applicable laws and in such amounts and in as many distinct series as it may determine.
The share purchase contracts may be issued separately or as part of units consisting of a share purchase contract and beneficial interests in debt obligations of third parties, securing the holders’ obligations to purchase the Common Shares under the share purchase contracts, which are referred to in this prospectus as share purchase units. The share purchase contracts may require the Company to make periodic payments to the holders of the share purchase units or vice versa, and these payments may be unsecured or refunded and may be paid on a current or on a deferred basis. The share purchase contracts may require holders to secure their obligations under those contracts in a specified manner.
| 13 |
Holders of share purchase contracts are not shareholders of the Company. The particular terms and provisions of share purchase contracts offered by any Prospectus Supplement, and the extent to which the general terms and provisions described below may apply to them, will be described in the applicable Prospectus Supplement filed in respect of such share purchase contracts. This description will include, where applicable: (i) whether the share purchase contracts obligate the holder to purchase or sell, or both purchase and sell, Common Shares and the nature and amount of those securities, or the method of determining those amounts; (ii) whether the share purchase contracts are to be prepaid or not or paid in instalments; (iii) any conditions upon which the purchase or sale will be contingent and the consequences if such conditions are not satisfied; (iv) whether the share purchase contracts are to be settled by delivery, or by reference or linkage to the value or performance of Common Shares; (v) any acceleration, cancellation, termination or other provisions relating to the settlement of the share purchase contracts; (vi) the date or dates on which the sale or purchase must be made, if any; (vii) whether the share purchase contracts will be issued in fully registered or global form; (viii) the material income tax consequences of owning, holding and disposing of the share purchase contracts; and (ix) any other material terms and conditions of the share purchase contracts including, without limitation, transferability and adjustment terms and whether the share purchase contracts will be listed on a securities exchange or automated interdealer quotation system.
Original purchasers of share purchase contracts will be granted a contractual right of rescission against the Company in respect of the conversion, exchange or exercise of such share purchase contract. The contractual right of rescission will entitle such original purchasers to receive the amount paid upon conversion, exchange or exercise, upon surrender of the underlying securities gained thereby, in the event that this prospectus (as supplemented or amended) contains a misrepresentation, provided that: (i) the conversion, exchange or exercise takes place within 180 days of the date of the purchase of the convertible, exchangeable or exercisable security under this prospectus; and (ii) the right of rescission is exercised within 180 days of the date of the purchase of the convertible, exchangeable or exercisable security under this prospectus. This contractual right of rescission will be consistent with the statutory right of rescission described under section 130 of the Securities Act (Ontario), and is in addition to any other right or remedy available to original purchasers under section 130 of the Securities Act (Ontario) or otherwise at law.
DESCRIPTION OF UNITS
We may issue Units comprised of one or more of the other Securities described in this Prospectus in any combination. Each Unit will be issued so that the holder of the Unit is also the holder of each of the Securities included in the Unit. Thus, the holder of a Unit will have the rights and obligations of a holder of each included Security. The unit agreement, if any, under which a Unit is issued may provide that the Securities included in the Unit may not be held or transferred separately, at any time or at any time before a specified date. The particular terms and provisions of Units offered by any Prospectus Supplement, and the extent to which the foregoing general terms and provisions may apply thereto, will be described in the Prospectus Supplement filed in respect of such Units.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The applicable Prospectus Supplement will describe certain Canadian and U.S. federal income tax consequences to investors described therein of acquiring any Securities offered thereunder, as may be required by applicable securities laws.
EXEMPTION FROM TRANSLATION REQUIREMENTS
Pursuant to a decision of the Autorité des marchés financiers dated March 16, 2023, the Company was granted a permanent exemption from the requirement to translate into French this Prospectus, as well as the documents incorporated by reference herein, and any Prospectus Supplement to be filed in relation to an “at-the-market” distribution. This exemption is granted on the condition that this Prospectus and any Prospectus Supplement (other than in relation to an “at-the-market” distribution) be translated into French if the Company offers Securities to Québec purchasers in connection with an offering other than in relation to an “at-the-market” distribution.
LEGAL MATTERS
Certain legal matters related to the Securities offered by this Prospectus will be passed upon by DLA Piper (Canada) LLP on behalf of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Endeavor Trust Corporation at its principal office in the City of Vancouver, British Columbia.
| 14 |
INTEREST OF EXPERTS
The following are persons or companies whose profession or business gives authority to a statement made in this Prospectus as having prepared or certified a part of that document or report described in this Prospectus:
| ● | MSLL CPA LLP, Chartered Professional Accountants is the external auditor of the Company. |
To the knowledge of management of the Company, as of the date hereof, no expert, nor any associate or affiliate of such person has any beneficial interest, direct or indirect, in the securities or property of the Company or of an associate or affiliate of any of them, and no such person is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of an associate or affiliate thereof.
promoters
Except for Dr. Richard Lu, the Chief Executive Officer of the Company, no person or company has, within the two years immediately preceding the date of this Prospectus, been a promoter of the Company, within the meaning of applicable securities laws. Dr. Lu holds 781,000 Common Shares representing 2.91% of the issued and outstanding Common Shares and 550,000 stock options to acquire Common Shares at an exercise price of $0.75 per Common Share and expiring on November 4, 2027.
Other than as disclosed in this section or elsewhere in this Prospectus, no person who was a Promoter of the Company within the last two years:
| ● | received anything of value directly or indirectly from the Company or a subsidiary; | |
| ● | sold or otherwise transferred any asset to the Company or a subsidiary within the last two years; | |
| ● | has been a director, chief executive officer or chief financial officer of any company that during the past 10 years was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation for a period of more than 30 consecutive days or became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets; | |
| ● | has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; | |
| ● | has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision; or | |
| ● | has within the past 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets. |
PURCHASER’S STATUTORY RIGHTS
Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment thereto. In several of the provinces of Canada, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price damages if the Prospectus and any amendment thereto contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights or consult with a legal adviser.
| 15 |
In an Offering of convertible, exchangeable or exercisable Securities, investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the Prospectus is limited, in certain provincial securities legislation, to the price at which the convertible, exchangeable or exercisable Securities are offered to the public under an Offering. This means that, under the securities legislation of certain provinces, if the purchaser pays additional amounts upon conversion, exchange or exercise of the security, those amounts may not be recoverable under the statutory right of action for damages that applies in those provinces. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of this right of action for damages or consult with a legal adviser.
PURCHASER’S CONTRACTUAL RIGHTS
Original purchasers of Warrants (if offered separately), Subscription Receipts and Share Purchase Contracts will have a contractual right of rescission against the Company in respect of the conversion, exchange or exercise of such Warrant, Subscription Receipt or Share Purchase Contract, as the case may be.
The contractual right of rescission will entitle such original purchasers to receive, in addition to the amount paid on original purchase of the Warrant, Subscription Receipt or Share Purchase Contract, as the case may be, the amount paid upon conversion, exchange or exercise upon surrender of the underlying securities gained thereby, in the event that this Prospectus (as supplemented or amended) contains a misrepresentation, provided that: (i) the conversion, exchange or exercise takes place within 180 days of the date of the purchase of the convertible, exchangeable or exercisable security under this prospectus; and (ii) the right of rescission is exercised within 180 days of the date of purchase of the convertible, exchangeable or exercisable security under this prospectus. This contractual right of rescission will be consistent with the statutory right of rescission described under section 130 of the Securities Act (Ontario), and is in addition to any other right or remedy available to original purchasers under section 130 of the Securities Act (Ontario) or otherwise at law.
Original purchasers are further advised that in certain provinces the statutory right of action for damages in connection with a prospectus misrepresentation is limited to the amount paid for the convertible, exchangeable or exercisable security that was purchased under a prospectus, and therefore a further payment at the time of conversion, exchange or exercise may not be recoverable in a statutory action for damages. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of these rights, or consult with a legal adviser.
| 16 |
CERTIFICATE OF SOLARBANK CORPORATION
May 2, 2023
This short form prospectus, together with the documents incorporated in this prospectus by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces in Canada.
| /s/ “Dr. Richard Lu” | /s/ “Sam Sun” | |
|
DR. RICHARD LU Chief Executive Officer |
SAM SUN Chief Financial Officer |
ON BEHALF OF THE BOARD OF DIRECTORS
| /s/ “Paul Pasalic” | /s/ “Paul Sparkes” | |
|
PAUL PASALIC Director |
PAUL SPARKES Director |
| C-1 |
CERTIFICATE OF promoter
May 2, 2023
This short form prospectus, together with the documents incorporated in this prospectus by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces in Canada.
| /s/ “Dr. Richard Lu” | ||
| DR. RICHARD LU |
| C-2 |
Exhibit 99.30
Exhibit 99.31
Exhibit 99.32
Exhibit 99.33
SolarBank Files Final Base Shelf Prospectus
Toronto, Ontario, May 3, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) announces that it has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada.
The Shelf Prospectus will enable the Company to make offerings of up to C$200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
A copy of the Shelf Prospectus is available on SEDAR (www.sedar.com) and also may be obtained by contacting the Chief Administrative Officer of the Company at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2, telephone (416) 494-9559.
The common shares, debt securities, subscription receipts, units, warrants and share purchase contracts have not been, nor will they be, registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and type of future solar projects; and information pertaining any potential future offering(s) of securities pursuant to the Shelf Prospectus (and the use of proceeds therefrom). No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.34
SolarBank Commences Trading on OTCQX Best Market
Toronto, Ontario, May 5, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SLBCF) (“SolarBank” or the “Company”) is pleased to announce that it has today commenced trading on the OTC Market’s prestigious tier, OTCQX International, under the symbol of SLBCF. Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on www.otcmarkets.com. To qualify for OTCQX, companies must meet high financial standards, follow best practice corporate governance and demonstrate compliance with applicable securities laws.
“We are thrilled to be approved for trading on the OTCQX market, the highest tier of OTC Markets, which represents a significant milestone for our company,” said Dr. Richard Lu, President and CEO of SolarBank Corporation. “This achievement reflects our commitment to corporate governance and financial integrity, and we look forward to leveraging the benefits of this prestigious market to further grow and expand our business.”
ABOUT OTC MARKETS GROUP INC.
OTC Markets Group Inc. (OTCQX: OTCM) operates regulated markets for trading 12,000 U.S. and international securities. Its data-driven disclosure standards form the foundation of its three public markets: OTCQX® Best Market, OTCQB® Venture Market and Pink® Open Market.
Its OTC Link® Alternative Trading Systems (ATSs) provide critical market infrastructure that broker-dealers rely on to facilitate trading. It innovative model offers companies more efficient access to the U.S. financial markets.
OTC Link ATS, OTC Link ECN and OTC Link NQB are each an SEC regulated ATS, operated by OTC Link LLC, a FINRA and SEC registered broker-dealer, member SIPC.
To learn more about how they create better informed and more efficient markets, visit www.otcmarkets.com.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the megawatt capacity and type of future solar projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.35
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| May 3, 2023 | |
| 3. | News Release |
| A news release was disseminated on May 3, 2023 via Cision. | |
| 4. | Summary of Material Change |
| SolarBank has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to C$200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid. | |
| 5.1 | Full Description of Material Change |
SolarBank has filed the Shelf Prospectus with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to C$200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
A copy of the Shelf Prospectus is available on SEDAR (www.sedar.com) and also may be obtained by contacting the Chief Administrative Officer of the Company at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2, telephone (416) 494-9559. The common shares, debt securities, subscription receipts, units, warrants and share purchase contracts have not been, nor will they be, registered under the United States Securities Act of 1933, as amended and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful. |
| 2 |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. | |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is:
Sam Sun, Chief Financial Officer (416) 494-9559 sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| May 8, 2023 |
Forward-Looking Information
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and type of future solar projects; and information pertaining any potential future offering(s) of securities pursuant to the Shelf Prospectus (and the use of proceeds therefrom). No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.36
SolarBank Engages Hybrid Financial Ltd.
Toronto, Ontario, May 12, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SLBCF) (“SolarBank” or the “Company”) is pleased to announce that it has retained Hybrid Financial Ltd. (“Hybrid”) to provide marketing services to the Company. Hybrid has been engaged to heighten market and brand awareness for SolarBank and to broaden the Company’s reach within the investment community.
The services to be provided by Hybrid include phone calls to, and email communications with, qualified North American Investment Professionals (the “Services”).. Hybrid has agreed to comply with all applicable securities laws and the policies of the Canadian Securities Exchange in providing the Services.
Hybrid has been engaged by the Company for an initial period of six months starting May 15, 2023 (the “Initial Term”) and then, with the agreement of both parties, may be renewed for successive three month periods thereafter. Hybrid will be paid a monthly fee of $15,000, plus applicable taxes, during the Initial Term. No stock options are being granted to Hybrid under the terms of its engagement.
The contact information for Hybrid is Hybrid Financial Ltd, 222 Bay Street, PO Box 37, Suite 2600, Toronto, ON M5K 1B7; Phone: 1-888-246-9446; Email: info@hybridfinancial.ca. Hybrid its arm’s length to the Company. For inquiries about SolarBank please call 647-692-6047.
ABOUT HYBRID FINANCIAL LTD.
Hybrid is a sales and distribution company that actively connects issuers to the investment community across North America. Using a data driven approach, Hybrid provides its clients with comprehensive coverage of both American and Canadian markets. Hybrid Financial has offices in Toronto and Montreal.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the megawatt capacity and type of future solar projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.37
SolarBank Reaches Commercial Operation on BTM Solar Project in New York and Provides Update on Pipeline of Projects in Progress
| ● | Commercial operation reached on a 195kW DC behind-the-meter system for Honeywell International in Syracuse, NY | |
| ● | Mobilization underway and construction commenced on 3MW brownfield project in Geddes, NY. | |
| ● | Mobilization underway and construction commenced on 6MW closed landfill project in Manlius, NY | |
| ● | SolarBank secures major equipment order of panels, inverters, racking, and transformers for projects in Geddes and Manlius |
Toronto, Ontario, May 24, 2023 — SolarBank Corporation (CSE: SUNN) (OTCQX: SLBCF) (“SolarBank” or the "Company") is pleased to provide shareholders a update on its pipeline of projects, headlined by achieving commercial operation on a 195-kilowatt DC behind-the-meter (“BTM”) solar system located in Syracuse, New York for Honeywell International (“Honeywell”). The project is the latest completed for Honeywell in New York, a key U.S. market for SolarBank. Presently, SolarBank is developing nine additional solar projects in New York, totaling 80 Megawatts of potential future capacity (“MWp”).
Mobilization is underway and construction has begun on a 3MW potential capacity brownfield project in Geddes, NY. Incentives for the project have been secured from New York State Energy Research and Development Authority (“NYSERDA”) and the system is expected to quality for enhanced investment tax credit due to its location in a brownfield. The EPA provides incentives to utilize these types of land, whether any hazard is real or perceived, because investment increases local tax bases, facilitates job growth, and improves and protects the environment, amongst other reasons.
Mobilization is also underway and construction commenced on a 6MW potential capacity closed, municipally-owned landfill project in Manlius, NY. As with the Geddes project, incentives for the project have been secured from NYSERDA and the project is expected to qualify for enhanced investment tax credit due to its location in a closed landfill.
For the projects in Geddes and Manlius, SolarBank has leveraged its strong relationships with Tier 1 suppliers to secure major equipment orders of solar panels, inverters, racking, and transformers necessary for the projects.
“Despite lingering industry-wide supply chain disruptions that have slowed our competitors, we continue to execute and complete projects of varying scope and scale to cement our company as a reliable and trusted one-stop solutions provider,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “Whether the client needs engineering, procurement and construction, operation and maintenance, systems on rooftops or in fields, behind- or in-front-of-meter, we are there to meet their needs. After a strong end to 2022 for completing projects, we are excited about our growing development pipeline.”
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal, and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets, including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, "forward-looking statements") that relate to the Company's current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "expects", "will continue", "is anticipated", "anticipates", "believes", "estimated", "intends", "plans", "forecast", "projection", "strategy", "objective" and "outlook") are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release, the megawatt capacity and type of future solar projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under "Forward-Looking Statements" and "Risk Factors" in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.38
SolarBank Engages Investor Relations Service Providers
Toronto, Ontario, May 26, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SLBCF) (“SolarBank” or the “Company”) announce that it has retained certain investor relations service providers.
The Company has entered into an agreement with Think Ink Marketing Data & Email Services LLC (“Think Ink”) to provide public relations services in an effort to increase public awareness of the Company and its services and securities. Certain services to be provided by Think Ink are anticipated to include ‘investor relations activities’ under the policies of the Canadian Securities Exchange and applicable securities laws.
The agreement is for a 12 month term commencing May 26, 2023 with either party having the right to terminate upon 30 days written notice. The Company has budgeted up to US$250,000 for the marketing services of Think Ink, which include facilitating the creation and distribution of marketing materials, on-line banner and native ads.
Think Ink is a California-based marketing firm established in 1991 that provides its customers with a complete range of marketing services that includes data appending, e-mail marketing and pay-per-click on-line banner/native ads. Think Ink helps its clients to reach a large network of potential investors. No stock options are being granted to Think Inc. under the terms of its engagement.
The contact information for Think Ink is Think Ink Marketing Data & Email Services LLC, 3308 W. Warner Ave., Santa Ana, California 92704; Phone: 888-808-2161; Email: info@thinkinkmarketing.com. Think Ink and its principals are arm’s length to the Company.
The Company also announces that it has engaged Financial Research & Publication Ltd. (“FRP”) of 20-22 Wenlock Road London N1 7GU, Phone: +44 20 3608 1991; Email: financial.research.uk@gmail.com. FRP is a London-based consulting & media firm, that will provide the Company with strategic consulting, brand media, and business development services for the European market. Certain services to be provided by FRP are anticipated to include ‘investor relations activities’ under the policies of the Canadian Securities Exchange and applicable securities laws.
FRP will suggest press initiatives, on-line and traditional media content creation, Web development and webcasting, and translation services focused on the European Union. FRP will distribute through a variety of different platforms and media types across the Internet. FRP shall set up various online meetings, webinars and other online-tools for such purpose. FRP and its principals are arm’s length to the Company. The engagement is effective June 1, 2023 to December 31, 2023 and for a total fee of 400,000 Euros. The Company may terminate the agreement upon 30 days written notice. No stock options are being granted to FRP under the terms of its engagement and, to the knowledge of the Company, FRP does not own any common shares or other securities of the Company.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the megawatt capacity and type of future solar projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.39
Management’s Discussion and Analysis
For the Three and Nine Months End March 31, 2023
| Contact Information : | |
SolarBank Corporation (Formerly Abundant Solar Energy Inc.) | |
| 505 Consumers Road, Suite 803 | |
| Toronto, ON M2J 4V8 | |
| Contact Person: Mr. Sam Sun, CFO | |
| Email: info@abundantsolarenergy.com |
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of SolarBank Corporation. (“SUNN” or the “Company”) was prepared by management as of May 30, 2023 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the interim consolidated financial statements of the Company and notes thereto for the three and nine months ended March 31th, 2023. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries. The company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement and construction (“EPC”), operation and maintenance (“O&M”), and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth via organic growth and M&A.
Development of the Business
USA
The Company is focused on its key market in New York and Maryland. In New York the Company had six projects reached Permission to Operate (“PTO”) in the second quarter of 2023, totaling 12 MWp (see Existing Projects table below), including two Community Solar projects, two with municipal power purchase agreement (PPA), and two net metering projects for Honeywell International Inc. The Company also has two community solar projects that reached Notice to Proceed; Seven projects are under utility interconnection studies. In addition the Company is working on sites origination of potential community and utility scale solar projects. The Company is working with the Maryland Department of Transportation on eighteen potential solar project sites.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs is improving.
Canada
Over the past few years, the real estate sector has experienced an evolution in the importance of Environmental, Social and Governance (“ESG”) issues. The sector has made tremendous strides in tackling its contribution to Climate Change but despite efforts made so far, there is still a significant amount of work to be done, particularly given real estate’s 40% contribution toward global carbon emissions. Many Canadian real estate companies are set out to achieve its net zero emissions goals for all their operations and new developments. Real estate can be developed and managed to make positive impacts by stopping the growth of carbon emissions from properties and reduce emissions dramatically.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Selected Quarterly Information
The following table set selected condensed interim consolidated financial information for the Company for the three and nine-months period ended March 31, 2023 and 2022 and should be read in conjunction with the Company’s consolidated financial statements as at June 30, 2022 and 2021 and related notes thereto for such periods.
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| 2023 | 2022 | |||||||
| For the three months ended March 31 | $ | $ | ||||||
| Revenue | 706,856 | 977,562 | ||||||
| Revenue – EPC | 684,296 | 977,562 | ||||||
| Revenue – development | - | - | ||||||
| Revenue – O&M | 22,560 | - | ||||||
| Cost of goods sold | (51,601 | ) | (448,548 | ) | ||||
| Net income | 3,074,090 | 429,888 | ||||||
| Net income per share | 0.11 | 0.03 | ||||||
| 2023 | 2022 | |||||||
| For the nine months ended March 31 | $ | $ | ||||||
| Revenue | 9,152,242 | 9,791,250 | ||||||
| Revenue – EPC | 9,082,473 | 9,387,035 | ||||||
| Revenue – development | - | 404,215 | ||||||
| Revenue – O&M | 69,769 | - | ||||||
| Cost of goods sold | (6,895,613 | ) | (8,006,825 | ) | ||||
| Net income | 3,426,589 | 692,024 | ||||||
| Net income per share | 0.13 | 0.04 | ||||||
| March 31, 2023 | June 30, 2022 | |||||||
| As at | $ | $ | ||||||
| Total assets | 21,896,075 | 9,194,537 | ||||||
| Total current liabilities | 3,722,702 | 3,365,909 | ||||||
| Total non-current liabilities | 930,683 | 1,388,013 | ||||||
The following discussion addresses the operating results and financial condition of the Company for the three and nine months ended March 31th, 2023 compared with the three and nine months ended March 31th, 2022.
Result of Operations
Three and nine months ended March 31, 2023 compared to the three and nine months ended March 31, 2022
Trend
In fiscal 2023, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in US and development in both US and Canada. All existing EPC projects reached PTO or substantial completion in December 2022. It is expected that the Company’s revenue will keep growing in the fourth quarter of 2023 as two projects in the US reached notice to proceed stage (“NTP”) and three projects in the US are approaching NTP.
The net income for the three months ended March 31, 2023 increased by $2,644,202 compared to the net income for the three month ended March 31, 2022 with $3,074,090 net income recognized during the third quarter of 2023 as compared to a net income of $429,888 for the third quarter of 2022.
The net income for the first nine months of 2023 increased by $2,734,565 compared to the net profit for the first nine months of 2022 with $3,426,589 net income recognized in 2023 as compared to net income of $692,024 in 2022.
Key business highlights and projects updates in 2023
| ● | Existing projects |
| Name | Location | Size (MW DC) | Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached substantial completion in December 2022. | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. |
| ● | Projects under development |
| Name | Location | Size (MWDC) | Timeline | Milestone | Expected Cost | Cost Incurred |
Sources of Funding | Current Status | ||||||||
| Manlius | New York, USA | 6.1 | March 2023 | Completion of engineering and permitting, along with procurement deposit | 500,000 | 140,999 | IPO, working capital | The project currently has completed an interconnection agreement with the utility companies, and obtained permits from the local authority having jurisdiction (AHJ). Engineering and initial construction have commenced and the Company is about to initiate procurement of major equipment. | ||||||||
| Geddes | New York, USA | 4.0 | March 2023 | Completion of engineering and permitting, along with procurement deposit | 500,000 | 99,736 | IPO, working capital | The project currently has completed an interconnection agreement with the utility companies, and obtained permits from the local authority having jurisdiction (AHJ). Engineering and initial construction have started and the Company is about to initiate procurement of major equipment. |
| 261 Township | Alberta, Canada | 4.5 | June 2023 | Completion of engineering work and placement of orders for main project components | 800,000 | 31,428 |
IPO, working capital | The project has received notice to proceed from the property owner. A site visit is scheduled, engineering has commenced and the Company is in discussion with the local utility companies on net metering interconnection, and with local authority having jurisdiction on the building permit. | ||||||||
| Richmond 2 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 | 10,642 |
IPO, working capital | The three projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Richmond 3 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 10,642 |
IPO, working capital | |||||||||
| Hardie | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 13,386 |
IPO, working capital | |||||||||
| SUNNY | New York, USA | 28.0 | June 2025 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 | 33,232 |
IPO, working capital | The Company submitted an interconnection request to New York Independent System Operator. The company signed a lease agreement with the landowner in 2022. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). |
| Wastebeds1 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 |
IPO, working capital | The three projects are under utility interconnection study and engineering study. The design work will be after the completion of the interconnection study. | ||||||||
| Wastebeds2 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 |
IPO, working capital | |||||||||
| Wastebeds3 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 |
IPO, working capital |
Revenue
The Company’s revenue is mainly from EPC services, Development fee and O&M services.
| Three Months Ended March 31 | Nine Months Ended March 31 | |||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
| EPC services | 684,296 | 977,562 | (293,266 | ) | 9,082,473 | 9,387,035 | (304,562 | ) | ||||||||||||||||
| Development fees | - | - | - | - | 404,215 | (404,215 | ) | |||||||||||||||||
| O&M services | 22,560 | - | 22,560 | 69,769 | - | 69,769 | ||||||||||||||||||
| Total Revenue | 706,856 | 977,562 | (270,706 | ) | 9,152,242 | 9,791,250 | (639,008 | ) | ||||||||||||||||
The following table shows the significant changes in revenue from 2022
| Three months | Nine months | Explanation | ||||||||
| EPC services | (293,266 | ) | (304,562 | ) | The Company recognizes revenue on the achievement of certain milestones during project development and construction. Lower revenue arose from projects Portland and Richmond as major milestones that had greater revenue associated with them were completed and revenue earned in FY22. In FY23, $1.8M revenue earned for Portland and $4.1M for Richmond. In FY22, $2.8M and $6.1M earned for the same projects respectively. In FY23 Q3, $512k revenue earned from BESS projects. | |||||
| Development fees | - | (404,215 | ) | There was no development revenue in FY23. The development revenue in FY22 was from a project that was sold at NTP. | ||||||
| O&M services | 22,560 | 69,769 | The Company is growing the O&M services revenue by allocating more resources to this revenue stream. No O&M revenue was earned in FY22. | |||||||
| Total | (270,706 | ) | (639,008 | ) | ||||||
Expenses
Expenses consist of expenditures related to cost of services provided and costs to develop new projects, as well as corporate business development and administrative expenses.
| Expenses | Three Months Ended March 31 | Nine Months Ended March 31 | ||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
| Cost of goods sold | (51,601 | ) | (448,548 | ) | 396,947 | (6,895,613 | ) | (8,006,825 | ) | 1,111,212 | ||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Advertising and promotion | (47,719 | ) | (6,725 | ) | (40,994 | ) | (86,332 | ) | (7,400 | ) | (78,932 | ) | ||||||||||||
| Depreciation expenses | (12,846 | ) | (2,096 | ) | (10,750 | ) | (36,185 | ) | (6,288 | ) | (29,897 | ) | ||||||||||||
| Insurance | (29,391 | ) | (44,020 | ) | 14,629 | (87,179 | ) | (75,540 | ) | (11,639 | ) | |||||||||||||
| Office, rent and utilities | (91,153 | ) | (48,629 | ) | (42,524 | ) | (240,282 | ) | (144,169 | ) | (96,113 | ) | ||||||||||||
| Listing fees | (68,517 | ) | - | (68,517 | ) | (99,491 | ) | - | (99,491 | ) | ||||||||||||||
| Professional fees | (553,902 | ) | (15,796 | ) | (538,106 | ) | (713,977 | ) | (73,230 | ) | (640,747 | ) | ||||||||||||
| Salary and wages | (538,318 | ) | (397,081 | ) | (141,237 | ) | (1,281,712 | ) | (1,315,820 | ) | 34,108 | |||||||||||||
| Stock based compensation | (2,621,451 | ) | - | (2,621,451 | ) | (2,621,451 | ) | - | (2,621,451 | ) | ||||||||||||||
| Travel and accommodation | (21,022 | ) | (6,675 | ) | (14,347 | ) | (133,924 | ) | (35,204 | ) | (98,720 | ) | ||||||||||||
| Total operating expenses | (3,984,319 | ) | (521,022 | ) | (3,463,297 | ) | (5,300,533 | ) | (1,657,651 | ) | (3,642,882 | ) | ||||||||||||
| Total Expenses | (4,035,920 | ) | (969,570 | ) | (3,066,350 | ) | (12,196,146 | ) | (9,664,476 | ) | (2,531,670 | ) | ||||||||||||
The following table shows the significant changes in expenses from 2022:
| Expenses | Three months | Nine months | ||||||||
| Cost of goods sold | 396,947 | 1,111,212 | Less cost of goods sold due to less revenue being recognized in this quarter. | |||||||
| Advertising and promotion | (40,994 | ) | (78,932 | ) | Additional costs incurred in FY23 relating to investor marketing, including design of new company logo and website. | |||||
| Office, rent and utilities | (42,524 | ) | (96,113 | ) | Increase in FY23 due to accounting software migration to Quickbook Online from Quickbook Desktop. In FY23, both versions of the software are being used. In FY23, there were also IT equipment upgrades. | |||||
| Listing fees | (68,517 | ) | (99,491 | ) | In FY23, Company incurred various IPO related fees, including prospectus and SEDAR filling fees ($44k), IPO listing and processing fees ($15k), and fees associated with a OTCQX application for trading in the United States ($20k). | |||||
| Professional fees | (538,106 | ) | (640,747 | ) | Increase due to $123k audit fees all incurred in FY23, $237k consulting fees relating to PCDC claims, and $211k legal fees accrual (invoice not received). | |||||
| Stock based compensation | (2,621,451 | ) | (2,621,451 | ) | Employee stock compensation of $597k and $1.8M related to warrants granted for advisory services. | |||||
| Travel and accommodation | (14,347 | ) | (98,720 | ) | More travel and seminars activities in 2023 as there is no pandemic restriction. $50k sponsorship for the 6th Annual Growth Conference in FY23. | |||||
| Various others | (137,358 | ) | (7,428 | ) | YTD adjustment in salaries expense of $357k booked in FY23Q3 to be consistent with prior year. Other changes are not significant. | |||||
| Total Expenses | (3,066,350 | ) | (2,531,670 | ) | ||||||
Other Income (Expense)
For the three months ended March 31, 2023, the Company had other income of $6,363,363 compared to other income of $431,865 for the three months ended March 31, 2022. Other income for the three months ended March 31, 2023 consists mainly of Pre-Construction Development Costs recovered from IESO of $6,338,640, CESIR refund of $18,327, and other income of $6,396. Other income for the three months ended March 31, 2022 consists mainly of NYSERDA grant of $431,705 and other income of $160.
For the nine months ended March 31, 2023, the Company had other income of $6,473,127 compared to other income of $654,860 for the nine months ended March 31, 2022. Other income for the nine months ended March 31, 2023 consists mainly of Pre-Construction Development Costs recovered from IESO of $6,338,640, foreign exchange gain of $114,900, CESIR refund of $18,327, government subsidies of $2,808, offsetting by interest expense of $1,548. Other income for the nine months ended March 31, 2022 consists mainly of NYSERDA grant of $431,705, Covid subsidy of $133,506, CESIR refund of $58,128, foreign exchange gain of $66,093, offset by other expense of $34,572.
Net Income (loss)
The net income for the three months ended March 31, 2023 was $3,074,090 for an income per share of $0.11 based on 26,800,000 outstanding shares versus $429,888 for a income per share of $0.03 based on 16,000,000 outstanding shares for the comparative period.
The net income for the nine months ended March 31, 2023 was $3,426,589 for an income per share of $0.13 based on 26,800,000 outstanding shares versus $692,024 for a income per share of $0.04 based on 16,000,000 outstanding shares for the comparative period.
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The case does not represent a material threat to the Company. |
| (2) | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all Feed-In Tariff (FIT) 2, 3, 4 and 5 contracts where the Independent Electricity System Operator (IESO) had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. IESO confirmed the full $6.3 million amount during the quarter ended March 31, 2023. As of March 31, 2023, $1.4 million have been recovered from IESO and the remaining $4.9 million was recorded as receivable.
| (3) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (4) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| (5) | The Company has $6,486,838 in accounts receivable outstanding from the Solar Flow Through group of companies for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. These amounts are expected to be paid during the 2023 calendar year. Accordingly, the accounts receivable balance is not yet recognized. |
Summary of Quarterly Results
The Company has not previously prepared quarterly financial statements except for the three months and nine months ended March 31, 2023, and 2022. According to item 1.5 (ii) of Form 51-102F1, the Company is not providing a tabular comparison of the eight most recently completed quarters, it is only providing the information for quarters in which it has prepared financial statements.
| Q3 | Q2 | Q1 | ||||||||||
March 31, 2023 | December 31, 2022 | September 30, 2022 | ||||||||||
| Description | ($) | ($) | ($) | |||||||||
| Revenue | 706,856 | 2,964,934 | 5,480,452 | |||||||||
| Income (Loss) for the period | 3,064,872 | 89,468 | 164,482 | |||||||||
| Income (Loss) per share | 0.11 (basic | ) | ||||||||||
| (basic and diluted) | 0.09 (diluted | ) | 0.01 | 0.01 | ||||||||
| Q3 | Q2 | Q1 | ||||||||||
March 31, 2022 | December 31, 2021 | September 30, 2021 | ||||||||||
| Description | ($) | ($) | ($) | |||||||||
| Revenue | 977,562 | 6,211,631 | 2,602,057 | |||||||||
| Income (Loss) for the period | 235,346 | 399,331 | 57,731 | |||||||||
| Income (Loss) per share | ||||||||||||
| (basic and diluted) | 0.03 | 0.02 | 0.00 | |||||||||
Historical quarterly results of operations and income per share data do not necessarily reflect any recurring expenditure patterns or predictable trends except for the fact that seasonally the Company’s third quarter typically has the smallest amount of revenue due to winter conditions that are less favorable for construction. The Company’s revenues fluctuate from quarter to quarter based on the timing of recognition of revenue which is dependent on the stage of the various solar power projects under development. Refer to “Results of Operations” for additional discussion.
Liquidity and Capital Resources
As at March 31, 2023, the Company had a cash balance of $5,630,599 (June 30, 2022 - $931,977) with working capital surplus of $17,998,131 (June 30, 2022 - $5,617,200).
The following table summarizes the Company’s liquidity position:
| March 31, 2023 | June 30, 2022 | |||||||
| As at | $ | $ | ||||||
| Cash | 5,630,599 | 931,977 | ||||||
| Working capital | 17,998,131 | 5,617,200 | ||||||
| Total assets | 21,896,075 | 9,194,537 | ||||||
| Total liabilities | 4,653,385 | 4,753,922 | ||||||
| Shareholders’ equity | 17,242,690 | 4,440,615 | ||||||
The Company believes that with the proceeds of the Offering, along with its expected operating income and cash flows, it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities, including equity issuances, in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
To assist with potential liquidity needs, the Company has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to $200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| March 31, 2023 | March 31, 2022 | |||||||
| For nine months ended | $ | $ | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 4,653,394 | 3,259,107 | ||||||
| Investing activities | - | (2,994 | ) | |||||
| Financing activities | (133,549 | ) | (1,012,746 | ) | ||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 4,698,622 | 2,369,776 | ||||||
Cash flow from operating activities
The Company generated cash of $4,653,394 from operating activities during the nine months ended March 31, 2023, while the Company generated $3,259,107 cash during the same period ended March 31, 2022. The Company generated cash of $6,084,225 from the operational activities and used $1,430,831 for the change of working capital during the nine months ended March 31, 2023, while the Company generated cash of $698,312 from the operating activities and generate $2,560,795 due to the change of working capital for the same period ended March 31, 2022.
Cash flow from financing activities
The Company used cash of $133,549 from financing activities during the nine months ended March 31, 2023, while the Company used $1,012,746 cash during the same period ended March 31, 2022. The cash generated in financing activities for the nine months ended March 31, 2023 was mainly driven by the net proceeds of $1,250,000 received from debenture financing completed in October 2022 and net proceed from the issuance of common shares of $5,611,802, offset by the issuance of notes receivable of $1,284,393, purchase of ST GIC of $4,680,000, repayment of short-term loans of $593,167, long-term loans of $417,996. The cash used in financing activities for the nine months ended March 31, 2022 was solely resulted from the repayment of short-term loans of $1,012,746.
Cash flow from investing activities
The Company used cash of $nil in acquisition of plant, property and equipment during the nine months ended March 31, 2023, while the Company used $2,994 in acquisition of plant, property and equipment during the same period ended March 31, 2022.
Capital Transactions
On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The Company fully repaid the Energy line Loan in the amount of $343,776 in principal and $13,146 in interest on October 6, 2022.
On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note payment date was extended to end of April. The note receivable remains unpaid subsequently. Management is currently in negotiation with this customer to settle the note receivable through obtaining partial ownership of certain solar projects back from this customer. As at March 31, 2023, an accrued interest of $78,389 (USD $57,925) was receivable and outstanding from this customer.
In October 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.
Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. The Series A vesting condition was satisfied on date of the closing of the Offering. As a result, 2,500,000 Series A warrants vested on March 1, 2023.
Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a venture issuer.
Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.
On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. On March 1, 2023, the full liability portion of the Convertible Loan converted to 2,500,000 Common Shares. A continuity of the liability portion of the convertible debentures is as follows:
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 47,348 | |||
| FV adjustment from conversion | (47,348 | ) | ||
| Conversion of Loan upon IPO | (1,1136,364 | ) | ||
| Balance, March 31, 2023 | $ | - |
On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consists of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Company paid $362,250 broker commission, $63,448 legal fees and issued 483,000 broker warrants to purchase common shares at $0.75 per share until March 1, 2026. The broker warrants were valued using the Black-Scholes model resulting in fair value of $242,575. As of March 31, 2023, the Company has used the net proceeds from the Offering as follows:
| Use of Proceeds | Initial Estimated Amount ($) | Actual Amount ($) | ||||||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | 283,655 | ||||||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 | 34,329 | ||||||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | Nil | ||||||
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | 99,006 | ||||||
| Salaries for new hires. | 418,250 | Nil | ||||||
| Total | 4,718,250 | 416,990 | ||||||
On February 10, 2023, the Company granted 500,000 Restricted Share Units (“RSUs”) to a consultant. Pursuant to the agreement, each unit is exercisable into one common share of the Company for a period of 60 days from the vesting date. 50% of the units, or 250,000 units, vested on the date of closing of the Offering, which was March 1, 2023, and the remaining 50% vests on the 5-month after the date of closing of the Offering (on August 2, 2023). On March 8, 2023, 250,000 common shares were issued as a result of the vesting of 250,000 RSUs.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| March 31, 2023 | June 30, 2022 | |||||||
| Long-term debt -non-current portion (note 14) | $ | 787,037 | 1,230,643 | |||||
| Shareholder Equity | $ | 17,242,690 | 4,440,615 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, issuance of equity, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
Changes to capital management from the prior year includes closing of Company’s initial public offering of common shares on March 1, 2023.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. As of the date of this MD&A, there were (i) 26,800,000 common shares issued and outstanding; and (ii) 2,500,000 Series A Warrants and 2,500,000 Series B Warrants converted from a $1,250,000 convertible debt; (iii) 2,500,000 Advisory Warrants; (iv) 483,000 Broker Warrants; (v) 2,759,000 stock options; and (vi) 265,000 Restricted Stock Units.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
As at March 31, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of SIL. The purpose was for short-term bridge funding to cover working capital and project development expenses.
As at March 31, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op (“RSE”) for payment made to a vendor on behalf of RSE. One of RSE’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of RSE.
As at March 31, 2023, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022. The purpose was for short-term bridge funding to cover working capital and project development expenses.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three and six months ended March 31, 2023 and 2022 were as follows:
| Three Month Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 280,016 | $ | 170,283 | ||||
| Share-based compensation | 83,531 | - | ||||||
| Advisory warrants | 445,361 | - | ||||||
| Nine Month Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 1,020,355 | $ | 651,759 | ||||
| Share-based compensation | 83,531 | - | ||||||
| Advisory warrants | 445,361 | - | ||||||
Short-term employee benefits include consulting fees.
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Significant Accounting Policies
| ● | Revenue recognition: |
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.
EPC services
The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.
| ● | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development and construction costs, borrowing costs, property taxes and other construction overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| ● | Lease |
The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.
| ● | Contract fulfilment cost |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company first considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| ● | Convertible debenture |
The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument.
| ● | Taxes |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| ● | Expected credit loss |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| ● | Warranties |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three and six months ended March 31, 2023, $Nil and $Nil warranty provision was recorded (2022 - $Nil and $Nil).
| ● | Stock-based compensation and warrant valuation |
The fair value of stock options issued and warrants granted are subjective to the limitation of the Black-Scholes option pricing model which incorporates market data, and which involved uncertainty and subjectivity in estimates used by management in the assumptions. The model requires assumptions relating to share price volatility, expected life of options and discount rate. Changes in these assumptions affect the fair value of the options and the amount of stock-based compensation to be recognized in operations over the vesting period.
| ● | Accounting standards issued buy not yet effective |
The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023.
IFRS 17 Insurance Contracts
In June 2020, the International Accounting Standards Board (IASB) issued IFRS 17. IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 with earlier adoption permitted as long as IFRS 9 is also applied. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.
The Company has not early adopted IFRS 17 and determined that the adoption of this standard will not have an impact on the Company’s consolidated financial statements.
Critical Accounting Estimates
Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience regarding past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, there are no critical accounting estimates that affect our financial statements for the three and nine months ended March 31, 2023 and 2022.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
Nine months ended March 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,919,270 | 65 | % | ||||
Nine months ended March 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,898,638 | 91 | % | ||||
Three months ended March 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 105,180 | 15 | % | ||||
| Customer B | $ | 264,572 | 37 | % | ||||
| Customer C | $ | 151,696 | 21 | % | ||||
| Customer D | $ | 100,000 | 14 | % | ||||
Three months ended March 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 965,074 | 99 | % | ||||
| March 31, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer B | $ | 298,966 | 15 | % | ||||
| Customer E | $ | 1,505,083 | 76 | % |
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Subsequent Events
| a) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The proceeding was dismissed, but the petitioners have appealed subsequent to March 31, 2023. A second case against the town and Company by one of the original petitioners was filed in November 2022 largely mirroring the first challenge. On November 30, 2022, the case was dismissed as to all claims against the Company, one claim under the Open Meeting Law against the town remains. Motions for summary judgement on that claim by the town and Company are currently pending. The case does not represent a material threat to the Company. |
| b) | On May 10, 2023, a total of $1,905,666 received from IESO relating the PCDC claims. |
Exhibit 99.40
Exhibit 99.41
Exhibit 99.42
SolarBank Announces Third Quarter Results and Provides Year-End Revenue Guidance
| ● | Revenue for the nine month period of $9.1 million | |
| ● | Net income for the nine month period of $3 million or $0.13 per share (undiluted) | |
| ● | Cash and short-term investments of $10.3 million | |
| ● | Revenue guidance of $17 million to $20 million for the full fiscal year ended June 30, 2023 |
Toronto, Ontario, May 30, 2023 — SolarBank Corporation (CSE: SUNN) (OTCQX: SLBCF) (FSE: GY2) (“SolarBank” or the “Company”) today reported third quarter 2023 interim financial results. All financial figures are in Canadian dollars and in accordance with International Financial Reporting Standards (IFRS) as presented in the interim consolidated financial statements.
Third Quarter Highlights (All Amounts are for the Nine Month Period)
| ● | Revenue of $9.2 million: | |
| ● | Cash flow from operating activities of $4.7 million; | |
| ● | Net income of $3.4 million; | |
| ● | Net income of $0.13 per share (undiluted); | |
| ● | Cash and short-term investments of $10.3 million; | |
| ● | Six projects have reached permission to operate (PTO); and | |
| ● | Mobilization underway and construction commenced on Manlius (5.7 MWdc) and Geddes (3.8 MWdc) projects in New York. |
“I am pleased with our nine month financial results and our growing volume of business. We are successfully implementing our operating plan to become a leader in turn key solar projects.” stated Dr. Richard Lu, Chief Executive Officer of SolarBank Corporation. “While the third quarter is seasonally slower due to winter conditions limiting construction activities, the outlook for the full fiscal year ended June 30, 2023 remains strong and I expect to achieve our revenue guidance.”
Summary of Quarterly Results (All Amounts are for the Nine Month Period)
| Quarter Ended | March 31, 2023 | March 31, 2022 | ||||||
| Statement of Income and Comprehensive Income | ||||||||
| Total Revenue | $ | 9,152,242 | $ | 9,791,250 | ||||
| Cash flow from operating activities | $ | 4,653,394 | $ | 3,259,107 | ||||
| Net income | $ | 3,426,589 | $ | 692,024 | ||||
| Basic earnings per share | $ | 0.13 | $ | 0.04 | ||||
| Diluted earnings per share | $ | 0.10 | $ | 0.04 | ||||
The Company ended the third quarter of 2023 with $21.7 million in current assets, an increase of $12.7 million compared to year end June 30, 2022. The increase is mainly due to the increase in cash balances from financing activities.
Current liabilities increased slightly from $3.4 million as of year ended June 30, 2022 to $3.7 million in the current quarter, mainly due to an increase in trade and other payables and unearned revenue, offset by the repayment of a loan that was outstanding as of June 30, 2022.
For complete details please refer to the unaudited condensed interim consolidated financial statements and associated Management Discussion and Analysis for the nine months ended March 31, 2023, available on SEDAR (www.sedar.com).
2023 Year End Outlook
The Company is providing guidance of expected full year revenue in 2023 of between $17 million and $20 million. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2023 financial results for evaluating the performance of the Company’s business and is dated as of the date of this press release. This information may not be appropriate for other purposes. Information about the Company’s guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with “Forward-Looking Statements” in this press release and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause the Company’s actual future financial and operating results to differ from what it currently expects.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal, and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets, including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has completed over 1,000 development projects with a combined capacity of over 60 megawatts. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this press release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the megawatt capacity and type of future solar projects; and future revenue guidance. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this press release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings. In addition, there are difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and government regulation that characterize the industries in which the Company operates.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.43
SolarBank now Trades as “SUUNF” on the OTCQX Best Market
Toronto, Ontario, June 2, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that its symbol on the OTCQX International has changed to SUUNF. SolarBank trades on the OTC Market’s prestigious tier, OTCQX International. Investors can find current financial disclosure and Real-Time Level 2 quotes for the Company on www.otcmarkets.com. To qualify for OTCQX, companies must meet high financial standards, follow best practice corporate governance and demonstrate compliance with applicable securities laws.
OTC Markets Group Inc. (OTCQX: OTCM) operates regulated markets for trading 12,000 U.S. and international securities. Its data-driven disclosure standards form the foundation of its three public markets: OTCQX® Best Market, OTCQB® Venture Market and Pink® Open Market.
The Company also announces that it has acquired from existing limited partners an aggregate of 31,430 limited partnership units allocated amongst three series of Solar Flow-Through Limited Partnerships (“SFT”) for an aggregate purchase price of $722,490. SFT finances and develops solar photovoltaic (PV) power facilities in Canada.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has developed over 1,000 renewable and clean energy projects with a combined capacity of over 60 megawatts built. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.44
SolarBank Has Received $6.33 million in Pre-Construction Development Costs
Toronto, Ontario, June 5, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that its subsidiary (the “Subsidiary”) has now received the full $6.33 million of Pre-Construction Development Costs (“PCDC”) from the Ontario IESO. PCDC are defined as reasonable costs incurred in development of a project from contract award date to termination date. The PCDC were incurred in connection with certain FIT Contracts in Ontario. The amount represents a full recovery of the PCDC claims submitted by the Subsidiary to the Ontario ISEO.
The Subsidiary is owned 49.9% by the Company; however, based on an arrangement between the Subsidiary and SolarBank, SolarBank will receive the full amount of the PCDC recoveries from the Subsidiary.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has developed over 1,000 renewable and clean energy projects with a combined capacity of over 60 megawatts built. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.45
SolarBank Partners with Rural Energy Development LLC (RED Renewables) on Co-Development Agreement
● SolarBank has partnered with U.S.-based Rural Energy Development LLC (RED Renewables), a provider of solar energy solutions to the commercial agricultural market
● The Co-Development Agreement provides for SolarBank to develop and construct solar energy projects introduced by Rural Energy Development LLC (RED Renewables)
Toronto, Ontario, June 13, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce a new partnership with Rural Energy Development LLC (“Red Renewables”) through a Co-Development Agreement (the “Agreement”) between the parties. Red Renewables is a North Carolina USA based provider of solar energy solutions that is focused on the agricultural and commercial markets. This partnership aims to accelerate the integration of solar power into agricultural and commercial operations, benefiting both the environment and farmers alike.
Under the Agreement, SolarBank and Red Renewables will combine their expertise and resources to identify, develop, and implement solar energy solutions tailored specifically for the unique requirements of the agriculture industry and service a growing pipeline of commercial opportunities. This focus will accelerate the opportunity for farmers and commercial customers with cost-effective and sustainable energy alternatives, reducing their carbon footprint, and optimizing their operations. After Red Renewables introduces an acceptable project to SolarBank, SolarBank shall be responsible for the financing, development and construction of the project.
“We are thrilled to partner with Red Renewables to bring solar power integration in the agriculture sector. By leveraging our combined expertise, we aim to create customized solar solutions that not only meet the unique energy needs of farmers but also contribute to a greener and more sustainable future,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “This collaboration aligns perfectly with our mission of providing clean, reliable, and affordable solar energy solutions to diverse industries.”
The agriculture sector has traditionally been an underserved market which has a substantial energy demand, relying heavily on traditional energy sources that are often expensive and environmentally damaging, typically in rural areas of America. By harnessing the power of the sun, SolarBank and Red Renewables aim to bring clean, renewable energy solutions to farmers, empowering them to operate more efficiently and sustainably, while reducing their dependence on fossil fuels.
“We are excited about this collaboration with SolarBank and the potential it holds,” added Robert Kalainikas, Managing Partner at Red Renewables. “By leveraging our collective strengths, we can accelerate the development and deployment of solar power projects in the agriculture sector. Our partnership with SolarBank will increase our offering to our clients. Customers can now take advantage of PPAs in addition to the traditional net metering options.”
The Company notes that the partnership with Red Renewables is subject to several risks. In order to develop a project, the Company and Red Renewables must agree on a suitable project location and development terms. There is no certainty that a project location will be identified or that the parties will agree on development terms. The development of any projects is subject to the continued availability of third-party financing arrangements for the Company. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in the projects under consideration by the parties no longer being economic. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About Red Renewables
Red Renewables provides custom solar energy solutions to the agricultural and commercial markets. Based out of Mooresville, NC, Red Renewables is the largest agricultural solutions provider in the Southeast USA. Every install is tailored specifically for the customer’s needs with a focus on the highest level of financial return. The company achieves this by developing solar solutions tailored to its customer’s needs using tier one materials backed by industry leading power production warranties. Red Renewables is a part of the agricultural community and understands the unique requirements of operating in a commercial farm operation. To learn more about RED Renewables, please visit www.redrenewables.com.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; expectations from the relationship with Red Renewables; the provision of custom solar power solutions to the agriculture industry; and the reduction of greenhouse gas emissions. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.46
SolarBank Added to ‘CSE 25’ Index as One of the 25 Largest Companies on the CSE
Toronto, Ontario, June 19, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that the Company has been added to the CSE25™ Index on the Canadian Securities Exchange (“CSE”) effective after market close on June 16, 2023. The CSE25 Index is a subgroup of the CSE Composite Index. It contains the securities of the twenty-five largest index companies by market capitalization. This sub-index contains over 52.75% of the total weight of the Composite Index.
“Today marks a milestone for SolarBank as we proudly join the CSE 25 index,” said Dr. Richard Lu, CEO of SolarBank. “This is a testament to the hard work and dedication of the team in executing on our business plan since the IPO and resulting market recognition.”
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.47
[REDACTED VERSION]
Engineering, Procurement and Construction Agreement
New York Solar Project:
5701 Bowman Road, Town of Manlius, East Syracuse, Onondaga County, NY 13057
This Engineering, Procurement and Construction Agreement (the “Agreement”) is made and dated as of June 19, 2023, between Abundant Solar Power (M1) LLC, a Delaware limited liability company (“Contractor”), and Solar Advocate Development, LLC, an Ohio limited liability company (“Owner”). Each of Owner and Contractor may be referred to individually as a “Party”, and together they may be referred to as the “Parties”.
Recitals
| A. | Owner is an Ohio limited liability company which engages in the ownership and operation of solar energy assets. |
| B. | Contractor is a Delaware corporation which engages in the development, engineering, procurement, construction, and operations of solar energy facilities. |
| C. | Owner desires to construct and operate 5.7 MW-DC/4.35 MW-AC solar energy facilities located in the Town of Manlius, Onondaga County, New York (“Facility”) and Contractor is willing to perform development, design, engineering, construction work to bring the Facility to commercial operation, all pursuant to contract with Owner. Contractor is also willing to operate the Facility commercially under separate agreement with Owner. |
| D. | Owner intends to finance the ownership of the Facility through internal capital and/or bank financing. |
| E. | Contractor is further willing to act on behalf of Owner by coordinating and enforcing the Subcontractor Protections as set forth in this Agreement. |
| F. | The Project requires permits from applicable governmental authorities (“Authorizations”). |
| G. | Owner desires that Contractor perform on behalf of Owner the duties to act as general contractor for the design, construction, performance of startup and testing of the Facility, and development of the operation manual(s) for the Facility upon the terms and conditions set forth in this Agreement. |
| H. | Following completion of the Project, Owner will own the Facility, and Contractor will have the potential to operate and maintain the Facility pursuant to an O&M Agreement. |
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the Parties agree as follows.
ARTICLE 1 - DEFINITIONS
1.1 - Definitions.
Capitalized terms used herein shall have the meanings set forth in Schedule I.
ARTICLE 2 - REPRESENTATIONS
2.1 - Representations by Contractor. Contractor represents that:
2.1.1 Organization and Qualification. Contractor is a corporation duly organized and validly existing under the laws of Delaware. Contractor has all necessary power and authority to carry on its business as presently conducted and to enter into and perform its obligations under this Agreement.
2.1.2 Authorization, approvals, no defaults. The execution, delivery and performance of this Agreement by Contractor (1) has been duly authorized by all requisite company action, (2) to the best of Contractor’s knowledge will not conflict with any provisions of applicable Law, and (3) will not conflict with any legal or contractual obligation to which it is a party or by which it or its property is affected.
2.1.3 Enforceability. This Agreement constitutes the legal, valid and binding obligation of Contractor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.
2.1.4 Legal proceedings. There is no action, suit or proceeding, at law or in equity, or official investigation by or before any governmental authority, arbitral tribunal or any other body pending or, to the knowledge of Contractor threatened, against or affecting Contractor or any of its properties, rights or assets, which could reasonably be expected to result in a material adverse effect on Contractor’s ability to perform its obligations under this Agreement or on the validity or enforceability of this Agreement.
2.1.5 Site Inspection. Contractor and Contractor’s agents and representatives have visited, inspected and are familiar with the Site, its physical condition, roads, access rights, utilities, topographical conditions and air quality conditions, except for unusual or unknown surface or subsurface conditions, or unusual or unknown soil conditions, and have performed all reasonable investigations necessary to determine that the Site is suitable for the construction and installation of the Facility, and are familiar with the local and other conditions which may be material to Contractor’s performance of its obligations under this Agreement (including, but not limited to transportation, seasons and climates, access, the handling and storage of materials and fuel and availability and quality of labor and materials).
2.1.6 Necessary Rights. Contractor owns or will obtain the legal right to use all patents, rights to patents, trademarks, copyrights and licenses necessary for the performance by Contractor of this Agreement and the transactions contemplated hereby, without any material conflict with the rights of others.
2.1.7 Approvals. Contractor has obtained and is in compliance with all Governmental Authorizations (other than Governmental Authorizations listed in Schedule VIII, which Contractor will obtain as indicated in that schedule) that Contractor is required to obtain hereunder and for the valid execution, delivery and performance by Contractor of this Agreement, and all such legal entitlements are in full force and effect.
2.1.8 Qualification. Contractor (including where applicable, through its relationships with Subcontractors and its Affiliates) possesses the know-how and wherewithal to oversee the design, engineering, procurement and construction work needed to complete construction of the Facility.
| - 2 - |
2.2 - Representations by Owner. Owner represents that:
2.2.1 Organization and qualification. Owner is a limited liability company duly organized and validly existing under the laws of Ohio. It has all necessary power and authority to carry on its business as presently conducted, to own or hold its properties, and to enter into and perform its obligations under this Agreement.
2.2.2 Authorization, approvals, no defaults. The execution, delivery and performance of this Agreement by Owner (1) has been duly authorized by all requisite company action; (2) to the best of Owner’s knowledge will not conflict with any provisions of applicable Law, and (3) will not conflict with any legal or contractual obligation to which it is a party or by which it or its property is affected.
2.2.3 Enforceability. This Agreement constitutes the legal, valid and binding obligation of Owner in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.
2.2.4 Legal proceedings. There is no action, suit or proceeding, at law or in equity, or official investigation by or before any governmental authority, arbitral tribunal or any other body pending or, to the knowledge of Owner threatened, against or affecting Owner or any of its properties, rights or assets, which could reasonably be expected to result in a material adverse effect on Owner’s ability to perform its obligations under this Agreement or on the validity or enforceability of this Agreement.
ARTICLE 3 - THE WORK
3.1 - Scope of Work. Contractor shall provide or perform the Work or cause the Work to be provided or performed, in accordance with the terms of this Agreement. Without limiting the foregoing, the Work shall include conducting, performing, providing or procuring when and as necessary to permit progress of the Work to proceed in accordance with the Project Schedule:
3.1.1 all design and engineering activities and services necessary to conduct the Work and complete the Facility in accordance with this Agreement and Contractor’s obligations under the Facility Lease;
3.1.2 all design and engineering activities and services necessary to obtain all required permits for the construction and operation of the Facility;
3.1.3 all construction activities and services necessary to conduct the Work and complete the Facility in accordance with this Agreement (including Site preparation, excavation and grading and proper disposal of all excavated materials if and as required in connection with performance of the Work);
3.1.4 all materials necessary to conduct the Work and complete the Facility in accordance with this Agreement (including all necessary transport thereof);
3.1.5 all work forces necessary to conduct the Work and complete the Facility in accordance with this Agreement (including all skilled and unskilled labor, supervisory, quality assurance and support service personnel);
3.1.6 all documents required to direct Owner’ personnel in the proper start-up, operation and maintenance of the Facility, including, without limitation, the Equipment Instruction Manual and all as-built drawings and as-built wiring diagrams (in digital format capable of generating reproducible hard copies, stamped by an Engineer registered in the jurisdiction of the Facility).
| - 3 - |
3.1.7 all training of Operator adequate to allow Operator to assume responsibility for dispatch and control of the Facility;
3.1.8 all other activities, services and items, whether or not specifically described above, in Schedule VII or elsewhere in this Agreement, if such performance, provision or procurement is necessary for a complete and operable Facility; provided, that Contractor shall not be responsible for performing, providing or procuring those activities, services and items for which Owner bear express responsibility pursuant to Article 5;
3.1.9 all design, engineering, materials, work forces needed to perform the Acceptance Tests; and
3.1.10 all activity necessary to enable Contractor to achieve the agreed service Date on or before December 31st, 2023.
ARTICLE 4 - CONTRACTOR’S RIGHTS AND RESPONSIBILITIES
4.1 - Engineering, Procurement and Construction of the Facility; Performance of the Work. Contractor, on behalf of the Owner, shall act as the general contractor for the Project and shall be solely responsible for the engineering, procurement and construction of the Work, including, without limitation, the overall oversight and coordination of construction of the Facility in accordance with: (a) the Specifications; (b) the Authorizations for the Facility; (c) the terms of this Agreement; (d) the Traffic Control Plan, the Safety Plan and the Security Plan; and (e) all applicable Laws. Contractor shall coordinate the activities of Engineer, PM/CM, the Prime Subcontractors, the Safety Director1, the QA/QC Director2 and other persons providing labor and materials to the Project to design, engineer and procure the equipment and materials for and complete the construction of the Facility and act as the interface between the Owner and such persons all in accordance with applicable Law and Good Utility Practice.
4.2 - Retention of Qualified Subcontractors and Suppliers. Contractor may subcontract any portion of the Work to one or more Subcontractors and Suppliers. Owner shall have the right to present to Contractor, within the time period specified in Section 16.20 of this Agreement, any objections or concerns they have regarding such proposed Subcontractors and Suppliers, which objections and concerns shall be duly considered by Contractor; provided, however, that the final decision and responsibility as to whether to contract with any particular Subcontractor or Supply shall reside with Contractor.
4.2.1 Project Engineer. Contractor shall retain an engineer for the Project (“Engineer”) or perform the duties of the Engineer. Engineer or Contractor shall be retained under a separate Engineer’s Contract. The Engineer’s Contract shall include, among other terms and conditions: (a) the requirement that Engineer dedicate a competent team of professionals to perform the services required under Engineer’s Contract and keep that team available to the Project for the duration of Engineer’s Contract (which shall not end prior to the Commercial Operation Date); and (b) commercially reasonable levels of professional liability insurance protecting against errors and omissions of Engineer and Engineer’s employees and agents. Engineer shall have the primary design responsibilities with respect to the Project. Engineer’s role and responsibilities shall be more particularly set forth in Engineer’s Contract. If Contractor undertakes to perform the duties of the Engineer, Contractor shall have the same obligations defined for inclusion in the Engineer’s Contract.
1 The site control and safety will be assured by the main subcontractor acting as the general contractor on site.
2 The QA/QC Director role will be assured by the project engineer of record (LaBella) overseeing the subcontractor’s QC personnel.
| - 4 - |
4.2.2 Project Manager/Construction Manager3. Contractor shall retain the project manager/construction manager for the Project (“PM/CM”) or perform the duties of the PM/CM. PM/CM or Contractor shall be retained under a separate PM/CM’s Contract. At a minimum, the PM/CM’s Contract shall obligate the PM/CM to (a) create and update the Project Schedule, subject to Owner’s approval; (b) monitor and oversee the performance of all Subcontractors and suppliers to keep the Project moving towards completion in accordance with the Project Schedule; (c) review and recommend whether to pay of all invoices submitted by Project suppliers and Subcontractors and review the work related thereto, to confirm that the work for which payment is requested has been performed; (d) inspect the Work as completed to confirm that it was constructed in accordance with the Specifications and performed to the required standard of care; (e) comply with the Safety Plan; and (f) inform Contractor and the Owner regarding the progress and quality of the Work, as necessary to enable them to perform their respective functions under this Agreement. PM/CM shall further have the role and responsibilities with respect to the Project, as are more particularly set forth in the PM/CM’s Contract.
4.2.3 Major Equipment Suppliers. Contractor, with the assistance of PM/CM, will select the persons to supply the major equipment systems for the Project. (collectively, the “Major Equipment Suppliers”). Contractor and PM/CM, after consultation with Owner, will select the Major Equipment Suppliers through a process that evaluates, among other things, the cost, performance specifications, environmental impact, performance history, and demonstrated performance of their installed equipment. Contractor will negotiate commercially reasonable forms of contracts with the Major Equipment Suppliers, which forms shall include commercially reasonable terms and conditions, including warranties, performance guarantees and liquidated damages.
4.2.4 Prime Subcontractors. Contractor shall retain the major construction subcontractors (“Prime Subcontractors”) for the Project. Contractor, with the assistance of PM/CM, will select the Prime Subcontractors by an evaluation process that evaluates potential candidates based upon relevant criteria, including experience, reputation, and demonstrated success in relevant construction projects. Each Prime Subcontractor Contract shall also give Contractor the right to inspect and review that Prime Subcontractor’s audited financial statements, payroll records and other relevant information related to its invoices to Contractor.
4.2.5 Quality Control/Quality Assurance. Contractor shall retain a qualified person or firm to be responsible for quality control and quality assurance of the completed Work (the “QA/QC Director”), subject to the approval of Owner, not to be unreasonably withheld. The QA/QC Director shall be responsible, among other things, for developing procedures for testing materials, the oversight of materials testing, inspecting field assembled equipment (such as quality control of welding procedures and welding testing), verifying QA/QC of materials used in the manufacture of major equipment and verifying that all equipment and materials delivered to the Site meet the specifications of Engineer.
3 Abundant will assign a local representative to act as a PM.
| - 5 - |
4.2.6 Safety Director4. Contractor shall retain a qualified person or firm to serve as the safety director for the Project (the “Safety Director”), subject to the approval of Owner, not to be unreasonably withheld. If required by either Owner’s or Contractor’s insurance provider, such Safety Director shall have the qualifications and authority necessary to support the issuance of the required insurance for the Project. The Safety Director shall be responsible to observe and enforce safe practices at the Site and related support facilities.
4.3 Sales & Use Tax. Contractor shall pay, and invoice to Owner all sales, consumer, use, gross receipts, and other similar taxes, special assessments and other fees in accordance with applicable Law.
4.4 Investigation of the Site.
4.4.1 Contractor acknowledges that it has reviewed the Land Easement and has made reasonable efforts to investigate the physical conditions affecting the Site, consistent with the access that has been to Contractor and its agents.
4.4.2 Contractor shall ascertain the nature of the Site consistent with the access that Owner has granted to Contractor and its agents and the general and local conditions that may affect the Site and the cost of making the Site fit for the construction of the Facility, provided however, that Contractor makes no representation or warranty as to (a) any environmental matters that may exist, including without limitation, any surface or subsurface contamination at the Site, except such surface or subsurface contamination found in soil boring testing and subsurface water testing previously conducted by or on behalf of Contractor; (b) the use or contents of any of the buildings that Contractor has been asked to demolish or remove from the Site, except such use or contents revealed by soil boring testing and subsurface water testing previously conducted by or on behalf of Contractor; (c) any subsurface conditions of the Site; (d) any matters not disclosed in Owner-provided drawings or other information provided to Contractor by Owner on which Contractor has reasonably relied; or (e) any conditions at any off-Site areas or facilities previously provided by Owner with respect to the Facility.
4.4.3 Except for environmental conditions and subsurface or other conditions that could not have reasonably been discovered by a reasonable inspection of the Site within the scope of access afforded Contractor by Owner, Contractor is responsible for accommodating all Site conditions in the Specifications for and construction of the Facility, regardless of when the Site condition is discovered, but shall not be responsible for (a) subsurface or other conditions that could not be discovered by a reasonable inspection of the Site, consistent with the limitations on access provided by Owner; (b) any conditions of the off-Site Lay Down Areas, the Soil Disposal Area, the Easement Areas or other staging areas for the Work provided by Owner, except to the extent that such conditions were disclosed by the drawings and other information provided by Owner to Contractor. Notwithstanding a failure by Contractor to perform its Site investigation due diligence consistent with the access Owner has granted under this Section 4.4, Contractor (except as expressly provided otherwise in Section 7.2.4 of this Agreement) shall be responsible for successfully constructing the Facility without adjustment of the EPC Price.
4 The prime Subcontractor will be assuming the General contractor role on site and be responsible for safety.
| - 6 - |
4.5 - Hazardous Substances; Erosion.
4.5.1 Contractor shall be responsible for assuring that all Hazardous Substances transported to or from, moved, or used or stored upon, the Site in connection with Contractor’s performance of its obligations under this Agreement are transported, moved, used or stored in accordance with applicable Law. Contractor shall further assure that all Hazardous Substances are disposed of in accordance with applicable Law. Any costs of clean up, transportation, treatment, storage or disposal of Hazardous Substances, other than those Hazardous Substances identified in the soil boring testing and subsurface water testing previously conducted by or on behalf of Contractor, that were on or under the Site prior to the commencement of the Work shall be the sole responsibility and expense of Owner.
4.5.2 Contractor shall be responsible for assuring that all waste generated in the performance of its obligations under this Agreement and all waste transported to or from, moved or used or stored upon the Site by Contractor or any other person for whom Contractor is responsible, within the scope of Contractor’s performance of this Agreement, is handled in accordance with applicable Law. Contractor shall cause the affected Subcontractors to manage and dispose of the waste in compliance with applicable Law and Good Utility Practice.
4.5.3 Contractor shall be responsible to see that all sedimentation, erosion control, and siltation within or adjacent to the Site caused by Subcontractors is conducted in accordance with applicable Law. In the event Contractor fails to prevent such sedimentation, erosion or siltation from occurring in violation of applicable Law, Owner shall have the right, after notifying Contractor and providing it an opportunity to cure of not less than seven (7) Business Days, to correct such pollution or siltation. All expenses incurred by the Owner in the course of such correction shall be credited against payments owed to Contractor.
4.6 Compliance with Laws In carrying out its duties hereunder, Contractor shall comply with all applicable Laws, including without limitation, all Laws relating to health, safety or the protection of the environment. Owner shall have no responsibility for any costs of environmental compliance or remediation to the extent caused by the negligent acts and omissions or intentional or willful misconduct of Contractor or any of Contractor’s employees or agents, including, without limitation, all Subcontractors and Suppliers.
4.7 Traffic Control Plan. Contractor shall work together with Owner to develop a comprehensive traffic control plan for the Project (“Traffic Control Plan”), to assure all persons supplying the Work prompt and safe access for deliveries to the Site, while minimizing disruption to the surrounding area its regular activities or scheduled events. Without limitation, the Traffic Control Plan shall provide, as required by the surrounding areas and its activities: (a) for off-site parking for construction personnel and transport of such personnel to the Site; (b) a general prohibition on deliveries of Major Equipment to the Site during the hours of 9pm to 4am; (c) that Contractor shall use its reasonable efforts to arrange for deliveries of Major Equipment during Business Days between 7am to 5pm; and (d) that it shall be consistent with any traffic control requirements set forth in any Governmental Authorization. Owner shall use good faith efforts to assist Contractor in the development of this plan and to assist in gaining for Contractor access to roads and other transportation facilities necessary for timely and cost-effective completion of the Project. When available, the draft traffic control plan shall be presented to Owner for review and approval. Contractor acknowledges that it has studied the Site, railroads, surrounding streets and highways and Contractor can transport all equipment to the Site and all costs associated with the transportation and unloading of the equipment are included in the EPC Price, provided that access to the Site is available to Contractor and the Subcontractors at all reasonable times and in accordance with the Traffic Control Plan.
| - 7 - |
4.8 Safety Plan. Contractor, in conjunction with PM/CM, Safety Director and the Prime Subcontractors for the Project shall develop a comprehensive safety plan to establish and maintain appropriate safety rules and procedures in connection with the performance of this Agreement (the “Safety Plan”). Such Safety Plan shall require, among other things that Contractor and Owner satisfy any safety requirements of the insurers for the Project.
4.9 Security Plan. Contractor shall establish appropriate security measures to maintain the security of the Site and protect the Work in progress (the “Security Plan”). The Security Plan shall comply with all requirements of the insurers for the Project and shall address the reasonable concerns of the Owner.
4.10 Construction and Storage Confined to Permitted Areas. Contractor and the Subcontractors and suppliers shall confine construction activities and storage to the Site, to the Lay Down Areas provided by Owner as more particularly depicted on the diagram attached hereto as Schedule V (the “Lay Down Areas”), to the area designated by Owner for soil disposal (the “Soil Disposal Area”), to temporary and permanent easements that are reasonably necessary for the construction, operation, maintenance and repair of the Project and support facilities for the Project, that have been provided or are in the future provided by Owner (the “Easement Areas”) and to other areas that may hereafter be provided by Owner or other persons for such purposes.
4.11 Construction Office; Records. Contractor shall maintain a temporary construction office per two Sites during the course of construction of the Facility. Contractor shall maintain at such office a copy of the Specifications, together with construction-related drawings that are developed during the course of the Project. Contractor agrees to provide space for the Safety Director in the temporary construction office. Contractor agrees to remove the temporary construction office from the Site within six months after the Commercial Operation Date. Contractor shall further maintain an electronic data room (i.e., Dropbox account) , which during the Term of this Agreement and the 24 months following the Commercial Operation Date shall serve as a repository for all documents relating to the Project. Contractor shall provide Owner full access to such records during regular business hours in accordance with the procedures set forth in Section 5.4.4.
4.12 No Liens. Contractor shall be responsible to see that all equipment and materials incorporated into the Work that are purchased by Contractor or by any Subcontractor to the Project shall not be subject to any chattel mortgage, conditional sales contract, or security agreement under which an interest or lien is retained; provided, however, that such equipment and materials may be subject to the security interest of the vendor, to secure the payment of the purchase price of the affected equipment and materials, so long as such security interest is terminable upon payment in full and Contractor causes good title to such equipment and materials, free and clear of such security interest to be conveyed to Owner on or before the date of Final Payment. Contractor shall, as a condition precedent to payment, provide lien waivers to Owner before final payment is required to be made by Owner.
4.13 Compliance with Authorization Requirements. Contractor will familiarize itself with and comply with any applicable requirements of all Government Authorizations for the Facility, including without limitation, requirements pertaining to environmental protection, noise abatement, erosion, traffic control, and parking.
| - 8 - |
4.14 Patents. Contractor shall, at its sole expense, pay or use reasonable efforts to ensure that its Subcontractors and Suppliers pay all royalties, license fees or other costs incident to their use in the performance of the Work of any invention, design, process, product, or device that is the subject of patent rights or copyrights held by others.
4.15 Inspections; Defective Work. Contractor shall communicate regularly with PM/CM regarding PM/CM’s inspection of completed portions of the Work for conformity with the Specifications and for freedom from defects. Contractor shall accompany PM/CM on such inspections as necessary under the circumstances. In the event that PM/CM notifies Contractor of defective work that: (a) has the potential to have a material impact on the Cost of the Work or the Project Schedule; or (b) indicates a systemic problem (i.e., a persistent, widespread and/or material problem for the Project) with any piece of equipment, any portion of the Work, or the performance of any Major Equipment Supplier or Subcontractor, Contractor shall within 3 Business Days notify and provide relevant information to the Owner. Such information shall include the nature and extent of the problem, the cost and delay associated with the defective Work (if known), and the steps that Contractor and PM/CM are taking to remedy the defective performance, including any remedies that they are pursuing under the applicable contract.
4.16 Contractor Responsibility to Owner. Contractor covenants that in carrying out its duties on behalf of Owner under this Agreement, Contractor will at all times proceed in accordance with Good Industry Practice, will protect the interests of Owner in any dealings with Contractor’s affiliates .
4.17 Facility Start Up and Acceptance Testing. Contractor shall be responsible for coordinating all tasks and responsibilities associated with Acceptance Testing and Facility Start Up.
4.17.1 Testing Methodology. The testing methodology for Acceptance Testing is set forth in Article 11 and in Schedule III.
4.17.2 Acceptance Standards; Consequences of Under-Performance. The Acceptance Tests for the Work and the consequences for the Work falling short of the Acceptance Test Capacity Guarantee standards are set forth in Article 11 and Schedule III.
4.18 Other Authorizations. Except for the Governmental Authorizations, Contractor shall be required to obtain all other Authorizations (e.g., street opening permits, plumbing permits, etc.) required for the performance of the Work.
4.19 Confidentiality. Contractor shall make available to Owner any record produced or collected under this Agreement. Owner agrees to treat as confidential materials that Contractor reasonably identified, and clearly designated, as confidential. Owner agrees that if it shall receive an order (in whatever form) compelling it by Law to disclose any such confidential record produced or collected under this Agreement, it shall (to the extent permitted by Law) afford Contractor, and any Subcontractors who were the source of the requested record, notice of such request to afford Contractor or such others an opportunity to contest the order.
4.20 Insurance. Contractor shall obtain and maintain insurance as set forth in Schedule II.
4.21 Contractor Guarantee. On the Effective Date, Contractor shall obtain and deliver a guarantee from Abundant Solar Power Inc. (“Parent Guarantee”) of performance for the obligations of Contractor, in the form of Schedule IX. The obligations of Owner pursuant to Article 5 hereunder are expressly conditioned upon the receipt of such Parent Guarantee.
| - 9 - |
ARTICLE 5 - OWNER’ RIGHTS AND RESPONSIBILITIES
5.1 Transfer of Control Responsibility to Owner. On the Commercial Operation Date, Owner, through Operator and in accordance with the terms of a separate O&M Agreement, shall assume sole responsibility for the dispatch and control of the Facility. except that Contractor shall have the right and obligation to (a) provide technical, operational and general supervisory guidance, (b) complete any remaining Punch List items on a schedule that is mutually agreeable to the Parties; and (c) otherwise perform its remaining obligations under this Agreement.
5.2 Owner’s Responsibilities During the Project. Owner shall:
5.2.1 Make payment of the Cost of the Work in accordance with Article 9.
5.2.2 Require employees and agents to abide by all rules applicable to the Site and the Facility, including but not limited to rules pertaining to safety, security procedures or requirements, and designated entrances.
5.2.3 Reasonably cooperate with Contractor and provide any other assistance reasonably necessary to enable Contractor to perform the Work as required hereunder.
5.2.4 Provide adequate temporary construction easements and permanent easements for the Facility and any necessary support facilities for the Facility.
5.2.5 At all times promptly respond, including making appropriate representatives available with decision-making authority, to any reasonable requests by any of the Parties to this Agreement for meetings, for review and comments regarding relevant documents provided to them for review and comment.
5.2.6 At all times, use commercially reasonable efforts to proceed in a manner that supports the Project Schedule.
5.2.7 Promptly take all actions reasonably requested by Contractor to assist Contractor in obtaining any Authorizations for the Facility.
5.2.8 Not unreasonably withhold their support from other actions reasonably requested by Contractor to promote the timely completion of the Facility or to promote the completion of the Facility within the Project budget.
5.3 Denial of Authorizations. Subject to the specific rights and obligations of the Parties set forth in Section 7.2.4 and Article 14, if Contractor or Owner is denied a required Authorization, or any such Authorization is obtained but contains restrictions, qualifications or conditions that would have a material adverse impact on the benefits or obligations of the Parties under this Agreement, the Parties agree to use commercially reasonable efforts, within 30 days of the denial of the required Authorization or issuance of the unduly restrictive Authorization, to reform this Agreement, or to take other mutually agreeable actions (including, for example and without limitation, one Party indemnifying or making whole the other Party), that provide each Party with economic or other benefits that are substantially equivalent to those set forth in this Agreement. If the Parties are unable to so reform this Agreement or agree upon other mutually acceptable arrangements, Section 13.5 (Force Majeure; Failure of Authorizations) shall apply.
| - 10 - |
5.4 Owner’s Additional Rights and Responsibilities. In addition to its responsibilities as Owner under Section 5.2 of this Agreement, Owner shall have the following responsibilities with respect to the Project:
5.4.1 Financing. Owner will take all actions necessary to obtain the financing it needs to enable it to satisfy its payment obligations under this Agreement.
5.4.2 Inspection of Contractor’s Records . At any time from the execution of this Agreement to 2 years after the Final Completion Date, Contractor (or an Affiliate of Contractor duly designated as the custodian of Contractor’s books and records) shall, upon reasonable prior notice from Owner with respect to the subject matter and schedule, provide a designated representative of Owner during normal business hours with such reasonable access to Contractor’s books and records as is reasonably necessary to enable the person providing notice to review Contractor’s costs incorporated into the Cost of the Work and Contractor’s calculation thereof. Such review shall be at the cost and expense of the person(s) conducting the review. In conducting such review, the person(s) reviewing such books and records shall follow reasonable security procedures designed to protect against the release of trade secrets and other confidential information.
5.4.3 Owner’s Right to Inspect Work. Owner and its agents and employees shall, upon reasonable prior notice to Contractor and subject to adherence to the safety procedures and other procedures and requirements applicable to the Site (including without limitation, and such procedures and requirements established in connection with any insurance coverage obtained in connection with the Project), have access to inspect all Work; provided, however, that any inspection of the Work shall be conducted at a reasonable time and in a manner that does not delay or increase the Cost of the Work by disrupting the Work. Contractor shall have the right to condition such inspection upon the persons conducting the inspection observing procedures to preserve the safety and security of the Site and to comply with any applicable requirements of Project insurers. Notwithstanding any review or inspection by the State of the Work, Contractor shall not be relieved of its responsibility for the design, construction and performance of the Project as expressly set forth in this Agreement solely by virtue of the State’s inspection or review.
5.5 Contractor’s Rights and Responsibilities.
5.5.1 Financing. Contractor will take all actions necessary to obtain the financing it needs to enable it to satisfy its payment obligations under this Agreement.
5.5.2 Government Authorizations. Contractor, on behalf of Owner shall apply for and obtain all necessary Authorizations for the construction and operation of the Facility that are identified by Government Authorities as being required for the Facility, based upon the submitted Engineering Plan for the Facility.
ARTICLE 6 - OWNERSHIP OF ASSETS
6.1 Ownership of the Facility; Risk of Loss. Ownership of the Facility, and of each item of material, equipment, machinery, supplies and other items incorporated therein, shall pass from Contractor to Owner in accordance with the percentage Ownership interest obtained with each payment pursuant to Article 9, except as provided below.
| - 11 - |
ARTICLE 7 - COST OF THE WORK; PROJECT FINANCING
7.1 EPC Price. The amount the Owner shall be obligated to pay Contractor for completion of the Work in accordance with Schedule VI: Project Budget (“EPC Price”), subject only to the adjustments defined in this Article 7 of this Agreement. Such EPC Price includes land acquisition cost to be paid to a 3rd party by Owner. Owner’s responsibility for the EPC Price shall be adjusted only pursuant to (a) Section 7.2 of this Agreement relating to the EPC Price; (b) the right of the Utility Regulator to affect the Costs of the Work, as set forth in Article 14; (c) the impact of Change Orders made by the Parties as set forth in Article 8, but excluding increases to the Cost of the Work resulting from Change Orders necessary to remedy errors and omissions by Contractor or its Subcontractors; and (d) the final solar system size (Watt, DC).
7.2 Exclusions from the EPC Price. The following items (the “Excluded EPC Costs”) are not covered by the EPC Price and such costs shall be payable by Owner in excess of the EPC Price, except as expressly provided otherwise below: (a) any incremental Cost of the Work resulting from uninsured Force Majeure, which, at Owner’s election, may be shared equally with Contractor, in which case, termination for a Force Majeure Event because of the shared costs shall not be permitted; (b) any increase or decrease in the Cost of the Work resulting from the imposition of additional requirements or reallocation of the Cost of the Work by the Utility Regulator, which shall be handled in accordance with Section 14.l; (c) any increase or decrease in the Cost of the Work resulting from any Change Order made pursuant to Section 8.4, 8.5, or 8.8, which shall be allocated as set forth in such Sections; and (d) any increase in the Cost of the Work resulting from the Owner’s failure to cooperate reasonably with Contractor the other Parties to this Agreement, including without limitation owner’s failure to carry out its duties under Sections 5.2 or 5.4.
7.3 Cost Savings. Owner and Contractor will agree to a Project Budget (further defined in Schedule VI) which the EPC Price will be based on.
ARTICLE 8 - ADDENDA AND CHANGE ORDERS
8.1 General. “Addenda” are changes to the Work before construction begins. “Change Orders” are changes to the Work after construction begins. Addenda and Change Orders shall be handled as follows:
8.1.1 Any Party may request an Addendum or Change Order in writing.
8.1.2 Approval or rejection of Addenda and Change Orders that increase or decrease the Cost of the Work or change in schedule that could have the effect of delaying Mechanical Completion must be approved by Owner and Contractor prior to execution of such Addenda or Change Order.
8.1.3 Addenda and Change Orders that increase or decrease the Cost of the Work shall be approved or rejected in accordance with the procedures set forth in Sections 8.2 and 8.3 and in accordance with the time periods provided for the State in Section 16.20.
8.2 Process. Any of the Parties may request in writing an Addendum or a Change Order consisting of additions to, deletions from, or other revisions to the Work, provided that such changes are within the general scope of the Work. All requests for Addenda or Change Orders by an Owner shall be submitted to Contractor, with copies to PM/CM and Engineer (as appropriate). All requests for Addenda or Change Orders by Contractor shall be submitted to Owner, with copies to PM/CM and Engineer.
| - 12 - |
8.3 Initial Evaluation of Addendum and Change Order Requests; Applicable Standards. Any Addendum or Change Order request from an Owner shall be evaluated by Contractor, with the input and assistance of PM/CM and Engineer. Each Addendum or Change Order request shall initially be evaluated to determine whether it: (a) adds value to the Facility without increasing the Cost of the Work or delaying Mechanical Completion of the Facility; (b) adds value to the Facility without delaying Mechanical Completion of the Facility, but increases the Cost of the Work; or (c) does not add value to the Facility or adds value to the Facility, but will delay Mechanical Completion of the Facility or compromise performance of the Facility; or (d) (in the case of an Addendum only) decreases Cost of Work without delaying Mechanical Completion. All Addenda and Change Orders in category (a) or Addenda in category (d) shall be approved; all Addenda and Change Orders in category (c) shall be rejected (unless mutually agreed otherwise, including the allocation of the cost, by all Parties); and all Addenda and Change Orders in category (b) shall be approved, if and only if the increased Cost of the Work is allocated as set forth below in this Article 8.
8.4 Addenda or Change Orders Requested by Owner. If Owner requests an Addendum or a Change Order to address solely Owner’s needs, including without limitation changes to address aesthetic or design requirements, and such Addendum or Change Order is approvable under Section 8.3 above and approved by Contractor, but increases the Cost of the Work, then Owner shall bear the entire incremental Cost of the Work (including costs of delays and rework) resulting from such Addendum or Change Order.
8.5 Addenda and Change Orders Required by Acts of Governmental Authorities. If any action of any Governmental Authority requires an Addendum or a Change Order that increases or decreases the Cost of the Work the Owner shall be responsible for any incremental Cost of the Work.
8.6 Addenda and Change Orders Requested by Contractor. If Contractor requests an Addendum or a Change Order that is approved by the Owner, then Owner and Contractor shall share equally any increase or decrease in the Cost of the Work resulting from such Addendum or Change Order.
8.7 Addenda and Change Orders Resulting from Errors or Omissions of Contractor. Owner shall not be responsible for any increased Cost of the Work resulting from Addenda and Change Orders that are necessary because of errors of Contractor and/or its Subcontractors in coordinating the design, scheduling or construction of the Facility.
8.8 [Intentionally Deleted]
8.9 Tracking of Cost Impact of Addenda and Change Orders. Contractor shall institute and maintain a ledger type system to track the impact of all increases and decreases to the Owner’ Allocated Shares of the Cost of the Work resulting from any Addenda or Change Orders approved by Contractor and Owner. Contractor shall monthly, and more frequently upon request, report to the Owner the cumulative impact of such Addenda and Change Orders upon their respective Allocated Shares of the Cost of the Work. If applicable, the Parties shall modify the Project Schedule and Payment Milestones to reflect the impact of Addenda and Change Orders.
| - 13 - |
ARTICLE 9 - PAYMENT FOR WORK
9.1 Payment Milestones; Payment Schedule.
9.1.1 Progress Report and Invoice.
9.1.1.1 Contractor shall submit to Owner based on the Payment Milestone Schedule (Schedule IV) (i) its invoice, and (ii) a progress report covering the previous calendar month (the “Payment Period”) containing at a minimum the following information (“Progress Report”): (1) A description of the Work performed during the Payment Period and all Payment Milestones achieved; (2) A description of the Work not yet performed, if any, necessary to meet the Project Schedule for such Payment Period; (3) A description of the Work and the related Payment Milestones anticipated to be performed or achieved during the next month; (4) A statement of the amount due Contractor for Work for which payment was withheld from an earlier payment; (5) A statement of all sums previously paid to Contractor; (6) Partial lien waivers from Contractor covering all the Work through the immediately preceding Payment Period; (7) An updated Project Schedule showing progress to date, any failures to meet the Project Schedule, the current schedule of activities and a forecast of activities remaining to be performed; (8) Information regarding unusual weather conditions or Force Majeure events encountered during the Payment Period that have affected the Work; (9) A discussion of any problems encountered during the period and the remedies effected or planned; (10) Bulk quantities installation curves showing planned versus completed quantities (e.g., concrete, piping, conduit and wire); (11) Any interim payment by Contractor to the Subcontractors that obligates Owner to pay interest to Contractor as part of the invoiced Milestone Payment, together with the amount of interest that is payable; (12) Any other information reasonably requested in writing by either Owner; (13) Value of Change Orders and Addendums added to the Payment Milestone Schedule; (14) Itemization and allocation of any Excluded EPC Costs; and (15) If requested by Owner: a) the dates of any Payment Milestones for Major Equipment Supplier contract payments coming due before the next monthly Payment Due Date; and b) Contractor’s good faith estimate of all payroll and other Subcontractor and Supplier payments (together with the estimated payment dates) that Owner will need to make, prior to the next monthly Payment Due Date to avoid or minimize interest charges. Notwithstanding anything contained in this Agreement to the contrary, Contractor hereby agrees and acknowledges that Owner has the right to pay directly to Subcontractors and Suppliers upon Contractor’s instructions and approval with respect to such payments.
9.1.1.2 In the event either Owner reasonably determines that Contractor has not met a Payment Milestone in accordance with the Payment Milestone Schedule during the applicable period, Owner may withhold an amount equal to the value of the Payment Milestone not completed until such Payment Milestone is completed. In the event of any such withholding, the dissatisfied Owner shall deliver to Contractor, not later than the Payment Due Date for the payment from which such withholding is being made, a written Notice specifying the basis for the withholding. Contractor shall be paid such withheld amount, without interest, on succeeding Payment Date(s) when and to the extent Contractor demonstrates and Owner reasonably agrees that the previously unjustified payment has become justified. If the disputing Owner and Contractor agree before the next Payment Due Date that any Payment Milestone payment was wrongly withheld, then the disputing Owner shall pay to Contractor on the next Payment Due Date interest at the Late Payment Rate on any monies that were wrongly withheld. In the event of any withholding dispute that is not resolved by the next Payment Due Date, Contractor shall have the right to have the PM/CM review the dispute and the disputing Owner’s reasons for withholding payment. If the PM/CM concludes the withholding is justified, then Contractor shall not be entitled to be paid the withheld amount unless and until it addresses any reasons for withholding that are confirmed by the PM/CM. If the PM/CM concludes that the withheld payment was wrongly withheld, then the withholding Owner shall immediately pay to Contractor, the wrongly withheld amount, together with interest at the Late Payment Rate on the withheld Payment Milestone payment(s), from the Payment Due Date until the wrongly withheld amount is paid in full.
| - 14 - |
9.1.1.3 In the event Contractor owes Owner any amounts under this Agreement and such amounts remain unpaid 30 Days after Notice thereof, Owner may offset such amounts from any payment hereunder.
9.1.1.4 Contractor shall not cease or reduce the rate of its performance under this Agreement on account of any withholding under this Section 9.1.
9.1.2 Payment. Other than amounts properly withheld pursuant to Sections 9.1 and 9.2, Owner shall pay the applicable payment for each Payment Milestone within 20 days after Contractor invoices the applicable Payment Milestone (the “Payment Due Date”).
9.2 Final Payment. Upon (a) Final Completion, (b) the provision by Contractor of lien waivers for all remaining liens on the Project to Owner and (c) acceptance of the Work by Owner in accordance with Section 10.6, Owner shall pay the “Final Payment”.
ARTICLE 10 - COMMENCEMENT AND PERFORMANCE OF WORK
10.1 Commencement; Schedule. Contractor shall commence performance of the Work at the earliest reasonable time (the “Construction Commencement Date”) but no later than 30 days following the last to occur of the following: (a) issuance of any Authorizations required for the Facility; (b) completion of the final foundation drawings for the Project; (c) availability of suitable weather conditions for the commencement of construction; and (d) Owner having in place all insurance policies required of them under this Agreement.
10.2 Mechanical Completion. “Mechanical Completion” shall occur when, except for minor items of the Work that would not affect the performance or operation of the Facility such as painting, landscaping and so forth (a) all materials and equipment for the Facility have been mechanically installed substantially in accordance with the Specifications; (b) all systems required to be installed by Contractor have been installed and tested (excluding Acceptance Testing); (c) all the equipment and systems can be operated in a safe and prudent manner and have been installed in a manner that does not void any Subcontractor equipment or system warranties.
10.3 Commercial Operation. “Commercial Operation” shall be deemed to have occurred as of the first point in time after (i) Mechanical Completion of the Facility has occurred, as determined by the Independent Engineer; (ii) completion of Acceptance Testing pursuant to Section 11.2, or alternatively satisfaction of Contractor’s Acceptance Test related obligations in Section 11.3 (including, if applicable, payment of liquidated damages pursuant to Section 11.3); and (iii) when the Facility is used and useful for the purpose of delivering electric energy to Owner (other than electric energy delivered during Facility Start Up and Acceptance Testing). If the Owner disputes that Commercial Operation has occurred, it shall provide written notice to that effect to Contractor, specifying the basis for disputing Commercial Operation and the Parties in dispute shall thereafter utilize the dispute resolution procedures in Article 12 to resolve the dispute. Failure of the Owner to provide such written notice within five (5) Business Days after receipt of notice of Commercial Operation shall constitute waiver of the Owner’s right to dispute that Commercial Operation has occurred.
| - 15 - |
10.4 Punch List. A list of the uncompleted items for the Project shall be established by Contractor prior to Commercial Operation (the “Punch List”). The Punch List may be amended from time to time, upon written Agreement of the Parties, prior to Final Completion. The Punch List shall include all deliverables through Final Completion. The “Punch List Holdback Amount” shall be in the amount of the aggregate of the value of the Punch List items agreed to by the Parties, or determined by the Independent Engineer, if the Parties cannot agree. The Punch List Holdback Amount shall be withheld from payments due upon Commercial Operation, and the agreed value of each Punch List item shall be paid to Contractor upon completion of the Punch List item and any remaining Punch List Holdback Amount shall be paid to Contractor upon completion of all Punch List items.
10.5 Final Completion. “Final Completion” occurs after Commercial Operation has occurred and any remaining Punch List items have been finished. Contractor will notify Owner when it considers that Final Completion has occurred. If the Owner disputes that Final Completion has occurred, it shall provide written notice to that effect to Contractor specifying the basis for disputing Final Completion and the Parties in dispute shall thereafter use the dispute resolution procedures in Article 12 to resolve the dispute. Failure of the Owner to provide such written notice within 10 Business Days after the initial notice from Contractor shall constitute waiver of the Owner’s rights to dispute that Final Completion has occurred.
ARTICLE 11 - ACCEPTANCE TESTING; CAPACITY GUARANTEE; COMPLETION GUARANTEE; WARRANTIES; LIMITATION OF LIABILITY
11.1 Acceptance Tests. Contractor will be responsible for coordinating the Acceptance Tests of the Facility as more particularly set forth in Section 11.2 and Schedule III of this Agreement (the “Acceptance Tests”). Such Acceptance Tests shall be conducted by LaBella (the “Testing Engineer”).
11.2 2 Acceptance Testing.
11.2.1 General. Within 60 days following Mechanical Completion, Contractor shall cause the Testing Engineer to conduct the initial Acceptance Test, subject to Section 11.2.3 below. The Acceptance Tests shall be conducted in accordance with Schedule III.
11.2.2 Procedure.
11.2.2.1 The procedures for conduct of the Acceptance Test are set forth in Schedule III. Either Party may propose changes to a test procedure at any time up to 60 days prior to commencement of the initial Acceptance Test, and each Party agrees to cooperate in good faith in evaluating such change. No change shall be effective, however, without written acceptance of Owner and Contractor.
| - 16 - |
11.2.2.2 Contractor shall give Owner and Engineer 30 days’ advance written notice of the time it expects the qualified independent testing company to conduct the initial Acceptance Test. Owner, Engineer and their representatives may observe any Acceptance Test conducted by the Testing Engineer in order to confirm the Testing Engineer’s compliance with the procedures set forth in Schedule III.
11.2.3 Acceptance Testing Period; Repeat Tests. Contractor, subject to the provisions of this Section 11.2.3 and Schedule III, may repeat an Acceptance Test as Contractor deems appropriate; provided, that all Acceptance Tests must be completed by 60 days after the Facility achieves Mechanical Completion (the “Acceptance Testing Period”), unless: (a) the Parties agree otherwise in writing; or (b) the Acceptance Testing Period is extended by Force Majeure, but not beyond the Delay Default Date. Contractor shall bear the costs of performing the repeat Acceptance Tests. Contractor shall give Owner and Engineer not less than the following advance notice of each Acceptance Test following the initial Acceptance Test: (i) if the Acceptance Test is a prompt retest which merely continues a previously commenced Acceptance Test or promptly follows a failed Acceptance Test, not less than 24 hours advance notice; and (ii) if the Acceptance Test is a new Acceptance Test that follows an interim period of more than 10 Business Days during which no Acceptance Testing has occurred, then not less than 3 Business Days advance notice, unless a shorter period is agreed to by the Parties.
11.2.4 Acceptance Test Results.
11.2.4.1 After the Testing Engineer completes an Acceptance Test, Contractor shall give written notice thereof to Owner and Engineer and shall provide Owner and Engineer with all gross and reduced data for such test in accordance with Schedule III.
11.2.4.2 If the Testing Engineer determines that the Acceptance Test was successfully completed, Contractor shall ensure that the Testing Engineer notifies Owner and Engineer thereof promptly following determination to that effect, including providing them a copy of the written test report.
11.2.5 Contractor to Promptly Commence and Complete Acceptance Testing. Contractor shall promptly commence and complete Acceptance Testing following Mechanical Completion.
11.3 Acceptance Test Capacity Guarantee. At the end of Acceptance Testing Period under Section 11.2.3, the Facility shall have demonstrated the capability to produce 7.0 MW-DC, subject to final as-build system size, based upon the Acceptance Testing results. Contractor hereby guarantees that the Facility shall perform at not less than 97% of the Promised Capacity by the end of the Acceptance Testing Period (the “Acceptance Test Capacity Guarantee”). Contractor and the Testing Engineer shall be entitled to conduct and verify satisfaction of the Acceptance Tests in stages and in such order as may be appropriate given the available testing conditions. In the event that the Facility fails to meet the Acceptance Test Capacity Guarantee, the following shall apply:
11.3.1 If either the actual tested performance is less than [REDACTED: Percentage] but greater than [REDACTED: Percentage] of the Promised Capacity (the “Minimum Required Capacity”), Contractor will make (or cause to be made) the modifications, improvements, redesign, repairs or reconstruction (“Remedial Measures”) necessary to cause the Facility to meet the Acceptance Test Capacity Guarantee as evidenced by repeat Acceptance Tests. Contractor’s obligations under this Section to undertake Remedial Measures shall be counted toward and subject to the Damages Cap set forth in Section 11.10.
11.3.2 If the actual tested capacity of the Facility is less than the Minimum Required Capacity, Contractor shall conduct Remedial Measures until the earlier in time to occur of the following: (a) the actual tested capacity of the Facility is at least equal to the Minimum Required Capacity; or (b) Contractor reaches the Damages Cap set forth in Section 11.9.
| - 17 - |
11.4 Compliance with Standards. In the event the Facility contains any design or construction defects (“Defects”) that cause it to fail to meet any design, construction or Mechanical Completion standard in the Specifications or the Agreement, then Contractor shall, at no expense to Owner (except in the case of omitted equipment and materials, as provided in this Article 11), make (or cause to be made) the Remedial Measures necessary to remedy the Defects. In the event the Remedial Measures include supplying equipment and materials that were necessary to the Facility, but omitted from its construction, Owner shall pay for the costs of such omitted equipment and materials as part of the Cost of the Work if such Remedial Measure is implemented to address Defects discovered before the Facility achieves Mechanical Completion. If the Remedial Measure is implemented to address Defects discovered after the Facility achieves Mechanical Completion, Owner shall not be obligated to pay any portion of the cost of the omitted equipment and materials.
11.5 Contractor’s Warranties. Contractor warrants to Owner as follows:
11.5.1 Contractor shall perform the Work, including its design and engineering services hereunder, and will procure all materials hereunder using its best skill and attention, in accordance with Good Industry Practice associated with engineering and procurement of facilities such as the Facility.
11.5.2 Contractor shall perform its construction services hereunder in a good and workmanlike manner and otherwise in accordance with Good Industry Practice associated with constructing facilities such as the Facility. The Facility will, at all times through the Commercial Operation Date, comply with all Laws. Contractor shall have no obligation for breach of warranty under this Section 11.5 to the extent any deficiencies are the result of Force Majeure, normal wear and tear, misuse or negligence by Owner or someone other than Contractor acting on Owner’s behalf.
11.5.3 All materials procured or furnished by Contractor hereunder shall be new (unless otherwise agreed by Owner in writing), of good quality and in accordance with the specifications set forth in this Agreement and the Schedules.
11.6 Repair and Replacement of Defective Work. If any breach arises under Contractor’s warranties in Section 11.5, Contractor shall, at its sole cost and expense and subject to the Damages Cap, promptly correct, replace or repair, at Owner’s selection, any defect in design, engineering, materials, workmanship or operability in the Facility discovered during the Warranty Period. Any such correction, replacement or repair prior to Mechanical Completion shall not be considered a Remedial Measure. Contractor’s correction, replacement, or repair shall be made with due regard to Owner’s operational requirements.
11.7 Subcontractor Warranties; Subcontractor Protections for Owner. Contractor shall use its good faith efforts, in its negotiations with all Subcontractors for the Facility, to see that such Subcontractors provide commercially reasonable remedies, including warranties, performance guarantees, and, where appropriate, liquidated damages. Contractor shall enforce all contractual remedies and enforce any other remedies against the Subcontractors, including, without limitation, those arising from Subcontractors’ negligent acts or omissions (collectively, the “Subcontractor Protections”). Contractor shall enforce, at its sole expense, all warranties contained within the Subcontractor Protections for the Subcontractor warranty periods provided for the specific equipment to which such warranties pertain. Upon request from any Party, Contractor shall, following the negotiation of all Subcontractor contracts, update Owner to reflect the final negotiated warranty periods. Contractor agrees to assign to Owner on and as of the Commercial Operation Date any warranties, performance guarantees and related liquidated damages provisions contained in any contracts between Contractor and Subcontractors to the extent such assignments are permitted under the terms thereof.
| - 18 - |
11.8 Contractor Enforcement of Subcontractor Protections. Contractor agrees to act on Owner’ behalf, at no additional cost to Owner, to enforce any Subcontractor Protections with respect to Work; provided, however, that Contractor may use its reasonable discretion on how best to approach the resolution of any particular problem, and provided further that such enforcement obligation shall only last for the duration of the Subcontractor Protection in question. In the event that litigation is necessary to enforce any Subcontractor Protection, Contractor shall pursue such litigation at its own expense.
11.9 9 Limitation of Liability
11.9.1 Notwithstanding any provision in this Agreement to the contrary, in no event shall the total liability of Contractor or Guarantor to Owner for liquidated damages and Remedial Measures under Section 11.3 and 11.11 exceed in the aggregate [REDACTED: Dollar amount] per Site, provided that this limitation shall not apply to direct damages following an Contractor Event of Default pursuant to Article 13, or indemnification obligations pursuant to Section 11.10, and this limitation in no way affects Contractor’s absolute obligation to bring the Facility to Mechanical Completion. The limitation of liability to Owner for liquidated damages and Remedial Measures as described in this Section 11.9 is sometimes referred to herein as the “Damages Cap”.
11.9.2 APART FROM THE GUARANTEES AND OTHER REMEDIES PROVIDED IN THIS AGREEMENT, CONTRACTOR HEREBY DISCLAIMS ANY OTHER WARRANTIES, OR PERFORMANCE GUARANTEES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11.9.3 Owner shall not be liable for any lost profits or indirect, special, multiple, or punitive damages.
11.10 Indemnification. Owner shall assume and retain all liability, including claims, demands, losses, costs, damages and expenses of every kind and description, or damages to persons or property arising out of or in connection with or occurring during the course of this Agreement, where such liability is proximately caused by the acts or omissions of any of the officers, employees or agents of Owner while acting within the scope of their employment. Contractor shall indemnify Owner against any and all loss or damages that Owner may incur as a result of any claim of Persons other than Owner, Contractor, or their respective employees and agents, to the extent same (a) arise out a breach by Contractor of its obligations under this Agreement, or (b) are caused by the negligence or intentional or willful misconduct of Contractor, the Subcontractors or their agents or employees. Contractor shall indemnify and hold harmless Owner from all liabilities, damages, costs or expenses incurred by Owner by reason of any lien filed against the Facility by any Subcontractor of Contractor in connection with the performance of the Work. Any Party entitled to indemnification or other protection under this Section 11.10 shall keep the benefited party apprised of the status of all claims with respect to which it is entitled to such indemnification or protection and shall not settle any such claim without the consent of the benefited party, such consent not to be unreasonably withheld or unduly delayed.
| - 19 - |
ARTICLE 12 - DISPUTE RESOLUTION
12.1 In General. The Parties shall attempt to settle every dispute arising out of or in connection with this Agreement (“Dispute”), by following the dispute resolution process set forth below in this Article 12, to the extent permitted by Law.
12.1.1 Mutual Discussions. If any dispute or difference of any kind whatsoever (a “Dispute”) arises between the Parties in connection with, or arising out of, this Agreement, the Parties within 30 days shall attempt to settle such Dispute in the first instance by mutual discussions between Owner and Contractor.
12.1.2 Further Procedures. If the Dispute cannot be settled within 30 days by mutual discussions, then the Dispute shall be finally settled under the provisions of this Section 12.1.2 or Section 12.1.3. If the Parties fail to resolve any dispute through discussions within 10 Business Days, either Party shall have the right to provide written notice of the Dispute to the president or chief executive officer (“Senior Management”) of the other Party. Upon a timely referral, the Senior Management of the Parties shall consider the Dispute, review such relevant information as they may determine and issue their decision (which decision shall be confirmed in writing) within 5 Business Days after receiving the referral. If the Senior Management of the Parties cannot resolve the issue within the five Business Day period, then the Parties shall have the rights set forth below in Section 12.1.3.
12.1.3 Arbitration. Subject as hereinafter provided, any Dispute arising out of. or in connection with, this Agreement and not settled by Section 12.1.1 or Section 12.1.2 of this Agreement may (regardless of the nature of the Dispute) be submitted by either Party for arbitration to the offices of the American Arbitration Association (“AAA”) located closest to Owner’s principal offices at the time of such demand. The arbitration shall be governed exclusively by the United States Arbitration Act (9 U.S.C. § 1, et seq.), without reference to any state arbitration statutes. The arbitration proceedings shall be conducted in the city closest to Owner’s principal place of business (currently, Columbus, Ohio) and shall be conducted in accordance with the then-current commercial arbitration rules of the AAA, except as modified by this Agreement. The parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The Parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations.
12.2 Continued Performance. During the conduct of dispute resolution procedures pursuant to this Article 12, (a) the Parties shall continue to perform their respective obligations under this Agreement, and (b) no Party shall exercise any other remedies hereunder arising by virtue of the matters in dispute.
ARTICLE 13 - DEFAULTS; REMEDIES; TERM; TERMINATION
13.1 Contractor Default. The occurrence of any of the events set forth below shall constitute a “Contractor Event of Default” under this Agreement:
13.1.1 Bankruptcy. Contractor becomes insolvent, or become the subject of any bankruptcy, insolvency or similar proceeding, which, in the case of any such proceeding that a third party brings against either of them, has not been terminated, stayed, or dismissed within 60 Business Days after it was commenced, unless the affected Party provides evidence to Owner of that Party’s ability to perform all of its obligations under this Agreement; or
| - 20 - |
13.1.2 Failure to Maintain Insurance. Contractor fails to maintain the insurance coverages required under Section 4.20 as set forth in Schedule II hereto; or
13.1.3 Failure to Perform. Contractor shall have defaulted in its performance under any other material provision of this Agreement and shall have failed to cure such default within 30 days following delivery to Contractor of a Notice from Owner to cure such default, or if a cure cannot be effected within such 30 day period, such period shall extend for a reasonable period of time, but not to exceed a total of 60 days, so long as Contractor is proceeding diligently to cure such default throughout such period; or
13.1.4 Representation False. Any material representation made by Contractor herein shall have been false or misleading in any material respect when made; or
13.1.5 Failure to Achieve Mechanical Completion. If Mechanical Completion is not achieved by the Delay Default Date; or
13.1.6 Failure to Obtain Authorization. The Project cannot proceed to completion as the ultimate result of a refusal of Governmental Authority to approve the Project or any other Authorization, which refusal is due solely to the negligence or willful misconduct of Contractor.
13.2 Owner’s Default Remedies Against Contractor. If a Contractor Event of Default shall have occurred and be continuing, Owner shall have the right to terminate this Agreement by notice to Contractor. In the event of such termination:
13.2.1 If requested by Owner, Contractor shall withdraw from the Site, shall assign to the Owner (without future recourse to Contractor) such of Contractor’s subcontracts as Owner may request, and shall remove such materials, equipment, tools and instruments used and any debris or waste materials generated by Contractor in the performance of the Work as Owner may direct, and Contractor shall promptly deliver to Owner all designs, drawings, and other documents related to the Project. In the event of such termination, Contractor shall deliver to Owner all materials and data for which title has passed to Owner. To the extent any specific item of the Work is partially complete at the time of termination, at the option of either Owner, Contractor shall complete such partially completed Work. In such event, Owner shall pay Contractor the amount that Owner would have otherwise paid to Contractor for such item of Work had such termination not occurred, less any damages payable hereunder.
13.2.2 Owner, without incurring any liability to Contractor, shall have the right to have the Facility brought to Final Completion. In such event, Contractor shall be liable to Owner for the reasonably incurred costs to Owner of achieving Mechanical Completion, including costs of accelerated or expedited construction activities actually performed in an attempt to achieve Mechanical Completion (by the Delay Default Date if not yet past, or otherwise as expeditiously as practicable), and/or to mitigate any delay by Contractor, and actual costs for administering any subcontract and for legal fees associated with the termination. With respect to the costs of performing any of the Work that follows after Mechanical Completion, Contractor’s liability shall be limited to the amounts set forth in Section 11.9. Such costs and fees for which Contractor is liable as set forth above (and for failure to perform as may be requested pursuant to Section 13.2.1 above) may be deducted by Owner out of monies due, or that may at any time thereafter become due, to Contractor. If such costs exceed the sum that would have otherwise been payable to Contractor under this Agreement, then Contractor shall be liable for, and shall promptly, but in any event not more than 30 days after Notice from Owner, pay to Owner the amount of such excess excluding Changes in the Work approved by Owner following such Contractor Event of Default.
| - 21 - |
13.2.3 Upon termination of the Work pursuant to this Article 13, Contractor shall promptly submit to Owner an accounting of Contractor’s actual costs for the Work performed prior to the date of termination. If Owner exercises its right to have the Work finished, such amounts may be withheld until the Work is completed and shall be used to offset any amounts due Owner pursuant to Section 13.2.2. Notwithstanding the foregoing such amounts may be withheld and applied to any liability hereunder.
13.2.4 Notwithstanding the availability and/or exercise of the foregoing remedies, Owner shall have all such other remedies available under applicable Law.
13.2.5 In exercising any of the foregoing remedies, the Owner shall use reasonable efforts to mitigate its damages.
13.3 Owner’s Event of Default. Each of the following shall constitute an “Owner’s Event of Default” with respect to such Owner:
13.3.1 Failure to Make a Payment to Contractor When Due. The failure of an Owner to make the full amount of the payment to Contractor required under this Agreement within 10 Business Days following notice of failure to pay; or
13.3.2 Bankruptcy. An Owner becomes insolvent, or become the subject of any bankruptcy, insolvency or similar proceeding, which, in the case of any such proceeding that a third party brings against either of them, has not been terminated, stayed, or dismissed within 60 Business Days after it was commenced, unless the affected Party provides evidence to Contractor of that Party’s ability to perform all of its obligations under this Agreement; or
13.3.3 Representation False. Any material representation made by an Owner herein shall have been false or misleading in any material respect when made; or
13.3.4 Failure to Perform. Owner’s failure to perform any of its respective non- payment obligations under this Agreement, and such failure is not cured within 30 days after receipt of written notice thereof, or if a cure cannot be effected within such 30 day period, such period shall extend for a reasonable period of time, but not to exceed a total of 60 days, so long as Owner is proceeding diligently to cure such default throughout such period; or
13.3.5 Failure to Maintain Insurance. If an Owner fails to obtain and maintain in effect through the Commercial Operation Date such insurance as it is required by this Agreement to obtain and maintain; or
13.3.6 Failure to Cooperate or Allow Access. If an Owner fails to cooperate with Contractor in any situation where such cooperation is necessary to enable Contractor to carry out obligations under this Agreement. Such failure to cooperate shall include, without limitation, the failure to assist in obtaining required Authorizations, the failure to afford Contractor the access to the Site, to the Lay Down Areas, to the Soil Disposal Area or to the Easement Areas necessary for Contractor and all persons retained by Contractor in connection with the Project to perform their Project-related duties. An Owner Event of Default shall not include any other default by Owner of any of their obligations under this Agreement.
| - 22 - |
13.4 Contractor Remedies for Owner Event of Default. Subject to the rights granted in Section 13.5 below, upon the occurrence of an Owner Event of Default, Contractor shall have the right to terminate this Agreement, to order all Subcontractors to stop Work and remove all their tools and equipment from the Site, and/or pursue all such remedies as may be allowed under this Agreement, at law or in equity. In addition, and without limiting the foregoing remedies, Owner shall pay to Contractor the amounts payable upon termination under Section 13.7 of this Agreement.
13.5 5 Force Majeure; Failure of Authorizations.
13.5.1 Effect. Any delays in or failure of performance by a Party, other than the obligations to pay monies hereunder, shall not constitute a default hereunder if and to the extent such delays or failures of performance are caused by Force Majeure events.
13.5.2 Notice of Occurrence and Effect.
13.5.2.1 Notice of Occurrence. Any Party claiming that a Force Majeure condition has arisen shall immediately notify the other Party of the same, shall act diligently to overcome, remove and/or mitigate the effects of the event of Force Majeure, shall notify the other Party on a continuing basis of its efforts to overcome, remove and/or mitigate the event of Force Majeure and shall notify the other Party immediately when said condition has ceased.
13.5.2.2 Notice of Impact. In addition to its obligations under Section 13.5.2.1, if Contractor claims there is a Force Majeure condition, Contractor shall (i) promptly notify Owner, in writing of the nature, cause and cost of such Force Majeure condition, (ii) state whether and to what extent the condition will delay the Delay Default Date, the Commercial Operation Date or Final Completion Date, (iii) state the date and time the Force Majeure condition commenced; and (iii) state whether Contractor recommends that Owner initiate a Change Order pursuant to Article 8.
13.5.3 Effect of Force Majeure. No failure or delay in performance under this Agreement shall be deemed to be a breach hereof to the extent such failure or delay is occasioned by or due to Force Majeure. With respect to delay in performance, a Force Majeure condition shall excuse such delay in performance on a day for day basis for a period of time equal to the duration of the Force Majeure condition or the period needed to remedy its effects, to the extent that such Force Majeure condition causes a delay in the Work.
13.5.4 Termination. In the event that (a) Contractor or Owner are denied any required Authorizations, or such Authorizations are obtained, but are withdrawn, or contain restrictions, qualifications, or conditions that would have a material adverse effect on the benefits or obligations of the Parties, and the Parties are unable to reform this Agreement or agree upon other mutually acceptable arrangements, or (b) if a Force Majeure event continues for more than 180 days after notice of the event of Force Majeure is given under Section 13.5.2, or (c) the Project cannot proceed to completion as the ultimate result of a refusal of a Governmental Authority to approve the Project or to provide any other Authorization, which refusal or failure is not due solely to the negligence or willful misconduct of the terminating Party, then such Party may terminate this Agreement, in its sole discretion, within 60 days after the conditions in (a), (b) or (c), by giving at least 10 Business Days prior written notice to the other Parties.
13.6 Right to Termination . No Party shall have the right to terminate this Agreement for cause or otherwise except as described in Section 13.2, Section 13.4, Section 13.5, Section 14.2 and Section 16.21.
| - 23 - |
13.7 Effect of Termination Under Sections 13.4, 13.5, 14.2 & 16.21. In the event that this Agreement is terminated by either party pursuant to Sections 13.4 13.5, 14.2 or 16.21, Owner shall pay to Contractor an amount equal to the sum of (1) the Cost of the Work incurred by Contractor in connection with the Work and the Project as of the date of termination, plus (2) to the extent not already reflected in (1), any termination charges incurred by Contractor that are imposed by Subcontractors as a result of the Termination and any other costs reasonably incurred by Contractor solely as a result of the termination to the extent that this sum is not reimbursed pursuant to insurance policies maintained by Contractor pursuant to Schedule II (it being specifically understood that Owner shall be responsible for the payment of all deductible amounts under any said insurance policies to the extent provided in Schedule II). Upon such payment by Owner, Owner shall have exclusive Ownership of the Facility and the Work and Contractor shall have no further obligations with respect thereto.
13.8 Completion; Survival. Unless earlier terminated pursuant to the terms of this Article 13, this Agreement shall be deemed to be completed when both of the following have taken place: (a) the Final Completion Date has occurred, and (b) Owner has paid the Cost of the Work in full pursuant to Article 9. Notwithstanding the foregoing, Contractor’s obligations under Section 5.4.2 shall continue until the date that is 2 years after the Final Completion Date and Contractor’s obligations under Section 11.7 shall continue until the expiration of the applicable Subcontractor warranty periods pursuant to Section 11.8. Notwithstanding anything in this Agreement to the contrary, the provisions of Section 11.10 and Article 12 shall survive the completion or termination of this Agreement and nothing in this Agreement shall be deemed to limit the applicable statute of limitations period within which any Party may bring a claim for breach of this Agreement.
ARTICLE 14 - UTILITY REGULATOR MODIFICATIONS
14.1 Utility Regulator Modifications. The Parties have been informed and acknowledge that: (a) this Agreement will require the Parties to make substantial contractual commitments and incur significant costs based upon the terms of this Agreement, including the terms that recognize the possibility that the Utility Regulator may take action that results in the reallocation of costs within the Facility or the reallocation of risks between the Parties; and (b) this Agreement will be executed in advance of the Utility Regulator’s approval of the Project and the contemplated sale of its electricity output. The Parties agree that in the event that the Utility Regulator takes action that results in the reallocation of any costs or any risks relating to the Facility in a manner that materially affects any of the costs or obligations under this Agreement, the costs and/or obligations shall be adjusted accordingly among the Parties to this Agreement to reflect the effect of the Utility Regulator’s action. To the extent that the Utility Regulator or any other Governmental Authority imposes any additional requirements or modifications that increase the overall cost of the Work, the Owner shall bear such cost increase.
14.2 Conditional Right to Terminate Upon Material Reallocation of Costs. In the event that the Utility Regulator reallocates costs within the Facility between the Parties in an amount that is greater than or equal to [REDACTED: Dollar Amount], then Owner shall thereupon have the right, exercisable upon not less than 3 Business Days advance written notice to Contractor to terminate this Agreement. Notwithstanding the foregoing, in the event that Contractor agrees to assume the excess of the amount of costs reallocated by the Utility Regulator over [REDACTED: Dollar Amount], there shall be no right to terminate this Agreement.
| - 24 - |
14.3 Parties to Defend Cost Allocation. In the event that the Utility Regulator challenges this Agreement or any related agreement, the Parties agree to use their good faith efforts to defend it in proceedings before the Utility Regulator.
ARTICLE 15 - GOVERNING LAW; INTERPRETATION
15.1 Governing Law. This Agreement shall be construed in accordance with the laws of New York.
15.2 Interpretation.
15.2.1 Schedules are Part of Agreement. This Agreement includes the attached Schedules I through VIII.
15.2.2 Entire Agreement. This Agreement, together with the Schedules attached hereto and the Collateral Agreements, constitutes the entire agreement and complete understanding between Contractor and Owner with respect to the subject matter described herein and therein and supersedes all other understandings and agreements between the Parties with respect to such subject matter.
15.2.3 Order of Interpretation. In the event of any inconsistencies between the terms and conditions of the body of this Agreement and the Schedules, the provision of the body of this Agreement shall prevail over the terms of any Schedule.
15.2.4 Captions. Captions or headings to Articles, Sections or paragraphs of this Agreement are inserted for convenience of reference only and shall not affect the interpretation or construction hereof.
15.2.5 Additional Principles of Construction. The Agreement shall be interpreted in a manner as to be consistent with the following principles:
15.2.5.1 Use of Good Industry Practice. It is the intent of the Agreement to require the application of Good Industry Practice to the Work where details of such Work are not included, are incomplete, are not specified, or are not clearly defined in the Specifications.
15.2.5.2 Integration of Project Documents. It is the intent of the Parties that the Specifications for the Facility, this Agreement, and the Schedules hereto (the “Project Documents”) are to be interpreted as an integrated whole. Where work or obligations are referenced in one of the Project Documents but not in another, Contractor shall coordinate the design and installation of the Work as if it were shown on both to the extent required to comply with the Acceptance Tests and Good Industry Practice.
15.3 Drafting Ambiguities. Each Party to the Agreement and its counsel have reviewed and revised the Agreement. The rule of construction that any ambiguities are to be resolved against the drafting parties shall not be employed in the interpretation of the Agreement, or any amendment thereto.
ARTICLE 16 - MISCELLANEOUS
16.1 Third Party Beneficiaries. Except with respect to the provisions of the Agreement pertaining to assignment, the Agreement is not intended to and shall not create rights of any character whatsoever in favor of any person other than the Parties to the Agreement.
| - 25 - |
16.2 Good Faith and Fair Dealing. Whenever the Agreement grants to any Party the right to take action, exercise discretion, or determine whether to approve a proposal of any other Party, the Party possessing the right shall act in good faith and shall deal fairly with each other. In the event of a Dispute, the Parties shall be obligated to make a reasonable and diligent effort to resolve the Dispute at the appropriate level before invoking the dispute resolution procedures in Article 12. Each of the Parties further expressly agrees that at all times it will exercise its good faith in the administration of this Agreement, and all actions of the Parties shall be designed to facilitate the successful completion of the Work by Contractor and to promote the effective and efficient administration of this Agreement, and to achieve the objective of providing efficient, reliable and economical long term energy production. The Parties further commit to act in a timely fashion, consistent with maintaining the Project Schedule to: (a) review all documents, (b) respond to all requests for information, (c) support all applications for Authorizations; (d) respond to requests for access to offsite support facilities and other assistance; and (e) resolve all differences and Disputes in a timely fashion.
16.3 Severability. Every part, term or provision of the Agreement is severable from others. Notwithstanding any possible future finding by duly constituted authority that a particular part, term or provision is invalid, void or unenforceable (but subject to the effect of the Parties’ agreements in Section 5.3 and Article 14), the Agreement has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby.
16.4 Survival. All representations and warranties, and all agreements by the parties in this Agreement to indemnify each other shall survive the termination of this Agreement. The termination of this Agreement shall not limit or otherwise affect the respective rights and obligations of the Parties which accrued prior to the date of termination, and which continue to exist following the termination of this Agreement.
16.5 Technical or Trade Usage. When words that have a well-known technical or trade meaning are used to describe materials, equipment or services, such words will be interpreted in accordance with such meaning. Reference to such standard specifications, manuals, or codes of any technical society, organization or association, or to the code of any governmental authority, whether such references be specific or by implication, shall mean the latest standard specification, manual or code (whether or not specifically incorporated by reference in the contract documents). Performance shall conform to the standards in effect at the time of performance and may change the duties and responsibilities of Contractor or Owner, or any of their agents, consultants, or employees from those set forth in the Agreement.
16.6 Amendments and Waivers. This Agreement may be amended only by a written instrument signed by a duly authorized representative of each Party. The failure of any Party to insist on one or more occasions upon strict performance of the obligations owed it by the other parties shall not waive or release such party’s right to insist on strict performance of such obligation or any other obligation in the future.
| - 26 - |
16.7 Notices. Except as expressly provided otherwise in this Agreement, all notices given to any of the Parties pursuant to or in connection with this Agreement shall be in writing, shall be delivered by hand, by certified or registered mail, return receipt requested, by facsimile transmission with confirmation, or by Federal Express, Express Mail, or other nationally recognized overnight carrier, or transmitted by e-mail if receipt of such transmission by e-mail is specifically acknowledged by the recipient (automatic responses not being sufficient for acknowledgment). Notices are effective when received. Notice addresses are as follows:
If to Contractor:
Abundant Solar Power (M1) LLC
700 West Metro Park
Rochester, NY 14623-2678
Attention: Richard Lu
If to Owner:
Solar Advocate Development, LLC
5000 Arlington Centre Blvd.,
Columbus, OH 43220
Attention: Shera Markley
16.8 Change of Address. Any Party may, by written notice to the other Parties given in accordance with the foregoing, change its address for notices.
16.9 Successors; Assignment. This Agreement shall be binding upon the parties and their respective successors and permitted assigns. No party shall make any sale, assignment, mortgage, pledge or other transfer of all or any portion of its rights or obligations under this Agreement, whether voluntarily or involuntarily, by operation of law or otherwise, without the prior written consent of the other Party; provided, however, that: (a) any Party may make a collateral assignment of its interest in this Agreement to a Financing Party; and (b) this Section 16.12 shall not require prior written consent for any voluntary transfer in connection with a change in Ownership, or the merger, restructuring or consolidation of Contractor, so long as the Agreement is transferred to an affiliate and the Parent Guarantee continues to guarantee performance of the Agreement, as so voluntarily transferred. Any successor to Contractor or Owner’ respective interests under this Agreement shall assume in writing all responsibilities of Contractor or Owner, as the case may be under this Agreement.
16.10 Counterparts. This Agreement may be signed in counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute the same instrument.
16.11 Further Assurances. Each Party agrees to execute and deliver any such instruments and to perform any such acts as may be necessary or reasonably requested by any other Party in order to give full effect to the terms of this Agreement.
16.12 Interest. Past due payments hereunder not contested in good faith shall bear interest from the due date until paid at the Late Payment Rate.
| - 27 - |
16.13 Relationship to Other Agreements.
16.13.1 The Parties recognize that this Agreement and other related agreements relating to the Facility entered into between Owner and Contractor and others (the “Collateral Agreements”) constitute an integrated and comprehensive set of agreements that are intended to facilitate the construction and operation of the Facility to provide efficient, reliable and economic long-term electricity production. To the extent permitted by Law, all of the Collateral Agreements shall be read together to achieve these objectives and the Parties agree to support all such documents, regardless of whether they are a party to a particular Collateral Agreement.
16.13.2 Notwithstanding Section 16.16, the Agreement and the Collateral Agreements are separate and independent undertakings by the Parties. Termination of one of these agreements shall not affect or impair the rights or obligation of the Parties under the Collateral Agreements, except as otherwise specifically provided herein and in the Collateral Agreements.
16.14 No Partnership; Third Party Beneficiaries. The Parties hereby expressly disclaim any intention to create a joint venture or partnership relation between the Parties. Except as expressly stated in this Agreement, there are no third-party beneficiaries to this Agreement.
16.15 Further Documents and Actions. Each Party shall promptly execute and deliver such further documents and assurances for and take such further actions reasonable requested by the other Parties as may be reasonably necessary to carry out the intent and purpose of this Agreement.
16.16 Time of the Essence; Cooperation to Control Costs. The Parties recognize that time is of the essence in designing and completing construction of the Facility. The Parties agree to use their good faith efforts to cooperate with each other and, where applicable, with Subcontractors to keep the Project on schedule, to control Project costs and to refrain from actions that drive up the Project costs or inject delay into the Project Schedule.
16.17 State Right to Approve; Failure to Promptly Respond Deemed Approval. In all instances in this Agreement where Owner has the right to provide feedback or approve of the actions of Contractor with respect to the construction process, including without limitation, the Owner’s feedback and approval rights under Article 4.2 (Subcontractors), Article 4.2.5 (QA/QC Director), and Article 4.2.6 (Safety Director), Owner shall use its best efforts to promptly respond, with due regard to the time sensitivity of the particular situation. Unless expressly provided otherwise in this Agreement, in the event the Owner fails to respond in any such situation within 5 Business Days of the delivery of the information or notice that triggers the Owner’s right to approve or provide feedback, the Parties agree that Owner shall be deemed to have approved the item in question or to have waived its right to provide feedback, as the case may be.
[SIGNATURE PAGE FOLLOWS]
| - 28 - |
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first set forth above.
| CONTRACTOR: | ||
| Abundant Solar Power (M1) LLC | ||
| By: | “Richard Lu” | |
| Name: | Richard Lu | |
| Its: | Director | |
| OWNER | ||
| Solar Advocate Development, LLC | ||
| By: | “Charley M. Shin” | |
| Name: | Charley M. Shin | |
| Its: | Director | |
| - 29 - |
Attached Schedules:
Schedule I – Definitions
Schedule II – Insurance
Schedule III – Acceptance Testing
Schedule IV – Payment Milestone Schedule
Schedule V – Site Plans
Schedule VI – Project Budget
Schedule VII – The Work
Schedule VIII – Governmental Authorizations to be Obtained
Schedule IX – Form of Parent Guarantee
| - 30 - |
Schedule I
Definitions
“Acceptance Tests/Acceptance Testing” shall mean the performance tests, to be performed on the Facility as more particularly set forth on Schedule III, including any adjustments thereto as provided in this Agreement or as otherwise agreed to by the Parties to address the conditions present at the time the Facility is available for testing.
“Acceptance Test Capacity Guarantee” shall have the meaning assigned to it in Section 11.3. “Acceptance Testing Period” shall have the meaning set forth in Section 11.2.3.
“Addendum” or “Addenda” shall have the meaning assigned to it in Section 8.1.
“Affiliate” shall mean (i) any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a Party, and (ii) any Person that, directly or indirectly, is the beneficial owner of five percent (5%) or more of any class of equity securities of, or other Ownership interests in, a Party or of which the Party is directly or indirectly the owner of five percent (5%) or more of any class of equity securities or other Ownership interests.
“Agreement” shall have the meaning assigned to it in the first paragraph of this Agreement.
“Authorization” shall mean any license, permit, approval, filing, waiver, exemption, variance, clearance, entitlement, allowance, franchise, or other authorization, whether from any Governmental Authority, corporate or otherwise.
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which either the state or national banks in the State of Ohio are not open for the conduct of normal banking business.
“Change Order” shall mean a document issued pursuant to Article 8, which describes changes in or to the Work.
“Commercial Operation” shall have the meaning given it in Section 10.3
“Commercial Operation Date” shall mean the date on which the Facility achieves Commercial Operation.
“Construction Commencement Date” shall have the meaning assigned to it in Section 10.1.
“Contractor” shall have the meaning assigned to it in the first paragraph of this Agreement.
“Contractor Event of Default” shall have the meaning assigned to it in Section 13.1.
“Cost of the Work” shall mean the anticipated actual costs of construction, subject to the EPC Price, as defined in Section 7.1, including the exceptions and additions permitted therein.
“Damages Cap” shall have the meaning set forth in Section 11.9.
“Defects”, individually a “Defect”, shall have the meaning assigned to it in Section 11.4.
| - 31 - |
“Delay Default Date” shall mean December 31st, 2023, as such date may be extended by any Force Majeure condition.
“Dispute” shall have the meaning assigned to it in Section 12.1.
“Easement Areas” shall have the meaning assigned to it in Section 4.10.
“Effective Date” shall mean the date that this Agreement has been signed by Contractor and Owner.
“EPC Price” shall have the meaning assigned to it in Section 7.2.
“Equipment Instruction Manual” shall mean the manual or manuals provided by Contractor to Owner pursuant to Section 3.1.6, including operation requirements, guidelines and manuals established by the manufacturers of the major equipment for the Facility.
“Excluded EPC Costs” shall have the meaning given the term in Section 7.2.
“Facility” shall mean the solar energy facility, as more particularly described in the Recitals to this Agreement.
“Facility Start Up” shall mean the activities following completion of construction of the Facility, but prior to Acceptance Testing, that are necessary to accomplish the initial start up of the equipment within the Facility that generates electricity, including, without limitation, filling equipment with oils and other fluids, and the provision of any equipment vendor services relating thereto.
“Final Completion” shall have the meaning assigned to it in Section 10.5. “Final Completion Date” shall mean the date Final Completion occurs. “Final Payment” shall have the meaning assigned to it in Section 9.2.
“Financing Party” shall mean any Person, other than Parties, providing debt or equity financing (including equity contributions or commitments) refinancing of any guarantees, insurance or credit support for or in connection with such a financing or refinancing, in connection with the development, construction, Ownership or leasing operation or maintenance of the Facility, or any part thereof including any trustee or agent acting on any such Person’s behalf.
“Force Majeure” shall mean in respect of any Party an event beyond the reasonable control of such Party which prevents or delays such Party from performing its obligations under this Agreement (except for the obligation to pay money) or which materially increases its costs of performing those obligations. Examples include, to the extent they otherwise meet the foregoing definition, the following: war, hostilities, civil disturbances, any kind of local or national emergency, riot, fire, flood, hurricane, storm, earthquake, concealed or subterranean conditions at the Site that could not be discovered by a reasonable inspection of the Site, power failure or power surge, epidemic, explosion, sabotage, act of God, acts or failures to act by Governmental Authorities (including failure to issue, delays in issuing beyond the period provided by law (or if no such period is provided, beyond the customary period), or revocation of Governmental Authorizations, except to the extent any such failure, delay or revocation is due to the negligence or willful misconduct of Contractor or its Affiliates), failure of the Subcontractors or Suppliers to perform or deliver on a timely basis, to the extent such failure is due to a force majeure condition affecting the Subcontractor or Supplier, strike, slowdown or other labor unrest (other than a localized strike against an individual employer), delay of carriers, failure of the usual modes of transportation, embargo, change in any applicable Law from that in effect on the date hereof, any condition at the Site that requires remediation under any applicable Law related to the environment, or expropriation or confiscation of facilities. The effect of Force Majeure upon the EPC Price and upon the Delay Default Date shall be limited as more particularly set forth in Sections 7.2 and 13.5.3. Force Majeure shall not include breach of contract by Subcontractors or Suppliers.
| - 32 - |
“Good Industry Practice” shall mean, at any particular time, (a) any of the practices, methods and acts engaged in or approved by a significant portion of the United States solar electric power generating industry prior to such time and by constructors, Owner, operators or maintainers of facilities similar in size and operational characteristics to the Facility, or (b) any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable costs consistent with applicable Law and the Authorizations, environmental considerations, good business practices, reliability, safety, expedition and the manufacturer’s maintenance requirements, provided that “Good Industry Practice” is not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to be a spectrum of the acceptable practices methods or acts generally accepted in such industry having due regard for, among other things, the manufacturer’s maintenance requirements, the requirements of Governmental Authorities and any applicable agreements.
“Governmental Authority” shall mean the national government, and any regulatory department, body, political subdivision, commission, agency, instrumentality, ministry, court, judicial or administrative body, taxing authority, or other authority thereof (including any corporation or other entity owned or controlled by any of the foregoing) having jurisdiction over either Party, the Facility or the Site, whether acting under actual or assumed authority. Permits, orders or other approvals given by such bodies are “Governmental Authorizations”.
“Hazardous Substances” shall mean, collectively, any petroleum or petroleum product, asbestos in any form that is or could become friable, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs), hazardous waste, hazardous material, hazardous substance, toxic substance, contaminant or pollutant, as defined or regulated under any federal, state or local law relating to the protection of the environment, including the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq., the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq., or any similar state statute.
“Independent Engineer” shall mean a qualified independent engineering firm mutually agreeable to Contractor and the State, to be selected by them not later than ten (10) days prior to the commencement of construction. The Parties shall employ the Independent Engineer, whose compensation shall be a part of the Cost of the Work, to verify that Mechanical Completion has occurred and to resolve any disputes among the Parties as to the items that should appear on the Punch List.
“Law” shall mean (i) any law, legislation, statute, act, rule, ordinance, decree, treaty, regulation, order, judgment, or other similar legal requirement, or (ii) any legally binding announcement, directive or published practice or interpretation thereof, enacted, issued or promulgated by any Governmental Authority.
“Lay Down Areas” shall have the meaning assigned to it in Section 4.10.
| - 33 - |
“Major Equipment Suppliers” shall have the meaning assigned to it in Section 4.2.3.
“Mechanical Completion” shall have the meaning set forth in Section 10.2.
“Minimum Required Capacity” shall have the meaning assigned to it in Section 11.3.1.
“O&M Agreement” shall mean that certain Operation and Maintenance Agreement of dated [date of separate O&M agreement, if Contractor is to perform as operator] between contractor and Owner.
“Operator” shall mean Contractor and its successor(s) as operator of the Facility under the separate O&M Agreement.
“Owner” shall mean Solar Advocate Development, LLC.
“Owner’s Event of Default” shall have the meaning assigned to it in Section 13.3.
“Parent Guarantee” shall have the meaning assigned to it in Section 4.21.
“Parties” shall mean Contractor and Owner when referred to collectively and “Party” shall mean any one of the Parties referred to singly.
“Payment Due Date” shall have the meaning assigned to it in Section 9.1.2. “Payment Milestones” shall mean those milestones set in Schedule IV. “Payment Milestone Schedule” shall mean Schedule IV.
“Payment Period” shall have the meaning assigned to it in Section 9.1.1.1.
“Person” shall mean any individual, firm, company, association, general partnership, limited partnership, limited liability company, trust, business trust, corporation, public body, or other legal entity.
“PM/CM” shall have the meaning assigned to it in Section 4.2.2.
“PM/CM’s Contract” shall have the meaning assigned to it in Section 4.2.2.
“Prime Subcontractor” shall have the meaning assigned to it in Section 4.2.4.
“Prime Subcontractor Contracts” shall have the meaning assigned to it in Section 4.2.4.
“Progress Report” shall have the meaning assigned to it in Section 9.1.1.1.
“Project” shall mean the development of the Facility at the Site by the Contractor and shall include the Work.
“Project Budget” shall have the meaning assigned to it in Section 7.3 and Schedule VI
“Project Documents” shall have the meaning assigned to it in Section 15.2.5.2.
“Project Schedule” shall mean the schedule of activities (including all amendments or supplements thereto following the Effective Date of this Agreement) during the Project that coordinates all aspects of the Project, including without limitation, permitting, engineering, procurement of equipment and materials, construction, Facility Start Up, Mechanical Completion, Acceptance Testing, completion of the Punch List and Project close out. The Project Schedule will include, without limitation, the Payment Milestone Schedule and sub-Project schedules for each of the major participants in the Project.
“Punch List” shall have the meaning assigned to it in Section 10.4.
“Punch List Holdback Amount” shall have the meaning assigned to it in Section 10.4.
| - 34 - |
“QA/QC Director” shall have the meaning assigned to it in Section 4.2.5. “QA/QC Contract” shall have the meaning assigned to it in Section 4.2.5. “Remedial Measures” shall have the meaning assigned to it in Section 11.3.1. “Safety Director” shall have the meaning assigned to it in Section 4.2.6. “Safety Contract” shall have the meaning assigned to it in Section 4.2.6. “Safety Plan” shall have the meaning assigned to it in Section 4.8.
“Security Plan” shall have the meaning assigned to it in Section 4.9.
“Site” shall mean the following address: 5701 Bowman Road, Town of Manlius, East Syracuse, Onondaga County, NY 13057
“Soil Disposal Area” shall have the meaning assigned to it in Section 4.10.
“Specifications” shall mean the Design Review Manual prepared by Engineer, which is incorporated into this Agreement by this reference, and any supplements or amendments thereto that may be agreed to by the Parties after execution of this Agreement. The Specifications shall further include any Change Orders and other changes to the Work authorized in accordance with Article 8 of this Agreement.
“Subcontractor” shall mean every Person (other than employees of Contractor) employed or engaged by Contractor or any Person (other than Owner) directly or indirectly in privity with Contractor (including every sub-subcontractor of whatever tier) to perform any portion of the Work, whether the furnishing of labor, materials, equipment, services or otherwise.
“Subcontractor Protections” shall have the meaning assigned to it in Section 11.7
“Suppliers” shall mean a manufacturer, fabricator, supplier, distributor, materialman or vendor having a direct contract with Contractor or with any Subcontractor to furnish materials or equipment to be incorporated in the Work by Contractor or any Subcontractor.
“Term” shall mean the duration of this Agreement, from the Effective Date until Final Completion.
“Testing Engineer” shall have the meaning set forth in Section 11.1.
“Traffic Control Plan” shall have the meaning set forth in Section 4.7.
“Uninsured Force Majeure” shall mean any event of Force Majeure, or portion thereof, not covered by the insurance required to be carried in connection with the Project.
“Utility Regulator” shall mean any Governmental Authority that has specific jurisdiction over the production, sale, or pricing of the provision of electric energy or related services.
“Warranty Period” shall mean, with respect to any component, the applicable length of any warranties provided by the related Subcontractor.
“Work” shall mean all design, engineering, procurement, construction, erection, installation, training, start-up and testing activities and services necessary to achieve a complete and operable Facility in accordance with the terms of this Agreement, to achieve Mechanical Completion, Commercial Operation, and Final Acceptance, and shall include all activities and services described in Schedule VII and in Section 3.1.
| - 35 - |
Schedule II
Insurance
Insurance During Construction: The Parties shall maintain insurance during construction as follows per each Site:
Owner
– General liability insurance
○ Minimum of $1,000,000 per occurrence / $2,000,000 limit
– Excess liability insurance (Umbrella)
○ Minimum of $5,000,000
– Personal Injury
○ Minimum of $2,000,000 per occurrence
– Property insurance
Contractor
– General liability insurance
○ Minimum of $1,000,000 per occurrence / $2,000,000 limit
– Builder’s risk insurance
○ Minimum of $3,000,000
– Worker’s compensation insurance
○ As required by law
| - 36 - |
Schedule III
Acceptance Testing
[REDACTED: Confidential and commercially sensitive information regarding term of Acceptance Testing and Capacity Testing]
| - 37 - |
Schedule IV
Payment Milestone Schedule
The EPC Price ($11,354,345) will be paid by Owner as follows:
[REDACTED: Confidential and commercially sensitive information regarding the detailed breakdown of costs and schedule]
| - 38 - |
Schedule V: Site Plans
Manlius Project
[REDACTED: Confidential and commercially sensitive map of site plan]
| - 39 - |
Schedule VI
Manlius Project Budget
| Solar System Size (Watt, DC) | 5,728,320 | |||
| Contingent (Watt, DC) | 123,120 | |||
| Total (Watt, DC) | 5,851,440 | |||
REDACTED: Confidential and commercially sensitive information regarding the detailed breakdown of costs]
| ||||
| - 40 - |
Schedule VII
The Work
The Work shall include all design, engineering, procurement, permitting (to the extent provided in the EPC Contract), construction, erection, installation, training, start-up and testing activities and services necessary to achieve a complete and operable Facility with the following planned equipment and systems:
[REDACTED: Confidential and commercially sensitive list of equipment.]
| - 41 - |
Schedule VIII
Governmental Authorizations Obtained
[to be attached]
| - 42 - |
Schedule IX
Form of Parent Guarantee
CORPORATE GUARANTEE AGREEMENT
THIS AGREEMENT is made as of________June 19, 2023___, by Abundant Solar Power Inc., a Delaware corporation (“Guarantor”).
R E C I T A L S :
A. Abundant Solar Power (M1) LLC, a Delaware limited liability company (“Obligor”) and Solar Advocate Development, LLC, an Ohio limited liability company, are entering into an Engineering, Procurement and Construction Agreement dated June 19, 2023 (the “EPC Agreement”) for the development and construction of one 5.7 MW-DC solar energy facilities that will produce electric capacity and energy, to be located in New York (“Projects”).
B. Owner has required that the Guarantor guarantee the Obligations (defined below) as a condition to the Owner’s willingness to enter into the EPC Agreement. The Obligor is a wholly-owned subsidiary or affiliate of the Guarantor. The development and construction of the Projects and the transactions contemplated by the EPC Agreement will provide direct benefits to the Obligor and will therefore indirectly benefit the Guarantor.
C. The term “Obligations” means all of the obligations of the Obligor to Owner under the EPC Agreement of whatever nature, however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, secured or unsecured, and whether the Obligor is liable individually or jointly with others, but subject to the limitations set forth in the EPC Agreement.
C O V E N A N T S :
IN CONSIDERATION OF these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed that:
1. The Guarantor hereby (a) unconditionally guarantees the full and prompt payment and performance of the Obligations when due, whether by acceleration or otherwise, or (if earlier) at the time any Obligor becomes the subject of bankruptcy or other insolvency proceedings; (b) agrees to pay all costs, expenses and reasonable attorneys’ fees incurred by Owner in enforcing this Agreement and the Obligations and realizing on any collateral for either; provided however, that Guarantor shall not be required to pay such amounts incurred by Owner in any attempted enforcement by Owner of this Agreement in which Guarantor ultimately prevails; and (c) agrees to pay to Owner the amount of any payments made to Owner or another in connection with any of the Obligations which are recovered from Owner by a trustee, receiver, creditor or other party pursuant to applicable law.
| - 43 - |
2. This is a guarantee of payment and performance of the Obligations, and not of collection. Owner shall not be obligated to: (a) take any steps whatsoever to collect from, or to file any claim of any kind against, any Obligor, any other guarantor, or any other person or entity liable for payment or performance of any of the Obligations; or (b) take any steps whatsoever to protect, accept, obtain, enforce, take possession of, perfect its interest in, foreclose or realize on collateral or security, if any, for the payment or performance of any of the Obligations or any guarantee of any of the Obligations; or
(c) in any other respect exercise any diligence whatever in collecting or attempting to collect any of the Obligations by any means.
3. The Guarantor’s liability for payment and performance of the Obligations shall be absolute and unconditional; the Guarantor unconditionally and irrevocably waives each and every defense which, under principles of guarantee or suretyship law, would otherwise operate to impair or diminish such liability; and nothing whatever except actual full payment and performance of the Obligations (and all other debts, obligations and liabilities of the Guarantor under this Agreement) shall operate to discharge the Guarantor’s liability hereunder. Without limiting the generality of the foregoing, Owner shall have the exclusive right, which may be exercised from time to time without diminishing or impairing the liability of the Guarantor in any respect, and without notice of any kind to the Guarantor, to: (a) accept any collateral, security or guarantee for any Obligations or any other credit; (b) determine how, when and what application of payments, credits and collections, if any, shall be made on the Obligations and any other credit and accept partial payments; (c) determine what, if anything, shall at any time be done with respect to any collateral or security; subordinate, sell, transfer, surrender, release or otherwise dispose of all or any of such collateral or security; and purchase or otherwise acquire any such collateral or security at foreclosure or otherwise; and (d) with or without consideration grant, permit or enter into any waiver, amendment, extension, modification, refinancing, indulgence, compromise, settlement, subordination, discharge or release of: (i) any of the Obligations, the EPC Agreement, or any other agreement relating to any of the Obligations, (ii) any obligations of any guarantor or other person or entity liable for payment or performance of any of the Obligations, and any agreement relating to such obligations and (iii) any collateral or security or agreement relating to collateral or security for any of the foregoing. Notwithstanding anything in this Agreement to the contrary, Guarantor shall have the right to assert as defenses and shall have the benefit of all rights of set-off, claims, counter-claims, reduction or diminution as to any obligation of Owner to Obligors and any defenses to enforcement of this Agreement (except Bankruptcy and other insolvency-related defenses) that Obligors would be entitled to assert in defense to payment or performance of any of the Obligations.
| - 44 - |
4. The Guarantor hereby unconditionally waives (a) presentment, notice of dishonor, protest, demand for payment and all notices of any kind, including without limitation: notice of acceptance hereof; notice of the creation of any of the Obligations; notice of nonpayment, nonperformance or other default on any of the Obligations; and notice of any action taken to collect upon or enforce any of the Obligations; (b) any subrogation to the rights of Owner against any Obligor and any other claim against any Obligor which arises as a result of payments made by the Guarantor pursuant to this Agreement, until the Obligations have been paid or. performed in full and such payments are not subject to any right of recovery; and (c) any claim for contribution against any co-guarantor, until the Obligations have been paid or performed in full and such payments are not subject to any right of recovery.
5. The Guarantor represents and warrants that:
a. The execution, delivery and performance of this Agreement by the Guarantor are within the corporate powers of the Guarantor, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders (or other governing body) of the Guarantor which has not been obtained, (ii) violate any provision of the articles of incorporation or by-laws (or other governing rules of the enterprise) of the Guarantor or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Guarantor or any subsidiary of the Guarantor; (iii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority, or (iv) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Guarantor or any subsidiary of the Guarantor pursuant to, any indenture or other agreement or instrument under which the Guarantor or any subsidiary of the Guarantor is a party or by which it or any of its properties may be bound or affected.
b. This Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors’ rights generally.
6. This Agreement shall inure to the benefit of Owner and its successors and assigns, including every holder or owner of any of the Obligations, and shall be binding upon the Guarantor and the Guarantor’s successors and assigns. This is a continuing guarantee and shall continue in effect until all Obligations and all obligations of the Guarantor hereunder shall be paid or performed in full and such payments are not subject to any right of recovery.
7. This Agreement constitutes the entire agreement between Owner and the Guarantor with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, understanding, promise or condition concerning the subject matter hereof shall be binding upon Owner unless expressed herein. This Agreement shall be governed by the laws of the State of Ohio without regard to conflicts of law principles.
| - 45 - |
8. The Guarantor hereby consents to the exclusive jurisdiction of a competent court in Franklin County, Ohio, and waives any objection based on lack of personal jurisdiction, improper venue or forum non conveniens, with regard to any actions, claims, disputes or proceedings relating to this Agreement, or any document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. Nothing herein shall affect the State’s right to serve process in any manner permitted by law, or limit Owner’s right to bring proceedings against the Guarantor or its property or assets in the competent courts of any other jurisdiction or jurisdictions.
9. The Guarantor hereby waives any and all right to trial by jury in any action or proceeding relating to this Agreement, or any document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. The Guarantor represents that this waiver is knowingly, willingly and voluntarily given.
| Abundant Solar Power Inc. | ||
| BY: | ||
| Name: | Andrew van Doorn | |
| TITLE: | President | |
| - 46 - |
Exhibit 99.48
SolarBank Submits Revised Pricing for 60 MWh of Battery Energy Storage Proposals to Ontario Independent Electricity System Operator on Behalf of Investors
● SolarBank submitted proposals for projects across Ontario utilizing Lithium Iron Phosphate technology
● If awarded, SolarBank will advance each project through permitting, engineering, procurement, construction, and commercial operation
● Awarded contracts are expected to operate under a 22-year contract with additional revenue earned from Ontario’s energy and ancillary markets
Toronto, Ontario, June 20, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce the submission of revised pricing for three separate proposals, following submission of the full proposals in early 2023, to the Independent Electricity System Operator’s (“IESO”) Expedited Long-Term 1 (“E-LT1”) Reliability Procurement in Ontario. The proposed projects are owned by Solar Flow-Through Funds and two First Nations communities in Ontario (the “Investors”). The proposals represent SolarBank’s initial foray into battery energy storage, a market forecast by Fortune Business Insights to grow at a 16.3% compound annual growth rate from 2022 to reach US$31.2 billion by 2029.1
SolarBank successfully obtained resolutions of support from local municipal councils for each project and will act as the project developer and engineer on behalf of the Investors. Should the projects be awarded, SolarBank will advance each project through permitting, engineering, procurement, construction, and commercial operation.
“We have extensive experience working with Ontario’s IESO and are very pleased to be interacting with them again as they remain proactive in energy reliability,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “As a market leading proponent of the IESO’s Feed-In-Tariff program, we secured multiple 20-year contracts for small-scale solar photovoltaic projects throughout the province, projects that continue to produce clean energy today. Now, as we aim to make our entrance into the battery energy storage markets, we are fortunate to have the opportunity to work with Solar Flow-Through Funds, First Nations, and, once again, the IESO to further galvanize the future of our company.”
The IESO works at the heart of Ontario’s power system, delivering key services across the electricity sector, including managing the power system in real-time, planning for the province’s future energy needs, enabling conservation, and designing a more efficient electricity marketplace to support sector evolution.
Addressing the province’s projected grid reliability needs, the IESO is competitively securing capacity through an expedited procurement process. E-LT1 initial procurement capacity is slated at 1800 megawatts (“MW”). The IESO plans to launch a 2200 MW LT1 procurement later in 2023 and an LT2 procurement after LT1.
Transmission and distribution-connected battery storage projects provide reliability benefits to existing electricity grids. In what is known as energy arbitrage, the storage systems will discharge their capacity during periods of peak demand and high prices and then re-charge from the grid when demand and prices are low. Utilities and system operators pay for these benefits to the grid via capacity payments.
Contracts for the E-LT1 procurement require projects to be operational between May 2025 and May 2026. Each system is expected to operate under a 22-year contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The systems will also earn revenue from the energy and ancillary markets in Ontario.
The projects in SolarBank’s submissions are in three different areas of Ontario. Each has a 4.99 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium Iron Phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
There are several risks associated with the proposals set forth in this news release. Firstly, there is no certainty that the Company’s proposals will be accepted as submitted or at all. If the proposals are not accepted the Company will not proceed with these projects, will not recover any costs expended in advancing the proposals and will not generate any related revenue or profits from operations. If the proposals are accepted there remain risks related to the construction of the projects and their ultimate successful operation. There is not certainty the projects will be completed on schedule or that they will operate in accordance with their design capacity. The development of any project is subject to receipt of required permits and the continued availability of third-party financing arrangements for the Company. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for battery storage systems, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
1 https://www.fortunebusinessinsights.com/industry-reports/battery-energy-storage-market-100489
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the battery storage projects mentioned in this press release; the megawatt capacity and type of future solar projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: the Company’s bid is accepted; obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company’s bid is not accepted and the battery storage projects do not proceed; the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.49
SolarBank Acquires Majority Interest
in Two Solar Projects in New York
● US1 Project has an installed capacity of 389.7kW DC
● VC1 Project has an installed capacity of 297.9kW DC
● Both projects have power purchase agreement (“PPA”) to sell electricity to municipality via remote net metering
Toronto, Ontario, June 21, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has acquired a 67% interest in the US1 Project and VC1 Project, each located in New York (the “Projects”). Operating as an Independent Power Producer is a key pillar of the Company’s business model.
The first project is the US1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kWh of clean, renewable energy in its first year of operation.
The second project is the VC1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Cazenovia, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 297.9kW DC and is expected to generate an estimated 387,000 kWh of clean, renewable energy in its first year of operation.
“When we completed our go-public transaction, one of the primary goals was to expand the Company’s business model to include independent power producer operations. I am very proud that we have achieved this goal and have plans to significantly grow our portfolio of owned and operated projects from here,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “These two projects will generate nearly 1,000,000 kWh of clean, renewable energy in their first year, which is terrific in our bid to battle climate change. We collected nearly $300,000 in NYSERDA incentives between the projects and will retain majority ownership of each with agreements in place for long-term revenue through the sale of electricity to the municipalities.”
The acquisition of the Projects was completed through the settlement of a promissory note due from a customer that had a principal balance of $1,206,004 (USD $891,158). The outstanding principal and interest under the note were settled by the customer through the transfer of a 67% interest in the Projects to the Company through the acquisition of a 67% interest in a holding company that has a 100% interest in the Projects.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of the Projects may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and expected power generation of solar projects; the acquisition of additional solar projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.50
SolarBank’s 5.9MW, DC, Community Solar Project in the Town of Manlius, Onondaga County, New York is permitted and under construction for Solar Advocate Development LLC
| ● | SolarBank has entered into an EPC agreement with Solar Advocate Development LLC | |
| ● | The system will produce approximately 7 million kilowatt hours of electricity to about 1,500 homes in its first year of operation, equivalent to reducing more than 2,500 metric tons of carbon dioxide (CO2) emissions. |
Toronto, Ontario, June 27, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that its Manlius, New York community solar project (the “Project”) will now be developed and constructed for Solar Advocate Development LLC (the “Owner”).
SolarBank originated the site in Manlius, New York and has completed an interconnection agreement with the utility company, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have commenced and the Company has initiated procurement of major equipment. The Company has also leveraged its strong relationships with Tier 1 suppliers to secure major equipment orders of solar panels, inverters, racking, and transformers necessary for the Project. The Company will now continue to build the Project for the Owner to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. The EPC agreement has a total value of approximately US$11.35 million.
Incentives for the Project have been secured from New York State Energy Research and Development Authority (“NYSERDA”). NYSERDA also provides additional incentives to utilize these types of land, whether any hazard is real or perceived, because investment increases local tax bases, facilitates job growth, and improves and protects the environment, amongst other reasons.
“We are thrilled to build yet another community solar project,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “This project is among one of the largest that we have constructed to date and aligns with our focus on growing our business through the development of more and larger projects. We are excited to leverage our expertise and work collaboratively with all stakeholders to deliver a solar project that will contribute significantly to New York’s renewable energy goals.”
There are several risks associated with the development of the Project. As disclosed in the Company’s financial statements, the project is being challenged by neighboring residents to the site. The development of any project is subject to the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the expected value of the EPC Agreement; the reduction of carbon emissions; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.51
Ontario
Awards 60 MWh of Battery Energy Storage in Response
to Proposals Submitted by SolarBank on Behalf of Investors
● Three projects in Ontario, each has a discharge capacity of 4.99 megawatts with 19.96 megawatt hours of storage
● SolarBank currently manages solar farms at two of the three locations that will now host a Battery Energy Storage System (BESS)
● The projects will now be developed and built, subject to the successful completion and execution of definitive contracts and related closing documents
Toronto, Ontario, June 28, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that the Ontario Independent Electricity System Operator’s (“IESO”) has confirmed the award of three separate proposals submitted by SolarBank for the IESO’s Expedited Long-Term 1 (“E-LT1”) Reliability Procurement in Ontario related to battery storage (see press release dated June 20, 2023). The proposed projects are owned by Solar Flow-Through Funds and two First Nations communities in Ontario (the “Investors”). The proposals represent SolarBank’s initial foray into battery energy storage, a market forecast by Fortune Business Insights to grow at a 16.3% compound annual growth rate from 2022 to reach US$31.2 billion by 2029.1
SolarBank successfully obtained resolutions of support from local municipal councils for each project and has completed the proposals responding to IESO’s E-LT1 Procurement Request for Proposal on behalf of the Investors. The Investors will now develop and build the projects, subject to the successful completion and execution of the E-LT1 Contract and related closing documents. SolarBank and the Investors are in discussions regarding SolarBank’s future involvement with these projects, which could include continuing to advance each project through permitting, engineering, procurement, construction, and commercial operation.
The IESO works at the heart of Ontario’s power system, delivering key services across the electricity sector, including managing the power system in real-time, planning for the province’s future energy needs, enabling conservation, and designing a more efficient electricity marketplace to support sector evolution.
Transmission and distribution-connected battery storage projects provide reliability benefits to existing electricity grids. In what is known as energy arbitrage, the storage systems will discharge their capacity during periods of peak demand and high prices and then re-charge from the grid when demand and prices are low. Utilities and system operators pay for these benefits to the grid via capacity payments.
Projects under the E-LT1 are expected to be operational no later than April 30, 2026. Each system is expected to operate under a 22-year contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The systems will also earn revenue from the energy and ancillary markets in Ontario.
The projects in SolarBank’s submissions are in three different areas of Ontario. Each has a 4.99 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium Iron Phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
There are several risks associated with the proposals set forth in this news release. Firstly, there is no certainty that the Investors will successfully complete the execution of the E-LT1 Contract and related closing documents. There is also no certainty that the Company and the Investors will agree on terms for the Company’s continued involvement with the projects. There is no certainty the projects will be completed on schedule or that they will operate in accordance with their design capacity. The development of any project is subject to receipt of required permits and the continued availability of third-party financing arrangements for the Company. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for battery storage systems, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
1 https://www.fortunebusinessinsights.com/industry-reports/battery-energy-storage-market-100489
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the battery storage projects mentioned in this press release; the megawatt capacity and type of future solar projects; the Company’s future involvement with respect to these projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: the Company’s bid is accepted; obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company’s bid is not accepted and the battery storage projects do not proceed; the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.52
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
Information has been incorporated by reference in this prospectus supplement, and in the short form base shelf prospectus dated May 2, 2023, to which it relates, from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of SolarBank Corporation at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8, telephone (604) 696-4241, and are also available electronically at www.sedar.com.
This prospectus supplement together with the short form base shelf prospectus dated May 2, 2023, to which it relates, as amended or supplemented, and each document incorporated or deemed to be incorporated by reference in this prospectus supplement and in the short form base shelf prospectus, as amended or supplemented, constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities.
The securities offered under this prospectus supplement have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the United States of America (the “United States” or “U.S.”), and may not be offered or sold within the United States. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby within the United States. See “Plan of Distribution”.
PROSPECTUS SUPPLEMENT
(TO A SHORT FORM BASE SHELF PROSPECTUS DATED MAY 2, 2023)
| New Issue | June 29, 2023 |
SOLARBANK CORPORATION
Up to $15,000,000
Common Shares
This prospectus supplement (the “prospectus supplement”) of SolarBank Corporation (the “Company” or “SolarBank”, “we” or “us”), together with the short form base shelf prospectus dated May 2, 2023, to which it relates, as may be amended or supplemented (the “prospectus”) qualifies the distribution (the “Offering”) of common shares (the “Offered Shares”) in the capital of the Company having an aggregate offering amount of up to $15,000,000. See “Plan of Distribution” and “Description of Share Capital”.
The common shares of the Company (the “Common Shares”) are listed and posted for trading on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN”. On June 28, 2023, the last trading day prior to the date of this prospectus supplement, the closing price of the Common Shares on the CSE was $8.95. The Company has provided notice to the CSE to list the Offered Shares for trading on the CSE. Listing will be subject to the Company fulfilling all of the requirements of the CSE.
SolarBank has entered into an equity distribution agreement dated June 29, 2023 (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) pursuant to which the Company may distribute up to $15,000,000 of Offered Shares in the Offering from time to time through the Agent, as agent, in accordance with the terms of the Distribution Agreement. See “Plan of Distribution”.
Sales of Offered Shares, if any, under this prospectus supplement and the prospectus will only be made in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 — Shelf Distributions (“NI 44-102”), involving sales made directly on the CSE or on any other trading market for the Common Shares in Canada. The Offered Shares will be distributed at market prices prevailing at the time of the sale. As a result, prices may vary as between purchasers and during the period of distribution. The Agent is not required to sell any specific number or dollar amount of Offered Shares, but will use its commercially reasonable efforts to sell the Offered Shares pursuant to the terms and conditions of the Distribution Agreement. There is no minimum amount of funds that must be raised under the Offering. This means that the Offering may terminate after only raising a small portion of the offering amount set out above, or none at all. The Agent will only sell Common Shares on marketplaces in Canada. See “Plan of Distribution”.
SolarBank will pay the Agent a commission for its services in acting as agent in connection with the sale of Offered Shares pursuant to the Distribution Agreement (the “Commission”) in an amount equal to 2.0% of the gross sales price per Offered Share sold. The Company estimates that the total expenses that it will incur related to the commencement of the Offering, excluding compensation payable to the Agent under the terms of the Distribution Agreement and the expenses of the Agent that the Company will reimburse under the terms of the Distribution Agreement, will be approximately $200,000. See “Plan of Distribution”.
It is anticipated that the Offered Shares will be delivered through CDS Clearing and Depository Services Inc. (“CDS”) or its nominee under its CDSX system and deposited in electronic form. A purchaser of Offered Shares will only receive a customer confirmation from the Agent or another registered dealer from or through which the Offered Shares are purchased and who is a CDS depository service participant. No definitive certificates will be issued unless specifically requested or required. See “Plan of Distribution”.
Purchasers of the Offered Shares should be aware that the acquisition of the Offered Shares may have tax consequences in Canada. Such consequences for purchasers who are resident in Canada may not be described fully herein. Purchasers of the Offered Shares should read the tax discussion contained in this prospectus supplement and consult their own tax advisors. See “Certain Canadian Federal Income Tax Considerations”.
Investing in the Offered Shares is highly speculative and involves significant risks that you should consider before purchasing such Offered Shares. The risks outlined in this prospectus supplement, the prospectus and in the documents incorporated by reference herein and therein should all be carefully reviewed and considered by prospective investors in connection with an investment in the Offered Shares. See “Risk Factors”.
As sales agent, the Agent will not engage in any transactions to stabilize or maintain the price of the Common Shares. Neither the Agent nor any person or company acting jointly or in concert with an underwriter, may, in connection with the distribution, enter into any transaction that is intended to stabilize or maintain the market price of the Common Shares, including selling an aggregate number or principal amount of securities that would result in the Agent creating an over-allocation position in the Common Shares. See “Plan of Distribution”.
Paul Pasalic, a director of the Company, resides outside of Canada and has appointed DLA Piper (Canada) LLP, Suite 2800, Park Place, 666 Burrard St., Vancouver, British Columbia, V6C 2Z7, Canada, as agent for service of process in Canada. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that resides outside of Canada, even if the party has appointed an agent for service of process.
The Company’s head office and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
NO CANADIAN SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED HEREBY, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS ARE TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.
Unless otherwise indicated, all references in this prospectus supplement to “$”, “C$” or “dollars” are to Canadian dollars and references to “US$” are to United States dollars. See “Exchange Rate Information”.
| - ii - |
TABLE OF CONTENTS OF THE PROSPECTUS SUPPLEMENT
| Page | |
| ABOUT THIS PROSPECTUS SUPPLEMENT | 1 |
| EXCHANGE RATE INFORMATION | 1 |
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 2 |
| DOCUMENTS INCORPORATED BY REFERENCE | 4 |
| THE COMPANY | 6 |
| RISK FACTORS | 8 |
| CONSOLIDATED CAPITALIZATION | 11 |
| USE OF PROCEEDS AND BUSINESS OBJECTIVES AND MILESTONES | 11 |
| PLAN OF DISTRIBUTION | 12 |
| DESCRIPTION OF SHARE CAPITAL | 14 |
| PRIOR SALES | 14 |
| TRADING PRICE AND VOLUME | 15 |
| CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS | 15 |
| AGENT FOR SERVICE OF PROCESS | 18 |
| LEGAL MATTERS | 18 |
| INTEREST OF EXPERTS | 18 |
| AUDITORS, REGISTRAR AND TRANSFER AGENT | 18 |
| PROMOTERS | 19 |
| ELIGIBILITY FOR INVESTMENT | 19 |
| STATUTORY EXEMPTIONS | 19 |
| PURCHASERS’ STATUTORY RIGHTS | 20 |
| CERTIFICATE OF THE COMPANY | C-1 |
| CERTIFICATE OF THE PROMOTER | C-2 |
| CERTIFICATE OF THE AGENT | C-3 |
| - iii - |
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of the Offered Shares being offered and also adds to and updates information contained in the prospectus and the documents incorporated by reference herein and therein. The second part, the prospectus, gives more general information, some of which may not apply to the Offering. If the information varies between this prospectus supplement and the prospectus, the information in this prospectus supplement supersedes the information in the prospectus. This prospectus supplement is deemed to be incorporated by reference into the prospectus solely for the purposes of the Offering constituted by this prospectus supplement.
No person is authorized by the Company to provide any information or to make any representation other than as contained in this prospectus supplement or the prospectus in connection with the issue and sale of the Offered Shares hereunder. Investors should rely only on the information contained or incorporated by reference in this prospectus supplement, the prospectus and any documents incorporated by reference herein and therein. If the description of the Offered Shares or any other information varies between this prospectus supplement and the prospectus (including the documents incorporated by reference herein and therein on the date hereof), the investor should rely on the information in this prospectus supplement. We have not, and the Agent has not, authorized anyone to provide you with different or additional information and the Company and the Agent take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with any different, additional, inconsistent or other information, you should not rely on it. Neither the Company nor the Agent are making an offer to sell or seeking an offer to buy the Offered Shares in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus supplement, the prospectus and the documents incorporated by reference herein and therein is accurate as of any date other than the date on the front of this prospectus supplement, the prospectus or the respective dates of the documents incorporated by reference herein and therein, as applicable, regardless of the time of delivery of this prospectus supplement or of any sale of the Offered Shares pursuant hereto. Our business, financial condition, results of operations and prospects may have changed since those dates. Information contained on the Company’s website should not be deemed to be a part of this prospectus supplement, the prospectus or incorporated by reference herein and should not be relied upon by prospective investors for the purpose of determining whether to invest in the Offered Shares.
This prospectus supplement, the prospectus and the documents incorporated therein by reference include references to the Company’s trademarks, including, without limitation, the “SolarBank” trademark on the face page of this prospectus supplement, which are protected under applicable intellectual property laws and are the Company’s property. The Company’s trademarks and trade names referred to in this prospectus supplement, the prospectus and the documents incorporated therein by reference may appear without the ® or ™ symbol, but references to the Company’s trademarks and trade names in the absence of such symbols are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. All other trademarks and trade names used in this prospectus supplement, the prospectus or in documents incorporated therein by reference are the property of their respective owners.
Market data and industry forecasts used throughout this prospectus supplement, the prospectus and the documents incorporated by reference therein were obtained from various publicly available sources. Although the Company believes that these independent sources are generally reliable, the accuracy and completeness of the information from such sources are not guaranteed and have not been independently verified by the Company or the Agent and neither the Company nor the Agent make any representation as to the accuracy of such information.
This prospectus supplement shall not be used by anyone for any purpose other than in connection with the Offering.
Unless otherwise noted or the context otherwise requires, references to “we”, “us”, “our” or similar terms, as well as references to “SolarBank” or the “Company”, refer to SolarBank Corporation together with our subsidiaries.
EXCHANGE RATE INFORMATION
The consolidated financial statements of the Company incorporated by reference in this prospectus supplement have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in Canadian dollars, and the audit of such financial statements are subject to Canadian auditing and auditor independence standards.
Unless otherwise indicated, all references in this prospectus supplement to “$”, “C$” or “dollars” are to Canadian dollars and references to “US$” are to United States dollars.
| S-1 |
The following table sets out, for the period indicated, certain exchange rates based upon the rate published by the Bank of Canada during the respective periods. The rates are set out as United States dollars per C$1.00.
Year ended June 30, | Three Month Period Ended March 31, 2023 | |||||||||||||||
| | 2022 | 2021 | 2020 | |||||||||||||
| Low | US$ | 0.7669 | US$ | 0.7344 | US$ | 0.6898 | US$ | 0.7243 | ||||||||
| High | US$ | 0.8111 | US$ | 0.8306 | US$ | 0.7710 | US$ | 0.7512 | ||||||||
| Average | US$ | 0.7901 | US$ | 0.7807 | US$ | 0.7453 | US$ | 0.7394 | ||||||||
On June 28, 2023, the daily exchange rate for the U.S. dollar in terms of Canadian dollars, as quoted by the Bank of Canada, was US$1.00 = C$1.3254.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the prospectus, including the documents incorporated by reference herein, contain “forward-looking information” or “forward-looking statements” within the meaning of applicable securities legislation (collectively, “forward-looking statements”). The forward-looking statements in this prospectus supplement are provided as of the date of this prospectus supplement and forward-looking statements incorporated by reference are made as of the date of those documents. The Company does not intend to and does not assume any obligation to update forward-looking statements, except as required by applicable law. For this reason and the reasons set forth below, investors should not place undue reliance on forward-looking statements.
Forward-looking statements contained herein are based on current expectations, estimates, forecasts, projections, beliefs and assumptions made by management of the Company about the industry in which it operates. Such statements include, in particular, statements about the Company’s plans, strategies and prospects. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and disclaims any obligation, to update any forward-looking statements after it files this prospectus supplement, whether as a result of new information, future events or otherwise, except as required by the securities laws. These forward-looking statements are made as of the date of this prospectus supplement.
The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
| ● | the use of the net proceeds from the Offering; | |
| ● | any decision not to sell Offered Shares if the sales cannot be effected at or above the price designated by the Company; | |
| ● | the intentions, plans and future actions of the Company; | |
| ● | statements relating to the business and future activities of the Company; | |
| ● | intended or anticipated developments in the operations of the Company; | |
| ● | the anticipated power generation from the US1/VC1 Projects (as defined herein); | |
| ● | market position, ability to compete and future financial or operating performance of the Company; | |
| ● | the timing and amount of funding required to execute the Company’s business plans; | |
| ● | capital expenditures; | |
| ● | the effect on the Company of any changes to existing or new legislation or policy or government regulation; | |
| ● | the availability of labour; | |
| ● | requirements for additional capital; | |
| ● | goals, strategies and future growth; | |
| ● | the adequacy of financial resources; |
| S-2 |
| ● | expectation that the Common Shares will continue to be listed on the CSE; | |
| ● | expectations regarding revenues, expenses and anticipated cash needs; and | |
| ● | the impact of the COVID-19 pandemic on the business and operations of the Company. |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward-looking statements included in this prospectus supplement, the Company has made various material assumptions, including but not limited to: (i) obtaining the necessary regulatory approvals; (ii) that regulatory requirements will be maintained; (iii) general business and economic conditions; (iv) the Company’s ability to successfully execute its plans and intentions; (v) the availability of financing on reasonable terms; (vi) the Company’s ability to attract and retain skilled staff; (vii) market competition; (viii) the products and services offered by the Company’s competitors; (ix) that the Company’s current good relationships with its service providers and other third parties will be maintained; and (x) government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot provide any assurance that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, prospective purchasers of Offered Shares should not place undue reliance on forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Risk Factors” in this prospectus supplement, in the prospectus and in documents incorporated herein and therein by reference, which include:
| ● | the Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings; | |
| ● | the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers; | |
| ● | the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; | |
| ● | governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline; | |
| ● | general global economic conditions may have an adverse impact on our operating performance and results of operations; | |
| ● | the Company’s project development and construction activities may not be successful; | |
| ● | developing and operating solar projects exposes the Company to various risks; | |
| ● | the Company faces a number of risks involving power purchase agreements (“PPAs”) and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms; | |
| ● | the Company is subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where it does business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity; | |
| ● | the markets in which the Company competes are highly competitive and evolving quickly; | |
| ● | an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; | |
| ● | the Company’s quarterly operating results may fluctuate from period to period; | |
| ● | foreign exchange rate fluctuations; | |
| ● | a change in the Company’s effective tax rate can have a significant adverse impact on its business; | |
| ● | seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; | |
| ● | the Company may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; | |
| ● | the Company may incur substantial additional indebtedness in the future; | |
| ● | the Company is subject to risks from supply chain issues; | |
| ● | risks related to inflation; | |
| ● | unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; | |
| ● | if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; | |
| ● | there are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes the Company and its utility scale solar projects to additional risk; | |
| ● | compliance with environmental laws and regulations can be expensive; |
| S-3 |
| ● | corporate responsibility, specifically related to Environmental, Social and Governance matters and unsuccessful management of such matters may adversely impose additional costs and expose the Company to new risks; | |
| ● | the long term impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company; | |
| ● | the Company has limited insurance coverage; | |
| ● | the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; | |
| ● | the Company does not anticipate paying cash dividends; | |
| ● | the Company may become subject to litigation; | |
| ● | discretion of the Company on use the net proceeds of the Offerings; | |
| ● | no guarantee on how the Company will use its available funds; | |
| ● | the Company is subject to additional regulatory burden resulting from its public listing on the CSE; | |
| ● | the market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control; | |
| ● | future sales of Common Shares by existing shareholders could reduce the market price of the Company’s Common Shares; | |
| ● | the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and | |
| ● | future dilution as a result of financings. |
These factors should not be considered exhaustive. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.
Information contained in forward-looking statements in this prospectus supplement is provided as of the date of this prospectus supplement, and we disclaim any obligation to update any forward-looking statements, whether as a result of new information or future events or results, except to the extent required by applicable securities laws. Accordingly, potential investors should not place undue reliance on forward-looking statements or the information contained in those statements.
Prospective purchasers of securities of the Company should carefully consider the risk factors described in a document incorporated by reference in this prospectus supplement (including subsequently filed documents incorporated by reference) and those described in a prospectus. Discussions of certain risks affecting the Company in connection with its business are provided in the Company’s disclosure documents filed with the various securities regulatory authorities which are incorporated by reference in this prospectus supplement.
All of the forward-looking statements contained in this prospectus supplement are expressly qualified by the foregoing cautionary statements. Investors should read this entire prospectus supplement and consult their own professional advisors to assess the income tax, legal, risk factors and other aspects of their investment.
DOCUMENTS INCORPORATED BY REFERENCE
This prospectus supplement is deemed to be incorporated by reference in the prospectus solely for the purpose of the distribution of the Offered Shares. Information has been incorporated by reference in this prospectus supplement from documents filed with the securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of the Company at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2, telephone (416) 494-9559 or by accessing the disclosure documents through the Internet on the Canadian System for Electronic Document Analysis and Retrieval (“SEDAR”), under the Company’s profile at www.sedar.com. Our filings through SEDAR are not incorporated by reference in this prospectus supplement except as specifically set forth herein. The following documents, filed by the Company with the securities commissions or similar authorities in each of the provinces of Canada, are specifically incorporated by reference into, and form an integral part of, this prospectus supplement and the prospectus:
| (a) | the Company’s long form prospectus for its initial public offering dated February 10, 2023 (the “IPO Prospectus”), excluding the following: | ||
| (i) | the unaudited condensed interim consolidated financial statements of the Company for the three months ended September 30, 2022, attached as part of Schedule A to the IPO Prospectus; and | ||
| (ii) | the Company’s management’s discussion and analysis for the three months ended September 30, 2022, as set out under the heading “Interim Management’s Discussion and Analysis” in the IPO Prospectus; | ||
| S-4 |
| (b) | the audited financial statements of the Company for the year ended June 30, 2022 (the “Annual Financial Statements”), which are contained within the IPO Prospectus; | |
| (c) | the management’s discussion and analysis of the Company for the year ended June 30, 2022, which is contained within the IPO Prospectus; | |
| (d) | the unaudited condensed consolidated interim financial statements of the Company for the three and nine months ended March 31, 2023 (the “Interim Financial Statements”); | |
| (e) | the management’s discussion and analysis of the Company for the three and nine months ended March 31, 2023; | |
| (f) | the material change report dated March 6, 2023, with respect to the announcement of the completion of the Company’s initial public offering to raise gross proceeds of $6,037,500 and listing of the Common Shares on the CSE; and | |
| (g) | the material change report dated May 8, 2023, with respect to the announcement of the Company’s filing of the prospectus with the securities regulatory authorities in each of the provinces of Canada to make offerings of up to $200,000,000 of Common Shares, debt securities, warrants, subscription receipts, units and share purchase contracts, or a combination thereof, of the Company. |
Any document of the type referred to in item 11.1 of Form 44-101F1 – Short Form Prospectus of National Instrument 44-101 – Short Form Prospectus Distributions of the Canadian Securities Administrators (other than confidential material change reports, if any) filed by the Company with any securities commissions or similar regulatory authorities in Canada after the date of this prospectus supplement and prior to the termination of the Offering shall be deemed to be incorporated by reference in this prospectus supplement and the prospectus. These documents will be available on SEDAR, which can be accessed under the Company’s profile at www.sedar.com. Documents referenced in this prospectus supplement, the prospectus or any of the documents incorporated by reference herein or therein, but not expressly incorporated by reference herein or therein and not otherwise required to be incorporated by reference herein or therein, are not incorporated by reference in this prospectus supplement.
If SolarBank disseminates a news release in respect of previously undisclosed information that, in SolarBank’s determination, constitutes a “material fact” (as such term is defined under applicable Canadian securities laws), SolarBank will identify such news release as a “designated news release” for the purposes of this prospectus supplement and the prospectus in writing on the face page of the version of such news release that SolarBank files on SEDAR (each such news release, a “Designated News Release”), and each such Designated News Release shall be deemed to be incorporated by reference into this prospectus supplement and the prospectus for the purposes of the Offering.
The documents incorporated or deemed to be incorporated herein by reference contain meaningful information relating to the Company and readers should review all information contained in this prospectus supplement, the prospectus and the documents incorporated or deemed to be incorporated herein or therein by reference.
Any statement contained in this prospectus supplement, the prospectus or in a document incorporated or deemed to be incorporated by reference herein or therein shall be deemed to be modified or superseded, for purposes of this prospectus supplement and the prospectus, to the extent that a statement contained herein or therein, or in any other subsequently filed document that also is, or is deemed to be, incorporated by reference herein or therein, modifies or supersedes such prior statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or the accompanying prospectus. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall thereafter neither constitute, nor be deemed to constitute, a part of this prospectus supplement or the prospectus, except as so modified or superseded.
When the Company files an annual information form (or equivalent disclosure document), audited consolidated financial statements and related management’s discussion and analysis and, where required, they are accepted by the applicable securities regulatory authorities during the time that this prospectus supplement is valid, the IPO Prospectus, the previous audited consolidated financial statements and related management’s discussion and analysis and all unaudited interim condensed consolidated financial statements and related management’s discussion and analysis for such periods, all material change reports and any business acquisition report filed prior to the commencement of the Company’s financial year in which the annual information form (or equivalent disclosure document) is filed will be deemed no longer to be incorporated by reference in this prospectus supplement for purposes of future offers and sales of Offered Shares under this prospectus supplement. Upon new unaudited interim condensed consolidated financial statements and related management’s discussion and analysis being filed by the Company with the applicable securities regulatory authorities during the term of this prospectus supplement, all unaudited interim condensed consolidated financial statements and related management’s discussion and analysis filed prior to the filing of the new unaudited interim condensed consolidated financial statements shall be deemed no longer to be incorporated by reference into this prospectus supplement for purposes of future offers and sales of securities hereunder. Upon a management information circular in connection with an annual meeting being filed by the Company with the appropriate securities regulatory authorities during the currency of this prospectus, the management information circular filed in connection with the previous annual meeting (unless such management information circular also related to a special meeting) will be deemed no longer to be incorporated by reference in this prospectus supplement for purposes of future offers and sales of securities hereunder.
References to the Company’s website in any documents that are incorporated by reference into this prospectus supplement and the prospectus do not incorporate by reference the information on such website into this prospectus supplement and the prospectus and the Company disclaims any such incorporation by reference.
| S-5 |
THE COMPANY
The following description of the Company does not contain all of the information about the Company and its assets and business that you should consider before investing in the Offered Shares. You should carefully read the entire prospectus supplement and the prospectus, including the sections titled “Risk Factors”, as well as the documents incorporated by reference herein and therein (including the IPO Prospectus) before making an investment decision.
Overview of the Company
The Company is an independent renewable and clean energy project developer and asset operator based in Canada and the United States. The Company is engaged in the development and operation of solar photovoltaic (“PV”) power generation projects in Canada and the United States. The Company’s mission is to support an energy transition in North America through deployment of clean energy at a distributed scale closer to where consumption occurs. Its objective is to scale-up as a leading developer, owner and operator of a significant fleet of distributed solar power assets that have economic and technical value. The Company originates, develops, designs and builds solar power projects. The Company is also gaining expertise in battery storage, co-generation and other technologies that will enable greater penetration of clean energy. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built.
Principal Operations
The Company focuses on grid connected solar PV electricity power plants. With its full in-house development, engineering and construction expertise, the Company’s capabilities span the value chain from development, engineering, procurement and construction (“EPC”), financing, operating as an Independent Power Producer (“IPP”), and performing asset management. The Company’s core business consists of:
| ● | Development: The Company identifies, evaluates and secures control of suitable solar development sites; obtains grid interconnection from utilities; acquires permits from government authorities; and engages solar energy subscribers or PPA clients as off-takers. A PPA, also referred to as an off-take agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer or off-taker). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA requires active management to reconcile monthly deliveries, penalties and payment for electricity. | |
| ● | EPC: The Company engineers, procures and constructs efficient, eco-friendly, renewable solar power plants for industrial, commercial, community and utility electricity market, using high engineering standards and the latest technology. | |
| ● | Financing: The Company assists with securing sponsor equity, tax equity, long-term debt, and construction financing to deploy solar power plants. | |
| ● | Independent Power Producer: The Company has recently become an IPP through its acquisition by the Company’s subsidiary Abundant Solar Power Inc. of a 67% interest in Solar Alliance Devco LLC, a holding company incorporated under the laws of Delaware, which through subsidiary entities, owns the US1/VC1 Projects (defined below). Prior to the acquisition of these projects, the Company did carry out one of the core functions of an IPP as it operates and maintains solar power plants for maximized production (O&M services described further below) and oversees solar power subscribers through two customer support centers in Boston and Chicago. The Company manages PPA and off-take agreements as an asset manager. |
O&M stands for Operations and Maintenance. It refers to the set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable regulations. It encompasses several ongoing maintenance processes along with the replacement and disabling of broken and damaged system and structural components. O&M is essential to ensuring that solar power plants sustain themselves for their expected system life. O&M consists of three fundamental and principal functions:
| ● | Preventative maintenance. | |
| ● | Reactive maintenance: rapid identification, analysis, and resolution of issues and problems. | |
| ● | Comprehensive and detailed monitoring and reporting with adequate and requisite transparency. |
| S-6 |
Recent Developments
Recovery of Pre-Construction Development Costs
The Company’s subsidiary, 2467264 Ontario Inc. (the “Subsidiary”) has concluded agreements for and received repayment of $6.33 million of Pre-Construction Development Costs (“PCDC”). The PCDC were incurred in connection with certain FIT (Feed-in-Tariff) Contracts in Ontario. PCDC are defined as reasonable costs incurred in development of a project from contract award date to termination date. The Subsidiary is owned 49.9% by the Company; however, based on an arrangement between the Subsidiary and the Company, the Company has received the full amount of the PCDC recoveries from the Subsidiary.
QTCQX
On May 5, 2023, the Company’s common shares commenced trading on the OTCQX International under the symbol “SUUNF”.
Project Update
The Company has achieved commercial operation on a 195-kilowatt (“kW”) direct current (“DC”) behind-the-meter (“BTM”) solar energy system located in Syracuse, New York, for Honeywell International.
SFT Investment
On June 1, 2023, the Company has acquired from existing limited partners of three limited partnerships an aggregate of 31,430 limited partnership units, comprised of 200 limited partnership units of Solar Flow Through 2012-I Limited Partnership for an aggregate purchase price of $4,200 and 31,230 limited partnership units of Solar Flow Through 2013-I Limited Partnership for an aggregate purchase price of $718,290. Solar Flow Through 2012-I Limited Partnership and Solar Flow Through 2013-I Limited Partnership finance, develop and own solar photovoltaic power facilities in Canada.
Co-Development Agreement
The Company entered into a Co-Development Agreement (the “Red Agreement”) with Rural Energy Development LLC (“Red Renewables”) dated effective June 2, 2023. Red Renewables is a North Carolina, USA, based provider of solar energy solutions that is focused on the agricultural and commercial markets. Under the Red Agreement, SolarBank and Red Renewables will combine their expertise and resources with the goal of identifying, developing, and implementing solar energy solutions tailored specifically for the unique requirements of the agriculture industry and service commercial opportunities. After Red Renewables introduces an acceptable project to the Company, the Company shall be responsible for the financing, development and construction of the project. In order to develop a project, the Company and Red Renewables must agree on a suitable project location and development terms. There is no certainty that a project location will be identified or that the parties will agree on development terms.
US1/VC1 Acquisition
On June 20, 2023, the Company acquired a 67% interest in Solar Alliance Devco LLC, which owns the US1 Project and VC1 Project, each located in New York (the “US1/VC1 Projects”). Operating as an Independent Power Producer is a key pillar of the Company’s business model.
The first project is the US1 Project, which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. Per the PPA with the municipality, it is proposed that the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kilowatt-hours (“kWh”) of renewable energy in its first full year of operation.
The second project is the VC1 Project, which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Cazenovia, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 297.9kW DC and is expected to generate an estimated 387,000 kWh of clean, renewable energy in its first full year of operation.
| S-7 |
The acquisition of the US1/VC1 Projects was completed through the settlement of a promissory note due from a customer. On December 28, 2022, the Company agreed to convert a series of overdue accounts receivables of $1,206,984 (US$891,158) since August 2022 to a promissory note in favour of the Company from the customer. The promissory note had interest rate of 15% per annum and was payable on a monthly basis. The promissory note was expected to be repaid in March 2023 but subsequently the repayment date was extended. The outstanding principal and interest under the note were settled by the customer through the transfer of a 67% interest in the US1/VC1 Projects to the Company through the acquisition of a 67% interest in Solar Alliance Devco LLC, which owns a 100% interest in the US1/VC1 Projects.
Manlius EPC Agreement
On June 26, 2023, the Company executed an EPC Agreement with Solar Advocate Development LLC (“Solar Advocate”) to develop and construct the 5.9 megawatt DC Manlius, New York, community solar project (the “Manlius Project”) for Solar Advocate. The Company originated the site in Manlius, New York, has entered into an interconnection agreement with the utility company and obtained permits from the local authority having jurisdiction over the Manlius Project. Engineering and initial construction have commenced and the Company has initiated procurement of major equipment. The Company has also leveraged its strong relationships with suppliers to secure major equipment orders of solar panels, inverters, racking, and transformers necessary for the Manlius Project. The Company will now continue to build the Manlius Project for Solar Advocate to commercial operation in accordance with the EPC Agreement. The EPC agreement has a total value of approximately US$11.35 million.
RISK FACTORS
Investing in the Offered Shares is speculative and involves a high degree of risk due to the nature of our business and the present stage of its development. Before deciding to invest in the Offered Shares, investors should carefully consider all of the information contained in, and incorporated or deemed to be incorporated by reference in, this prospectus supplement and the prospectus. An investment in the Offered Shares is subject to certain risks, including risks related to the business of the Company, risks related to renewable projects and risks related to the Company’s securities described in this prospectus supplement, the prospectus and the documents incorporated or deemed to be incorporated by reference in the prospectus and herein (including the IPO Prospectus). SEE THE RISK FACTORS BELOW AND THE “RISK FACTORS” SECTION OF THE PROSPECTUS AND THE DOCUMENTS INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN AND THEREIN, INCLUDING THE IPO PROSPECTUS WHICH MAY BE ACCESSED ON THE COMPANY’S SEDAR PROFILE AT WWW.SEDAR.COM. Each of the risks described in these sections and in the documents incorporated by reference herein could materially and adversely affect our business, financial condition, results of operations and prospects, could cause them to differ materially from the estimates described in forward-looking statements relating to the Company, or its business, property or financial results, and could result in a loss of your investment. These risks are not the only risks we face. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations and prospects.
No certainty regarding the net proceeds to the Company
There is no certainty that $15,000,000 will be raised under the Offering. The Agent has agreed to use commercially reasonable efforts to sell, on the Company’s behalf, the Offered Shares designated by the Company, but the Company is not required to request the sale of the maximum amount offered or any amount and, if the Company requests a sale, the Agent is not obligated to purchase any Offered Shares as principal. As a result of the Offering being made on a commercially reasonable efforts basis with no minimum, and only as requested by the Company, the Company may raise substantially less than the maximum total offering amount or nothing at all.
Discretion in the use of proceeds
The Company currently intends to allocate the net proceeds, if any, received from the Offering as described under “Use of Proceeds and Business Objectives and Milestones”; however, the Company will have discretion in the actual application of such net proceeds, and may elect to allocate net proceeds differently from that described under “Use of Proceeds and Business Objectives and Milestones” if determined by the board of directors of the Company (the “Board”) to be in the Company’s best interests to do so. Shareholders may not agree with the manner in which the Board and management choose to allocate and spend the net proceeds. The Company may pursue acquisitions, collaborations or other opportunities that do not result in an increase in the market value of our securities, including the market value of the Common Shares, and that may increase our losses. The failure by the Company to apply these funds effectively could have a material adverse effect on the Company’s business.
| S-8 |
Dilution risk
The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in subsequent offerings or may issue additional Common Shares or other securities to finance future acquisitions outside of the Offering. The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s stock options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares on the CSE may decrease due to the additional amount of Common Shares available in the market.
Return on investment not guaranteed / Loss of entire investment
An investment in the Offered Shares is speculative and may result in the loss of an investor’s entire investment. Only potential investors who are experienced in high risk investments and who can afford to lose their entire investment should consider an investment in the Company. There is no guarantee that an investment in the securities described herein will provide any positive return in the short term or long term. An investment in the securities of the Company is speculative and involves a high degree of risk and should be undertaken only by investors whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. An investment in the securities of the Company described herein is appropriate only for holders who have the capacity to absorb a loss of some or all of their investment.
At-the-market offering
Investors who purchase Offered Shares in this Offering at different times will likely pay different prices, and so may experience different outcomes in their investment results. The Company will have discretion, subject to market demand, to vary the timing, prices and numbers of Offered Shares sold, and there is no minimum or maximum sales price. Investors may experience a decline in the value of their Offered Shares as a result of Common Share sales made at prices lower than the prices they paid.
The market price of the Common Shares may be volatile after this Offering
The market price of the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control. This volatility may affect the ability of holders of Common Shares to sell their securities at an advantageous price. Market price fluctuations in the Common Shares may be due to the Company’s operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or other material public announcements by the Company or its competitors, along with a variety of additional factors, and other risk factors described in this prospectus supplement and the prospectus, including the documents incorporated by reference herein and therein, including the IPO Prospectus. These broad market fluctuations may adversely affect the market price of the Common Shares.
Financial markets historically at times have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results have not changed. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely impacted and the trading price of the Common Shares may be materially adversely affected.
Future sales of Common Shares by shareholders
Sales of a large number of the Common Shares in the public markets, or the potential for such sales, could decrease the trading price of the Common Shares and could impair the Company’s ability to raise capital through future sales of the additional equity securities. The Company cannot predict the effect that future sales of Common Shares or other equity-related securities would have on the market price of the Common Shares. The price of the Common Shares could be affected by possible sales of the Common Shares by hedging or arbitrage trading activity. If the Company raises additional funding by issuing additional equity securities, such financing may substantially dilute the interests of shareholders of the Company and reduce the value of their investment.
Liquidity risk
Shareholders of the Company may be unable to sell significant quantities of Common Shares into the public trading markets without a significant reduction in the price of their Common Shares, as applicable, or at all. There can be no assurance that there will be sufficient liquidity of the Common Shares on the trading market, and that the Company will continue to meet the listing requirements of the CSE or achieve listing on any other public listing exchange.
| S-9 |
Conditions of the Offering
The completion of the Offering remains subject to the satisfaction of a number of conditions. There can be no certainty that the Offering will be completed.
Forward-looking statements may be inaccurate
Investors are cautioned not to place undue reliance on forward-looking statements. By their nature, forward-looking statements involves numerous assumptions, known and unknown risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking statements or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate. Additional information on the risks, assumptions and uncertainties are found in this prospectus supplement and the prospectus under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Caution Regarding Forward-Looking Statements”, respectively.
Operational risks associated with becoming an Independent Power Producer
As the Company is now an IPP, there are certain additional risks associated with the ownership and operation of solar power projects.
The Company could fail to optimize operations at its facilities due to a shortfall in operational efficiency or resource optimization, or owing to inadequate maintenance plans or operation in extreme conditions. The Company’s facilities are subject to the risk of equipment failure due to deterioration of the asset resulting from wear and tear, age, hidden defects or design errors, or to extreme weather. The ability of solar power projects to generate the maximum amount of power is a key determinant of the Company’s profitability. If the solar power projects require longer downtime than expected for maintenance and repairs, or if power production is suspended for other reasons, it could adversely affect the Company’s profitability.
Furthermore, the amount of power generated by the Company’s solar power projects is dependent on sunlight, which is naturally variable. Although the Company believes that past resource studies and production data collected demonstrate that the sites are economically viable, historical data and engineering forecasts may not accurately reflect the strength and consistency of resources in the future. If resources are insufficient, the assumptions underlying the financial projections for the volume of electricity to be produced by solar power projects might not materialize, which could have a material adverse effect on the Company’s cash flows and profitability.
The Company’s ability to sell electricity is impacted by the availability of the various power transmission and distribution systems in each jurisdiction in which it operates. The failure of existing transmission or distribution facilities or the lack of adequate transmission capacity would have a material adverse effect on the Company’s ability to deliver electricity to its various counterparties, thereby adversely impacting the Company’s operating results, financial position or prospects.
The ownership and operation of the Company’s solar power projects also carry an inherent risk of liability related to worker health and safety, including the risk of government-imposed orders to remedy unsafe conditions, of potential penalties for contravention of health and safety laws, licenses, permits and other approvals, and of potential civil liability for the Company. Compliance with health and safety laws (and any future changes to these laws) and the requirements of licenses, permits and other approvals will remain material to the Company. In addition, the Company may become subject to government orders, investigations, inquiries or civil suits relating to health and safety matters. Potential penalties or other remediation orders could have a material adverse effect on the Company’s business and results of operations.
Potential risks associated with acquisitions
The Company believes that the acquisitions recently completed and expected to be completed will have benefits for the Company. However, it is possible that all or some of the anticipated benefits, including financial benefits and those that are the subject of forward-looking financial information, may not materialize, particularly within the time frame set by the Company’s management. The realization of such benefits may be affected by a number of factors, many of which are beyond the control of the Company.
| S-10 |
It is also possible that the Company did not detect in its due diligence during the completion of the acquisitions any liabilities and contingencies for which the Company may not be indemnified. Discovery of any material liability or contingency with respect to shares, assets or businesses acquired following such acquisitions could have a material adverse effect on the business acquired and the Company’s financial position and operating results.
Lastly, the integration of assets acquired or to be acquired as part of the Company’s acquisitions could pose significant challenges, and the Company’s management may be unable to complete the integration or succeed in doing so only by investing significant amounts of money. There can be no assurance that management will be able to successfully integrate the assets acquired or expected to be acquired pursuant to these acquisitions or to realize the full benefits expected from the acquisitions.
CONSOLIDATED CAPITALIZATION
Except as described in the Interim Financial Statements and as outlined under “Prior Sales”, there have been no material changes in the share and loan capital of the Company, on a consolidated basis, since March 31, 2023. As a result of the Offering, the shareholder’s equity of the Company will increase by the amount of the net proceeds of the Offering and the number of issued and outstanding Common Shares will increase by the number of Offered Shares actually distributed under the Offering.
USE OF PROCEEDS AND BUSINESS OBJECTIVES AND MILESTONES
The net proceeds from the Offering, if any, are not determinable in light of the nature of the distribution. Sales of Offered Shares, if any, will be made in transactions that are deemed to be “at-the-market distributions” as defined in NI 44-102, including sales made by the Agent directly on the CSE. Any proceeds that the Company receives will depend on the number of Offered Shares actually sold and the offering price of such Offered Shares. The net proceeds to the Company of any given distribution of Offered Shares through the Agent in an “at-the-market distribution” under the Distribution Agreement will represent the gross proceeds of the Offering, after deducting the Commission, any transaction or filing fees imposed by any governmental, regulatory, or self-regulatory organization in connection with any such sales of Offered Shares and the expenses of the Offering, including the expenses of the Agent, as provided in the Distribution Agreement. The gross proceeds of the Offering will be up to $15,000,000. The Agent will receive the Commission of 2.0% of the gross proceeds from the sale of the Offered Shares. Any Commission paid to the Agent will be paid out of the proceeds from the sale of Offered Shares. There is no minimum amount of funds that must be raised under the Offering. This means that the Offering may terminate after raising only a portion of the Offering amount set out above, or none at all. See “Plan of Distribution”.
The Company intends to use the net proceeds from the Offering, if any, to advance the Company’s business objectives and for general corporate purposes (discussed further below), including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. At this time, the Company does not have any proposed acquisitions.
As disclosed in the IPO Prospectus, the Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. Under the heading “General Development and Business of the Company – Operations Process” in the IPO Prospectus, the Company described the five phases of its business model:
| ● | Phase 1 – Site Origination to Bankable Lease | |
| ● | Phase 2 – Development to Notice to Proceed | |
| ● | Phase 3 – Financing | |
| ● | Phase 4 – Delivery: Engineering, Procurement and Construction to Commercial Operations Date/Permission to Operate | |
| ● | Phase 5 – Operations and Management, Subscriber Management and Asset Management |
In order to become an Independent Power Producer, the Company would need to make an adjustment in Phase 3. Instead of bringing in a project sponsor to finance and own the relevant project, the Company would be the sponsor by financing the project itself and retaining ownership. The process and costs associated with project ownership are the same as the Company’s existing business model, except for the requirement to fund the development costs. As a result, in order to accomplish this, the Company needs additional capital to cover the equity portion of project development costs. Absent additional capital, the Company will continue with its “develop to sell” strategy and take smaller ownership interests in smaller projects. The ability to access financing through this prospectus supplement will allow the Company to retain a larger ownership in larger projects and accelerate its development pipeline. The Company has not identified any specific projects that financing from this prospectus supplement would be allocated towards for project ownership purposes or accelerated development and any determination is subject to the availability and amount of any future financing.
| S-11 |
In order to advance the business objectives of project ownership or acceleration of the development pipeline, the Company would use funds raised from the Offering for project development costs including:
| ● | completion of design and submission of zoning and interconnection documents; | |
| ● | interconnection studies; | |
| ● | engineering and permitting; | |
| ● | interconnection deposits; | |
| ● | procurement bid application fees; | |
| ● | lease payments on the project sites; | |
| ● | contractor costs; and | |
| ● | equipment purchases including orders of solar panels, inverters, racking, and transformers necessary for the projects. |
Up to 25% of the proceeds raised from this prospectus supplement may be allocated to general and administrative costs including contractor costs, professional fees, rent, travel and conference, insurance, investor relations and marketing, and general office expenses.
Until applied, some or all of the net proceeds of the Offering, if any, may be held as cash balances in the Company’s bank account or invested at the discretion of the Company, including in certificates of deposit and other instruments issued by banks or obligations of or guaranteed by the Government of Canada or any province thereof or the Government of the United States or any state thereof.
Although the Company intends to expend the net proceeds from the Offering as set forth above, there may be circumstances where, for sound business reasons, a reallocation of funds may be prudent or necessary, and may vary materially from that set forth above. In addition, management of the Company will have broad discretion with respect to the actual use of the net proceeds from the Offering. See “Risk Factors”.
PLAN OF DISTRIBUTION
The Company has entered into the Distribution Agreement with the Agent under which the Company may issue and sell from time to time Offered Shares having an aggregate sale price of up to $15,000,000 in each of the provinces of Canada pursuant to placement notices delivered by the Company to the Agent from time to time in accordance with the terms of the Distribution Agreement. Sales of Offered Shares, if any, will be made in transactions that are deemed to be “at-the-market distributions” as defined in NI 44-102, including sales made by the Agent directly on the CSE or any other trading market for the Common Shares in Canada. Subject to the pricing parameters in a placement notice, the Offered Shares will be distributed at the market prices prevailing at the time of the sale. As a result, prices may vary as between purchasers and during the period of distribution. The Company cannot predict the number of Offered Shares that it may sell under the Distribution Agreement on the CSE or any other trading market for the Common Shares in Canada, or if any Offered Shares will be sold.
The Agent will offer the Offered Shares subject to the terms and conditions of the Distribution Agreement from time to time as agreed upon by the Company and the Agent. The Company will designate the maximum amount of Offered Shares to be sold pursuant to any single placement notice to the Agent. Subject to the terms and conditions of the Distribution Agreement, the Agent will use its commercially reasonable efforts to sell, on the Company’s behalf, all of the Offered Shares requested to be sold by the Company. The Company may instruct the Agent not to sell Offered Shares if the sales cannot be effected at or above the price designated by the Company in a particular placement notice. Any placement notice delivered to the Agent shall be effective upon delivery unless and until (i) the Agent declines to accept the terms contained in the placement notice or the Agent does not promptly confirm the acceptability of such placement notice, (ii) the entire amount of Offered Shares under the placement notice are sold, (iii) the Company suspends or terminates the placement notice in accordance with the terms of the Distribution Agreement, (iv) the Company issues a subsequent placement notice with parameters superseding those of the earlier placement notice, or (v) the Distribution Agreement is terminated in accordance with its terms. The Agent will not be required to purchase Offered Shares on a principal basis pursuant to the Distribution Agreement.
Either the Company or the Agent may suspend the Offering upon proper notice to the other party. The Company and the Agent each have the right, by giving written notice as specified in the Distribution Agreement, to terminate the Distribution Agreement in each party’s sole discretion at any time.
The Company will pay the Agent the Commission for its services in acting as agent in connection with the sale of Offered Shares pursuant to the Distribution Agreement. The amount of the Commission will be 2.0% of the gross sales price per Offered Share sold, provided however, that the Company shall not be obligated to pay the Agent any Commission on any sale of Offered Shares that it is not possible to settle due to (i) a suspension or material limitation in trading in securities generally on the CSE, (ii) a material disruption in securities settlement or clearance services in Canada, or (iii) failure by the Agent to comply with its obligations under the terms of the Distribution Agreement. The sales proceeds remaining after payment of the Commission and after deducting any expenses payable by the Company, including the expenses of the Agent as provided in the Distribution Agreement and any transaction or filing fees imposed by any governmental, regulatory, or self-regulatory organization in connection with the sales, will equal the net proceeds to the Company from the sale of any such Offered Shares.
| S-12 |
The Agent will provide written confirmation to the Company following close of trading on the trading day on which the Agent has made sales of the Offered Shares under the Distribution Agreement setting forth (i) the number of Offered Shares sold on such day (including the number of Offered Shares sold on the CSE or on any other marketplace in Canada), (ii) the average price of the Offered Shares sold on such day (including the average price of Offered Shares sold on the CSE or on any other marketplace in Canada), (iii) the gross proceeds, (iv) the commission payable by the Company to the Agent with respect to such sales, and (v) the net proceeds payable to the Company.
The Company will disclose the number and average price of the Offered Shares sold under this prospectus supplement, as well as the gross proceeds, Commission and net proceeds from sales hereunder in the Company’s annual and interim financial statements and related management’s discussion and analysis and annual information forms, filed on www.sedar.com, for any quarters or annual periods in which sales of Offered Shares occur.
Settlement for sales of Offered Shares will occur, unless the parties agree otherwise, on the second trading day on the applicable exchange following the date on which any sales were made in return for payment of the gross proceeds (less the Commission and any expenses of the Agent payable under the Distribution Agreement) to the Company. There is no arrangement for funds to be received in an escrow, trust or similar arrangement. Sales of Offered Shares will be settled through the facilities of CDS for Securities or by such other means as the Company and the Agent may agree.
The Agent will only sell Offered Shares on marketplaces in Canada.
The Offered Shares have not been and will not be registered under the U.S. Securities Act, or the securities laws of any state of the United States, and may not be offered or sold within the United States. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby within the United States. The Offered Shares have been qualified for sale in each of the provinces of Canada (collectively, the “Canadian Qualifying Jurisdictions”), and no other jurisdictions. Accordingly, in the Distribution Agreement, each Agent has agreed that (i) it will not offer or sell Offered Shares in the United States, and (ii) it will not, to its knowledge, offer or sell Offered Shares to a person that it knows or has reason to believe is resident in the United States or acting for the account or benefit of a person resident in the United States, or that it knows or has reason to believe intends to reoffer, resell or deliver the Offered Shares to any person in the United States. Further, the Agent and the Company have agreed in the Distribution Agreement that no advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of the sale of Offered Shares contemplated hereunder shall be undertaken in the United States by the Company or the Agent.
The Company has agreed in the Distribution Agreement to provide indemnification and contribution to the Agent against certain liabilities, including liabilities under Canadian securities laws. In addition, the Company has agreed to pay the reasonable expenses of the Agent in connection with the Offering, pursuant to the terms of the Distribution Agreement.
As sales agent, the Agent will not engage in any transactions to stabilize or maintain the price of the Common Shares in connection with any offer or sales of Offered Shares pursuant to the Distribution Agreement. No underwriter of the at-the-market distribution, including the Agent, and no person or company acting jointly or in concert with an underwriter, may, in connection with the distribution, enter into any transaction that is intended to stabilize or maintain the market price of the securities or securities of the same class as the securities distributed under this prospectus supplement and the prospectus, including selling an aggregate number or principal amount of securities that would result in the underwriter creating an over-allocation position in the securities.
The total expenses related to the commencement of the Offering to be paid by the Company, excluding the Commission payable to the Agent and the expenses of the Agent to be reimbursed by the Company under the Distribution Agreement, are estimated to be approximately $200,000.
Pursuant to the Distribution Agreement, the Company has the right to terminate the Distribution Agreement in its sole discretion at any time by giving written notice, and the Agent has the right to terminate its obligations under the Distribution Agreement in its sole discretion at any time by giving written notice. In addition, the Distribution Agreement shall automatically terminate upon the issuance and sale of all of the Offered Shares on the terms and subject to the conditions set forth in the Distribution Agreement.
The Common Shares are listed on the CSE. The Company has provided notice to the CSE to list the Offered Shares for trading on the CSE. Listing will be subject to the Company fulfilling all of the requirements of the CSE.
| S-13 |
DESCRIPTION OF SHARE CAPITAL
The Company is authorized to issue an unlimited number of Common Shares. As of June 29, 2023, there were 26,800,000 Common Shares issued and outstanding.
In addition, as of the date of this prospectus supplement, there are: 2,759,000 Common Shares issuable upon the exercise of outstanding stock options, each with an exercise price of $0.75 per share; 265,000 Common Shares issuable upon the conversion of outstanding restricted share units; and 7,983,000 Common Shares issuable upon the exercise of outstanding warrants.
All of the issued and outstanding Common Shares have been fully paid for and none are subject to any future call or assessment. Holders of Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders of the Company and to receive all notices and other documents required to be sent to share holders in accordance with the Company’s articles, corporate law and the rules of any applicable stock exchange. On a poll, every shareholder has one vote for each Common Share held. The holders of Common Shares are entitled to dividends if, as and when declared by the board of directors of the Company and, upon the liquidation, dissolution or winding-up of its affairs or other distribution of its assets for the purpose of winding-up its affairs, to receive, on a pro rata basis, all of the remaining assets of the Company. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking fund or purchase fund provisions.
PRIOR SALES
During the 12-month period before the date of this prospectus supplement, the Company has issued the following Common Shares and securities convertible into Common Shares.
| Date of Issuance | Type of Security | Number of Securities | Issue / Exercise / Conversion Price | |||||||
| October 3, 2022 | Advisory Warrants | 2,500,000 | $ | 0.10 | ||||||
| October 3, 2022 | Convertible Loan | $ | 1,250,000 | (1) | $ | 0.50 | ||||
| November 4, 2022 | Options | 2,774,000 | $ | 0.75 | ||||||
| November 4, 2022 | Restricted Share Units | 500,000 | $ | 0.75 | ||||||
| March 1, 2023 | Broker Warrants | 483,000 | $ | 0.75 | ||||||
| March 1, 2023 | Common Shares | 8,050,000 | $ | 0.75 | ||||||
| March 1, 2023 | Common Shares | 2,500,000 | $ | 0.50 | (1) | |||||
| March 1. 2023 | Series A Warrants | 2,500,000 | $ | 0.50 | (1) | |||||
| March 1. 2023 | Series B Warrants | 2,500,000 | $ | 0.50 | (1) | |||||
| March 13, 2023 | Restricted Share Units | 15,000 | $ | 0.75 | ||||||
Notes:
| (1) | The principal sum of the convertible loan issued on October 3, 2022, was $1,250,000, which automatically converted into units of the Company (the “Conversion Units”) upon the closing of the initial public offering of the Company on March 1, 2023, at a price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one series A share purchase warrant (a “Series A Warrant”) and one series B share purchase warrant (a “Series B Warrant”). Each Series A Warrant and each Series B Warrant, upon the satisfaction of the Series A Warrant Vesting Condition and Series B Warrant Vesting Condition, respectively, are exercisable into Common Shares at an exercise price of $0.50 per Common Share. The Series A Warrants shall become exercisable upon the following condition being met (the “Series A Warrant Vesting Condition”): the Company attaining a fully diluted market capitalization of $20 million calculated by multiplying all of the issued and outstanding Common Shares and convertible securities of the Company by the closing price of the Common Shares on the stock exchange where its primary trading occurs. The Series A Vesting Condition was met on March 2, 2023. The Series B Warrants shall become exercisable upon the following condition being met (the “Series B Warrant Vesting Condition”): the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer” as defined in National Instrument 51-102 – Continuous Disclosure Obligations. The Series B Warrant Vesting Condition has not yet been met. |
| S-14 |
On October 17, 2022, the Company completed a share split of its Common Shares then outstanding on a 1:160 basis. The 100,000 pre-split common shares issued and outstanding were adjusted to 16,000,000 post-split Common Shares.
TRADING PRICE AND VOLUME
The Common Shares are listed and posted for trading on the CSE under the symbol “SUNN” since March 2, 2023. The following table sets forth information relating to the trading of the Common Shares on the CSE for March 2, 2023, until June 28, 2023.
| Month | High ($) | Low ($) | Trading Volume | |||||||||
| June 1 to 28, 2023 | 8.95 | 6.60 | 395,879 | |||||||||
| May 2023 | 7.27 | 6.02 | 162,880 | |||||||||
| April 2023 | 6.92 | 2.68 | 756,472 | |||||||||
| March 2023 | 2.90 | 1.75 | 891,343 | |||||||||
On June 28, 2023, the last trading day prior to the date of this prospectus supplement, the closing price of the Common Shares on the CSE was $8.95.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of DLA Piper (Canada) LLP, Canadian counsel to the Company, and MLT Aikins LLP, Canadian counsel to the Agent, the following is, as of the date hereof, a general summary of the principal Canadian federal income tax considerations under the Income Tax Act (Canada) and the regulations thereunder (the ”Tax Act”) generally applicable to a holder who acquires the Offered Shares as beneficial owner pursuant to the Offering and who, at all relevant times, for purposes of the Tax Act, deals at arm’s length with the Company and the Agent, is not affiliated with the Company or the Agent, and will acquire and hold such Offered Shares as capital property (each, a ”Holder”), all within the meaning of the Tax Act. Offered Shares will generally be considered to be capital property to a Holder unless the Holder acquires, holds or uses the Offered Shares or is deemed to acquire, hold or use the Offered Shares in the course of carrying on a business of trading or dealing in securities or has acquired them or deemed to have acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
This summary does not apply to a Holder (a) that is a ”financial institution” (as defined in the Tax Act) for purposes of the ”mark-to-market property” rules in the Tax Act, (b) an interest in which is or would constitute a ”tax shelter investment” (as defined in the Tax Act), (c) that is a ”specified financial institution” (as defined in the Tax Act), (d) that has elected to report its ”Canadian tax results” for purposes of the Tax Act in a currency other than Canadian currency, (e) that is exempt from tax under the Tax Act, (f) that has entered into, or will enter into, a ”synthetic disposition arrangement” or a ”derivative forward agreement” (as those terms are defined in the Tax Act) with respect to the Offered Shares, (g) that receives dividends on Common Shares under or as part of a “dividend rental arrangement” (as defined in the Tax Act), or (h) that is a corporation resident in Canada (for purposes of the Tax Act) or a corporation that does not deal at arm’s length (for purposes of the Tax Act) with a corporation resident in Canada, and that is or becomes as part of a transaction or event or series of transactions or events that includes the acquisition of the Common Shares, controlled by a non-resident person, or group of non-resident persons not dealing with each other at arm’s length, for the purposes of the foreign affiliate dumping rules in Section 212.3 of the Tax Act. Any such Holders should consult their own tax advisors to determine the particular Canadian federal income tax consequences to them of acquiring Offered Shares pursuant to the Offering.
This summary does not address the deductibility of interest by a Holder who has borrowed money or otherwise incurred debt in connection with the acquisition of Offered Shares.
This summary is based on the facts set out in this prospectus supplement, the current provisions of the Tax Act in force as of the date hereof, specific proposals to amend the Tax Act which have been announced by or on behalf the Minister of Finance (Canada) prior to the date hereof (the ”Tax Proposals”), and counsel’s understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (the ”CRA”). This summary assumes that the Tax Proposals will be enacted in the form proposed and does not take into account or anticipate any other changes in law or in the administrative policies or assessing practices of the CRA, whether by way of judicial, legislative or governmental decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax considerations discussed herein. No assurances can be given that the Tax Proposals will be enacted as proposed or at all, or that legislative, judicial or administrative changes will not modify or change the statements expressed herein.
| S-15 |
This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to an investment in Offered Shares. This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or income tax advice to any particular Holder. The tax consequences of acquiring, holding and disposing of Offered Shares will vary according to the Holder’s particular circumstances. Holders should consult their own income tax advisors with respect to the tax consequences applicable to them based on their own particular circumstances.
Residents of Canada
This portion of the summary is generally applicable to a Holder who, for the purposes of the Tax Act and any applicable tax treaty or convention, is resident or deemed to be resident in Canada at all relevant times (a ”Resident Holder”). Certain Resident Holders whose Offered Shares might not otherwise qualify as capital property may be entitled to make an irrevocable election pursuant to subsection 39(4) of the Tax Act to have the Offered Shares, and every other ”Canadian security” (as defined by the Tax Act) owned by such Resident Holder in the taxation year of the election and in all subsequent taxation years, deemed to be capital property. Resident Holders should consult their own tax advisors for advice as to whether an election under subsection 39(4) of the Tax Act is available or advisable in their particular circumstances.
Taxation of Dividends
Dividends received or deemed to be received on the Offered Shares will be included in computing a Resident Holder’s income. In the case of a Resident Holder that is an individual (including certain trusts), dividends (including deemed dividends) received on the Offered Shares will be included in the Resident Holder’s income and be subject to the gross-up and dividend tax credit rules normally applicable to taxable dividends received by an individual from “taxable Canadian corporations”, as defined in the Tax Act, including the enhanced gross-up and dividend tax credit for ”eligible dividends” properly designated as such by the Company. There may be limitations on the Company’s ability to designate any particular dividend as an ”eligible dividend” and the Company has made no commitments in this regard.
Dividends received by a Resident Holder who is an individual (including certain trusts) may result in such Resident Holder being liable for alternative minimum tax under the Tax Act. Resident Holders who are individuals should consult their own tax advisors in this regard.
In the case of a Resident Holder that is a corporation, dividends (including deemed dividends) received on the Offered Shares will be included in the Resident Holder’s income but will normally be deductible in computing such Resident Holder’s taxable income, subject to all of the rules and restrictions under the Tax Act in that regard. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received by a Resident Holder that is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors having regard to their own circumstances.
A Resident Holder that is a ”private corporation” or ”subject corporation” (as those terms are defined in the Tax Act) may be liable to pay an additional tax (refundable under certain circumstances) under Part IV of the Tax Act on dividends received or deemed to be received on the Offered Shares to the extent that such dividends are deductible in computing the Resident Holder’s taxable income for the year. A “subject corporation” is generally a corporation (other than a private corporation) resident in Canada and controlled directly or indirectly by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts).
Disposition of Offered Shares
A Resident Holder who disposes of, or is deemed to have disposed of, an Offered Share (other than to the Company, unless purchased by the Company in the open market in the manner in which shares are normally purchased by any member of the public in the open market) will realize a capital gain (or incur a capital loss) equal to the amount by which the proceeds of disposition in respect of the Offered Share exceed (or are exceeded by) the aggregate of the adjusted cost base to the Resident Holder of such Offered Share immediately before the disposition or deemed disposition and any reasonable expenses incurred for the purpose of making the disposition. The adjusted cost base to a Resident Holder of an Offered Share will be determined by averaging the cost of that Offered Share with the adjusted cost base of all other Common Shares held as capital property at that time, if any, by the Resident Holder. The tax treatment of capital gains and capital losses is discussed in greater detail below under the subheading ”Residents of Canada - Taxation of Capital Gains and Capital Losses”.
| S-16 |
Taxation of Capital Gains and Capital Losses
Generally, one-half of any capital gain (a ”taxable capital gain”) realized by a Resident Holder must be included in the Resident Holder’s income for the taxation year in which the disposition occurs. Subject to and in accordance with the provisions of the Tax Act, one-half of any capital loss incurred by a Resident Holder (an ”allowable capital loss”) must be deducted from taxable capital gains realized by the Resident Holder in the taxation year in which the disposition occurs. Allowable capital losses in excess of taxable capital gains for the taxation year of disposition generally may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent year against net taxable capital gains realized in such years (but not against other income), in the circumstances and to the extent provided in the Tax Act.
A capital loss realized on the disposition of an Offered Share by a Resident Holder that is a corporation may in certain circumstances be reduced by the amount of dividends which have been previously received or deemed to have been received by the Resident Holder on the Offered Share (or a share substituted for such Offered Share). Similar rules may apply where a corporation is, directly or indirectly through a trust or partnership, a member of a partnership or a beneficiary of a trust that owns Offered Shares. Resident Holders to whom these rules may be relevant are urged to consult their own tax advisors.
A Resident Holder that is throughout the relevant taxation year a ”Canadian-controlled private corporation” (as defined in the Tax Act) may be liable to pay an additional refundable tax on its ”aggregate investment income” (as defined in the Tax Act) for the year, which is defined to include an amount in respect of taxable capital gains. Tax Proposals released on August 9, 2022, are intended to extend this additional tax and refund mechanism in respect of “aggregate investment income” to “substantive CCPCs” as defined in such Tax Proposals. Resident Holders are advised to consult their own tax advisors regarding the possible implications of these Tax Proposals in their particular circumstances.
Capital gains realized by a Resident Holder who is an individual (including certain trusts) may result in such Resident Holder being liable for alternative minimum tax under the Tax Act. Resident Holders who are individuals should consult their own tax advisors in this regard.
Non-Residents of Canada
The following portion of this summary is generally applicable to a Holder who, for purposes of the Tax Act and any applicable tax treaty or convention and at all relevant times, is neither resident nor deemed to be resident in Canada and does not acquire, use or hold, and will not be deemed to acquire, use or hold, Offered Shares in the course of carrying on, or otherwise in connection with, a business in Canada (a ”Non-Resident Holder”).
Special considerations, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer that carrying on an insurance business in Canada and elsewhere or that is an “authorized foreign bank” (as defined in the Tax Act). Such Non-Resident Holders should consult their own advisors.
Taxation of Dividends
Dividends paid or credited, or deemed to be paid or credited, to a Non-Resident Holder on the Offered Shares will be subject to Canadian withholding tax under the Tax Act at the rate of 25% of the gross amount of the dividend unless reduced by the terms of an applicable tax treaty or convention between Canada and the country in which the Non-Resident Holder is resident. For example, under the Canada-United States Tax Convention (1980) as amended (the “Treaty”), the rate of withholding tax on dividends paid or credited to a Non-Resident Holder who is resident in the U.S. for purposes of the Treaty, is the beneficial owner of the dividends, and is entitled to full benefits under the Treaty (a “U.S. Holder”) is generally reduced to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Holder that is a company beneficially owning at least 10% of the Company’s voting shares). Non-Resident Holders should consult their own tax advisors in this regard.
Disposition of Offered Shares
A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition or deemed disposition of Offered Shares, nor will capital losses arising therefrom be recognized under the Tax Act, unless the Offered Shares constitute ”taxable Canadian property” (as defined in the Tax Act) of the Non-Resident Holder at the time of the disposition and the Non-Resident Holder is not entitled to an exemption pursuant to the terms of an applicable tax treaty or convention between Canada and the country in which the Non-Resident Holder is resident.
| S-17 |
Provided the Offered Shares are listed on a ”designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE) at the time of the disposition, the Offered Shares will not constitute taxable Canadian property of a Non-Resident Holder at that time, unless at any time during the 60-month period immediately preceding the disposition the following two conditions are met concurrently: (a) the Non-Resident Holder, persons with whom the Non-Resident Holder does not deal at arm’s length, partnerships whose members include, either directly or indirectly through one or more partnerships, the Non-Resident Holder or persons who do not deal at arm’s length with the Non-Resident Holder, or any combination of them, owned 25% or more of the issued shares of any class or series of shares of the capital stock of the Company; and (b) more than 50% of the fair market value of the Offered Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, ”Canadian resource properties” (as defined in the Tax Act), ”timber resource properties” (as defined in the Tax Act), and options in respect of or interests in, or for civil law rights in, any such property (whether or not such property exists).
Notwithstanding the foregoing, an Offered Share may otherwise be deemed to be taxable Canadian property to a Non-Resident Holder for purposes of the Tax Act in particular circumstances.
If Offered Shares are taxable Canadian property (or deemed to be taxable Canadian property) of a Non-Resident Holder and the Non-Resident Holder is not entitled to an exemption pursuant to the terms of an applicable tax treaty or convention, the consequences above under ”Residents of Canada — Disposition of Offered Shares” and ”Residents of Canada — Taxation of Capital Gains and Capital Losses” will generally apply.
Non-Resident Holders whose Offered Shares are taxable Canadian property should consult their own advisors.
AGENT FOR SERVICE OF PROCESS
Paul Pasalic, a director of the Company, resides outside of Canada and has appointed DLA Piper (Canada) LLP, Suite 2800, Park Place, 666 Burrard St., Vancouver, British Columbia, V6C 2Z7, Canada, as agent for service of process in Canada.
Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
LEGAL MATTERS
Certain legal matters relating to the Offering hereby will be passed upon on behalf of the Company by DLA Piper (Canada) LLP, and on behalf of the Agent by MLT Aikins LLP.
As of the date of this prospectus supplement, the designated professionals (as such terms is defined in item 16.2(1.1) of Form 51-102F2 – Annual Information Form of NI 51-102) of each of DLA Piper (Canada) LLP and MLT Aikins LLP, as a group, beneficially own, directly or indirectly, less than 1% of the Company’s outstanding securities.
INTEREST OF EXPERTS
The Company’s external auditor, MSLL CPA LLP, Chartered Professional Accountants, is independent of the Company within the meaning of the rules of professional conduct of the Chartered Professional Accountants of British Columbia.
As of the date of this prospectus supplement, the designated professionals of MSLL CPA LLP, Chartered Accountants, as a group, beneficially own, directly or indirectly, less than 1% of the Company’s outstanding securities.
AUDITORS, REGISTRAR AND TRANSFER AGENT
MSLL CPA LLP, Chartered Professional Accountants, is the external auditor of the Company.
The registrar and transfer agent for the Common Shares is Endeavor Trust Corporation at its principal offices in Vancouver, British Columbia.
| S-18 |
PROMOTERS
Except for Dr. Richard Lu, the Chief Executive Officer of the Company, no person or company has, within the two years immediately preceding the date of this prospectus supplement, been a promoter of the Company, within the meaning of applicable securities laws. Dr. Lu holds 781,000 Common Shares representing 2.91% of the issued and outstanding Common Shares and 550,000 stock options to acquire Common Shares at an exercise price of $0.75 per Common Share and expiring on November 4, 2027.
Other than as disclosed in this section or elsewhere in this prospectus supplement, including the prospectus and any documents incorporated by reference therein or herein, no person who was a Promoter of the Company within the last two years:
| ● | received anything of value directly or indirectly from the Company or a subsidiary; | |
| ● | sold or otherwise transferred any asset to the Company or a subsidiary within the last two years; | |
| ● | has been a director, chief executive officer or chief financial officer of any company that during the past 10 years was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation for a period of more than 30 consecutive days or became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets; | |
| ● | has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; | |
| ● | has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision; or | |
| ● | has within the past 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets. |
ELIGIBILITY FOR INVESTMENT
In the opinion of DLA Piper (Canada) LLP, counsel to the Company, and MLT Aikins LLP, counsel to the Agent, based on the current provisions of the Tax Act in force as of the date hereof, the Offered Shares, if issued on the date hereof, would be “qualified investments” under the Tax Act for trusts governed by a ”registered retirement savings plan”, ”registered retirement income fund”, ”tax-free savings account”, ”first home savings account”, “registered education savings plan”, “registered disability savings plan” (collectively referred to as ”Registered Plans”) and a ”deferred profit sharing plan”, provided that the Offered Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the CSE). or the Company is otherwise a “public corporation” (as defined in the Tax Act).
Notwithstanding that an Offered Share may be a qualified investment for a Registered Plan, if the Offered Share is a ”prohibited investment” within the meaning of the Tax Act for the Registered Plan, the holder, annuitant or subscriber of the Registered Plan, as the case may be, will be subject to penalty taxes as set out in the Tax Act. The Offered Shares will not generally be a ”prohibited investment” for a Registered Plan if the holder, annuitant or subscriber, as the case may be, (i) deals at arm’s length with the Company for the purposes of the Tax Act, and (ii) does not have a ”significant interest” (as defined in the Tax Act) in the Company. In addition, the Offered Shares will not be a ”prohibited investment” if the Offered Shares are ”excluded property” (as defined in the Tax Act) for the Registered Plan.
Prospective purchasers of Offered Shares who intend to hold such Offered Shares in a Registered Plan are urged to consult their own tax advisors to ensure the Offered Shares would not be a prohibited investment, including whether the Offered Shares would be excluded property, in their particular circumstances.
STATUTORY EXEMPTIONS
Pursuant to a decision of the Autorité des marchés financiers dated March 16, 2023, the Company was granted a permanent exemption from the requirement to translate into French the prospectus as well as the documents incorporated by reference therein and any prospectus supplement in connection therewith to be filed in relation to an “at-the-market distribution”. This exemption was granted on the condition that the prospectus and any prospectus supplement (other than in relation to an “at-the-market distribution”) be translated into French if the Company offers Securities to Québec purchasers in connection with an offering other than in relation to an “at-the-market distribution”.
| S-19 |
PURCHASERS’ STATUTORY RIGHTS
The following is a description of a purchaser’s statutory rights in connection with any purchase of Offered Shares pursuant to the Offering, which supersedes and replaces the statement of purchasers’ rights in the prospectus under the heading “Purchaser’s Statutory Rights” solely with regard to the Offering.
Securities legislation in some provinces of Canada provides purchasers of securities with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus, prospectus supplement and any amendment relating to securities purchased by a purchaser are not sent or delivered to the purchaser. However, purchasers of Offered Shares distributed under an at-the-market distribution by the Company do not have the right to withdraw from an agreement to purchase the Offered Shares and do not have remedies of rescission or, in some jurisdictions, revisions of the price, or damages for non-delivery of the prospectus, prospectus supplement and any amendment relating to the Offered Shares purchased by such purchaser because the prospectus, prospectus supplement and any amendment relating to the Offered Shares purchased by such purchaser will not be sent or delivered, as permitted under Part 9 of NI 44-102.
Securities legislation in some provinces of Canada further provides purchasers with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus, prospectus supplement and any amendment relating to securities purchased by a purchaser contains a misrepresentation. Those remedies must be exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation that a purchaser of Offered Shares distributed under an at-the-market distribution by the Company may have against the Company or the Agent for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus, prospectus supplement and any amendment relating to securities purchased by a purchaser contain a misrepresentation will remain unaffected by the non-delivery of the prospectus referred to above.
A purchaser should refer to applicable securities legislation for the particulars of these rights and should consult a legal adviser.
| S-20 |
CERTIFICATE OF THE COMPANY
Dated: June 29, 2023
The short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, will, as of the date of a particular distribution of securities under the prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and the supplement as required by the securities legislation of each of the provinces of Canada.
“Dr. Richard Lu” |
“Sam Sun” | |
|
DR. RICHARD LU Chief Executive Officer |
SAM SUN Chief Financial Officer |
ON BEHALF OF THE BOARD OF DIRECTORS
| “Paul Pasalic” | “Paul Sparkes” | |
|
PAUL PASALIC Director |
PAUL SPARKES Director |
| C-1 |
CERTIFICATE OF promoter
Dated: June 29, 2023
The short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, will, as of the date of a particular distribution of securities under the prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and the supplement as required by the securities legislation of each of the provinces of Canada.
| “Dr. Richard Lu” | ||
| DR. RICHARD LU |
| C-2 |
CERTIFICATE OF THE AGENT
Dated: June 29, 2023
To the best of our knowledge, information and belief, the short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, will, as of the date of a particular distribution of securities under the prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and the supplement as required by the securities legislation of each of the provinces of Canada.
| RESEARCH CAPITAL CORPORATION | |||
| By: | “Jovan Stupar” |
||
| Jovan Stupar | |||
| Managing Director, Venture Investment Banking | |||
| C-3 |
Exhibit 99.53
SOLARBANK CORPORATION
EQUITY DISTRIBUTION AGREEMENT
June 29, 2023
Research Capital Corporation
1075 West Georgia Street, Suite 1920
Vancouver, British Columbia V6E 3C9
Ladies and Gentlemen:
Solarbank Corporation, a corporation governed by the Business Corporations Act (Ontario) (the “Company”), confirms its agreement (this “Agreement”) with Research Capital Corporation (the “Agent”) with respect to the issuance and sale from time to time by the Company of shares (the “Offered Shares”) of the Company’s common shares without par value (the “Common Shares”), having an aggregate offering price of up to $15,000,000 (the “Maximum Amount”) through or to the Agent, as sales agent, on the terms and subject to the conditions set forth in this Agreement (the “Offering”).
The Company has prepared and filed with the securities regulatory authorities (the “Qualifying Authorities”) in each of the provinces of Canada (the “Qualifying Jurisdictions”), a preliminary short form base shelf prospectus dated March 21, 2023 (the “Preliminary Base Prospectus”), and has prepared and filed with the Qualifying Authorities in the Qualifying Jurisdictions a final short form base shelf prospectus dated May 2, 2023 (the “Base Prospectus”), in respect of the sale and issuance, from time to time, of an aggregate of up to $200,000,000 of Common Shares, debt securities, warrants to purchase securities, subscription receipts, share purchase contracts and units of the Company comprised of any combination of such securities (collectively, the “Shelf Securities”) in each case in accordance with Securities Laws (as defined herein). For greater certainty, all references to the Base Prospectus herein include all documents incorporated therein by reference and the documents otherwise deemed to be a part thereof or included therein pursuant to Securities Laws, including but not limited to, all Designated News Releases (as defined herein). The Ontario Securities Commission (the “Reviewing Authority”) is the principal regulator of the Company under the passport system procedures provided for under Multilateral Instrument 11-102 – Passport System and National Policy 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions in respect of the Shelf Securities and the offering of the Offered Shares. The Reviewing Authority has issued a receipt evidencing that receipts have been issued on behalf of itself and the other Qualifying Authorities, as applicable, for the Preliminary Base Prospectus and the Base Prospectus (the “Receipts”). The term “Securities Laws” means all applicable securities laws in each of the Qualifying Jurisdictions and the respective rules and regulations under such laws, together with applicable published national, multilateral and local policy statements, instruments, notices and blanket orders of the Canadian Securities Administrators and the Qualifying Authorities, as modified by the Translation Decision (as defined herein), including National Instrument 44-101 – Short Form Prospectus Distributions (“NI 44-101”) and National Instrument 44-102 – Shelf Distributions (“NI 44-102”), as well as the rules and policies of the Canadian Securities Exchange or any other stock exchange in Canada on which the Common Shares are listed or quoted (the “Exchange”). As used herein, a “Designated News Release” means a news release disseminated by the Company in respect of previously undisclosed information that, in the Company’s determination, acting reasonably, constitutes a material fact (as such term is defined in Securities Laws) and identified by the Company as a “designated news release” in writing on the face page of the version of such news release that is filed by the Company on the System for Electronic Document Analysis and Retrieval (“SEDAR”) in Canada. As used herein, “Prospectus Supplement” means the most recent prospectus supplement to the Base Prospectus relating to the Offered Shares filed by the Company with the Qualifying Authorities in accordance with Securities Laws and includes all documents incorporated therein by reference and the documents otherwise deemed to be a part thereof or included therein pursuant to Securities Laws. As used herein, “Offering Prospectus” means the Prospectus Supplement (and any additional prospectus supplement prepared in accordance with the provisions of this Agreement and filed with the Qualifying Authorities in accordance with Securities Laws and relating to the Offering) together with the Base Prospectus. The Prospectus Supplement shall provide that any and all Designated News Releases shall be deemed to be incorporated by reference in the Base Prospectus. The “Translation Decision” means the decision of the Autorité des marches financiers dated March 16, 2023, granting exemptive relief from the requirement that the Offering Prospectus and the documents incorporated by reference in the Offering Prospectus be publicly filed in both the French and English languages. For the purposes of the Offering Prospectus, the Company is not required to publicly file French versions of the Offering Prospectus and the documents incorporated by reference therein.
Any reference herein to the Base Prospectus, the Prospectus Supplement or the Offering Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Base Prospectus, the Prospectus Supplement or the Offering Prospectus shall be deemed to refer to and include the filing or furnishing of any document with or to the Qualifying Authorities on or after the date of the Base Prospectus, the Prospectus Supplement or the Offering Prospectus, as the case may be, and deemed to be incorporated by reference therein. For purposes of this Agreement, all references to the Base Prospectus, the Prospectus Supplement and the Offering Prospectus or any amendment or supplement thereto shall be deemed to include any copy thereof filed with any Qualifying Jurisdiction on SEDAR.
All references in this Agreement to financial statements and other information which is “described,” “contained,” “included” or “stated” in the Base Prospectus, Prospectus Supplement or the Offering Prospectus (or other references of like import) shall be deemed to mean and include all such financial statements and other information which is incorporated by reference in or otherwise deemed by Securities Laws to be a part of or included in the Base Prospectus, Prospectus Supplement or the Offering Prospectus, respectively.
The Company confirms its agreement with the Agent as follows:
1. Sale and Delivery of the Offered Shares.
| (a) | Agency Transactions. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company and the Agent agree that the Company may issue and sell through the Agent, as sales agent for the Company, the Offered Shares (an “Agency Transaction”) as follows: |
| (i) | The Company may, from time to time, propose to the Agent the terms of an Agency Transaction by means of a telephone call (confirmed promptly by electronic mail in a form substantially similar to Schedule C hereto (an “Agency Transaction Notice”)) from at least two of the individuals listed as authorized representatives of the Company in Schedule A hereto (each, an “Authorized Company Representative”), such proposal to include the trading day(s) (each, a “Trading Day”) for the Exchange (which may not be a day on which the Exchange is closed or scheduled to close prior to its regular weekday closing time) on which the Offered Shares are to be sold; the maximum number or value of Offered Shares that the Company wishes to sell in the aggregate and on each Trading Day; and the minimum price at which the Company is willing to sell the Offered Shares (the “Floor Price”), among other parameters permitted in accordance with this Agreement the following. The Agency Transaction Notice shall be effective upon delivery to the Agent unless and until (A) the Agent declines to accept the terms contained therein for any reason, in its sole discretion, (B) the Company withdraws the Agency Transaction Notice for any reason, in its sole discretion, (C) the Company is in possession of material non-public information or such sale of Offered Shares would constitute a material fact or material change (as such terms are defined under Securities Laws), (D) the entire amount of the Offered Shares under the Agency Transaction Notice have been sold, (E) the Company issues a subsequent Agency Transaction Notice with parameters superceding those in the prior Agency Transaction Notice, (F) the expiry of the time period, if any, set out in the Agency Transaction Notice or (G) this Agreement has been terminated under the provisions of this Agreement. The terms of an Agency Transaction shall be proposed to, and each Agency Transaction Notice shall be addressed to, the individuals from the Agent set forth on Schedule A hereto (the “Authorized Agent Representatives”). | |
| (ii) | If such proposed terms for an Agency Transaction are acceptable to the Agent, it shall promptly confirm the terms by countersigning the Agency Transaction Notice for such Agency Transaction and emailing it to the Authorized Company Representatives which delivered such Agency Transaction Notice. | |
| (iii) | Subject to the terms and conditions hereof, the Agent shall use its commercially reasonable efforts to sell all of the Offered Shares designated in, and subject to the terms of, each accepted Agency Transaction Notice. The Agent shall not sell any Offered Share at a price lower than the Floor Price. The Company acknowledges and agrees with the Agent that (A) there can be no assurance that the Agent will be successful in selling all or any of such Offered Shares or as to the price at which any Offered Shares are sold, if at all, (B) the Agent shall not incur liability or obligation to the Company or any other person or entity if it does not sell any Offered Shares for any reason, and (C) the Agent shall not be required to purchase Offered Shares on a principal basis pursuant to this Agreement. | |
| (iv) | The Agent hereby covenants and agrees that, during the time that an Agency Transaction Notice delivered pursuant to Section 1(a)(i) hereof remains in effect and that has not been suspended or terminated in accordance with the terms hereof, the Agent will prudently and actively monitor the market’s reaction to trades made on any marketplace (as such term is defined in National Instrument 21-101 - Marketplace Operation) pursuant to this Agreement in order to evaluate the likely market impact of future trades, and that, if the Agent has concerns as to whether a particular sale contemplated by an Agency Transaction Notice may have a significant effect on the market price of the Offered Shares, the Agent will, upon receipt of the applicable Agency Transaction Notice, recommend to the Company against effecting the trade at that time or on the terms proposed. Notwithstanding the foregoing, the Company acknowledges and agrees that the Agent cannot provide complete assurances that any sale will not have a significant effect on the market price of the Offered Shares. | |
| (v) | The Agent covenants that it will not over-allot Offered Shares in connection with the distribution of Offered Shares in an “at-the-market distribution” (as defined in NI 44-102) or effect any other transactions that are intended to stabilize or maintain the market price of the Offered Shares in connection with such distribution. The Agent will cause its affiliates and persons or companies acting jointly or in concert with the Agent to comply with this Section 1(a)(v). | |
| (vi) | The Company may, acting through at least one Authorized Company Representative, or the Agent may, upon notice to the Company by telephone (confirmed promptly by electronic mail), suspend an offering of the Offered Shares or terminate an Agency Transaction Notice; provided, however, that such suspension or termination shall not affect or impair the parties’ respective obligations with respect to the Offered Shares sold hereunder prior to the giving of such notice. | |
| (vii) | If the terms of any Agency Transaction as set forth in an Agency Transaction Notice contemplate that the Offered Shares shall be sold on more than one Trading Day, then the Company and the Agent shall mutually agree to such additional terms and conditions as they deem necessary in respect of such multiple Trading Days, and such additional terms and conditions shall be binding to the same extent as any other terms contained in the relevant Agency Transaction Notice. | |
| (viii) | The Agent, as sales agent in an Agency Transaction, shall not make any sales of the Offered Shares on behalf of the Company pursuant to this Agreement other than by means of ordinary brokers’ transactions in the Qualifying Jurisdictions (A) that constitute an “at-the-market-distribution” under NI 44-102 and are made in compliance with NI 44-102, including, without limitation, sales made directly on the Exchange, or any Canadian marketplace or (B) such other sales of the Offered Shares on behalf of the Company in its capacity as agent of the Company as shall be agreed by the Company and the Agent in writing. | |
| (ix) | The compensation to the Agent for sales of the Offered Shares in an Agency Transaction with respect to which the Agent acts as sales agent hereunder shall be as set forth in the Agency Transaction Notice for such Agency Transaction and shall be equal to 2.0% of the gross offering proceeds of the Offered Shares sold in such Agency Transaction (the “Commission”). The Agent shall provide written confirmation to the Company (which may be provided by email to at least two of the Authorized Company Representatives) following the close of trading on each Trading Day on which Offered Shares are sold in an Agency Transaction under this Agreement, setting forth (A) the number and the average price of Offered Shares sold on such Trading Day (showing the number and the average price of Offered Shares sold on the Exchange or on any other marketplace), (B) the gross offering proceeds received from such sales, (C) the Commission payable with respect to such sales, and (D) the net offering proceeds (being the gross offering proceeds for such sales less the Commission payable for such sales and any expenses of the Agent payable pursuant to Section 3(h)) (the “Net Offering Proceeds”). | |
| (x) | Settlement for sales of the Offered Shares in an Agency Transaction pursuant to this Agreement shall occur on the second Trading Day (or such earlier day as is industry practice for regular-way trading) following the date on which such sales are made (each such day, a “Settlement Date”). On each Settlement Date, the Offered Shares sold through the Agent in Agency Transactions for settlement on such date shall be issued and delivered by the Company to the Agent against payment by the Agent to the Company of the Net Offering Proceeds from the sale of such Offered Shares. Settlement for all such Offered Shares shall be effected by free delivery of the Offered Shares by the Company or its transfer agent to the Agent’s or its designee’s account (provided that the Agent shall have given the Company written notice of such designee prior to the relevant Settlement Date) at The Canadian Depository for Securities (“CDS”) or by such other means of delivery as may be mutually agreed upon by the parties hereto, which in all cases shall be fully paid and non-assessable, freely tradable, transferable, registered Common Shares in good deliverable form, in return for payment of the Net Offering Proceeds in same-day funds delivered to the account designated by the Company. If the Company defaults on its obligation to deliver the Offered Shares on any Settlement Date, the Company shall (A) hold the Agent harmless against any loss, claim, damage, or expense (including, without limitation, reasonable legal fees and expenses), as incurred, arising out of or in connection with such default and (B) pay the Agent the Commission to which it would otherwise be entitled absent such default, provided, however, that without limiting Section 5 hereof, with respect to (B) above, the Company shall not be obligated to pay the Agent the Commission on any Offered Shares that it is not possible to settle due to: (1) a suspension or material limitation in trading in securities generally on the Exchange; (2) a material disruption in securities settlement or clearance services in Canada; or (3) failure by the Agent to comply with its obligations under the terms of this Agreement. | |
| (xi) | The Offered Shares have not been qualified for sale in any jurisdiction other than the Qualifying Jurisdictions. Accordingly, the Agent agrees that (i) it will not offer or sell Offered Shares in the United States and (ii) it will not, to its knowledge, offer or sell Offered Shares to a person that it knows or has reason to believe is resident in the United States or acting for the account or benefit of a person resident in the United States, or that it knows or has reason to believe intends to reoffer, resell or deliver the Offered Shares to any person in the United States. No advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of the sale of Offered Shares contemplated hereunder shall be undertaken in the United States by the Company or the Agent. |
| (b) | Maximum Number of Offered Shares. Under no circumstances shall (i) the Company propose to the Agent a sale of Offered Shares in an Agency Transaction pursuant to this Agreement if such sale would (A) cause the aggregate gross sales proceeds of the Offered Shares sold pursuant to this Agreement to exceed the Maximum Amount, (B) cause the number of Offered Shares sold to exceed the number of Common Shares available for offer and sale under the Offering Prospectus or (C) cause the number of Offered Shares sold pursuant to this Agreement to exceed the number of Offered Shares authorized from time to time to be issued and sold pursuant to this Agreement by the Company’s board of directors, or a duly authorized committee thereof, and notified to the Agent in writing, or (ii) the Agent effect a sale of Offered Shares in an Agency Transaction pursuant to this Agreement if such sale would (A) cause the aggregate gross sales proceeds of the Offered Shares sold pursuant to this Agreement to exceed the Maximum Amount or (B) cause the number of Offered Shares sold pursuant to this Agreement to exceed the number of Offered Shares authorized from time to time to be issued and sold pursuant to this Agreement by the Company’s board of directors, or a duly authorized committee thereof, provided that the Agent is notified in writing of the number of authorized Offered Shares referred to in Section 1(b)(ii)(B) that remain available concurrently with the delivery of each Agency Transaction Notice. |
| (c) | Black-out Periods. Notwithstanding any other provision of this Agreement, no sales of Offered Shares shall take place during any period in which the Company’s insider trading or similar policy would prohibit the purchase or sale of Common Shares by persons subject to such policy, or during any other period in which the Company is, or could be deemed to be, in possession of material non-public information with respect to the Company. The Company shall not issue an Agency Transaction Notice nor otherwise request the sales of any Offered Shares that would be sold during any such period and the Company shall, in accordance with the terms hereof, suspend or terminate any previously issued Agency Transaction Notice as soon as reasonably practicable and, in any event, within two Business Days, if, after the issuance of such Agency Transaction, any sales thereunder would be so prohibited or if there occurs a material change in respect of the Company which has not been generally disclosed. The Agent shall not be liable for any breach of this Section 1(c) if the Company has failed to comply with its obligations under this Section 1(c). |
| (d) | Continuing Accuracy of Representations and Warranties. Any obligation of the Agent to use its commercially reasonable efforts to sell the Offered Shares on behalf of the Company as sales agent shall be subject to the continuing accuracy of the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder and to the continuing satisfaction of the conditions specified in Section 3 of this Agreement. |
2. Representations and Warranties of the Company. The Company represents and warrants to, and covenants with, the Agent as follows:
| (a) | Due Incorporation and Organization. The Company and each of its material subsidiaries, being those subsidiaries listed in Schedule B hereto (together, the “Material Subsidiaries”), have been duly incorporated and organized and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation and have all requisite corporate authority and power to carry on their respective businesses, as now conducted and as presently proposed to be conducted, and to own or lease and operate their respective property and assets. Neither the Company nor any Material Subsidiary is in violation of any provision of its constating documents. |
| (b) | Material Subsidiaries. The Company has no subsidiary (as such term is defined under the Business Corporations Act (Ontario)) that is material to the Company other than the Material Subsidiaries and the Company beneficially owns, directly or indirectly, the percentage indicated in Schedule B hereto of all of the issued and outstanding shares of the Material Subsidiaries, all of which have been duly authorized and are validly issued and are outstanding as fully paid and non-assessable shares, and free and clear of all charges, mortgages, liens, hypothecs, pledges, claims, restrictions, security interests or other encumbrances, whether created or arising by agreement, statute or otherwise pursuant to any applicable law, attaching to property, interests or rights and whether or not they constitute specific or floating charges, as those terms are understood under the laws of the Province of Ontario and the jurisdiction of existence of each Material Subsidiary (each, an “Encumbrance”) or adverse interests whatsoever, and no person has any agreement, option, right or privilege (whether pre-emptive or contractual) capable of becoming an agreement or option, for the purchase from the Company or any Material Subsidiary of any of the shares or other securities of any Material Subsidiary. |
| (c) | Qualification to Carry on Business. The Company and each of the Material Subsidiaries is qualified to carry on business and is validly subsisting under the laws of each jurisdiction in which it carries on its business except where the failure to be so qualified would not reasonably be expected to (i) materially adversely affect the condition, financial or otherwise, or the earnings, operations, condition, assets, liabilities (absolute, accrued, contingent or otherwise), share capital or business affairs of the Company and the Material Subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business or (ii) result in the Offering Prospectus containing a misrepresentation (each, a “Material Adverse Effect”). |
| (d) | Compliance with Law. The Company and each Material Subsidiary (i) has conducted and is conducting, in each case, in all respects, its business in compliance with all applicable laws, rules, regulations, tariffs, orders and directives of each jurisdiction in which it carries on business and which would reasonably be expected to affect the Company or such Material Subsidiary, and (ii) possesses all approvals, consents, certificates, registrations, authorizations, permits and licenses issued by the appropriate provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business currently carried on by it, and (iii) is in compliance with the terms and conditions of all such approvals, consents, certificates, authorizations, permits and licenses and with all laws, regulations, tariffs, rules, orders and directives material to the operations thereof, and to enable its assets to be owned or to be licensed and operated, as currently licensed and operated, and all such approvals, consents, certificates, authorizations, qualifications, permits and licenses held are valid and existing and in good standing, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Material Subsidiary has received any notice of the modification, revocation or cancellation of, or any intention to modify, revoke, or cancel any proceeding relating to the modifications, revocation, or cancellation of any such approval, consent, certificate, authorization, permit or license, nor has the Company or any Material Subsidiary received a notice of non-compliance, nor does the Company or any Material Subsidiary know of, nor have reasonable grounds to know of, any facts that could give rise to a notice of non- compliance with any such laws, regulations and statutes that could reasonably be expected to result in a Material Adverse Effect or materially affect the business or legal environment under which the Company or any of the Material Subsidiaries operates. |
| (e) | No Default or Breach. The Company is not in default or breach of, and the execution and delivery of, and the performance of and compliance with the terms of this Agreement by the Company or any of the transactions contemplated hereby, and the application of the net proceeds from the offering and sale of the Offered Shares to be sold by the Company in the manner set forth in the Prospectus Supplement under the heading “Use of Proceeds and Business Objectives and Milestones” do not and will not result in any breach of, or constitute a default under, and does not and will not create a state of facts which, after notice or lapse of time or both, would result in a breach of or constitute a default under or create any Encumbrance on its or any of the Material Subsidiaries’ properties or assets under, any term or provision of the articles, by-laws or resolutions of the Company or any of the Material Subsidiaries, or any indenture, mortgage, note, contract, agreement (written or oral), instrument, lease or other document to which the Company or any of the Material Subsidiaries is a party or by which it or they or any of its or their properties are bound, any judgment, decree, order, statute, rule or regulation applicable to the Company or any of the Material Subsidiaries, nor would it violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or any of its Material Subsidiaries, except where such default or breach could not reasonably be expected to result in a Material Adverse Effect. This Agreement conforms in all material respects to the description thereof required to be contained in the Offering Prospectus. |
| (f) | Corporate Power and Authority. The Company has full corporate power and authority to enter into this Agreement, to execute and deliver the Offering Prospectus, and, if applicable, will have the necessary corporate power and authority to execute and deliver any amendment to the Offering Prospectus prior to the filing thereof, and to perform its obligations set out in this Agreement and the Offering Prospectus. This Agreement and has been duly authorized, executed and delivered by the Company and is a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms subject to the general qualifications that (i) enforceability may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights generally and (ii) equitable remedies, including the remedies of specific performance and injunctive relief, are available only in the discretion of the applicable court and rights of indemnity contained in this Agreement may be limited under applicable law. All necessary corporate action has been taken by the Company to authorize the filing by it of the Prospectus Supplement with the Qualifying Authorities and the execution and delivery by it of the Offering Prospectus in each of the Qualifying Jurisdictions under Securities Laws. |
| (g) | Consents and Approvals. No consent, approval, authorization, order, permit, license, filing, regulation, clearance or qualification of any court or governmental agency, body, regulator or any other third parties is required in connection with the transactions contemplated by this Agreement except such as have been obtained under Securities Laws, the rules of the Exchange or under any other applicable securities laws. |
| (h) | No Material Adverse Change. There has not been any material adverse change in the capital, assets, condition, liabilities or obligations (absolute, accrued, contingent or otherwise) of the Company and the Material Subsidiaries, taken as a whole (a “Material Adverse Change”), from the position set forth in the unaudited condensed interim financial statements of the Company as at and for the three and nine months ended March 31, 2023, including the schedules thereto and the notes in respect thereof (the “Interim Financial Statements”). |
| (i) | Financial Statements. The Interim Financial Statements and the audited annual financial statements of the Company for the years ended June 30, 2022 and 2021, including the schedules thereto, the auditor’s report thereon and the notes in respect thereof (the “Annual Financial Statements” and, together with the Interim Financial Statements, the “Financial Statements”), taken together, present fairly in all material respects the financial condition, results of operations and cash flows of the Company on a consolidated basis as of the dates and for the periods indicated, complies in all material respects as to form with the applicable accounting requirements of Securities Laws and have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”); the supporting schedules present fairly in accordance with IFRS the information required to be stated therein; the Company has no liability or obligation (including, without limitation, liabilities or obligations to fund any operations or work, to give any guarantees or for taxes), whether accrued, absolute, contingent or otherwise, not reflected in the Financial Statements, which could reasonably be expected to result in a Material Adverse Effect. |
| (j) | Description of Assets and Liabilities. The description of the assets and liabilities of the Company and the Material Subsidiaries, taken as a whole, set forth in the Financial Statements fairly presents, in accordance with IFRS consistently applied, the financial position and condition of the Company and the Material Subsidiaries, taken as a whole, as at the dates thereof and reflects all material liabilities (absolute, accrued, contingent or otherwise) of the Company and the Material Subsidiaries, as at the dates thereof. |
| (k) | No Actions. There are no actions, suits, proceedings or inquiries pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Material Subsidiaries at law or in equity or before or by any federal, provincial, state, territorial, municipal or other governmental department, commission, board, bureau, agency or instrumentality which could reasonably be expected to result in a Material Adverse Effect; there is no bankruptcy, liquidation, winding-up or other similar proceeding pending or in progress, or, to the knowledge of the Company, threatened against or relating to the Company or any of the Material Subsidiaries before any governmental authority; none of the Company or any of the Material Subsidiaries nor any of the respective properties or assets is subject to any outstanding judgment, order, writ, injunction or decree that involves or may involve, or restricts or may restrict the right or ability of the Company or any of the Material Subsidiaries to conduct its respective business in all material respects as it has been carried on prior to the date hereof. |
| (l) | Proceedings. To the knowledge of the Company, none of the directors or officers of the Company is or has ever been subject to prior regulatory, criminal or bankruptcy proceedings in Canada or elsewhere. |
| (m) | Subsequent Events. Except as disclosed in the Offering Prospectus, since March 31, 2023: (i) neither the Company nor any of the Material Subsidiaries has incurred, assumed or suffered any liability (absolute, accrued, contingent or otherwise) or entered into any transaction which is or may be material to the Company and the Material Subsidiaries, taken as a whole; (ii) neither the Company nor any of the Material Subsidiaries has declared or paid any dividends, or made any other distribution of any kind, on or in respect of its share capital (other than dividends paid in the ordinary course consistent with past practice); (iii) there has not been any material change in the share capital or long-term or short-term debt of the Company and the Material Subsidiaries taken as a whole; (iv) neither the Company nor any Material Subsidiary has sustained any material loss or material interference with its business or assets from fire, explosion, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labour dispute or any legal or governmental proceeding, in any such case that is material to the Company and the Material Subsidiaries taken as a whole; and (v) there has not been any material adverse change or any development involving a prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or affecting the business, general affairs, management, condition (financial or otherwise), results of operations, shareholders’ equity, assets or prospects of the Company and the Material Subsidiaries, taken as a whole; since the date of the latest balance sheet included, or incorporated by reference, in the Offering Prospectus, neither the Company nor any Material Subsidiary has incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which are material to the Company and the Material Subsidiaries, taken as a whole, except for liabilities, obligations and transactions which are disclosed in the Offering Prospectus. |
| (n) | Public Record. The information and statements set forth in all documents incorporated by reference in the Offering Prospectus and all information filed by or on behalf of the Company with the Qualifying Authorities, in compliance, or intended compliance, with Securities Laws (the “Public Record”), were true, correct and complete in all material respects and did not contain any misrepresentation as of the date of such information or statements. |
| (o) | Reporting Issuer. The Company is a “reporting issuer” or has equivalent status within the meaning of Securities Laws in each of the Qualifying Jurisdictions and the Company has not received any correspondence or notice from any Qualifying Authority concerning a review of any of the Company’s continuous disclosure documents in respect of which any matters remain outstanding; the Company complies, in all material respects, with the provisions of National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings; the responsibilities, operation and composition of the Company’s audit committee comply with National Instrument 52-110 – Audit Committees (“NI 52-110”); except in connection with any potential listing of the Common Shares on the Toronto Stock Exchange, Cboe Canada or another recognized stock exchange, no delisting, suspension of trading in or cease trading order with respect to any securities of the Company and, to the knowledge of the Company, no inquiry or investigation (formal or informal) of any Qualifying Authority or the Exchange is in effect or ongoing or, to the knowledge of the Company, expected to be implemented or undertaken with respect to the foregoing. |
| (p) | Control of Company. To the knowledge of the Company, no agreement is in force or effect which in any manner affects the voting or control of any of the securities of the Company. |
| (q) | Auditor. MSLL CPA LLP, who have reviewed the Interim Financial Statements in accordance with Canadian generally accepted standards for a review of unaudited interim financial statements by an entity’s auditor, are independent chartered accountants with respect to the Company within the meaning of Securities Laws and there has not been any “reportable event” (within the meaning of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”)) with MSLL CPA LLP since its initial engagement as the Company’s auditor. |
| (r) | Taxes. The Company and each of the Material Subsidiaries (i) filed all domestic, foreign, federal, provincial, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure to so file could not reasonably be expected to result in a Material Adverse Effect) and have paid all taxes required to be paid by it, other than those which are being or have been contested in good faith and in respect of which reserves have been provided in the most recently published financial statements of the Company, and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty as could not reasonably be expected to result in a Material Adverse Effect, (ii) duly and timely withheld all taxes and other amounts required by applicable laws to be withheld by them and have duly and timely remitted to the appropriate governmental authority such taxes and other amounts required by applicable laws to be remitted by them and (iii) duly and timely collected all amounts on account of sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by applicable laws to be collected by them and have duly and timely remitted to the appropriate governmental authority any such amounts required by applicable laws to be remitted by them; the Company is of the opinion that the charges, accruals and reserves for taxes reflected in the Financial Statements (whether or not due and whether or not shown on any tax return but excluding any provision for deferred income taxes) are adequate under IFRS to cover taxes with respect to the Company accruing through the date hereof; there are no disputes, proceedings, investigations, audits, assessments, reassessments or claims now pending or to the knowledge of the Company, threatened against the Company that propose to assess taxes in addition to those reported in the tax returns; there are no liens for taxes upon any of the assets or properties that have not been paid by the Company, except for liens for taxes not yet due and payable. |
| (s) | Labour Dispute. No labour problem or dispute with the employees of the Company or any of the Material Subsidiaries exists or is threatened or imminent and the Company is not aware of any existing or imminent labour disturbance by the employees of any of the Material Subsidiaries. |
| (t) | Compliance with Employment Laws. The Company and each Material Subsidiary are in compliance, in all material respects, with all applicable laws respecting employment and employment practices, terms and conditions of employment, pay equity and wages, except where such non-compliance could not reasonably be expected to either constitute an adverse material fact concerning the Company or any Material Subsidiary or result in a Material Adverse Effect, and neither the Company nor any Material Subsidiary has engaged in any unfair labour practice; there is no labour strike, dispute, slowdown, stoppage, complaint or grievance pending or, to the Company’s knowledge, threatened against the Company or a Material Subsidiary; no union representation question exists respecting the employees of the Company or a Material Subsidiary and no collective bargaining agreement is in place or currently being negotiated by the Company or a Material Subsidiary; neither the Company nor a Material Subsidiary has received any notice of any unresolved matter and there are no outstanding orders under the Employment Standards Act (Ontario), the Human Rights Code (Ontario), the Occupational Health and Safety Act (Ontario) or the Workers’ Compensation Act (Ontario) or any other similar legislation in any jurisdiction in which a Material Subsidiary is organized or incorporated or in which the Company or a Material Subsidiary carries on business; no employee has any agreement as to the length of notice required to terminate his or her employment with the Company or a Material Subsidiary in excess of 24 months or equivalent compensation; and all benefit or pension plans of the Company and the Material Subsidiaries are funded in accordance with applicable laws and no past service funding liability exist thereunder. |
| (u) | Employee Plans. Each material plan for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drugs, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, pension, incentive or otherwise contributed to, or required to be contributed to, by the Company or any subsidiary of the Company for the benefit of any current or former employee, consultant, officer or director has been disclosed in the Offering Prospectus, as may be required pursuant to Securities Laws, and has been maintained in material compliance with the terms thereof and with the requirements prescribed by any and all statutes, orders, rules, policies and regulations that are applicable to any such plan. There are no profit sharing arrangements in place that provide for any additional payments by the Company or any subsidiary of the Company. |
| (v) | Employee Bonuses. Other than as disclosed in the Offering Prospectus, there are no material bonuses, distributions, commissions, excess salary payments and other amounts owing to employees which will be payable outside the ordinary course of business by the Company or any subsidiary of the Company to any employee relating to their employment with the Company or any subsidiary of the Company. |
| (w) | Insider Sales. To the knowledge of the Company, no insider (as such term is defined in Securities Laws) of the Company has a present intention to sell any securities of the Company held by it. |
| (x) | Accruals. All material accruals for unpaid vacation pay, premiums for unemployment insurance, health premiums, federal or provincial pension plan premiums, accrued wages, salaries and commissions and payments for any plan for any person have been accurately reflected in the books and records of the Company or the applicable subsidiary of the Company, as applicable. |
| (y) | Key Person Compensation. The directors, officers and key employees of the Company and the compensation arrangements with respect to such individuals are as disclosed or consistent with the disclosure in the Offering Prospectus and, except as disclosed in the Offering Prospectus, there are no pensions, profit sharing, group insurance or similar plans or other deferred compensation plans of any kind whatsoever affecting the Company. |
| (z) | Insurance. The assets of the Company and its Material Subsidiaries and their respective business operations carry certain third-party liability insurance against property damage and injury. The Company also caries insurance policies for its assets and its business operations except where the failure to carry such insurance could not reasonably be expected to result in a Material Adverse Effect on the Company, including: director and officer insurance, errors and omissions insurance, umbrella liability insurance, excess liability insurance, and automobile insurance. |
| (aa) | Legislation. The Company is not aware of any proposed changes to existing legislation, or proposed legislation published by a legislative body, which it anticipates will materially and adversely affect the business, affairs, operations, assets, liabilities (contingent or otherwise) of the Company or any Material Subsidiary. |
| (bb) | Disclosure Controls and Procedures. The Company: (i) except as disclosed or incorporated by reference in the Offering Prospectus, has designed disclosure controls and procedures to provide reasonable assurance that financial information relating to the Company, including the Material Subsidiaries, is accurate and reliable and is made known to management of the Company by others within those entities, particularly during the periods in which filings are being prepared, except as disclosed in the Offering Prospectus, has designed internal controls to provide reasonable assurance regarding the accuracy and reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Since the date of the latest audited consolidated financial statements of the Company included or incorporated by reference in the Offering Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Such disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Laws is (i) recorded, processed, summarized and reported, and (ii) made known to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure; such disclosure controls and procedures have been evaluated by the Company’s principal executive officer and principal financial officer as effective. |
| (cc) | Disclosure Controls. The Company maintains disclosure controls and procedures (as such term is defined in Securities Laws) that comply with the requirements of the Securities Laws. |
| (dd) | Intellectual Property. The Company and each Material Subsidiary owns or has the valid rights to use all of the intellectual property rights, including: (i) patents and inventions; (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works in whatever form or medium; (iv) registrations, applications and renewals for any of the foregoing; (v) proprietary computer software (including but not limited to data, data bases and documentation); (vi) trade secrets, confidential information and know-how; and (vii) all licenses, agreements and other contracts and commitments relating to any of the foregoing (together, “Intellectual Property”) necessary for the conduct of its respective business as currently conducted except where the failure to have such right could not reasonably be expected to result in a Material Adverse Effect on the Company. The Company and each Material Subsidiary have a valid and enforceable right to use all third party Intellectual Property used or held for use in the business of the Company or a Material Subsidiary as currently conducted, as applicable except where the failure to have such right could not reasonably be expected to result in a Material Adverse Effect on the Company. All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property that are material to the conduct of the business of the Company or a Material Subsidiary as currently conducted to which the Company or a Material Subsidiary, as applicable, is a party are valid and binding obligations of the Company or a Material Subsidiary, as applicable, enforceable in accordance with their terms, and, to the knowledge of the Company, there exists no event or condition that will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or a Material Subsidiary, as applicable, under any such license agreement. To the Company’s knowledge, the conduct of the Company’s and each Material Subsidiary’s business as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, and the Intellectual Property of the Company and the Material Subsidiaries which is material to the conduct of the business of the Company and the Material Subsidiaries as currently conducted or as currently proposed to be conducted is not, to the Company’s knowledge, being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Company’s knowledge, threatened or pending that seeks to limit or challenge the ownership, use, validity or enforceability of any Intellectual Property of the Company or any Material Subsidiary and the Company’s and each Material Subsidiaries’ use of any Intellectual Property owned by a third party. None the Company or any Material Subsidiary has received any communications alleging that the Company or a Material Subsidiary has violated or, by conducting its business as presently proposed, could violate any Intellectual Property or other proprietary rights of any other person, nor, without undertaking an investigation, is the Company or any Material Subsidiary aware of any basis therefor. |
| (ee) | Security Measures. The Company and each Material Subsidiary have security measures and safeguards in place, consistent with generally accepted industry practice and applicable laws, to protect all personal information and data it may collect and that is also created, obtained or kept by any person receiving access to any of such client information and data from the Company or a Material Subsidiary, or permitted by the Company or a Material Subsidiary to use, sell, handle or in any way deal with, including, but not limited to, subcontractors, bodies corporate, and researchers, from illegal or unauthorized access or use by them, their personnel or third parties, or access or use by them, their personnel or third parties in a manner that violates the privacy rights of such parties. The Company and each Material Subsidiary have complied, in all material respects, with all privacy legislation under applicable laws, and has not collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized access to any information protected by applicable privacy legislation, whether collected directly or from third parties, in an unlawful manner. The Company and each Material Subsidiary have taken all reasonable steps to protect personal information against loss or theft and against unauthorized access, copying, use, modification, disclosure or other misuse. |
| (ff) | IT Systems. |
| (i) | There has been no security breach or other compromise of or relating to any of the Company’s or any of the Material Subsidiaries’ information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”) and the Company and each Material Subsidiary have not been notified of, and have no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data. | |
| (ii) | The Company and each Material Subsidiary are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as could not, in the case of this Section 2(gg)(ii), individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. | |
| (iii) | The Company and each Material Subsidiary have implemented and maintained commercially reasonable safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data. | |
| (iv) | The Company and each Material Subsidiary have implemented backup and disaster recovery technology consistent with industry standards and practices. |
| (gg) | Third Party Partners. No third-party partners of the Company have notified the Company that such partner does not intend to continue dealing with the Company on substantially the same terms as presently conducted, subject to changes in pricing and volume in the ordinary course of business. |
| (hh) | Contracts. All of the material contracts and agreements of the Company and the Material Subsidiaries required to be disclosed or described in the Offering Prospectus by Securities Laws have been disclosed or described in the Offering Prospectus. Neither the Company nor any Material Subsidiary has received any notification from any party claiming that the Company or such Material Subsidiary is in breach or default under any contract or agreement, except which default or breach could not reasonably be expected to result in a Material Adverse Effect. The Company and each Material Subsidiary is not in default in the payment of any material obligation owed which is over thirty days past due, if any, and there is no action, suit, proceeding or investigation commenced or, to the knowledge of the Company, threatened or pending which, either in any case or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or which places, or would reasonably be expected to place, in question the validity or enforceability of this Agreement or any document or instrument delivered, or to be delivered, by the Company pursuant hereto. |
| (ii) | Business Activities. All product research and development activities, including quality assurance, quality control, testing, and research and analysis activities, conducted by, or on behalf of, the Company and any Material Subsidiary, as applicable, in connection with their business is in compliance, in all material respects, with all industry, laboratory safety, management and training standards and applicable laws and regulations applicable to the Company’s current and proposed business, and all such processes, procedures and practices, required in connection with such activities are in place as necessary and are being complied with, in all material respects. |
| (jj) | Freedom to Operate. Neither the Company nor any Material Subsidiary is a party to any agreement or understanding restricting the Company’s or any Material Subsidiary’s freedom to operate within a particular area or otherwise restricting the ability of the Company or any Material Subsidiary from freely competing with competitors. |
| (kk) | Environmental Laws. Neither the Company nor any subsidiary of the Company (including the Material Subsidiaries) are in violation of any federal, provincial, state, local, municipal or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemical pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”). The Company and its subsidiaries (including the Material Subsidiaries) have all permits, authorizations and approvals required under any applicable Environmental Laws for the conduct of their businesses as presently carried on and are in compliance with their requirements except where the failure to have such permits, authorizations or approvals or such non-compliance could not reasonably be expected to result in a Material Adverse Effect on the Company. There are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Laws against the Company or any of its subsidiaries (including the Material Subsidiaries). There are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit, or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries (including the Material Subsidiaries) relating to Hazardous Materials or any Environmental Laws. |
| (ll) | Real Property. Other than with respect to the Company’s office leases or leases for land that the Company intends to develop solar project sites on, the Company and its Material Subsidiaries do not, directly or indirectly, own or lease any material interest in any real property. |
| (mm) | Cross Border Transfers. The Company and its Material Subsidiaries are able to contemporaneously transfer funds to the United States from Canada and to Canada from the United States in order to meet the business needs and liabilities of the Company and its Material Subsidiaries including those arising pursuant to this Agreement. For greater certainty, the Company and each Material Subsidiary have no restrictions which would impede their ability to transfer funds to and from the United States in order to pay the liabilities of the Company and Material Subsidiaries generally as they become due. |
| (nn) | Books and Records. The corporate records and minute books of the Company have been maintained in material compliance with all applicable laws and are complete and accurate in all material respects. The financial books and records and accounts of the Company (i) have been maintained in accordance with good business practices on a basis consistent with past practice; (ii) are stated in reasonable detail and accurately and fairly reflect the material transactions and acquisitions and dispositions of assets of the Company; and (iii) accurately and fairly reflect the basis for the Financial Statements. |
| (oo) | Company Information. All information provided by the Company to the Agent and its counsel in relation to it and the Offering (including in respect of its due diligence requests) is accurate and complete in all material respects at its respective date as stated therein and is not misleading and does not omit to state any fact or information which would be material to a financial advisor and agent performing the services being performed by the Agent hereunder. |
| (pp) | No Withheld Material Facts. The Company has not withheld from the Agent any material facts known to the Company relating to the Company, any Material Subsidiary or the Offering that would reasonably be expected to be material to the Agent. The Company has proactively provided and will continue to provide the Agent and its counsel with all materials that may reasonably be required to conduct all due diligence regarding the Company, any Material Subsidiary or the Offering which the Agent may reasonably require, and has made known to the Agent and its counsel all material facts which may reasonably be required by the Agent and its counsel to conduct their due diligence procedures. |
| (qq) | Capitalization. The Company is authorized to issue an unlimited number of Common Shares, of which, as at June [●], 2023, 26,800,000 Common Shares were issued and outstanding, all of which Common Shares are issued as fully paid and non-assessable. As of the date hereof, no person has or will have any agreement, option, right or privilege (whether pre-emptive, contractual or otherwise) capable of becoming an agreement for the purchase, acquisition, subscription for or issue of any securities of the Company, other than: (i) 2,759,000 incentive stock options, each exercisable to acquire one Common Share at a price of $0.75 per Common Share until November 4, 2027; (ii) 7,983,000 share purchase warrants, each exercisable to acquire one Common Share at prices ranging from $0.10 - $0.75 per Common Share until expiry dates ranging from March 1, 2026 to March 1, 2028; and (iii) 265,000 restricted share units, each convertible into one Common Share in accordance with its terms. |
| (rr) | Stock Plan. Each outstanding incentive stock option and restricted share unit of the Company granted under any existing equity incentive plan of the Company (each, a “Plan”) was granted with a per share exercise price no less than the fair market value per Common Share on the grant date of such stock option or restricted share unit; each such stock option or restricted share unit (i) was granted in compliance with applicable law and with the applicable Stock Plan(s), (ii) was duly approved by the board of directors, or a duly authorized committee thereof, of the Company, as applicable, and (iii) has been properly accounted for in the Company’s consolidated financial statements at the relevant time. |
| (ss) | Common Share Certificate. The form and terms of the certificate representing the Common Shares (including the Offered Shares to be issued pursuant to the Offering) has been approved and adopted by the board of directors of the Company and the form and terms of the certificate representing the Common Shares does not and will not conflict with any applicable laws or the rules and policies of the Exchange. |
| (tt) | Due and Valid Issuance. The Offered Shares have been duly and validly allotted and reserved for issuance by the Company and will be, if and when issued by the Company, duly and validly issued as fully paid and non-assessable Common Shares of the Company. |
| (uu) | No Pre-Emptive Rights. Except as disclosed in the Offering Prospectus and pursuant to the corporate and financial advisory agreement with a private equity firm dated June 10, 2022 (“Advisory Agreement”), no person currently has any agreement, option, right or privilege (whether pre-emptive or contractual) capable of becoming an agreement (including convertible securities or warrants) for the purchase, subscription or issuance of Common Shares; no person has the right to require the Company or any of the Material Subsidiaries to qualify or register any securities for sale under Securities Laws by reason of the filing of the Offering Prospectus with any Qualifying Authority or the issuance and sale of the Offered Shares. |
| (vv) | Securities Law Compliance. No Qualifying Authority or similar regulatory authority or the Exchange has issued any order which is currently outstanding preventing or suspending trading in any securities of the Company, no such proceeding is, to the knowledge of the Company, pending, contemplated or threatened and the Company is not in material default of any requirement of Securities Laws or any other applicable securities laws; the Company has filed, in accordance with Securities Laws, the applicable policies of the Exchange and all other applicable securities laws, with all applicable Qualifying Authorities, the Exchange and all applicable self-regulatory authorities a true and complete copy of all of the Public Record and at the time filed or, if amended, as of the date of such amendment, the Public Record (i) did not contain any misrepresentation and did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and (ii) complied in all material respects with the requirements of applicable securities legislation and the rules, policies and instruments of all Qualifying Authorities having jurisdiction over the Company; the Company has not filed any confidential material change or other report or other document with any Qualifying Authority, the Exchange or any other self-regulatory authority which at the date hereof remains confidential; and no Material Subsidiary of the Company is required to file any reports or other documents with (or furnish such reports or other documents to) any of the Qualifying Authorities, the Exchange or any other self-regulatory authority. |
| (ww) | Stock Exchanges. The issued and outstanding Common Shares are listed and posted for trading under the trading symbol “SUNN” on the Canadian Securities Exchange and under the trading symbol “SUUNF” on the OTCQX. The Company is not required to file reports with the United States Securities and Exchange Commission pursuant to Section 13(a) or Section 15(d) of the United States Securities Exchange Act of 1934, as amended. In connection with each Agency Transaction, the Company has complied and will comply with all applicable corporate and securities laws and administrative policies including without limitation, the Securities Laws and applicable laws of foreign jurisdictions. |
| (xx) | Good Standing with Regulators. The Company and each Material Subsidiary have conducted and is conducting it affairs and communications, in each case, in all material respects, in a responsive, cooperative and courteous manner with all provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business carried on by the Company and the Material Subsidiary, as applicable, and the and each Material Subsidiary has had and continues to have a good standing relationship with all provincial, state, municipal, federal or other regulatory agency or body necessary to carry on the business in the relevant jurisdictions in which the Company and each Material Subsidiary operates. The Company is not aware of any material disagreement, issue of non-compliance or complaint, past or present, between the Company or any of the Material Subsidiaries and any provincial, state, municipal, federal or other regulatory agency or body in any jurisdiction where the Company or its Material Subsidiaries has or continues to carry on its business. |
| (yy) | Transfer Agent. Endeavor Trust Corporation has been duly appointed as transfer agent and registrar for the Common Shares in Canada. |
| (zz) | Related Party Transactions. The are no business relationships, contracts, documents, related party transactions or off balance sheet transactions or any other non-arm’s length transactions involving the Company or any Material Subsidiary that are required to be disclosed in the Offering Prospectus that have not been disclosed or filed in the Offering Prospectus. |
| (aaa) | Stabilization or Manipulation. The Company has not taken, directly or indirectly, and will not take any action designed to or that would constitute or that might reasonably be expected to cause or result in, under Securities Laws or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Offered Shares. |
| (bbb) | Significant Acquisition. The Company has not completed any “significant acquisition” (as such term is used in NI 44-101) that would require the inclusion of any additional financial statements or pro forma financial statements in the Offering Prospectus pursuant to Securities Laws, and no proposed acquisition by the Company has progressed to a state where a reasonable person would believe that the likelihood of the Company completing the acquisition is high and that: (i) if completed by the Company at the date of the Prospectus Supplement, would be a significant acquisition for the purposes of Securities Laws or (ii) would require financial statement disclosure in respect of the acquired business for the purposes of Securities Laws. |
| (ccc) | Continuous Disclosure. The Company will promptly file all reports required to be filed by it with the Qualifying Authorities under Securities Laws for so long as the delivery of a prospectus relating to the Offered Shares is required to be delivered by the Agent under the Securities Laws (disregarding, for such purpose, Section 9.2(1) of NI 44-102), and during such same period will notify the Agent, promptly after it receives notice thereof, of the issuance by the Qualifying Authorities of any stop order or of any order preventing or suspending the use of any prospectus relating to the Common Shares, of the suspension of the qualification of the Common Shares for offering or sale in any of the Qualifying Jurisdictions, of the initiation or threat, to the knowledge of the Company, of any proceeding for any such purpose, or of any request by the Qualifying Authorities for the amending or supplementing of the Offering Prospectus or for additional information relating to the Common Shares; and the Company will use commercially reasonable efforts to prevent the issuance of any such stop order or any such order preventing or suspending the use of any prospectus relating to the Common Shares or the suspension of any such qualification and, in the event of the issuance of any such stop order or of any such order preventing or suspending the use of any prospectus relating to the Common Shares or suspending any such qualification, to use commercially reasonable efforts to obtain the withdrawal of such order as soon as possible. |
| (ddd) | Filings. There are no reports or information that in accordance with the requirements of Securities Laws must be made publicly available in connection with the Offering that have not been made publicly available as required; and there are no documents required to be filed as of the date hereof with any of the Qualifying Authorities in connection with the Offering that have not been filed as required. |
| (eee) | Cease Trade Orders. No order preventing, ceasing or suspending trading in any securities (including the Offered Shares) of the Company or prohibiting the issue and sale of securities by the Company is issued and outstanding and no proceedings for either of such purposes have been instituted or, to the best of the knowledge of the Company, are pending, contemplated or threatened. |
| (fff) | Forward-Looking Information and Statements. All forward-looking information and statements of the Company and the Material Subsidiaries contained in the Public Record and the Offering Prospectus, including any forecasts and estimates, expressions of opinion, intention and expectation have been based on assumptions that are reasonable in the circumstances, and the Company has updated such forward-looking information and statements as required by and in compliance with Securities Laws. |
| (ggg) | Commissions. Except for the Agent as provided in this Agreement, there is no person acting for the Company entitled to any brokerage or finder’s fee in connection with this Agreement or any of the transactions contemplated hereunder. |
| (hhh) | Anti-Bribery Laws. None of the Company, any of the Material Subsidiaries or any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of the Material Subsidiaries, is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the United States Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder, the Corruption of Foreign Public Officials Act (Canada) and the rules and regulations thereunder or any other applicable anti-bribery or anticorruption provisions of applicable law (collectively, “Anti-Bribery Laws”) and the Company, the Material Subsidiaries and their respective affiliates have conducted their businesses in compliance with Anti-Bribery Laws and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. |
| (iii) | Money Laundering Laws. The operations of the Company and the Material Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the United States Currency and Foreign Transactions Reporting Act of 1970, as amended, and the rules and regulations thereunder, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and the rules and regulations thereunder and the money laundering statutes of all jurisdictions in which the Company or any of the Material Subsidiaries does business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of the Material Subsidiaries or any of their respective properties, assets or operations (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any such arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency involving the Company or any of the Material Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened. |
| (jjj) | Sanctions. None of the Company, any of the Material Subsidiaries, any director or officer of the Company or any of the Material Subsidiaries or, to the Company’s knowledge, any agent, employee, affiliate or other person acting on behalf of the Company or any of the Material Subsidiaries, (i) is currently subject to any sanctions administered or enforced by the United States (including any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State or the Bureau of Industry and Security of the U.S. Department of Commerce), Canada (including sanctions administered or enforced by the Office of the Superintendent of Financial Institutions or other relevant sanctions authority) or any other country (collectively, “Sanctions”), including Sanctions with respect to Russia, Crimea, Ukraine, Russian persons or Ukrainian persons or (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory, including Russia, Crimea or the Ukraine. |
| (kkk) | Effectiveness of Qualification. The Company is qualified in accordance with the provisions of NI 44-101 and NI 44-102 to file a short form base shelf prospectus in each of the Qualifying Jurisdictions and the entering into of this Agreement will not cause the Receipts to no longer be effective. Any amendment or supplement to the Offering Prospectus required by this Agreement will be so prepared and filed by the Company. No order preventing or suspending the use of the Offering Prospectus has been issued by any Qualifying Authority. The Offering Prospectus, at the time of filing thereof with the Qualifying Authorities, complied in all material respects and, as amended or supplemented, if applicable, will comply in all material respects with Securities Laws. The Offering Prospectus, as amended or supplemented, as of its date, did not and, as of each Time of Sale (as defined herein) and Settlement Date, if any, will not, contain a misrepresentation, as defined under Securities Laws. The Offering Prospectus, as amended or supplemented, as of its date, did and, as of each Time of Sale and Settlement Date, if any, will contain full, true and plain disclosure of all material facts relating to t the Company, the Company’s business and its securities (including the Offered Shares), will contain no misrepresentations, will be accurate in all material respects and will omit no fact, the omission of which will make such representations misleading or incorrect in any material respect. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Offering Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to the Agent furnished to the Company in writing by or on behalf of the Agent expressly for use therein. The Company has delivered to the Agent a conformed copy of the Offering Prospectus, as amended or supplemented, at such places as the Agent have reasonably requested. “Time of Sale” means the time of the Agent’s initial entry into contracts with investors for the sale of such Offered Shares. There is no fact known to the Company which the Company has not or will not disclose in the Offering Prospectus which results or will result in a Material Adverse Effect or, so far as the Company can reasonably foresee, could reasonably be expected to either result in a Material Adverse Effect or materially adversely affect the ability of the Company to perform its obligations under this Agreement. The Company has a reasonable basis for disclosing any forward- looking information in the Offering Prospectus and is not, as of the date hereof, required to update any such forward-looking statements pursuant to NI 51-102. |
Any certificate signed by any officer of the Company and delivered to the Agent or to counsel for the Agent shall be deemed a representation and warranty by the Company, as the case may be, to the Agent as to the matters covered thereby.
3. Agreements of the Company. The Company covenants and agrees with the Agent as follows:
| (a) | Prospectus Amendments. After the date of this Agreement and until the completion of the sales contemplated hereunder, (i) the Company will notify the Agent promptly of the time when any subsequent amendment to the Base Prospectus has been filed with any Qualifying Authority and where a receipt has been issued therefor or any subsequent supplement to the Offering Prospectus has been filed (each, an “Amendment Date”) and of any request by any Qualifying Authority for any amendment or supplement to the Offering Prospectus or for additional information; (ii) the Company will file promptly all other material required to be filed by it with the Qualifying Authorities; (iii) the Company will submit to the Agent a copy of any amendment or supplement to the Offering Prospectus (other than a copy of any documents incorporated by reference into the Offering Prospectus) within a reasonable period of time before the filing thereof and will afford the Agent and the Agent’s counsel a reasonable opportunity to comment on any such proposed filing prior to such proposed filing; and (iv) the Company will furnish to the Agent at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference in the Offering Prospectus (provided that the Company shall not be required to deliver documents or information incorporated by reference into the Offering Prospectus if such documents are accessible from SEDAR) and the Company will cause each amendment or supplement to the Offering Prospectus to be filed with the Qualifying Authorities as required pursuant to NI 44-101 and NI 44-102 (the “Shelf Procedures”) or, in the case of any document to be incorporated therein by reference, to be filed with the Qualifying Authorities as required pursuant to the Securities Laws, within the time period prescribed. The Company further agrees to notify the Agent and its counsel in writing as soon as reasonably practicable, and, in any event, within two Business Days, in the event it is provided notice or otherwise becomes aware that the Translation Decision has been modified, amended, cancelled or terminated in any manner whatsoever. |
| (b) | Material Change. The Company agrees that if, throughout the period during which an Agency Transaction Notice is pending or effective (and not suspended), it receives notice of, or discovers, any material change, or any event or the discovery of any fact which it believes is or could reasonably be expected to be material or would require the making of any amendment, supplement or revision to the Prospectus Supplement, the Base Prospectus or the Offering Prospectus under Securities Laws, the Company will promptly notify the Agent in writing of the full particulars thereof. Unless otherwise advised by the Company, the Agent will be entitled to assume that there has been no material change in such information and entitled to rely thereon. The Company will not, without the prior written consent of the Agent, such consent not to be unreasonably withheld or delayed, take any action which would have the effect of causing a material change in the business and affairs of the Company or any Material Subsidiary while an Agency Transaction Notice is in effect. |
| (c) | Notice of Stop Orders. The Company will advise the Agent, promptly after it receives notice thereof, of the issuance by the Qualifying Authorities of any stop order or of any order preventing or suspending the use of the Offering Prospectus or other prospectus in respect of the Offered Shares, of the suspension of the qualification of the Offered Shares for offering or sale in the Qualifying Jurisdictions, of the initiation or threatening of any proceeding for any such purpose or of any request by the Qualifying Authorities for the amending or supplementing of the Offering Prospectus or for additional information relating to the Offered Shares. If there is an Agency Transaction Notice that has been issued by the Company that has not been suspended or terminated in accordance with the notice requirements set forth in Section 2 or Section 7, as applicable, the Company will use commercially reasonable efforts to prevent the issuance of any stop order or any order preventing or suspending the use of the Offering Prospectus or other prospectus in respect of the Offered Shares or the suspension of any qualification for offering or sale in the Qualifying Jurisdictions, and, in the event of the issuance of any such stop order or any such order preventing or suspending the use of any prospectus relating to the Offered Shares or suspending any such qualification, the Company will use commercially reasonable efforts to obtain the lifting or withdrawal of such order as soon as possible. If there is no such outstanding Agency Transaction Notice, then, if, in the Company’s determination and at the Company’s sole discretion, it is necessary to prevent the issuance of any stop order or have a stop order lifted, the Company will use commercially reasonable efforts to prevent the issuance of any stop order or any order preventing or suspending the use of the Offering Prospectus or other prospectus in respect of the Offered Shares, or the suspension of any qualification for offering or sale in the Qualifying Jurisdictions, and, in the event of the issuance of any such stop order or any such order preventing or suspending the use of any prospectus relating to the Offered Shares or suspending any such qualification, the Company will use commercially reasonable efforts to obtain the lifting or withdrawal of such order as soon as possible. |
| (d) | Subsequent Changes. Within the time during which a prospectus relating to the Offered Shares is required to be delivered by the Agent under Securities Laws (disregarding, for such purpose, Section 9.2(1) of NI 44-102), the Company will comply in all material respects with all requirements imposed upon it by Securities Laws, as appropriate and as from time to time in force, and will file or furnish on or before their respective due dates all reports and filings required to be filed or furnished by it with the Qualifying Authorities pursuant to the Securities Laws. If during such period any event occurs as a result of which the Offering Prospectus as then amended or supplemented would include an untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Offering Prospectus to comply with the Securities Laws, the Company will promptly notify the Agent to suspend the Offering during such period and, if, in the Company’s determination and at the Company’s sole discretion, it is necessary to file an amendment or supplement to the Offering Prospectus to comply with the Securities Laws, the Company will promptly prepare and file with the Qualifying Authorities such amendment or supplement as may be necessary to correct such statement or omission or to make the Offering Prospectus comply with such requirements, and the Company will furnish to the Agent such number of copies of such amendment or supplement as the Agent may reasonably request. |
| (e) | Delivery of Prospectus. The Company will furnish to the Agent and its counsel (at the expense of the Company) electronic copies of the Offering Prospectus (including all documents incorporated by reference therein) and all amendments and supplements to the Offering Prospectus that are filed with the Qualifying Authorities during the period in which a prospectus relating to the Offered Shares is required to be delivered under Securities Laws (disregarding, for such purpose, Section 9.2(1) of NI 44-102), including all documents filed with the Qualifying Authorities during such period that are deemed to be incorporated by reference therein, in each case as soon as reasonably practicable and in such quantities as the Agent may from time to time reasonably request, provided, however, the Company shall not be required to furnish any documents to the Agent that are available on SEDAR. |
| (f) | Company Information. The Company will furnish to the Agent such information in its possession as is reasonably requested by the Agent as necessary or appropriate to fulfil its obligations as agent pursuant to this Agreement and Securities Laws. |
| (g) | Material Non-public Information. The Company covenants that it will not issue an Agency Transaction Notice to the Agent in accordance with Section 1 hereof if the Company is in possession of material non-public information regarding the Company and the Material Subsidiaries, taken as a whole, or the Common Shares. |
| (h) | Reimbursement of Certain Expenses. Whether or not any of the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company shall pay, or reimburse if paid by the Agent all costs and expenses incident to the performance of the obligations of the Company under this Agreement, including, without limitation, costs and expenses of or relating to (i) the preparation, printing and filing of the Offering Prospectus and any amendment or supplement to the Offering Prospectus, (ii) the preparation and delivery of certificates representing the Offered Shares, (iii) the preparation of this Agreement, (iv) furnishing (including costs of shipping, mailing and courier) such copies of the Offering Prospectus, and all amendments and supplements thereto, as may be requested for use in connection with the Offering, (v) the listing of the Offered Shares on the Exchange, (vi) any filings required to be made by the Agent with the Qualifying Authorities, and the fees, disbursements and other charges of counsel for the Agent in connection therewith, (vii) counsel to the Company, (viii) CDS and any other depositary, transfer agent or registrar for the Offered Shares, (ix) the marketing of the offering of the Offered Shares by the Company, including, without limitation, all costs and expenses of commercial airline tickets, hotels, meals and other travel expenses of officers, employees, agents and other representatives of the Company, (x) all reasonable and documented out-of-pocket fees, disbursements and other charges of the Agent incurred in connection with this Agreement, the Offering Prospectus and the offering of the Offered Shares (including without limitation, due diligence expense, meals, hotels, airfare, ancillary out-of-pocket expenses, the fees and disbursements of counsel to the Agent and all applicable taxes (to a maximum of $75,000, exclusive of taxes and disbursements), provided that any single expense, other than fees and disbursements of counsel, greater than $1,000 shall require the prior written approval of the Company and (xi) all fees, costs and expenses for consultants used by the Company in connection with the Offering. |
| (i) | Use of Proceeds. The Company shall apply the net proceeds from the offering and sale of the Offered Shares to be sold by the Company in the manner set forth in the Offering Prospectus under the heading “Use of Proceeds and Business Objective and Milestones” and the Company does not intend to use any of the proceeds from the sale of the Offered Shares to repay any outstanding debt owed to the Agent or any affiliate of the Agent. |
| (j) | Change of Circumstances. During the term of this Agreement, the Company will, at any time during a fiscal quarter in which the Company intends to deliver an Agency Transaction Notice to the Agent to sell Offered Shares, advise the Agent promptly after it has received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document provided to the Agent pursuant to this Agreement. |
| (k) | Due Diligence Cooperation. The Company shall reasonably cooperate with any reasonable due diligence review requested by the Agent or its counsel from time to time in connection with the transactions contemplated hereby or any Agency Transaction Notice, including, without limitation, (i) prior to the open of trading on each intended purchase date and any Time of Sale or Settlement Date, making available appropriate corporate officers of the Company and, upon reasonable request, representatives of the accountants for the Company and an update on diligence matters with representatives of the Agent and its counsel and (ii) at each Representation Date (as defined herein) or otherwise as the Agent may reasonably request, providing information and making available documents and appropriate corporate officers of the Company and representatives of the accountants for the Company for one or more due diligence sessions with representatives of the Agent and its counsel. |
| (l) | Clear Market. The Company shall not offer to sell, sell, pledge, hypothecate, contract or agree to sell, purchase any option to sell, grant any option for the purchase of, lend, or otherwise dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares or warrants or other rights to acquire shares of Common Shares or any other securities of the Company that are substantially similar to the Common Shares (each a “Proposed Transaction”), without giving the Agent by written notice or by news release sent to the Agent at least three Business Days (as define herein) prior written notice to the issuance date specifying the nature and date of such Proposed Transaction; except that if the Company is proposing to issue securities under a “bought deal” or other financing transaction where the Company is not aware of the Proposed Transaction sufficiently in advance to allow for three Business Days prior notice, then the Company shall notify the Agent as soon as possible upon becoming aware of the Proposed Transaction and in any event prior to accepting any offer or entering into any agreement with respect to the Proposed Transaction. Notwithstanding the foregoing, the Company may, without giving any such prior notice, (i) qualify the offering and sale of the Offered Shares through the Agent pursuant to this Agreement, (ii) issue Common Shares upon the exercise or settlement of an option, warrant or restricted share unit or the conversion of a convertible security outstanding on the date hereof and referred to in the Offering Prospectus, or (iii) issue Common Shares, options, restricted share units or other securities convertible into or exchangeable for Common Shares pursuant to a Plan or pursuant to the Advisory Agreement. If notice of a proposed transaction is provided by the Company pursuant to this Section 3(l), the Agent may suspend activity of the transactions contemplated by this Agreement for such period of time as may be requested by the Company or as may be deemed appropriate by the Agent. “Business Day” means any day other than a Saturday, Sunday or statutory or civil holiday in the City of Vancouver, British Columbia. |
| (m) | Affirmation of Representations, Warranties, Covenants and Other Agreements. Upon commencement of the Offering under this Agreement (and upon the recommencement of the Offering under this Agreement following any suspension of sales under Section 1(a)(vi)), and at each Time of Sale, each Settlement Date and each Amendment Date, the Company shall be deemed to have affirmed each representation and warranty contained in this Agreement. |
| (n) | Required Filings Relating to Sale of Offered Shares. In each quarterly financial statements, quarterly and annual management discussion and analysis, AIF (as such term is defined in NI 44-101) and annual financial statements filed by the Company in respect of any quarter or year, as applicable, in which sales of Offered Shares were made by the Agent under this Agreement, the Company shall set forth with regard to the most recent applicable quarter or year, as applicable, the number of Offered Shares and the average selling price of the Offered Shares sold through the Agent under this Agreement, the gross and net proceeds received by the Company and the compensation paid by the Company to the Agent with respect to sales of Offered Shares pursuant to this Agreement. For so long as the Offered Shares are listed on the Exchange, the Company will provide the Exchange with all information it requires with respect to the Offering within the timelines prescribed by the Exchange. |
| (o) | Representation Dates; Certificate. During the term of this Agreement, each time the Company (i) files the Offering Prospectus relating to the Offered Shares or amends or supplements the Offering Prospectus relating to the Offered Shares by means of an amendment or supplement but not by means of incorporation of document(s) by reference to the Offering Prospectus relating to the Offered Shares; or (ii) files or amends annual or interim financial statements pursuant to Securities Laws (each date of filing of one or more of the documents referred to in (i) or (ii), above, shall be a “Representation Date”), the Company shall furnish the Agent with a certificate, in the form contemplated under Section 4(d), upon execution of this Agreement and within three days of each Representation Date. |
| (p) | Legal Opinions. Upon execution of this Agreement and within three Trading Days after any Representation Date, the Company shall cause to be furnished to the Agent, dated the date the opinions are so furnished and addressed to the Agent, in form and substance satisfactory to the Agent and its counsel, acting reasonably, the written opinion of DLA Piper (Canada) LLP, Canadian counsel for the Company and other local counsel, as required, with respect to the Company and the Offering but modified as necessary to relate to the Offering Prospectus as amended and supplemented to the date of such opinion and with respect to the Material Subsidiaries or, in lieu of such opinions, counsel last furnishing such opinion to the Agent and its counsel may furnish the Agent with a letter addressed to the Agent and its counsel to the effect that the Agent and its counsel may rely on such last opinion to the same extent as though it was dated the date of such letter authorizing reliance (except that statements in such last opinion shall be deemed to relate to the Offering Prospectus as amended and supplemented to the time of delivery of such letter authorizing reliance). The requirement to furnish the documents set out in this Section 3(p) shall be waived for any Representation Date occurring at a time at which no Agency Transaction Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers an Agency Transaction Notice hereunder (which for such calendar quarter shall be considered a Representation Date), and the next occurring Representation Date. Notwithstanding the foregoing, if the Company subsequently decides to sell Offered Shares following a Representation Date when the Company relied on such waiver, then before the Company delivers the Agency Transaction Notice, or the Agent sells any Offered Shares, the Company shall provide the Agent with each of the documents set out in this Section 3(p). |
| (q) | Comfort Letters. Upon execution of this Agreement and within three Trading Days after each Representation Date, the Company shall cause its auditor, MSLL CPA LLP to furnish the Agent a letter (each, a “Comfort Letter”) dated the date the Comfort Letter is delivered, in form and substance satisfactory to the Agent, acting reasonably, addressed to the Agent and its counsel, relating to the verification of certain of the financial information and statistical and accounting data relating to the Company and the Material Subsidiaries contained in the Offering Prospectus or incorporated by reference therein, which comfort letter shall be based on a review having a cut-off date not more than two Business Days prior to the date of such letter, (i) stating that such auditors are independent public accountants within the meaning of the Securities Laws, and that in their opinion (as applicable) the audited financial statements of the Company incorporated by reference in the Offering Prospectus comply as to form in all material respects with the published accounting requirements of the Securities Laws and with the applicable accounting requirements of the Securities Laws and the related published rules and regulations adopted by the Qualifying Authorities (the first such letters, the “Initial Comfort Letters”) and (ii) updating the Initial Comfort Letters with any information which would have been included in the Initial Comfort Letters had it been given on such date and modified as necessary to relate to the Offering Prospectus, as amended and supplemented to the date of such letter(s). The requirement to furnish the documents set out in this Section 3(q) shall be waived for any Representation Date occurring at a time at which no Agency Transaction Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers an Agency Transaction Notice hereunder (which for such calendar quarter shall be considered a Representation Date), and the next occurring Representation Date. Notwithstanding the foregoing, if the Company subsequently decides to sell Offered Shares following a Representation Date when the Company relied on such waiver, then before the Company delivers the Agency Transaction Notice, or the Agent sells any Offered Shares, the Company shall provide the Agent with each of the documents set out in this Section 3(q). |
| (r) | Additional Materials. Upon execution of this Agreement and within three Trading Days after each Representation Date in connection with which the Company is required to deliver the materials set out in Section 3(p) and Section 3(q), the Company shall deliver to the Agent and its counsel: |
| (i) | a certificate of good standing (or equivalent) dated within two Business Days of the applicable delivery date in respect of the Company and each Material Subsidiary; | |
| (ii) | certificates or lists issued under Securities Laws stating or evidencing that the Company is a “reporting issuer” in each Qualifying Jurisdiction and not in default under Securities Laws; | |
| (iii) | a certificate from the transfer agent of the Company dated within two Business Days of the applicable delivery date as to the number of Common Shares issued and outstanding as of such date; and | |
| (iv) | one or more accurate certificates, dated such date and signed by two executive officers of the Company, in form and substance satisfactory to the Agent with respect to the constating documents of the Company and the Material Subsidiaries, all resolutions of the Company’s board of directors relating to the Offering Prospectus, the Offering and otherwise pertaining to the purchase and sale of the Offered Shares and the transactions contemplated hereby and thereby, the incumbency and specimen signatures of signing officers and such other matters as the Agent may reasonably request. |
| (s) | Market Activities. The Company will not, directly or indirectly, (i) take any action designed to or that would constitute or that would reasonably be expected to cause or result in, under Securities Laws or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Offered Shares or (ii) sell, bid for, or purchase the Offered Shares, or pay anyone any compensation for soliciting purchases of the Offered Shares other than the Agent. |
| (t) | Board Authorization. Prior to delivering notice of the proposed terms of an Agency Transaction pursuant to Section 1 (or at such time as otherwise agreed between the Company and the Agent), the Company shall have (i) obtained from its board of directors or a duly authorized committee thereof all necessary corporate authority for the sale of the Offered Shares pursuant to the relevant Agency Transaction, and (ii) provided to the Agent a copy of the relevant board or committee resolutions or other authority. |
| (u) | Offer to Refuse to Purchase. If, to the knowledge of the Company, any condition set forth in Section 4(a) of this Agreement shall not have been satisfied on the applicable Settlement Date, the Company shall offer to any person who has agreed to purchase Offered Shares from the Company as the result of an offer to purchase solicited by the Agent the right to refuse to purchase and pay for such Offered Shares. |
| (v) | Consent to the Agent’s Trading. The Company consents, to the extent permitted under Securities Laws and under this Agreement, to the Agent trading in the Common Shares of the Company: (i) for the account of its clients at the same time as sales of Offered Shares occur pursuant to this Agreement; and (ii) for the Agent’s own accounts, provided that in the case of Section 3(v)(ii), no such purchase or sale shall take place by the Agent while the Agent has received an Agency Transaction Notice that remains in effect, unless the Company has expressly authorized or consented in writing to any such trades by the Agent, and provided further that in the case of Sections 3(v)(i) and (ii), by providing such consent, the Company will incur no liability on behalf of the Agent or its clients resulting from such trading activity and provided further that. |
| (w) | Distribution of Offering Materials. The Company has not distributed and will not distribute, during the term of this Agreement, any “marketing materials” (as defined in National Instrument 41-101 – General Prospectus Requirements) solely connected to the offering and sale of the Offered Shares other than the Offering Prospectus, provided that the Agent covenants with the Company not to take any action that would result in the Company being required to file with the Qualifying Authorities any “marketing materials” that otherwise would not be required to be filed by the Company, but for the action of the Agent. |
| (x) | Purchases under Normal Course Issuer Bid. Without having first agreed with the Agent, acting reasonably, as to the appropriate adjustments, if any, to be made to the parameters set forth in the applicable Agency Transaction Notice, the Company will not purchase Common Shares, and not permit any person acting on its behalf to purchase Common Shares, under a normal course issuer bid throughout (i) any period during which an Agency Transaction Notice is pending or effective and (ii) the period beginning on the second Business Day immediately prior to the date on which any Agency Transaction Notice is delivered to the Agent hereunder and ending on the second Business Day immediately following the final Settlement Date with respect to the Offered Shares sold pursuant to such Agency Transaction Notice. |
4. Conditions to the Agent’s Obligations. The obligations of the Agent hereunder are subject to the accuracy of the representations and warranties of the Company on the date hereof, on each Representation Date and as of each Time of Sale and each Settlement Date, the performance of the Company of its obligations hereunder and the following additional conditions:
| (a) | Prospectus Supplement. The Prospectus Supplement shall have been filed with the Qualifying Authorities under the Shelf Procedures and in accordance with Securities Laws and this Agreement and all requests for additional information on the part of the Qualifying Authorities shall have been complied with to the reasonable satisfaction of the Agent and Agent’s counsel and the Translation Decision shall remain in full force and effect without amendment. |
| (b) | No Material Adverse Changes. Since the date of the most recent financial statements of the Company included or incorporated by reference in the Offering Prospectus, except as described in the Offering Prospectus, there shall not have been a Material Adverse Change. |
| (c) | No Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company of any request for additional information from the Qualifying Authorities or any other federal, provincial, state, foreign or other governmental, administrative or self-regulatory authority during the period during which the delivery of a prospectus relating to the Offered Shares is required to be delivered by the Agent under the Securities Laws (disregarding, for such purpose, Section 9.2(1) of NI 44-102), the response to which would require any amendments or supplements to the Offering Prospectus; (ii) the issuance by the Qualifying Authorities or any other foreign or other governmental authority of any stop order suspending the effectiveness of the Offering Prospectus or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Offered Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the occurrence of any event that makes any statement made in the Offering Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Offering Prospectus or any document incorporated or deemed to be incorporated therein by reference so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company having reasonably determined that an amendment to the Offering Prospectus would be appropriate. |
| (d) | Officers’ Certificates. The Agent shall have received, upon execution of this Agreement and on each Representation Date, one or more accurate certificates, dated such date and signed by an executive officer of the Company, in form and substance satisfactory to the Agent, to the effect set forth in Sections 4(b) and (c) and to the effect that: |
| (i) | each signatory of such certificate has carefully examined the Offering Prospectus (including any documents filed under Securities Laws and deemed to be incorporated by reference into the Offering Prospectus); | |
| (ii) | as of such date and as of each Time of Sale subsequent to the immediately preceding Representation Date, if any, that the Offering Prospectus does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; | |
| (iii) | each of the representations and warranties of the Company contained in this Agreement are, as of such date and each Time of Sale subsequent to the immediately preceding Representation Date, if any, true and correct; and | |
| (iv) | each of the covenants and agreements required herein to be performed by the Company on or prior to such date has been duly, timely and fully performed and each condition herein required to be complied with by the Company on or prior to such date has been duly, timely and fully complied with. |
| (e) | Legal Opinions. The Agent shall have received the opinions of counsel to be delivered pursuant to Section 3(p) on or before the date on which such delivery of such opinions are required pursuant to Section 3(p). |
| (f) | Comfort Letter(s). The Agent shall have received the Comfort Letter(s) required to be delivered pursuant to Section 3(q) on or before the date on which such delivery of such letter(s) is required pursuant to Section 3(q). |
| (g) | Additional Materials. The Agent shall have received the materials and documents required to be delivered pursuant to Section 3(r) on or before the date on which such delivery of such materials and documents is required pursuant to Section 3(r). |
| (h) | Due Diligence. The Company shall have complied with all of its due diligence obligations required pursuant to Section 3(k). |
| (i) | Stock Exchange Listing. The Offered Shares shall have been duly authorized for listing on the Exchange, subject only to notice of issuance at or prior to the applicable Settlement Date. |
| (j) | Filings Made. All filings required by the Qualifying Authorities to have been filed prior to the issuance of any Agency Transaction Notice hereunder shall have been made within the applicable time period prescribed for such filings by Securities Laws. |
| (k) | Additional Certificates. The Company shall have furnished to the Agent such certificate or certificates, in addition to those specifically mentioned herein, as the Agent may have reasonably requested as to the accuracy and completeness at each Representation Date of any statement in the Offering Prospectus or any documents filed under Securities Laws and deemed to be incorporated by reference into the Offering Prospectus, as to the accuracy at such Representation Date of the representations and warranties of the Company herein, as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Agent. |
| (l) | Press Release. Concurrently with the execution of this Agreement, the Company shall have issued and disseminated, and filed with the Qualifying Authorities, a news release, in form and substance acceptable to the Agent, acting reasonably, (i) announcing that the Company has entered into this Agreement, (ii) indicating that the Prospectus Supplement has been or will be filed, (iii) specifying where and how a purchaser of Offered Shares may obtain a copy of this Agreement and the Prospectus Supplement and (iv) if applicable, that the completion of the distribution of Offered Shares would constitute a material fact or material change. Promptly after the execution of this Agreement, and in any event before any sales of Offered Shares are made hereunder, the Company shall file this Agreement with the Qualifying Authorities and the Exchange in accordance with Securities Laws. |
5. Representations, Warranties and Covenants of the Agent.
| (a) | The Agent hereby represents, warrants and covenants to the Company that: |
| (i) | it is and will remain so, while this Agreement remains in effect, appropriately registered under applicable Securities Laws so as to permit it to lawfully fulfill its obligations hereunder; | |
| (ii) | it has good and sufficient right and authority to enter into this Agreement and complete the transactions contemplated under this Agreement on the terms and conditions set forth herein; and | |
| (iii) | it will comply with applicable Securities Laws in connection with the transactions contemplated under this Agreement in all jurisdictions in which the Offered Shares may be sold. |
6. Indemnification.
| (a) | Indemnification of the Agent. The Company shall indemnify and hold harmless the Agent and its affiliates (collectively referred to as the “Agent” in this Section 6), and the directors, officers, employees, shareholders, counsel and agents of the Agent from and against any and all losses, claims, liabilities, expenses and damages (including, without limitation, any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which they, or any of them, may become subject under Securities Laws or other statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Offered Shares in the public offering to any person by the Agent and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to the Agent furnished in writing to the Company by the Agent expressly for inclusion in the Offering Prospectus and, provided further, that none of the foregoing indemnities shall apply if and to the extent that a court of competent jurisdiction in a final judgment from which no appeal can be made or a regulatory authority in a final ruling from which no appeal can be made shall determine that the losses, liability, claims, damages or expenses resulted from the gross negligence, fraud or willful misconduct of an indemnified party claiming indemnity, in which case this indemnity shall cease to apply to such indemnified party in respect of such claim. This indemnity will be in addition to any liability that the Company might otherwise have. |
| (b) | Indemnification of the Company. The Agent shall indemnify and hold harmless the Company, its agents, each director of the Company and each officer of the Company who signs the Prospectus Supplement to the same extent as the foregoing indemnity from the Company to the Agent, but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to the Agent furnished in writing to the Company by the Agent expressly for inclusion in the Offering Prospectus. This indemnity will be in addition to any liability that the Agent might otherwise have. The Company acknowledges that the name of the Agent set forth on the front and back covers and on the certificate of the Agent in the Prospectus Supplement constitutes the only information furnished in writing by or on behalf of the Agent for inclusion in the Offering Prospectus. |
| (c) | Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Section 6 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party or results in any increase in the liability under this indemnity that the indemnifying party would not otherwise have incurred had the indemnified party given the required notice. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party) or (iv) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel shall be at the expense of the indemnifying party or parties. Notwithstanding the foregoing sentence, it is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified parties in the event that the indemnifying party is responsible for such firm’s fees, disbursements and other charges pursuant to the foregoing sentence. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld or delayed). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 6 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent (A) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding and (B) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by this Section 6(c), the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (1) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (2) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (3) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. |
| (d) | Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company or the Agent, the Company and the Agent shall contribute to the total losses, claims, liabilities, expenses and damages (including, without limitation, any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted but after deducting any contribution received by the Company from persons other than the Agent, such as officers of the Company who signed the Offering Prospectus and directors of the Company, who also may be liable for contribution) to which the Company and the Agent may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Agent on the other hand. The relative benefits received by the Company on the one hand and the Agent on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company to the sum of (i) the total compensation actually received by the Agent pursuant to Section 1(a)(ix) (in the case of one or more Agency Transactions hereunder) and (ii) the underwriting discounts and commissions actually received by the Agent as set forth on the cover page of the Offering Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Agent, on the other hand, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Agent, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6(d) shall be deemed to include, for purpose of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), the Agent shall not be required to contribute any amount in excess of the sum of (A) the total compensation actually received by the Agent pursuant to Section 1(a)(ix) (in the case of one or more Agency Transactions hereunder) and (B) the underwriting discounts and commissions actually received by the Agent as set forth in the table on the cover page of the Offering Prospectus, and no person found guilty of fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6(d), will notify any such party from whom contribution may be sought, but the omission so to notify will not relieve the party from whom contribution may be sought from any other obligation it may have under this Section 6(d) unless, and only to the extent that, such omission results in any increase in the liability to contribute pursuant to this Section 6(d) that the party would not otherwise have had the other contributing party given notice. No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld). |
7. Termination.
| (a) | The Company may terminate this Agreement in its sole discretion at any time upon giving prior written notice to the Agent. Any such termination shall be without liability of any party to the other party, except that (i) with respect to any pending sale, the obligations of the Company, including, without limitation, in respect of compensation of the Agent, shall remain in full force and effect notwithstanding such termination; and (ii) the provisions of Sections 2 (Representations and Warranties of the Company), 3 (Agreements of the Company) (except that if no Offered Shares have been previously sold hereunder, only Section 3(h) (Reimbursement of Certain Expenses) shall survive), 6 (Indemnification), 8(b) (Consent to Jurisdiction), 8(c) (No Third Party Beneficiaries), 8(d) (Survival of Representations and Warranties), 8(e) (Disclaimer of Fiduciary Relationship), 8(f) (Governing Law) and 8(g) (Judgment Currency) of this Agreement shall remain in full force and effect notwithstanding such termination. |
| (b) | The Agent may terminate its obligations under this Agreement in its sole discretion at any time upon giving prior written notice to the Company. Any such termination shall be without liability of any party to another party, except that (i) with respect to any pending sale, the obligations of the Company, including, without limitation, in respect of compensation of the Agent, shall remain in full force and effect notwithstanding such termination; and (ii) the provisions of Sections 2 (Representations and Warranties of the Company), 3 (Agreements of the Company) (except that if no Offered Shares have been previously sold hereunder, only Section 3(h) (Reimbursement of Certain Expenses) shall survive), 6 (Indemnification), 8(b) (Consent to Jurisdiction), 8(c) (No Third Party Beneficiaries), 8(d) (Survival of Representations and Warranties), 8(e) (Disclaimer of Fiduciary Relationship), 8(f) (Governing Law) and 8(g) (Judgment Currency) of this Agreement shall remain in full force and effect notwithstanding such termination. |
| (c) | This Agreement shall remain in full force and effect until the earliest to occur of (i) termination of this Agreement pursuant to Section 7(a) or (b) above or otherwise by mutual written agreement of the parties, and (ii) such date that the aggregate gross sales proceeds of the Offered Shares sold pursuant to this Agreement equals the Maximum Amount, in each case except that (A) with respect to any pending sale, the obligations of the Company, including, without limitation, in respect of compensation of the Agent, shall remain in full force and effect notwithstanding such termination; and (B) the provisions of Sections 2 (Representations and Warranties of the Company), 3 (Agreements of the Company) (except that if no Offered Shares have been previously sold hereunder, only Section 3(h) (Reimbursement of Certain Expenses) shall survive), 6 (Indemnification), 8(b) (Consent to Jurisdiction), 8(c) (No Third Party Beneficiaries), 8(d) (Survival of Representations and Warranties), 8(e) (Disclaimer of Fiduciary Relationship), 8(f) (Governing Law) and 8(g) (Judgment Currency) of this Agreement shall remain in full force and effect notwithstanding such termination. The Company and the Agent agree that, if the Company files a new base shelf prospectus and prospectus supplement to such new base shelf prospectus, then this Agreement shall continue to apply, provided that (A) the parties hereto will make consequential amendments to this Agreement in respect thereof, and (B) pending such new base shelf prospectus and prospectus supplement being declared effective by the Reviewing Authority and receipts being issued by the Qualifying Authorities in respect of such new base shelf prospectus and prospectus supplement, no Agency Transaction Notice shall be given by the Company. |
| (d) | Any termination of this Agreement shall be effective on the date specified in the notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Agent or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Offered Shares, such sale shall settle in accordance with the provisions of Section 1. |
8. Miscellaneous.
| (a) | Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed, hand delivered or emailed: |
| (i) | if to the Agent, at the offices of: | |
| Research Capital Corporation | ||
| 1075 West Georgia Street, Suite 1920 | ||
| Vancouver, British Columbia V6E 3C9 |
| Attention: | Jovan Stupar, Managing Director, Venture Investment Banking | |
| Email: | [REDACTED] |
| with a copy to: | ||
| MLT Aikins LLP | ||
| 1066 West Hastings Street, Suite 2600 | ||
| Vancouver, British Columbia V6E 3X1 |
| Attention: | Mahdi Shams | |
| Email: | [REDACTED] |
| (ii) | or if sent to the Company, at the office of the Company: | |
| Solarbank Corporation | ||
| 505 Consumers Road, Suite 803 | ||
| Toronto, Ontario, M2J 4Z2 |
| Attention: | Richard Lu, Chief Executive Officer | |
| Email: | [REDACTED] |
| with a copy to: | ||
| DLA Piper (Canada) LLP | ||
| 666 Burrard Street, Suite 2800 | ||
| Vancouver, British Columbia V6C 2Z7 |
| Attention: | Denis Silva | |
| Email: | [REDACTED] |
Any such notice or other communication shall be deemed given (i) on the Business Day that it was hand delivered, (ii) on the next Business Day after timely delivery to a nationally-recognized overnight courier, (iii) on the Business Day actually received if deposited in the U.S. mail or through Canada Post (certified or registered mail, return receipt requested, postage prepaid), and (iv) if sent by email, on the Business Day on which it was sent if sent prior to 5:00 p.m. (Toronto Time), or thereafter on the following Business Day.
| (b) | Consent to Jurisdiction. The Company irrevocably (i) agrees that any legal suit, action or proceeding against the Company brought by the Agent or by any person who controls the Agent arising out of or based upon this Agreement or the transactions contemplated thereby may be instituted in the courts of the province of British Columbia, (ii) waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of venue of any such proceeding and (iii) submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. To the extent that the Company has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of its obligations under the above-referenced documents, to the extent permitted by law. The provisions of this Section 8(b) shall survive any termination of this Agreement, in whole or in part. |
| (c) | No Third Party Beneficiaries. The Company acknowledges and agrees that the Agent are acting solely in the capacity of arm’s length contractual counterparties to the Company with respect to the Offering contemplated hereby (including in connection with determining the terms of the offering) and not as financial advisors or fiduciaries to, or agents of, the Company or any other person. Additionally, the Agent are not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Agent shall have no responsibility or liability to the Company with respect thereto. Any review by the Agent of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Agent and shall not be on behalf of the Company. |
| (d) | Survival of Representations and Warranties. All representations, warranties and agreements of the Company contained herein or in certificates or other instruments delivered pursuant hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Agent or any of its controlling persons and shall survive delivery of and payment for the Offered Shares hereunder. |
| (e) | Disclaimer of Fiduciary Relationship. The Company acknowledges and agrees that (i) the purchase and sale of the Offered Shares pursuant to this Agreement, including the determination of the terms of the offering and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the Agent, on the other hand, (ii) in connection with the offering contemplated by this Agreement and the process leading to such transaction, the Agent owes no fiduciary duties to the Company or its securityholders, creditors, employees or any other party, (iii) the Agent has not assumed nor will it assume any advisory or fiduciary responsibility in favor of the Company with respect to the Offering contemplated by this Agreement or the process leading thereto (irrespective of whether the Agent or its affiliates have advised or are currently advising the Company on other matters) and the Agent has no obligation to the Company with respect to the Offering contemplated by this Agreement except the obligations expressly set forth in this Agreement, (iv) the Agent and its affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (v) the Agent has not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated by this Agreement and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate. |
| (f) | Governing Law. THIS AGREEMENT, AND ANY DISPUTE, CLAIM OR CONTROVERSY ARISING UNDER OR RELATED TO THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE PROVINCE OF BRITISH COLUMBIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH PROVINCE. Each party hereto hereby irrevocably submits for purposes of any action arising from this Agreement brought by the other party hereto to the jurisdiction of the courts of the province of British Columbia. |
| (g) | Currency. All references herein to dollar amounts are to lawful money of Canada. |
| (h) | Judgment Currency. The Company agrees to indemnify the Agent and its affiliates and the respective directors, officers, employees, shareholders, counsel and agents of the Agent and its affiliates against any loss incurred by the Agent as a result of any judgment or order being given or made for any amount due hereunder and such judgment or order being expressed and paid in a currency (the “judgment currency”) other than Canadian dollars and as a result of any variation as between (i) the rate of exchange at which the Canadian dollar amount is converted into the judgment currency for the purpose of such judgment or order, and (ii) the rate of exchange at which such indemnified person is able to purchase Canadian dollars with the amount of the judgment currency actually received by the indemnified person. The foregoing indemnity shall constitute a separate and independent obligation of the Company and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term “rate of exchange” shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, the relevant currency. |
| (i) | Counterparts and Electronic Signature. This Agreement may be executed manually or electronically in any number of counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. The transmission by facsimile or e-mail of a copy of the execution page hereof reflecting the manual or electronic execution of this Agreement by any party hereto shall be effective to evidence that party’s intention to be bound by this Agreement and that party’s agreement to the terms, provisions and conditions hereof, all without the necessity of having to produce an original copy of such execution page. |
| (j) | Survival of Provisions Upon Invalidity of Any single Provision. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. |
| (k) | Titles and Subtitles. The titles of the Sections of this Agreement are for convenience and reference only and are not to be considered in construing this Agreement. |
| (l) | Entire Agreement. Other than the terms set forth in each Agency Transaction Notice delivered hereunder, this Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. This Agreement may not be amended or otherwise modified or any provision hereof waived except by an instrument in writing signed by the Agent and the Company. |
[Signature page follows]
Please confirm that the foregoing correctly sets forth the agreement between the Company and the Agent.
| SOLARBANK CORPORATION | ||
| “Dr. Richard Lu” | ||
| by its authorized signatory | ||
| Name: | Dr. Richard Lu | |
| Title: | CEO | |
Confirmed as of the date first above mentioned:
| RESEARCH CAPITAL CORPORATION | ||
| “Jovan Stupar” | ||
| by its authorized signatory | ||
| Name: | Jovan Stupar | |
| Title: | Managing Director, Venture Investment Banking | |
SCHEDULE A
AUTHORIZED COMPANY REPRESENTATIVES*
| Name and Office / Title | E-mail Address | Telephone Numbers | ||
| Richard Lu, Chief Executive Officer | [REDACTED] | [REDACTED] | ||
| Olen Aasen, General Counsel | [REDACTED] | [REDACTED] |
* Notices to be provided to at least two of the above Company Representatives.
AUTHORIZED AGENT REPRESENTATIVES
The Authorized Agent Representatives of Research Capital Corporation are as follows
| Name and Office / Title | E-mail Address | Telephone Numbers | ||
Jovan Stupar
Managing Director, Venture Investment Banking |
[REDACTED] | [REDACTED] | ||
Savio Chiu
Vice President, Venture Investment Banking |
[REDACTED] | [REDACTED] |
SCHEDULE B
MATERIAL SUBSIDIARIES
| Name of Material Subsidiary | Jurisdiction of Existence of Material Subsidiary | Date of Acquisition of Interest | Interest Held in Material Subsidiary (%) | Notes | ||||||
| Abundant Solar Power Inc. | Delaware | December 15, 2016 | 100% | Abundant Solar Power Inc. was incorporated to carry out the Corporation’s operations in the United States. | ||||||
| Abundant Construction Inc. | Ontario | November 8, 2018 | 100% | Abundant Construction Inc. was incorporated to act as the counter-party for certain of the Corporation’s construction agreements. | ||||||
SCHEDULE C
[Company Letterhead]
Research Capital Corporation
1075 West Georgia Street, Suite 1920
Vancouver, British Columbia V6E 3C9
VIA EMAIL
TRANSACTION NOTICE
Ladies and Gentlemen:
The purpose of this Transaction Notice is to propose certain terms of the Agency Transaction entered into with the Agent under, and pursuant to, that certain Equity Distribution Agreement between the Company and the Agent, dated June 29, 2023 (the “Agreement”). Please indicate your acceptance of the proposed terms below. Upon acceptance, the particular Agency Transaction to which this Transaction Notice relates shall supplement, form a part of, and be subject to, the Agreement. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Agreement.
The terms of the particular Agency Transaction to which this Transaction Notice relates are as follows:
| Trading Day(s) on which Offered Shares may be sold: | [_______], 20[__], [_______], 20[__] . . . [_______], 20[__] |
| Maximum [Number]/[Value] of Offered Shares to be sold in the Aggregate: | [_______] |
| Maximum [Number]/[Value] of Offered Shares to be sold on each Trading Day: | [_______] |
| Stock exchange: | [_______] |
| Floor Price: | $[__.__] |
[Remainder of Page Intentionally Blank]
| Very truly yours, | ||
| SOLARBANK CORPORATION | ||
| by its authorized signatory | ||
| Name: | ||
| Title: | ||
| Accepted and agreed as of the date first above written: | ||
| RESEARCH CAPITAL CORPORATION | ||
| by its authorized signatory | ||
| Name: | ||
| Title: | ||
Exhibit 99.54
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| June 26, 2023 | |
| 3. | News Release |
| A news release was disseminated on June 27, 2023 via Cision. | |
| 4. | Summary of Material Change |
| On June 26, 2023, the Company executed an engineering, procurement, and construction (“EPC”) Agreement with Solar Advocate Development LLC (“Solar Advocate”) to develop and construct the 5.9MW DC (total watts) Manlius, New York community solar project (the “Manlius Project”) for Solar Advocate. The Company originated the site in Manlius, New York and has completed an interconnection agreement with the utility company, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have commenced and the Company has initiated procurement of major equipment. The Company has also leveraged its strong relationships with Tier 1 suppliers to secure major equipment orders of solar panels, inverters, racking, and transformers necessary for the Manlius Project. The Company will now continue to build the Manlius Project for Solar Advocate to commercial operation via the EPC Agreement. The EPC agreement has a total value of approximately US$11.35 million. | |
| 5.1 | Full Description of Material Change |
On June 26, 2023, the Company executed an EPC Agreement with Solar Advocate to develop and construct the 5.9MW DC (total watts) Manlius Project for Solar Advocate. The Company originated the site in Manlius, New York and has completed an interconnection agreement with the utility company, and obtained permits from the local authority having jurisdiction. Engineering and initial construction have commenced and the Company has initiated procurement of major equipment. The Company has also leveraged its strong relationships with Tier 1 suppliers to secure major equipment orders of solar panels, inverters, racking, and transformers necessary for the Manlius Project. The Company will now continue to build the Manlius Project for Solar Advocate to commercial operation via the EPC Agreement. The EPC agreement has a total value of approximately US$11.35 million.
Incentives for the Project have been secured from New York State Energy Research and Development Authority (“NYSERDA”). NYSERDA also provides additional incentives to utilize these types of land, whether any hazard is real or perceived, because investment increases local tax bases, facilitates job growth, and improves and protects the environment, amongst other reasons.
There are several risks associated with the development of the Project. As disclosed in the Company’s financial statements, the project is being challenged by neighboring residents to the site. The development of any project is subject to the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Information” for additional discussion of the assumptions and risk factors associated with the statements in this report. |
| 2 |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. | |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is:
Sam Sun, Chief Financial Officer (416) 494-9559 sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| June 30, 2023 |
Forward-Looking Information
This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this report; the expected value of the EPC Agreement; the reduction of carbon emissions; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
| 3 |
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.55
Not for distribution to U.S. news wire services or dissemination in the United States.
SolarBank Announces At-The-Market Offering
Toronto, Ontario, June 30, 2023 — SolarBank Corporation (CSE: SUNN) (“SolarBank” or the “Company”) is pleased to announce that it has entered into an equity distribution agreement (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) to establish an at-the-market equity program (the “ATM Program”).
The Company may issue up to $15,000,000 of common shares of the Company (the “Offered Shares”) from treasury under the ATM Program. The Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions.
Sales of Offered Shares, if any, will be made through the Agent in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions on the Canadian Securities Exchange (“CSE”) or any other applicable “marketplace” (as such term is defined in National Instrument 21-101 – Marketplace Operation) for the Offered Shares in Canada. The Company is not obligated to make any sales of Offered Shares under the Distribution Agreement. Unless earlier terminated by the Company or the Agent as permitted therein, the Distribution Agreement will terminate upon the date that the aggregate gross sales proceeds of the Offered Shares sold under the ATM Program reaches $15,000,000.
The Company will pay the Agent a commission of 2.0% of the gross offering proceeds from each sale of Offered Shares and has agreed to provide the Agent with customary indemnification and contribution rights. The Company will also reimburse the Agent for certain specified expenses in connection with the entering into and performance of the Distribution Agreement.
The ATM Program is being made pursuant to a prospectus supplement dated June 29, 2023 (the “Prospectus Supplement”) to the Company’s final short form base shelf prospectus dated May 2, 2023 (the “Base Prospectus”).
Copies of the Prospectus Supplement, Base Prospectus and Distribution Agreement are available under the Company’s profile on SEDAR at www.sedar.com. Alternatively, the Agent will send copies of the relevant documents to Canadian investors upon request by contacting the Agent at Research Capital Corporation, by mail at Research Capital Corporation, 1075 West Georgia Street, Suite 1920, Vancouver, British Columbia V6E 3C9, by email at schiu@researchcapital.com or by telephone at (778) 373-4088.
This press release does not constitute an offer to sell or the solicitation of an offer to buy securities, nor will there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The securities have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. It currently has a potential development pipeline of over 700 megawatts. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation Tracy Zheng
Chief Administration Officer, Solarbank Corporation
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements including statements with respect to the Offered Shares sold under the ATM Program; the use of proceeds from any such sale of Offered Shares; the use by the Company of the ATM Program; future development, production, cash flow and other anticipated or possible future developments of the Company’s business as well as those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, , which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.56
| SOLARBANK CORPORATION | ||
| (Formerly Abundant Solar Energy Inc.) | ||
| Consolidated Financial Statements | ||
| (Expressed in Canadian Dollars) | ||
| Years ended June 30, 2023 and 2022 | ||
| MSLL CPA LLP | |
| 2110 - 1177 West Hastings Street | Tel: 604 688 5671 |
| Vancouver, B.C. Canada | Fax: 604 688 8479 |
| V6E 2K3 | msllcpa.com |
INDEPENDENT AUDITORS’ REPORT
To the shareholders of SolarBank Corporation:
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of SolarBank Corporation (the “Company”), which comprise the consolidated statements of financial position as at June 30, 2023 and 2022, and the consolidated statements of income (loss) and comprehensive income (loss), the consolidated statements of changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at June 30, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended June 30, 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our auditor’s report.
Settlement of note receivable through the acquisition of 67% ownership of Solar Alliance Energy DevCo LLC
Description of the matter
We draw attention to Note 7, 16, 20 to the financial statements. On June 20, 2023, the Company settled a promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo LLC (“Solar Alliance DevCo”), The Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the ,acquisition date. The total consideration of $574,824 is the fair value of the promissory note and accrued interest as of June 20, 2023. The acquisition date fair value for identifiable net asset was $857,946 and for non-controlling interest was $283,122.
| 2 |
Why the matter is a key audit matter
The Company’s determination of whether the transaction is accounted for as a business combination instead of asset acquisition requires significant management judgment. The fair value of capital assets acquired in business combination also involved high degree of estimation uncertainty.
Additionally, Solar Alliance DevCo has recognized an amount of $460,607 of tax equity liability relating to certain projects in the U.S. under tax equity structures to finance the capital cost of solar facilities on the acquisition date.
Tax equity structures allocate the majority of the renewable tax incentives, such as investment tax credits and accelerated depreciation for tax purpose, to tax equity investors until they receive an agreed-upon after tax-investment return (the “flip point”). Estimates are made when determining the expected future cash flows to calculate the effective interest rate and amortization of tax equity liability. Future cash flows depend on certain assumptions such as electricity production, selling prices, cost to operate and tax amounts.
Auditing these estimates and market conditions required a high degree of subjectivity in applying audit procedures and in evaluating the results of those procedures. This resulted in an increased extent of audit effort, including the involvement of fair value specialists.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
| ● | Obtained and reviewed agreements related to the settlement of promissory note and acquisition of 67% ownership and assess the appropriateness of management’s accounting treatment to ensure it is in alien with IFRS 3; | |
| ● | Assessed whether the transaction should be accounted for as business combination or asset acquisition by applying a three-element process (inputs, processes and outputs) under IFRS 3; | |
| ● | Obtained and reviewed the valuation report prepared by third party valuation expert related to Solar Alliance DevCo’s solar energy projects and assessed the appropriateness of the valuation, methodology and the reasonability of the underlying data and assumptions; | |
| ● | Performed enquiries and discussion with management’s valuation expert and confirm the expert’s qualification and objectivity; | |
| ● | Reviewed and assessed overall purchase price allocation calculation for reasonableness; |
For tax equity liabilities, we evaluated the Company’s estimated total tax equity liabilities by:
| ● | Obtained an understanding of the tax equity structure and assessed whether the project company should be consolidated based on the Company’s right to variable returns and its ability to influence financial and operational decisions impacting those returns; | |
| ● | Reviewed agreements related to the investment made in U.S. renewable energy projects with the tax equity investors and assessed the appropriateness of management’s accounting treatment; | |
| ● | Assessed the appropriateness of the Company’s identification and evaluation of the contractual terms and conditions in their assessment of the recognition of the investor’s contribution; |
| 3 |
| ● | Evaluated the methodology used by management and noted it was consistent with the contractual allocation provisions of the agreements; | |
| ● | Evaluated the appropriateness of the Company’s expected tax amounts and timing of tax credits and other tax attributes in the models by assessing the Company’s estimated outcome of applicable tax laws; |
Other Information
Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
| 4 |
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| ● | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. | |
| ● | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. | |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. | |
| ● | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. | |
| ● | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. | |
| ● | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Ying Xu, CPA, CA.
Chartered Professional Accountants
Vancouver, Canada
October 23, 2023
| 5 |
SOLARBANK CORPORATION
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
| Notes | June 30, 2023 | June 30, 2022 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 749,427 | $ | 931,977 | ||||||
| Short-term investment | 3(d) | 6,550,000 | - | |||||||
| Trade and other receivables | 4 | 3,837,207 | 2,200,226 | |||||||
| Unbilled revenue | 7,405,866 | - | ||||||||
| Prepaid expenses and deposits | 5 | 3,054,678 | 2,060,455 | |||||||
| Contract fulfilment costs | 8 | - | 3,594,531 | |||||||
| Inventory | 9 | 448,721 | 195,920 | |||||||
| Non-current assets | 22,045,899 | 8,983,109 | ||||||||
| Property, plant and equipment | 6 | 950,133 | 25,114 | |||||||
| Right-of-use assets | 13 | 144,487 | 186,314 | |||||||
| Development asset | 10 | 1,106,503 | - | |||||||
| Investment | 21 | 722,515 | - | |||||||
| 2,923,638 | 211,428 | |||||||||
| Total assets | $ | 24,969,537 | $ | 9,194,537 | ||||||
| Liabilities and Shareholder’s equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 11 | $ | 4,713,497 | $ | 2,602,864 | |||||
| Unearned revenue | 12 | 1,150,612 | 16,281 | |||||||
| Current portion of long-term debt | 15 | 151,111 | 111,111 | |||||||
| Loan payables | 14 | - | 567,664 | |||||||
| Tax payable | 929,944 | 19,225 | ||||||||
| Current portion of lease liability | 13 | 44,961 | 48,764 | |||||||
| Current portion of tax equity | 16 | 93,751 | - | |||||||
| Non-current liabilities: | 7,083,876 | 3,365,909 | ||||||||
| Long-term debt | 15 | 759,259 | 1,230,643 | |||||||
| Deferred tax liabilities | - | 3,430 | ||||||||
| Lease liability | 13 | 128,350 | 153,940 | |||||||
| Tax equity | 16 | 366,856 | - | |||||||
| 1,254,465 | 1,388,013 | |||||||||
| Total liabilities | $ | 8,338,341 | $ | 4,753,922 | ||||||
| Shareholders’ equity: | ||||||||||
| Share capital | 19 | 6,855,075 | 1,000 | |||||||
| Contributed surplus | 15 | 3,001,924 | - | |||||||
| Accumulated other comprehensive income | (116,759 | ) | 73,767 | |||||||
| Retained earnings | 6,652,551 | 4,410,565 | ||||||||
| Equity attributable to shareholders of the company | 16,392,791 | 4,485,332 | ||||||||
| Non-controlling interest | 20 | 238,405 | (44,717 | ) | ||||||
| Total equity | 16,631,196 | 4,440,615 | ||||||||
| Total liabilities and shareholders’ equity | $ | 24,969,537 | $ | 9,194,537 | ||||||
Approved and authorized for issuance on behalf of the Board of Directors on October 23, 2023 by:
| “Richard Lu” | “Sam Sun” | |
| Richard Lu, CEO, and Director | Sam Sun, CFO |
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
SOLARBANK CORPORATION
Consolidated Statements of Income and Comprehensive Income
(Expressed in Canadian dollars)
Years ended June 30
| Notes | 2023 | 2022 | ||||||||
| Revenue from EPC services | $ | 15,577,210 | $ | 9,791,511 | ||||||
| Revenue from development fees | 2,724,040 | 406,108 | ||||||||
| Revenue from O&M services | 96,259 | - | ||||||||
| 18,397,509 | 10,197,619 | |||||||||
| Cost of goods sold | (13,860,309 | ) | (8,231,476 | ) | ||||||
| Gross profit | 4,537,200 | 1,966,143 | ||||||||
| Operating expense: | ||||||||||
| Advertising and promotion | (282,908 | ) | (8,390 | ) | ||||||
| Depreciation | (49,209 | ) | (25,782 | ) | ||||||
| Insurance | (130,259 | ) | (62,751 | ) | ||||||
| Office, rent and utilities | (348,864 | ) | (263,742 | ) | ||||||
| Listing fees | (101,505 | ) | - | |||||||
| Professional fees | (1,248,895 | ) | (143,937 | ) | ||||||
| Salary and Wages | (1,876,338 | ) | (1,774,583 | ) | ||||||
| Stock based compensation | (2,946,850 | ) | - | |||||||
| Travel and events | (228,509 | ) | (47,504 | ) | ||||||
| Total operating expenses | (7,213,337 | ) | (2,326,689 | ) | ||||||
| Other income (loss) | ||||||||||
| Interest expense | 3,155 | (150,910 | ) | |||||||
| Impairment loss | 7 | (724,205 | ) | - | ||||||
| Other income | 20 | 6,590,347 | 204,732 | |||||||
| Net income (loss) before taxes | $ | 3,193,160 | $ | (306,724 | ) | |||||
| Income tax | (951,174 | ) | - | |||||||
| Deferred income tax expenses | - | 118,331 | ||||||||
| Net income/(loss) | $ | 2,241,986 | $ | (188,393 | ) | |||||
| Current translation adjustments, net of tax of $nil | (200,824 | ) | 219,706 | |||||||
| Net income and comprehensive income (loss) | $ | 2,041,162 | $ | 31,313 | ||||||
| Net income (loss) attributable to: | ||||||||||
| Shareholders of the company | 2,241,986 | (188,393 | ) | |||||||
| Non-controlling interest | - | - | ||||||||
| Net income (loss) | $ | 2,241,986 | $ | (188,393 | ) | |||||
| Total income (loss) and comprehensive income (loss) attributable to: | ||||||||||
| Shareholders of the company | 2,041,162 | 31,313 | ||||||||
| Non-controlling interest | - | - | ||||||||
| Total income (loss) and comprehensive income (Loss) | $ | 2,041,162 | $ | 31,313 | ||||||
| Net income (loss) per share | ||||||||||
| Basic | 0.11 | (0.01 | ) | |||||||
| Diluted | 0.06 | (0.01 | ) | |||||||
| Weighted average number of common shares outstanding | ||||||||||
| Basic | 19,575,479 | 16,000,000 | ||||||||
| Diluted | 37,233,190 | 16,000,000 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
SOLARBANK CORPORATION
Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian Dollars)
| Note | Number of shares | Share Capital | Share Option Reserve | Retained Earnings | Accumulated OCI | Total Shareholders’ Equity | Non-Controlling Interest | Total Equity | ||||||||||||||||||||||||||
| Balance at June 30, 2021 | 16,000,000 | $ | 1,000 | - | $ | 4,598,958 | $ | (145,939 | ) | $ | 4,454,019 | $ | (44,717 | ) | $ | 4,409,302 | ||||||||||||||||||
| Net loss | - | - | - | (188,393 | ) | - | (188,393 | ) | - | (188,393 | ) | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | 219,706 | 219,706 | - | 219,706 | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | |||||||||||||||||||
| Net income | - | - | - | 2,241,986 | - | 2,241,986 | - | 2,241,986 | ||||||||||||||||||||||||||
| Conversion of convertible debentures | 17, 19 | 2,500,000 | 1,297,348 | - | - | - | 1,297,348 | - | 1,297,348 | |||||||||||||||||||||||||
| Common shares issued, net of costs | 19(b)(ii) | 8,050,000 | 5,611,802 | - | - | - | 5,611,802 | - | 5,611,802 | |||||||||||||||||||||||||
| Broker warrants issued | - | (242,575 | ) | 242,575 | - | - | - | - | - | |||||||||||||||||||||||||
| RSU granted | 19(e) | - | - | 156,231 | - | - | 156,231 | - | 156,231 | |||||||||||||||||||||||||
| RSU vested | 19(e) | 250,000 | 187,500 | - | - | - | 187,500 | - | 187,500 | |||||||||||||||||||||||||
| Share-based compensation | 19(d) | - | - | 810,524 | - | - | 810,524 | - | 810,524 | |||||||||||||||||||||||||
| Advisory warrants issued | 19(c) | - | - | 1,792,594 | - | - | 1,792,594 | - | 1,792,594 | |||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | (190,526 | ) | (190,526 | ) | - | (190,526 | ) | |||||||||||||||||||||||
| Solar facilities acquisition | - | - | - | - | - | - | 283,122 | 283,122 | ||||||||||||||||||||||||||
| Balance at June 30, 2023 | 26,800,000 | $ | 6,855,075 | $ | 3,001,924 | $ | 6,652,551 | $ | (116,759 | ) | $ | 16,392,791 | $ | 238,405 | $ | 16,631,196 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 8 |
SOLARBANK CORPORATION
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
| For the year ended June 30 | ||||||||
| In Canadian Dollars | 2023 | 2022 | ||||||
| Operating activities: | ||||||||
| Net income | $ | 2,241,986 | $ | (188,393 | ) | |||
| Items not involving cash: | ||||||||
| Depreciation | 49,209 | 25,782 | ||||||
| Impairment loss | 724,205 | - | ||||||
| Loss on fixed asset disposed | 4,792 | - | ||||||
| Forgiveness of loan receivable | - | 132,487 | ||||||
| Interest expense | 47,348 | 44,954 | ||||||
| Share-based compensation | 2,946,849 | - | ||||||
| 6,014,389 | 14,830 | |||||||
| Changes in non-cash working capital balances: | ||||||||
| Trade and other receivables | (2,502,992 | ) | 4,067,611 | |||||
| Unbilled revenue | (7,405,866 | ) | - | |||||
| Contract fulfilment costs | 3,384,064 | (3,594,531 | ) | |||||
| Inventory | (264,182 | ) | 455,992 | |||||
| Prepaids | (908,175 | ) | 42,559 | |||||
| Trade and other payables | 2,461,871 | (542,069 | ) | |||||
| Advance from customer | 1,150,612 | (17,287 | ) | |||||
| Income tax payable | 908,865 | (17,458 | ) | |||||
| Deferred taxes | - | (118,331 | ) | |||||
| Changes in due to related parties | (645,876 | ) | (120,104 | ) | ||||
| Cash provided by operating activities | 2,192,710 | 171,212 | ||||||
| Investing activities: | ||||||||
| Acquisition of property, plant and equipment | (950,713 | ) | (10,970 | ) | ||||
| Acquisition of development asset | (1,122,465 | ) | ||||||
| Cash used in investing activities | (2,073,178 | ) | (10,970 | ) | ||||
| Financing activities: | ||||||||
| Net proceeds from convertible loan | 1,250,000 | - | ||||||
| Proceeds from issuance of common shares, net transaction costs | 5,611,802 | - | ||||||
| Investment in GIC | (6,550,000 | ) | - | |||||
| Cash released from secure line of credit | - | 45,409 | ||||||
| Repayment of lease obligation | (29,392 | ) | - | |||||
| Repayment of short-term loans | (320,275 | ) | (982,642 | ) | ||||
| Net (repayment)/proceeds from long-term debts | (111,111 | ) | 257,962 | |||||
| Investment in partnership units | (722,615 | ) | - | |||||
| Proceeds from tax equity | 467,252 | - | ||||||
| Non-controlling interest | 287,206 | - | ||||||
| Cash provided by (used in) financing activities | (117,133 | ) | (679,271 | ) | ||||
| Effect of changes in exchange rates on cash | (184,949 | ) | 50,933 | |||||
| Increase (decrease) in cash | (182,550 | ) | (468,096 | ) | ||||
| Cash and cash equivalents, beginning | 931,977 | 1,400,073 | ||||||
| Cash and cash equivalents, ending | 749,427 | 931,977 | ||||||
| Interest paid | 84,813 | 59,137 | ||||||
| Income tax paid | - | 17,458 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 9 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 1. | Nature of operations: |
SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.
The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.
On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
| 2. | Basis of presentation |
| (a) | Statement of compliance: |
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The board approved these consolidated financial statements of directors for issue on October 23, 2023.
| (b) | Basis of measurement: |
These consolidated financial statements were prepared on a going concern basis and historical cost basis with the exception of certain financial instruments as disclosed in note 3.
| (c) | Basis of consolidation: |
| (i) | Subsidiaries |
These consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non-controlling interests’ relative interests in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interest and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to equity holders of the Company. There are no changes in ownership interest in subsidiaries for the period end June 30, 2023. Details of the Company’s ownership interests in its subsidiaries are as follows:
| 10 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 2. | Basis of presentation (continued) |
| Name | Method of accounting | Ownership interest | ||
| Abundant Solar Power Inc. | Consolidation | 100% | ||
| Abundant Construction Inc. | Consolidation | 100% | ||
| Abundant Energy Solutions Ltd. | Consolidation | 100% | ||
| 2467264 Ontario Inc. | Consolidation | 49.9% | ||
| Solar Alliance Energy DevCo LLC | Consolidation | 67% | ||
| Solar Alliance TE HoldCo 1, LLC | Consolidation | 67% | ||
| Solar Alliance VC1 LLC | Consolidation | 67% | ||
| Abundant Solar Power (US1) LLC | Consolidation | 67% | ||
| Abundant Solar Power (New York) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Maryland) LLC | Consolidation | 100% | ||
| Abundant Solar Power (RP) LLC | Consolidation | 100% | ||
| SUNN 1011 LLC | Consolidation | 100% | ||
| SUNN 1012 LLC | Consolidation | 100% | ||
| Abundant Solar Power (CNY) LLC | Consolidation | 100% | ||
| SUNN 1016 LLC | Consolidation | 100% | ||
| Abundant Solar Power (TZ1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (M1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (J1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Steuben) LLC | Consolidation | 100% | ||
|
ABUNDANT SOLAR POWER (USNY- MARKHAM HOLLOW RD-001) LLC |
Consolidation | 100% | ||
| SUNN 1015 LLC | Consolidation | 100% | ||
| SUNN 1002 LLC | Consolidation | 100% | ||
| SUNN 1003 LLC | Consolidation | 100% | ||
| ABUNDANT SOLAR POWER (USNY-Richmond-002) LLC | Consolidation | 100% | ||
| ABUNDANT SOLAR POWER (USNY-Richmond-003) LLC | Consolidation | 100% | ||
| SUNN 1006 LLC | Consolidation | 100% | ||
| SUNN 1007 LLC | Consolidation | 100% | ||
| SUNN 1008 LLC | Consolidation | 100% | ||
| SUNN 1009 LLC | Consolidation | 100% | ||
| SUNN 1010 LLC | Consolidation | 100% | ||
| SUNN (203 Fuller Rd) LLC | Consolidation | 100% | ||
| SUNN 1001 LLC | Consolidation | 100% | ||
| Abundant Solar Power (USNY-6882 Rice Road-001) LLC | Consolidation | 100% | ||
| Abundant Solar Power (LCP) LLC | Consolidation | 100% | ||
| Abundant Solar Power (SB13W) LLC | Consolidation | 100% | ||
| Abundant Solar Power (SB13N) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Dutch Hill 2) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Dutch Hill 3) LLC | Consolidation | 100% | ||
| SUNN 1004 LLC | Consolidation | 100% |
| 11 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 2. | Basis of presentation (continued) |
| (i) | Functional and presentation currency: |
The Company’s consolidated financial statements are presented in Canadian dollars. The functional currency of Canadian parent company and its Canadian subsidiaries is the Canadian dollar. The functional currency of its subsidiaries in the United States is the US dollar.
| 3. | Significant accounting policies |
| (a) | Revenue recognition: |
The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.
The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.
At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.
Project development services
Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.
OM services
Each OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outlined in the contract.
EPC services
Each contract for EPC services has a single performance obligation due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contracts for, that is, to build the solar sites. The performance obligations are satisfied over a period of time, based on costs incurred to date compared to the total estimated costs for the project.
| (b) | Inventory: |
Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.
| 12 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (c) | Foreign currency translation: |
The functional currency of the Company is the Canadian Dollar. Functional currencies of the Company’s subsidiaries are the currency of the primary economic environment in which the subsidiary operates.
Monetary assets and liabilities denominated in foreign currencies are translated to the appropriate functional currency at foreign exchange rates as at the balance sheet date. Foreign exchange differences arising on translation are recognized in the statement of income and loss. Non-monetary assets that are measured in a foreign currency at historical cost are translated using the exchange rate at the date of the transaction.
In preparing the Company’s consolidated financial statements, the financial statements of each entity are translated into Canadian dollars. The assets and liabilities of foreign operations are translated into Canadian dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. Foreign exchange differences are recognized in other comprehensive income.
| (d) | Short-term investments |
Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase. As at June 30, 2023, the Company has two GICs in short-term investment totalling $6,550,000. The GIC of $2,980,000 has one year term and with interest rate of 4.7%. The GIC of $3,570,000 has one year term and with interest rate of 4.95%.
| (e) | Business Combination |
The Company applies the acquisition method in accounting for business combinations. The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. If the Company acquires a controlling interest in a business in which it previously held an equity interest, that equity interest is remeasured to fair value at the acquisition date with any resulting gain or loss recognised in profit or loss or other comprehensive income, as appropriate. Consideration transferred as part of a business combination may include the amounts related to the settlement of pre-existing relationships. The gain or loss on the settlement of any pre-existing relationship is recognised in profit or loss.
| (f) | Financial instruments: |
The Company recognizes a financial asset or a financial liability in its consolidated statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability.
| 13 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (i) | Financial assets: |
The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss based on its business model for managing the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are defined as follows:
| A. | Financial assets at amortized cost: |
A financial asset is measured at amortized cost if both of the following conditions are met:
| ● | the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and | |||
| ● | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
The Company’s trade and other receivables and short-term investments are measured at amortized cost.
| B. | Financial assets at fair value through other comprehensive income: |
Financial assets are classified and measured at fair value through other comprehensive loss if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The Company does not have any financial assets classified as fair value through other comprehensive loss.
| C. | Financial assets at fair value through profit or loss: |
Any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss. The Company’s cash and long-term investment in partner units is classified as fair value through profit or loss.
| (ii) | Financial liabilities: |
The Company’s financial liabilities include accounts payable and accruals, advance from vendor, loan payable, and long-term debt. The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. The Company’s accounting policy for each category is as follows:
| A. | Financial liabilities at fair value through profit or loss: |
Financial liabilities are classified at fair value through profit or loss if they are held for trading or are derivative liabilities. The Company does not have any financial liabilities classified as fair value through profit or loss.
| B. | Financial liabilities at amortized cost: |
Financial liabilities classified at amortized cost are those that are not classified as financial liabilities at fair value through profit or loss. Subsequent to initial recognition, they are carried at amortized cost using the effective interest method. The Company’s trade and other payables, loan payable, lease liabilities, convertible debenture, long-term debt, and tax equity liabilities are classified at amortized cost.
| (iii) | Finance income and finance costs |
Investment income on financial assets at amortized cost and FVOCI are amortized using the effective interest rate method.
Finance fees and transaction costs on financial assets at FVTPL are expensed as incurred.
| 14 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (g) | Expected credit losses: |
In accordance with IFRS 9, loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortized cost or at FVOCI are recognized. ECLs are updated at each reporting date on the basis of available information. The Company applies the simplified approach described in IFRS 9 to trade receivables, whereby the amount of the impairment allowance of a receivable is measured subsequent to initial recognition on the basis of lifetime expected credit losses.
| (h) | Tax equity structures |
The Company owns and operates solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the construction and operation of solar facilities. These structures are designed to allocate the majority of renewable tax incentives, such as investment tax credits (“ITCs”) and accelerated depreciation for tax purposes, to tax equity investors (“TEIs”). With its current portfolio of solar facilities, the Company cannot fully monetize such tax incentives and it therefore partners with third party TEIs. Generally, tax equity structures allocate the majority of the project’s US taxable income and renewable tax incentives, along with a portion of the project’s cash flows, to the TEIs until they receive an agreed-upon after-tax investment return (the “flip point”). The flip points are generally dependent on the projects’ respective returns but also may be contractually determined. At all times, both before and after the projects’ flip points, the Company retains control over the projects finance with a tax equity structure in partnership with third party TEIs. Subsequent to the flip point, the Company receives the majority of the projects’ taxable income, cash flows and remaining tax incentives.
When a tax equity partnership is formed, the Company assesses whether the project company should be consolidated based on the Company’s right to variable returns and its ability to influence financial and operational decisions impacting those returns. Due to the operational and financial nature of the projects, and the protective nature of the rights normally given to tax equity investors, the Company typically has the control and influence to consolidate the entity.
Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the EIR method. The Company has the option to settle with the TEI after the flip date at a defined price and in certain contracts the TEI can put their investment back to the Company after the flip date at the same defined price. These options are generally time bound.
The Company recognizes the TEI contributions as a long-term liability, at an amount representing the proceeds received from the TEI in exchange for shares of the subsidiary, net of the following elements affecting amortized cost of the tax equity:
| ● | ITC: Allocation of ITCs to the TEI is recognized in other income and as a reduction of tax equity. | ||
| ● | Taxable income (loss), including tax attributes such as accelerated tax depreciation: Allocation of taxable income and other tax attributes to the TEI is recognized in other (income) expenses as incurred and as a reduction of tax equity. | ||
| ● | Cash distributions: Cash allocation to the TEI is recognized as a reduction of tax equity. |
Tax equity balances are increased by interest recognized at the implicit interest rate.
| 15 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (i) | Basic and diluted net income (loss) per share |
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
| (j) | Impairment of non-financial assets: |
At each reporting date, the Company reviews the carrying amounts of its non-financial assets including property, plant and equipment (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into cash-generating units (“CGUs”) which are the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
Impairment losses are recognized in profit or loss. The Company evaluates impairment losses, except goodwill, for potential reversals when events or circumstances warrant such consideration. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
| (k) | Income taxes: |
Income tax represents current tax and deferred tax. The Company and its subsidiaries record current tax based on the taxable income for the period calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income taxes are accounted for using the liability method. The asset-liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference based on enacted or substantially enacted tax rates that are expected to be in effect when the underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as non-capital loss carry forwards, are recognized to the extent it is probable that taxable income will be available against which the asset can be utilized.
| 16 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (l) | Property, plant and equipment: |
Property, plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is computed on a declining balance basis based on the nature and useful lives of the assets. The significant classes of plant and equipment and their estimated useful lives are as follows:
| Computer equipment | 55% | |
| Furniture and equipment | 20% | |
| Leasehold improvement | Lesser of lease term and useful life | |
| Solar facility | 5-year MACRS |
Subsequent costs that meet the asset recognition criteria are capitalized, while costs incurred that do not extend the economic useful life of an asset are considered repairs and maintenance, which are accounted for as an expense recognized during the year.
| (m) | Development asset: |
Development assets consists of design, development, engineering, interconnection, permitting, and acquisition costs associated with new solar facilities. These costs are capitalized within project development costs until construction begins, at which time they are transferred to property, plant and equipment. The Company capitalizes these costs when it believes the facilities will more likely than not be constructed.
| (n) | Share based payment transactions: |
The Company makes share-based awards, including restricted share units (“RSUs”) and stock options to employees, officers, directors, and consultants.
For equity-settled awards, the fair value is charged to the consolidated statements of income and credited to equity, on a straight-line basis over the vesting period, after adjusting for the estimated number of awards that are expected to vest. The fair value of RSUs is determined based on quoted market price of our common shares at the date of grant. The fair value of the stock options granted to employees, officers, and directors is determined at the date of grant using the Black-Scholes option pricing model with market related input. The fair value of stock options granted to consultants is measured at the fair value of the services delivered unless that fair value cannot be estimated reliably, which then is determined using the Black-Scholes option pricing model. Stock options with graded vesting schedules are accounted for as separate grants with different vesting periods and fair values.
At each reporting date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management’s best estimate of the awards that are ultimately expected to vest is computed (after adjusting for non-market performance conditions). The movement in cumulative expense is recognized in the consolidated statements of income with a corresponding entry within equity. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
| 17 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (o) | Leases: |
The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.
| (p) | Government grant: |
The government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant, and the grant will be received. The government grant is recognized in profit or loss to offset the related expenses on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset.
| (q) | Significant accounting judgments and estimates: |
The preparation of financial statements requires management to use accounting estimates and exercise judgment in the process of applying its accounting policies. Actual results may differ from the estimates and assumptions used in preparing these consolidated financial statements. Estimates and judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the consolidated financial statements:
| (i) | Taxes: |
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
| (ii) | Percentage of completion calculation: |
The Company measures the stage of completion for EPC projects based on costs incurred to date compared to the total estimated costs for the project. The estimation of total estimated costs requires judgement and changes to these estimates may affect revenue, unbilled revenue, and deferred revenue.
| 18 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (iii) | Expected credit loss: |
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
| (iv) | Warranties: |
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the year ended June 30, 2023, $Nil warranty provision was recorded (2022 - $Nil).
| (v) | Contract fulfilment costs: |
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
| 19 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
| (vi) | Convertible debenture: |
The determination of the fair value of convertible debentures requires the input of highly subjective assumptions, including the expected discount rate. Changes in the input assumptions could materially affect the fair value estimate.
| (vii) | Stock-based compensation and warrant valuation: |
The fair value of stock options issued and warrants granted are subject to the limitation of the Black-Scholes option pricing model which incorporates market data, and which involves uncertainty and subjectivity in estimates used by management in the assumptions. The model requires assumptions relating to share price volatility, expected life of options and discount rate. Changes in these assumptions affect the fair value of the options and the amount of stock-based compensation to be recognized in operations over the vesting period.
| (viii) | Tax equity liabilities |
The Company makes estimates in the determination of expected future cash flows to calculate the effective interest rate (“EIR”) and amortization of tax equity liabilities. Tax equity investors generally require a specified allocation of the project’s cash distributions and tax attributes such as investment tax credit and taxable income or loss, including accelerated tax depreciation. Estimates are made when determining the amount and allocation of cash distributions and tax attributes to the tax equity investors, which may be influenced by a number of assumptions such as electricity production, selling prices, costs to operate and tax amounts.
| (ix) | Determining control or significant influence of special purpose entities |
The determination of whether the Company has control or significant influence over special purpose entities requires the Company to make assumptions and judgments in evaluating its specific control and influence characteristics. The Company exercises judgment in determining whether non-wholly owned special purpose entities are controlled by the Company, which involves the assessment of how the decisions of the special purpose entities are made, whether the rights of other partners are protective or substantive in nature, and the ability of the Company to influence the returns of the special purpose entity.
| (x) | Acquisitions |
Management has had to apply judgment relating to acquisitions with respect to whether the acquisition was a business combination or an asset acquisition. Management applied a three-element process to determine whether a business or an asset was purchased, considering inputs, processes and outputs of each acquisition in order to reach a conclusion.
| 20 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 3. | Significant accounting policies (continued) |
| (r) | Utilization, derecognition and impairment of contract fulfilment costs: |
The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.
A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.
At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.
| (s) | Convertible debenture: |
The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument.
| (t) | Accounting standards issued but not yet effective: |
The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.
IAS 1 – Presentation of Financial Statements
In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.
The Company does not expect the adoption of these new amendments to have a significant impact as the amendments only affect the note disclosure of the financial statements.
| 21 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 4. | Trade and other receivables |
| June 30, 2023 | June 30, 2022 | |||||||
| Accounts receivable, net | $ | 1,978,834 | $ | 387,816 | ||||
| Receivable from Solar Flow-Through (1) | $ | 1,537,357 | 1,469,693 | |||||
| Other receivable | 321,016 | 135,013 | ||||||
| Due from related parties (note 22) | - | 207,704 | ||||||
| $ | 3,837,207 | $ | 2,200,226 | |||||
| (1) | In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. Management expects the accounts receivable is fully collectible once SFT receive the payments from the Ontario government in respect of terminated contracts. With the expectation of collection from SFT, the Company recovered $212,227 allowance for doubtful account recorded in previous year and recognized the amount in other income for the year ended June 30, 2023. In June 2023, the Company acquired partnership units from SFT, see note 21. |
| 5. | Prepaid expenses and deposits |
| June 30, 2023 | June 30, 2022 | |||||||
| Interconnection deposits(1) | $ | 469,725 | $ | 2,008,441 | ||||
| Construction in progress deposit(2) | 1,623,209 | - | ||||||
| Security deposits | 12,352 | 14,852 | ||||||
| Prepaid insurance | 74,373 | 18,335 | ||||||
| Prepaid rent | - | 7,297 | ||||||
| Prepaid marketing expenses(3) | 782,101 | |||||||
| Other prepaids and deposits | 92,918 | 11,530 | ||||||
| $ | 3,054,678 | $ | 2,060,455 | |||||
| (1) | Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation. | |
| (2) | Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Manlius and Geddes, located in New York, USA. | |
| (3) | The Company hired two investor relations and marketing consultant companies to increase the Company’s visibility in the market and to explore over-seas markets. The balance is related to the payment made to these two marketing consultant companies. |
| 22 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 6. | Property, Plant and Equipment |
| Computer equipment | Furniture and equipment | Leasehold improvement | Total | |||||||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 49,014 | $ | 83,706 | $ | 10,650 | $ | 143,370 | ||||||||
| Additions | 10,970 | - | (10,650 | ) | 320 | |||||||||||
| Balance, June 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2021 | $ | 44,629 | $ | 64,364 | $ | 5,857 | $ | 114,850 | ||||||||
| Amortization/reversal | 5,344 | 4,239 | (5,857 | ) | 3,726 | |||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Net Book Value- June 30, 2022 | $ | 10,011 | $ | 15,103 | $ | - | $ | 25,114 | ||||||||
| Computer equipment | Furniture and equipment | IPP facilities(1) | Total | |||||||||||||
Cost: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Additions/dispositions | (40,728 | ) | (33,453 | ) | 937,194 | 863,013 | ||||||||||
| Balance, June 30, 2023 | $ | 19,256 | $ | 50,253 | $ | 937,194 | $ | 1,006,703 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Depreciation | 4,728 | 2,655 | - | 7,383 | ||||||||||||
| Reversal | (40,825 | ) | (28,564 | ) | - | (69,389 | ) | |||||||||
| Balance, June 30, 2023 | $ | 13,876 | $ | 42,694 | $ | - | $ | 56,570 | ||||||||
| Net Book Value- June 30, 2023 | $ | 5,380 | $ | 7,559 | $ | 937,194 | $ | 950,133 | ||||||||
| (1) | Independent Power Producer facilities. On June 20, 2023, the Company acquired 67% membership interest in Solar Alliance Energy DevCo LLC (“Solar Alliance DevCo”) which indirectly holds two solar facilities in New York: Solar Alliance VC1 LLC (“VC1”) and Abundant Solar Power US1 LLC (“US1”). |
| 23 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 7. | Acquisitions |
Solar Alliance DevCo LLC
Abundant Solar Power (“ASP”) has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects reached PTO (permission to operation) in December 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects were reached PTO.
On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.
On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo, a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.
The provisional allocation of the purchase consideration to the total fair value of net assets acquired is as follows:
| Fair value of net assets acquired | $ | |||
| Accounts receivable | 407,210 | |||
| Capital assets | 937,194 | |||
| Accounts payable | (25,851 | ) | ||
| Tax equity liability | (460,607 | ) | ||
| Identifiable net assets acquired | 857,946 | |||
| Non-controlling interest | (283,122 | ) | ||
| Purchase consideration transferred | 574,824 |
On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit and loss.
The Company also recognized $283,122 (USD $213,838) for 33% non-controlling interest in Solar Alliance DevCo.
| 24 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 8. | Contract fulfilment costs |
As of June 30, 2023 and 2022, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.
| Balance, June 30, 2022 | $ | 3,594,531 | ||
| Additions: EPC costs | 5,278,453 | |||
| Utilised during the period | (9,038,312 | ) | ||
| Foreign currency Impact | 165,328 | |||
| Balance, June 30, 2023 | $ | - |
| 9. | Inventory |
As of June 30, 2023 and 2022, the Company’s inventory is comprised of development costs for the solar projects.
| Balance, June 30, 2021 | 593,784 | |||
| Additions: development costs | 110,241 | |||
| Minus: development costs expensed to cost of goods sold | (512,832 | ) | ||
| Foreign currency Impact | 4,727 | |||
| Balance, June 30, 2022 | $ | 195,920 |
| Balance, June 30, 2022 | 195,920 | |||
| Additions: development costs | 805,214 | |||
| Minus: development costs expensed to cost of goods sold | (555,794 | ) | ||
| Foreign currency Impact | 3,381 | |||
| Balance, June 30, 2023 | $ | 448,721 |
| 10. | Development asset |
Development projects are depreciated over the useful lives of the resulting assets once they become operational. The balance in development assets include costs incurred on the projects relating to completion of interconnection agreement with the utility companies and obtaining permits from the local authority having jurisdiction.
| 11. | Trade and other payables |
| June 30, 2023 | June 30, 2022 | |||||||
| Accounts payable and accrued liabilities | $ | 1,542,849 | $ | 1,950,817 | ||||
| Due to related party | 63,754 | 104,545 | ||||||
| Other payable (1) | 3,106,894 | 547,502 | ||||||
| $ | 4,713,497 | $ | 2,602,864 | |||||
| (1) | Balance includes $2,123,220 NYSERDA grants to be paid to various projects. |
| 25 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 12. | Unearned revenue |
As of June 30, 2023 and 2022, the Company’s unearned revenue mostly consists of payments received for EPC projects not started yet.
| Balance, June 30, 2022 | $ | 16,281 | ||
| Additional payments received | 1,134,331 | |||
| Recognized to revenue | - | |||
| Balance, June 30, 2023 | $ | 1,150,612 |
| 13. | Right of use assets and lease liabilities |
The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.
The continuity of the right-of-use as of June 30, 2023 and 2022 is as follows:
| Right-of- use assets | Office | |||
| Cost: | ||||
| Balance, June 30, 2022 | 197,719 | |||
| Addition | - | |||
| Balance, June 30, 2023 | 197,719 | |||
| Accumulated amortization: | ||||
| Balance, June 30, 2022 | 11,405 | |||
| Amortization: | 41,827 | |||
| Balance, June 30, 2023 | 53,232 | |||
| Net Book Value, June 30, 2023 | 144,487 | |||
| 26 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 13. | Right of use assets and lease liabilities (continued) |
The continuity of the lease liabilities as of June 30, 2023 and 2022 is as follows:
| Lease liabilities | Office | |||
| Balance, June 30, 2022 | 202,704 | |||
| Payments: | (46,966 | ) | ||
| Interest accretion: | 17,573 | |||
| Balance, March 31, 2023 | 173,311 | |||
| Current | 44,961 | |||
| Long term | 128,350 | |||
| Net Book Value, March 31, 2023 | 173,311 | |||
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of June 30, 2023 is as follows:
| 2024 | $ | 60,302 | ||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 203,873 |
| 14. | Loan payable |
| June 30, 2023 | June 30, 2022 | |||||||
| Shareholder loan (1) | $ | - | $ | 567,664 | ||||
| $ | - | $ | 567,664 | |||||
| (1) | On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The loan has a maturity of January 7, 2022 as well as the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. The balance at June 30, 2022 was $567,664. The Company fully repaid the loan plus interest of $5,677 on September 16, 2022. |
| 27 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 15. | Long-term debt |
| June 30, 2023 | June 30, 2022 | |||||||
| Highly Affected Sectors Credit Availability Program (1) | $ | 870,370 | $ | 981,481 | ||||
| Canadian Emergency Business Account (2) | 40,000 | 40,000 | ||||||
| Promissory Note (3) | - | 320,273 | ||||||
| Total | 910,370 | 1,341,754 | ||||||
| Less: current portion | 151,111 | 111,111 | ||||||
| Long-term portion | $ | 759,259 | $ | 1,230,643 | ||||
| (1) | In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the year ended June 30, 2023, the interest recorded and paid was $37,214 (2022 - $39,970). | |
| (2) | The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2024, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. |
The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.
| (3) | On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 in principal and $13,146 in interest has been fully repaid on October 6, 2022. |
Estimated principal repayments are as follows:
| 2024 | $ | 151,111 | ||
| 2025 | 111,111 | |||
| 2026 | 111,111 | |||
| 2027 | 111,111 | |||
| 2027 onwards | 425,926 | |||
| Total | $ | 910,370 |
| 28 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 16. | Tax equity |
On June 20, 2023 the Company acquired 67% membership interest in an entity which owns and operates certain solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the capital cost of the solar facilities. Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the effective interest rate (“EIR”) method. Amortized cost is affected by the allocation of ITCs, taxable income, and accelerated tax depreciation. Financing expenses represent the interest accretion using the EIR. The EIR of the tax equity was determined to be 9%, the loan value was $549,061 (USD 414,699), with a maturity date (representing the expected flip point as estimated) of 2028 and the percentage of ownership between 99%, reflecting the allocation of taxable income or loss prior to the flip date.
Tax equity investors in US solar projects generally require sponsor guarantees as a condition to their investment. To support the tax equity investments, the Company executed guarantees indemnifying the tax equity investors against certain breaches of project level representations, warranties and covenants and other events. The Company believe these indemnifications cover matters which are substantially under its control and are very unlikely to occur.
| 17. | Convertible debenture |
In October 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan converted into Conversion Units at a conversion price of $0.50 per Conversion Unit (or 2,500,000 Conversion Units). Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.
Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. The Series A vesting condition was satisfied on the closing date of the IPO. As a result, 2,500,000 Series A warrants vested on March 1, 2023.
Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that the Company is not designated as a venture issuer. This condition has not yet been satisfied.
Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.
On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. On March 1, 2023, the full liability portion of the Convertible Loan converted to 2,500,000 Common Shares. A continuity of the liability portion of the convertible debentures is as follows:
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 47,348 | |||
| Conversion of Loan upon IPO | (1,183,712 | ) | ||
| Balance, June 30 2023 | $ | - |
| 29 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 18. | Financial instruments |
The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt.
| (a) | Fair value: |
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | ||
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | ||
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
| (b) | Financial risk management: |
| (i) | Credit risk and economic dependence: |
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
| (ii) | Concentration risk and economic dependence: |
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable. Outstanding accounts payable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few vendors who account for over 10% of total purchases as well as vendors who account for over 10% of outstanding accounts payable.
| 30 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 18. | Financial instruments (continued) |
| June 30, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,687,175 | 47 | % | ||||
| Customer B | $ | 5,924,196 | 32 | % | ||||
| June 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,925,034 | 88 | % | ||||
| June 30, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 8,584,998 | 76 | % | ||||
| Customer C | $ | 1,537,357 | 14 | % | ||||
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
| June 30, 2023 | Purchase | % of Total Purchases | ||||||
| Vendor A | $ | 2,698,889 | 19 | % | ||||
| June 30, 2022 | Purchase | % of Total Purchases | ||||||
| Vendor B | $ | 2,928,814 | 36 | % | ||||
| Vendor C | $ | 1,630,780 | 20 | % | ||||
| June 30, 2023 | Account Payable | % of Account Payable | ||||||
| Vendor A | $ | 549,996 | 12 | % | ||||
| June 30, 2022 | Account Payable | % of Account Payable | ||||||
| Vendor B | $ | 1,108,168 | 43 | % | ||||
| (iii) | Liquidity risk: |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
| (iv) | Interest rate risk: |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
| 31 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 19. | Share Capital |
(a) Authorized
Unlimited number of common shares with no par value.
(b) Issued and outstanding share capital
At June 30, 2023, the Company had 26,800,000 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity. During the year ended June 30, 2023 the Company did not issue any Common Shares in at-the-market offerings.
During the year ended June 30, 2023, the Company issued the following shares:
| i. | On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000. As required by International Accounting Standards (“IAS”) 33 Earnings per Share, all references to share capital, common shares outstanding, warrants outstanding, options outstanding, and per share amounts in these consolidated financial statements and the accompanying notes for time periods prior to the share consolidation have been restated to reflect the 1:160 share split. | ||
| ii. | On March 1, 2023, the Company closed its initial public offering (the “IPO”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The IPO consisted of a total of 8,050,000 common shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per common share. The Company paid $362,250 in broker commissions, $63,448 legal fees and issued 483,000 broker warrants to purchase common shares at $0.75 per share until March 1, 2026.The broker warrants were valued using the Black-Scholes model resulting in fair value of $242,575. | ||
| iii. | On March 1, 2023, upon the closing of the Offering, the proceeds of the Convertible Loan (see Note 17) converted into 2,500,000 common shares, 2,500,000 Series A Warrant and 2,500,000 Series B Warrant. | ||
| iv. | On November 4, 2022, the Company granted 500,000 Restricted Share Units (“RSUs”) to a consultant in connection with the services provided to assist the Company successfully completed IPO. The RSUs were granted to consultant at price of $0.75 per share. Pursuant to the agreement, each unit is exercisable into one common share of the Company for a period of 60 days from the vesting date. 50% of the units, or 250,000 units, are vested on the date of closing of the Company’s IPO, which was March 1, 2023, and the remaining 50% vests on the date that is 5-month after the date of closing of the IPO (on August 2, 2023). On March 8, 2023, 250,000 common shares were distributed as a result of the vesting of 250,000 RSUs. | ||
| v. | On March 13, 2023, 15,000 Restricted Share Units (“RSUs”) were granted to an employee of the Company at grant date closing price of $2.73 per share subject to a vesting schedule over a two years term with 50% of the RSUs vesting on March 1, 2024 and 50% vested on March 1, 2025. |
| 32 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 19. | Share Capital (continued) |
(c) Warrants
The following table reflects the warrants issued and outstanding as of June 30, 2023:
| Date granted | Expiry | Exercise price (CAD) | Issued | Expired | Exercised | Balance at June 30, 2023 | ||||||||||||||||
| 03-Oct-2022 | 10-Jun-2027 | $ | 0.10 | 2,500,000 | - | - | 2,500,000 | |||||||||||||||
| 01-Mar-2023 | 01-Mar-2026 | $ | 0.75 | 483,000 | - | - | 483,000 | |||||||||||||||
| 01-Mar-2023 | 01-Mar-2028 | $ | 0.50 | 5,000,000 | - | - | 5,000,000 | |||||||||||||||
| 7,983,000 | - | - | 7,983,000 | |||||||||||||||||||
| Weighted average exercise price | $ | 0.39 | ||||||||||||||||||||
| Weighted average remaining contractual life | 4.33 years | |||||||||||||||||||||
On October 3, 2022, the Company granted an aggregated of 2,500,000 warrants as compensation to consultants in connection with the advisory services provided to assist the Company to successfully complete IPO. The warrants have been recorded at their estimated fair value of $1,792,594 during the year ended June 30, 2023. Each fully vested warrant may be exercised at $0.10 to acquire common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.59% | ||
| ● | Expected life: 4.69 years; | ||
| ● | Expected volatility: 126% based on historical five-year trends of industry peers; | ||
| ● | Expected dividend yield: 0%; |
On March 1, 2023, the Company granted an aggregate of 483,000 warrants to a brokerage firm as commission for the completion of the IPO. The warrants have been recorded at their estimated fair value of $248,069 during the year ended June 30, 2023. Each fully vested warrant may be exercised at $0.75 to acquire a common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.85% | ||
| ● | Expected life: 3 years; | ||
| ● | Expected volatility: 111% based on historical three-year trends of industry peers; | ||
| ● | Expected dividend yield: 0%; |
On March 1, 2023, the Company granted an aggregate of 5,000,000 warrants as a result of the Convertible Loan conversion (see Note 17). Each fully vested warrant may be exercised at $0.50 to acquire a common share. The warrants vest 50% at closing of the Offering, which was on March 1, 2023 and 50% upon the Company completing a listing on senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer”. These warrants were issued as a result of conversion of convertible loan, thus no additional expenses recorded.
As at June 30, 2023, 5,483,000 warrants were exercisable.
| 33 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 19. | Share Capital (continued) |
(d) Stock Options
The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.
Details of the stock option outstanding as at June 30, 2023 are as follows:
| Date granted | Expiry | Exercise price (CAD) | Granted | Exercised | Expired/Cancelled | Balance at June 30, 2023 | ||||||||||||||||
| 04-Nov-2022 | 04-Nov-2027 | $ | 0.75 | 2,774,000 | (15,000 | ) | 2,759,000 | |||||||||||||||
| 2,774,000 | - | (15,000 | ) | 2,759,000 | ||||||||||||||||||
On November 4, 2022, the Company granted an aggregate of 2,774,000 stock options to employees and directors at an exercise price of $0.75 per share, exercisable for a period of 5 years. The options vest over 24 months, 50% 12 months from grant date and the remaining 50% 24 months from grant date. The estimated fair value of these options has been measured using the Black-Scholes valuation model. During the year ended June 30, 2023, compensation expense related to stock options was $809,628. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.80%; | ||
| ● | Expected life: 4 years; | ||
| ● | Expected volatility: 124% based on historical four-year trends of industry peers; | ||
| ● | Expected dividend yield: 0%; |
As at June 30, 2023, no stock options were exercisable.
(e) Restricted Stock Units
Details of the Restricted Stock Units (RSU) outstanding as at June 30, 2023 are as follows:
| Date granted | Vesting Date | Granted | Distributed | Forfeited | Balance at June 30, 2023 | |||||||||||||
| 4-Nov-2022 | 02-Mar-2023 | 250,000 | (250,000 | ) | - | - | ||||||||||||
| 4-Nov-2022 | 02-Aug-2023 | 250,000 | - | - | 250,000 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2024 | 7,500 | - | - | 7,500 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2025 | 7,500 | - | - | 7,500 | |||||||||||||
| 515,000 | (250,000 | ) | - | 265,000 | ||||||||||||||
The weight average grant date price per share is $0.86.
| 34 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 20. | Non-Controlling Interest |
The following items affects non-controlling interest for the year ended June 30, 2023:
Recovery of PCDC
On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all Feed-In Tariff (FIT) 2, 3, 4 and 5 contracts where the Independent Electricity System Operator (IESO) had not issued Notice to Proceed (“NTP”). A NTP was issued for a contract when it was ready for construction.
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018 including the Company’s subsidiary, 2467264 Ontario Inc. (“246 Ontario”). However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by 246 Ontario, is $6.3 million. IESO confirmed the full $6.3 million amount in January 2023. As of June 30, 2023, the entire $6.3 million have been recovered from IESO and recognized as other income. The Company incurred related professional fees of $237,254 in associated with the claims.
Pursuant to the agreement reached with non-controlling shareholder, the Company is entitled to the entire balance of the PCDC claims. As a result, the non-controlling interest amount is not affected for the year ending June 30, 2023.
Acquisition of Solar Alliance DevCo LLC
On June 20, 2023, the Company acquired 67% membership interest in two solar facilities. Upon consolidation, the 33% non-controlling portion of the facilities are disclosed separately at fair value.
| 21. | Investment |
On June 1, 2023, the Company acquired 200 limited partnership units of Solar Flow-Through 2012-I Limited Partnership from former partner unitholders for an aggregate purchase price of $4,200, and 31,230 limited partnership units of Solar Flow-Through 2013-I Limited Partnership for an aggregate purchase price of $718,290.
The Company does not have significant influence over Solar Flow-Through 2012-I Limited Partnership and Solar Flow-Through 2013-I Limited Partnership subsequent to the purchase of units. No fair value adjustment is required as at June 30, 2023.
| 35 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 22. | Related Party Transactions |
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
As at June 30, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of SIL.
As at June 30, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op (“RSE”). One of RSE’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of RSE.
As at June 30, 2023, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.
Compensation of key management personnel
The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the year ended June 30, 2023 and 2022 were as follows:
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 1,533,393 | $ | 998,511 | ||||
| Share-based compensation | 440,362 | - | ||||||
| Advisory warrants | 448,156 | - | ||||||
Short-term employee benefits solely include consulting fees.
| 36 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 23. | Capital Management |
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| June 30, 2023 | June 30, 2022 | |||||||
| Long-term debt -non-current portion (note 15) | $ | 759,259 | 1,230,643 | |||||
| Shareholders’ Equity | $ | 16,631,196 | 4,440,615 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, issuance of equity, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
Changes to capital management from the prior year includes closing of Initial Public Offering on March 1, 2023.
| 24. | Segment Reporting |
The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.
The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the years ended June 30, 2023 and 2022 are as follows:
| Revenue from external customers | Non-current assets | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Canada | $ | 1,618,765 | 5,984 | $ | 879,941 | 211,428 | ||||||||||
| United States | 16,778,744 | 10,191,635 | 2,043,697 | - | ||||||||||||
| $ | 18,397,509 | 10,197,619 | $ | 2,923,638 | 211,428 | |||||||||||
| Total assets | Total liabilities | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Canada | $ | 11,219,868 | 2,525,390 | $ | 2,603,271 | 104,538 | ||||||||||
| United States | 13,739,128 | 6,669,147 | 5,724,529 | 4,649,384 | ||||||||||||
| $ | 24,958,996 | 9,194,537 | $ | 8,327,800 | 4,753,922 | |||||||||||
| 37 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 25. | Income Tax |
The Company is subject to income taxes in Canada, while the subsidiaries in United States are subject to the income tax laws of United States.
Income tax expense differs from the amount that would be computed by applying the combined corporate income tax rate of 26.5% to loss before income taxes. The reasons for the differences are as follows:
| 2023 | 2022 | |||||||
| Income (loss) before tax | $ | 3,193,160 | $ (306,724 | ) | ||||
| Statutory tax rate | 26.5 | % | 26.5 | % | ||||
| Expected income tax benefit (expense) | 672,497 | (81,282 | ) | |||||
| Permanent differences | - | 1,246 | ||||||
| Share issuance costs | 90,248 | - | ||||||
| Adjustment to prior years provision versus statutory tax return tax returns | (153,137 | ) | 69,315 | |||||
| Changes in statutory, foreign tax, foreign exchange rates and other | 367,410 | (364,514 | ) | |||||
| Change in unrecognized temporary differences | (25,844 | ) | 256,904 | |||||
| Total income tax expense (recovery) | 951,174 | (118,331 | ) | |||||
| Current tax expense | 957,174 | - | ||||||
| Deferred tax expense (recovery) | - | (118,331 | ) | |||||
| Total income tax expense | $ | 957,174 | - | |||||
The components of the net deferred tax liability are as follows:
| 2023 | 2022 | |||||||
| Inventory | - | (22,286 | ) | |||||
| Accounts receivable | - | 56,386 | ||||||
| Share issuance costs | 90,248 | - | ||||||
| Property and equipment | 192,136 | 585 | ||||||
| Non-capital losses carried forward | - | 277,816 | ||||||
| 282,384 | 312,501 | |||||||
| Deferred tax assets not recognized | (282,384 | ) | (315,931 | ) | ||||
| Net deferred tax liabilities | - | (3,430 | ) | |||||
As at June 30, 2023, the Company has non-capital losses of approximately $Nil (2022 - $945,794) available that may be carried forward and applied against future income for Canadian income tax purposes. The Company’s United States’ subsidiary has non-capital losses of approximately $Nil (2022 - $102,576) available that may be carried forward and applied against future income for US income tax purposes.
| 38 |
SOLARBANK CORPORATION
Notes to Consolidate Financial Statements
Years ended June 30, 2023 and 2022
(Expressed in Canadian Dollars)
| 26. | Subsequent events |
| a) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The company, in cooperation with the town, is vigorously defending this suit. The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. A second case against the town and Company by one of the original petitioners was filed in November 2022 largely mirroring the first challenge. On November 30, 2022, the case was dismissed as to all claims against the Company, one claim under the Open Meeting Law against the town remains. Motions for summary judgement on that claim by the town and Company are currently pending. The case does not represent a material threat to the Company. | |
| b) | On July 5, 2023, the Company acquired 42,500 limited partnership units of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000. | |
| c) | During the quarter ended September 30, 2023 the Company sold 2,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $22,003.96. | |
| d) | On September 19, 2023, the Company completed a sale of 21 MW DC ground-mount solar power projects (the “SB Projects”) that are under development in upstate New York to Honeywell International Inc. (“Honeywell”). The Company will build the SB Projects for Honeywell to commercial operation via an EPC” agreement. The sale of the SB Projects and EPC agreement have a total value of approximately USD $41 million. The Company also expects that it will retain an operations and maintenance contract for the SB Projects following the completion of construction. | |
| e) | On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects (the “BESS Projects”) with a total contract value of approximately $36 million. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario. | |
| f) | On October 10, 2023, the Company received a demand letter from US lawyers representing Dan Juhl claiming that the company is infringing Mr. Juhl’s trademark rights.Mr. Juhl holds a trademark registration for SOLARBANK in association with “Electric power generators, namely, reserve electric power generators for the renewable energy sector”. The Company is responding to the letter on several grounds, and that confusion to trademark is unlikely because the Company’s business and services are very different from the products listed in Mr. Juhl’s application. | |
| g) | The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The shares of the Purchased Entities are being acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company will acquire 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company will also acquire 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The closing of the OFIT Transaction is subject to certain customary conditions including the receipt of consents from lenders to the Purchased Entities, landlords for the leases of the solar sites and shareholders of the Purchased Entities. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and will indirectly receive one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction. |
| 39 |
Exhibit 99.57
SOLARBANK CORPORATION
REVISED ANNUAL INFORMATION FORM
For the year ended June 30, 2023
505 Consumers Road, Suite 803
Toronto, Ontario, Canada M2J 4V8
October 27, 2023
SOLARBANK CORPORATION
ANNUAL INFORMATION FORM
TABLE OF CONTENTS
| Page | |
| PRELIMINARY NOTES | 1 |
| Effective Date of Information | 1 |
| Currency | 1 |
| Cautionary Note Regarding Forward-Looking Information | 1 |
| GLOSSARY | 4 |
| CORPORATE STRUCTURE | 8 |
| Name, Address and Incorporation | 8 |
| Inter-corporate Relationships | 8 |
| DESCRIPTION AND GENERAL DEVELOPMENT OF THE BUSINESS | 9 |
| Overview | 9 |
| NARRATIVE DESCRIPTION OF THE BUSINESS | 17 |
| Summary of the Business | 17 |
| Products and Services | 18 |
| Customers and Sales Channels | 21 |
| Operations Process | 25 |
| Employees, Specialized Skill and Knowledge | 26 |
| Competitive Conditions | 27 |
| Third Party Suppliers | 30 |
| Pricing and Marketing | 32 |
| Regulatory Environment | 32 |
| Impact of Environmental Laws and Regulations | 35 |
| Intellectual Property | 36 |
| Cycles | 36 |
| Foreign Operations | 36 |
| Economic Dependence | 36 |
| Social or Environmental Policies | 36 |
| Lending | 36 |
| Bankruptcy and Similar Procedures | 37 |
| Reorganizations | 37 |
| Significant Acquisitions | 37 |
| RISK FACTORS | 37 |
| Risks Related to Our Company and Our Industry | 37 |
| DIVIDENDS | 56 |
| DESCRIPTION OF CAPITAL STRUCTURE | 56 |
| MARKET FOR SECURITIES | 56 |
| Market | 56 |
| Trading Price and Volume | 56 |
| Prior Sales | 57 |
| ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER | 57 |
| Contractual Escrow Securities | 57 |
| National Policy 46-201 Escrow | 58 |
| DIRECTORS AND OFFICERS | 59 |
| Cease Trade Orders, Bankruptcies, Penalties or Sanctions | 60 |
| Conflicts of Interest | 61 |
| LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 61 |
| PROMOTERS | 62 |
| INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 62 |
| MATERIAL CONTRACTS | 63 |
| INTEREST OF EXPERTS | 64 |
| TRANSFER AGENT AND REGISTRAR | 64 |
| ADDITIONAL INFORMATION | 64 |
| AUDIT COMMITTEE | 64 |
| i |
ANNUAL INFORMATION FORM
SOLARBANK CORPORATION
PRELIMINARY NOTES
Effective Date of Information
The information contained in SolarBank Corporation’s annual information form (“AIF” or “Annual Information Form”) is presented as of June 30, 2023, unless otherwise stated herein. Unless the context otherwise requires, all references to the “Company” or “SolarBank” shall mean SolarBank Corporation.
Currency
Unless specified otherwise, all references in the AIF to “dollars” or to “$” are to Canadian dollars and all references to “U.S. dollars” or to “U.S.$” are to United States dollars.
Cautionary Note Regarding Forward-Looking Information
This AIF, including the documents incorporated by reference herein, contains “forward-looking information” or “forward-looking statements” within the meaning of applicable securities legislation (collectively, “forward-looking statements”). The forward-looking statements in this AIF are provided as of the date of this AIF and forward-looking statements incorporated by reference are made as of the date of those documents. The Company does not intend to and does not assume any obligation to update forward-looking statements, except as required by applicable law. For this reason and the reasons set forth below, investors should not place undue reliance on forward-looking statements.
This AIF, including the documents incorporated by reference herein, contains “forward-looking statements” or “forward-looking information” (collectively “forward-looking statements”) within the meaning of applicable securities laws. Forward-looking statements contained herein are based on current expectations, estimates, forecasts, projections, beliefs and assumptions made by management of the Company about the industry in which it operates. Such statements include, in particular, statements about the Company’s plans, strategies and prospects. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, and disclaims any obligation, to update any forward-looking statements after it files this AIF, whether as a result of new information, future events or otherwise, except as required by the securities laws. These forward looking statements are made as of the date of this AIF.
The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
| ● | the completion, size, pricing, expenses and timing of the closing of any securities offerings: | |
| ● | the Company’s discretion in the use of net proceeds from securities offerings; | |
| ● | the Company’s expectations regarding its revenue, expenses and operations; |
| 1 |
| ● | industry trends and overall market growth; | |
| ● | the Company’s growth strategies; | |
| ● | expectations relating to director and executive officer compensation levels; | |
| ● | the Company’s anticipated cash needs and its needs for additional financing; | |
| ● | the Company’s intention to grow the business and its operations; | |
| ● | expectations with respect to future costs; | |
| ● | the Company’s competitive position and the regulatory environment in which the Company operates; | |
| ● | the Company’s expected business objectives for the next 12 months; | |
| ● | the Company’s ability to obtain additional funds through the sale of equity or debt commitments; and | |
| ● | the effect of the Novel Coronavirus (“COVID-19”) outbreak on the ability of the Company to carry on business. |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this AIF, the Company has made various material assumptions, including but not limited to: (i) obtaining the necessary regulatory approvals; (ii) that regulatory requirements will be maintained; (iii) general business and economic conditions; (iv) the Company’s ability to successfully execute its plans and intentions; (v) the availability of financing on reasonable terms; (vi) the Company’s ability to attract and retain skilled staff; (vii) market competition; (viii) the products and services offered by the Company’s competitors; (ix) that the Company’s current good relationships with its service providers and other third parties will be maintained; and (x) government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, prospective purchasers of Offered Shares should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Risk Factors”, which include:
| ● | the Company may be adversely affected by volatile solar and renewable power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings; | |
| ● | the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers; | |
| ● | the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; | |
| ● | governments may revise, reduce or eliminate incentives and policy support schemes for solar, renewable and battery storage power, which could cause demand for the Company’s services to decline; | |
| ● | general global economic conditions may have an adverse impact on our operating performance and results of operations; | |
| ● | the Company’s project development and construction activities may not be successful; | |
| ● | developing and operating solar and renewable projects exposes the Company to various risks; | |
| ● | the Company faces a number of risks involving power purchase agreements (“PPAs”) and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms; | |
| ● | the Company is subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where it does business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar and renewable power and battery storage products, solar projects and solar and renewable electricity; |
| 2 |
| ● | the markets in which the Company competes are highly competitive and evolving quickly; | |
| ● | an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar and renewable power projects; | |
| ● | the Company’s quarterly operating results may fluctuate from period to period; | |
| ● | foreign exchange rate fluctuations; | |
| ● | a change in the Company’s effective tax rate can have a significant adverse impact on its business; | |
| ● | seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; | |
| ● | the Company may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development; | |
| ● | the Company may incur substantial additional indebtedness in the future; | |
| ● | the Company is subject to risks from supply chain issues; | |
| ● | risks related to inflation; | |
| ● | unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; | |
| ● | if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; | |
| ● | there are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes the Company and its utility scale solar projects to additional risk; | |
| ● | compliance with environmental laws and regulations can be expensive; | |
| ● | corporate responsibility, specifically related to Environmental, Social and Governance matters and unsuccessful management of such matters may adversely impose additional costs and expose the Company to new risks; | |
| ● | the impact of COVID-19 on the Company is unknown at this time and the financial consequences of this situation cause uncertainty as to the future and its effects on the economy and the Company; | |
| ● | the Company has limited insurance coverage; | |
| ● | the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; | |
| ● | the Company does not anticipate paying cash dividends; | |
| ● | the Company may become subject to litigation; | |
| ● | discretion of the Company on use of the net proceeds of any securities offerings; | |
| ● | no guarantee on how the Company will use its available funds; | |
| ● | the Company is subject to additional regulatory burden resulting from its public listing on the CSE; | |
| ● | the market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control; | |
| ● | future sales of Common Shares by existing shareholders could reduce the market price of the Company’s Common Shares; | |
| ● | the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and | |
| ● | future dilution as a result of financings. |
These factors should not be considered exhaustive. If any of these risks or uncertainties materialize, or if assumptions underlying the forward-looking statements prove incorrect, actual results might vary materially from those anticipated in those forward-looking statements.
Readers of this AIF are cautioned that the foregoing lists of factors are not exhaustive and it would be unreasonable to rely on any such forward-looking statements and information as creating any legal rights, that the statements and information are not guarantees and may involve known and unknown risks and uncertainties, and that actual results may differ (and may differ materially) and objectives and strategies may differ or change from those expressed or implied in the forward-looking statements or information as a result of various factors Our assumptions and estimates relating to the forward-looking information referred to above are updated, as required, in conjunction with filing our quarterly and annual MD&A,
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information is made as of the date of this AIF.
| 3 |
GLOSSARY
In the AIF, unless otherwise defined or unless there is something in the subject matter or context inconsistent therewith, the following terms have the meanings set forth herein or therein:
| “Advisory Warrant” | means transferrable Common Share purchase warrants of the Company, with each Advisory Warrant entitling the holder, upon the closing of the IPO, to purchase one Common Share up to the day that is five years from the date of issuance thereof at a price of $0.10 per Common Share. | |
| “Agency Agreement” | has the meaning ascribed thereto under “General Development and Business of the Company – Three Year History – Developments for the Year Ended June 30, 2023” | |
| “Agent” | Means Research Capital Corporation, the agent for the IPO. | |
| “Agent’s Warrants” | means the warrants issued to the Agent, with each warrant to purchase one Common Share up to March 1, 2026 at a price of $0.75 per Common Share. | |
| “AIF” | means this Annual Information Form; | |
| “Audit Committee” | means the audit committee of the Company. | |
| “Board” or “Board of Directors” | means the board of directors of the Company. | |
| “CEO” | means Chief Executive Officer. | |
| “CFO” | means Chief Financial Officer. | |
| “Common Shares” | means the common shares without par value in the capital of the Company. | |
| “company” | means, unless specifically indicated otherwise, a corporation, incorporated association or organization, body corporate, partnership, trust, association or other entity other than an individual. | |
| “Company” or “SolarBank” | means SolarBank Corporation, a corporation existing under the OBCA. | |
| “Conversion Unit” | means a unit issuable on the conversion of the Convertible Loan consisting of one Common Share, one Series A Warrant and one Series B Warrant. | |
| “Convertible Loan” | has the meaning ascribed thereto under “Description and General Development of the Business – Three Year History – Developments for the Year Ended June 30, 2023”. | |
| “CSE” or “Exchange” | means the Canadian Securities Exchange. | |
| “GAAP” | means generally accepted accounting principles in Canada, which is “IFRS” meaning International Financial Reporting Standards. |
| 4 |
| “Honeywell EPC Agreement” | has the meaning ascribed thereto under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” | |
| “Honeywell MIPA” | has the meaning ascribed thereto under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” | |
| “Insider” | means: |
| (a) | a director or senior officer of the Company; | |
| (b) | a director or senior officer of a company that is itself an Insider or subsidiary of the Company, | |
| (c) | a Person that beneficially owns or controls, directly or indirectly, shares carrying more than 10% of the voting rights attached to all outstanding voting shares of the Company; or | |
| (d) | the Company itself if it holds any of its own securities. |
| “IPO” | means the Company’s initial public offering of Common Shares that closed on March 1, 2023 pursuant to which it issued a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) at a purchase price of $0.75 per Common Share for aggregate gross proceeds of $6,037,500. | |
| “Listing Date” | means date the Common Shares commenced trading on the CSE which was February 28, 2023. | |
| “Manlius EPC Agreement” | has the meaning ascribed thereto under “General Development and Business of the Company – Three Year History – Developments for the Year Ended June 30, 2023” | |
| “MD&A” | means Management’s Discussion and Analysis. | |
| “Named Executive Officers” or “NEO” | has the meaning ascribed thereto under “Executive Compensation – Executive Compensation”. | |
| “NI 51-102” | means National Investment 51-102 – Continuous Disclosure, of the Canadian Securities Administrators. | |
| “NI 52-110” | means National Investment 52-110 – Audit Committees, of the Canadian Securities Administrators. | |
| “NP 46-201” | means National Policy 46-201 – Escrow for Initial Public Offerings, of the Canadian Securities Administrators. | |
| “OBCA” | means the Business Corporations Act (Ontario). | |
| “Options” | means stock options to acquire Common Shares issuable pursuant to the Share Compensation Plan. |
| 5 |
| “Person” | means a company, individual or trust. | |
| “Principal” | means, collectively, Richard Lu, Sam Sun, Andrew van Doorn, Tracy Zheng, Olen Aasen, Paul Pasalic and Paul Sparkes. | |
| “Promoter” | means (a) a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer, or (b) a person or company who, in connection with the founding, organizing or substantial reorganizing of the business of an issuer, directly or indirectly, receives in consideration of services or property, or both services and property, 10% or more of any class of securities of the issuer or 10% or more of the proceeds from the sale of any class of securities of a particular issue, but a person or company who receives such securities or proceeds either solely as underwriting commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this definition if such person or company does not otherwise take part in founding, organizing, or substantially reorganizing the business. | |
| “Regulation S” | means Regulation S promulgated under the U.S. Securities Act. | |
| “RSUs” | means restricted share units that upon vesting are redeemed for Common Shares issuable pursuant to the Share Compensation Plan. | |
| “SEDAR+” | means the System for Electronic Document Analysis and Retrieval maintained by the Canadian Securities Administrators. | |
| “Series A Warrant” | means transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series A Warrant entitling the holder, upon satisfaction of the Series A Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. | |
| “Series A Warrant Vesting Condition” | means the Series A Warrants shall become exercisable upon the Company attaining a fully diluted market capitalization of $20 million calculated by multiplying all of the issued and outstanding Common Shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. | |
| “Series B Warrant” | means a transferrable Common Share purchase warrants of the Company forming part of the Conversion Units, with each Series B Warrant entitling the holder, upon satisfaction of the Series B Warrant Vesting Condition, to purchase one Common Share up to the Warrant Expiry Date at a price of $0.50 per Common Share. | |
| “Series B Warrant Vesting Condition” | means the Series B Warrants shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a “Venture Issuer” as defined in NI 51-102. |
| “Shareholders” | means holders from time to time of Common Shares. | |
| “Share Compensation Plan” | means the share compensation plan of the Company adopted on November 4, 2022. | |
| “Tax Act” | means the Income Tax Act (Canada) and the regulations promulgated thereunder, as amended. | |
| “Warrant Expiry Date” | means March 1, 2028. | |
| “Warrants” | means the Advisory Warrants, Agent’s Warrants, Series A Warrants and Series B Warrants. | |
| “U.S. Exchange Act” | means the U.S. Securities Exchange Act of 1934, as amended. | |
| “U.S. Securities Act” | means the U.S. Securities Act of 1933, as amended. | |
| “USA”, “United States”, “U.S.” or “US” | means the United States of America, its territories and possessions, and any state of the United States, and the District of Columbia. |
| 6 |
SELECT SOLAR INDUSTRY TERMS
The following solar industry specific terms are used in this AIF:
“BOS” means balance-of-system
“BTM” means behind-the-meter
“C&I” means commercial and industrial
“COD” means commercial operations date
“CRCE” means Canadian Renewable Conservation Expenses
“EPC” means engineering, procurement and construction
“FIT” means Feed-In-Tariff
“GHG” means Greenhouse Gas
“GW” means Gigawatt
“IEA” means International Energy Agency
“IESO” means Independent Electricity System Operator
“IPP” means Independent Power Producer
“IRA” means Inflation Reduction Act of 2022
“ITC” means Investment Tax Credit
“kW” means Kilowatt
“kWh” means Kilowatt hour
“kWp” means Kilowatt peak, or kW, DC
“MPPT” means Maximum Power Point tracking
“MW” means Megawatt
“MWac” means Mega-Watt, Alternating Current
“MWp” means Megawatt peak, or MW, DC
“NMCA” means Net Metering Credit Agreement
“NTP” means Notice to Proceed
“NZ2050” Means Net-Zero by 2050
“O&M” means operations and management
“PCDC” means Pre-Construction Development Costs
“PO” means purchase order
“PPA” means Power Purchase Agreement
“PTO” means Permission to Operate
“PV” means photovoltaic
“QA/QC” means quality assurance/quality control
“REC” means Renewable Energy Certificate
“RPS” means Renewable Portfolio Standards
“VDER” Means Value of Distributed Energy Resources
| 7 |
Corporate STructure
Name, Address and Incorporation
The Company was incorporated under the OBCA on September 23, 2013 as 2389017 Ontario Inc. On October 11, 2013 its name was changed to Abundant Solar Energy Inc. On October 7, 2022 it completed a share split on a 1:160 basis. On October 17, 2022, it amended its Articles to establish an authorized capital consisting of an unlimited number of Common Shares. On October 17, 2022 its name was changed to SolarBank Corporation.
The Company’s head and registered office is located at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2.
Inter-corporate Relationships
The corporate structure of the Company is outlined in the diagram below and is current as at the date of filing of this Prospectus.
Subsidiaries
The Company’s subsidiary Abundant Solar Power Inc. (“Abundant USA”) was incorporated in the State of Delaware on December 15, 2016. The registered address of Abundant USA is 850 New Burton Road, Suite 201, City of Dover, County of Kent, Delaware, 19904 United States. Abundant USA was incorporated to carry out the Company’s operations in the United States.
The Company’s subsidiary Abundant Construction Inc. (“ACI”) was incorporated in the Province of Ontario on November 8, 2018. The registered address of ACI is 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. ACI was incorporated to act as the counter-party for certain of the Company’s construction agreements.
The Company’s subsidiary 2467264 Ontario Inc. (“246 Ontario”) was incorporated in the Province of Ontario on May 21, 2015. The registered address of 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4Z2. 246 Ontario was incorporated to develop FIT solar power projects in the Province of Ontario in partnership with f 2543154 Ontario Inc., an arm’s length third party, who holds the remaining 51.1% of 246 Ontario. 2543154 Ontario Inc. is a corporation that is owned 50% by the MoCreebec Eeyoud and 50% by the Aroland First Nation, both First Nations Communities.
| 8 |
description and General DEVELOPMENT OF THE BUSINESS
Overview
The Company is an independent renewable and clean energy project developer, power producer and asset operator based in Canada and the United States. The Company is engaged in the development, construction and operation of solar photovoltaic (“PV”) power generation projects, Battery Energy Storage Systems, and EV-Charging projects in Canada and the United States. The Company’s mission is to support the energy transition in North America through deployment of clean energy at a distributed scale closer to where consumption occurs. Its objective is to scale-up as a leading developer, owner and operator of a significant fleet of distributed renewable power assets that have economic and technical value. The Company originates, develops, designs and builds solar power projects, BESS and EV-Charging stations. The Company is also gaining expertise in other clean and renewable technologies that will enable greater penetration of clean energy.
The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries.
The Company’s success started with the renewable Feed-In-Tariff (“FIT”) program for rooftop and ground mount solar arrays in Ontario, Canada. Since then, the Company has established itself as a trusted developer, engineer, builder and asset operator that enables the proliferation of renewable and clean energy in the pursuit of Net Zero carbon emission goals in the fight against climate change and global warming.
The Company’s core competency is in deeply understanding and mastering the ‘local playbook’ of standard offer programs in numerous energy markets in North America allowing it to successfully gain market share while maintaining low overhead and capital-at-risk. The Company provides simple, reliable, and energy-resilient solutions to its customers that significantly reduce their carbon footprint. The Company has extensive experience working with 1,000+ customers including municipalities, First Nations, community co-operatives, regional economic planning authorities, commercial and industrial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions.
The Company’s leadership team has over 100 years of combined expertise in the renewable and clean energy industry coupled with a strongly defined philosophy and financial vision for successful growth. The team brings expertise in site origination, utility grid interconnection, permitting, financing, Engineering, Procurement and Construction (“EPC”), Operation & Maintenance, and asset management of solar PV power plants to the renewable and clean energy industry. As a total solution provider, the Company brings certainty at speed and scale in site control, government relations, grid interconnection, global supply chain and project financing to bring grid-connected solar power plants to productive operation.
The Company focuses on grid connected solar PV electricity power plants, BESS and EV-Charging stations. With its full in-house development, engineering and construction expertise, the Company’s capabilities span the value chain from development, EPC, financing, and operating as an Independent Power Producer (“IPP”). The Company’s core business consists of:
| ● | Development: The Company identifies, evaluates and secures control of suitable solar, BESS and other renewable development sites; obtains grid interconnection from utilities; acquires permits from government authorities; and engages solar energy subscribers and/or Power Purchase Agreement (“PPA”) clients as off-takers. A PPA, also referred to as an off-take agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer or off-taker). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination. A PPA requires active management to reconcile monthly deliveries, penalties and payment for electricity. |
| 9 |
| ● | EPC: The Company engineers, procures and constructs safe, efficient, eco-friendly, solar and other renewable power plants for industrial, commercial, community and utility electricity market, using high engineering standards and the latest technology. | |
| ● | Financing: The Company secures sponsor equity, tax equity, long-term debt, and construction financing to deploy BESS, solar and other renewable power plants. | |
| ● | Independent Power Producer: The Company commenced operating as an IPP since 2023. Previously the Company was carrying out one of the core functions of an IPP as it operates and maintains solar power plants for maximized production (O&M services described further below) and oversees solar power subscribers through two customer support centers in Boston and Chicago. The Company manages PPA and off-take agreements as an asset manager. | |
| ● | O&M stands for Operations and Maintenance. It refers to the set of activities, most of them technical in nature, which enable power plants to perform their task of producing energy at or above the expected level of performance, in compliance with applicable regulations. It encompasses several ongoing maintenance processes along with the replacement and disabling of broken and damaged system and structural components. O&M is essential to ensuring that BESS, solar and other renewable power plants sustain themselves for their expected system life. O&M consists of three fundamental and principal functions: |
| ● | Preventative maintenance. | |
| ● | Reactive maintenance: rapid identification, analysis, and resolution of issues and problems. | |
| ● | Comprehensive and detailed monitoring and reporting with adequate and requisite transparency. |
In carrying out its O&M services, the Company’s service standards are set out in its O&M contracts. These service standards have been developed over time based on experience and industry best practices. Referring to government agencies and industry associations such the National Renewable Energy Laboratory in the United States and Solar Power Europe, the standards have been developed based on industry experience, reliability, resilience and maximizing system output. Afterwards experience in the field and the close monitoring of system performance has allowed the standards to develop as to adapt to site specific conditions and achieve the highest system output and up time possible. Some references used in the development of the Company’s service standards are as follows: (i) Best Practices for Operation and Maintenance of Photovoltaic and Energy Storage Systems, 3rd Edition National Renewable Energy Laboratory, Sandia National Laboratory, SunSpec Alliance, and (ii) the SunShot National Laboratory Multiyear Partnership PV O&M Best Practices Working Group Operations and Maintenance Best practices guidelines version 5.0 by Solar power Europe.
The Company generates revenues via a diverse portfolio of distributed and community solar projects across multiple solar markets including projects with host off-takers, community solar, and net metering projects under programs such as FIT, Value of Distributed Energy Resources (“VDER”), Net Metering Credit Agreements (“NMCAs”), and PPAs. The Company develops solar projects that sell electricity to commercial, industrial, municipal, residential and utility off-takers.
| 10 |
Since incorporation, the Company’s team delivered value in Ontario’s FIT program with the completion of hundreds of projects, New York’s Community Solar Program, and an RFP issued by the Maryland Department of Transportation. As a developer, full-service EPC contractor, and asset O&M manager, the Company has been successful in the renewable and clean energy industry working with 1,000 plus stakeholders including property owners, municipalities, indigenous people, co-operatives, electric utilities and regulatory agencies. The Company designed and constructed hundreds of solar power plants, including C&I rooftop installations and ground mount solar farms of varying scale. The Company’s management team has developed, financed and built over 600 C&I projects in Ontario, Minnesota and New York. Through its contracted customer care centers in Boston and Chicago the Company serves more than 10,000 retail electricity customers as community solar subscribers.
The Company’s success in the solar energy market is a result of its creativity, innovation, and ability to think outside of the box, in designing responses to the growing challenges facing the power industry. The Company has managed over $100 million in project financing to-date and has access to low-cost development financing by collaborating with tax-advantaged investment funds seeking CRCE in Canada or federal ITCs in the United States. A tax advantaged investment fund is an investment fund that passes through tax credits to its investors providing investors with tax benefits that allow such funds to offer lower returns to investors. This in turn means that the Company can access funding from such investment funds at a lower cost of capital. An example of a tax-advantaged investment fund is the Solar Flow Through Funds Group. There is a risk that if tax credits are eliminated or reduced in the future that such investment funds will have difficulty raising capital and as a result the Company may no longer have access to this form of financing.
| 11 |
Three-year history
Developments for the Year Ended June 30, 2021
On August 1, 2020, the Company entered into a promissory note agreement of $248,081 (US$200,000) with Central New York Enterprise Development Corporation (“CNY”) for a loan with a fixed interest rate of 5% per annum and principal and interest are payable on February 1, 2022. This loan is secured by the following collateral clause: all of the Company’s inventory, equipment, fixtures, accounts, contract rights, chattel paper, security agreements, instruments, deposit accounts, reserves, documents and general intangibles; and all judgements, claims, insurance policies and payments owed or made, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements. Subsequently, the Company has fully repaid the loan in December 2021.
On December 21, 2020, the Company entered into Purchase Order with Honeywell International Inc. for the construction of a solar energy facility in New York State in consideration for cash in the amount of US$1,413,694.52. To date the Company has completed six community and net metering solar projects in collaboration with Honeywell in New York State.
On July 31, 2020, the Company entered into a secured note agreement with TGC Fund III, LP (“TGC”), a customer of the Company, for a loan of $2,483,775 (US$2,000,000). The term loan has an interest rate of 10% per annum to pay for 75% of the interconnection deposits of three projects. Upon TGC purchasing these projects from the Company, the principal and interest amounts are due. TGC purchased two projects as of June 30, 2021 and the third project was expected to close six months after. The third project has been closed subsequently and outstanding term loan has been fully repaid in July 2021.
On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (US$517,017) that comprised of a fixed interest rate of 10% for the first month and 1% for the remaining 11 months, compound monthly. The loan had a maturity date of January 7, 2022 and was secured by the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. In September 2022, the Company fully repaid the shareholder’s loan.
On February 9, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Troupsburg LLC for the construction and operation of 14.0 MW-DC solar energy facilities located in the Town of Richmond, Ontario County, New York and the Town of Portland, Chautauqua County, New York in consideration for cash in the amount of US$16,269,500. This project was placed into service on October 12, 2022.
On May 3, 2021, the Company received a Highly Affected Sectors Credit Availability Program loan for a total of $1,000,000 at an interest rate of 4% per annum from the Bank of Montreal. The loan has a ten-year amortization period with interest payments only for the first year. Principal payments commenced in May 2022.
The Company received a Canada Emergency Business Account interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two year term which bears interest at 5% per annum.
| 12 |
Developments for the Year Ended June 30, 2022
On November 15, 2021, the Company entered into an Engineering, Procurement, and Construction Agreement with Abundant Solar Power (VC1) LLC for the construction and operation of 298 kW-DC solar energy facilities located in the Village of Cazenovia, Madison County, New York in consideration for cash in the amount of US$488,321.
On November 15, 2021, the Company entered into a Membership Interest Purchase and Sale Agreement with Solar Alliance Energy DevCo LLC, for the sale of its interest in the Cazenovia Facility. This transaction closed in December 2022.
On January 31, 2022, the Company entered into an Engineering, Procurement, and Construction Agreement with Solar Alliance Energy DevCo LLC (US1) for construction and operation of 278 kW-DC solar energy facilities located in the Village of Union Springs, New York in consideration for cash in the amount of US$802,383.20.
Developments for the Year Ended June 30, 2023
On October 3, 2022 the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Each Convertible Loan is convertible at the option of the holder thereof into Conversion Units at a conversion price of $0.50 per Conversion Unit at any time. The Convertible Loans mature on the 12 month anniversary of the date of issuance of the Convertible Loans and do not bear interest at any time. Upon the closing of the IPO, the proceeds of the Convertible Loan converted into 2,500,000 Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and one Series B Warrant.
On March 1, 2023 the Company closed the IPO raising aggregate gross proceeds of $6,037,500. The IPO consisted of a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Common Shares were offered on a “commercially reasonable efforts” basis pursuant to an agency agreement between the Company and the Agent dated February 10, 2023, which has been entered into in connection with the IPO (the “Agency Agreement”). The Agent received a cash commission of $362,250, a corporate finance fee of $35,000 and reimbursement of its expenses in connection with the IPO. In addition, the Agent received an aggregate of 483,000 Agent’s Warrants.
On March 2, 2023 the Common Shares began trading on the CSE under the ticker symbol “SUNN”.
On March 7, 2023 the Company announced that it had reached Commercial Operation on a 389.7kW DC Solar Ground Mount System in Union Springs, NY. The solar power project passed its final New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program inspection and has been placed into commercial operation.
On March 14, 2023 the Company announced the achievement of commercial operation and financial closing on a 3.544 MW community solar power project in Portland, New York. The project has been sold to a subsidiary of Columbus, Ohio-based Gosh Enterprises, Inc., the parent company of Charleys Cheesesteaks, Bibibop Asian Grill, Lenny’s Grill and Subs, and non-profit Charley’s Kids.
On March 16, 2023 the Company announced achievement of commercial operation and financial closing on a 7 MW community solar power project in Richmond, New York. The project has been sold to a subsidiary of Columbus, Ohio-based Gosh Enterprises, Inc.
On March 21, 2023 the Company announced that it has achieved commercial operation on a solar power project in New York state for Honeywell International Inc. (“Honeywell”). The system has an installed capacity of 683.55kWdc, and is expected to generate over 753,000kWh of clean, renewable energy in its first year of operation.
| 13 |
On May 5, 2023 the Company commenced trading the on OTCQX Best Market.
On May 23, 2023 the Company announced that commercial operation reached on a 195kW DC behind-the-meter system for Honeywell in Syracuse, New York.
On June 5, 2023 the Company announced that its subsidiary, 246 Ontario, has now received the full $6.33 million of Pre-Construction Development Costs (“PCDC”) from the Ontario IESO. PCDC are defined as reasonable costs incurred in development of a project from contract award date to termination date. The PCDC were incurred in connection with certain FIT Contracts in Ontario. The amount represents a full recovery of the PCDC claims submitted by 246 Ontario to the Ontario ISEO. 246 Ontario is owned 49.9% by the Company; however, based on an arrangement between 246 Ontario and SolarBank, SolarBank will receive the full amount of the PCDC recoveries from 246 Ontario.
On June 13, 2023 the Company announced that it has partnered with U.S.-based Rural Energy Development LLC (“RED Renewables”), a provider of solar energy solutions to the commercial agricultural market. The Co-Development Agreement provides for SolarBank to develop and construct solar energy projects introduced by RED Renewables.
On June 19, 2023 the Company announced that is has been added to the ‘CSE 25’ Index as One of the 25 Largest Companies on the CSE.
On June 21, 2023 the Company announces that it has acquired a 67% interest in the US1 Project and VC1 Project, each located in New York. Operating as an Independent Power Producer is a key pillar of the Company’s business model. The first project is the US1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kWh of clean, renewable energy in its first year of operation.
The second project is the VC1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Cazenovia, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 297.9kW DC and is expected to generate an estimated 387,000 kWh of clean, renewable energy in its first year of operation.
On June 27, 2023 the Company announced that the 5.9MW, DC, Community Solar Project in the Town of Manlius, Onondaga County, New York is permitted and under construction for Solar Advocate Development LLC. SolarBank has entered into an EPC agreement with Solar Advocate Development LLC with a total value of approximately US$11.35 million (the “Manlius EPC Agreement”).
On June 28, 2023 the Company announced that the Ontario IESO has awarded 60 MWh of Battery Energy Storage Systems (“BESS”) in response to proposals submitted by SolarBank on behalf of investors. This consists of three projects in Ontario, each has a discharge capacity of 4.74 megawatts with 18.96 megawatt hours of storage. The proposed projects are owned by Solar Flow-Through Funds (“SFF”), two First Nations communities, and a third party developer in Ontario.
Developments subsequent to the Year Ended June 30, 2023
On July 10, 2023 the Company announced that it has made a strategic investment in a Canadian solar project developer and operator by acquiring from existing limited partners an aggregate of 42,500 limited partnership units of the Solar Flow-Through 2016-I Limited Partnership, a partnership that is part of the group of Solar Flow Through Funds. The total purchase price for the Units was $2,465,000. The purchase price for the Units was based on an independent valuation report that was prepared for SFF in connection with the unitholder meetings to approve a restructuring of limited partnerships into a single corporation.
| 14 |
On July 19, 2023 the Company announced that it has received positive interconnection results on 7 MW ground mount site (Hardie) in Upstate New York.
On July 26, 2023 the Company announced that it has awarded a contract to Polar Racking, a leading North American supplier and manufacturer of solar mounting solutions, to supply its CORE fixed tilt ground mount solar mounting solution, and ballasted foundations to the Manlius and Geddes projects that are being developed by the Company. The Manlius project is being developed by the Company for Solar Advocate Development LLC and, subject to receipt of financing, the Company intends to own and operate the Geddes project.
On August 3, 2023 the Company announced that it has awarded a contract to Hewitt Young Electric, LLC to provide electrical subcontracting work for the Geddes project that is being developed by the Company. Subject to receipt of financing, the Company intends to own and operate the Geddes project. The Geddes project which has a designed capacity of 3.7 MW is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets.
On August 21, 2023 the Company announced that it has secured funding of up to US$20 million from Honeywell to advance 21 MW DC ground-mount solar power projects that are under development in upstate New York (the “SB Projects”). The SB Projects are known as SB-1, SB-2 and SB-3.
On September 18, 2023 the Company and Honeywell entered into a Membership Interest Purchase Agreement (the “Honeywell MIPA”) and an EPC agreement (the “Honeywell EPC Agreement”) pursuant to which Honeywell acquired the SB Projects and retained the Company for their construction, with a total transaction value of US$41 million. The Company also expects that it will retain an operations and maintenance contract for the SB Projects following the completion of construction.
On September 21, 2023 the Company announced that it has executed a lease agreement on a proposed 7MW ground mount solar project site in Upstate New York and 16.817MW ground mount solar project site in Alberta. The Alberta Utilities Commission (“AUC”) has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024, and that it will review policies and procedures for the development of renewable electricity generation. This pause will impact the Company’s receipt of interconnection approval for the project from the AUC until it is over, but in the interim the Company will advance its environmental and other studies, along with permits that are unrelated to the AUC.
On September 26, 2023 the Company announced that it has completed mechanical construction of the Community Solar Project in the Town of Manlius, Onondaga County, New York. The 5.9MW Project was constructed for Solar Advocate Development LLC under the terms of the Manlius EPC Agreement. All civil work is complete, along with the mechanical installation of racking and modules. The next step is completion of some final electrical work and acceptance testing. The project is expected to become operational during the fourth quarter of calendar year 2023.
On October 2, 2023 the Company announced that it has commenced major construction on the Geddes project that is being developed by the Company in Geddes, New York. Current activities include civil work and the commencement of the racking and module installation. Subject to receipt of financing, the Company intends to own and operate the Geddes project. The Geddes project which has a designed capacity of 3.7 megawatts MW DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. Based on its forecast project schedule, the Company anticipates that construction of the Geddes project will be completed in the 1st quarter of calendar 2024.
| 15 |
On October 3, 2023, the Company entered into three EPC agreements for the construction of three separate BESS projects (the “BESS Projects”) that were previously announced in June 2023, with a total contract value of approximately $36 million. The Projects are owned by SFF, two First Nations communities, and a third party developer in Ontario through holding companies. The BESS Projects are known as 903, OZ-1 and SFF 06 and are subject to the following agreements:
| (i) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234763 Ontario Inc. and the Company for 903 Project (the “903 EPC Agreement”); | |
| (ii) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234813 Ontario Inc. and the Company for OZ-1 Project (the “OZ-1 EPC Agreement”); and | |
| (iii) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234763 Ontario Inc. and the Company for SFF 06 Project (the “SFF 06 EPC Agreement”). |
The BESS Projects were awarded as part of a procurement process with the Ontario IESO known as “E-LT1”. Projects under the E-LT1 are expected to be operational no later than April 30, 2026, but the Company intends to have them completed for operation by the summer of 2025. Each BESS Project is expected to operate under a long term contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The Projects will also earn revenue from the energy and ancillary markets in Ontario. Each has a 4.74 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium-iron-phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “OFIT Projects”) for consideration of 278,875 common shares (the “OFIT Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the OFIT Projects since 2017. The shares of the Purchased Entities are being acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the OFIT SPAs, the Company will acquire 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company will also acquire 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The closing of the OFIT Transaction is subject to certain customary conditions including the receipt of consents from lenders to the Purchased Entities, landlords for the leases of the solar sites and shareholders of the Purchased Entities. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and will indirectly receive one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.
Outlook
Building upon its solid core competencies in full-service development, the Company will deliver an integrated growth solution that has the capacity to generate revenue and grow the business in different revenue streams and that is discussed in this paragraph. For C&I end users, the Company will extend its expertise in rooftop solar to behind-the-meter (“BTM”) solar and BESS projects, carports, and building-integrated photovoltaics enabling large property management firms and C&I customers like Honeywell to achieve corporate Net-Zero commitments. The Company has been in negotiations with C&I customers to achieve this goal. The Company also intends to extend its success in FIT ground mount solar gardens and Community Solar farms to large Utility Scale solar farms with a targeted size of 100 MWp or more. In this regard, the Company has site control of a potential 30 MWp utility solar project and is actively searching for suitable sites that could allow for a utility size solar or other renewable energy project. The Company’s track record in operations, maintenance, and asset management create a strong foundation for it to become a successful IPP delivering long-term, sustainable, and profitable growth. The Company’s pipeline has been growing in all aspects of what is being discussed above which is the result of an integrated growth solution.
| 16 |
To achieve this strategic growth goal, the Company will strengthen its team of professionals to increase volume. In 2022 and 2023 it added additional employees with professional credentials in engineering and accounting. An existing team of 12 professionals with experienced and committed core members will be supplemented by outsourcing certain EPC services to meet a growing volume of business as the Company expects to complete projects with more total MWp in the current fiscal year than were completed in the fiscal year ended June 30, 2023. The Company will continue its tradition in project execution with simplicity, focus, and speed to enhance its leading position in cost competitiveness, with time to COD as a key measure of operation excellence.
NARRATIVE DESCRIPTION OF THE BUSINESS
Summary of the Business
Industry Overview
People need energy for nearly everything they do. The majority of the energy sources on earth are still coal and natural gas, representing close to 60% of global electricity supply.1 However, fossil fuel reserves are limited.
Conversely, the sun has all the energy our civilization needs. About 173,000,000 GW of Solar energy continue to reach the Earth’s surface.2 The US Department of Energy revealed that about 430 quintillion Joules (1.19e+14 kWh) of solar energy strikes the earth every hour.3 A single hour of solar energy could provide enough energy to power the planet for a year. Unlike conventional energy sources, it will take 5 billion years for the sun to run out of fuel.4
93% of the global population lives in countries that have an average daily solar PV potential between 3.0 and 5.0 kWh/kWp.5 Because of this abundance of solar power, we only need a small percentage of the planet’s surface to harvest enough energy to power the planet. For example, in Ethiopia just 0.005% of the country’s land area could generate sufficient power to cover existing needs, and in Mexico that figure is just 0.1%.6
Solar PV potential varies across Canada, with the highest insolation in southern Saskatchewan, Alberta, Manitoba, and Ontario, and the lowest in northern and coastal regions.7 The National Energy Board of Canada expects that by 2040, solar power will generate 13% of the country’s electricity.8
Solar power is more affordable, accessible, and prevalent in the United States than ever before. From just 0.34 GW in 2008, U.S. solar power capacity has grown to an estimated 97.2 GW today.9 This is enough to power the equivalent of 18 million American homes at average consumption.10 Today, over only a small percentage of U.S. electricity comes from solar energy. According to the US Department of Energy, with aggressive cost reductions, enabling policies, and large-scale electrification, solar could account for as much as 40% of the nation’s electricity supply by 2035 and as much as 45% by 2050.11
1 International Energy Agency. Global Energy Review 2020. https://www.iea.org/reports/global-energy-review-2020/renewables
2 Pierce, E.R. (2016). Top 6 Things You Didn’t Know About Solar Energy. U.S. Department of Energy. www.energy.gov/articles/top-6-things-you-didnt-know-about-solar-energy.
3 Ashrafun Nushra Oishi, A.N., Meer Shadman Shafkat Tanjim and M. Tanseer Ali (2019). Loss Analysis of Market Available Solar Cells and Possible Solutions. Journal of Scientific & Engineering Research, Volume 10, Issue 9, September-2019 ISSN 2229-5518.
4 Scudder, J. (2015). The sun won’t die for 5 billion years, so why do humans have only 1 billion years left on Earth? https://phys.org/news/2015-02-sun-wont-die-billion-years.html
5 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
6 Solar Photovoltaic Power Potential by County (2020). https://www.worldbank.org/en/topic/energy/publication/solar-photovoltaic-power-potential-by-country
7 Market Snapshot: Which cities have the highest solar potential in Canada? (2018) https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2018/market-snapshot-which-cities-have-highest-solar-potential-in-canada.html
8 National Energy Board. Canada’s Energy Future 2017: Energy Supply and Demand Projections to 2040 (2017) https://www.cer-rec.gc.ca/en/data-analysis/canada-energy-future/archive/2017/2017nrgftr-eng.pdf
9 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
10 U.S. Department of Energy. Solar Energy in the United States. https://www.energy.gov/eere/solar/solar-energy-united-states
11 U.S. Department of Energy. Solar Futures Study (2021) https://www.energy.gov/sites/default/files/2021-09/Solar%20Futures%20Study.pdf
| 17 |
Products and Services
The Company recognizes revenue from project development service and EPC services. The Company provides solar energy solutions by developing, permitting, designing and building BTM solar power generation and transmission or distribution electricity grid connected community solar gardens and utility scale solar farms. While the Company’s focus is on delivering solar power plants from site origination to commercial operation, and the operation and management of the solar power assets, the Company also provides renewable and clean energy project development, EPC, O&M and asset management services for a fee.
| 18 |
A description of the Company’s three focus areas: BTM solar power generation, community solar and utility scale solar farms are as follows:
Behind-the-Meter (BTM) Solar Power Generation
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with grid electricity coming from renewable sources such as solar and wind (long-term) and BTM power plants (solar or BESS) to provide zero emission renewable solar power onsite for the building’s self-use (immediate).
The term “behind-the-meter” refers to energy production and storage systems that directly supply C&I buildings with electricity. Commercial and Industrial solar panels are considered to be behind-the-meter, as are C&I BESS —the energy that is produced or stored by these systems is separate from the grid and does not need to be counted by a meter before being used, so they are positioned behind the meter. Behind-the-meter, however, is not the same as “off-grid”. Most behind-the-meter energy systems are still grid-tied, which means they maintain a connection to the electrical grid. The energy the solar PV systems provide do not pass through an electricity meter before it is used by a C&I business, but, when the panels are not in use (when there is no sunlight), energy from the grid is sent to the C&I business, and that energy must pass through a meter first so that it can be accounted for by the utility.
All electricity end customers sit behind the meter. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Energy cost savings, | |
| ● | Control over project operations and maintenance, | |
| ● | Self-consumption of distributed generation (usually solar PV), | |
| ● | Visible commitment to sustainability (with solar PV), and | |
| ● | Resiliency (with battery storage). |
| 19 |
All provinces and territories in Canada offer net metering program though the details may differ.12 Forty-one States in the US, in addition to Washington, D.C., American Samoa, U.S. Virgin Islands and Puerto Rico offer net metering programs.13 The BTM solar projects are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems, and could be profitable with a targeted 15% gross margin. The Company can be a turn-key service provider to commercial and industrial (“C&I”) customers for them to own BTM solar power plants on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and third party ownership.
There has been an increased interest in BTM solar projects and BESS. Existing buildings are responsible for 18% of Canada’s GHG emissions, BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050.14
Community Solar & BESS
Solar power can help reduce CO2 emissions mainly by being a clean and renewable source of electricity. Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production at residential or C&I subscribers’ locations. Community Solar farms provide opportunities for the subscribers to do their part in achieving the Net-Zero goal.
Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
Community solar projects are usually 3 – 7 MWp each in size (see below a Company developed 3 MWp solar farm in Portland, NY, USA) subject to State regulation. Community solar capacity has increased because more projects have come online and because projects have generally become larger over time. Economies of scale enable cost-effective construction of a renewable energy system at a site with optimal renewable resource availability.
12 Alberta: https://www.epcor.com/products-services/power/micro-generation/Pages/net-metering.aspx; British Columbia: https://app.bchydro.com/accounts-billing/electrical-connections/net-metering.html; Saskatchewan: https://www.saskpower.com/Our-Power-Future/Powering-2030/Generating-Power-as-an-Individual/Using-the-Power-You-Make/Net-Metering; Manitoba: https://www.hydro.mb.ca/accounts_and_services/generating_your_own_electricity/?_ga=2.88824211.949710914.1666383471-1665874008.1666383471; Ontario: https://www.hydroone.com/business-services/generators/net-metering; Quebec: http://www.hydroquebec.com/residential/customer-space/account-and-billing/understanding-bill/residential-rates/net-metering-option.html; PEI: https://www.maritimeelectric.com/services/articles/net-metering/; Nova Scotia: https://energy.novascotia.ca/renewables/programs-and-projects/enhanced-net-metering; New Brunswick: https://www.nbpower.com/en/products-services/net-metering/; Newfoundland: https://www.newfoundlandpower.com/My-Account/Usage/Electricity-Rates/Net-Metering; Yukon: https://yukon.ca/en/micro-generation-program; Northwest Territories: https://www.inf.gov.nt.ca/en/NetMetering; Nunavut: https://www.qec.nu.ca/customer-care/generating-power/net-metering-program.
13 National Renewable Energy Laboratory. Net Metering. https://www.nrel.gov/state-local-tribal/basics-net-metering.html
14 Natural Resources Canada. Green Buildings. https://www.nrcan.gc.ca/energy-efficiency/green-buildings/24572
| 20 |
Community solar farm projects leverage economies of scale and often offer quick to market solutions for scales of approximately 1,000 homes/7 MWp. Additional advantages include, shared transaction costs often make this procurement option less expensive than self-supply, and customers are generally not responsible for maintenance and upkeep.
Utility Scale Solar & BESS
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production. For comparison, the average American household uses approximately 900 kWh. A utility-scale solar power plant can utilize several solar technologies including primary PV, tracking (rotate to track the sun’s movement) or fixed racking (does not track the sun’s movement).
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a PPA with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time. Utility scale systems also participate in monthly and spot auction markets for energy, capacity, and ancillary services.
Utility-scale solar has become a growing source of electricity in the world. Many utility-scale solar designs can also include energy storage capacity that provides power when the sun is not shining and increases grid reliability and resiliency.
To reach NZ2050, every industry requires power and every business needs to decarbonize. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory, and utility scale solar farm is a commercially viable decarbonization solution for reaching the Net-Zero carbon emission goal.
Customers and Sales Channels
The pursuit of Net-Zero carbon emissions comes a rising demand for renewable energy. Customers are increasingly capitalizing on the climate benefits of renewables; they are looking for renewable energy to meet rising energy needs; they want to benefit from the improving economics of renewable energy via subsidies; and they want to move their businesses away from fossil fuel dependency. Based on application, the Company has customers in the following market segments: BTM, Community Solar, Corporate PPA, and Utility PPA.
| 21 |
Behind the Meter (BTM) Solar for C&I Customers
Corporate Net-Zero goals boost BTM solar growth. The C&I BTM solar market, which consists of on-site solar power generation primarily for self use has grown rapidly in recent years. Net-Zero adoption by businesses, non-for-profits and governments will help continue to increase the demand for BTM solar segments. Many C&I customers are becoming more interested in making sustainability-focused choices. With little more than 1% of commercial electricity demand served by on-site solar, there remains significant opportunity for growth in the BTM solar segment.
All subnational jurisdictions in Canada and the United States have net metering programs for BTM solar projects.15 The Company delivers BTM projects to C&I customers with in-house expertise, enabling economic progress on Net-Zero goals. A residential BTM market segment also exists; however, the Company sees Community Solar as its strongest opportunity to serve mass market residential customers.
15 See notes 12 and 13.
| 22 |
Community Solar for Mass Market Subscribers
A Community solar subscription is tied to an offsite solar farm, or solar garden and allows homeowners, renters, small businesses, religious organizations, and other not-for-profits to purchase solar energy without the need to install panels on their property. Rather than purchasing energy solely sourced from utility-scale generators, such as coal and natural gas power plants, some or all electricity is sourced from the community solar project. Subscribers are billed for the solar energy and are credited on their utility bill. In many cases, this creates a discount over conventional electricity purchases. Community solar is especially appealing to those customers who are unable or unwilling to install a renewable energy generator at their residence or commercial facility but still seek the economic and environmental benefits of solar energy.
As of December 2021, Community solar projects are located in 39 states, plus Washington, D.C. 22 states, plus Washington, D.C., have policies that support community solar. Community solar projects represent more than 3,200 MWac of total installed capacity.16 The Biden Administration wants community solar to reach 5 million households by 2025 and create $1 billion in energy bill savings.17
Community Choice Aggregation (“CCA”) is an alternative to the investor-owned utility energy supply system in which local entities in the United States aggregate the buying power of individual customers within a defined jurisdiction to secure an alternative energy supply contract. The CCA chooses the power generation source on behalf of the consumers; and thus have the potential to be a major source of viable customers for community solar projects, representing very large contracts for community solar generators. The main goals of CCAs have been to either lower costs for consumers or to allow consumers greater control of their energy mix, mainly by offering cleaner generation portfolios than many local utilities.
Seven states in the United States have enacted CCA-enabling laws.18 CCAs have set national green power and climate protection records while reducing power bills. CCAs have won National Renewable Energy Laboratory and Environmental Protection Agency recognition for supplying significantly higher amounts of renewable energy while maintaining rates that are competitive with conventional fossil fuel and nuclear-based utility power. 19 CCAs are therefore already conspicuous leaders in green power innovation, receiving the U.S. Environmental Protection Agency’s “green power leadership awards” for achievements in renewable energy. The Company has existing intends to in the future establish relationships with CCAs as a primary method of entry into the Community Solar project market.
Corporate America and IPP Customers
Regulation, investor activism, and rising consumer interest are among the factors pushing companies to benchmark and improve the sustainability performance of their offerings. Both governments and consumers are demanding companies reduce emissions and their environmental footprint. As a result, a growing demand exists for renewable electricity generation from large corporations. Globally, thousands of companies have set or are in the process of setting commitments to emissions reduction. In addition, hundreds of large US-based companies have committed to net-zero targets, many of which have set ambitious emissions reductions targets by 2030 or sooner.
16 National Renewable Energy Laboratory. Community Solar. https://www.nrel.gov/state-local-tribal/community-solar.html
17 U.S. Department of Energy. DOE Sets 2025 Community Solar Target to Power 5 Million Homes. https://www.energy.gov/articles/doe-sets-2025-community-solar-target-power-5-million-homes
18 National Renewable Energy Laboratory. Community Choice Aggregation (CCA) Helping Communities Reach Renewable Energy Goals. https://www.nrel.gov/state-local-tribal/blog/posts/community-choice-aggregation-cca-helping-communities-reach-renewable-energy-goals.html
19 See note 18.
| 23 |
Solar PPAs continue to evolve, with corporations increasingly procuring solar generation offsite. Major customers include renewable investment funds, RE100 corporations, and government administrations. Corporate solar PPAs can be classified as follows:
| ● | Physical PPA: a contract for the purchase of power and associated Renewable Energy Credits from a specific renewable energy generator to a purchaser of renewable electricity. | |
| ● | Financial PPA: a financial arrangement between a renewable energy generator and a consumer. A Financial PPA does not include the electricity delivery to the buyer, and so the buyer can be located in a different power market. A Financial PPA involves crediting the consumer for the generator’s production. |
Corporate solar PPA prices vary widely from state to state. From 2020 to 2021, there were reductions in levelized electricity costs for commercial and utility-scale PV plus-storage systems. The levelized cost of electricity of utility-scale stand-alone PV fell from 4.6 cents/kWh in Q1 2020 to 4.1 cents/kWh in Q1 2021.20 State-by-state variance in contract prices is a function of avoided cost, resource availability and state incentives. PPA rates continue to decline, increasing viability and market opportunity in more jurisdictions. Falling component and build costs and attractive financing make solar the lowest-cost generation alternative in many states. Corporate customers are also negotiating shorter PPA terms to maximize future flexibility.
Traditional Energy Utilities as Customers
For the United States, the path to NZ2050 entails a comprehensive and rapid effort to decarbonize the economy. America’s annual GHG emissions come from a variety of sources, spanning every sector. Demand from utilities for renewable energy is expected to continue to grow in line with the broader economy. Utilities form the largest share of demand globally, particularly in the Americas, as they are required by law to meet RPS. They also have increased exposure to the merchant market (non-PPA), which will start to account for a larger share of solar PV installations.
Customers Buy Solar Renewable Energy Certificate (“REC”) Off-Sets
One way that the decarbonization effort is being pursued by lawmakers is the creation of RPS at the subnational level. An RPS makes it law for utilities to source a certain percentage of the electricity they sell to customers from renewable energy sources. This is done via REC trading systems.
To facilitate compliance with RPS requirements, states have adopted a market-based system of tradable RECs that represent the legal property rights to the environmental benefits of one MWh of renewable electricity generation. A REC is issued for every MWh of electricity generated and delivered to the electric grid from a renewable energy resource.
In the REC state markets, various RPS regimes require electricity suppliers to secure a portion of their electricity from renewable power plants. Utilities must generate RECs themselves via self-owned renewable generation, purchase them from renewable generators, or else pay a penalty that is generally higher than the market rate for RECs.
All green power supply options involve the generation and retirement of RECs. Renewable energy providers can unbundle energy from RECs - selling energy as “brown” power and the RECs on the open market. REC sales involve no physical delivery of electricity to customers. One way to think of RECs is that they represent the “solar” aspect of the electricity that was produced.
REC generation and sales are a key revenue stream for utility-scale renewable projects owned by IPPs. In many cases, it is the value of RECs that make these large projects financially viable. REC markets vary by state in line with RPS requirements. As governments more aggressively pursue their carbon emissions targets in the lead up to 2030 and 2050, the Company expects RPS requirements to escalate accordingly and REC prices to increase.
20 Vignesh Ramasamy, David Feldman, Jal Desai, and Robert Margolis. U.S. Solar Photovoltaic System and Energy Storage Cost Benchmarks: Q1 2021, https://www.nrel.gov/docs/fy22osti/80694.pdf
| 24 |
Operations Process
Leveraging the Company’s development expertise means that it can finish turnkey solar projects in an efficient and timely manner. The Company’s process has five phases: Site Origination; Development; Financing; Engineering, Procurement and Construction; Operation & Maintenance and Asset Management. This process has been tested and verified and has brought the Company success.
Phase 1 - Site Origination to Bankable Lease
| ● | Policy analysis: Political analysis, environmental, permitting, land use. | |
| ● | Prioritize low-cost interconnection sites. | |
| ● | Financial analysis: Incentive framework, IRR analysis and relevant investment threshold. | |
| ● | Site control: identification, evaluation and execute bankable lease to grow its greenfield Pipeline with efficient site acquisitions, affordable land with low property tax rates. | |
| ● | Acquisition of development pipelines. |
Phase 2 - Development to Notice To Proceed (NTP)
| ● | Evaluate and prioritize projects with the highest likelihood of success. | |
| ● | Grid interconnection studies: detailed discussions with the electrical utilities to determine the most economical methods of connecting the projects to the electrical grid, could result in Connection Impact Assessments, Connection Cost Assessments, Connection Agreements. | |
| ● | Permitting: municipal, state and/or federal permits and approvals, site plan optimization and approval, multiple approvals from zoning, planning and town boards and city council are required depending on the type and size of the project. Projects may also involve a county level review. | |
| ● | Environmental and required regulatory permits to ensure that the project will not significantly negatively impact the surrounding natural environment. | |
| ● | Incentives and PILOT/Tax. | |
| ● | PPA rates, off-taker credit, post-contract assumptions. |
Phase 3 - Financing
| ● | Sponsor equity: Draw on sponsor equity commitments from family office and other investors. | |
| ● | Investment tax credit: Source tax equity from providers. | |
| ● | Long-term debt: Opportunistically add project-level debt or bank leverage to maximize returns. | |
| ● | Construction Financing: project cost and budgeting. |
| 25 |
Phase 4 - Delivery: Engineering, Procurement and Construction to COD/PTO
| ● | EPC selection and negotiation, vet EPC partners based on experience and track record, run targeted RFPs with firms that the company has a close relationship with. | |
| ● | Further fieldwork such as geotechnical investigation, legal or topographical surveys, and site assessments. | |
| ● | Electrical, civil, mechanical and structural engineering design, including erosion and sediment control plan, Issue For Construction drawings. | |
| ● | Construction permits such as building permits and entrance and address permits. | |
| ● | Procurement: supplier negotiation on price and on-time delivery to the sites (solar panels, racking, inverter and BOS), procurement of electrical equipment is a critical step done as soon as the engineering phase has finalized its design. Some equipment such as transformers can take up to 16 weeks of lead time for delivery. | |
| ● | Work closely with local utilities and EPC firms to streamline the construction process. | |
| ● | Contracting: installers contracting. | |
| ● | Fencing and Safety: Fencing of the project site, coordinating with existing facilities and preparing safety measures. | |
| ● | Construction control: on budget, on schedule, regular site visits, QA/QC, PO and change order management. | |
| ● | System commissioning, coordination of all jurisdictional inspections and approvals, identification and correction of deficiencies, site commissioning inspections and tests must be passed. These include electrical commissioning and creation of as-built drawings and finalized package, and COD/PTO. | |
| ● | Site permits closing, site cleanup, landscaping, financial closing support, and coordinating with the utility to receive a final acceptance letter. |
Phase 5 - O&M, Subscriber Management, and Asset Management
| ● | Project handover, acceptance, and O&M for high production. | |
| ● | 100% subscription, 100% credit allocation, and utility reconciliation. | |
| ● | Asset management: contract management, financial reporting, regulatory filings. |
Employees, Specialized Skill and Knowledge
As of June 30, 2023, the Company has 15 employees and an additional two contracted service providers. The operations of the Company are managed by its directors and officers.
| 26 |
The nature of the Company’s business requires specialized knowledge and technical skill around procurement, construction, management, financing and regulations of the solar industry. The required skills and knowledge to succeed in this industry are available to the Company through certain members of the Company’s management, directors, officers, and advisory teams. The Company’s employees and consultants have extensive experience working with municipalities, First Nations, community co-operatives, regional planning authorities, commercial businesses, and landowners that value the numerous benefits of resilient renewable energy solutions. The Company’s team also has extensive experience developing, financing, building, permitting, commissioning, operating and maintaining renewable and clean power plants in Canada and the US with collectively over 100 years of direct experience profitably originating and executing on projects. Many members of the team have a long track record working together at major North American renewable energy companies such as Potentia, Solar Power Networks, Sky Solar and ARISE Technologies. Most of the team built its track record developing, financing, conducting EPC and O&M, executing both ground mount and rooftop FIT solar projects in Canada and in the US. See “Directors and Executive Officers”.
Competitive Conditions
The global solar market remains highly fragmented. Fragmentation will continue as barriers to entry remain low for residential, community, commercial, and industrial applications and annual installations continue to grow driven by Net-Zero policy initiatives. As a result, the Company predicts significant price competition among solar power competitors.
The Company competes with peers in development, EPC, O&M, and IPP Asset Management. Solar companies are not disrupting or undermining the solar energy industry by selling new products or services that may replace the Company’s. The Company competes on cost and volume via operational excellence. Certain companies in the segment could be vulnerable due to limited scope. The Company addresses this through exposure to the whole renewable energy value chain. Scale may hinder an operator’s ability to meet increasing market demand. Successful solar companies in the Company’s segment are successful because of their ability to access capital markets to fund volume.
Solar Developers
A solar developer is a company that shepherds a solar power plant from ideation to construction readiness, also known as Notice to Proceed (“NTP”) A developer can employ just a few employees or up to thousands. Some developers specialize in certain sizes of projects or in specific regions.
The process of developing a solar power plant can take years. Developers must secure a project site, find an customer for the electricity the power plant will produce (a utility, an electric cooperative in rural areas, a corporation that wants the energy for its own use, or community solar subscribers); conduct technical, geological and other studies on the land, study how the energy generated by the power plant will be connected to the electric grid; apply for a variety of permits from local, state, and sometimes federal agencies; secure financing for the construction of the solar power plant; negotiate equipment purchases; and contract with an EPC firm for the build. All of this must happen before construction begins.
Competitors in solar development in markets relevant to the Company are presented in the table below, with information from Solar Power World. The number one developer in Utah (UT), AES Clean Energy has delivered 526MW utility scale solar in 2020; Nexamp in Massachusetts’ (MA) C&I market delivered 128MW; and Enerlogics in Ohio’s (OH) C&I market delivered 1MW. The Company delivered 12MW in 2020 with more than 100MW delivered since the Company’s founding. The Company could be ranked within the top 20 solar developers on this list.
| 27 |
Solar EPC Companies
Solar EPC companies provide engineering, procurement, and construction of a full solar system. A solar EPC company is more sophisticated and holistic in the products and services they provide compared to a typical solar installer. These include:
| ● | Site surveys for project viability. | |
| ● | Determine power generation capacity and equipment selection. | |
| ● | Design and install of the PV system. | |
| ● | Electric grid interconnection and metering. | |
| ● | Facilitate financing including tax incentives and rebates. | |
| ● | Commission the solar system to meet the designed production requirement. |
A list of competitors in the Company’s solar EPC segment is presented in the table below based on information from Solar Power World. The number one solar contractor is SOLVE Energy from California (CA), which installed 8.7 GW with 901 employees since founding. The last one in the table, Renewable Energy Outfitters in Colorado (CO), delivered 593 kW with only 3 employees. The Company has installed more than 100MW since its founding.
| 28 |
Solar O&M Service Providers
Many of the large IPPs that own utility-scale solar PV portfolios in the U.S. rely on the plant developer or EPC firm for operations and maintenance, except for those that develop their own projects. Greentech Media (GTM) Research’s O&M and asset management report identified the top 5 O&M providers managing U.S. utility-scale PV plants in the table below. One of the firms, Sempra, is also an IPP.
Asset Management service – an IPP World
GTM Research defines asset management as the ongoing management of financial, commercial, and administrative tasks that are necessary to ensure the financial performance of a solar PV plant or a portfolio of plants. GTM Research and SoliChamba Consulting recently released a report, ‘Megawatt-Scale PV O&M and Asset Management 2016-2021’ which features a list of asset managers of U.S. utility-scale PV plants. The table below identifies the top five players:
| 29 |
IPPs who own solar power plants and typically perform asset management in-house dominate the top of the rankings, and make up four of the top five utility-scale PV asset managers in the U.S (based on reporting by SoliChamba Consulting outlined above). Most IPPs and financial investors; however, only manage the assets they invest in. The market for third-party asset management services remains small in the U.S. and its growth is probably limited by the dominance of IPPs and large portfolio owners who tend to self-service. The top third-party asset managers include project developers like Recurrent Energy and affiliated service providers like Bay4 Energy Services and EDF Renewable Services, as well as independent service providers like Radian Generation and CAMS.
Company Competitive Advantage
The Company has grown through participating in standard offering programs such as the Ontario Feed-In-Tariff program and New York’s NYSERDA NY-Sun Community Solar Program and are developing more than 70 Community solar projects in collaboration with Central New York Regional Planning and Development Board in New York. It has a good track record in developing and building renewable and clean energy projects in Canada and the USA. The Company has succeeded at delivering value at non-utility solar projects as a developer and a full-service EPC contractor; however, it has been evaluating opportunities for more growth in solar project volumes. Becoming an IPP aiming at long-term sustainable investment returns is the Company’s natural next step. To meet the desire for growth, the Company has re-positioned itself to deliver integrated growth solutions that expands from developer to an IPP in the C&I, Community, and Utility solar PV and BESS market segments.
The Company’s competitive advantage lies in its people, processes and experience. The Company’s team is skilled in translating customer needs into value-add solutions. The Company’s solar power plant delivery process is safe, reliable and low cost; and the Company provides a customer experience that is simple and focused with speed in implementation.
Third Party Suppliers
The Company procures all plant components on the open market. The Company qualifies suppliers’ products based on three factors: bankability, availability, and cost.
| 30 |
Product is considered bankable if lenders are willing to finance it. Component bankability is a key factor in projects being offered non-recourse debt financing by lenders. Products must also be available to meet construction schedules at a competitive price. Though China is the most cost-competitive location for the manufacture of solar PV and BESS components, Chinese solar and BESS products still must be bankable and available in order to be procured for the Company’s solar power and BESS plants.
Bloomberg NEF has developed a tiering system for PV module products based on bankability, creating a transparent differentiation between the hundreds of manufacturers of solar modules on the market. Tier 1 solar panels, such as those from Canadian Solar, ZNShine, and Jinko are built to higher standards and have the strongest reputation within the solar industry for quality and service. These panels last longer and produce more energy. Tier 1 manufacturers can be expected to honor product warranties. The Company primarily sources Tier 1 panels.
Solar panel mounts and racks are the equipment that secures solar panels in place. Racking is used to attach solar panels to a rooftop, ground, or another surface. With proper installation, an effective mount secures the solar panels against all weather conditions and ultimately protects the investment. Choosing the right racking system depends on the site, local climate, and installer preference (bankable, available, and low cost). Additional information on the Company’s key supplies are below:
| ● | Fixed Ground Mounts: Fixed ground mounts have lower energy production when compared to tracking systems, however no moving parts means lower O&M costs, and installation and procurement costs are lower. Fixed system suppliers, such as Schletter’s fixed tilt solar racking system, are also more bankable. | |
| ● | Single-Axis and Dual-Axis Solar Tracker: Trackers increase the efficiency of solar systems by providing more direct sunlight to the system, moving the solar panels from East to West (single-axis include solutions from RBI Solar and TerraSmart’s) or from East to West and from North to South (dual-axis). The additional mechanical complexity leads to higher O&M costs, and procurement and installation costs are higher compared to fixed systems. | |
| ● | Ballasted (Zero Penetration) Mounts: These systems are ideal for sites on roof membranes, landfill caps and industrial brownfields. More space is required to avoid table to table shading, and precast blocks have higher shipping costs and require heavy equipment to move around a site. GameChange Solar has both precast and pour-in-place ballast racking solutions. | |
| ● | Solar Inverters: These are an integral part of every system. The Company has used many top brands such as Huawei, SunGrow, and SMA. The inverters perform two key functions: DC to AC conversion; and Maximum Power Point tracking (“MPPT”), where the inverter dynamically selects the voltage and current combination for the highest power production. | |
| ● | String Inverters: These have better MPPT capability per string for high production, shorter DC wires for lower power loss, and require special racking for the inverter for each string. In general, these have a higher per Watt cost than central inverters. | |
| ● | Central Inverter: Central inverters feature easy system design, installation and O&M trouble shooting. However, they represent a single point of failure for the whole system, with high DC wiring costs and high power loss due to voltage drop. In addition, partial shading and string mismatch drastically reduces power output. |
| 31 |
Pricing and Marketing
The Company strives to ensure its operational excellence. In the pursuit of Net-Zero there is an increasing willingness among customers to purchase renewable and clean energy such as solar power. Commercial customers are price sensitive in that they need to balance Net-Zero preferences and operational costs to remain competitive in their core businesses. Like with all utility economics, regulatory policy is a primary driver of revenue. Electricity prices are set largely by regulatory bodies like Public Service Commissions or Energy Boards. A PPA has to be equal to or lower than the regulated electricity price, in addition to providing renewable energy credits. The Company and its competitors generally have the same electricity price point (economic oligopoly). The Company gains economic value by managing project cost (the larger the project, the lower cost per watt installed), and driving business volume through a portfolio approach with large partners like Honeywell and large property management companies.
The Company prices its community and utility solar project and services competitively, and aligns itself with market pricing forecasts. The Company prices BTM & BESS solar projects to offer the host C&I customers a lower electricity cost, while securing a required return to its investors. BTM project pricing works the best in the Northeast USA where the retail electricity prices are high enough to enable a healthy margin in every BTM project the Company does.
With respect to promotion and marketing to secure customers:
Sales Team
| ● | The Company’s sales team must be highly trained, with a financial background, one on one selling skills, and should ideally hold a business credential. | |
| ● | One dedicated sales manager per Province/State, with core team support from head office in order to support 50 MWp to 100 MWp annual growth rate at $150k total annual budget per person. |
Marketing Communications Plan with a promotion budget of 5% of gross revenue
| ● | 20% on advertising (online & printed media). | |
| ● | 80% public relations and investor relations. |
Messaging customers with key messages
| ● | Community Solar Subscribers: Save on your utility bills while doing good to the environment. | |
| ● | Community Choice Aggregation: Let the Company’s PPA be your way to cheaper, greener energy for your community members. | |
| ● | Major Corporations: Be the 1st Net-Zero corporation among your peers. | |
| ● | Large Utilities: Your state RPS compliance is the Company’s business. |
Regulatory Environment
Achieving Net-Zero by 2050 (“NZ2050”) is widely seen as the best way to halt climate change. “Net zero” means our total carbon dioxide emissions are equal to or less than the emissions we remove from the environment. NZ2050 will require new policies, investments, participation and commitment by government, industry, and individuals. The most feasible pathways to net-zero emissions include four main strategies:
| ● | Generate emission-free electricity using sources like wind, solar, nuclear, and waterpower. | |
| ● | Use vehicles and equipment that are powered by electricity instead of fossil fuels. | |
| ● | Use energy more efficiently. | |
| ● | Remove carbon dioxide from the atmosphere. |
| 32 |
Policymakers are increasingly recognizing that renewable energy is the key to net-zero. Governments must build frameworks and reform bureaucracies to level the playing field for renewables as, in many countries, the bureaucracies still favour fossil fuels, giving the fossil fuel industry large subsidies. To date more than 140 countries have now set or are considering a target of NZ2050.21 United Nations Secretary-General António Guterres called on the world to “end fossil fuel pollution and accelerate the renewable energy transition, before we incinerate our only home”.22
Fighting climate change is good business. Renewables such as wind and solar are readily available and in most cases, are cheaper than coal and other fossil fuels. Solar and battery energy storage costs have plummeted in the past decade. Despite the headwinds presented by ongoing cost inflation and supply chain challenges, demand for clean energy sources has never been higher, and the Company expects that the global energy crisis will continue to act as an accelerant for the clean energy transition.
Since the International Energy Agency’s (“IEA”) last in-depth review in 2015, Canada has made a series of international and domestic commitments, putting it on a path toward achieving an ambitious energy system transformation and climate transition. The Canadian Net-Zero Emissions Accountability Act, which became law on June 29, 2021, enshrines in legislation Canada’s commitment to achieve net-zero emissions by 2050. The majority of Canadians already depend on clean, reliable electricity to power their everyday lives. Canada has accelerated the phase-out of coal, implemented natural gas regulations and put a price on carbon pollution. The Government will connect regions with clean power through Regional Strategic Initiatives.23 The Greenhouse Gas Pollution Pricing Act encourages the reduction of GHG emissions. The Liberal Party of Canada has signaled its intention to continue the annual price increases until the price on emissions reaches $170 per tonne of CO2e by 2030.24
21 Climate Action Tracker. CAT net zero target evaluations. https://climateactiontracker.org/global/cat-net-zero-target-evaluations/#:~:text=As%20of%2020%20September%202022,zero%20goal%20in%20November%202021
22 António Guterres. UN Secretary-General Remarks. https://media.un.org/en/asset/k1q/k1qn00cy8a
23 Government of Canada. Regional Tables Launched to Collaboratively Drive Economic Opportunities in a Prosperous Net-Zero Future. www.canada.ca/en/natural-resources-canada/news/2022/06/regional-tables-launched-to-collaboratively-drive-economic-opportunities-in-a-prosperous-net-zero-future.html
24 Government of Canada. Update to the Pan-Canadian Approach to Carbon Pollution Pricing 2023-2030. https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information/federal-benchmark-2023-2030.html
| 33 |
With the United States’ announcement of targets to halve US GHG emissions and to reach net-zero emissions by 2050, the world’s largest economy (and second-largest emitter) has joined some 130 nations in its intention to act on climate change.
The Biden infrastructure plan (“American Jobs Plan”) is expected to result in very favorable federal policy environment for renewable energy development in the US with a goal towards a 100% emission free power sector by 2035 and economy wide net zero emissions by 2050.
The Inflation Reduction Act of 2022 (“IRA”) is a bill passed by the 117th United States Congress in August 2022 that aims to curb inflation by reducing the deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean energy solutions. The IRA includes long-term solar and energy storage tax incentives and other critical provisions that will help decarbonize the electric grid with significant clean energy deployment. The legislation earmarks $369 billion for U.S. energy security and fighting climate change. It is expected to cut annual U.S. greenhouse gas emissions by about 1 billion metric tons by 2030 mainly by speeding up the deployment of clean electricity and electric vehicles.25 The IRA extends the solar ITC by 10 years at 30%. The existing federal ITC has been fundamental to incentivizing the growth of American solar. The credit applies to residential, commercial, and utility-scale developers and will create an effective discount of 30% on the capital cost of solar installations for ten years (until 2033). The credit will decline to 26% in 2033 and to 22% in 2034. The reinvigorated ITC will come with a variety of “adders,” which could push the tax credit to as high as 50% for some projects. Additionally, the credit is equipped with a direct pay provision, allowing developers with little to no tax liability to treat it as a tax overpayment, resulting in a cash refund.
The IRA also provides ITCs for Standalone Storage and Interconnection Upgrades. Until now, battery storage was only eligible for the ITC if it was directly charged by solar. With respect to interconnection upgrades, a significant portion of the cost of solar projects is to pay for utilities to upgrade the grid so that the solar project can connect to it. With the IRA, standalone storage and interconnection upgrades are eligible for ITC.
25 Jesse D. Jenkins, Erin N. Mayfield, Jamil Farbes, Ryan Jones, Neha Patankar, Qingyu Xu, and Greg Schivley. Preliminary Report: The Climate and Energy Impacts of the Inflation Reduction Act of 2022. https://repeatproject.org/docs/REPEAT_IRA_Prelminary_Report_2022-09-21.pdf
| 34 |
To promote a diversified resource mix and encourage deployment of renewable energy, most States have established RPS. The policies require that a specified percentage of the electricity sold by utilities comes from renewable resources. RPS policies help drive the United States market for wind, solar and other renewable energy. Roughly half of the growth in U.S. renewable energy generation since the beginning of the 2000s can be attributed to State renewable energy requirements.
In addition, the Company is subject to a variety of laws and regulations in the markets where it does business. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. The Company also faces trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. The Company expects that our solar power projects and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. See “Risk Factors”.
Impact of Environmental Laws and Regulations
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of the Company’s business operations.
The Company is required to comply with all national and local environmental regulations. The Company’s business generates noise, wastewater and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as its business has expanded. The Company believes that it substantially complies with all relevant environmental laws and regulations and has all necessary and material environmental permits to conduct its business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If the Company fails to comply with present or future environmental regulations, it may be required to pay substantial fines, suspend production or cease operations.
| 35 |
The Company’s solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and the Company may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, the Company may lose market share and its financial results may be adversely affected. Any failure by the Company to control its use or to restrict adequately the discharge, of hazardous substances could subject the Company to potentially significant monetary damages, fines or suspensions of its business operations.
Intellectual Property
The Company is not dependent on intellectual property rights for its business. The Company has no registered trademarks, patents or patent applications; however, the Company has applied in Canada and the United States to trademark the term “SOLARBANK”. The Company asserts copyright ownership generally in its written works, but has no formal copyright registration process in place.
Cycles
The Company’s business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
Foreign Operations
Currently the Company’s only foreign operations are in the United States which are detailed above. The Company intends to continue to focus on developing solar projects in Canada and the United States but will evaluate expanding into other countries based on the regulatory environment, demand and financial metrics of opportunities.
Economic Dependence
The Company’s business is not substantially dependent on any one contract for the products and services that it provides or the sourcing of the materials, labour and supplies it requires to provide its services. However, each year it is limited to the number of projects that it can develop and therefore its material contracts such as the Manlius EPC Agreement, Honeywell EPC Agreement and SFF EPC Agreement are the current source of the majority of its expected revenue for the fiscal year ended June 30, 2024. As a result, the termination of either of these contracts would have a material adverse effect on the Company’s financial performance. See also “Risk Factors”.
Social or Environmental Policies
The Company has not yet implemented any formal social or environmental policies that are fundamental to its operations. It is currently evaluating the implementation of such policies based on current trends related to environment, social and governance initiatives.
Lending
The Company does not currently hold any investments or have lending operations and has not adopted any specific policies or restrictions regarding investments or lending.
| 36 |
Bankruptcy and Similar Procedures
There are no bankruptcies, receivership or similar proceedings against the Company, nor is the Company aware of any such pending or threatened proceedings. There has not been any voluntary bankruptcy, receivership or similar proceedings by the Company since its incorporation.
Reorganizations
There has not been any material reorganization of the Company or any of its subsidiaries within the three most recently completed financial years or completed during or proposed for the current financial year.
Significant Acquisitions
The Company has made no significant acquisitions for which disclosure is required under Part 8 of National Instrument 51-102.
Risk Factors
Due to the nature of that business and the present stage of development of its business, the Company may be subject to significant risks. The Company’s actual operating results may be very different from those expected as at the date of this AIF, in which the event the value or trading price (once listed) of the Company’s Common Shares could decline and an investor may lose all or part of his or her investment.
All statements regarding the Company and the Company’s business should be viewed in light of these risk factors. Such information does not purport to be an exhaustive list. If any of the identified risks were to materialize, the Company’s business, financial position, prospectus, anticipated operations, results and/or future operations may be materially affected (each a “material adverse effect”). Additional risks and uncertainties not presently known to the Company, or which the Company currently deems not to be material, may also have a material adverse effect. References to “we” or “us” shall mean the Company.
Risks Related to Our Company and Our Industry
The Company may be adversely affected by volatile solar power market and industry conditions; in particular, the demand for its services may decline, which may reduce its revenues and earnings.
Our business is affected by conditions in the solar power market and industry. We believe that the solar power market and industry may from time to time experience oversupply. When this occurs, many solar power project developers and solar system installers, may be adversely affected.
The solar power market is still at a relatively early stage of development, and future demand for solar power products and services is uncertain. Market data for the solar power industry is not as readily available as for more established industries, where trends are more reliably assessed from data gathered over a longer period of time. In addition, demand for solar power products and services in our largest end markets, including the U.S, may not develop or may develop to a lesser extent than we anticipate. Many factors may affect the viability of solar power technology and the demand for solar power products, including:
| ● | the cost-effectiveness, performance and reliability of solar power products and services compared to conventional and other renewable energy sources and products and services; | |
| ● | the availability of government incentives to support the development of the solar power industry; | |
| ● | the availability and cost of capital, including long-term debt and tax equity, for solar projects; | |
| ● | the success of other alternative energy technologies, such as wind power, hydroelectric power, clean hydrogen, geothermal power and biomass fuel; |
| 37 |
| ● | fluctuations in economic and market conditions that affect the viability of conventional and other renewable energy sources, such as increases or decreases in the prices of oil, gas and other fossil fuels; | |
| ● | capital expenditures by end users of solar power products and services, which tend to decrease when the economy slows; and | |
| ● | the availability of favorable regulation for solar power within the electric power industry and the broader energy industry. |
If solar power technology is not suitable for widespread adoption or if sufficient demand for solar products and services does not develop or takes longer to develop than we anticipate, our revenues may suffer and we may be unable to sustain our profitability.
The execution of our growth strategy depends upon the continued availability of third-party financing arrangements for us and our customers, which is affected by general economic conditions. Tight credit markets could depress demand or prices for solar power products and services, hamper our expansion and materially affect our results of operations.
Most solar projects require financing for development and construction with a mixture of equity and third-party funding. The cost of capital affects both the demand and price of solar power systems. A high cost of capital may materially reduce the internal rate of return for solar projects.
Furthermore, solar projects compete for capital with other forms of fixed income investments such as government and corporate bonds. Some classes of investors compare the returns of solar projects with bond yields and expect a similar or higher internal rate of return, adjusted for risk and liquidity. Higher interest rates could increase the cost of existing funding and present an obstacle for future funding that would otherwise spur the growth of the solar power industry. In addition, higher bond yields could result in increased yield expectations for solar projects, which would result in lower system prices. In the event that suitable funding is unavailable, our customers may be unable to pay for services they have agreed to purchase and we may be unable to develop our own solar power projects. It may also be difficult to collect payments from customers facing liquidity challenges due to either customer defaults or financial institution defaults on project loans. Constricted credit markets may impede our expansion plans and materially and adversely affect our results of operations. The cash flow of a solar power project may be derived from government-funded or government-backed Feed-In Tariffs (“FITs”). Consequently, the availability and cost of funding solar projects is determined in part based on the perceived sovereign credit risk of the country where a particular project is located.
In light of the uncertainty in the global credit and lending environment, we cannot make assurances that financial institutions will continue to offer funding to solar project developers at reasonable costs. An increase in interest rates or a decrease in funding of capital projects within the global financial market could make it difficult to fund solar power systems and potentially reduce the demand for solar projects, which may materially and adversely affect our business, results of operations, financial condition and prospects.
Our future success depends partly on our ability to expand the pipeline of our energy business in several key markets, which exposes us to a number of risks and uncertainties.
Historically, our provision of solar power project development services have accounted for the majority of our net revenues. While we plan to continue to monetize our current portfolio of solar projects in operation, we also intend to grow our energy business by developing and selling or operating more solar projects, including those that we develop and those that we acquire from third parties. As we do, we will be increasingly exposed to the risks associated with these activities. Further, our future success largely depends on our ability to expand our solar project pipeline. The risks and uncertainties associated with our energy business, and our ability to expand our solar project pipeline, include:
| ● | the uncertainty of being able to sell the projects, receive full payment for them upon completion, or receive payment in a timely manner; |
| 38 |
| ● | the need to raise significant additional funds to develop greenfield or purchase late stage solar projects, which we may be unable to obtain on commercially reasonable terms or at all; | |
| ● | delays and cost overruns as a result of a number of factors, many of which are beyond our control, including construction and procurement price inflation, delays in regulatory approvals, grid connection, supply chain of our suppliers or availability of components, construction and installation, and customer acceptance testing; | |
| ● | delays or denial of required regulatory approvals by relevant government authorities, as a result of, among others, poor management of permitting process, including lack or resources and opaqueness of administrative measures; | |
| ● | diversion of significant management attention and other resources; and | |
| ● | failure to execute our project pipeline expansion plan effectively. |
If we are unable to successfully expand our energy business, and, in particular, our solar project pipeline, we may be unable to expand our business, maintain our competitive position, improve our profitability and generate cash flows.
Governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for our products to decline.
Historically, the market for on-grid applications, where solar power supplements the electricity a customer purchases from the utility network or sells to a utility under a FIT, depends largely on the availability and size of government subsidy programs and economic incentives. Until recently, the cost of solar power exceeded retail electricity rates in many locations. Government incentives vary by geographic market. Governments in many countries provided incentives in the form of FITs, rebates, tax credits, renewable portfolio standards, auctions for Contracts for Difference, Feed-in Premium and other incentives. These governments implemented mandates to end-users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. However, these government mandates and economic incentives in many markets either have been or are scheduled to be reduced or eliminated altogether, and it is likely that eventually incentives for solar and alternative energy technologies will be phased out completely. Over the past few years, the cost of solar energy has declined, and the industry has become less dependent on government incentives. However, governments in some of our largest markets, including the United States, have expressed their intention to continue supporting various forms of “green” energies, including solar power, as part of broader policies towards the reduction of carbon emissions. The governments in many of our largest markets, including the United States, continue to provide incentives and policy support schemes for investments in solar power that will directly benefit the solar industry. We believe that the near-term growth of the market partially depends on the availability and size of such government incentives.
While solar projects may continue to offer attractive internal rates of return, it is unlikely that these rates will be as high as they were in the past. If internal rates of return fall below an acceptable rate for project investors, and governments continue to reduce or eliminate incentives for solar power, this may cause a decrease in demand and considerable downward pressure on solar systems and therefore negatively impact the value of solar projects. The reduction, modification or elimination of government incentives in one or more of our markets could therefore materially and adversely affect the growth of such markets or result in increased price competition, either of which could cause our revenues to decline and harm our financial results.
| 39 |
Operational risks associated with becoming an Independent Power Producer
As the Company is now an IPP, there are certain additional risks associated with the ownership and operation of solar power projects.
The Company could fail to optimize operations at its facilities due to a shortfall in operational efficiency or resource optimization, or owing to inadequate maintenance plans or operation in extreme conditions. The Company’s facilities are subject to the risk of equipment failure due to deterioration of the asset resulting from wear and tear, age, hidden defects or design errors, or to extreme weather. The ability of solar power projects to generate the maximum amount of power is a key determinant of the Company’s profitability. If the solar power projects require longer downtime than expected for maintenance and repairs, or if power production is suspended for other reasons, it could adversely affect the Company’s profitability.
Furthermore, the amount of power generated by the Company’s solar power projects is dependent on sunlight, which is naturally variable. Although the Company believes that past resource studies and production data collected demonstrate that the sites are economically viable, historical data and engineering forecasts may not accurately reflect the strength and consistency of resources in the future. If resources are insufficient, the assumptions underlying the financial projections for the volume of electricity to be produced by solar power projects might not materialize, which could have a material adverse effect on the Company’s cash flows and profitability.
The Company’s ability to sell electricity is impacted by the availability of the various power transmission and distribution systems in each jurisdiction in which it operates. The failure of existing transmission or distribution facilities or the lack of adequate transmission capacity would have a material adverse effect on the Company’s ability to deliver electricity to its various counterparties, thereby adversely impacting the Company’s operating results, financial position or prospects.
The ownership and operation of the Company’s solar power projects also carry an inherent risk of liability related to worker health and safety, including the risk of government-imposed orders to remedy unsafe conditions, of potential penalties for contravention of health and safety laws, licenses, permits and other approvals, and of potential civil liability for the Company. Compliance with health and safety laws (and any future changes to these laws) and the requirements of licenses, permits and other approvals will remain material to the Company. In addition, the Company may become subject to government orders, investigations, inquiries or civil suits relating to health and safety matters. Potential penalties or other remediation orders could have a material adverse effect on the Company’s business and results of operations.
General global economic conditions may have an adverse impact on our operating performance and results of operations.
The demand for solar products and services is influenced by macroeconomic factors, such as global economic conditions (e.g. interest rates, foreign exchange rates and inflation), demand for electricity, supply and prices of other energy products, such as oil, coal and natural gas, as well as government regulations and policies concerning the electric utility industry, clean and other alternative energy industries and the environment. As a result of global economic conditions, some governments may implement measures that reduce the FITs and other incentives designed to benefit the solar industry. A decrease in solar power tariffs or wholesale electricity in many markets placed downward pressure on the price of solar power in those and other markets. In addition, reductions in oil and coal prices may reduce the demand for and the prices of solar power products and services. Our growth and profitability depend on the demand for and the prices of solar power products and services. If we experience negative market and industry conditions and demand for solar power products and services weakens as a result, our business and results of operations may be adversely affected.
| 40 |
Our project development and construction activities may not be successful, projects under development may not receive required permits, property rights, EPC agreements, interconnection and transmission arrangements, and financing or construction of projects may not commence or continue as scheduled, all of which could increase our costs, delay or cancel a project, and have a material adverse effect on our revenue and profitability.
The development and construction of solar projects involve known and unknown risks, many of which are not under our sole control. For example, we may be required to invest significant amounts of money for land and interconnection rights, preliminary engineering and permitting and may incur legal and other expenses before we can determine whether a project is feasible; we may also need to engage and rely on third parties including, but not limited to, contractors and consultants. Success in developing a particular project is contingent upon, among other things:
| ● | securing land rights and related permits, including satisfactory environmental assessments; | |
| ● | receipt of required land use and construction permits and approvals; | |
| ● | receipt of rights to interconnect to the electric grid; | |
| ● | availability of transmission capacity, potential upgrade costs to the transmission grid and other system constraints; | |
| ● | payment of interconnection and other deposits (some of which are non-refundable); | |
| ● | negotiation of satisfactory EPC agreements; | |
| ● | obtaining construction financing, including debt, equity and tax credits; and | |
| ● | timely and satisfactory execution and performance by the third parties that we engage. |
In addition, successful completion of a particular project may be adversely affected by numerous factors, including:
| ● | changes in laws, regulations and policies and shifts in trade barriers and remedies, especially tariffs; | |
| ● | delays in obtaining and maintaining required governmental permits and approvals; | |
| ● | potential challenges from local residents, environmental organizations, and others who may not support the project; | |
| ● | unforeseen engineering problems; subsurface land conditions; construction delays; cost over-runs; labor, equipment and materials supply shortages or disruptions (including labor strikes); | |
| ● | failure to enter into PPAs on terms favorable to us, or at all; | |
| ● | additional complexities when conducting project development or construction activities in foreign jurisdictions, including compliance with applicable U.S. or local laws and customs; and | |
| ● | force majeure events, including adverse weather conditions, pandemics, supply chain disruptions, hostilities and other events beyond our control. |
If we are unable to complete the development of a solar project or we fail to meet any agreed upon system level capacity or energy output guarantees or warranties or other contract terms, or our projects cause grid interference or other damage, the EPC, the PPA or other agreements related to the project may, depending on the specific terms of the agreements, be terminated and/or we may be subject to significant damages, penalties and other obligations relating to the project, including obligations to repair, replace or supplement materials for the project.
We may enter into fixed-price EPC agreements in which we act as the general contractor for our customers in connection with the installation of their solar power projects. All essential costs are estimated at the time of entering into the EPC agreement for a particular project, and these costs are reflected in the overall fixed price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us and the subcontractors, suppliers and other parties involved in the project. In addition, we require qualified, licensed subcontractors to install most of our solar power and battery storage systems. Shortages of components (which may be attributable to the shortage of raw materials or components) or skilled labor could significantly delay a project or otherwise increase our costs. Should miscalculations in planning a project occur, including those due to unexpected increases in commodity prices or labor costs, or delays in execution occur and we are unable to increase the EPC sales price commensurately, we may not achieve our expected margins or our results of operations may be adversely affected.
| 41 |
Developing and operating solar & BESS projects exposes us to various risks.
The development of solar and BESS projects can take many months or years to complete and may be delayed for reasons beyond our control. It often requires us to make significant up-front payments for, among other things, land rights, interconnection work and permitting in advance of commencing construction, and revenue from these projects may not be recognized for several additional months following contract signing. Any inability or significant delays in entering into sales contracts with customers after making such up-front payments could adversely affect our business and results of operations. Furthermore, we may become constrained in our ability to simultaneously fund our other business operations and invest in other projects.
Developing solar and BESS projects requires significant management attention to negotiate the terms of our engagement and monitor the progress of the projects which may divert management’s attention from other matters. Our revenue and liquidity may be adversely affected to the extent the market for solar projects weakens or we are not able to successfully complete the customer acceptance testing due to technical difficulties, equipment failure, or adverse weather, and we are unable to sell our solar projects at prices and on terms and timing that are acceptable to us.
Our energy business also includes operating solar projects and selling electricity to the local or national grid or other power purchasers. As a result, we are subject to a variety of risks associated with intense market competition, changing regulations and policies, insufficient demand for solar or power, technological advancements and the failure of our power generation facilities.
We face a number of risks involving PPAs and project-level financing arrangements, including failure or delay in entering into PPAs, defaults by counterparties and contingent contractual terms such as price adjustment, termination, buy-out, acceleration and other clauses, all of which could materially and adversely affect our energy business, financial condition, results of operations and cash flows.
We may not be able to enter into PPAs for our future solar projects due to intense competition, increased supply of electricity from other sources, reduction in wholesale electricity prices, changes in government policies or other factors. There is a limited pool of potential buyers for electricity generated by solar power plants since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions. The willingness of buyers to purchase electricity from an independent power producer may be based on a number of factors and not solely on pricing and surety of supply. Failure to enter into PPAs on terms favorable to us, or at all, would negatively impact our revenue and our decisions regarding the development of power plants. We may experience delays in entering into PPAs for some of our solar projects or may not be able to replace an expiring PPA with a contract on equivalent terms and conditions, or otherwise at prices that permit operation of the related facility on a profitable basis. Any delay in entering into PPAs may adversely affect our ability to finance project construction and to enjoy the cash flows generated by such projects. If we are unable to replace an expiring PPA with an acceptable new PPA, the affected site may temporarily or permanently cease operations, or could be exposed to more uncertain merchant or wholesale electricity pricing, which could materially and adversely affect our financial condition, results of operations and cash flows.
Substantially all of the electric power generated by our solar projects is expected to be sold under long-term PPAs with public utilities, licensed suppliers, corporate offtakers, and commercial, industrial or government end users. Despite possible future alternatives, we expect a substantial number of our future projects to also have long-term PPAs or similar offtake arrangements such as FIT programs. If, for any reason, any of the purchasers of power under these contracts are unable or unwilling to fulfill their related contractual obligations, they refuse to accept delivery of the power delivered thereunder or they otherwise terminate them prior to their expiration, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. Further, to the extent any of our power purchasers are, or are controlled by, governmental entities, our facilities may be subject to legislative or other political action that may impair their contractual performance or contain contractual remedies that do not provide adequate compensation in the event of a counterparty default.
| 42 |
PPAs may be subject to price adjustments over time. If the price under any of our PPAs is reduced below a level that makes a project economically viable, our financial conditions, cash flow and results of operations could be materially and adversely affected. Additionally, certain of the projects that we may acquire in the future may allow, the lenders or investors to accelerate the repayment of the financing arrangement in the event that the related PPA is terminated or if certain operating thresholds or performance measures are not achieved within specified time periods.
We are subject to numerous laws, regulations and policies at the national, regional and local levels of government in the markets where we do business. Any changes to these laws, regulations and policies may present technical, regulatory and economic barriers to the purchase and use of solar power and battery storage products, solar projects and solar electricity, which may significantly reduce demand for our products and services or otherwise adversely affect our financial performance.
We are subject to a variety of laws and regulations in the markets where we do business, some of which may conflict with each other and all of which are subject to change. These laws and regulations include energy regulations, export and import restrictions, tax laws and regulations, environmental regulations, labor laws, supply chain laws and regulations and other government requirements, approvals, permits and licenses. We also face trade barriers and trade remedies such as export requirements, tariffs, taxes and other restrictions and expenses, including antidumping and countervailing duty orders, which could increase the prices of our supplies.
In the countries where we do business, the market for solar power, solar projects and solar electricity is heavily influenced by national, state and local government regulations and policies concerning the electric utility industry, as well as policies disseminated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation, and could deter further investment in the research and development of alternative energy sources as well as customer purchases of solar power and battery storage technology, which could result in a significant reduction in the potential demand for our solar power services, solar projects and solar electricity.
We expect that our solar power products and their installation will continue to be subject to national, state and local regulations and policies relating to safety, utility interconnection and metering, construction, environmental protection, and other related matters. Any new regulations or policies pertaining to solar power products may result in significant additional expenses to us and our customers, which could cause a significant reduction in demand for our solar power and battery storage products.
In our energy business, we are subject to numerous national, regional and local laws and regulations. Changes in applicable energy laws or regulations, or in the interpretations of these laws and regulations, could result in increased compliance costs or the need for additional capital expenditures. If we fail to comply with these requirements, we could also be subject to civil or criminal liability and the imposition of fines. Further, national, regional or local regulations and policies could be changed to provide for new rate programs that undermine the economic returns for both new and existing projects by charging additional, non-negotiable fixed or demand charges or other fees or reductions in the number of projects allowed under net metering policies. National, regional or local government energy policies, law and regulation supporting the creation of organized merchant or wholesale electricity markets are currently, and may continue to be, subject to challenges, modifications and restructuring proposals, which may result in limitations on the commercial strategies available to us for the sale of our power.
| 43 |
Regulatory changes in a jurisdiction where we are developing a solar project may make the continued development of the project infeasible or economically disadvantageous and any expenditure that we have previously made on the project may be wholly or partially written off. Any of these changes could significantly increase the regulatory related compliance and other expenses incurred by the projects and could significantly reduce or entirely eliminate any potential revenues that can be generated by one or more of the projects or result in significant additional expenses to us, our offtakers and customers, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We also face regulatory risks imposed by various transmission providers and operators, including regional transmission operators and independent system operators, and their corresponding market rules. These regulations may contain provisions that limit access to the transmission grid or allocate scarce transmission capacity in a particular manner, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
We are also subject to the Canadian Corruption of Foreign Public Officials Act (CFPOA), U.S. Foreign Corrupt Practices Act of 1977, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act and other anti-corruption laws that prohibit companies and their employees and third-party intermediaries from authorizing, offering or providing, directly or indirectly, improper payments or benefits to foreign government officials, political parties and private-sector recipients for the purpose of obtaining or retaining business in countries in which we conduct activities. We may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities in the course of our business (for example, to obtain approvals, permits and licenses from applicable government authorities and to sell power to government-owned entities). We would face significant liabilities if we failed to comply with these laws and we could be held liable for the illegal activities of our employees, representatives, contractors, partners, and agents, even if we did not authorize such activities. Any violation of the CFPOA, FCPA or other applicable anticorruption laws could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, which could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, responding to any enforcement action may result in the diversion of management’s attention and resources, significant defense costs and other professional fees.
Because the markets in which we compete are highly competitive and evolving quickly, because many of our competitors have greater resources than we do or are more adaptive, and because we have a limited track record in our energy business, we may not be able to compete successfully and we may not be able to maintain or increase our market share.
In our energy business, we compete in a more diversified and complicated landscape since the commercial and regulatory environments for solar project development and operation vary significantly from region to region and country to country. Our primary competitors are local and international developers and operators of solar projects. Some of our competitors may have advantages over us in terms of greater experience or resources in the operation, capital, financing, technical support and management of solar projects, in any particular markets or in general. As the solar power and renewable energy industry grows and evolves, we will also face new competitors who are not currently in the market. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors will limit our growth and will have a material adverse effect on our business and prospects.
An anti-circumvention investigation could adversely affect us.
On August 16, 2021, a group of anonymous entities calling itself the American Solar Manufacturers Against Chinese Circumvention (“A-SMACC”) requested that the U.S. Department of Commerce (“USDOC”) initiate an anti-circumvention inquiry regarding crystalline silicon photovoltaic (“CSPV”) products from Malaysia, Thailand, and Vietnam. A-SMACC alleged that certain CSPV products from Malaysia, Thailand, and Vietnam containing Chinese-origin components were circumventing the Solar 1 antidumping (“AD”) and countervailing duty (“CVD”) orders (i.e., CSPV solar cells manufactured in China). On November 10, 2021, the USDOC rejected A-SMACC’s request and declined to initiate an anti-circumvention inquiry.
| 44 |
On February 8, 2022, U.S. module producer Auxin Solar Inc. (“Auxin”) filed with the USDOC separate circumvention petitions on CSPV products from Cambodia, Malaysia, Thailand, and Vietnam. Canadian Solar entered these proceedings with respect to Thailand and Vietnam and requested that the USDOC reject Auxin’s petition. On April 1, 2022, the USDOC initiated anti-circumvention inquiries on a country-wide basis with respect to all four countries.
U.S. law provides that the USDOC may find that circumvention exists when (among other things) merchandise subject to an AD/CVD order is completed or assembled in third countries with the end result of AD/CVD duty avoidance. Specifically, with respect to the existing Solar 1 China AD/CVD orders, the USDOC may find that (i) certain CSPV cells and/or modules produced in Thailand and Vietnam fall within the scope of the AD/CVD orders; and (ii) the collection of AD and/or CVD deposits is appropriate to prevent evasion of AD/CVD duties. The USDOC’s investigation will examine, inter alia, whether (i) the production process in Thailand and Vietnam is “minor or insignificant”; and (ii) the value of the merchandise produced in China is a significant portion of the value of the product exported to the United States. With respect to affirmative finding by the USDOC, imports of CSPV from Malaysia, Thailand and Vietnam would essentially be treated as if they were of Chinese origin and subject to potentially very high AD/CVD deposit rates. This in turn would significantly increase the cost of CSPV products that are required for our solar projects and risk significant harm to our financial condition and operations.
More recently, on June 6, 2022 the U.S. Federal Government declared a 24-month tariff moratorium on solar panels manufactured in Cambodia, Malaysia, Thailand, and Vietnam, by way of executive action by President Joe Biden. It remains possible that companies may be subject to tariffs after the 24-month period ends; however, the moratorium reportedly will exempt U.S. companies from any retroactive tariffs.
Our quarterly operating results may fluctuate from period to period.
Our quarterly operating results may fluctuate from period to period based on a number of factors, including:
| ● | the timing of completion of construction of solar projects; | |
| ● | the timing and pricing of our services; | |
| ● | the availability and cost of solar cells and wafers from our suppliers; | |
| ● | the availability and cost of raw materials; | |
| ● | changes in government incentive programs and regulations, particularly in our key and target markets; | |
| ● | the availability and cost of external financing for solar power applications; | |
| ● | acquisition, investment and offering costs; | |
| ● | geopolitical turmoil and natural disasters within any of the countries in which we operate; | |
| ● | foreign currency fluctuations, particularly in United States and Canadian dollars; | |
| ● | our ability to establish and expand customer relationships; | |
| ● | fluctuations in electricity rates due to changes in fossil fuel prices or other factors; | |
| ● | allowances for credit losses; | |
| ● | impairment of property, plant and equipment; | |
| ● | impairment of project assets; | |
| ● | share-based compensation expenses on performance-based share awards under our share incentive plan; | |
| ● | income taxes; and | |
| ● | construction progress of solar projects and related revenue recognition. |
We base our planned operating expenses in part on our expectations of future revenues. A significant portion of our expenses will be fixed in the short-term. If our revenues for a particular quarter are lower than we expect, we may not be able to reduce our operating expenses proportionately, which would harm our operating results for the quarter. As a result, our results of operations may fluctuate from quarter to quarter and our interim and annual financial results may differ from our historical performance.
| 45 |
Fluctuations in exchange rates could adversely affect our business, including our financial condition and results of operations.
Fluctuations in exchange rates, particularly between the U.S. dollars and Canadian dollars may result in foreign exchange gains or losses. Volatility in foreign exchange rates will hamper, to some extent, our ability to plan our pricing strategy. To the extent that we are unable to pass along increased costs resulting from exchange rate fluctuations to our customers, our profitability may be adversely impacted. As a result, fluctuations in foreign currency exchange rates could have a material and adverse effect on our financial condition and results of operations.
A change in our effective tax rate can have a significant adverse impact on our business.
A number of factors may adversely impact our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to provisional taxes upon finalization of various tax returns; adjustments to the interpretation of transfer pricing standards; changes in available tax credits; changes in stock-based compensation expenses; changes in tax laws or the interpretation of tax laws (e.g., in connection with fundamental U.S. international tax reform); changes in GAAP; and expiration of or the inability to renew tax rulings or tax holiday incentives. A change in our effective tax rate due to any of these factors may adversely influence our future results of operations.
Seasonal variations in demand linked to construction cycles and weather conditions may influence our results of operations.
Our business is subject to seasonal variations in demand linked to construction cycles and weather conditions. Demand for solar power and battery storage products and services from some markets, such as the U.S., may also be subject to significant seasonality due to adverse weather conditions that can complicate the installation of solar power systems and negatively impact the construction schedules of solar projects. Seasonal variations could adversely affect our results of operations and make them more volatile and unpredictable.
We may be unable to generate sufficient cash flows or have access to external financing necessary to fund planned operations and make adequate capital investments in solar project development.
We anticipate that our operating and capital expenditures requirements may increase. To develop new projects, support future growth, achieve operating efficiencies and maintain service standard quality, we may need to make significant capital investments in facilities and capital equipment. We also anticipate that our operating costs may increase as we hire additional personnel, increase our sales and marketing efforts and invest in joint ventures and acquisitions.
Our operations are capital intensive. We cannot guarantee that we will continue to be able to extend existing or obtain new financing on commercially reasonable terms or at all. Also, we may not be able to raise capital via public equity and debt issuances due to market conditions and other factors, many of which are beyond our control. Our ability to obtain external financing is subject to a variety of uncertainties, including:
| ● | our future financial condition, results of operations and cash flows; | |
| ● | general market conditions for financing activities by solar power companies, including, but not limited to interest rates; and | |
| ● | economic, political and other conditions in the U.S. and elsewhere. |
If we are unable to obtain funding in a timely manner and on commercially acceptable terms, our growth prospects and future profitability may be adversely affected.
| 46 |
Construction of our solar projects may require us to obtain financing for our projects, including through project financing, green bond financing or others. If we are unable to obtain financing, or if financing is only available on terms which are not acceptable to us, we may be unable to fully execute our business plan. In addition, we generally expect to sell our projects to tax-oriented, strategic industry and other investors. Such investors may not be available or may only have limited resources, in which case our ability to sell our projects may be hindered or delayed and our business, financial condition, and results of operations may be adversely affected. There can be no assurance that we will be able to generate sufficient cash flows, find other sources of capital to fund our operations and solar projects, make adequate capital investments to remain competitive in terms of technology development and cost efficiency required by our projects. If adequate funds and alternative resources are not available on acceptable terms, our ability to fund our operations, develop and construct solar projects, or otherwise respond to competitive pressures would be significantly impaired. Our inability to do the foregoing could have a material and adverse effect on our business and results of operations.
We may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations.
In the ordinary course of developing solar projects, we may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations. In the future, we may from time to time incur substantial additional indebtedness and contingent liabilities and this could have important consequences to us and our shareholders. For example, it could:
| ● | limit our ability to satisfy our debt obligations; | |
| ● | increase our vulnerability to adverse general economic and industry conditions; | |
| ● | require us to dedicate a substantial portion of our cash flow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and for other general corporate purposes; | |
| ● | limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate; | |
| ● | place us at a competitive disadvantage compared with our competitors that have less debt; | |
| ● | limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds; and | |
| ● | increase the cost of additional financing. |
Our ability to generate sufficient cash to satisfy our debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow from operations to support the repayment of our indebtedness. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all. In addition, certain of our financing arrangements may impose operating and financial restrictions on our business, which may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund required capital expenditures, or withstand a continuing or future downturn in our business. Any of these factors could materially and adversely affect our ability to satisfy our debt obligations.
| 47 |
Supply chain issues, including shortages of adequate raw materials, component and equipment supply, cancellation or delay of purchase orders, inflationary pressures and cost escalation could adversely affect our business and results of operations.
We depend mainly on third-party suppliers for raw materials and components, and we also procure certain equipment overseas. Our suppliers may not always be able to meet quantity requirements, or keep pace with the price reductions or quality improvements, necessary for us to price products and projects competitively. Additionally, they may experience manufacturing delays and increased manufacturing cost that could increase the lead time for deliveries or impose price increases.
The failure of a supplier, for whatever reason, to supply the materials, essential components and equipment that meet quality, quantity and cost requirements in a timely manner could impair our ability to develop projects, increase costs, hinder compliance with supply agreements’ terms and may result, ultimately, in cancellation of projects and potential liability for us. The impact could be more severe if we are unable to access alternative sources on a timely basis or on commercially reasonable terms and at prices that are profitable. Supply may be interrupted by government mandates, accidents, disasters or other unforeseen events beyond our control.
Potential risks associated with acquisitions
The Company believes that the acquisitions recently completed and expected to be completed will have benefits for the Company. However, it is possible that all or some of the anticipated benefits, including financial benefits and those that are the subject of forward-looking financial information, may not materialize, particularly within the time frame set by the Company’s management. The realization of such benefits may be affected by a number of factors, many of which are beyond the control of the Company.
It is also possible that the Company did not detect in its due diligence during the completion of the acquisitions any liabilities and contingencies for which the Company may not be indemnified. Discovery of any material liability or contingency with respect to shares, assets or businesses acquired following such acquisitions could have a material adverse effect on the business acquired and the Company’s financial position and operating results.
Lastly, the integration of assets acquired or to be acquired as part of the Company’s acquisitions could pose significant challenges, and the Company’s management may be unable to complete the integration or succeed in doing so only by investing significant amounts of money. There can be no assurance that management will be able to successfully integrate the assets acquired or expected to be acquired pursuant to these acquisitions or to realize the full benefits expected from the acquisitions.
Because of our U.S. operations, we could be adversely affected by violations of anti-bribery laws.
Anti-bribery laws and regulations generally prohibit companies and their intermediaries from making improper payments to non-resident officers, employees or any other persons acting in an official capacity for any government entity to any political party or official thereof or to any candidate for political office for the purpose of obtaining or retaining business. While our management services agreements, services agreements and operational policies and procedures, including our compliance program, mandate compliance with applicable law, we cannot assure you that we will be successful in preventing our contractors, employees or other agents from taking actions in violation of these laws or regulations or that we will not otherwise be deemed to have failed to comply with such laws. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
Inflation in many countries and regions, especially in those where we operate, may adversely affect our business and our profitability.
As of June 30, 2023, we have facilities and offices in Canada and the United States. We also acquire materials for solar power projects from overseas countries. As such, we are exposed to the inflation risks therein. Recently, on a global basis, countries are experiencing high inflation rates. Inflation could increase the costs of our supplies and labour costs. We may not be able to adjust the pricing of our PPAs or services sufficiently or take appropriate pricing actions to fully offset the effects of inflation on our cost structures, thus we may fail to maintain current levels of gross profit and operating, selling and distribution, general and administrative expenses and maintenance costs as a percentage of total net revenues. As such, rising inflation rates may negatively impact our profitability. In addition, a high inflation environment would also have negative effects on the level of economic activity, employment and adversely affect our business, results of operations and financial conditions. For example, an increase in the inflation rates may result in an increase in market interest rates, which may require us to pay higher interest rates on debt securities that we issue in the financial market from time to time to finance our operations and increase our interest expenses.
| 48 |
We may be subject to unexpected warranty expenses that may not be adequately covered by our insurance policies.
For solar projects built by us, we also provide a limited workmanship or balance of system warranty against defects in engineering, design, installation and construction under normal use, operation and service conditions. In resolving claims under the workmanship or balance of system warranty, we have the option of remedying through repair, refurbishment or replacement of equipment. We have also entered into similar workmanship warranties with our suppliers to back up our warranties.
As part of our energy business, before commissioning solar projects, we conduct performance testing to confirm that the projects meet the operational and capacity expectations set forth in the agreements. In limited cases, we also provide for an energy generation performance test designed to demonstrate that the actual energy generation for up to the first three years meets or exceeds the modeled energy expectation (after adjusting for actual solar irradiation). In the event that the energy generation performance test performs below expectations, the appropriate party (EPC contractor or equipment provider) may incur liquidated damages capped at a percentage of the contract price. Potential warranty claims may exceed the scope or amount of coverage under our insurance and, if they do, they could materially and adversely affect our business.
If we are unable to attract, train, retain, and successfully integrate key personnel into our management team, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train, and retain management, operations, sales, and technical personnel, including personnel in foreign jurisdictions. Recruiting and retaining capable personnel, particularly those with expertise in the solar industry across a variety of technologies, are vital to our success. We are also dependent on the services of our executive officers and other members of our senior management team. The loss of one or more of these key associates or any other member of our senior management team could have a material adverse effect on our business. We may not be able to retain or replace these key associates and may not have adequate succession plans in place. Several of our current key associates, including our executive officers, are subject to employment conditions or arrangements that contain post-employment non-competition provisions. However, these arrangements permit the associates to terminate their employment with us upon little or no notice.
There are a limited number of purchasers of utility-scale quantities of electricity and entities that have the ability to interconnect projects to the grid, which exposes us and our utility scale solar projects to additional risk.
Since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility-scale quantities of electricity in a given geographic location, normally transmission grid operators, state and investor-owned power companies, public utility districts and cooperatives. As a result, there is a concentrated pool of potential buyers for electricity generated by our solar power plants, which may restrict our ability to negotiate favorable terms under new PPAs and could impact our ability to find new customers for the electricity generated by our solar power plants should this become necessary. Additionally, these possible purchasers may have a role in connecting our projects to the grid to allow the flow of electricity. Furthermore, if the financial condition of these utilities and/or power purchasers deteriorates, or government policies or regulations to which they are subject and which compel them to source renewable energy supplies change, demand for electricity produced by our plants or the ability to connect to the grid could be negatively impacted. In addition, provisions in our PPAs or applicable laws may provide for the curtailment of delivery of electricity for various reasons, including preventing damage to transmission systems, system emergencies, force majeure or economic reasons. Such curtailment could reduce revenues to us from our PPAs. If we cannot enter into PPAs on terms favorable to us, or at all, or if the purchaser under our PPAs were to exercise its curtailment or other rights to reduce purchases or payments under the PPAs, our revenues and our decisions regarding development of additional projects in the energy business may be adversely affected.
| 49 |
Historically, a limited number of customers have accounted for a substantial portion of our revenue.
We derive a significant portion of our revenue from a limited number of existing customers. Our top customer accounted for 57% of our revenue for the fiscal year ended June 30, 2023. It is not possible for us to predict the future level of demand from our largest customer. If our largest customer elects to not do future business with us, or decrease of our services, or if our largest customer otherwise seeks to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations would be adversely affected.
In addition, the Company has $7.9 million in accounts receivable outstanding from SFF for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. There is a risk that this receivable may not be paid in 2023 or at all.
Compliance with environmental laws and regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages, fines and the suspension or even termination of our business operations.
We are required to comply with all national and local environmental regulations. Our business generates noise, wastewater, gaseous wastes and other industrial waste in our operations and the risk of incidents with a potential environmental impact has increased as our business has expanded. We believe that we substantially comply with all relevant environmental laws and regulations and have all necessary and material environmental permits to conduct our business as it is presently conducted. However, if more stringent regulations are adopted in the future, the costs of complying with these new regulations could be substantial. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations.
Our solar power projects must comply with the environmental regulations of the jurisdictions in which they are installed, and we may incur expenses to comply with such regulations. If compliance is unduly expensive or unduly difficult, we may lose market share and our financial results may be adversely affected. Any failure by us to control our use or to restrict adequately the discharge, of hazardous substances could subject us to potentially significant monetary damages, fines or suspensions of our business operations.
Corporate responsibility, specifically related to Environmental, Social and Governance (“ESG”) matters and unsuccessful management of such matters may adversely impose additional costs and expose us to new risks.
Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. We may face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards set by our investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third party rating services. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks, including increased risk of investigation and litigation, and negative impacts on the value of our products and access to capital, which may put us at a commercial disadvantage relative to our peers.
| 50 |
Furthermore, various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results. We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations may adversely affect our business and results of operations.
We face risks related to natural disasters, health epidemics, such as COVID-19, and other catastrophes, which could significantly disrupt our operations.
Our business could be materially and adversely affected by natural disasters or other catastrophes, such as earthquakes, fire, floods, hail, windstorms, severe weather conditions, environmental accidents, power loss, communications failures, explosions, terrorist attacks and similar events. Our business could also be materially and adversely affected by public health emergencies, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, the 2019 novel coronavirus (COVID-19) or other local health epidemics in jurisdictions where we operate and global pandemics. If any of our employees is suspected of having contracted any contagious disease, we may, under certain circumstances, be required to quarantine those employees and the affected areas of our operations. As a result, we may have to temporarily suspend part or all of our facilities. Furthermore, authorities may impose restrictions on travel and transportation and implement other preventative measures in affected regions to deal with the catastrophe or emergency, which may lead to the temporary closure of our facilities and declining economic activity at large. A prolonged outbreak of any health epidemic or other adverse public health developments, in jurisdictions where we operate, could have a material adverse effect on our business operations.
The COVID-19 pandemic has continued to pose significant challenges to many aspects of our business, including our operations, customers, suppliers and projects. The extent to which the COVID-19 has and may persist to impact our ability to effectively operate continues to be highly uncertain. The outbreak continues to evolve, and the impact that COVID-19, or new variants of COVID-19, will ultimately have on our result of operations, financial condition, liquidity and cash flows cannot be estimated and is impossible to predict. We will continue to monitor and adhere to the policies, lockdowns, restrictions, and preventive measures implemented by the various government authorities, as well as general movement restrictions, social distancing and other measures imposed to slow the spread of COVID-19.
We have limited insurance coverage and may incur significant losses resulting from operating hazards, product liability claims, project construction or business interruptions.
Our operations involve the use, handling, generation, processing, storage, transportation and disposal of hazardous materials, which may result in fires, explosions, spills and other unexpected or dangerous accidents causing personal injuries or death, property damages, environmental damages and business interruption. Although we currently carry third-party liability insurance against property damage, the policies for this insurance are limited in scope and may not cover all claims relating to personal injury, property or environmental damage arising from incidents on our properties or relating to our operations. Any occurrence of these or other incidents which are not insured under our existing insurance policies could have a material adverse effect on our business, financial condition or results of operations.
For projects we construct, we are exposed to risks associated with the design and construction that can create additional liabilities to our operations. We manage these risks by including contingencies to our construction costs, ensuring the appropriate insurance coverages are in place such as professional indemnity and construction all risk as well as obtaining indemnifications from our contractors where possible. However, there is no guarantee that these risk management strategies will always be successful.
| 51 |
Information Technology Systems and Data Security Breaches.
The Company’s operations depend, in part, on how well it and its third party service providers protect networks, equipment, information technology (“IT”) systems and software against damage from a number of threats, including, but not limited to, cable cuts, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
The Company does not anticipate paying cash dividends.
The Company’s current policy is to retain earnings to finance the development of its solar power projects and to otherwise reinvest in the Company. Therefore, the Company does not anticipate paying cash dividends on the Company’s shares in the foreseeable future. The Company’s dividend policy will be reviewed from time to time by the Company’s board in the context of its earnings, financial condition and other relevant factors. Until the time that the Company pays dividends, which the Company might never do, Common Shareholders will not be able to receive a return on their Common Shares unless they sell them.
Litigation.
From time to time, we have been and may be subject to disputes and litigation, with and without merit, that may be costly and which may divert the attention of our management and our resources in general, whether or not any dispute actually proceeds to litigation. The results of complex legal proceedings are difficult to predict. Moreover, complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. Even if we are able to estimate losses related to these actions, the ultimate amount of loss may be materially higher than our estimates. Any resolution of litigation, or threatened litigation, could involve the payment of damages or expenses by us, which may be significant or involve an agreement with terms that restrict the operation of our business. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be significant. These costs may exceed the dollar limits of our insurance policies or may not be covered at all by our insurance policies.
The Company cannot assure you that a market will continue to develop or exist for the Common Shares or what the market price of the Common Shares will be.
The Company cannot assure that a market will be sustained now that the Company’s Common Shares are listed on the CSE. If a market is not sustained, it may be difficult for investors to sell the Common Shares at an attractive price or at all. The Company cannot predict the prices at which the Common Shares will trade.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control.
The market price for the Company’s Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control, including the following:
| ● | actual or anticipated fluctuations in the Company’s quarterly results of operations; | |
| ● | recommendations by securities research analysts; | |
| ● | changes in the economic performance or market valuations of companies in the industry in which the Company operates; |
| 52 |
| ● | addition or departure of the Company’s executive officers and other key personnel; | |
| ● | release or expiration of lock-up or other transfer restrictions on outstanding Common Shares; | |
| ● | sales or perceived sales of additional Common Shares; | |
| ● | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or the Company’s competitors; | |
| ● | operating and share price performance of other companies that investors deem comparable to us; fluctuations to the costs of vital production materials and services; | |
| ● | changes in global financial markets and global economies and general market conditions, such as interest rates; | |
| ● | operating and share price performance of other companies that investors deem comparable to the Company or from a lack of market comparable companies; | |
| ● | news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets; and | |
| ● | regulatory changes in the industry. |
Financial markets have recently experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Common Shares may decline even if the Company’s operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which might result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely affected and the trading price of the Common Shares might be materially adversely affected.
The intentions of the existing shareholders regarding their long-term economic ownership are subject to change. Factors that could cause the existing shareholders’ current intentions to change include changes in each of their personal circumstances, our succession planning or changes in our management, changes in tax laws, market conditions and our financial performance.
Further, we cannot predict the size of future issuances of our Common Shares or the effect, if any, that future issuances and sales of our Common Shares will have on the market price of our Common Shares. Sales of substantial amounts of our Common Shares, or the perception that such sales could occur, may adversely affect prevailing market prices for our Common Shares. See “The Company may need to raise additional capital in the future”.
The Company may need to raise additional capital in the future.
The Company’s capital needs in the future will depend upon factors such as its growth strategy and the success of its solar power projects. None of these factors can be predicted with certainty. The Company may need additional debt or equity financing in the future. The Company cannot assure investors that any additional financing, if required, will be available or, even if it is available that it will be on terms acceptable to the Company. If the Company raises additional funds by selling securities, the ownership of existing shareholders will be diluted. Any inability to obtain required financing could have a material adverse effect on the Company’s business, results of operations and financial condition.
Failure to raise capital in a timely manner will constrain the Company’s growth.
The Company’s growth depends on developing solar power projects, which requires capital. If the Company experiences difficulty or delays in raising the funds it needs, it will delay its ability to develop solar power projects. Additional future delays in obtaining funding may be caused by a combination of factors. Future delays in obtaining funding in a timely manner will constrain or prevent the Company’s growth.
| 53 |
The Company may be unable to support existing or new business if it does not raise sufficient funds.
Unless the Company can obtain adequate financing from the sale of its securities, the Company will not have sufficient funds and may be unable to support existing operations, expand operations, or operate its expanded operations, and it will be unable to carry out its business plans. Without adequate financing the Company may be unable to carry on its business. There is no assurance that the Company will raise adequate funds in future financings.
Dilution.
The offering price of Common Shares may significantly exceed the net tangible book value per share of the Common Shares. Accordingly, a purchaser of Common Shares may incur immediate and substantial dilution of his, her or its investment. If outstanding RSUs, options and warrants to purchase Common Shares are exercised or securities convertible into Common Shares are converted, additional dilution will occur. The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in subsequent offerings or may issue additional Common Shares or other securities to finance future acquisitions. The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s RSUs, Options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares on the CSE may decrease due to the additional amount of Common Shares available in the market.
Impact of securities or industry analysts’ reports.
The trading market for our Common Shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence covering us, the trading price for our Common Shares would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrade our Common Shares or publish inaccurate or unfavourable research about our business, our trading price may decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common Shares could decrease, which could cause our trading price and volume to decline.
Risks related to the book-based system
Unless and until certificated Common Shares are issued in exchange for book-entry interests in the Common Shares, owners of the book-entry interests will not be considered owners or holders of Common Shares. Instead, the depository or its nominee will be the sole holder of the Common Shares. Unlike holders of the Common Shares themselves, owners of book-based interests will not have the direct right to act upon the Company’s solicitations or requests or other actions from holders of the Common Shares. Instead, holders of beneficial interests in the Common Shares will be permitted to act only to the extent such holders have received appropriate proxies to do so from CDS or, if applicable, a CDS participant. There is no assurance that procedures implemented for the granting of such proxies will be sufficient to enable holders of beneficial interests in the Common Shares to vote on any requested actions on a timely basis.
General Economic Risks
Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.
Macroeconomic trends, including increases in inflation and rising interest rates, may adversely impact our business, financial condition and results of operations. Inflation in the United States is currently expected to continue at an elevated level in the near-term. Rising inflation could have an adverse impact on our operating expenses and our credit facilities. There is no guarantee we will be able to mitigate the impact of rising inflation. The Federal Reserve has raised interest rates to combat inflation and restore price stability and it is expected that rates will stay at an elevated level in early 2024. While most of the Company’s existing borrowings are currently at fixed interest rates, there are risks that any additional borrowing or refinancing of the existing borrowings could be at increased interest rates which will result in higher debt service costs and which will also adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth..
Climate change-related risks and uncertainties and legal or regulatory responses to climate change could negatively impact the Company’s results of operations, financial condition and/or reputation.
The Company is subject to increasing climate-related risks and uncertainties, many of which are outside of its control. Climate change may result in more frequent severe weather events, potential changes in precipitation patterns and extreme variability in weather patterns, which can disrupt the operations of the Company as well as those of its customers, partners and vendors. The transition to lower greenhouse gas emissions technology, the effects of carbon pricing and changes in public sentiment, regulations, taxes, public mandates or requirements and increases in climate-related lawsuits, insurance premiums and implementation of more robust disaster recovery and business continuity plans could increase costs to maintain or resume the Company’s operations or achieve its sustainability commitments in the expected timeframes, which would negatively impact the Company’s results of operations.
Market rate fluctuations could adversely affect our results of operations.
We may be subject to market risk through the risk of loss of value in our portfolios resulting from changes in interest rates, foreign exchange rates, credit spreads, and equity prices. We are required to mark to market our held for trading investments at the end of each reporting period, to the extent we own any such investments. This process could result in significant write-downs of our investments over one or more reporting periods, particularly during periods of overall market instability, including the extreme market volatility in connection with the COVID-19 pandemic, which could have a significant unfavorable effect on our financial position.
| 54 |
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia and Ukraine.
The global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting from ongoing military conflict between Russia and Ukraine. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials. Furthermore, governments in the United States, the European Union, the United Kingdom, Canada and others have imposed financial and economic sanctions on certain industry segments and various parties in Russia and Belarus. We are monitoring the conflict including the potential impact of financial and economic sanctions on the global economy. Increased trade barriers, sanctions and other restrictions on global or regional trade could adversely affect our business, financial condition and results of operations. The length and impact of the ongoing military conflict is highly unpredictable, and resulted in market disruptions, including significant volatility in commodity prices, credit and capital markets, an increase in cyber security incidents as well as supply chain disruptions. Further escalation of geopolitical tensions related to this military conflict and/or its expansion could result in increased volatility and disruption to the global economy and the markets in which we operate adversely impacting our business, financial condition or results of operations.
Risks Related to Public Reporting
Our inability to maintain effective internal controls over financial reporting could increase the risk of an error in our financial statements.
Our senior management is responsible for establishing and maintaining adequate internal controls over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives due to its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is therefore subject to error, collusion, or improper override. Given such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis, and although it is possible to incorporate into the financial reporting process safeguards to reduce this risk, they cannot be guaranteed to entirely eliminate it. If we fail to maintain effective internal control over financial reporting, then there is an increased risk of an error in our financial statements that could result in us being required to restate previously issued financial statements at a later date.
We incur expenses as a result of being a public company and our current resources may not be sufficient to fulfill our public company obligations.
We incur significant legal, accounting, insurance and other expenses as a result of being a public company, which may negatively impact our performance and could cause our results of operations and financial condition to suffer. Compliance with applicable securities laws in Canada and the U.S. and the rules of the CSE and NASDAQ substantially increases our expenses, including our legal and accounting costs, and makes some activities more time-consuming and costly. Reporting obligations as a public company and our anticipated growth may place a strain on our financial and management systems, processes and controls, as well as our personnel.
We are responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of our inherent limitations and the fact that we are a public company and are implementing additional financial control and management systems, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A failure to prevent or detect errors or misstatements may result in a material impact on our financial position, liquidity, and results of operations.
If our management is unable to certify the effectiveness of our internal controls or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could have a material impact on our financial position, liquidity, and results of operations. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could have a material impact on our financial position, liquidity, and results of operations.
We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely effected, which could also cause investors to lose confidence in our reported financial information, which in turn could have a material impact on our financial position, liquidity and results of operations.
Our senior management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.
We are publicly listed on the CSE. The individuals who now constitute our senior management team have relatively limited experience managing a publicly traded company and limited experience complying with the increasingly complex laws pertaining to public companies compared to senior management of other publicly traded companies. Our senior management team may not successfully or efficiently manage a public company subject to significant regulatory oversight and reporting obligations under Canadian and U.S. securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business.
| 55 |
Dividends
The Company has not, since the date of its incorporation, declared or paid any dividends on its Common Shares and does not currently have a policy with respect to the payment of dividends. For the immediate future, the Company does not envisage any earnings arising from which dividends could be paid. The payment of dividends in the future will depend on the Company’s earnings, if any, the Company’s financial condition and such other factors as the directors of the Company consider appropriate. There are no contractual restrictions on the Company’s ability to pay dividends.
DESCRIPTION OF CAPITAL STRUCTURE
The authorized share capital of the Company consists of an unlimited number of common shares without par value. As of the date hereof, 26,857,200 Common Shares were issued and outstanding as fully paid and non-assessable common shares.
The Company is authorized to issue an unlimited number of Common Shares. Holders of Common Shares are entitled to receive notice of any meetings of Shareholders, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all directors standing for election. Holders of Common Shares are entitled to receive on a pro-rata basis such dividends, if any, as and when declared by the Board at its discretion from funds legally available therefor and upon the liquidation, dissolution or winding up of the Company are entitled to receive on a pro-rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro-rata basis with the holders of Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption or conversion rights, nor do they contain any sinking or purchase fund provisions.
MARKET FOR SECURITIES
Market
The Company’s Common Shares are listed on the Canadian Securities Exchange under the trading symbol “SUNN”, listed on the Frankfurt Stock Exchange under the trading symbol “GY2”, and quoted on the OTCQX under the trading symbol “SUUNF”.
Trading Price and Volume
The following table sets out the monthly high and low trading prices and the monthly volume of trading of the Common Shares of the Company on the Canadian Securities Exchange for the most recently completed financial year:
| High (Cdn$) | Low (Cdn$) | Volume | ||||||||||
| July 2022 | N/A | N/A | N/A | |||||||||
| August 2022 | N/A | N/A | N/A | |||||||||
| September 2022 | N/A | N/A | N/A | |||||||||
| October 2022 | N/A | N/A | N/A | |||||||||
| November 2022 | N/A | N/A | N/A | |||||||||
| December 2022 | N/A | N/A | N/A | |||||||||
| January 2023 | N/A | N/A | N/A | |||||||||
| February 2023 | N/A | N/A | N/A | |||||||||
| March 2023 | 2.90 | 1.75 | 887,043 | |||||||||
| April 2023 | 6.92 | 2.68 | 756,472 | |||||||||
| May 2023 | 7.27 | 6.02 | 162,880 | |||||||||
| June 2023 | 9.25 | 6.60 | 434,894 | |||||||||
| 56 |
Prior Sales
The following summarizes the Common Shares and securities convertible into Common Shares issued by the Company during the most recently completed financial year.
| Date of Issuance | Security Type | Number of Securities | Issue/Exercise Price | |||||||||
| October 3, 2022 | Advisory Warrants | 2,500,000 | $ | 0.10 | ||||||||
| October 3, 2022 | Convertible Loan | $ | 1,250,000 | (1) | $ | 0.50 | ||||||
| November 4, 2022 | Options | 2,774,000 | $ | 0.75 | ||||||||
| November 4, 2022 | RSUs | 500,000 | N/A | |||||||||
| March 1, 2023 | Common Shares | 8,050,000 | $ | 0.75 | ||||||||
| March 1, 2023 | Agent’s Warrants | 483,000 | $ | 0.75 | ||||||||
| March 1, 2023 | Common Shares | 2,500,000 | $ | 0.50 | ||||||||
| March 1, 2023 | Series A Warrants | 2,500,000 | $ | 0.50 | ||||||||
| March 1, 2023 | Series B Warrants | 2,500,000 | $ | 0.50 | ||||||||
| March 8, 2023 | Common Shares | 250,000 | $ | 2.35 | ||||||||
| March 13, 2023 | RSUs | 15,000 | N/A | |||||||||
Note:
| (1) | The principal sum of the Convertible Loan is equal to $1,250,000 and was automatically converted into Conversion Units upon the closing of the IPO. The Convertible Loan was converted at a price of $0.50 per Conversion Units. The Conversion Units consist of 2,500,000 Common Shares, 2,500,000 Series A Warrants and 2,500,000 Series B Warrants. The Series A Warrants and Series B Warrants, upon the satisfaction of the Series A Warrant Vesting Condition and Series B Warrant Vesting Condition (as applicable) are exercisable into Common Shares at an exercise price of $0.50 per Common Share. |
ESCROWED SECURITIES and securities subject to contractual restriction on transfer
Contractual Escrow Securities
The Company and non-Principal existing holders of Common Shares prior to the IPO entered into an agreement with the Company (the “Voluntary Escrow Agreements”) in the form of escrow agreement provided under National Policy 46-201 Escrow For Initial Public Offerings (the “Voluntary Escrow”) setting out contractual escrow terms, being a 36 month voluntary trading restriction where 10% of each holder’s shares are released at the Listing Date, and 15% of each holder’s shares are released at the six, twelve, eighteen, twenty-four, thirty and thirty-six month anniversaries of the Listing Date. Any Common Shares issuable on the exercise of 6,275,000 Warrants and 975,000 Stock Options are subject to the same terms of the Voluntary Escrow. A copy of the Voluntary Escrow Agreement will be available under the Company’s profile on SEDAR+ at www.sedarplus.com.
| 57 |
As of the dated of the AIF, pursuant to the Voluntary Escrow Agreement, the following securities of the Company are subject to contractual restrictions on transfer as shown in the following table:
| Designation of Class | Total number of securities that are subject to a contractual restriction on transfer (1) | Percentage of Class | ||||||
| Common Shares | 13,070,108 | 48.67 | % | |||||
| Warrants | 4,706,250 | 59.36 | % | |||||
National Policy 46-201 Escrow
NP 46-201 provides that all securities of an issuer owned or controlled by a Principal must be placed in escrow at the time the issuer distributes its securities or convertible securities to the public by prospectus, unless the securities held by such Principal or issuable to such Principal upon conversion of convertible securities held by the Principal collectively represent less than 1% of the total issued and outstanding securities of the issuer after giving effect to the initial distribution. As such, the securities held by the Principals are held in escrow pursuant to the policies of NP 46-201.
The following table sets forth the securities of the Principals that, as at the date of the AIF, are subject to escrow and the percentage that number represents of the outstanding securities of that class.
| Designation of Class | Total number of securities that are held in escrow(1) | Percentage of Class | ||||||
| Common Shares | 804,900 | 3.00 | % | |||||
| Warrants | 918,750 | 11.59 | % | |||||
The Company and the Principals entered into an escrow agreement (the “Escrow Agreement”) with Endeavor Trust Corporation, as escrow agent (the “Escrow Agent”), pursuant to which the Escrowed Shareholders collectively deposited the Common Shares and Warrants listed in the table above into escrow (the “Escrowed Securities”) with the Escrow Agent.
The Company is currently an “emerging issuer” pursuant to NP 46-201 and, as such, the Escrowed Securities are subject to a three year escrow and subject to the following release scheduled:
| Date | Amount of Escrowed Securities Released | |
| On the Listing Date | 1/10 of the escrow securities | |
| 6 months after the Listing Date | 1/6 of the remaining escrow securities | |
| 12 months after the Listing Date | 1/5 of the remaining escrow securities | |
| 18 months after the Listing Date | 1/4 of the remaining escrow securities | |
| 24 months after the Listing Date | 1/3 of the remaining escrow securities | |
| 30 months after the Listing Date | 1/2 of the remaining escrow securities | |
| 36 months after the Listing Date | the remaining escrow securities |
The release schedule may be accelerated if the Company establishes itself as an “established issuer” as described in NP 46-201.
A copy of the Escrow Agreement is available under the Company’s profile on SEDAR+ at www.sedarplus.com.
| 58 |
DIRECTORS AND OFFICERS
The names and province or state and country of residence of the directors and executive officers of SolarBank, positions held by them with SolarBank and their principal occupations for the past five years are as set forth below. The term of office of each of the present directors expires at the next annual general meeting of shareholders. After each such meeting, the Board of Directors appoints the Company’s officers and committees for the ensuing year.
Name and Municipality of Residence |
Director/officer Since and Position with the Company |
Principal Occupation for Last Five Years |
Common Shares Beneficially Owned, Directly or Indirectly, over which Control or Discretion is Exercised(1) | |||
| Dr.
Richard Lu Toronto, ON Canada |
Director, Chief Executive Officer and President since August 1, 2014 | Chief Executive Officer and President of the Company since August 2014. | 802,446(3) | |||
| Sam
Sun Toronto, ON Canada |
Chief Financial Officer since July 1, 2022 | Chief Financial Officer of the Company since July, 2022; Head of Finance for Aucto Canada Inc. from May 2021 to June 2022; Finance Director of NRI Industrial Sales Inc. from November 2020 to April 2021; Head of Finance of Brook Crompton Ltd. from November 2018 to June 2020; VP of Finance and Operation of Lynks Motoplex Inc. from May 2017 to October 2018. | 17,500 | |||
| Andrew
van Doorn Toronto, ON Canada |
Chief Operating Officer since July 1, 2021 | Chief Operating Officer of the Company since July 2021 and acted in the capacity of Chief Operation Officer of the Company from July 2018 to July 2020; VP Engineering & Construction for Potentia Renewables from April 2012 to June 2018. | 20,657 | |||
| Xiaohong
(Tracy) Zheng Toronto, ON Canada |
Chief Administrative Officer since July 1, 2021 | Chief Administrative Officer of the Company since July 2021; Vice President of Operations of the Company from August 2017 to June 2021. | 12,630 | |||
| Olen
Aasen(2) Vancouver, BC Canada |
Director since November 3, 2022 | Practicing lawyer since May 2017. | 150,000 | |||
| Paul
Pasalic(2) London, UK |
Director since November 3, 2022 | Managing Director, Head of Legal (Europe) – Private Equity Transactions, with Hudson Advisors since 2019; Associate lawyer with Shearman & Sterling LLP from 2012 to 2019. | 53,000 | |||
| Paul
Sparkes(2) Toronto, ON Canada |
Director since November 3, 2022 | Corporate director and Self-Employed advisor advising growth entities in private and public markets. | Nil |
Notes:
| (1) | Information as to securities of the Company beneficially owned, or over which control or direction is exercised, has been furnished by the respective directors and officers. | |
| (2) | Member of the Audit Committee. Mr. Pasalic is the Chair. | |
| (3) | 773,200 Common Shares are held by 2384449 Ontario Inc., a corporation controlled by Dr. Lu. |
Unless otherwise noted above, the term of office of the directors expires on the earlier of the Company’s next annual general meeting, or upon resignation. The term of office of the officers expires at the discretion of the directors.
As of the date of this prospectus, the Company’s directors and officers as a group, beneficially own, directly and indirectly, or exercise control or direction over, 1,056,233 Common Shares, representing 3.93% of the issued and outstanding Common Shares.
| 59 |
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
Other than as disclosed below, no director or executive officer of the Company is as of the date of this AIF, or has been in the last 10 years, a director, chief executive officer or chief financial officer of any company (including the Company) that,
| (a) | was the subject of a cease trade order or similar order or an order that denied such company access to any exemptions under securities legislation, for a period of more than 30 consecutive days which was issued while the person was acting in that capacity; or | |
| (b) | was subject to a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation, for a period of more than 30 consecutive days, that was issued after that person ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while the person was acting in that capacity. |
Other than as disclosed below, no director or executive officer or shareholder holding a sufficient number of securities of the Company to materially affect the control of the Company:
| (a) | is, as at the date of this AIF, or has been within the 10 years before the date of this AIF, a director or executive officer of any company (including the Company) that while that person was acting in that capacity, or within a year of that person ceasing to act in the capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets; or | |
| (b) | has, within 10 years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets. |
No director or executive officer of the Company or a shareholder holding a sufficient number of securities to affect materially the control of the Company has been subject to:
| (a) | any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or | |
| (b) | any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision. |
The foregoing, not being within the knowledge of the Company, has been furnished by the respective directors, executive officers and shareholders holding a sufficient number of securities of the Company to affect materially control of the Company.
By Order of the Supreme Court of Newfoundland and Labrador dated June 17, 2020, Deloitte Restructuring Inc. was appointed as the receiver and manager of all current and future assets, undertakings, and properties of the Kami Mine Limited Partnership, Kami General Partner Limited, and Alderon Iron Ore Corp. The receivership was initiated by a secured creditor of the Kami Mine Limited Partnership after its failure to refinance the secured debt due to the COVID-19 pandemic. Mr. Aasen was Corporate Secretary of Alderon Iron Ore Corp. and Secretary and Director of Kami General Partner Limited until April 28, 2020.
On February 5, 2016, the British Columbia Securities Commission issued a cease trade order against Ziplocal Inc. for failure to file its annual audited financial statements and MD&A. The required documents were filed and the order was subsequently revoked on March 11, 2016. Mr. Paul Sparkes was a director of Ziplocal Inc. during this period.
| 60 |
Conflicts of Interest
Certain directors and officers of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the renewable energy business. Such associations to other companies in the renewable energy sector may give rise to conflicts of interest from time to time. As a result, opportunities provided to a director of the Company may not be made available to the Company, but rather may be offered to a company with competing interests. The directors and senior officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any personal interest which they may have in any project or opportunity of the Company, and to abstain from voting on such matters.
The directors and officers of the Company are aware of the existence of laws governing the accountability of directors and officers for corporate opportunity and requiring disclosure by the directors of conflicts of interests and the Company will rely upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors and officers.
LEGAL PROCEEDINGS and regulatory actions
Except as disclosed below, there are no legal proceedings material to the Company to which the Company is a party or of which any of its property is the subject matter, and there are no such proceedings known to the Company to be contemplated.
First legal claim for the improper termination of FIT Contracts
On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “First Claim Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “First Claim Defendants”). First Claim Plaintiffs seek damages from the First Claim Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions.
Second legal claim for the improper termination of FIT Contracts
On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Second Claim Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Second Claim Defendants”). The Second Claim Plaintiffs seek damages from the Second Claim Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ, 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. The Company expects statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action.
| 61 |
Claim against town of Manlius, New York
In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property that is being developed by the Company. The lawsuit was filed challenging the approval of the Manlius landfill. The Company is not named in the lawsuit; however, in cooperation with the town, the Company is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted.
PROMOTERS
Except for Dr. Richard Lu, the Chief Executive Officer of the Company, no person or company has, within the two years immediately preceding the date of this Prospectus, been a promoter of the Company, within the meaning of applicable securities laws.
Other than as disclosed in this section or elsewhere in this AIF, no person who was a Promoter of the Company within the last two years:
| ● | received anything of value directly or indirectly from the Company or a subsidiary; | |
| ● | sold or otherwise transferred any asset to the Company or a subsidiary within the last two years; | |
| ● | has been a director, chief executive officer or chief financial officer of any company that during the past 10 years was the subject of a cease trade order or similar order or an order that denied the company access to any exemptions under securities legislation for a period of more than 30 consecutive days or became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets; | |
| ● | has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; | |
| ● | has been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision; or | |
| ● | has within the past 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver or receiver manager or trustee appointed to hold its assets. |
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as disclosed in this AIF and other than transactions carried out in the ordinary course of business of the Company or its subsidiary, none of the directors or executive officers of the Company, any shareholder directly or indirectly beneficially owning, or exercising control or direction over, more than 10% of the outstanding Common Shares, nor an associate or affiliate of any of the foregoing persons has had, during the three most recently completed financial years of the Company or during the current financial year, any material interest, direct or indirect, in any transactions that materially affected or would materially affect the Company or its subsidiary.
| 62 |
MATERIAL CONTRACTS
The Company has entered into the following material contracts:
| 1. | Master Services Agreement dated February 9, 2018 between Abundant Solar Power Inc. and the State of Maryland, acting through the Maryland Department of Transportation. Pursuant to the agreement, Abundant Solar Power Inc. provides deliverables, programs, good and services for renewable energy development projects that are awarded in accordance with the terms of the agreement. The agreement has a term of thirty years commencing on February 22, 2018. However, the Maryland Department of Transportation may terminate the agreement if it shall determine such termination is in the best interest of the State of Maryland. The State will pay all reasonable costs incurred up to the date of termination, and all reasonable costs associated with termination; however, the Company will not be reimbursed for any anticipatory profits that have not been earned up to the date of termination. |
| 2. | Engineering, Procurement, and Construction Agreement dated February 9, 2021 with Solar Troupsburg LLC as described under “General Development and Business of the Company – Three Year History – Other Development of the Business” |
| 3. | Agency Agreement as described under “General Development and Business of the Company – Three Year History – Developments for the Year Ended June 30, 2023” |
| 4. | Manlius EPC Agreement as described under “General Development and Business of the Company – Three Year History – Developments for the Year Ended June 30, 2023” |
| 5. | Honeywell MIPA as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 6. | Honeywell EPC Agreement as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 7. | 903 EPC Agreement as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 8. | OZ-1 EPC Agreement as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 9. | SFF 06 EPC Agreement as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 10. | Share Purchase Agreement dated October 23, 2023 between the Company, N. Fine Investments Limited, Linden Power Inc. and OFIT GM Inc. as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 11. | Share Purchase Agreement dated October 23, 2023 between the Company, N. Fine Investments Limited, Linden Power Inc. and OFIT RT Inc. as described under “General Development and Business of the Company – Three Year History – Developments subsequent to the Year Ended June 30, 2023” |
| 63 |
interest of experts
No person or corporation is named as having prepared or certified a statement, report, opinion or valuation described or included in a filing, or referred to in a filing, made under National Instrument 51-102 – Continuous Disclosure Obligations by our Company during, or relating to the financial year ended June 30, 2023 and whose profession or business gives authority to the statement, report, opinion or valuation made by the person or corporation, other than MSLL CPA LLP our external auditors.
With respect to the current auditors of the Company, MSLL CPA LLP has advised the Company that it is independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any application legislation or regulation.
TRANSFER AGENT AND REGISTRAR
The Company’s registrar and transfer agent is Endeavor Trust Corporation with its office located in Vancouver, British Columbia.
ADDITIONAL INFORMATION
Additional information on the Company may be found on SEDAR+ at www.sedarplus.com. Additional information, including directors’ and officers’ remuneration and indebtedness to the Company, principal holders of the securities of the Company and securities authorized for issuance under equity compensation plans, is contained in the Company’s management information circular for its most recent annual general meeting, which is filed on SEDAR+. Additional financial information is provided in the Company’s audited consolidated financial statements for the year ended June 30, 2023 and the related management’s discussion and analysis of financial conditions and results of operations, both of which are available on SEDAR+.
AUDIT COMMITTEE
Pursuant to the provisions of National Instrument 52-110 - Audit Committees (“NI 52-110”), reporting issuers are required to provide disclosure with respect to its audit committee, including the text of the audit committee’s charter, composition of the committee, and the fees paid to the external auditor. Accordingly, the Company provides the following disclosure with respect to its Audit Committee.
Audit Committee Charter
The Company has adopted an Audit Committee Charter, which is attached as Schedule “A” to this AIF.
Composition of the Audit Committee
Pursuant to applicable laws, the Company is required to have an audit committee comprised of at least three directors, all of whom must not be officers or employees of the Company or an affiliate of the Company.
The following are the members of the Audit Committee effective on the Listing Date:
Member |
Independence(1) |
Financially Literacy | ||
| Paul Pasalic | Independent | Yes | ||
| Paul Sparkes | Independent | Yes | ||
| Olen Aasen | Not Independent | Yes |
Note:
| (1) | Within the meaning of NI 52-110. |
| 64 |
Relevant Education and Experience
All of the current Audit Committee members are senior level businesspersons with extensive experience in financial matters; each has a broad understanding of accounting principles used to prepare financial statements and varied experience as to general application of such accounting principles, as well as the internal controls and procedures necessary for financial reporting, garnered from working in their individual fields of endeavour. In addition, each of the current members of the Audit Committee has knowledge of the role of an audit committee in the realm of reporting companies from their years of experience as directors or senior officers of public companies other than the Company.
Mr. Pasalic is a private equity professional and a corporate lawyer with more than 15 years of experience in corporate, securities and regulatory matters. Mr. Pasalic has advised on a diverse array of complex multi-jurisdictional transactions across various industries and across the capital structure. Mr. Pasalic holds a bachelors of business administration (finance) from Simon Fraser University, and obtained a juris doctor from the University of Calgary in 2007. Mr. Pasalic is a qualified attorney in Canada (Ontario; Alberta), New York State as well as in England and Wales. Mr. Pasalic is also a CFA charterholder.
Mr. Aasen is an executive and corporate and securities lawyer with more than 16 years of experience in corporate, securities, mining and regulatory matters. He has been the Corporate Secretary, General Counsel or Vice President, Legal at various Canadian and U.S.-listed companies in the mining, transportation and technology sectors. In the past ten years Mr. Aasen has advised on a significant number of debt and equity financings and structured finance packages. Mr. Aasen did his undergraduate studies in the Finance Department of the Sauder School of Business, obtained a J.D. from the University of British Columbia in 2006 and was called to the British Columbia Bar in 2007. Mr. Aasen was also appointed to the 2016 Legal 500 GC Powerlist for Canada.
Mr. Sparkes is an entrepreneur with over 25 years of experience in media, finance, capital markets and Canada’s political arena. He spent a decade in the broadcast and media industry as CTVglobemedia’s Executive Vice President, Corporate Affairs. He also held senior positions in public service, including with the Government of Canada as Director of Operations to Prime Minister Jean Chretien, and as a senior aide to two Premiers of Newfoundland and Labrador. Paul was a co-founder and executive vice chairman at Difference Capital Financial and serves on a number of private and public boards. He is currently President and founder of Otterbury Holdings Inc., Global Alternatives Advisory, and is an advisor and deal maker for growth companies in the private and public markets.
Reliance on Certain Exemptions
During the financial year ended June 30, 2023, the Company has not relied on the exemptions contained in section 2.4, 3.2, 3.4, 3.5 or under part 8 of NI 52-110.
The Company is relying on the exemption in section 6.1 of NI 52-110 with respect to compliance with the requirements of Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of NI 52-110.
Reliance on Exemption in Subsection 3.3(2), Section 3.6 or Section 3.8
At no time since the commencement of the financial year ended June 30, 2023, has the Company relied on any of the exemptions contained in the followings sections of NI 52-110: subsection 3.3(2) (Controlled Companies), section 3.6 (Temporary Exemption for Limited and Exceptional Circumstances) or section 3.8 (Acquisition of Financial Literacy).
| 65 |
Audit Committee Oversight
At no time since the commencement of the Company’s most recently completed financial year, has the Company’s Board of Directors failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.
Pre-Approval Policies and Procedures
The Audit Committee is required to approve the engagement of the Company’s external auditors in respect of non-audit services in accordance with applicable law, including those provided to the Company’s subsidiaries by the auditor or any other person in its capacity as independent auditor of such subsidiary. Between scheduled Audit Committee meetings, the Audit Committee Chair, on behalf of the Audit Committee, is authorized to pre-approve any audit or non-audit services and engagement fees and terms up to $50,000. At the next Audit Committee meeting, the Audit Committee Chair shall report to the Audit Committee any such pre-approval given.
External Auditor Service Fees
The aggregate fees billed by the Company’s external auditors in each of the last two fiscal years for audit fees are set out in the table below. “Audit Fees” includes fees for audit services including the audit services completed for the Company’s subsidiaries.
| Year Ended | Audit Fees | Audit Related Fees | Tax Fees | All Other Fees | ||||||||
| June 30, 2023 | $ | 197,945 | $ | 30,300 | Nil | Nil | ||||||
| June 30, 2022 | $ | 61,000 | Nil | Nil | Nil | |||||||
Notes:
| (1) | “Audit Fees” includes fees necessary to perform the annual audit and quarterly reviews of the Company’s financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits. | |
| (2) | “Audit-Related Fees” include services that are traditionally performed by the auditor. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation. | |
| (3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities. | |
| (4) | “All Other Fees” include all other non-audit services. |
| 66 |
SCHEDULE A
SOLARBANK CORPORATION
AUDIT COMMITTEE CHARTER
November
4, 2022
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
AUDIT COMMITTEE CHARTER
| 1. | PURPOSE |
The main purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) is to assist the Board in fulfilling its statutory responsibilities in relation to internal control and financial reporting, and to carry out certain oversight functions on behalf of the Board, including the oversight of:
| (a) | the integrity of the Company’s financial statements and other financial information provided by the Company to securities regulators, governmental bodies and the public to ensure that the Company’s financial disclosures are complete, accurate, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations by the International Financial Reporting Interpretations Committee (“IFRIC”), and fairly present the financial position and risks of the Company; |
| (b) | assessing the independence, qualifications and performance of the Company’s independent auditor (the ”Auditor”), appointing and replacing the Auditor, overseeing the audit and non- audit services provided by the Auditor, and approving the compensation of the Auditor; |
| (c) | Senior Management (as defined below) responsibility for assessing and reporting on the effectiveness of internal controls; |
| (d) | financial matters and management of financial risks; |
| (e) | the prevention and detection of fraudulent activities; and |
| (f) | investigation of complaints and submissions regarding accounting or auditing matters and unethical or illegal behavior. |
The Committee provides an avenue for communication between the Auditor, the Company’s executive officers and other senior managers (“Senior Management”) and the Board, and has the authority to communicate directly with the Auditor. The Committee shall have a clear understanding with the Auditor that they must maintain an open and transparent relationship with the Committee. The Auditor is ultimately accountable to the Committee and the Board, as representatives of the Company’s shareholders.
| 2. | COMPOSITION |
The Committee shall be comprised of three directors. Each Committee member shall:
| (a) | satisfy the laws governing the Company; |
| (b) | be “independent” in accordance with Sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees (“NI 52-110”) (subject to the exceptions set forth in Part 3 and Part 6 of NI 52-110, as applicable), which sections are reproduced in Appendix A of this charter; and |
| (c) | be “financially literate” in accordance with the definition set out in Section 1.6 of NI 52-110, which definition is reproduced in Appendix A of this charter. |
For purposes of subparagraph (b) above, the position of non-executive Chair of the Board is considered to be an executive officer of the Company.
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
Committee members and the chair of the Committee (the “Committee Chair”) shall be appointed annually by the Board at the first Board meeting that is held after every annual general meeting of the Company’s shareholders. The Board may remove a Committee member at any time in its sole discretion by a resolution of the Board.
If a Committee member simultaneously serves on the audit committees of more than three public companies, the Committee shall seek the Board’s determination as to whether such simultaneous service would impair the ability of such member to effectively serve on the Committee and ensure that such determination is disclosed.
| 3. | MEETINGS |
The Committee shall meet at least once per financial quarter and as many additional times as the Committee deems necessary to carry out its duties effectively.
The Committee shall meet:
| (a) | within 60 days following the end of each of the first three financial quarters to review and discuss the unaudited financial results for the preceding quarter and the related management’s discussion and analysis (“MD&A”); and |
| (b) | within 120 days following the end of the Company’s fiscal year end to review and discuss the audited financial results for the year and related MD&A. |
As part of its job to foster open communication, the Committee shall meet at least once each financial quarter with Senior Management and the Auditor in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.
A majority of the members of the Committee shall constitute a quorum for any Committee meeting. No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present or by unanimous written consent of the Committee members.
The Committee Chair shall preside at each Committee meeting. In the event the Committee Chair is unable to attend or chair a Committee meeting, the Committee will appoint a chair for that meeting from the other Committee members.
The Corporate Secretary of the Company, or such individual as appointed by the Committee, shall act as secretary for a Committee meeting (the “Committee Secretary”) and, upon receiving a request to convene a Committee meeting from any Committee member, shall arrange for such meeting to be held.
The Committee Chair, in consultation with the other Committee members, shall set the agenda of items to be addressed at each Committee meeting. The Committee Secretary shall ensure that the agenda and any supporting materials for each upcoming Committee meeting are circulated to each Committee member in advance of such meeting.
The Committee may invite such officers, directors and employees of the Company, the Auditor, and other advisors as it may see fit from time to time to attend at one or more Committee meetings and assist in the discussion and consideration of any matter. For purposes of performing their duties, members of the Committee shall, upon request, have immediate and full access to all corporate information and shall be permitted to discuss such information and any other matters relating to the duties and responsibilities of the Committee with officers, directors and employees of the Company, with the Auditor, and with other advisors subject to appropriate confidentiality agreements being in place.
| 2 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
Unless otherwise provided herein or as directed by the Board, proceedings of the Committee shall be conducted in accordance with the rules applicable to meetings of the Board.
| 4. | DUTIES AND RESPONSIBILITIES |
Subject to the powers and duties of the Board and the Articles of the Company, in order to carry out its oversight responsibilities, the Committee shall:
| 4.1 | Financial Reporting Process |
| (a) | Review with Senior Management and the Auditor any items of concern, any proposed changes in the selection or application of accounting principles and policies and the reasons for the change, any identified risks and uncertainties, and any issues requiring the judgement of Senior Management, to the extent that the foregoing may be material to financial reporting. |
| (b) | Consider any matter required to be communicated to the Committee by the Auditor under generally accepted auditing standards, applicable law and listing standards, if applicable, including the Auditor’s report to the Committee (and the response of Senior Management thereto) on: |
| (i) | accounting policies and practices used by the Company; | |
| (ii) | alternative accounting treatments of financial information that have been discussed with Senior Management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the Auditor; and | |
| (iii) | any other material written communications between the Auditor and Senior Management. |
| (c) | Discuss with the Auditor their views about the quality, not just the acceptability, of accounting principles and policies used by the Company, including estimates and judgements made by Senior Management and their selection of accounting principles. |
| (d) | Discuss with Senior Management and the Auditor: |
| (i) | any accounting adjustments that were noted or proposed (immaterial or otherwise) by the Auditor but were not reflected in the financial statements; | |
| (ii) | any material correcting adjustments that were identified by the Auditor in accordance with generally accepted accounting principles (“GAAP”) or applicable law; | |
| (iii) | any communication reflecting a difference of opinion between the audit team and the Auditor’s national office on material auditing or accounting issues raised by the engagement; and | |
| (iv) | any “management” or “internal control” letter issued, or proposed to be issued, by the Auditor to the Company. |
| (e) | Discuss with Senior Management and the Auditor any significant financial reporting issues considered during the fiscal period and the method of resolution, and resolve disagreements between Senior Management and the Auditor regarding financial reporting. |
| 3 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (f) | Review with Senior Management and the Auditor: |
| (i) | any off-balance sheet financing mechanisms being used by the Company and their effect on the Company’s financial statements; and | |
| (ii) | the effect of regulatory and accounting initiatives on the Company’s financial statements, including the potential impact of proposed initiatives. |
| (g) | Review with Senior Management and the Auditor and legal counsel, if necessary, any litigation, claim or other contingency, including tax assessments, that could have a material effect on the financial position or operating results of the Company, and the manner in which these matters have been disclosed or reflected in the financial statements. |
| (h) | Review with the Auditor any audit problems or difficulties experienced by the Auditor in performing the audit, including any restrictions or limitations imposed by Senior Management, and the response of Senior Management, and resolve any disagreements between Senior Management and the Auditor regarding these matters. |
| (i) | Review the results of the Auditor’s work, including findings and recommendations, Senior Management’s response, and any resulting changes in accounting practices or policies and the impact such changes may have on the financial statements. |
| (j) | Review and discuss with Senior Management the audited annual financial statements and related MD&A and make recommendations to the Board with respect to approval thereof before their release to the public. |
| (k) | Review and discuss with Senior Management and the Auditor all interim unaudited financial statements and related interim MD&A. |
| (l) | Approve interim unaudited financial statements and related interim MD&A prior to their filing and dissemination. |
| (m) | In connection with Sections 4.1 and 5.1 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), obtain confirmation from the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) (and considering the Auditor’s comments, if any, thereon) to their knowledge: |
| (i) | that the audited financial statements, together with any financial information included in the annual MD&A and annual information form, fairly present in all material respects the Company’s financial condition, financial performance and cash flows; and | |
| (ii) | that the interim financial statements, together with any financial information included in the interim MD&A, fairly present in all material respects the Company’s financial condition, financial performance and cash flows. |
| (n) | Review news releases to be issued in connection with the audited annual financial statements and related MD&A and the interim unaudited financial statements and related interim MD&A, before being disseminated to the public, if the Company is required to do so under applicable securities laws, paying particular attention to any use of “pro-forma” or “adjusted” non-GAAP, information. |
| 4 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (o) | Review any news release containing earnings guidance or financial information based upon the Company’s financial statements prior to the release of such statements, if the Company is required to disseminate such news releases under applicable securities laws. |
| (p) | Review the appointment of the CFO and have the CFO report to the Committee on the qualifications of new key financial personnel involved in the financial reporting process. |
| 4.2 | Internal Controls |
| (a) | Consider and review with Senior Management and the Auditor the adequacy and effectiveness of internal controls over accounting and financial reporting within the Company and any proposed significant changes in them. |
| (b) | Consider and discuss any Auditor’s comments on the Company’s internal controls, together with Senior Management responses thereto. |
| (c) | Discuss, as appropriate, with Senior Management and the Auditor any major issues as to the adequacy of the Company’s internal controls and any special audit steps in light of material internal control deficiencies. |
| (d) | Review annually the disclosure controls and procedures. |
| (e) | Receive confirmation from the CEO and the CFO of the effectiveness of disclosure controls and procedures, and whether there are any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information or any fraud, whether or not material, that involves Senior Management or other employees who have a significant role in the Company’s internal control over financial reporting. In addition, receive confirmation from the CEO and the CFO that they are prepared to sign the annual and quarterly certificates required by Sections 4.1 and 5.1 of NI 52-109, as amended from time to time. |
| 4.3 | The Auditor |
Qualifications and Selection
| (a) | Subject to the requirements of applicable law, be solely responsible to select, retain, compensate, oversee, evaluate and, where appropriate, replace the Auditor. The Committee shall be entitled to adequate funding from the Company for the purpose of compensating the Auditor for authorized services. |
| (b) | Instruct the Auditor that: |
| (i) | they are ultimately accountable to the Board and the Committee, as representatives of shareholders; and | |
| (ii) | they must report directly to the Committee. |
| 5 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (c) | Ensure that the Auditor have direct and open communication with the Committee and that the Auditor meet with the Committee once each financial quarter without the presence of Senior Management to discuss any matters that the Committee or the Auditor believe should be discussed privately. |
| (d) | Evaluate the Auditor’s qualifications, performance, and independence. As part of that evaluation: |
| (i) | at least annually, request and review a formal report by the Auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; | |
| (ii) | annually review and confirm with Senior Management and the Auditor the independence of the Auditor, including all relationships between the Auditor and the Company, including the amount of fees received by the Auditors for the audit services, the extent of non-audit services and fees therefor, the extent to which the compensation of the audit partners of the Auditor is based upon selling non-audit services, the timing and process for implementing the rotation of the lead audit partner, reviewing partner and other partners providing audit services for the Company, and whether there should be a regular rotation of the audit firm itself; and | |
| (iii) | annually review and evaluate senior members of the audit team of the Auditor, including their expertise and qualifications. In making this evaluation, the Committee should consider the opinions of Senior Management. |
Conclusions on the independence of the Auditor should be reported by the Committee to the Board.
| (e) | Approve and review, and verify compliance with, the Company’s policies for hiring of employees and former employees of the Auditor and former auditors. Such policies shall include, at minimum, a one-year hiring “cooling off” period. |
Other Matters
| (a) | Meet with the Auditor to review and approve the annual audit plan of the Company’s financial statements prior to the annual audit being undertaken by the Auditor, including reviewing the year-to-year co-ordination of the audit plan and the planning, staffing and extent of the scope of the annual audit. This review should include an explanation from the Auditor of the factors considered by the Auditor in determining their audit scope, including major risk factors. The Auditor shall report to the Committee all significant changes to the approved audit plan. |
| (b) | Review and pre-approve all audit and non-audit services and engagement fees and terms in accordance with applicable law, including those provided to the Company’s subsidiaries by the Auditor or any other person in its capacity as independent auditor of such subsidiary. Between scheduled Committee meetings, the Committee Chair, on behalf of the Committee, is authorized to pre-approve any audit or non-audit services and engagement fees and terms up to $50,000. At the next Committee meeting, the Committee Chair shall report to the Committee any such pre-approval given. |
| (c) | Establish and adopt procedures for such matters. |
| 6 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| 4.4 | Compliance |
| (a) | Monitor compliance by the Company with all payments and remittances required to be made in accordance with applicable law, where the failure to make such payments could render the Company’s directors personally liable. |
| (b) | Receive regular updates from Senior Management regarding compliance with laws and regulations and the process in place to monitor such compliance, excluding, however, legal compliance matters subject to the oversight of the Corporate Governance and Nominating Committee of the Board, if any. Review the findings of any examination by regulatory authorities and any observations by the Auditor relating to such matters. |
| (c) | Establish and oversee the procedures in the Company’s Whistleblower Policy to address: |
| (i) | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting or auditing matters or unethical or illegal behaviour; and | |
| (ii) | confidential, anonymous submissions by employees of concerns regarding questionable accounting and auditing matters or unethical or illegal behaviour. |
| (d) | Ensure that political and charitable donations conform with policies and budgets approved by the Board. |
| (e) | Monitor management of hedging, debt and credit, make recommendations to the Board respecting policies for management of such risks, and review the Company’s compliance therewith. |
| (f) | Approve the review and approval process for the expenses submitted for reimbursement by the CEO. |
| (g) | Oversee Senior Management’s mitigation of material risks within the Committee’s mandate and as otherwise assigned to it by the Board. |
| 4.5 | Financial Oversight |
| (a) | Assist the Board in its consideration and ongoing oversight of matters pertaining to: |
| (i) | capital structure and funding including finance and cash flow planning; | |
| (ii) | capital management planning and initiatives; | |
| (iii) | property and corporate acquisitions and divestitures including proposals which may have a material impact on the Company’s capital position; | |
| (iv) | the Company’s annual budget; | |
| (v) | the Company’s insurance program; | |
| (vi) | directors’ and officers’ liability insurance and indemnity agreements; and | |
| (vii) | matters the Board may refer to the Committee from time to time in connection with the Company’s capital position. |
| 7 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| 4.6 | Other |
| (a) | Perform such other duties as may be assigned to the Committee by the Board. |
| (b) | Annually review and assess the adequacy of its charter and recommend any proposed changes to the Corporate Governance and Nominating Committee. |
| (c) | Review its own performance annually, and provide the results of such evaluation to the Board for its review. |
| 5. | AUTHORITY |
The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to:
| (a) | select, retain, terminate, set and approve the fees and other retention terms of special or independent counsel, accountants or other experts, as it deems appropriate; and |
| (b) | obtain appropriate funding to pay, or approve the payment of, such approved fees, without seeking approval of the Board or Senior Management. |
| 6. | ACCOUNTABILITY |
The Committee Chair shall make periodic reports to the Board, as requested by the Board, on matters that are within the Committee’s area of responsibility.
The Committee shall maintain minutes of its meetings with the Company’s Corporate Secretary and shall provide an oral report to the Board at the next Board meeting that is held after a Committee meeting.
| 8 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
Appendix A
Definitions from National Instrument 52-110 Audit Committees
| Section 1.4 | Meaning of Independence |
| (1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
| (2) | For the purposes of subsection (1), a “material relationship” is a relationship which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of a member’s independent judgement. |
| (3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
| (a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; | |
| (b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; | |
| (c) | an individual who: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, | |
| (ii) | is an employee of that firm, or | |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, | |
| (ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or | |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuer’s current executive officers serves or served at that same time on the entity’s compensation committee; and | |
| (f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
| (4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
| (a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
| 9 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
| (5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
| (6) | For the purposes of clause (3)(f), direct compensation does not include: |
| (a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and | |
| (b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
| (7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
| (a) | has previously acted as an interim chief executive officer of the issuer, or | |
| (b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
| (8) | For the purpose of Section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
| Section 1.5 | Additional Independence Requirements |
| (1) | Despite any determination made under Section 1.4, an individual who |
| (a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or | |
| (b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
| (2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
| (a) | an individual’s spouse, minor child or stepchild, or a child or stepchild who shares the individual’s home; or | |
| (b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
| (3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
| Section 1.6 | Meaning of Financial Literacy |
For the purposes of this Instrument, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.
| 10 |
Exhibit 99. 58
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| June 29, 2023 | |
| 3. | News Release |
| A news release was disseminated on June 30, 2023 via Cision. | |
| 4. | Summary of Material Change |
The Company announced that it has entered into an equity distribution agreement (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) to establish an at-the-market equity program (the “ATM Program”).
The Company may issue up to $15,000,000 of common shares of the Company (the “Offered Shares”) from treasury under the ATM Program. The Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. | |
| 5.1 | Full Description of Material Change |
The Company announced that it has entered into the Distribution Agreement with the Agent to establish the ATM Program.
The Company may issue up to $15,000,000 of Offered Shares from treasury under the ATM Program. The Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. |
| 2 |
Sales of Offered Shares, if any, will be made through the Agent in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions on the Canadian Securities Exchange (“CSE”) or any other applicable “marketplace” (as such term is defined in National Instrument 21-101 – Marketplace Operation) for the Offered Shares in Canada. The Company is not obligated to make any sales of Offered Shares under the Distribution Agreement. Unless earlier terminated by the Company or the Agent as permitted therein, the Distribution Agreement will terminate upon the date that the aggregate gross sales proceeds of the Offered Shares sold under the ATM Program reaches $15,000,000.
The Company will pay the Agent a commission of 2.0% of the gross offering proceeds from each sale of Offered Shares and has agreed to provide the Agent with customary indemnification and contribution rights. The Company will also reimburse the Agent for certain specified expenses in connection with the entering into and performance of the Distribution Agreement.
The ATM Program is being made pursuant to a prospectus supplement dated June 29, 2023 (the “Prospectus Supplement”) to the Company’s final short form base shelf prospectus dated May 2, 2023 (the “Base Prospectus”).
Copies of the Prospectus Supplement, Base Prospectus and Distribution Agreement are available under the Company’s profile on SEDAR at www.sedar.com. Alternatively, the Agent will send copies of the relevant documents to Canadian investors upon request by contacting the Agent at Research Capital Corporation, by mail at Research Capital Corporation, 1075 West Georgia Street, Suite 1920, Vancouver, British Columbia V6E 3C9, by email at schiu@researchcapital.com or by telephone at (778) 373-4088.
This report does not constitute an offer to sell or the solicitation of an offer to buy securities, nor will there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. The securities have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. | |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. | |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is:
Sam Sun, Chief Financial Officer (416) 494-9559 sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| July 6, 2023 |
| 3 |
Forward-Looking Information
This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements including statements with respect to the Offered Shares sold under the ATM Program; the use of proceeds from any such sale of Offered Shares; the use by the Company of the ATM Program; future development, production, cash flow and other anticipated or possible future developments of the Company’s business as well as those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, , which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.59
SolarBank Makes Strategic Investment in Canadian Solar Project Developer and Operator
This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated June 29, 2023 to its short form base shelf prospectus dated May 2, 2023.
Toronto, Ontario, July 10, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that it has acquired from existing limited partners an aggregate of 42,500 limited partnership units (the “Units”) of the Solar Flow-Through 2016-I Limited Partnership, a partnership that is part of the group of Solar Flow Through Funds (“SFF”).
Originally founded in 2011, SFF is an independent renewable and clean energy project developer and asset operator based in Canada. SFF is engaged in the development and operation of solar photovoltaic (PV) power generations to meet the demand for renewable energy in Canada. SFF is proposing to expand its business into development of solar power projects in the United Sates, battery storage and electric vehicle charging systems.
SolarBank has a long-term relationship with SFF and has acted as a development partner for several SFF solar power projects. Most recently, SolarBank submitted proposals on behalf of SFF to Ontario and SFF and its co-investors were awarded 60 MWh of Battery Energy Storage contracts (subject to satisfaction of certain conditions).
SFF is undertaking a transaction pursuant to which all of its existing limited partnerships will be consolidated into a single corporate entity (the “Corporate Consolidation”). This will provide a structure that will allow SFF to become a public corporation by obtaining a listing on a stock exchange, either by way of direct listing or business combination transaction with a publicly listed company. The completion of a go public transaction by SFF remains subject to conditions including the receipt of shareholder approval, stock exchange approval and other customary conditions.
The total purchase price for the Units is $2,465,000. The purchase price for the Units was based on an independent valuation report that was prepared for SFF in connection with the unitholder meetings to approve the Corporate Consolidation.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the completion of a go-public transaction by SFF; SFF’s future development plans; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.60
SolarBank
Receives Positive Interconnection Results on 7MW
Ground Mount Site (Hardie) in Upstate New York
● Permitting process has now commenced.
● Expected to operate as a community solar site, selling credits to subscribers.
● Eligible to participate in the NYSUN program to receive NYSERDA incentives.
Toronto, Ontario, July 19, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has received positive interconnection results via a completed Coordinated Electric System Interconnection Review (CESIR) on a 7MW DC ground-mount solar power project that is under development by the Company in upstate New York that is known as the Hardie Project (the “Project”).The Project is expected to be eligible for incentives under the New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program.
Now that the Company has received a positive interconnection determination, it will proceed with permitting the Project site. Following receipt of the necessary permits and financing, the Company intends to commence the construction of the Project.
Once completed, the Project will be operated as a community solar project. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
There are several risks associated with the development of the Project. The development of any project is subject to receipt of required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the reduction of carbon emissions; the receipt permits and financing to be able to construct the Project; and the receipt of incentives for the Project. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors”in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.61
SolarBank Awards Contract to Polar Racking for 10 MW New York Landfill Solar Projects
| ● | Polar Racking was selected to supply its CORE fixed tilt ground mount solar racking and ballasted foundations and complete a full mechanical installation of the solar projects. |
Toronto, Ontario, July 26, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has awarded a contract to Polar Racking, a leading North American supplier and manufacturer of solar mounting solutions, to supply its CORE fixed tilt ground mount solar mounting solution, and ballasted foundations to the Manlius and Geddes projects that are being developed by the Company. The Manlius project is being developed by the Company for Solar Advocate Development LLC and, subject to receipt of financing, the Company intends to own and operate the Geddes project.
The two solar projects totalling 10 megawatts (MW) DC are repurposing two closed landfills, addressing two critical challenges: the need for clean energy and the transformation of contaminated l and into valuable assets. Polar Racking was selected as the supplier and installer for these sites because of its innovative ballasted foundation product line, designed to securely anchor fixed tilt and tracker solar racking solutions, and their experience supplying landfill sites. Most recently, Polar Racking supplied ballasted foundations and racking for the 92.5 MW solar projects, Deerfoot and Barlow, located in the city Calgary, Alberta, Canada.
“We selected Polar Racking’s ground mount solar solution because of the innovative and proven engineering design that stands behind it,” says Andrew van Doorn, Chief Operating Officer of the Company. “Companies like Polar Racking are extending boundaries of where we can safely build large-scale solar projects, supporting our goal to drive the energy transition forward.”
“Polar Racking is thrilled to be supplying and constructing the two landfill solar projects in New York for a customer we’ve worked on over 20 projects with. We view this as a testament to our unwavering commitment to brownfield redevelopment and delivering top-quality solutions that meet the evolving needs of the solar industry,” stated Vishal Lala, Managing Partner of Polar Racking. “This recognition affirms our expertise and validates the trust our customers and partners place in us as we work together to drive forward innovation in solar racking and mounting solutions, while offering the highest levels of customer service.”
Polar Racking’s solar mounting solutions and ballasted foundations are renowned for their quick assembly, robustness, and adaptability to a varying terrain of solar projects. With a focus on innovation and engineering excellence, the company continuously strives to develop industry-leading solutions that optimize energy generation, streamline installation processes, and ensure long-term system reliability.
As the supplier of over 3 Gigawatts across North America with a future pipeline of 3.4 gigawatts (GW), Polar Racking reinforces its commitment to quality, innovation, and customer satisfaction.
There are several risks associated with the development of the projects disclosed in this press release. The development of any project is subject to receipt of required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About Polar Racking
Founded in 2009 with offices in Ontario, Alberta and the US, Polar Racking is a North American leader in PV mounting with a strong market share, specializing in commercial and utility-scale ground-mount, single-axis tracker, and carport solutions. With over 3 GW of PV mounting systems installed in North America, Polar Racking is focused on developing innovative racking solutions that enable its clients to build and own systems at the lowest installed cost per kWh. To learn more about Polar Racking, please visit: www.polarracking.com.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
Polar Racking
Janet Janzen
Email: Janet.janzen@oyaventures.com
Phone: 416-840-3358 x.131
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the details of and benefits from the contract with Polar Racking; the Company’s ownership of the Geddes project; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.62
SolarBank Awards Contract to Hewitt Young Electric for 3.7 MW Geddes Project
Toronto, Ontario, August 3, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has awarded a contract to Hewitt Young Electric, LLC to provide electrical subcontracting work for the Geddes project that is being developed by the Company. Subject to receipt of financing, the Company intends to own and operate the Geddes project.
The Geddes project which has a designed capacity of 3.7 megawatts (MW) DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. Hewitt Young Electric will, among other matters, supply and install the medium volage (MV), AC and DC systems for the Geddes project, and complete electrical inspection and testing.
Hewitt Young Electric was selected based on its experience operating in the local area. It started in 2003 and it is one of the largest electrical contracting companies in Rochester, New York. Hewitt Young Electric is a premier electrical solutions company specializing in industrial and commercial electrical work that provides superior quality electrical installations that exceed its customers’ schedules, budgets, and expectations.
There are several risks associated with the development of the project disclosed in this press release. The development of any project is subject to receipt of required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the details of and benefits from the contract with Hewitt Young Electric; the Company’s ownership of the Geddes project; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.63
SolarBank
Secures Funding to Advance the Development of 21MW
Community Solar Sites in Upstate New York
● Projects are construction ready
● Advance funding to be provided by a third party for procurement of key project components
●Expected to operate as community solar sites, selling credits to subscribers
This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated June 29, 2023 to its short form base shelf prospectus dated May 2, 2023.
Toronto, Ontario, August 21, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it is continuing to advance the development of the Company’s proposed 21 MW DC ground-mount solar power projects that are under development in upstate New York (the “Projects”). The Projects are known as SB-1, SB-2 and SB-3. SolarBank’s subsidiary, Abundant Solar Power Inc. (“ASP”) and an arm’s length third party (the “Lender”) have entered into a funding arrangement where the Lender will advance funds (the “Advances”) to be utilized solely as deposits/advance payments by the Company’s subsidiaries that currently own the Projects (the “Project Companies”) to vendors in furtherance of the development of the Projects. The total amount of the Advances has not been determined at this time but could be up to US$20 million.
Separately the Lender and the Company are negotiating the purchase of the Projects by the Lender and the Company thereafter continuing to build the Projects for the Lender to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. If the parties successfully negotiate a definitive purchase agreement and EPC agreement, the Advances will be applied to the consideration payable to the Company under such agreements. If negotiations are unsuccessful, the Advances must be repaid within 30 days of demand by the Lender. The Advances are secured against the assets of the Project Companies, and SolarBank and the Project Companies have provided guarantees for the obligations of ASP related to the Advances. The Advances bear interest at a rate of 9% per annum.
Once completed, the Projects will be operated as community solar projects. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner can earn credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home. The Projects are expected to be eligible for incentives under the New York State Energy Research and Development Authority (NYSERDA) NY-Sun Program.
There are several risks associated with the development of the Projects. The development of any project is subject to the continued availability of third-party financing arrangements for the project owner and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. If definitive agreements are not concluded for the purchase of the Project by the Lender then the Company will be required to repay the Advances within 30 days of demand. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the reduction of carbon emissions; the receipt of incentives for the Projects; the expected amount of the Advances; the conclusion of definitive agreements for the purchase of the Project by the Lender and an EPC agreement; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.64
SolarBank
Executes Lease on 7MW
Ground Mount Site in Upstate New York
| ● | Expected to operate as a community solar site, selling credits to subscribers. |
| ● | Eligible to participate in the NYSUN program to receive NYSERDA incentives. |
Toronto, Ontario, September 11, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that it has executed a lease agreement on a site in upstate New York. SolarBank intends to develop a 7MW DC ground-mount solar power project on the site (the “Project”). The Project is expected to be eligible for incentives under the New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program.
The Company has submitted its initial interconnection request for the Project and is awaiting the results of that process. Following receipt of interconnection approval, the Company will work to complete the permitting process and secure the necessary financing for the construction of the Project.
Once completed, the Project will be operated as a community solar project. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
There are several risks associated with the development of the Project. The development of any project is subject to receipt of interconnection approval, required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
The Company also announces that it has entered into an agreement with Think Ink Marketing Data & Email Services LLC (“Think Ink”) to provide public relations services in an effort to increase public awareness of the Company and its services and securities. Certain services to be provided by Think Ink are anticipated to include ‘investor relations activities’ under the policies of the Canadian Securities Exchange and applicable securities laws.
The agreement is for a 12 month term commencing September 11, 2023 with either party having the right to terminate upon 30 days written notice. The Company has budgeted up to US$250,000 for the marketing services of Think Ink, which include facilitating the creation and distribution of marketing materials, on-line banner and native ads, and social media investor marketing.
Think Ink is a California-based marketing firm established in 1991 that provides its customers with a complete range of marketing services that includes data appending, e-mail marketing and pay-per-click on-line banner/native ads and social media investor marketing. Think Ink helps its clients to reach a large network of potential investors. No stock options are being granted to Think Inc. under the terms of its engagement.
The contact information for Think Ink is Think Ink Marketing Data & Email Services LLC, 3308 W. Warner Ave., Santa Ana, California 92704; Phone: 888-808-2161; Email: info@thinkinkmarketing.com. Think Ink and its principals are arm’s length to the Company.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the reduction of carbon emissions; the receipt permits and financing to be able to construct the Project; and the receipt of incentives for the Project. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.65
MEMBERSHIP INTEREST PURCHASE AGREEMENT
By and Between
HONEYWELL
INTERNATIONAL INC.
(as Buyer)
and
ABUNDANT SOLAR POWER INC.
(as Seller)
Dated as of September 15, 2023
TABLE OF CONTENTS
| 1. | DEFINITIONS | 1 | |
| 1.1 | Certain Defined Terms | 1 | |
| 1.2 | Certain Interpretive Matters. | 9 | |
| 2. | ACQUISITION OF THE MEMBERSHIP INTERESTS, CLOSING, CLOSING DATE, CONSIDERATION AND OTHER CLOSING ITEMS | 9 | |
| 2.1 | Acquisition of Membership Interests. | 9 | |
| 2.2 | Purchase Price and Payment Terms. | 9 | |
| 2.3 | Security. | 9 | |
| 2.4 | Seller’s Deliverables. | 10 | |
| 2.5 | Buyer’s Deliverables. | 10 | |
| 3. | REPRESENTATIONS AND WARRANTIES OF SELLER | 11 | |
| 3.1 | Organization, Qualification and Status. | 11 | |
| 3.2 | Corporate Instruments and Records. | 11 | |
| 3.3 | Subsidiaries. | 11 | |
| 3.4 | Authorization; Valid and Binding Obligation. | 12 | |
| 3.5 | Membership Interests. | 12 | |
| 3.6 | No Violation. | 13 | |
| 3.7 | Financial Statements. | 13 | |
| 3.8 | Absence of Undisclosed and Contingent Liabilities. | 13 | |
| 3.9 | Absence of Certain Undertakings. | 14 | |
| 3.10 | Tax Matters. | 14 | |
| 3.11 | Litigation. | 16 | |
| 3.12 | Owned Real Estate. | 16 | |
| 3.13 | Real Property Agreements. | 16 | |
| 3.14 | Owned and Leased Tangible Personal Property. | 17 | |
| 3.15 | Project Contracts. | 17 | |
| 3.16 | Prepaid Items and Deposits. | 18 | |
| 3.17 | Personnel Matters. | 18 | |
| 3.18 | Termination of Business Relationships. | 19 | |
| 3.19 | Insurance | 19 | |
| 3.20 | Compliance With Laws and Applicable Orders. | 19 | |
| 3.21 | Governmental Approvals. | 19 | |
| 3.22 | Absence of Questionable Payments. | 20 | |
| 3.23 | Related Person Transactions. | 20 | |
| 3.24 | All Business Conducted by each Project Company/Sufficiency of Assets. | 20 | |
| 3.25 | Environmental Matters. | 20 | |
| 3.26 | Consents. | 21 | |
| 3.27 | Absence of Change. | 21 | |
| 3.28 | Limited Purpose Entity. | 22 | |
| 3.29 | No Broker. | 22 | |
| 3.30 | Construction Ready. | 22 | |
| 3.31 | Banks; Powers of Attorney. | 22 | |
| 3.32 | ITC Eligibility. | 22 | |
| 3.33 | Full Disclosure. | 22 | |
| - i - |
| - ii - |
EXHIBITS
| Exhibit A | Form of Assignment |
| Exhibit B | Construction Ready |
| Exhibit C | Form of Seller Release |
SCHEDULES
| - iii - |
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is made as of this 15th day of September, 2023, by and between HONEYWELL INTERNATIONAL INC., a Delaware corporation (“Buyer”) and ABUNDANT SOLAR POWER INC., a Delaware corporation (“Seller”) (Buyer and Seller are sometimes individually referred to as a “Party” and collectively referred to as the “Parties”).
RECITALS:
WHEREAS, Abundant Solar Power (SB14-4) LLC, Abundant Solar Power (SB13N) LLC and Abundant Solar Power (SB13W) LLC, each a New York limited liability company (each, individually, a “Project Company” and, collectively, the “Project Companies”), is each developing a community solar project with an expected total installed nameplate capacity of approximately 5 MW-AC to be constructed on a separate site located at Airport Road, Camillus, New York (each a “Project” and, collectively, the “Projects”), each currently leased from Buyer pursuant to a [REDACTED: Confidential and commercially sensitive information] (as amended, restated, or modified from time to time, each a “Lease” and, collectively, the “Leases”);
WHEREAS, Seller is the sole member and owner of all of the membership interests of each Project Company (collectively, the “Membership Interests”); and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all of the Membership Interests upon the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the premises and the mutual covenants and agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties hereto agree as follows:
| 1. | DEFINITIONS |
1.1 Certain Defined Terms.
In addition to terms otherwise defined in the body of this Agreement (evidenced by a capitalized first letter), the following terms when used in the Transaction Documents with initial letters capitalized have the meanings set forth below:
“Action” means any complaint, suit, proceeding, investigation, claim, counterclaim, litigation, arbitration, demand, assertion or other similar action adjudicated by or before a Governmental Authority.
“Affiliate” of a specified Person means any other Person which directly or indirectly, through one or more intermediates, (i) controls, is controlled by or is under common control with the Person specified, or (ii) owns or controls fifty percent (50%) or more of the outstanding voting securities of such Person. As used in this definition, each of the terms “control”, “controlled by” and “under common control with” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
| 1 |
“Applicable Order” means with respect to any Person, all judgments, injunctions, writs, decrees, rulings, assessments, orders, administrative decisions and arbitration awards of any Governmental Authority or arbitral body, in each case binding on such Person or on any property or asset of such Person.
“Assignment” means an Assignment and Transfer of Membership Interests, in the form of Exhibit A, a completed and executed copy of which is to be delivered by Seller to Buyer pursuant to Section 2.4.
“Books and Records” means all books, records, documents, files and papers created, controlled or maintained by each Project Company, whether in hard copy or electronic format.
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York, New York.
“Claim Notice” shall mean written notification of a Third Party Claim by an Indemnified Party to an Indemnifying Party pursuant to Section 10.5(a), enclosing a copy of all papers served, if any, and specifying the nature of and alleged basis for such Third Party Claim and, to the extent then feasible, the alleged amount or the estimated amount of such Third Party Claim.
“Closing” means the acquisition by Buyer of the Membership Interest per the terms and conditions of this Agreement.
“Closing Date” means the date of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended.
“Commercial Operation Date” has the meaning set forth in the Lease.
“Confidential Information” means any and all information, whether written or oral, concerning any Project Company, Seller, Buyer or any of their respective Affiliates, including with respect to any of their respective businesses, that is not already generally available to the public, except to the extent such information is (i) in the public domain through no fault of the Receiving Party or its Affiliates, directors, officers, employees, agents or representatives, (ii) is lawfully acquired by the Receiving Party or any of its Affiliates from a Person not known to the Receiving Party to be under an obligation to keep such information confidential, (iii) is independently developed by or for the Receiving Party or its Affiliates without the use of Confidential Information, or (iv) is in the Receiving Party’s lawful possession prior to receiving it from the Disclosing Party or its agents or representatives, as applicable.
“Construction Ready” has the meaning set forth in Exhibit B.
| 2 |
“Contract” means, with respect to any Person, any contract, agreement, lease, sublease, undertaking, understanding, obligation, indenture, mortgage, deed to secure debt, deed of trust or other instrument or document by which that Person, or any of its properties or assets, is bound, whether written or oral.
“Default” means (i) a breach of, default under or misrepresentation in or with respect to, any Contract or Governmental Approval, (ii) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of, default under or misrepresentation in or with respect to, any Contract or Governmental Approval, or (iii) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right to terminate, change the terms of or renegotiate, any Contract or Governmental Approval, or to accelerate, increase or impose any material Liability under any Contract or Governmental Approval.
“Encumbrances” means security interests, liens (statutory or otherwise), claims, charges, community property interests, mortgages, deeds to secure debt, deeds of trust, pledges, easements, encroachments, restrictions on use, rights-of-way, servitudes, leases, licenses, encroachments, rights of first refusal, purchase options, rights of first offer, conditional sales or other title retention agreements, covenants, hypothecations, restrictions, reservations, infringements, options, warrants, calls, charges of every kind, adverse rights, conditions or other similar restrictions (including restrictions on transfer) or other encumbrances of any nature whatsoever.
“Environmental Law” means any applicable federal, state, provincial or local Law, statute, ordinance, regulation, permit or valid and legally-binding order and Governmental Approval of any Governmental Authority relating to (a) the protection, preservation or restoration of the natural environment (including but not limited to air, soil, bedrock, surface water, groundwater, wetland and surface and subsurface land, including vapors and liquids in such lands, plant and animal life and any other natural resource) or (b) the exposure to, or the transportation, storage, handling, disposal or Release of Hazardous Substances or Regulated Substances. For the purposes of this definition, “Environmental Law” shall include, without limitation, the Resource Conservation and Recovery Act (42 U.S.C. §6901, et seq.), the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601, et seq.), the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act (49 U.S.C. §1801, et seq.), the Emergency Planning and Community Right to Know Act (42 U.S.C. §§ 11001 et seq.), the Hazardous and Solid Waste Amendments Act of 1984, the Toxic Substances Control Act (15 U.S.C. §2601, et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136, et seq.), the Clean Air Act (42 U.S.C. §7401, et seq.), the Federal Water Pollution Control Act (also known as the Clean Water Act) (33 U.S.C. §§ 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. §§ 300f et seq.), the Endangered Species Act (16 U.S.C. § 1531, et seq.), the National Environmental Policy Act (42 U.S.C. § 4321 et seq.), the Migratory Bird Treaty Act (16 U.S.C. §§ 703 et seq.), the Bald Eagle Protection Act (16 U.S.C. §§ 668 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. §§ 2701 et seq.), the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq. (to the extent it regulates exposure to or handling of Hazardous Substances) and any similar or analogous New York and local statutes or regulations and binding decisional Law of any Governmental Authority, as each of the foregoing may be amended or supplemented from time to time in the future.
| 3 |
“EPC Contract” means the Engineering, Procurement, and Construction Contract by and between each Project Company and the EPC Contractor.
“EPC Contractor” means the contractor under the EPC Contract.
“Finance Lease Obligation” means, at the time any determination is to be made, the amount of the liability in respect of a lease that would at that time be required to be accounted for as a financing or capital lease (and, for avoidance of doubt, not a straight-line or operating lease) on both the balance sheet and income statement for financial reporting purposes in accordance with GAAP as in effect prior to giving effect to the adoption of Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)” and ASU No. 2018-11 “Leases (Topic 842),”.
“Governmental Approvals” means any authorization, approval, consent, waiver, exception, variance, order, publication, license, filing, registration, ruling, permit, franchise, tariff, certification, exemption and other action, requirement by or with, and notice to and declarations of or with, any Governmental Authority that are required by any Law in connection with the development, financing, construction, ownership or operation of any Project including, without limitation, final land use, environmental and zoning permits and approvals from any local, county, state or federal governmental or quasi-governmental agency with jurisdiction over the construction and operation of any Project and necessary for the EPC Contractor or Project Company to obtain building and related ministerial and administrative permits to construct and operate a Project.
“Governmental Authority” means any supranational, national, federal, state or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, bureau, branch, instrumentality, commission, court, ministry or other similar body exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-Governmental Authority or self-regulatory body or stock exchange established by a Governmental Authority to perform any of such functions.
“Hazardous Substances” means any hazardous wastes, hazardous or extremely hazardous substances, hazardous materials, radioactive materials, special wastes, toxic substances, toxic chemicals or toxic pollutants defined in or listed under any Environmental Law, including, without limitation, any solid, gaseous or liquid wastes that are or have the characteristic of being hazardous, toxic, ignitable, reactive or corrosive pursuant to any Environmental Law, polychlorinated biphenyl compounds, per- and polyfluorinated alkyl substances, asbestos, and those elements or compounds which are contained in the list of hazardous substances adopted by the United States Environmental Protection Agency and petroleum products, including without limitation, gasoline, fuel oil, heating oil, motor oil and waste oil.
“Income Tax” means any federal, state, local or foreign income Tax or other Tax based upon, measured by, related to or calculated with respect to gross or net income, profits or receipts, including any interest, penalty or addition attributable to such Tax, whether disputed or not.
| 4 |
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for money borrowed; (b) all obligations of such Person evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (c) all obligations of such Person issued or assumed for deferred purchase price payments, conditional sale obligations or title retention agreements; (d) Finance Lease Obligations of such Person; (e) all obligations of such Person resulting from the settlement of disputes with former landlords; (f) all obligations of such Person for the reimbursement of any obligation on any letter of credit, banker’s acceptance, guarantees or similar credit transaction; (g) all obligations of such Person under interest rate or currency swap transactions; (h) all obligations of such Person arising from deferred compensation arrangements and all obligations under severance plans or arrangements, bonus plans or similar arrangements payable as a result of the consummation of the sale contemplated by this Agreement; (i) all guaranties of such Person in connection with any of the foregoing, whether such responsibility is direct or indirect, or as obligor, guarantor, surety or otherwise; (j) all obligations of such Person secured by an Encumbrance on any property or asset of such Person; and (m) all accrued principal, interest, fees, expenses and other amounts related to any of the foregoing, including prepayment premiums, penalties and breakage fees. For the avoidance of doubt, in the case of any Project Company, Indebtedness shall include all intercompany debt, including any obligations due to Seller or any of its Affiliates.
“Indemnity Notice” shall mean written notification of a claim for indemnity (which claim does not involve a Third Party Claim) by an Indemnified Party to an Indemnifying Party pursuant to Section 10.5(d), specifying the nature of and specific basis for such claim and, to the extent then feasible, the amount or the estimated amount of such claim.
“Intellectual Property” means the following intellectual property rights, both statutory and common law rights, if applicable: (a) copyrights, registrations and applications for registration thereof, (b) trademarks, service marks, trade names, slogans, domain names, logos, trade dress, and registrations and applications for registrations thereof, (c) patents, as well as any reissued and reexamined patents and extensions corresponding to the patents, and any patent applications, as well as any related continuation, continuation in part and divisional applications and patents issuing therefrom and (d) trade secrets and confidential information, including ideas, designs, concepts, compilations of information, methods, techniques, procedures, processes and other know-how, whether or not patentable.
“ITC” means the federal income tax credit available under Sections 38(b)(1), 46 and 48(a) of the Code, and any federal grants, credits or other tax incentives issued or arising in addition to or in lieu thereof.
“Knowledge” or “Known” with respect to a Party means (a) in the case of Seller, the extent of the actual and current knowledge, after reasonable inquiry, of the individuals listed in Schedule 1.1A as of the date of this Agreement (or in the case of such Persons, with respect to the officers’ certificates delivered pursuant to Section 8.4, the date of delivery of such certificates) and (b) in the case of Buyer, the extent of the actual and current knowledge, after reasonable inquiry, of the individuals listed in Schedule 1.1B as of the date of this Agreement.
“Law” means any law, statute, rule, regulation, ordinance, standard, code, order, judgment, decision, writ, injunction, decree, ruling, certificate of need, award or other governmental restriction issued or enforced by any Governmental Authority.
“Liability” means any direct or indirect, primary or secondary, liability (including strict liability under Environmental Laws or otherwise), Indebtedness, obligation, penalty, claim, deficiency, guaranty, or endorsement of or by any Person of any type, whether accrued, absolute, contingent, liquidated, unliquidated, matured, unmatured or otherwise.
| 5 |
“Losses” means any and all direct or indirect demands, claims, payments, obligations, recoveries, deficiencies, fines, penalties, interest, assessments, actions, causes of actions, suits, losses, damages, Liabilities, costs and expenses, whether accrued, absolute, contingent, known, unknown, threatened, or otherwise, and shall include (i) interest, penalties and reasonable attorney fees and expenses, (ii) attorneys’ fees and expenses associated with enforcing indemnification rights hereunder, and (iii) consultants’ and expert witnesses’ fees and other costs of defense, settlement or investigation, (iv) amounts paid in settlement, and (v) costs associated with bringing suit, including all court costs. “Losses”, other than those as a result of Third Party Claims, shall exclude incidential and consequential damages.
“Material Adverse Effect” means any change or event that is materially adverse to the business, assets, properties, or condition (financial or otherwise) of any Project Company, or a material impairment of the ability of any Project Company to develop, construct, own or operate any Project; provided, however, that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect: (a) any adverse change, event, development, or effect arising from or relating to (1) general business or economic conditions in the United States, except to the extent such conditions have a disproportionate impact on any Project Company, (2) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, except to the extent such conditions have a disproportionate impact on any Project Company, (3) effects of weather or meteorological events, (4) any change of Law, accounting standards, regulatory policy or industry standards after the date hereof, or (5) the taking of any action contemplated by this Agreement and the other agreements contemplated.
“Ordinary Course of Business” means the ordinary and usual course of day-to-day operations of the business of each Project Company and its Affiliates through the date hereof consistent with each Project Company’s and such Affiliates’ past practices or actions customarily taken by Persons that are in the business of developing solar projects.
“Permitted Encumbrances” means (a) any Encumbrance for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings (provided an appropriate reserve has been established therefore), or where the failure to pay would not have a Material Adverse Effect; (b) any Encumbrance incurred or deposits made in the Ordinary Course of Business not securing Indebtedness for borrowed money, including, without limitation, any Encumbrance (i) of a landlord, carrier, warehouseman, mechanic, materialman or any other statutory Encumbrance, in any case arising in respect of obligations that are not yet due and that is not resulting from a Default by any Project Company of any Contract or Governmental Approval or from a violation by any Project Company of any Law and (ii) in connection with workers’ compensation, unemployment insurance, other types of social security, or any other requirement of Law; (c) with respect to the Real Property, Encumbrances existing as of April 9, 2021 or otherwise caused by Buyer or an Affiliate; (d) Encumbrances that arise under zoning, subdivision, entitlement, and other land use Laws or regulations; (e) any rights of Buyer under the Leases or grantors, or other third party counterparties under and pursuant to the terms of any Real Property Agreements; or (f) liens created or arising pursuant to the terms and conditions of any Project Contract or Real Property Agreement.
| 6 |
“Person” means an individual, general or limited partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, estate, joint venture, firm, branch, registered office, Governmental Authority or any other entity.
“Project Site” means the Real Property upon which each Project is located or planned to be located, including related easements, licenses and similar rights.
“Property Tax” means any Tax resulting from and relating to the assessment of real or personal property by any Governmental Authority with respect to any Project or Project Site.
“Regulated Substances” include any substance, material or waste, regardless of its form or nature, the presence, use, manufacturing, processing, extraction, sale, generation, treatment, transportation, storage, recycling, disposal, release, discharge, labeling or other management or use of which is regulated by any applicable Environmental Law, including without limitation any Hazardous Substance, or any other substance, material or waste, regardless of its form or nature, defined as a “solid waste”, “industrial waste”, “residual waste”, “municipal waste”, “mixed waste”, “pollutant” or “contaminant” under any Environmental Law.
“Related Person” means any (i) employee, consultant, independent contractor, officer, director, manager, shareholder, partner or member of the Seller or any Affiliate of Seller or any Project Company (each an “Interested Party”), (ii) with respect to any Interested Party that is a person, any immediate family member or former spouse of any such Interested Party (each an “Interested Family Member”) or (iii) any Affiliate of Seller, any Project Company, any Interested Party or any Interested Family Member.
“Release” means any spilling, leaking, discharging, pumping, pouring, emitting, emptying, injecting, leaching, dumping, disposing into or through the environment (including ambient air, surface water, groundwater, surface land and subsurface land) of any Hazardous Substance or Regulated Substance, including the abandonment or discarding of Hazardous Substances or Regulated Substances in barrels, drums, tanks, containers or other receptacles.
“Tangible Personal Property” means all of the machinery, tools, hardware, software programs, firmware, equipment, vehicles, furniture, fixtures, background technology and other tangible property in any form whatsoever and any other information and know-how with respect to the Project owned or leased by any Project Company all being freely removable by each Project Company.
“Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing authority, including, without limitation: (i) taxes or other charges on or with respect to income, franchises, or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; (ii) taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; (iii) license, registration and documentation fees; and (iv) customs’ duties, tariffs and similar charges.
| 7 |
“Tax Returns” means all income, excise, sales, unemployment, real property, personal property, employer and employee withholding, social security, occupation, franchise and other Tax returns or Tax reports required by Law.
“Third Party” means a Person that is not included among the Seller Indemnified Parties or the Buyer Indemnified Parties.
“Third Party Claim” means a Buyer Third Party Claim or a Seller Third Party Claim.
“Transfer Taxes” means all transfer, documentary, recording, sales, use, stamp, registration, value added, conveyance and other similar Taxes and fees (including any penalties and interest, but excluding, for the avoidance of doubt, any income or gains Taxes or similar Taxes) applicable to, or resulting from, the transactions contemplated by this Agreement.
“Utility” means National Grid, and its successors and assignees.
For purposes of this Agreement, the following terms not defined above are defined in the following Sections of this Agreement.
| Term | Section | |
| Agreement | Preamble | |
| Real Property Agreements | 3.13(a) | |
| Applied For Permits | 3.21 | |
| Balance Sheet | 3.7(a) | |
| Balance Sheet Date | 3.7(a) | |
| Buyer | Preamble | |
| Buyer Basket | 10.2 | |
| Buyer Documents | 4.2 | |
| Buyer Indemnified Parties | 10.2 | |
| Buyer Losses | 10.2 | |
| Buyer Third Party Claim | 10.3 | |
| Disclosing Party | 8.1(a) | |
| Existing Permits | 3.21 | |
| Indemnified Party | 10.5 | |
| Indemnifying Party | 10.5 | |
| Membership Interests | Recitals | |
| Notice | 10.0 | |
| Notice Period | 10.5(a) | |
| Parties | Recitals | |
| Pre-Closing Tax Period | 6.2 | |
| Project(s) | Recitals | |
| Project Company/ies | Recitals | |
| Project Contracts | 3.15(a) | |
| Purchase Price | 2.3 | |
| Real Property | 3.13 | |
| Real Property Agreements | 3.13 | |
| Received Funds | 10.7(c) | |
| Receiving Party | 8.1(a) | |
| Security | 2.3 | |
| Securities Act | 3.5(b) | |
| Securities Laws | 4.4 | |
| Seller | Preamble | |
| Seller Approvals | 3.6 | |
| Seller Basket | 10.3 | |
| Seller Cap | 10.3 | |
| Seller Documents | 3.4 | |
| Seller Indemnified Parties | 10.3 | |
| Seller Losses | 10.3 | |
| Seller Third Party Claim | 10.2 | |
| Third Party Claim | 10.2 |
| 8 |
1.2 Certain Interpretive Matters. In this Agreement, unless the context otherwise requires:
| (a) | the singular number includes the plural number and vice versa; |
| (b) | reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; |
| (c) | reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time until the date hereof in accordance with the terms thereof and, if applicable, the terms hereof; |
| (d) | any accounting term used and not otherwise defined in this Agreement has the meaning assigned to such term in accordance with GAAP; |
| (e) | “hereunder”, “hereof”, and “hereto” are references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof; |
| (f) | “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term; and |
| (g) | reference to any law (including statutes and ordinances) means such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder. |
| 2. | ACQUISITION OF THE MEMBERSHIP INTERESTS, CLOSING, CLOSING DATE, CONSIDERATION AND OTHER CLOSING ITEMS |
2.1 Acquisition of Membership Interests.
Upon exchange of executed documentation by facsimile, pdf or other electronic means, and/or by overnight delivery services, as the Parties have agreed, and the payment of the Purchase Price by the Buyer, Seller will automatically sell, assign, transfer and deliver to Buyer, and Buyer will automatically purchase and accept, the Membership Interests, free and clear of any claim, suit, proceeding, call, commitment, voting trust, proxy, or Encumbrance, pursuant to the terms and conditions of this Agreement. Any Transfer Taxes with respect to such Assignment and conveyance and the transactions contemplated by this Agreement shall be shared equally between Buyer and Seller. Buyer shall prepare all necessary documentation and Tax Returns with respect to such Transfer Taxes, and Seller shall (i) cooperate in connection with the preparation of such documentation and Tax Returns and (ii) file any such Tax Returns, as may be reasonably requested by Buyer.
2.2 Purchase Price and Payment Terms. As consideration for the purchase of the Membership Interests, Buyer shall pay to Seller an amount equal to [REDACTED: Dollar value] (the “Purchase Price”) comtemporanously herewith; subject, however, to a credit up to the amount thereof to the extent of the indebtedness owing by Seller to Buyer pursuant to a certain Optional Advance Demand Promissory Grid Note dated August 18, 2023 (the “Promissory Grid Note”).
2.3 Security. Seller has provided certain deposits, security payments, prepayments, letters of credit, guarantees, sureties, bonds, escrowed funds, and similar security in support of power purchase, interconnection, procurement, construction and operating expenditures and obligations required for any Project to be Construction Ready (individually and collectively, “Security”) as set forth on Schedule 2.3.
| (a) | To the extent cash Security, such shall be treated as an asset of the subject Project Company included in the Purchase Price. |
| (b) | To the extent not cash Security, it shall be either (i) be replaced by Security provided by Buyer to the extent permitted by the secured party or (ii) if it cannot be replaced or released, Buyer shall indemnify Seller for any claims on such Security that arise after the Closing. |
| 9 |
2.4 Seller’s Deliverables. On or prior to the date hereof (the Closing Date) Seller has delivered to (or caused to be delivered to) Buyer:
| (a) | A good standing certificate and certified charter documents of each Project Company and Seller, each of recent date, from the Secretary of State of the State of New York; |
| (b) | Copies of the resolutions of the member or managers of Seller, certified by the secretary of Seller, as to the authorization of this Agreement, the Seller Documents and all of the transactions contemplated hereby, and the operating agreement of each Project Company, certified by an appropriate officer of each Project Company; |
| (c) | Copies of, all the Seller Approvals required under this Agreement, by any Governmental Authority, pursuant to any Contract or required by any Law in order to execute and deliver this Agreement and to perform its obligations hereunder, including the consents and approvals set forth on Schedule 3.6, which Seller Approvals and consents do not contain any conditions that could adversely and materially affect Buyer or any Project Company and all waiting periods required by any Law shall have expired; |
| (d) | A notarized Assignment with respect to the Membership Interests in the form of Exhibit A; |
| (e) | All instruments and documents necessary to evidence the release of all Encumbrances, including payoff letters and appropriate UCC financing statement amendments (termination statements); |
| (f) | A copy of (i) all Project Contracts, and (ii) executed versions of each Assignment and Assumption Agreement or Bill of Sale required to assign all of the rights of Seller and its Affiliates in the Projects, and required to assign all Project Contracts to the respective Project Company to the extent not a party thereto; |
| (g) | A non-foreign affidavit, sworn under penalty of perjury and in form and substance required under the Treasury Regulations issued pursuant to Code Section 1445 stating that Seller is not a “foreign person” as defined in Code Section 1445; and |
| (h) | A release regarding each Project Company substantially in the form attached as Exhibit C. |
2.5 Buyer’s Deliverables. Upon execution of this Agreement, Buyer shall deliver (or cause to be delivered) to Seller:
| (a) | the Purchase Price; and |
| (b) | documentation terminating the obligations of (i) Seller under the Promissory Grid Note and related Collateral Pledge Agreement and (ii) SolarBank Corporation under the Guaranty Agreement dated August 18, 2023 associated with the Promissory Grid Note. |
| 10 |
| 3. | REPRESENTATIONS AND WARRANTIES OF SELLER |
Except as qualified by the disclosures set forth on the applicable cross-referenced Schedules to this Agreement, Seller hereby represents and warrants to Buyer as follows:
3.1 Organization, Qualification and Status.
| (a) | Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and use its assets and to carry on its business as presently conducted. |
| (b) | Each Project Company is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of New York. Each Project Company has full limited liability company power and authority to own, lease and use its assets and to carry on its business as presently conducted. Each Project Company has at all times conducted business only in the State of New York. |
| (c) | Each Project Company was formed by Seller exclusively for purposes of developing the respective Projects and has not engaged in any activities unrelated thereto. Each Project Company has not operated under any fictitious name. Each Project Company has not changed its name or been the surviving entity of a merger, consolidation or other reorganization. |
3.2 Corporate Instruments and Records.
Copies of the articles of organization and operating agreement (certified by the Secretary or other appropriate officer) of each Project Company have been furnished by Seller to Buyer and are true, correct and complete and each includes all amendments thereto.
3.3 Subsidiaries.
No Project Company controls, nor has it ever controlled, directly or indirectly, and does not have, and has never had, any direct or indirect equity participation or ownership interest in, any corporation, partnership, limited liability company, trust or other Person, and no Project Company has ever been, directly or indirectly, a participant in any joint venture.
| 11 |
3.4 Authorization; Valid and Binding Obligation.
This Agreement and each other agreement, document, assignment, instrument or certificate contemplated by this Agreement and to be executed and/or delivered by Seller, in connection with the transactions contemplated hereby (collectively, the “Seller Documents”), and the consummation of each of the transactions contemplated hereby and thereby, have been duly authorized and approved by all required corporate action on the part of Seller. Seller has the requisite corporate power and authority to execute and deliver this Agreement and each of the Seller Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Seller Documents to which Seller is a party shall duly and validly executed and delivered by Seller. Assuming the due authorization, execution and delivery of this Agreement and each Seller Document by each party thereto other than Seller or each Project Company, this Agreement constitutes and each Seller Document constitutes the valid and legally binding obligation of Seller, enforceable against Seller in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors’ rights and remedies generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
3.5 Membership Interests.
| (a) | The Membership Interests comprise all of the membership interests and equity interests of each Project Company. The Membership Interests are owned beneficially and of record by Seller and have been duly authorized and validly issued and are fully paid and nonassessable. Seller owns and holds, beneficially and of record, good and marketable title to the entire right, title and interest in the Membership Interests, free and clear of any claim, suit, proceeding, call commitment, voting trust, proxy, restriction, limitation or Encumbrance. No Person other than Seller is or has ever been a member of any Project Company or owned any Membership Interests in any Project Company. |
| (b) | Except for this Agreement, no option, warrant, call, conversion right, preemptive right or commitment of any kind, whether direct, contingent, or otherwise, exists that obligates or would obligate Seller or any Project Company to issue any ownership interests in such Project Company or that obligates Seller or such Project Company to sell, transfer, issue or otherwise dispose of any Membership Interest or other interest in such Project Company. There are no restrictions upon the voting or transfer of any ownership interests in any Project Company or any of its assets, properties or business, except for any restrictions imposed by the Securities Act of 1933, as amended (the “Securities Act”) or any other applicable Law or any other restrictions applicable to Buyer. There is no outstanding stock appreciation, phantom stock, profit participation, equity participation or similar right that is binding on any Project Company. There are no bonds, debentures, notes or other Indebtedness of any Project Company having the right to vote on or consent to (or, convertible into, or exchangeable for, securities having the right to vote on or consent to) any matters on which members or managers of such Project Company may vote. |
| 12 |
3.6 No Violation.
Neither the execution and delivery of this Agreement or the other Seller Documents by Seller nor the consummation of the transactions contemplated hereby or thereby by Seller, nor compliance with the terms hereof by Seller, will (a) violate, conflict with or result in a breach of any of the terms, conditions or provisions of the certificate of formation or operating agreement of the Seller or the articles of organization or operating agreement of any Project Company, (b) violate, conflict with or result in a Default under any Contract or Governmental Approval to which Seller or any Project Company is a party or by which it is bound or to which Seller’s or any Project Company’s respective properties or assets are subject, (c) result in the creation of any Encumbrance (other than Permitted Encumbrances) on the assets of any Project Company or the Membership interests of any Project Company, (d) violate or conflict with any Law to which Seller or any Project Company, or any of the assets of Seller or any Project Company or any of the Membership Interests are subject, nor (e) except as set forth on Schedule 3.6 (the “Seller Approvals”), require any Project Company or Seller to give notice to, or obtain an authorization, approval, order, license, franchise, declaration or consent of, or make a filing with, any Governmental Authority or any other Person, other than those previously given, made or obtained.
3.7 Financial Statements.
| (a) | Schedule 3.7 contains an accurate and complete list of each Project Company’s material assets and other rights and interests, other than Project Contracts and Existing Permits, as well as existing Liabilities as of December 31, 2022, which is referred to in this Agreement as the “Balance Sheet” and “Balance Sheet Date”, which are consistent in all material respects with the Books and Records of each Project Company |
| (b) | All Books and Records of each Project Company are accurate and complete in all material respects and are maintained in accordance with good business practice and all applicable Laws. |
| (c) | Neither Seller nor any Project Company has received, or otherwise had or obtained knowledge of, any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting practices, procedures, methodologies or methods of each Project Company, including any complaint, allegation, assertion or claim that each Project Company has engaged in questionable or fraudulent accounting practices. |
3.8 Absence of Undisclosed and Contingent Liabilities.
Except for the transactions contemplated hereby, no Project Company has any material Liabilities of any nature (whether secured or unsecured, accrued, absolute or contingent, unliquidated or otherwise and whether known or unknown or due or to become due) as of the date hereof other than (a) under the Project Contracts, (b) Liabilities disclosed or reserved against in the Balance Sheet and (c) Liabilities arising in the Ordinary Course of Business after the Balance Sheet Date and similar in nature to those disclosed in or reserved against in the Balance Sheet (none of which, either singly or in the aggregate, constitutes a material Liability that arises outside the Ordinary Course of Business).
| 13 |
3.9 Absence of Certain Undertakings.
Except for the transactions contemplated hereby, since the Balance Sheet Date, each Project Company has conducted its business only in the Ordinary Course of Business and there has not been any event, change, occurrence or circumstance that, individually or in the aggregate with any such events, changes, occurrences or circumstances, has had a Material Adverse Effect. Without limiting the generality of the foregoing, since the Balance Sheet Date, except as arising under the Project Contracts and except for the transactions contemplated by this Agreement:
| (a) | There has not been any material damage, destruction or loss, whether or not covered by insurance, with respect to the property and assets of any Project Company; |
| (b) | No Project Company has issued, created, incurred, assumed, guaranteed, become surety or contingent obligor for or assumed or endorsed or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any obligation of any other Person or any Indebtedness; |
| (c) | No assets of any Project Company are or have been pledged, hypothecated, delivered for safekeeping, subjected to a security interest or other Encumbrance or otherwise provided in any way as security for payment or performance of any obligation of any other Person or any Indebtedness; |
| (d) | No Project Company has agreed, committed, arranged or entered into any understanding to do anything set forth in this Section 3.9. |
3.10 Tax Matters.
| (a) | (i) All Tax Returns which are or have been required to be filed by each Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income or payments on or prior to the date hereof (including extensions thereof) have been timely filed, all such Tax Returns being true, correct and complete in all material respects, (ii) all Taxes (whether or not shown on any Tax Return) which are or have become due and payable to all taxing authorities have been paid in full, (iii) to the extent material, all withholdings of Taxes required to be made by each Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income or payments have been made and have either been paid to the appropriate governmental agency or set aside in appropriate accounts for such purpose (and all filings required with respect thereto, including IRS Forms W-2 and 1099, have been made), and (iv) all applicable Laws and agreements with respect to the filing of Tax Returns and the payment of Taxes by each Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income or payments have been otherwise satisfied in all material respects. No elections to extend the time for filing a Tax Return by any Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income or payments have been made. |
| 14 |
| (b) | All Tax Returns that are required to be filed on or before the Closing Date by each Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income or payments have been or will be timely and properly filed, and all such Tax Returns are or will be true and correct and complete in all respects. There have been no Taxes due and payable (whether or not shown on any Tax Return) with respect to any Project Company and its assets, income or operations on or before the Closing Date. |
| (c) | The federal income Tax Returns of Seller or any other Person on whose Tax Return any of the income, gain, deductions or losses attributable to each Project Company or its activities are reflected have not been audited by the Internal Revenue Service. There are no Encumbrances (other than Permitted Encumbrances) for Taxes on the assets of any Project Company or the Membership Interests. None of the assets of any Project Company are treated as owned by any other person under Code Section 168. There are no powers of attorney currently outstanding with respect to any Tax matter relating to any Project Company or its assets or operations. |
| (d) | There are no unassessed Tax deficiencies proposed or, to Seller’s Knowledge, threatened against any Project Company or with respect to its right to conduct business, or with respect to any of its assets, activities, transactions, income or payments, nor are there any agreements, waivers, or other arrangements providing for extension of time with respect to the assessment or collection of any Tax against any Project Company or with respect to its right to conduct business, or with respect to any of its assets, activities, transactions, income or payments or any Actions, suits, proceedings, investigations or claims now pending against any Project Company or with respect to its right to conduct business, or with respect to any of its assets, activities, transactions, income or payments with respect to any Tax, or any matter under discussion with any federal, state, local, or foreign authority relating to any Taxes. |
| (e) | No Project Company is a party to, or bound by, nor does it have any obligation under, any Tax sharing, Tax indemnity or similar agreement. |
| (f) | (i)
Each Project Company is, and at all times during its existence has been, properly treated as a “disregarded entity” for
Federal Tax purposes and for state and local income Tax purposes. For all other purposes relating to Taxes, each Project Company is
and at all times during its existence has been properly treated as a taxpayer, subject to and liable for all other Taxes imposed
with respect to its right to conduct business, or with respect to any of its assets, activities, transactions, income or
payments. (ii) Seller is, and at all times while any Project Company has owned the Project, been properly treated as a partnership for Federal Tax and state and local income Tax purposes. |
| 15 |
3.11 Litigation.
| (a) | There are no Actions pending or, to Seller’s Knowledge, threatened, against or involving any Project Company, any property or asset of any Project Company or the Membership Interests. |
| (b) | There are no Actions pending or, to Seller’s Knowledge, threatened against or involving Seller or any property or asset of Seller, that question or impact the validity or enforceability of this Agreement or any Seller Document, or that, if resolved unfavorably, would prohibit the consummation of the transactions contemplated by this Agreement or any Seller Document, or would adversely affect the ability of Seller to perform its obligations under this Agreement, or would result in a Material Adverse Effect. |
| (c) | There are no Applicable Orders that apply to any Project Company, Seller or any of its Affiliates or any of their respective properties or assets that would prohibit the consummation of the transactions contemplated by this Agreement or any Seller Document, or would adversely affect the ability of Seller to perform its obligations under this Agreement, or would result in a Material Adverse Effect. |
3.12 Owned Real Estate.
No Project Company owns or has owned any real property.
3.13 Real Property Agreements.
| (a) | Schedule 3.13 sets forth all of the deeds, leases, subleases, easements, rights-of-way, setback agreements and other agreements, and any memoranda thereof (including the Leases, each a “Real Property Agreement”, and collectively, the “Real Property Agreements”) to which any Project Company is a party or which have been entered into by Seller or any of its Affiliates in connection with any Project. With respect to each Real Property Agreement listed on Schedule 3.13 and the rights and interests of each Project Company described therein (the “Real Property”), except as listed on Schedule 3.13: |
| (1) | a true, correct and complete copy of each Real Property Agreement has been delivered to Buyer; |
| (2) | each Real Property Agreement is in full force and effect, and is a legal, valid and binding agreement enforceable against the respective Project Company and, to Seller’s Knowledge, against each other party thereto; |
| 16 |
| (3) | following the consummation of the transactions contemplated hereby, each Real Property Agreement will continue to be in full force and effect on identical terms and will continue to be a legal, valid, binding agreement enforceable against each Project Company and, to Seller’s Knowledge, against any other party thereto; |
| (4) | no Project Company, nor, to the Knowledge of Seller, any other party to the Real Property Agreements, is in Default under any Real Property Agreements; |
| (5) | no party to the Real Property Agreements has repudiated any provision thereof; |
| (6) | there are no disputes, oral or written agreements, or, to the Knowledge of Seller, rights or claims asserted by third parties that are not the Buyer (other Permitted Encumbrances) with respect to the Real Property. |
| (b) | Except as listed in Schedule 3.13(b), the Real Property comprises all of the real property used in or necessary for the development and construction of the the respective Project, solely as the respective Project is intended to be developed and constructed pursuant to the documents delivered to Buyer as of the date of this Agreement, and no Project Company requires any easements or rights in real property other than the Real Property in order to interconnect the respective Project to the electric distribution system of the Utility. |
3.14 Owned and Leased Tangible Personal Property.
No Project Company owns any Tangible Personal Property other than as set forth on the Balance Sheet.
3.15 Project Contracts.
| (a) | Schedule 3.15(a) lists all material contracts and agreements to which each Project Company is a party, by which each Project Company or any of its properties or assets are bound or subject or which have been entered into by Seller or any of its Affiliates in connection with the respective Project (“Project Contracts”). True, correct and complete copies of the written Project Contracts and true, correct and complete written descriptions of the oral Project Contracts have heretofore been delivered by Seller to Buyer. |
| 17 |
| (b) | Except as set forth on Schedule 3.15(b): (i) all Project Contracts (A) have been duly and validly executed by (1) each Project Company (or have been duly and properly assigned to such Project Company) or (2), with respect to Project Contracts entered into by Seller or any of its Affiliates, Seller and such Affiliates, and (3), to Seller’s Knowledge, all other parties thereto, and (ii) are in full force and effect as of the date hereof; (ii) no event has occurred relating to any Project Company, Seller or any such Affiliate or to any third party which in any such case, after notice or the passage of time, would constitute a Default under any such Project Contract; (iii) each Project Contract is a legal, valid, binding and enforceable obligation of (1) any Project Company, or (2), with respect to Project Contracts entered into by Seller or any of its Affiliates, Seller and such Affiliates, and (3) to Seller’s Knowledge, all other parties thereto, in accordance with their respective terms ,except in each case as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors’ rights and remedies generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). |
| (c) | Except as set forth on Schedule 3.15(c), no Project Company owns or use or has ever owned or used any Intellectual Property to conduct its business. Neither Seller nor any Project Company has received from any Third Party a written claim that any Project Company is infringing in any material respect on the Intellectual Property of such Third Party. To Seller’s Knowledge, there are no pending or threatened written claims against such Intellectual Property, including, but not limited to, claims made or threatened by patent assertion entities or Intellectual Property holding companies, nor are there outstanding offers of licenses from such assertion entities or holding companies to any Project Company for such Intellectual Property. To Seller’s Knowledge, the licensor of any such Intellectual Property that is licensed to any Project Company is the true owner of the licensed Intellectual Property or is otherwise authorized by the true owner to make the license |
3.16 Prepaid Items and Deposits.
Schedule 3.16 describes all of the prepaid items and deposits of each Project Company. There are no prepaid items, deposits or other credit support arrangement and assurance that any Project Company is currently required by any Law (including any Governmental Approval) or any Project Contract to provide.
3.17 Personnel Matters.
No Project Company has ever had any employees. Neither Seller nor its Affiliates, including each Project Company, is a party to or is bound by any collective bargaining agreement with respect to any employees assigned to the the respective Project and, to Seller’s Knowledge, no union organizing efforts are currently underway with respect to any such employees and no Action has been commenced by any union as to the representation of such employees. There are no strikes, slowdowns, work stoppages, other job actions, lockouts, arbitrations, grievances or other labor disputes involving the Projects pending by employees of Seller or, to Seller’s Knowledge, threatened by employees of Seller.
| 18 |
3.18 Termination of Business Relationships.
No Project Company’s suppliers or service providers which cannot be replaced on commercially reasonable terms has evidenced to Seller or such Project Company their intent not to continuing supplying or providing service to such Project Company.
3.19 Insurance.
Schedule 3.19 is a list of all insurance policies and all fidelity bonds held by or applicable to each Project Company setting forth, in respect of each such policy, the policy name, policy number, carrier, term, type and amount of coverage and annual premium. All premiums due and payable for the insurance in Schedule 3.19 have been duly paid, and such policies or extensions or renewals thereof in such amounts are outstanding and duly in force without. Seller has delivered or made available to Buyer true, correct and complete copies of all of the material insurance policies, binders or bonds maintained by each Project Company. Except as set forth on Schedule 3.19, and excluding insurance policies that have expired and been replaced in the Ordinary Course of Business, no insurance policy has been cancelled within the last two (2) years and, to the Knowledge of Seller, no threat has been made to cancel any insurance policy of any Project Company during such period.
3.20 Compliance With Laws and Applicable Orders.
Except as set forth on Schedule 3.20: (a) Seller, and to Seller’s Knowledge, each Project Company has been in compliance in all material respects with all Laws and Applicable Orders applicable to Company, Projects, or the Membership Interests, other than violations of Law that could not result in such Project Company or Buyer incurring a Material Adverse Effect; and (b) neither Seller nor any Project Company has received any written notice that alleges any non-compliance with any such Law or Applicable Order (nor, to Seller’s Knowledge, is there any basis therefor).
3.21 Governmental Approvals.
Except as set forth on Schedule 3.21, each Project Company has all Governmental Approvals and has made or conducted all filings, applications, registrations and consultations with all Governmental Authorities that are currently necessary for it to own or lease its properties or to develop, own, operate or maintain the respective Project, and to Seller’s Knowledge there are no events or circumstances that would prevent Buyer or any Project Company from obtaining the remaining Governmental Approvals necessary to continue development, ownership, operation and maintenance of the respective Project after the Closing, all of which are identified on Schedule 3.21. Schedule 3.21 sets forth a true, complete and correct list of all Governmental Approvals from all Governmental Authorities (a) held or used by each Project Company, (b) applied for by each Project Company or Seller or any of their respective Affiliates, (c) that to Seller’s Knowledge are required to be obtained prior to commencement of construction of the respective Project, and (d) that to Seller’s Knowledge are required to be obtained prior to commencement of commercial operation of the respective Project. True and complete copies of the items listed in clause (a) above have heretofore been made available by Seller to Buyer (the “Existing Permits”). Except as set forth on Schedule 3.21, all Existing Permits are in full force and effect and include all Governmental Approvals currently necessary to own, develop, operate or maintain each Project Company and the respective Project in compliance with, and without giving rise to Liability under, Environmental Laws. Schedule 3.21 provides a description of the status of the items listed in clauses (b), (c) and (d) above (“Applied For Permits”), which shall be updated by Seller as such status changes. Except as set forth in Schedule 3.21, (a) to Seller’s Knowledge, no event has occurred that would cause any Existing Permit not to be in full force and effect, (b) each Project Company (or, to Seller’s Knowledge, the other designated permittee or licensee thereunder) is in compliance in all material respects with the terms, provisions and conditions of each Existing Permit, (c) there are no outstanding violations, notices of noncompliance therewith, judgments, consent decrees, orders or Actions affecting any of the Existing Permits, (d) to Seller’s Knowledge, no condition exists and no event has occurred which (whether with or without notice, lapse of time or the occurrence of any other event) would lawfully permit the suspension or revocation of any of the Existing Permits, other than by expiration of the term set forth therein, and (e) Seller has no Knowledge of any material non-compliance or alleged material non-compliance of Seller or any Project Company with any applicable requirements of filings, applications or registrations with respect to any Applied For Permit and no condition exists and no event has occurred that would, to Seller’s Knowledge, lawfully warrant denial of applications to issue or grant any of the Applied For Permits.
| 19 |
3.22 Absence of Questionable Payments.
Neither Seller, any Affiliate, nor any Project Company nor, to Seller’s Knowledge, their respective officers, directors, members, managers, agents or employees purporting to act on their behalf has authorized or made or agreed or offered to make, any payment or promise to pay any money or anything of value, or offer any use of such Project Company’s assets (a) to or on behalf of an official of any Governmental Authority, or political party or official thereof or candidate for political office (domestic or foreign), or other Person, to or for any purpose except as permitted by applicable Law, (b) for any of the purposes described in Section 162(c) of the U.S. Internal Revenue Code, or (c) for establishment or maintenance of any concealed fund or concealed bank account. Neither Seller nor any Project Company (nor, to the Knowledge of Seller, has any director, manager, officer, employee or other Person associated with or acting on behalf of any Company or Seller) directly or indirectly (i) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services (1) to obtain favorable treatment in securing business for any Project Company, (2) to pay for favorable treatment for business secured by each Project Company or any part of the respective Project, (3) to obtain special concessions or for special concessions already obtained, for or in respect of the respective Project or any Project Company, or (4) in violation of any Law with respect to the respective Project, or (ii) established or maintained any fund or asset with respect to any Project Company that has not been recorded in the Books and Records. In the conduct of its business, neither Seller nor any Project Company (nor, to the Knowledge of Seller, has any other Person) directly or indirectly, on behalf of or with respect to such Project Company, engaged in any transaction or made or received any payment which was not properly recorded in the Books and Records, including any unrecorded or misrecorded payment to any insurance agent, adjuster or other Person which reasonably could be construed to be an unlawful kickback, referral fee or similar payment.
3.23 Related Person Transactions.
No Related Person (i) owes any amount to any Project Company, nor does any Project Company owe any amount to, nor has any Project Company committed to make any loan or extend or guarantee credit to or for the benefit of, any Related Person, (ii) is involved in any business arrangement or other relationship with such Project Company (whether written or oral), except for Related Persons in their capacities as managers or members of such Project Company or as service providers or suppliers to such Project Company pursuant to an arm’s length transaction, (iii) owns any property or right, tangible or intangible, that is used by any Project Company, or (iv) has any claim or cause of action against any Project Company.
3.24 All Business Conducted by each Project Company/Sufficiency of Assets.
The business and operations of Seller and its Affiliates associated with each Project have been conducted exclusively and entirely by each Project Company, and not by any other business entity whether or not affiliated with any such Project Company. All assets, Tangible Personal Property, Real Property Agreements, Project Contracts and other agreements used, entered into or in effect in connection with the respective Project are held by each Project Company.
3.25 Environmental Matters.
| (a) | Copies Provided. Seller has furnished or made available to Buyer copies of all environmental site assessments, studies, plans, reports, audits, analyses, test results, correspondence with any Governmental Authorities or third parties, and related documentation in its or any of its Affiliates’ possession or control and relating to the suitability of the Project Site for development as a solar energy generation facility, the potential impact of development, construction and operation of the respective Project on environmental and natural resources, actual or potential Liabilities of any Project Company or the respective Project under Environmental Laws, and compliance of each Project Company and the respective Project with Environmental Laws. Other than with respect to the genuineness and completeness of the materials made available to Buyer hereunder, Seller makes no representations or warranties as to such environmental site assessments, resource assessments, studies, plans, analyses, test results, reports, audits, correspondence and related documentation prepared by Persons other than Seller or any Seller Affiliate, or the truth or accuracy of their contents or conclusions. |
| 20 |
| (b) | Compliance. Except as set forth on Schedule 3.25(b), to Seller’s Knowledge, each Project Company has complied with, and each Project Company and the respective Project are in compliance in all material respects with all applicable Environmental Laws. |
| (c) | No Claims. Except as set forth on Schedule 3.25(c), there are no pending or, to Seller’s Knowledge, threatened, claims, demands, notices, Actions or investigations against any Project Company by any Governmental Authority or third party (i) under any Environmental Law, (ii) alleging nuisance or damage to human health or the environment, or (iii) in connection with any Governmental Approvals issued or applied for pursuant to any Environmental Law in connection with the respective Project, which seek or may result in their non-issuance, reversal, rescission, termination, material modification or suspension, and no Project Company nor anyone acting on its behalf has received notice of any violation with respect to any such Governmental Approval, except for any such violation which has been fully resolved. |
| (d) | No Releases/USTs. Except as set forth on Schedule 3.25(d), (i) no Project Company has Released in, on, under, or about any Project Site, or transported thereto or therefrom, any Hazardous Substances or Regulated Substances that could reasonably be expected to subject each Project Company to Liability under any Environmental Law; (ii) to the Knowledge of Seller, no such Releases have occurred in, on, under or about each Project Site as a result of the activities of third parties, and (iii) to the Knowledge of Seller, there are no aboveground or underground tanks, whether operative or temporarily or permanently abandoned or closed, located on each Project Site. |
3.26 Consents.
Schedule 3.26 sets forth a true, correct and complete list of all third parties whose consent or approval is required by Company or Seller in connection with consummation of the sale contemplated by this Agreement, including any consent or approval required with respect to a change in ownership or control of any Project Company under any Contract, and the matter or Contract to which such consent relates.
3.27 Absence of Change.
Since the Balance Sheet Date (a) no Material Adverse Effect has occurred and (b) each Project Company has been operated in the Ordinary Course of Business.
| 21 |
3.28 Limited Purpose Entity.
The assets constituting the respective Projects are the only assets owned by the respective Project Company. The sole business of each Project Company is, and has been during its entire existence, the development, planning and permitting of the respective Project.
3.29 No Broker.
No Person is acting or has acted for Seller or any Project Company or any of their respective Affiliates as broker, finder or agent in connection with the transactions contemplated by this Agreement.
3.30 Construction Ready.
Except as set forth on Schedule 3.30, the respective Projects are Construction Ready.
3.31 Banks; Powers of Attorney.
There are no banks or financial institutions in which a Project Company has accounts or safe deposit boxes. No Person holds a power of attorney to act on behalf of any Project Company.
3.32 ITC Eligibility.
(a) No federal production tax credit, ITC or grant in lieu of any such credit pursuant to Section 45 or Section 48 of the Code, or any similar tax credit or grant in lieu of tax credits under state or local Law, has been claimed or applied for by the Seller or any of its Affiliates (including Company at any time prior to Closing) with respect to the respective Project.
(b) No proceeds of any issue of state or local government obligations have been used to provide financing for the respective Project the interest on which is exempt from Tax under Code Section 103.
(c) None of the assets of the Project Company are treated as leased to a tax-exempt entity (within the meaning of Section 168(h)(2) of the Code).
3.33 Full Disclosure.
No representation or warranty by Seller in this Agreement or any Schedule or Exhibit to this Agreement, or any statement, list or certificate furnished or to be furnished by Seller or any Project Company pursuant to this Agreement, or in connection with these transactions, contains or will contain any untrue statement of a material fact, or omits to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. Seller has no Knowledge of any information or other fact that is or could reasonably be expected to cause a Material Adverse Effect that has not been set forth in this Agreement or the Schedules to this Agreement.
| 22 |
| 4. | REPRESENTATIONS AND WARRANTIES OF BUYER |
Buyer represents and warrants to Seller and covenants and agrees with Seller as follows:
4.1 Organization and Qualification.
Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to carry on its business as presently conducted.
4.2 Authorization; Valid and Binding Obligation.
This Agreement and each other agreement, document, assignment, instrument or certificate contemplated by this Agreement and to be executed and/or delivered by Buyer, in connection with the transactions contemplated hereby (collectively, the “Buyer Documents”), and the consummation of each of the transactions contemplated hereby and thereby, have been duly authorized and approved by all required action on the part of Buyer. Buyer has the requisite corporate power and authority to execute and deliver this Agreement and each of the Buyer Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Buyer Documents to which Buyer is a party shall be at or prior to the Closing, duly and validly executed and delivered by Buyer. Assuming the due authorization, execution and delivery of this Agreement and each Buyer Document by each party thereto other than Buyer, this Agreement constitutes and each Buyer Document constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors’ rights and remedies generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
4.3 No Violation.
Neither the execution and delivery of this Agreement or the other Buyer Documents by Buyer nor the consummation of the transactions contemplated hereby or thereby by Buyer, nor compliance with the terms hereof by Buyer, will (a) violate, conflict with or result in a breach of any of the terms, conditions or provisions of the certificate of formation or operating agreement of the Buyer, (b) violate, conflict with or result in a Default under any Contract or Governmental Approval to which Buyer is bound, (c) violate or conflict with any Law to which Buyer is subject, nor (d) require Buyer to give notice to, or obtain an authorization, approval, order, license, franchise, declaration or consent of, or make a filing with, any Governmental Authority or any other Person, other than those previously given, made or obtained.
4.4 No Broker.
No Person is acting or has acted for Buyer or any Affiliate of Buyer as broker, finder or agent in connection with the transactions contemplated by this Agreement.
| 23 |
4.5 Accredited Investor/Investment.
Buyer is an “accredited investor” within the meaning of Regulation D under the Securities Act, and the rules and regulations promulgated thereunder. Buyer acknowledges that none of the Membership Interests has been, or are contemplated to be, registered under any federal, state or local or international securities Laws (collectively, “Securities Laws”), and may not be resold unless permitted under applicable exemptions contained in the Securities Laws or upon satisfaction of the registration or qualification requirements of the Securities Laws. Buyer acknowledges and agrees that it must bear the economic risk of its purchase of the Membership Interests under this Agreement for an indefinite period of time because the Membership Interests have not been registered or qualified under the Securities Laws, and, therefore, cannot be sold unless subsequently registered or exemptions from registration or qualification are available. Buyer is not acquiring the Membership Interests with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act. Buyer, together with its stockholders, directors and executive officers and advisors, is familiar with investments of the nature of the Membership Interests, understands that these investments involve substantial risks, has adequately investigated any Project, and has substantial knowledge and experience in financial and business matters, including, without limitation, energy power (including solar energy) production projects, such that it is capable of evaluating, and has evaluated, the merits and risks inherent in entering into the sale contemplated under this Agreement, and is able to bear the economic risks of such investment for an indefinite period.
4.6 Acknowledgement and Confirmations.
The Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its participation in the transactions contemplated by this Agreement and is able to bear the economic risk associated with the purchase of the Membership Interests (including, indirectly through the purchase of the Membership Interests, the assets, properties, liabilities, condition, operations and prospects of the Project Companies). The Buyer has conducted to its satisfaction its own independent review and analysis of, and based thereon has formed an independent judgment concerning, the transactions contemplated by this Agreement, the assets, properties, liabilities, condition, operations and prospects of the business of the Project Companies and the Membership Interests. In entering into this Agreement, the Buyer has relied solely upon its own review and analysis and the specific representations and warranties of the Seller expressly set forth in Article 3 and not on any representations, warranties, statements or omissions by any Person other than the Seller, or by the Seller other than its specific representations and warranties expressly set forth in Article 3. The Buyer acknowledges and confirms that, except for the representations and warranties expressly set forth in Article 3, none of the Seller, its Affiliates or any of their respective Related Persons have made, or shall be deemed to have made, and the Buyer has not relied on, is not relying on and hereby disclaims, any other representation or warranty, express or implied, at law or in equity, in respect of the Membership Interests or the assets and properties of the Project Companies.
| 5. | CONSENTS AND GOVERNMENTAL FILINGS |
Seller has obtained all Seller Approvals necessary or appropriate for the consummation by Seller of the sale contemplated hereunder. Seller has prepared and filed with the appropriate Governmental Authority any documents or other information required in connection therewith, copies of whichhave been provided to Buyer in form and substance reasonably satisfactory to Buyer.
| 24 |
| 6. | TAX MATTERS |
6.1 Tax Periods Ending on or Before the Closing Date.
Seller will prepare or cause to be prepared in a complete and accurate manner and file or cause to be filed on a timely basis all Tax Returns for each Project Company or with respect to its right to conduct business or with respect to any of its assets, activities, transactions, income and payments for all periods ending on or prior to the Closing Date and will pay or cause to be paid all Taxes shown due on such Tax Returns. Seller will permit Buyer and its agents to review and comment on each such Tax Return described in the preceding sentence prior to filing and will make such revisions to such Tax Returns as are reasonably requested by Buyer.
6.2 Tax Periods Beginning Before and Ending After the Closing Date.
Buyer will prepare or cause to be prepared and file or cause to be filed any Tax Returns for each Project Company for Tax periods that begin before the Closing Date and end after the Closing Date and will pay all Taxes shown as due on such Tax Returns. Buyer will permit Seller to review and comment on each such Tax Return described in the preceding sentence prior to filing and will make such revisions to such Tax Returns as are reasonably requested by Seller. Seller will pay to Buyer within fifteen (15) calendar days after the date on which Buyer pays the Taxes shown due on the Tax Returns an amount equal to the portion of such payment that is attributable to Taxes for the portion of such Taxable period ending on the Closing Date (the “Pre-Closing Tax Period”). For purposes of this Article 10, in the case of any Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) the Closing Date, the portion of such Tax that relates to the Pre-Closing Tax Period will (a) in the case of any Taxes other than Income Taxes, be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction the numerator of which is the number of calendar days in the Taxable period ending on the Closing Date and the denominator of which is the number of calendar days in the entire Taxable period, and (b) in the case of any Income Tax, be deemed equal to the amount that would be payable if the relevant Taxable period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations will be made in a manner consistent with prior practice of each Project Company or as agreed by the Parties.
6.3 Refunds and Tax Benefits; Amended Tax Returns.
Except to the extent attributable to losses or expenses incurred by Buyer after the Closing Date that are carried back or otherwise give rise to such Tax refunds (which shall inure to Buyer’s benefit), any Tax refunds that are received by Buyer or any Project Company and any amounts credited against Tax to which Buyer or any Project Company become entitled, that relate to Tax periods or portions thereof ending on or before the Closing Date will be for the account of Seller, and Buyer will pay over to Seller any such refund or the amount of any such credit within fifteen (15) calendar days after receipt or entitlement thereto; provided, however, that Buyer shall be entitled to any refund of Taxes of any Project Company due after the Closing Date and paid by Buyer. Without limiting the generality of the foregoing, this Section 10.3 will apply to any sales tax rebates and refunds, Property Tax exemption and credits or reductions in Property Taxes attributable to a retroactive reduction in assessment rate or assessment base. Except for amended Tax Returns or Actions for Tax refunds attributable solely to losses or expenditures incurred by Buyer after the Closing Date, no amended Tax Return or Action for Tax refund may be filed for any Tax Returns of each Project Company for a Tax period ending on or before the Closing Date or for a Tax period including a Pre-Closing Tax Period without the advance written consent of Seller, which shall not be unreasonably withheld.
6.4 Cooperation on Tax Matters.
The Parties will cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the preparation and filing of Tax Returns pursuant to this Article 10 and any audit, litigation or other Action with respect to Taxes, at the sole cost and expense of the requesting Party (unless the contesting or defending Party is entitled to indemnification therefor pursuant to the terms hereof). Such cooperation will include the retention and (upon the other Party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other Action and making employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Parties agree (to the extent such Books and Records are within their possession) (a) to retain all Books and Records with respect to Tax matters pertinent to each Project relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (b) to give the other Party reasonable written notice prior to transferring, destroying or discarding any such Books and Records and, if the Buyer so requests, Seller will allow Buyer to take possession of such Books and Records.
| 25 |
The Parties further agree, upon request, to use reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including without limitation with respect to the sale contemplated by this Agreement).
| 7. | EXPENSES |
| (a) | Except for any Project Company’s, Seller’s and their Affiliates’ costs and expenses which Buyer has expressly agreed to pay hereunder (including pursuant to Section 7(b)), Seller shall pay all fees and expenses incurred by it or any Project Company (in the case of any Project Company, up to and including the Closing Date but not thereafter) in connection with the transactions provided for hereunder, including the fees and expenses of Seller’s and any Project Company’s counsel and accountants (in the case of any Project Company, up to and including the Closing Date but not thereafter); and Buyer shall pay all expenses incurred by it in connection with the transactions provided for hereunder, including the fees and expenses of its counsel and accountants. |
| (b) | Buyer will bear all costs and expenses related to each Project Company and the Projects after the Closing Date. |
| 8. | CONFIDENTIALITY; NEWS RELEASES |
8.1 Confidentiality.
| (a) | Definitions. Each of Seller and Buyer (the “Receiving Party”) agrees to exercise all reasonable efforts, consistent with the efforts it uses to protect its own proprietary or confidential information, to, and to cause its respective Affiliates, directors, officers, members, managers, employees, agents and representatives to, (i) hold in strict confidence, (ii) not disclose to any third party without the consent of the Disclosing Party or, with respect to the terms of this Agreement, the consent of both Seller and Buyer, and (iii) not use for any purpose other than as contemplated by this Agreement, any Confidential Information obtained, directly or indirectly, from the other Party (the “Disclosing Party”) pursuant to, or in contemplation of entering into, this Agreement, or the terms of this Agreement. For purposes of this Agreement, the contents of this Agreement shall be deemed Confidential Information of each Party and shall not be disclosed without the other Party’s consent, except as otherwise provided herein. |
| (b) | Allowed Disclosures. Notwithstanding the foregoing, the Receiving Party may disclose Confidential Information (i) as may be required, or is reasonably believed to be required, by any Law, Applicable Order, Governmental Authority, or by the listing requirements of the stock exchange on which Receiving Party or any of its Affiliates is listed, provided, however, that Receiving Party first shall make good faith efforts to advise Disclosing Party of the same as soon as reasonably practicable and if a copy of this Agreement is required to be filed the Receiving Party shall consult with the Disclosing Party regarding redactions for confidentiality purposes; or (ii) as the Receiving Party deems necessary and desirable to disclose in any Action related to this Agreement. The Receiving Party shall promptly notify the Disclosing Party if it determines that a disclosure may be required, or is reasonably believed to be required, by any Law, Applicable Order or Governmental Authority so that the Disclosing Party may seek to obtain, with reasonable assistance from the Receiving Party, a protective order or other confidentiality protections with respect thereto. |
| 26 |
| (c) | Additional Exceptions. Notwithstanding the foregoing, the provisions of this Article 8 shall not apply to the disclosure by Buyer or any of its Affilaites regarding Confidential Information of any Project Company (including as it relates to this Agreement). |
| (d) | Survival. The restrictions regarding the disclosure or use of Confidential Information in this Section 8.1 shall remain in effect for a period of three (3) years beginning on the date hereof, provided, however, that with respect to Confidential Information that constitutes trade secrets, such restrictions shall apply for the life of the trade secret. |
No notices to third parties or any publicity, including press releases, concerning any of the transactions provided for herein shall be made by Seller unless approved in writing by Buyer; provided, however, (i) Seller may may issue or make any press release, public announcement, or statement required by applicable Law or judicial proceeding, Applicable Order, or by the listing requirements of the stock exchange on which Seller or any of its Affiliates is listed, provided, however, that Seller first shall make good faith efforts to advise Buyer of the same as soon as reasonably practicable, and (ii) Seller may provide reasonable public notification that the transactions contemplated by this Agreement have been consummated for marketing purposes without divulging the Purchase Price. Notices to third parties or any publicity, including press releases, concerning any of the transactions provided for herein may be made by Buyer with the approval of or coordination with Seller, such approval not to be unreasonable withheld or delayed.
| 9. | NOTICES |
Any notice, request, demand or other communication given by any Party under this Agreement (each a “notice”) shall be in writing, may be given by a Party or its legal counsel, and shall be deemed to be duly given (a) when personally delivered, or (b) upon delivery by United States Express Mail or similar overnight courier service which provides evidence of delivery, or (c) when five (5) calendar days have elapsed after its transmittal by registered or certified mail, postage prepaid, return receipt requested, addressed to the Party to whom directed at that Party’s address as it appears below or another address of which that Party has given notice, or (d) when delivered by electronic mail if a copy thereof is also delivered in person or by overnight courier. Notices of address change shall be effective only upon receipt notwithstanding the provisions of the foregoing sentence.
Notice to Buyer (or each Project Company post-Closing) shall be sufficient if given to:
Honeywell International, Inc.
855 South Mint Street
Charlotte, NC 28204
Attn: Anne Madden and Jake Wasserman
Email: [REDACTED: email address]
| 27 |
with a copy (which shall not constitute notice) to:
Barclay Damon LLP
125 East Jefferson Street
Syracuse, New York 13202
Attn: Brenda D. Colella, Esq.
Email: [REDACTED: email address]
Notice to Seller shall be sufficient, if given to:
Abundant Solar Power Inc.
700 West Metro Park Rochester,
New York 14623-2678
Attn: Andrew van Doorn
Email: [REDACTED: email address]
| 10. | INDEMNIFICATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES |
10.1 Exclusivity.
To the extent permitted by Law and except as otherwise provided in this Agreement, from and after the Closing, the rights and remedies of the Buyer Indemnified Parties under this Article 10 for indemnification in respect of any Buyer Losses are exclusive and in lieu of any and all other rights and remedies for money damages that the Buyer Indemnified Parties may have against Seller under this Agreement or under applicable Law with respect to any Buyer Losses, whether at law or in equity. To the extent permitted by Law, from and after the Closing, the rights and remedies of the Seller Indemnified Parties under this Article 10 for indemnification in respect of any Seller Losses are exclusive and in lieu of any and all other rights and remedies for money damages that the Seller Indemnified Parties may have against Buyer under this Agreement or under applicable Law with respect to any Seller Losses, whether at law or in equity. This Article 10 shall not apply to, and the Parties shall have all rights and remedies under this Agreement and applicable Law with respect to, claims, whether at law or equity, for fraud or intentional misconduct of a Party hereto. This Article 10 shall not limit or restrict the availability of specific performance or other injunctive or equitable relief to the Buyer Indemnified Parties or the Seller Indemnified Parties, to the extent that such specific performance or other relief would otherwise be available to such Person. Neither the Buyer Indemnified Parties nor the Seller Indemnified Parties may bring any claim against Seller or Buyer, respectively, with respect to this Agreement, whether in tort, contract or otherwise, except in accordance with the provisions of this Article 10. Accordingly, each of the Parties expressly waives and releases any remedy, liability and any rights it may have against the other Party pursuant to law or equity other than the remedies, liabilities and rights expressly provided or permitted under this Article 10. Furthermore, each Party covenants not to sue, assert any arbitration claim or otherwise threaten any claim against the other Party that includes any remedy, liability or right waived by the preceding. The Parties agree that, to the extent required by applicable Law to be effective, the agreements, waivers and releases contained in this Section 10.1 are conspicuous.
| 28 |
10.2 Indemnity by Seller.
Seller shall defend and hold harmless Buyer and its Affiliates (including each Project Company post-Closing), and their respective directors, managers, officers, stockholders, members, employees, agents, representatives, successors and assigns (collectively, the “Buyer Indemnified Parties”) against any and all Losses, on an after tax basis, which may be incurred by, imposed upon, or asserted against, any Buyer Indemnified Party (collectively, “Buyer Losses”) by reason or on account of (a) any breach or inaccuracy of the representations by or warranties made by Seller in this Agreement or any Seller Document as of the date hereof or the Closing Date by Seller; (b) any breach, nonperformance or violation of any covenant, agreement or other obligation of Seller set forth in this Agreement or any Seller Document; (c) any settlement, suit, action, claim or proceeding of a Third Party relating to Seller that arises out of or relates to the foregoing or to the negligence of Seller (a “Seller Third Party Claim”); or (d) (e) any Taxes of any kind of Seller and any Taxes of any Project Company for any Tax period (or portion thereof) ending on or prior to the Closing Date and for the Pre-Closing Tax Period, in each case asserted prior to the expiration of the relevant survival period set forth in Section 10.4.
No Buyer Indemnified Party may bring a Buyer Claim until the aggregate amount of all Buyer Claims exceeds $125,000 (the “Buyer Basket”), after which the Buyer Indemnified Party shall be entitled to indemnification for all such Buyer Losses beginning at the first dollar. Notwithstanding the foregoing, the Buyer Basket shall not be applicable to any claims made by the Buyer Indemnified Parties with respect to Sections 3.1 (Organization, Qualification and Status), 3.2 (Corporate Instruments and Records), 3.4 (Authorization; Valid and Binding Obligation), 3.5 (Membership Interests), 3.10 (Tax Matters), 3.22 (Absence of Questionable Payments), 3.24 (All Business Conducted by each Project Company/Sufficiency of Assets), or 3.29 (No Broker), or to any Seller Third Party Claim, and the Buyer Indemnified Parties shall be entitled to indemnification for all such Buyer Losses beginning at the first dollar.
10.3 Indemnity by Buyer.
Buyer shall defend and hold harmless Seller and its Affiliates (including each Project Company pre-Closing), and their respective directors, managers, officers, stockholders, members, employees, agents, representatives, successors and assigns (collectively, the “Seller Indemnified Parties”) against any and all Losses, on an after tax basis, which may be incurred by, imposed upon, or asserted against, any Seller Indemnified Party (collectively, “Seller Losses”) by reason or on account of (a) any breach or inaccuracy of the representations by or warranties made by Buyer in this Agreement or any Buyer Document as of the date hereof or the Closing Date by Buyer; (b) any breach, nonperformance or violation of any covenant, agreement or other obligation of Buyer set forth in this Agreement or any Buyer Document; (c) any settlement, suit, action, claim or proceeding of a Third Party relating to Buyer that arises out of or relates to the foregoing or to the negligence of Buyer (a “Buyer Third Party Claim”); (d) the operations of each Project Company (and its successors) and the Projects from and after the Closing; or (e) any Taxes of any kind of Buyer and any Taxes of any Project Company for any Tax period ending after the Closing Date and for the Post-Closing Tax Period, in each case asserted prior to the expiration of the relevant survival period set forth in Section 10.4.
| 29 |
The aggregate damages to which the Seller Indemnified Parties will be entitled for all Seller Claims shall be limited to the total amount of the Purchase Price paid to Seller (the “Seller Cap”). No Seller Indemnified Party may bring a Seller Claim until the aggregate amount of all Seller Claims exceeds $125,000 (the “Seller Basket”), after which the Seller Indemnified Party shall be entitled to indemnification for all such Seller Losses beginning at the first dollar. Notwithstanding the foregoing, the Seller Cap and the Seller Basket shall not be applicable to any claims made by the Seller Indemnified Parties with respect to Sections 4.1 (Organization, Qualification and Status), 4.2 (Authorization; Valid and Binding Obligation) or 4.3 (No Broker), or to any Buyer Third Party Claim, and the Seller Indemnified Parties shall be entitled to indemnification for all such Seller Losses beginning at the first dollar.
10.4 Survival.
All representations and warranties contained in or made pursuant to this Agreement or in any agreement, certificate, document or statement delivered pursuant hereto shall survive the Closing until 11:59:59 p.m. (eastern prevailing time) on the date which is eighteen (18) months after the Closing Date; provided, however, that, notwithstanding the foregoing, (a) the representations and warranties of Seller set forth in Sections 3.1 (Organization, Qualification and Status), 3.2 (Corporate Instruments and Records), 3.4 (Authorization; Valid and Binding Obligation), 3.5 (Membership Interests) and 3.29 (No Broker), and of Buyer set forth in Sections 4.1 (Organization, Qualification and Status), 4.2 (Authorization; Valid and Binding Obligation) and 4.3 (No Broker) shall survive the Closing forever, (b) the representations and warranties of Seller set forth in Sections 3.10 (Tax Matters) and 3.13(a)(5) (Transfer Taxes) shall survive the Closing for the applicable Tax statute of limitations and any extensions or waivers thereof, and (c) the representations and warranties of Seller set forth in Section 3.25 (Environmental Matters) shall survive the Closing for the later of the applicable statute of limitations or the final unappealable resolution of any claim. Notwithstanding the foregoing, any claims arising in favor of a Seller Indemnified Party pursuant to Section 10.3(d) and Section 10.3(e) shall survive the Closing forever. The termination of any representation and warranty, however, shall not affect any claim for breaches of representation or warranties if written notice thereof is given to the breaching Party or Parties on or prior to such termination date nor shall any representation or warranty terminate or expire solely for the purpose of preserving the validity of any Action during the pendency of any Action brought in respect of such representation and warranty prior to its termination or expiration.
Notwithstanding anything to the contrary contained in this Agreement, Buyer agrees that Seller is not making any representation or warranty whatsoever, express or implied, except those representations and warranties expressly contained in this Agreement, and in any certificate delivered by Seller at Closing. Notwithstanding anything to the contrary contained in this Agreement, Seller agrees that Buyer is making no representation or warranty whatsoever, express or implied, except those representations and warranties contained expressly contained in this Agreement, and in any certificate delivered by Buyer at Closing.
| 30 |
10.5 Indemnification Procedures.
Any Party making a claim for indemnification under this Article 10 (the “Indemnified Party”) shall notify the Party or Parties from whom it is seeking indemnification under this Agreement (the “Indemnifying Party”) of the claim in writing promptly after discovering the claim or receiving written notice of a claim against it (if by a third party), describing the claim, the amount thereof (if known and quantifiable), and the basis thereof. The obligations and liabilities of the Indemnifying Party with respect to claims resulting from the assertion of liability by any third party shall be subject to the following terms and conditions:
| (a) | In the event of any Third Party Claim, the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party after the Indemnified Party has actual notice of the Third Party Claim. The failure by any Indemnified Party to provide the Indemnifying Party with the Claim Notice required by the preceding sentence shall not impair the Indemnified Party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been thereby materially prejudiced in the defense of the applicable Third Party Claim. The Indemnifying Party shall notify the Indemnified Party within thirty (30) calendar days of receipt of the Claim Notice (“Notice Period”) whether the Indemnifying Party desires, at the sole cost and expense of the Indemnifying Party, to defend the Indemnified Party against such Third Party Claim. |
| (b) | If the Indemnifying Party notifies the Indemnified Party within the Notice Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 10.5, then the Indemnifying Party shall have the right to defend, at its sole cost and expense, and, except as provided in the following sentence, through counsel of its choice reasonably acceptable to the Indemnified Party such Third Party Claim by all appropriate proceedings, which proceedings shall be diligently defended by the Indemnifying Party to a final conclusion or shall be settled at the discretion of the Indemnifying Party (with the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld), so long as the Indemnified Party is fully released with respect to such Third Party Claim. If there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the reasonable judgment of the Indemnified Party for the same counsel to represent both the Indemnified Party and the Indemnifying Party and the Indemnifying Party does not provide separate counsel reasonably acceptable to the Indemnified Party, then the Indemnified Party shall be entitled to retain its own counsel, at the expense of the Indemnifying Party to the extent necessary to adequately address the conflict of interest. Assumption by the Indemnifying Party of the defense of this Third Party Claim will not constitute an admission by the Indemnifying Party that the claim or litigation is one for which the Indemnifying Party is required to indemnify the Indemnifying Party under this Article 10. The Indemnifying Party shall have full control of such defense and proceedings; provided, however, that the Indemnified Party may at the sole cost and expense of the Indemnifying Party, file during the Notice Period any motion, answer, or other pleadings that the Indemnified Party may deem necessary or appropriate to protect its interests; and provided further, however, that if requested by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate in the judgment of the Indemnified Party and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim or any cross-complaint against any Person (other than the Indemnified Party). The Indemnified Party may, at its sole cost and expense, participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 10.5(b). |
| 31 |
| (c) | If (i) the Indemnifying Party fails to notify the Indemnified Party within the Notice Period that the Indemnifying Party desires to defend the Indemnified Party pursuant to Section 10.5(a), or (ii) the Indemnifying Party gives such notice but fails to defend the Third Party Claim actively and diligently, or (iii) the Indemnifying Party does not provide the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party has the financial resources to defend against the Third Party Claim and to fulfill its obligations hereunder, or (iv) the Third Party Claim seeks an injunction or other equitable relief against or materially affecting the Indemnified Party, then the Indemnified Party will have the right (but not the obligation) to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be vigorously defended by the Indemnified Party or will be settled at the discretion of the Indemnified Party (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith). The Indemnifying Party shall reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and shall remain responsible for any and all Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or caused by the Third Party Claim to the fullest extent provided in this Article 10. The Indemnified Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and relating to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnifying Party or any of its Affiliates). The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 10.5(c), but the Indemnifying Party will bear its own costs and expenses with respect to such participation. Regardless of whether the Indemnifying Party defends a Third Party Claim on behalf of the Indemnified Party or participates in the defense thereof, the Indemnified Party and the Indemnifying Party shall reasonably cooperate with each other in all material respects in connection with the defense for such Third Party Claim. Each Party shall furnish such information regarding itself and the Third Party Claim as the Party defending the Third Party Claim may reasonably request in writing and as shall be reasonably required in connection with the defense thereof. No Third Party Claim may be settled by the Indemnified Party without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld), unless such settlement provides a release of the Indemnifying Party for such claim. |
| (d) | In the event any Indemnified Party should have a claim for Losses against any Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from the Indemnified Party, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party after the Indemnified Party has actual notice of such claim. The failure by any Indemnified Party to give the notice referred to in the preceding sentence shall not impair such Party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been irreparably prejudiced in the defense of such claim thereby. The Indemnifying Party and the Indemnified Party agree to proceed in good faith to negotiate a resolution of any dispute relating to such a claim for Losses within sixty (60) calendar days following receipt of any Indemnity Notice. If any such claim is not resolved within the foregoing period, the Indemnified Party may pursue any remedies available at law or in equity, notwithstanding the waiver of such remedies pursuant to Section 10.1. |
| (e) | Any estimated amount of a claim submitted in a Claim Notice or any Indemnity Notice shall not be conclusive of the final amount of such claim. |
| (f) | In connection with each Third Party Claim, the Indemnifying Party shall be obligated to provide only one counsel to all Indemnified Parties. |
| (g) | No right of subrogation shall accrue hereunder to any insurer or other party. There shall be no third party beneficiaries of any provisions of this Article 10 other than the Indemnified Parties. |
| 32 |
10.6 Indemnification Payments.
An Indemnifying Party shall pay to the Indemnified Party the full amount of any and all Losses (other than Losses resulting from a Third Party Claim) for which it is required to indemnify the Indemnified Party under this Article 10, within thirty (30) days after its receipt of notice thereof from the Indemnified Party; and the full amount of any and all Losses resulting from a Third Party Claim for which it is required to indemnify the Indemnified Party under this Article 10, within ten (10) days after final settlement or adjudication thereof; and in each case, thereafter the amount of any such Losses shall bear interest at the rate of interest equal to the lesser of (i) the rate publicly announced in New York, New York from time to time by the Wall Street Journal as the prime rate, plus five percent (5%) per annum, or (ii) the maximum rate permitted by law.
10.7 Other Provisions.
| (a) | (i) Seller shall not have any right of contribution or other recourse against any of the Buyer Indemnified Parties for any indemnifiable claims asserted against them by any of the other Buyer Indemnified Parties; and (ii) and Buyer shall not have any right of contribution or other recourse against any of the Seller Indemnified Parties for any indemnifiable claims asserted against them by any of the other Seller Indemnified Parties. Subject to the foregoing, if any Indemnifying Party is obligated to indemnify any Indemnified Party pursuant to this Article 10, such Indemnifying Party shall, upon payment of such Losses in full, be subrogated to all rights of such Indemnified Party with respect to the Losses to which such indemnification relates; provided, however, that such Indemnifying Party shall only be subrogated to the extent of any amount paid by it pursuant to this Article 15 in connection with such Losses. |
| (b) | Any amount paid under this Article 10 shall be treated as an adjustment to the Purchase Price for all income tax purposes. If, notwithstanding the treatment required by the preceding sentence, any indemnification payment under this Article 10 is determined to be taxable to the Indemnified Party receiving such payment by any taxing authority, the Indemnifying Party shall also indemnify such Indemnified Party for any Taxes incurred by reason of the receipt of such payment (including the payment for Taxes hereunder) and any Losses incurred by such Indemnified Party in connection with such Taxes (or any asserted deficiency or Action related to such Taxes). |
| (c) | If an Indemnified Party receives any amounts pursuant to insurance, guaranties, contributions, indemnification or other contractual and legal rights with respect to any Losses for which it is being indemnified under this Article 10 (other than amounts received from the Indemnifying Party pursuant to contractual and legal rights under Article 10) (“Received Funds”), then the Indemnified Party shall (i) if the Received Funds are received prior to being fully indemnified, reduce the amount of its Losses by the amount of such Received Funds, or, (ii) if the Received Funds are received after being fully indemnified, pay the Indemnifying Party the Received Funds, up to the amount received from the Indemnifying Party. In no event shall the Indemnifying Party be entitled to reduce the amount of the Indemnified Party’s Losses for which it is obligated to pay the Indemnified Party under Article 10 or delay performing its indemnification obligations under Article 10 in anticipation of the Indemnified Party receiving Received Funds. For the avoidance of doubt, any Losses incurred after Closing by an Indemnified Party related to the EPC Contract shall be covered solely by the EPC Contract. |
| 33 |
| 11. | FURTHER ASSURANCES |
Each Party shall, upon request of any of the other Parties hereto, at any time and from time to time execute, acknowledge, deliver and perform all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and instruments of further assurances as may reasonably be necessary or appropriate to carry out the provisions and intent of this Agreement, including, but not limited to, Seller providing support to Buyer by introducing Buyer and coordinating the transition of the Projects with respect to local land owners/lessors and public officials that may affect the development of the Projects. At Buyer’s sole cost and expense, for a reasonable period of time, Seller shall: (i) cooperate with Buyer’s reasonable requests to ensure each lessor, licensor, customer, supplier, or other business associate of any Project Company maintains the same business relationships with any Project Company after the Closing as it maintained with any Project Company prior to the Closing, provided, that the failure of any such lessor, licensor, customer, supplier or other business associate of any Project Company to so maintain its business relationships shall have no effect on the obligations of Buyer hereunder; and (ii) not take any action that is designed or intended to have the effect of discouraging any such Person from maintaining such relationships. Seller shall refer all customer inquiries relating to the business of any Project Company to Buyer from and after the Closing. Following the Closing, for a period of 120 days and as reasonably requested by Buyer and agreed to by Seller in its discretion, Seller agrees to provide reasonable assistance to Buyer with respect to fostering and transitioning relationships with local Governmental Authorities with respect to any Project.
| 12. | MISCELLANEOUS |
12.1 Governing Law.
This Agreement and any action or proceeding arising or in connection with this Agreement or the transactions contemplated by this Agreement shall be construed in accordance with and governed by the laws of the State of New York, without giving effect to conflict of laws principles. Each Party consents to the exclusive jurisdiction of the federal and state courts located in the applicable state court district in which the Projects are located or the U. S. District Court for the Northern District of New York over any action or proceeding arising or in connection with this Agreement or the transactions contemplated by this Agreement.
12.2 Counterparts/Electronic Delivery.
This Agreement shall not be binding upon either Party until executed by each Party. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which, when taken together, shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile, electronic mail in portable document format (.pdf) or DocuSign electronic signature systems. Any such facsimile, .pdf or electronic signature shall have the same legal effect as a manual signature.
| 34 |
12.3 Entire Agreement.
This Agreement (including the documents referred to herein) constitute the entire agreement of the Parties hereto respecting its subject matter and supersedes all negotiations, preliminary agreements and prior or contemporaneous discussions and understandings of the Parties hereto in connection with the subject matter hereof. This Agreement may be amended, modified, or supplemented only by a writing signed by all Parties by their duly authorized representatives. Any Party may waive the benefit of a term or condition of this Agreement and such waiver will not be deemed to constitute the waiver of another breach of the same, or any other, term or condition.
12.4 Headings.
The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
12.5 Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.
12.6 Construction.
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Nothing in the Schedules to this Agreement shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Schedule identifies the exception with particularity and describes the relevant facts in detail. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant.
12.7 Incorporation of Exhibits and Schedules.
The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.
| 35 |
12.8 Specific Performance.
Each of the Parties acknowledges and agrees that the other Party would be damaged imminently and irreparably in the event that a Party fails to comply with the terms of this Agreement. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to enforce specifically the requirements of this Agreement in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity.
12.9 Third Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns and, in the case of Article 10, the other Buyer Indemnified Parties and the other Seller Indemnified Parties.
12.10 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the Parties hereto, but shall not be assigned by any Party hereto without the prior written consent of the other Parties. Notwithstanding the foregoing, (a) Buyer may, without Seller’s approval,: (i) assign this Agreement and its rights and obligations hereunder to any Affiliate of Buyer; (ii) collaterally assign any or all of its rights, including but not limited to its rights to be indemnified under this Agreement, to one or more Persons who provide funds to Buyer in connection with the sale contemplated by this Agreement or otherwise; or (iii) assign this Agreement and its rights and obligations hereunder to any Person that purchases any Project Company or substantially all of the assets of any Project Company, provided that such Person (A) has experience owning and/or operating electric energy generating projects and (B) has the financial resources to satisfy the obligations of Buyer hereunder; and (b) Seller may assign any and all amounts owing hereunder, without Buyer’s approval, to any Person in connection with the monetization of such amounts.
[Balance of Page Blank; Signature Page Follows]
| 36 |
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the date first above written.*
[SIGNATURE PAGE TO MEMBERSHIP INTEREST PURCHASE AGREEMENT]
| 37 |
EXHIBIT A
FORM OF ASSIGNMENT
ASSIGNMENT AND TRANSFER OF MEMBERSHIP INTERESTS
The undersigned, ABUNDANT SOLAR POWER INC., a Delaware corporation (“Assignor”), which is the sole member of Abundant Solar Power (SB14-4) LLC, Abundant Solar Power (SB13N) LLC and Abundant Solar Power (SB13W) LLC, each a New York limited liability company (each a “Project Company”), hereby assigns and transfers to Honeywell International Inc., a Delaware corporation (the “Assignee”), all right, title and interest in and to all of the membership interests in each Project Company effective as of ________, 2023.
| ABUNDANT SOLAR POWER INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT B
CONSTRUCTION ready
Construction Ready means the Projects satisfy the following conditions:
| (a) | The Govermental Approvals are received by any Project Company or the respective Project; |
| (b) | For each Project, (i) the Utility has completed and provided a final Coordinated Electric System Interconnection Review (CESIR) report indicating that the Project meets the applicable criteria considered in the CESIR process and that the Project can be successfully interconnected to the electrical grid, (ii) the Project Company or Seller, or either of its Affiliates, has paid the necessary interconnection cost estimate to the Utility by the timeframe required under the New York State Standardized Interconnection Requirements and Application Process For New Distributed Generators and Energy Storage Systems 5 MW or Less Connected in Parallel with Utility Distribution Systems, (iii) the Project Company or Seller, or either of its Affiliates, has entered into an Interconnection Agreement with the Utility for the Project and (iv) the Project Company or Seller, or either of its Affiliates, has received permission to operate from the Utility for the Project; and |
| (c) | Each Project Company has applied for, and has been awarded, incentives under the NY-Sun Megawatt Block Incentive Program administered by the New York State Energy and Research Development Authority. |
EXHIBIT C
FORM OF SELLER RELEASE
LIMITED GENERAL RELEASE
THIS LIMITED GENERAL RELEASE (this “Release”) is executed and delivered by Abundant Solar Power Inc., a Delaware corporation (“Abundant”) to Abundant Solar Power (SB14-4) LLC, Abundant Solar Power (SB13N) LLC and Abundant Solar Power (SB13W) LLC (each a “Project Company”) and to the Released Persons (as defined below) as of ________ __, 2023.
RECITALS
WHEREAS, Abundant and Honeywell International Inc. (“Buyer”) entered into that certain Membership Interest Purchase Agreement, dated as of _______, 2023 (“Purchase Agreement”), pursuant to which Buyer agrees to buy all the membership interests of Project Company on the terms, and subject to the conditions, set forth therein.
WHEREAS, it is a condition to the closing of the sale of the membership interests of each Project Company to Buyer that Abundant execute and deliver this Release in favor of Project Company and its successors and assigns.
NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Abundant agrees as follows:
RELEASE
1. Abundant, on behalf of itself and its respective present and former parents, subsidiaries, affiliates, officers, directors, shareholders, members, successors and assigns (collectively, the “Releasing Parties”), hereby irrevocably releases, waives and forever discharges Project Company and its future members, directors, officers, managers, employees and agents, and their respective representatives, successors, heirs, assigns, executors and administrators (collectively, the “Released Persons”) from all actions, causes of action, suits, liabilities, obligations, debts, fees, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, promises, losses, damages, judgments, executions, rights, claims, and demands of every kind and nature whatsoever, whether now known or unknown, fixed or contingent, foreseen or unforeseen, matured or unmatured, or otherwise, and whether arising at law or in equity (collectively, the “Claims”), which Releasing Parties ever had, now have or hereafter can, shall or may have or acquire, against any of the Released Persons, from the beginning of time to the date of this Release; provided, however, that this release shall not apply to (i) Claims against Buyer arising from or related to any breach by Buyer of its obligations under the Purchase Agreement or (ii) any Claims by Seller Indemnified Parties arising under Article 15.3 of the Purchase Agreement, including but not limited to, Buyer Third Party Claims.
2. For purposes of this Release, Claims that are “unknown” shall include any and all Claims which Abundant does not currently know or suspect exists in its favor as of the date hereof. Abundant acknowledges that it may have Claims which have not been manifested or presently known, or which have not been identified as of the date of this Release, and does knowingly and deliberately release all of such possible future Claims that accrued through the date of this Release, subject to Abundant’s reservation of Claims against Buyer or arising under the Purchase Agreement as set forth in Section 1 hereof.
3. The parties hereto acknowledge that the inclusion of the release of Claims that may be presently unknown was separately bargained for and was a key element of this Release. Abundant acknowledges and understands that it may hereafter discover facts which are different from or in addition to those that it may now know or believe to be true with respect to any and all Claims herein released. Notwithstanding the foregoing, Abundant intends, by making this Release, to fully, finally and forever release all Claims that now exist, may exist or previously existed, as described in Section 1 hereof, subject to the reservation of Claims by Abundant in Section 1. This Release shall be and shall remain effective in all respects even if such different or additional facts are subsequently discovered by, or if additional or new rights or Claims arise in favor of, Abundant.
4. Abundant represents and warrants to the Released Persons as follows
| a. | Abundant has all requisite limited liability company power and authority to enter into and make this Release and to grant the release contained herein. |
| b. | The undersigned officer of Abundant has all requisite power and authority, and has been duly authorized by Abundant, to execute this Release on behalf of Abundant; |
| c. | Abundant knows of no Claims against the Released Parties which are not covered by the release set forth in Section 1 hereof, and has not pledged, assigned, conveyed or otherwise transferred any of the Claims released hereby to any other person or entity, and that no person or entity has subrogated to or has any rights or interest in any Claims hereby released. |
| d. | Abundant has carefully read all terms and provisions of this Release, understands such terms and provision, and understands the legal consequences of its decision to make this Release; |
| e. | Abundant has had a reasonable opportunity to consider the decision to make this Release with the advice of legal counsel; |
5. This Release shall be governed by and construed in accordance with the internal laws (as opposed to conflicts of law provisions) of the State of New York. This Release may be executed by facsimile, PDF or other electronic means and shall be valid and binding against Abundant and its successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this Release as of the date and year first above written.
| ABUNDANT SOLAR POWER INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 99.66
Master Engineering, Procurement and Construction Agreement
New York Solar Projects:
This Master Engineering, Procurement and Construction Agreement (the “Agreement”) is made and dated as of September 15, 2023, between Abundant Solar Power (SB13W) LLC, a New York limited liability company (SB13W LLC or an “Owner”), Abundant Solar Power (SB13N) LLC, a New York limited liability company (SB13N LLC or an “Owner”), and Abundant Solar Power (SB14-4) LLC, a New York limited liability company (SB14-4 LLC or an “Owner”), (collectively, the “Owners”), and Abundant Solar Power Inc., a Delaware corporation (“Contractor”). Each of the Owners and Contractor may be referred to individually as a “Party”, and together they may be referred to as the “Parties”.
Recitals
A. Each of the Owners is a New York limited liability company which engages in the ownership and operation of solar energy assets.
B. Contractor is a Delaware corporation which engages in the development, engineering, procurement, construction, and operations of solar energy facilities.
C. Each of the Owners leases the property at the site located at [REDACTED: address] (the “Site”) from the owner of the Site (the “Host”); and
C. Owners desire to construct and operate three (3) 7.0MW direct current (DC) (5.0 MW alternating current (AC)) solar energy facilities (each a “Facility” and collectively, the “Facilities”) at the Site and Contractor is willing to perform design, engineering, procurement, construction, interconnection, testing, commissioning, and related work to bring each Facility to commercial operation (collectively, the “Project”), all pursuant to this Agreement.
D. Owners intend to finance the development of the Facilities through internal capital and/or bank financing.
NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein and for other good and valuable consideration, the Parties agree as follows.
ARTICLE 1 - DEFINITIONS
1.1 - Definitions.
Capitalized terms used herein shall have the meanings set forth in Schedule I.
| -1- |
ARTICLE 2 - REPRESENTATIONS
2.1 - Representations by Contractor.
Contractor represents that:
2.1.1 Organization and Qualification. Contractor is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Contractor has all necessary power and authority to carry on its business as presently conducted and to enter into and perform its obligations under this Agreement.
2.1.2 Authorization, approvals, no defaults. The execution, delivery and performance of this Agreement by Contractor (1) has been duly authorized by all requisite company action, (2) to the best of Contractor’s knowledge will not conflict with any provisions of applicable Law, and (3) will not conflict with any legal or contractual obligation to which it is a party or by which it or its property is affected.
2.1.3 Enforceability. This Agreement constitutes the legal, valid and binding obligation of Contractor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.
2.1.4 Legal proceedings. There is no action, suit or proceeding, at law or in equity, or official investigation by or before any Governmental Authority, arbitral tribunal or any other body pending or, to the knowledge of Contractor, threatened, against or affecting Contractor or any of its properties, rights or assets, which could reasonably be expected to hinder, modify, delay or otherwise adversely affect Contractor’s ability to perform its obligations under this Agreement or on the validity or enforceability of this Agreement. Contractor has received no notice, nor to the best of Contractor’s knowledge is there pending or threatened any notice, of any violation of any applicable Laws that would materially and adversely affect its ability to perform hereunder.
2.1.5 Site Inspection. Contractor and Contractor’s agents and representatives have visited, inspected and are familiar with the Site, its physical condition, roads, access rights, utilities, topographical conditions and air quality conditions, except for unusual or unknown surface or subsurface conditions, or unusual or unknown soil conditions, and have performed all reasonable investigations necessary to determine that the Site is suitable for the construction and installation of the Facility, and are familiar with the local and other conditions which may be material to Contractor’s performance of its obligations under this Agreement (including, but not limited to transportation, seasons and climates, access, the handling and storage of materials and fuel and availability and quality of labor and materials). Contractor acknowledges receipt of the [REDACTED: Confidential and commercially sensitive information] and is familiar with the conditions of the Site set forth therein, as well as the closure plan requirements for the Site included therein. Contractor acknowledges receipt of all relevant plans, reports and other documents submitted by Owners (or Owners’ parent or affiliate) in accordance with the [REDACTED: Confidential and commercially sensitive information] regarding the conduct of activities required for the acceptable closure of the wastebeds located at the Site, including but not limited to [REDACTED: Confidential and commercially sensitive information].
2.1.6 Necessary Rights. Contractor owns or will obtain the legal right to use all patents, rights to patents, trademarks, copyrights and licenses necessary for the performance by Contractor of this Agreement and the transactions contemplated hereby, without any material conflict with the rights of others.
2.1.7 Approvals. Contractor has obtained and is in compliance with all Governmental Authorizations (other than Governmental Authorizations listed in Schedule VIII, which Contractor will obtain as indicated in that schedule) that Contractor is required to obtain hereunder and for the valid execution, delivery and performance by Contractor of this Agreement, and all such legal entitlements are in full force and effect.
| -2- |
2.1.8 Qualification. Contractor (including where applicable, through its relationships with Subcontractors and its Affiliates) has all the required skills, capacity and financial wherewithal necessary to perform or cause to be performed the Work in a timely and professional manner, utilizing sound design and engineering principles, project management procedures and supervisory procedures, all in accordance with prudent industry practices.
2.2 - Representations by Owners.
Each of the Owners represents that with respect to it individually:
2.2.1 Organization and qualification. Owner is a limited liability company duly organized, validly existing and in good standing under the laws of New York. It has all necessary power and authority to carry on its business as presently conducted, to own or hold its properties, and to enter into and perform its obligations under this Agreement.
2.2.2 Authorization, approvals, no defaults. The execution, delivery and performance of this Agreement by Owner (1) has been duly authorized by all requisite company action; (2) to the best of Owner’s knowledge will not conflict with any provisions of applicable Law, and (3) will not conflict with any legal or contractual obligation to which it is a party or by which it or its property is affected.
2.2.3 Enforceability. This Agreement constitutes the legal, valid and binding obligation of Owner in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.
2.2.4 Legal proceedings. There is no action, suit or proceeding, at law or in equity, or official investigation by or before any governmental authority, arbitral tribunal or any other body pending or, to the knowledge of Owner threatened, against or affecting Owner or any of its properties, rights or assets, which could reasonably be expected to result in a material adverse effect on Owner’s ability to perform its obligations under this Agreement or on the validity or enforceability of this Agreement. Owner has received no notice, nor to the best of Owner’s knowledge is there pending or threatened any notice, of any violation of any applicable Laws that would materially and adversely affect its ability to perform hereunder.
ARTICLE 3 - THE WORK
3.1 Scope of Work. Contractor shall provide or perform the Work or cause the Work to be provided or performed, in accordance with the terms of this Agreement. Without limiting the foregoing, the Work shall include any and all work, services or other duties or obligations that are to be performed or carried out by or at the direction of Contractor pursuant to this Agreement for the engineering, procurement, installation, construction, interconnection, and commissioning of each of the Facilities, including without limitation the following scope of work and that which is included in Schedule VII (collectively, the “Scope of Work”), which includes conducting, performing, providing or procuring when and as necessary to permit progress of the Work to proceed in accordance with the Project Schedule:
3.1.1 all design and engineering activities and services necessary to conduct the Work and complete each Facility in accordance with this Agreement and Owner’s obligations under the relevant Facility Lease;
| -3- |
3.1.2 all design and engineering activities and services necessary to obtain all required Authorizations for the construction and operation of each Facility, including all Authorizations from the New York State Department of Environmental Conservation with respect to compliance with the [REDACTED: Confidential and commercially sensitive information], including but not limited to any Closure Plan, Operations and Maintenance Plan and Performance Verification Plan for the Site, and necessary for the interconnection of the Facilities to the bulk electrical system, including obtaining permission to operate or other approvals from the Utility;
3.1.3 all construction activities and services necessary to conduct the Work and complete each Facility, including interconnection to the bulk electric system, in accordance with this Agreement, Authorizations and applicable Laws (including Site preparation, excavation and grading and proper disposal of all excavated materials if and as required in connection with performance of the Work);
3.1.4 all materials, equipment and rentals necessary to conduct the Work and complete each Facility, including interconnection to the bulk electric system, in accordance with this Agreement, Authorizations and applicable Laws (including all necessary transport thereof);
3.1.5 all work forces necessary to conduct the Work and complete each Facility, including interconnection to the bulk electric system, in accordance with this Agreement, Authorizations and applicable Laws (including all skilled and unskilled labor, supervisory, quality assurance and support service personnel);
3.1.6 all documents required to direct Owners’ personnel in the proper start-up, operation and maintenance of each Facility, including, without limitation, the Equipment Instruction Manual and all as-built drawings and as-built wiring diagrams (in digital format capable of generating reproducible hard copies, stamped by an Engineer registered in the jurisdiction of the Facility);
3.1.7 all training of Operator adequate to allow Operator to assume responsibility for dispatch and control of each Facility;
3.1.8 all other activities, services and items, whether or not specifically described above, in Schedule VII or elsewhere in this Agreement, if such performance, provision or procurement is necessary for each Facility to be complete and operable; provided, that Contractor shall not be responsible for performing, providing or procuring those activities, services and items for which Owners bear express responsibility pursuant to Article 5;
3.1.9 all design, engineering, materials, equipment and work forces needed to perform the Acceptance Tests; and
3.1.10 all activity necessary to enable Contractor to achieve commercial operation of, and the Substantial Completion Date for, each Facility by not later than December 31, 2024.
3.2 Standard of Care. Contractor and its Subcontractors, employees and agents, shall perform the Work, including but not limited to design and engineering services, construction services, project management and supervision services hereunder, and will procure all materials and equipment hereunder, (a) in a professional, prudent, workmanlike manner, free from defects, errors and omissions, and with the same degree of skill and care that is utilized by firms and professionals in the same field under the same or similar circumstances, (b) with materials and equipment that are new and of appropriate quality; (c) strictly in accordance with the Scope of Work and Specifications; and (d) in compliance with all applicable Laws and Authorizations, Good Industry Practice and any private covenants affecting the Site (including [REDACTED: Confidential and commercially sensitive information] and any requirements thereunder) that are made known to Contractor by Owner.
| -4- |
ARTICLE 4 - CONTRACTOR’S RIGHTS AND RESPONSIBILITIES
4.1 - Engineering, Procurement and Construction of the Facility; Performance of the Work. Contractor, on behalf of the Owner, shall act as the general contractor for the Project and shall be solely responsible for performing the Work in accordance with: (a) the Specifications; (b) the Authorizations for the Facility; (c) the terms of this Agreement; (d) the Traffic Control Plan, the Safety Plan and the Security Plan; (e) Good Industry Practice and (f) all applicable Laws. Any design and engineering or other professional service to be performed pursuant to this Agreement shall be performed by licensed personnel to the extent required by Law. Contractor shall coordinate the activities of Engineer, PM/CM, the Prime Subcontractors, the Safety Director the QA/QC Director and other subcontractors, employees or agents performing any of the Work, and act as the interface between the Owners and such persons all in accordance with applicable Law and Good Industry Practice.
4.2 - Retention of Qualified Subcontractors and Suppliers. Contractor may subcontract any portion of the Work to one or more Subcontractors and Suppliers. Contractor shall provide written notice to Owner of all proposed Subcontractors and Suppliers prior to any such Subcontractor or Supplier performing the Work. Owners shall have the right to present to Contractor, within five (5) Business Days of receipt of such notice, any objections or concerns they have regarding such proposed Subcontractors and Suppliers, which objections and concerns shall be duly considered by Contractor; provided, however, that the final decision and responsibility as to whether to contract with any Subcontractor or Supplier shall reside with Owner, acting reasonably, and any unreasonable delays or additional costs caused by non-approval of a proposed subcontractor may be subject to a change to the Project Schedule and an EPC Price adjustment in accordance with the procedures set forth in Article 8 herein. All Subcontractors performing Work on the Site must be vetted, meet the minimum requirements set forth and have an acceptable rating in ISNetworld’s database or receive the appropriate waiver as determined by Owners in their sole discretion. Contractor shall be fully responsible for ensuring labor harmony during performance of the Work.
4.2.1 Project Engineer. Contractor shall retain an engineer for the Project (“Engineer”) or perform the duties of the Engineer. Engineer shall be retained under a subcontract and for purposes of this Agreement shall be considered a Subcontractor. The Engineer’s subcontract shall include, among other terms and conditions: (a) the requirement that Engineer dedicate a competent, and as required by law, licensed team of professionals to perform the services required under Engineer’s subcontract and keep that team available to the Project for the duration of Engineer’s subcontract (which shall not end prior to the Substantial Completion Date); and (b) commercially reasonable levels of professional liability insurance protecting against errors and omissions of Engineer and Engineer’s employees and agents. Engineer shall have the primary design responsibilities with respect to the Project. Engineer’s role and responsibilities shall be more particularly set forth in Engineer’s subcontract, but at a minimum, will include the performance of all engineering and other design professional services necessary for the preparation of the required drawings, specifications and other design submittals to permit construction of the Work in accordance with the Authorizations and applicable Laws (such drawings, specifications and design submittals collectively, the “Specifications”). If Contractor undertakes to perform the duties of the Engineer, Contractor shall have the same obligations defined for inclusion in the Engineer’s subcontract. Contractor shall provide Owners with a copy of Engineer’s subcontract, and hard copies and electronic copies of all Specifications and other information (except financial, accounting and payroll records) furnished to Contractor by the Engineer or Engineer’s employees and agents.
| -5- |
4.2.2 Project Manager/Construction Manager. Contractor shall retain the project manager/construction manager for the Project (“PM/CM”) or perform the duties of the PM/CM. At a minimum, the PM/CM shall be obligated to: (a) create and update the Project Schedule, subject to Owners’ approval; (b) monitor and oversee the performance of all Subcontractors and Suppliers to keep the Project moving towards completion in accordance with the Project Schedule; (c) review and recommend whether to pay all invoices submitted by Suppliers and Subcontractors and review the Work related thereto, to confirm that the Work for which payment is requested has been performed; (d) inspect the Work as completed to confirm that it was constructed in accordance with the Specifications and performed to the required standard of care; (e) comply with the Safety Plan; and (f) inform Contractor and the Owners regarding the progress and quality of the Work, as necessary to enable them to perform their respective functions under this Agreement. PM/CM shall have the role and responsibilities with respect to the project management of the Project and if retained by subcontract, the PM/CM shall be considered a Subcontractor for purposes of this Agreement. The Owners may opt to assign a third party Project Controls Officer (PCO) to act as an Owners’ representative and whose role will include but not be limited to: routine site visits, review of project deliverables/schedule, participating in construction update calls, verifying achievement of project milestones, reviewing all invoices and proposed Addenda and Change Orders, reporting to Owners, and all other services as may be required by Owners to act as Owners’ representative with respect to the Project.
4.2.3 Major Equipment Suppliers. Contractor, with the assistance of PM/CM, will select the persons to supply the major equipment systems for the Project. (collectively, the “Major Equipment Suppliers”). Contractor and PM/CM, after consultation with and approval by Owner, will select the Major Equipment Suppliers through a process that evaluates, among other things, the cost, performance specifications, environmental impact, performance history, and demonstrated performance of their installed equipment. Contractor will negotiate commercially reasonable forms of contracts with the Major Equipment Suppliers, which forms shall include commercially reasonable terms and conditions, including warranties, performance guarantees and liquidated damages.
4.2.4 Prime Subcontractors. Contractor shall retain the major construction subcontractors (“Prime Subcontractors”) for the Project. Contractor, with the assistance of PM/CM, and subject to the review and approval of Owner, will select the Prime Subcontractors by an evaluation process that evaluates potential candidates based upon relevant criteria, including experience, reputation, and demonstrated success in relevant construction projects. Each Prime Subcontractor contract (“Prime Subcontractor Contract”) shall also give Contractor the right to inspect and review that Prime Subcontractor’s audited financial statements, payroll records and other relevant information related to its invoices to Contractor. All Subcontractors performing Work on the Site must be vetted, meet the minimum requirements set forth and have an acceptable rating in ISNetworld’s database, provided that the Owners may, in their sole discretion, waive the requirement that a certain Subcontractor have an acceptable rating in ISNetworld’s database.
| -6- |
4.2.5 Quality Control/Quality Assurance. Contractor shall retain a qualified person or firm to be responsible for quality control and quality assurance of the completed Work (the “QA/QC Director”), subject to the review and approval of Owner, not to be unreasonably withheld. Owners may assign personnel to perform as QA/QC Director for project purposes, but if retained by Contractor by subcontract, the QA/QC Director shall be considered a Subcontractor for purposes of this Agreement. The QA/QC Director shall be responsible, among other things, for developing procedures for testing materials, the oversight of materials testing, inspecting field assembled equipment (such as quality control of welding procedures and welding testing), verifying QA/QC of materials used in the manufacture of major equipment and verifying that all equipment and materials delivered to the Site meet the specifications of Engineer.
4.2.6 Safety Director. Contractor shall retain a qualified person or firm to serve as the safety director for the Project (the “Safety Director”), subject to the review and approval of Owners, not to be unreasonably withheld. If required by either Owners’ or Contractor’s insurance provider, such Safety Director shall have the qualifications and authority necessary to support the issuance of the required insurance for the Project. The Safety Director shall be responsible to observe and enforce safe practices at the Site and related support facilities. If retained by subcontract, the Safety Director shall be considered a Subcontractor for purposes of this Agreement.
4.3 Sales & Use Tax. Contractor shall pay, for the Owners’ account, all applicable sales, services, consumer, use, gross receipts, and other similar taxes, special assessments and other fees related to the Work (including any such taxes imposed on the services, materials or equipment supplied by Subcontractors and Suppliers). Within thirty (30) days following execution of this Agreement, Contractor shall provide Owners with the amount of sales and uses taxes Contractor anticipates it and all Subcontractors will incur in connection with the Work (the “Anticipated Sales Tax Amount”). In the event that Owners, or Contractor on Owners’ behalf, apply to the IDA for financial assistance in the form of an exemption from sales and use taxes (the “IDA Exemption”) associated with construction of the Facilities, and the IDA grants such financial assistance, Contractor shall use, and cause all Subcontractors to use, the IDA Exemption in the performance of the Work. Contractor shall provide, and cause applicable Subcontractors to provide, certain information and documentation related to the Work that is necessary for applying for, securing, using, maintaining or reporting on the IDA Exemption. Owners shall receive a credit against the EPC Price in an amount equal to the portion of the Anticipated Sales Tax Amount saved through use of the IDA Exemption (the “Sales Tax Savings”). Contractor shall report to Owners the amount of Sales Tax Savings, and apply the credit against the EPC Price for Sales Tax Savings realized, pursuant to Section 9.1.1.1 and 9.2 hereof.
4.4 Investigation of the Site.
4.4.1 Owners shall provide Contractor with sufficient space at the Site necessary for the performance of the Work, including the storage and operation of equipment and materials. Owners shall also provide Contractor, and all Subcontractors and other persons retained by Contractor for the Project, with the right to access the Site for purposes of performing the Work, during regular business hours or such other reasonable hours as may be requested by Contractor and acceptable to Owners. Contractor acknowledges that it has reviewed the applicable easements and has made reasonable efforts to investigate the physical conditions affecting the Site, consistent with the access that has been to Contractor and its agents.
| -7- |
4.4.2 Contractor acknowledges receipt of the [REDACTED: Confidential and commercially sensitive information] and is familiar with the conditions of the Site set forth therein, as well as the waste and stormwater management and closure plan requirements for the Site included therein. Contractor acknowledges receipt of all relevant plans, reports and other documents submitted by Owners (or Owners’ parent or affiliate) in accordance with [REDACTED: Confidential and commercially sensitive information].
4.4.2 Contractor shall further ascertain the nature of the Site consistent with the access that Owners have granted to Contractor and its agents and the general and local conditions that may affect the Site and the cost of making the Site fit for the construction of the Facilities, provided however, that Contractor makes no representation or warranty as to (a) any environmental matters that may exist, including without limitation, any surface or subsurface contamination at the Site, except such surface or subsurface contamination found in soil boring testing and subsurface water testing previously conducted by or on behalf of Contractor; (b) any subsurface conditions of the Site; (c) any matters not disclosed in Owner-provided drawings or other information provided to Contractor by Owners on which Contractor has reasonably relied; or (d) any conditions at any off-Site areas.
4.4.3 Except for environmental conditions and subsurface or other conditions that could not have reasonably been discovered by a reasonable inspection of the Site within the scope of access afforded Contractor by Owners or were not disclosed to Contractor by Owners, Contractor is responsible for accommodating all Site conditions in the Specifications for and construction of the Facilities, regardless of when the Site condition is discovered, but shall not be responsible for (a) subsurface or other conditions that could not be discovered by a reasonable inspection of the Site, consistent with the limitations on access provided by Owners, or were not disclosed in information provided by Owners; (b) any conditions of the off-Site Lay Down Areas, the Soil Disposal Area, if any, the Easement Areas or other staging areas for the Work provided by Owners, except to the extent that such conditions were disclosed by the drawings and other information provided by Owners to Contractor. Notwithstanding a failure by Contractor to perform its Site investigation due diligence consistent with the access Owners have granted and information provided by Owners under this Section 4.4, Contractor (except as expressly provided otherwise in Section 7.2 of this Agreement) shall be responsible for successfully constructing the Facilities in accordance with the Specifications, the Authorizations and applicable Law without adjustment of the EPC Price.
4.5 - Hazardous Substances; Erosion.
4.5.1 Contractor shall be responsible for assuring that all Hazardous Substances transported to or from, moved, or used or stored upon, the Site in connection with Contractor’s performance of its obligations under this Agreement are transported, moved, used or stored in accordance with applicable Law. Contractor shall further assure that all Hazardous Substances are disposed of in accordance with applicable Law. Contractor will ensure that all Hazardous Substances are brought only to Owner-approved disposal facilities. Any costs of clean up, transportation, treatment, storage or disposal of Hazardous Substances, other than those Hazardous Substances identified in the soil boring testing and subsurface water testing previously conducted by or on behalf of Contractor or disclosed to Contractor by Owners, that were on or under the Site prior to the commencement of the Work shall be the sole responsibility and expense of Owners.
| -8- |
4.5.2 Contractor shall be responsible for assuring that all waste generated in the performance of its obligations under this Agreement and all waste transported to or from, moved or used or stored upon the Site by Contractor or any other person for whom Contractor is responsible, within the scope of Contractor’s performance of this Agreement, is handled in accordance with applicable Law. Contractor shall cause the affected Subcontractors to manage and dispose of the waste in compliance with applicable Law and Good Industry Practice.
4.5.3 Contractor acknowledges that the Site is subject to [REDACTED: Confidential and commercially sensitive information]. Contractor shall not undertake any excavation or ground intrusive work on the Site without prior authorization from the Owner. Contractor shall be responsible for assuring that each Facility is constructed in a manner that is compliant with the [REDACTED: Confidential and commercially sensitive information] and all Closure Plans, Operation and Maintenance Plans, Performance Verification Plans and other plans or requirements under the [REDACTED: Confidential and commercially sensitive information] or under applicable Law. If Contractor undertakes any excavation or ground intrusive work at the Site without prior authorization from the Owners, or takes any action, or fails to take an action, which otherwise results in a violation of the [REDACTED: Confidential and commercially sensitive information], or any plans thereunder, Owners shall have the right, after notifying Contractor and providing it an opportunity to cure of not less than seven (7) Business Days, to correct such violation. All expenses incurred by the Owners in the course of such correction shall be credited or offset against payments owed to Contractor pursuant to this Agreement. To the extent no payments are owed to Contractor, Contractor shall be responsible for directly reimbursing Owners for all such costs incurred by Owners.
4.5.4 Contractor shall be responsible to see that all sedimentation, erosion control, and siltation within or adjacent to the Site caused by Subcontractors is conducted in accordance with applicable Law and Authorizations. In the event Contractor fails to prevent such sedimentation, erosion or siltation from occurring in violation of applicable Law or Authorizations, Owners shall have the right, after notifying Contractor and providing it an opportunity to cure of not less than seven (7) Business Days, to correct such pollution or siltation. All expenses incurred by the Owners in the course of such correction shall be credited against payments owed to Contractor pursuant to this Agreement. To the extent no payments are owed to Contractor, Contractor shall be responsible for directly reimbursing Owners for all such costs incurred by Owners.
4.6 Compliance with Laws. In carrying out its duties hereunder, Contractor shall comply with all Authorizations and applicable Laws, including without limitation, all Laws relating to health, safety or the protection of the environment. Owners shall have no responsibility for any costs of environmental compliance or remediation to the extent caused by the negligent acts and omissions or intentional or willful misconduct of Contractor or any of Contractor’s employees or agents, including, without limitation, all Subcontractors and Suppliers.
| -9- |
4.7 Traffic Control Plan. Contractor shall work together with Owners, or Owners’ PCO or other representative, to develop a comprehensive traffic control plan for the Project (“Traffic Control Plan”), to assure all persons supplying the Work prompt and safe access for deliveries to the Site, while minimizing disruption to the surrounding area its regular activities or scheduled events. Without limitation, the Traffic Control Plan shall provide, as required by the surrounding areas and its activities: (a) for off-site parking for construction personnel and transport of such personnel to the Site; (b) a general prohibition on deliveries from Major Equipment Suppliers to the Site during the hours of 9 pm to 4 am; (c) that Contractor shall use its reasonable efforts to arrange for deliveries from Major Equipment Suppliers during Business Days between 7 am to 5 pm; and (d) that it shall be consistent with any traffic control requirements set forth in any applicable Authorization or applicable Law. Owners shall use good faith efforts to assist Contractor in the development of this plan and to assist in gaining for Contractor access to roads and other transportation facilities necessary for timely and cost-effective completion of the Project. When available, the draft traffic control plan shall be presented to Owners for review and approval no later than 14 days prior to mobilization of any deliveries for the Site. Contractor acknowledges that it has studied the Site, railroads, surrounding streets and highways and Contractor can transport all equipment to the Site and all costs associated with the transportation, unloading and handling of the equipment are included in the EPC Price, provided that access to the Site is available to Contractor and the Subcontractors at all reasonable times and in accordance with the Traffic Control Plan.
4.8 Safety Plan. Contractor, in conjunction with PM/CM, Safety Director and the Prime Subcontractors for the Project shall develop a comprehensive safety plan to establish and maintain appropriate safety rules and procedures in connection with the performance of this Agreement (the “Safety Plan”). The Safety Plan shall comply with the Honeywell’s Corporate safety requirements, all Authorizations and all applicable Laws, including OSHA construction safety requirements. Such Safety Plan shall require, among other things that Contractor and Owners satisfy any safety requirements of the insurers for the Project. The Safety Plan shall be reviewed and approved by Owners’ Syracuse-based Operation & Safety Management team officers prior to mobilization. No Work may proceed without formal approval of the Safety Plan. The Safety Plan shall include phase-hazard analyses (PHAs) and the Contractor shall maintain a record that all workers acknowledge and review the Safety Plan and applicable PHA prior to proceeding with Work activities. The Contractor shall ensure that all field workers have adequate safety training and attend safety orientation provided by the Owners.
4.9 Security Plan. Contractor shall establish appropriate security measures to maintain the security of the Site and protect the Work in progress (the “Security Plan”). The Security Plan shall comply with all requirements of the insurers for the Project and shall address the reasonable concerns of the Owner, which include preventing interference with Owners’ access to such areas of the Site as are needed for Owners’ ongoing site operations.
4.10 Construction and Storage Confined to Permitted Areas. Contractor and the Subcontractors and Suppliers shall confine construction activities and storage to the Site, to the Lay Down Areas provided by Owners as more particularly depicted on the diagram attached hereto as Schedule V (the “Lay Down Areas”), to the area designated by Owners for soil disposal (the “Soil Disposal Area”), to temporary and permanent easements that are reasonably necessary for the construction, operation, maintenance and repair of the Project and support facilities for the Project, that have been provided or are in the future provided by Owners (the “Easement Areas”) and to other areas that may hereafter be provided by Owners or other persons for such purposes.
| -10- |
4.11 Construction Office; Records. Contractor shall maintain a temporary construction office at the Site during the course of construction of the Facility. Contractor shall maintain at such office a copy of the Specifications, including all construction-related drawings that are developed during the course of the Project, as well as all Authorizations. Contractor agrees to provide space for the Safety Director in the temporary construction office. Contractor agrees to remove the temporary construction office from the Site no later than six months after the Substantial Completion Date and once removed, to restore the area to pre-existing conditions. Contractor shall further maintain an electronic data room (i.e., Dropbox account), which during the Term of this Agreement and the 24 months following the Substantial Completion Date shall serve as a repository for all documents relating to the Project. Contractor shall provide Owners full access to such records during regular business hours in accordance with the procedures set forth in Section 5.4.2.
4.12 No Liens. Contractor shall be responsible to see that all equipment and materials incorporated into the Work that are purchased by Contractor or by any Subcontractor to the Project shall not be subject to any chattel mortgage, conditional sales contract, or security agreement under which an interest or lien is retained; provided, however, that such equipment and materials may be subject to the security interest of the vendor, to secure the payment of the purchase price of the affected equipment and materials, so long as such security interest is terminable upon payment in full and Contractor causes good title to such equipment and materials, free and clear of such security interest to be conveyed to Owners on or before the date of Final Payment. Contractor shall, as a condition precedent to payment, provide lien waivers to Owners before Final Payment is required to be made by Owner.
4.13 Compliance with Authorization Requirements. Contractor will familiarize itself with and comply with any applicable requirements of all Authorizations for the Facility, including without limitation, requirements pertaining to the [REDACTED: Confidential and commercially sensitive information], environmental protection, noise abatement, erosion, traffic control, and parking.
4.14 Patents. Contractor shall, at its sole expense, pay or use reasonable efforts to ensure that its Subcontractors and Suppliers pay all royalties, license fees or other costs incident to their use in the performance of the Work of any invention, design, process, product, or device that is the subject of patent rights or copyrights held by others.
4.15 Inspections; Defective Work. Contractor shall communicate regularly with PM/CM regarding PM/CM’s inspection of completed portions of the Work for conformity with the Specifications and for absence of defects. Contractor shall accompany PM/CM on such inspections, and shall notify Owners’ PCO or other representative so that such representative may also attend such inspections, as necessary under the circumstances. In the event that PM/CM notifies Contractor of defective work that: (a) has the potential to have a material impact on the Cost of the Work or the Project Schedule; or (b) indicates a systemic problem (i.e., a persistent, widespread and/or material problem for the Project) with any piece of equipment, any portion of the Work, or the performance of any Major Equipment Supplier or Subcontractor, Contractor shall within three (3) Business Days notify and provide relevant information to the Owner. Such information shall include the nature and extent of the problem, the cost and delay associated with the defective Work (if known), and the steps that Contractor and PM/CM are taking to remedy the defective performance, including any remedies that they are pursuing under the applicable subcontract.
4.16 Contractor Responsibility to Owners. Contractor covenants that in carrying out its duties on behalf of Owners under this Agreement, Contractor will at all times proceed in accordance with Good Industry Practice and will protect the interests of Owners in any dealings with Contractor’s affiliates.
| -11- |
4.17 Facility Start Up and Acceptance Testing. Contractor shall be responsible for coordinating all tasks and responsibilities associated with Acceptance Testing and Facility Start Up, as well as all verification testing required under the Utility’s interconnection process, as governed by the Standardized Interconnection Requirements.
4.17.1 Testing Methodology. The testing methodology for Acceptance Testing is set forth in Article 11 and in Schedule III.
4.17.2 Acceptance Standards; Consequences of Under-Performance. The Acceptance Tests for the Work and the consequences for the Work falling short of the Acceptance Test Capacity Guarantee standards are set forth in Article 11 and Schedule III.
4.18 Authorizations. In addition to its obligations under Section 5.5.2, Contractor shall be required to obtain all other Authorizations that are not issued by Governmental Authorities and are required for the performance of the Work.
4.19 Confidentiality. Contractor shall make available to Owners any record produced or collected under this Agreement. Owners agree to treat as confidential materials that Contractor reasonably identified, and clearly designated, as confidential. Owners agree that if it shall receive an order (in whatever form) compelling it by Law to disclose any such confidential record produced or collected under this Agreement, it shall (to the extent permitted by Law) afford Contractor, and any Subcontractors who were the source of the requested record, notice of such request to afford Contractor or such Subcontractor an opportunity to contest the order.
4.20 Insurance. Contractor shall obtain and maintain insurance as set forth in Schedule II.
4.21 Incentives.
| 4.21.1 | Any or all of the Facilities may be eligible to receive federal, state or local financial incentives, including but not limited to grants rebates, refunds, credits, and exemptions, through renewable energy programs or other incentive programs, including but not limited to programs set forth in the Inflation Reduction Act of 2022 and the Internal Revenue Code and the NY-SUN Incentive Program administered by New York State Energy and Research Development Authority (NYSERDA) and local incentives administered by industrial development agencies (collectively, the “Incentives”). |
| 4.21.2 | Contractor shall perform the Work so that the Facility meets or exceeds all requirements that may be imposed on Owners in connection with such Incentives, and if necessary, shall develop and submit any information required by NYSERDA, the Internal Revenue Service, the United States Treasury Department, the United States Department of Energy, the Environmental Protection Agency or any other Governmental Authority or body administering such Incentives on Owners’ behalf, and/or cooperate with Owners in providing such information. . |
| 4.21.3 | To the extent that any or all of the Facilities are awarded a grant or incentive by NYSERDA under its NY-Sun Incentive Program, Contractor agrees to (i) serve as the approved contractor under that program for one or more of the Facilities, (ii) to enter into any required agreements with NYSERDA as an approved contractor under the NY-Sun Incentive Program, and (iii) to fulfill all obligations of an approved contractor under the NYSERDA NY-SUN incentive agreements (including all Standard Terms and Conditions for all NYSERDA Agreements) and the NY-Sun Program Manual, including meeting all required in-service dates for the Facilities and meeting all capacity requirements thereunder. Contractor also agrees to take all actions necessary to assign all payments of any NY-Sun incentives for any Facility to the respective Owner of such Facility. Contractor agrees that the cost of complying with the NYSERDA NY-Sun incentive agreements and the NY-Sun program Manual has been included in the EPC Price and shall not be the basis for an Addendum or Change Order under this Agreement. |
| -12- |
| 4.21.4 | Contractor shall ensure that the hiring and payment of all laborers, workmen and mechanics performing any the Work, whether employed by Contractor or by a Subcontractor, is done in accordance with any requirements associated with any such Incentives, including but not limited to: (i) ensuring that any laborers, workmen or mechanics employed by Contractor or any Subcontractor for the Work are paid prevailing wages, as determined by the relevant Governmental Authority(ies); (ii) ensuring that certain labor hours are performed by qualified apprentices; and (iii) ensuring that all local labor and local/domestic content (including “Buy American”) requirements are met. Contractor agrees that the cost of complying with any such prevailing wage, apprenticeship, local labor, local/domestic content or other requirement imposed with respect to the Facilities as a result of the Incentives has been included in the EPC Price and shall not be the basis for an Addendum or Change Order under this Agreement. Contractor shall be fully responsible for maintaining, for at least seven (7) years, all records and documentation necessary, and shall cooperate with Owners to the extent necessary, to demonstrate compliance with such requirements. |
4.22 Interconnection and Regulatory Requirements. Contractor shall be fully responsible for ensuring that each Facility complies with the process and requirements set forth in the Standardized Interconnection Requirements, and ensuring that each Facility is successfully interconnected to the bulk electric system and receives permission to operate from the Facility. Contractor shall be fully responsible for ensuring that each Facility qualifies for, and meets all requirements under, the Community Distributed Energy program established by the relevant orders adopted by the New York State Public Service Commission in Case 15-E-0082 and any related cases, and as implemented by relevant tariff provisions adopted by the Utility (collectively, the “CDG Program Requirements”). This shall include, but not be limited to, submission on the Owners’ behalf of any application, initial allocation request form or other materials required of a “CDG Host,” as that term is defined in the CDG Program Requirements, by or before the Facilities are put into service and commence net metered service under the CDG Program.
ARTICLE 5 - OWNERS’ RIGHTS AND RESPONSIBILITIES
5.1 Transfer of Control Responsibility to Owners. On the Substantial Completion Date, Owners shall, or through an Operator in accordance with the terms of a separate Operating and Maintenance Agreement shall, assume sole responsibility for the dispatch and control of the Facilities, except that Contractor shall have the right and obligation to (a) provide technical, operational and general supervisory guidance, (b) complete any remaining Punch List items on a schedule that is mutually agreeable to the Parties; (c) to the extent that any or all of the Facilities are awarded an Incentive, to continue to serve as the approved contractor and fulfill all obligations of such approved contractor, under the NYSERDA NY-SUN incentive contract and fulfill any other obligations in connection with the Incentives; and (d) otherwise perform its remaining obligations under this Agreement.
| -13- |
5.2 Owner’s Responsibilities During the Project. With respect to its respective Facility, or the Work performed for its respective Facility, each Owner shall:
5.2.1 make payment of the Cost of the Work in accordance with Article 9;
5.2.2 require employees and agents to abide by all rules applicable to the Site and the Facility, including, but not limited to rules pertaining to safety, security procedures or requirements, and designated entrances;
5.2.3 use commercially reasonable efforts to cooperate with Contractor and provide any other assistance reasonably necessary to enable Contractor to perform the Work as required hereunder;
5.2.4 use commercially reasonable efforts to promptly respond, including making appropriate representatives available with decision-making authority, to any reasonable requests by any of the Parties to this Agreement for meetings, for review and comments regarding relevant documents provided to them for review and comment;
5.2.5 at all times, use commercially reasonable efforts to proceed in a manner that supports the Project Schedule;
5.2.6 use commercially reasonable efforts to promptly take all actions reasonably requested by Contractor to assist Contractor in obtaining any Authorizations for the Facility; and
5.2.7 not unreasonably withhold its support from other actions reasonably requested by Contractor to promote the timely completion of the Facility or to promote the completion of the Facility within the EPC Price.
5.3 Denial of Authorizations. Subject to the specific rights and obligations of the Parties set forth in Section 7.2, Section 8.5 and Article 14, if Contractor or any Owner is denied a required Authorization, or any such Authorization is obtained but contains restrictions, qualifications or conditions that would have a material adverse impact on the benefits or obligations of the Parties under this Agreement, and such denial or issuance of the unduly restrictive Authorization by the Governmental Authority is not the result of Contractor’s action, failure to act or error or omission, the Parties agree to use commercially reasonable efforts, within 30 days of the denial of the required Authorization or issuance of the unduly restrictive Authorization, to reform this Agreement or to take other mutually agreeable actions (including, for example and without limitation, one Party indemnifying or making whole the other Party), that provide each Party with economic or other benefits that are substantially equivalent to those set forth in this Agreement. If the Parties are unable to so reform this Agreement or agree upon other mutually acceptable arrangements, Section 13.5 shall apply.
5.4 Owner’s Additional Rights and Responsibilities. In addition to its responsibilities as Owner under Section 5.2 of this Agreement, Owner shall have the following responsibilities with respect to the Project:
5.4.1 Financing. Owner will take all actions necessary to obtain the financing it needs to enable it to satisfy its payment obligations under this Agreement.
| -14- |
5.4.2 Inspection of Contractor’s Records.
(a) Contractor will retain and preserve all records and materials, including invoice records, pertaining to the Work performed under this Agreement for a period of seven (7) years after expiration or termination of this Agreement or for the period prescribed by applicable Law, whichever period is longer. Thereafter, Contractor will not destroy or dispose of or allow the destruction or disposition of such records and materials without first offering, in writing, to deliver such records and materials or copies thereof to Owners at Owners’ expense. If Owners fail to request such records and materials within 90 days after receipt of the written offer, Contractor may destroy or dispose of such records and materials.
(b) Audit. For a period of seven (7) years after termination or expiration of this Agreement or for the period prescribed by applicable Law, whichever period is longer, Owners will have the right to ensure compliance with the terms of this Agreement by conducting an audit of all of Contractor’s records and documents pertaining to the Facilities and the Work under this Agreement. If any invoice submitted by Contractor during such audit is found to be in error, an appropriate adjustment will be made to the invoice or the next succeeding invoice following discovery of the error and the resulting payment or credit will be issued promptly. Contractor will promptly correct any deficiencies discovered as a result of the audit.
5.4.3 Owners’ Right to Inspect Work. Owners and their agents and employees, as well as Owners’ PCO, shall, upon reasonable prior notice to Contractor and subject to adherence to the safety procedures and other procedures and requirements applicable to the Site (including without limitation, and such procedures and requirements established in connection with any insurance coverage obtained in connection with the Project), have access to inspect all Work; provided, however, that any inspection of the Work shall be conducted at a reasonable time and in a manner that does not delay or increase the Cost of the Work by disrupting the Work. Contractor shall have the right to condition such inspection upon the persons conducting the inspection observing procedures to preserve the safety and security of the Site and to comply with any applicable requirements of Project insurers. Notwithstanding any review or inspection by a Governmental Authority of the Work, Contractor shall not be relieved of its responsibility for the design, construction and performance of the Project as expressly set forth in this Agreement solely by virtue of such Governmental Authority inspection or review.
5.5 Contractor’s Rights and Responsibilities.
5.5.1 Financing. Contractor will take all actions necessary to obtain the financing it needs to enable it to satisfy its payment obligations under this Agreement.
5.5.2 Government Authorizations. Contractor, on behalf of Owners, shall apply for and obtain all necessary Authorizations for the construction, testing and operation of the Facilities that are identified by Government Authorities with jurisdiction over the Facilities as being required for such activities, based upon the Specifications for the Facilities. Owner will use commercially reasonable efforts to cooperate with Contractor to obtain any Authorizations related to compliance with the [REDACTED: Confidential and commercially sensitive information] applicable to the Site; however, Contractor retains sole responsibility for obtaining all such Authorizations.
| -15- |
ARTICLE 6 - OWNERSHIP OF ASSETS
6.1 Ownership of the Facility; Risk of Loss. Ownership of each Facility, and of each item of material, equipment, machinery, supplies and other items incorporated therein, shall pass from Contractor to the Facility’s respective Owner in accordance with the percentage Ownership interest obtained with each payment pursuant to Article 9, except as provided below. Except for Owner-Supplied Equipment, Contractor will bear the risk of loss or damage to the materials and equipment used in the Work while in transit to the Site. After it arrives at the Site, Contractor shall bear risk of loss for all such materials and equipment in the Work (including Owner-Supplied Equipment) until Final Completion (or earlier termination of this Contract).
ARTICLE 7 - COST OF THE WORK; PROJECT FINANCING
7.1 EPC Price. As full consideration to Contractor for full and complete performance of the Work, Owners agree to pay Contractor a fixed, lump sum and not-to-exceed price in accordance with Schedule VI (“EPC Price”), which is inclusive of all permitting fees and costs, design fees and costs, construction costs, interconnection and other utility related costs, Taxes, and the cost of all Authorizations. Owners’ responsibility for the EPC Price shall be adjusted only pursuant to Sections 7.2 and 7.3 of this Agreement relating to the EPC Price.
7.2 Exclusions from the EPC Price. The following items (the “Excluded EPC Costs”) are not covered by the EPC Price and such costs shall be payable by Owners in excess of the EPC Price, except as expressly provided otherwise below: (a) any incremental Cost of the Work resulting from Uninsured Force Majeure, which, at Owners’ election, may be shared equally with Contractor, in which case, termination for a Force Majeure event because of the shared costs shall not be permitted; (b) any increase or decrease in the Cost of the Work resulting from the imposition of additional requirements or reallocation of the interconnection costs by the Utility, which shall be handled in accordance with Section 14.1; or (c) any increase or decrease in the Cost of the Work resulting from any Addendum or Change Order made pursuant to Section 8.4, 8.5, or 8.6, which shall be allocated as set forth in such Sections, but excluding increases to the Cost of the Work resulting from Addenda or Change Orders necessary to remedy errors and omissions by Contractor or its Subcontractors as set forth in Section 8.5 and 8.7.
7.3 Cost Savings. Reserved.
ARTICLE 8 - ADDENDA AND CHANGE ORDERS
8.1 General. “Addenda” are changes to the Work before construction begins. “Change Orders” are changes to the Work after construction begins. Addenda and Change Orders shall be handled as follows:
8.1.1 Any Party may request an Addendum or Change Order in writing.
8.1.2 Approval or rejection of Addenda and Change Orders that increase or decrease the Cost of the Work or change in schedule that could have the effect of delaying Mechanical Completion must be approved by Owners and Contractor prior to execution of such Addenda or Change Order.
| -16- |
8.1.3 Addenda and Change Orders that increase or decrease the Cost of the Work shall be approved or rejected in accordance with the procedures set forth in Sections 8.2 and 8.3 and in accordance with the time periods provided for in Section 16.2.
8.2 Process. Any of the Parties may request in writing an Addendum or a Change Order consisting of additions to, deletions from, or other revisions to the Work, provided that such changes are within the general scope of the Work. All requests for Addenda or Change Orders by Owners shall be first submitted to Contractor, with copies to PM/CM and Engineer (as appropriate). Once proposed, Contractor shall prepare a draft Addendum or Change Order specifying the (a) proposed changes, if any, in the Scope of Work, (b) the proposed changes, if any, in the Cost of the Work, and (c) the effect, if any, of the changes on the Project Schedule (all such changes collectively referred to as the “Proposed Changes”). Contractor shall provide a copy of the draft Change Order to Owners, with copies to Owners’ PCO or other representative, for review. Any Proposed Changes set forth in the draft Change Order prepared by Contractor shall be effective only upon the written consent of both Owners and Contractor, not to be unreasonably delayed or withheld. Within five (5) Business Days following the receipt of a draft Change Order, Owners shall provide Contractor with a written statement specifying any suggested modifications to such draft Change Order. Within ten (10) Business Days following the receipt of a draft Change Order, Contractor shall prepare the final Change Order and the Parties shall execute the Change Order. The Parties shall then perform their respective obligations in accordance with the changes specified in the Change Order. If the Parties do not agree on the effects of a Proposed Change on the Scope of Work, EPC Price, or the Project Schedule, then Owners and Contractor shall resolve such disagreement pursuant to Article 12 herein.
8.3 Initial Evaluation of Addendum and Change Order Requests and Applicable Standards. Each draft Addendum or Change Order shall initially be evaluated to determine whether it: (a) adds value to the Facility without increasing the Cost of the Work or delaying Mechanical Completion of the Facility; (b) adds value to the Facility without delaying Mechanical Completion of the Facility, but increases the Cost of the Work; or (c) does not add value to the Facility or adds value to the Facility, but will delay Mechanical Completion of the Facility or compromise performance of the Facility; or (d) (in the case of an Addendum only) decreases Cost of Work without delaying Mechanical Completion. Generally, subject to mutual agreement of the Parties otherwise: (1) all Addenda and Change Orders in category (a) or Addenda in category (d) shall be approved; and (2) all Addenda and Change Orders in category (b) and (c) must be approved by the mutual agreement by Owners and Contractor, upon consultation with the PM/CM, Engineer and Owners’ PCO or other representative, with any increase or decrease in Cost of the Work allocated as set forth below in this Article 8.
8.4 Addenda or Change Orders Requested by Owner. If Owners request an Addendum or a Change Order to address solely Owners’ needs, including without limitation changes to address aesthetic or design requirements, and such Addendum or Change Order is approvable under Section 8.3 above and approved by Contractor, but increases the Cost of the Work, then Owners shall bear the entire incremental Cost of the Work (including costs of delays and rework) resulting from such Addendum or Change Order and the EPC Price shall be adjusted accordingly. Any resulting decrease in the Cost of the Work will result in a downward adjustment to the EPC Price.
| -17- |
8.5 Addenda and Change Orders Required by Acts of Governmental Authorities. If any action of any Governmental Authority requires an Addendum or a Change Order that increases or decreases the Cost of the Work, the Owners shall be responsible for any incremental increase in the Cost of the Work and the EPC Price shall be adjusted accordingly; provided that if the action of the Governmental Authority giving rise to the Addendum or Change Order is the result of an action, failure to act, or an error or omission of Contractor and/or its Subcontractors in performing the Work hereunder, then Contractor shall be solely and fully responsible for any increase in the Cost of the Work and the EPC Price shall not be adjusted. Any resulting decrease in the Cost of the Work will result in a downward adjustment to the EPC Price.
8.6 Addenda and Change Orders Requested by Contractor. If Contractor requests an Addendum or a Change Order and such Addendum or Change Order is approvable under Section 8.3 above and approved by Owners, but increases the Cost of the Work, then Owners and Contractor shall share equally any increase or decrease in the Cost of the Work resulting from such Addendum or Change Order and the EPC Price shall be adjusted accordingly.
8.7 Addenda and Change Orders Resulting from Errors or Omissions of Contractor. Owners shall not be responsible for any increased Cost of the Work resulting from Addenda and Change Orders that are necessary because of errors or omissions of Contractor and/or its Subcontractors in performing the Work hereunder, and the EPC Price shall not be adjusted. Contractor shall be solely and fully responsible for such increase in the Cost of the Work.
8.8 Tracking of Cost Impact of Addenda and Change Orders. Contractor shall institute and maintain a ledger type system to track the impact of all increases and decreases to the Cost of the Work resulting from any Addenda or Change Orders approved by Contractor and Owners. Contractor shall monthly, and more frequently upon request, report to the Owners the cumulative impact of such Addenda and Change Orders upon the Cost of the Work. If applicable, the Parties shall modify the Project Schedule and Payment Milestones to reflect the impact of Addenda and Change Orders.
ARTICLE 9 - PAYMENT FOR WORK
9.1 Payment Milestones; Payment Schedule.
9.1.1 Progress Report and Invoice.
9.1.1.1 On or about the tenth Business Day of each calendar month, Contractor shall submit to Owners (i) its invoice, and (ii) a progress report covering the previous calendar month (the “Payment Period”) containing at a minimum the following information (“Progress Report”): (1) A description of the Work performed during the Payment Period and all Payment Milestones achieved including any Advance paid to Contractor pursuant to the Grid Note as applicable; (2) A description of the Work not yet performed, if any, necessary to meet the Project Schedule for such Payment Period; (3) A description of the Work and the related Payment Milestones anticipated to be performed or achieved during the next month; (4) A statement of the amount due Contractor for Work for which payment was withheld from an earlier payment; (5) A statement of all sums previously paid to Contractor, including any Advance paid to Contractor pursuant to the Grid Note; (6) Partial lien waivers from Contractor covering all the Work through the immediately preceding Payment Period; (7) An updated Project Schedule showing progress to date, any failures to meet the Project Schedule, the current schedule of activities and a forecast of activities remaining to be performed; (8) Information regarding unusual weather conditions or Force Majeure events encountered during the Payment Period that have affected the Work; (9) A discussion of any problems encountered during the period and the remedies effected or planned; (10) Bulk quantities installation curves showing planned versus completed quantities (e.g., concrete, piping, conduit and wire); (11) Any interim payment by Contractor to the Subcontractors that obligates Owners to pay interest at the Late Payment Rate to Contractor as part of the invoiced Milestone Payment, together with the amount of interest that is payable; (12) Any other information reasonably requested in writing by Owner; (13) Value of Change Orders and Addendums added to the Payment Milestone Schedule; (14) Itemization and allocation of any Excluded EPC Costs; (15) If requested by Owner: a) the dates of any Payment Milestones for Major Equipment Supplier contract payments coming due before the next monthly Payment Due Date; and b) Contractor’s good faith estimate of all payroll and other Subcontractor and Supplier payments (together with the estimated payment dates) that Owners will need to make, prior to the next monthly Payment Due Date to avoid or minimize interest charges; (16) A statement of the amount of any Sales Tax Savings for the period and the cumulative Sales Tax Savings for the Project associated with sales or other tax exemptions; and (17) A statement of the amount of any Interconnection Adjustment. The invoice and progress report shall be reviewed and approved by Owners or Owners’ PCO or other representative.
| -18- |
9.1.1.2 In the event Owners reasonably determine that Contractor has not met a Payment Milestone in accordance with the Payment Milestone Schedule during the applicable period, Owners may withhold an amount equal to the value of the Payment Milestone not completed until such Payment Milestone is completed. In the event of any such withholding, Owners shall deliver to Contractor, not later than the Payment Due Date for the payment from which such withholding is being made, a written Notice specifying the basis for the withholding. Contractor shall be paid such withheld amount, without interest, on succeeding Payment Date(s) when and to the extent Contractor demonstrates and Owners reasonably agree that the previously unjustified payment has become justified. If the Owners and Contractor agree before the next Payment Due Date that any Payment Milestone payment was wrongly withheld, then the Owners shall pay to Contractor the withheld amount on the next Payment Due Date with interest at the Late Payment Rate on any monies that were wrongly withheld. In the event of any withholding dispute that is not resolved by the next Payment Due Date, Contractor shall have the right to have the Owner’s PCO review the dispute and reasons for withholding payment. If the Owner’s PCO concludes the withholding is justified, then Contractor shall not be entitled to be paid the withheld amount unless and until it addresses any reasons for withholding that are confirmed by the PM/CM. If the PM/CM concludes that the withheld payment was wrongly withheld, then the Owners shall immediately pay to Contractor, the wrongly withheld amount, together with interest at the Late Payment Rate on the withheld Payment Milestone payment(s), from the Payment Due Date until the wrongly withheld amount is paid in full.
9.1.1.3 In the event Contractor owes Owners any amounts under this Agreement and such amounts remain unpaid 30 days after Notice thereof, Owners may offset such amounts from any payment that Owners owe to Contractor hereunder.
9.1.1.4 Contractor shall not cease or delay its performance of the Work under this Agreement on account of any withholding under this Section 9.1.
9.1.2 Retainage. Owners shall withhold an amount equal to five percent (5%) from each of the payments made in accordance with Section 9.1.1, except for the payment to be made for the first Payment Milestone (the “Retainage”) until such time as the Contractor achieves Final Completion of the Work as set forth in Schedule VI.
| -19- |
9.1.3 Payment. Other than amounts properly withheld pursuant to Sections 9.1 and 9.2, Owners shall pay the applicable payment for each Payment Milestone, less the Retainage (as applicable), within 45 Days after Owners’ receipt of each invoice and accompanying Progress Report for the applicable Payment Milestone (the “Payment Due Date”).
9.2 Final Payment. Upon (a) Final Completion and (b) acceptance of the Work by Owner in accordance with Section 10.6, Contractor shall deliver to Owners an invoice for final payment in accordance with the requirements of Section 9.1.1.1. Such invoice shall detail all Sales Tax Savings achieved in connection with the Work and reflect a credit in the amount of such Sales Tax Savings to the extent not previously credited, and shall also reflect any adjustment resulting from the Interconnection Adjustment to the extent not previously addressed. Owners shall pay the “Final Payment,” including all Retainage, within 45 Days of its receipt of the invoice for final payment.
ARTICLE 10 - COMMENCEMENT AND PERFORMANCE OF WORK
10.1 Limited Notice to Proceed. At any time prior to its issuance of the Notice to Proceed, if Owners desire for Contractor to perform certain preliminary activities in connection with the Work, Owners may notify Contractor, in which case the Parties will discuss and agree upon the exact scope to be performed and payment therefor. Upon mutual agreement thereof, Owners may deliver to Contractor a written notice (the “Limited Notice to Proceed”), in the form of Attachment 1, in which event, Contractor will perform such limited activities as described therein. Owner shall pay for Work performed pursuant to a Limited Notice to Proceed in accordance with the payment terms agreed to therein. The Parties agree that Owners and Contractor may agree upon multiple Limited Notices to Proceed prior to the issuance of the Notice to Proceed. Any Work performed pursuant to a Limited Notice to Proceed shall be deemed Work under this Agreement, and any payments therefore shall count against the EPC Price. Issuance of a Limited Notice to Proceed shall not require Owners to issue the Notice to Proceed. A Limited Notice to Proceed shall be deemed to have been issued by Owners to Contractor for the deposits and advance payments relating to the Work covered by an Advance made to Contractor pursuant to the Grid Note.
10.2 Notice to Proceed and Conditions Precedent.
(a) When the Owner has determined it desirable for Contractor to commence full performance of the Work for each Facility, Owner will deliver to Contractor a written notice specifying the date on which Contractor shall proceed with full performance of the Work for such Facility (“Notice to Proceed”) in the form of Attachment 2. Upon receipt of the Notice to Proceed, Contractor will promptly commence and thereafter shall diligently pursue full performance of the Work for that Facility. Unless otherwise agreed to by Owners in writing, Contractor shall not perform any Work at the Site, except for the performance of the Work in accordance with a Limited Notice to Proceed, unless and until the issuance of the Notice to Proceed.
| -20- |
(b) The Notice to Proceed shall not be issued by Owner for a Facility until the following conditions precedent have been met, unless any one or more such conditions are waived in writing by Owner:
(1) Owner has received a binding commitment for one or more real property tax agreements with all relevant taxing jurisdictions, which incorporate a tax burden or payments in lieu of taxes commensurate with the tax burden assumed in the pro forma prepared in connection with the development of the Facility or as otherwise acceptable to Owner;
(2) [REDACTED: Confidential and commercially sensitive information];
(3) Contractor shall have executed an Interconnection Agreement with the Utility for the Facility and shall have provided written notice to Owner that it has paid, as a deposit, twenty-five percent (25%) of the estimated interconnection costs agreed to by the Utility and Contractor for the Facility (the “Estimated Interconnection Costs”);
(4) Contractor shall have obtained all Authorizations necessary for the performance of the Work hereunder for the Facility, including but not limited to site plan approval and/or a special use permit approval and/or a zoning variance, building permits, and New York State Department of Environmental Conservation and/or Army Corps of Engineers permits or approvals.
10.3 Mechanical Completion. “Mechanical Completion” of each Facility shall have been deemed to occur when, except for minor items of the Work that would not affect the performance or operation of a Facility such as painting, landscaping and so forth: (a) all materials and equipment for the Facility have been mechanically installed substantially in accordance with the Specifications; (b) all systems required to be installed by Contractor have been installed and tested (excluding Acceptance Testing); (c) all the equipment and systems can be operated in a safe and prudent manner and have been installed in a manner that does not void any Subcontractor equipment or system warranties. Contractor will notify Owner when it considers that Mechanical Completion has occurred. If the Owner of such Facility disputes that Mechanical Completion has occurred, it shall provide written notice to that effect to Contractor within ten (10) Business Days of receipt of such notice from Contractor, specifying the basis for disputing Mechanical Completion and the Parties in dispute shall thereafter utilize the dispute resolution procedures in Article 12 to resolve the dispute.
10.4 Substantial Completion. “Substantial Completion” of each Facility shall be deemed to have occurred as of the first point in time after: (i) Mechanical Completion of the Facility has occurred, as determined by the Independent Engineer; (ii) completion of the Initial Acceptance Test pursuant to Section 11.2, or alternatively satisfaction of Contractor’s Initial Acceptance Test related obligations in Section 11.3 (including, if applicable, payment of liquidated damages pursuant to Section 11.3); and (iii) when the Facility is used and useful for the purpose of delivering electric energy to Owner (other than electric energy delivered during Facility Start Up and the Initial Acceptance Test). Contractor will notify Owner when it considers that Substantial Completion has occurred. If the Owner of such Facility disputes that Substantial Completion has occurred, it shall provide written notice to that effect to Contractor within ten (10) Business Days of receipt of such notice from Contractor, specifying the basis for disputing Substantial Completion and the Parties in dispute shall thereafter utilize the dispute resolution procedures in Article 12 to resolve the dispute.
| -21- |
10.5 Punch List. A list of the uncompleted items for a Facility shall be established by Contractor prior to Substantial Completion of that Facility (the “Punch List”). The Punch List may be amended from time to time, upon written agreement of the Parties, prior to Final Completion. The Punch List shall include all deliverables for the Facility through Final Completion. The “Punch List Holdback Amount” shall be in the amount of the aggregate of the value of the Punch List items agreed to by the Parties, or determined by the Owners’ PCO, if the Parties cannot agree. The Punch List Holdback Amount shall be withheld from payments due upon Substantial Completion, and the agreed value of each Punch List item shall be paid to Contractor upon completion of the Punch List item. Contractor will notify Owner of the respective Facility when it considers that all items on the Punch List have been completed. If the Owner of such Facility disputes that all items on the Punch List have been completed, it shall provide written notice to that effect to Contractor within ten (10) Business Days of receipt of such notice from Contractor, specifying the basis for disputing that items on the Punch List have been completed and the Parties in dispute shall thereafter utilize the dispute resolution procedures in Article 12 to resolve the dispute. Once the Punch List is determined complete, any remaining Punch List Holdback Amount shall be paid to Contractor as part of the Final Payment.
10.6 Final Completion. “Final Completion” occurs after Substantial Completion has occurred and any remaining Punch List items have been finished. Contractor will notify Owner when it considers that Final Completion has occurred. If the Owner disputes that Final Completion has occurred, it shall provide written notice to that effect to Contractor specifying the basis for disputing Final Completion within ten (10) Business Days of receipt of notice from Contractor, and the Parties in dispute shall thereafter use the dispute resolution procedures in Article 12 to resolve the dispute.
ARTICLE 11 - ACCEPTANCE TESTING; CAPACITY GUARANTEE; COMPLETION GUARANTEE; WARRANTIES; LIMITATION OF LIABILITY
11.1 Acceptance Tests. Contractor will be responsible for coordinating the Acceptance Tests of the Facilities as more particularly set forth in Section 11.2 and Schedule III of this Agreement. Such Acceptance Tests shall be conducted by LaBella Associates, D.P.C. as a qualified testing company (the “Testing Engineer”).
11.2 Acceptance Testing.
11.2.1 General.
11.2.1.1 Within 60 days following Mechanical Completion of a Facility, Contractor shall cause the Testing Engineer to conduct the Initial Acceptance Test for such Facility, subject to Section 11.2.3 below. In accordance with the Standardized Interconnection Requirements, Contractor shall provide the site-specific testing procedures to the Utility within thirty (30) Business Days of making the Interconnection Deposit or executing the Interconnection Agreement, or as otherwise required by the Utility (the “Initial Acceptance Test”). Contractor shall ensure that all verification testing required by the Standardized Interconnection Requirements is completed within ten (10) Business Days of notification to the Utility of Mechanical Completion at a mutually agreeable time for the Utility, after giving the Utility the opportunity to witness such tests. If the Utility opts not to witness the verification tests, Contractor shall send the Utility, within five (5) Business Days of completing such verification tests, a written notification certifying that the system has been installed and tested in accordance with the Standardized Interconnection Requirements, the Utility-accepted design and the equipment manufacturer’s instructions. If the Initial Acceptance Tests can satisfy the requirements of such verification testing, then Contractor can provide the results of such Initial Acceptance Tests to the Utility to meet this requirement.
| -22- |
11.2.1.2 Within 60 days following Substantial Completion of a Facility Contractor shall cause the Testing Engineer to conduct the Final Acceptance Test for such Facility, subject to Section 11.2.3 below. The Final Acceptance Test shall be conducted in accordance with Schedule III.
11.2.2 Procedure.
11.2.2.1 The procedures for the conduct of the Initial Acceptance Test shall be in accordance with the Standardized Interconnection Requirements. The procedures for conduct of the Final Acceptance Test are set forth in Schedule III. Either Party may propose changes to a test procedure at any time up to 60 days prior to commencement of the Final Acceptance Test, and each Party agrees to cooperate in good faith in evaluating such change. No change shall be effective, however, without written acceptance of Owner of the respective Facility and Contractor.
11.2.2.2 Contractor shall give Owner and Engineer 30 days’ advance written notice of the time it expects the Testing Engineer to conduct the Acceptance Test for a Facility. The respective Owner and Engineer, and their representatives, may observe any Acceptance Test conducted by the Testing Engineer in order to confirm the Testing Engineer’s compliance with the procedures set forth in Schedule III.
11.2.3 Acceptance Testing Period; Repeat Tests. Contractor, subject to the provisions of this Section 11.2.3 and Schedule III, may repeat an Acceptance Test as Contractor deems appropriate for a Facility; provided, that (a) all Initial Acceptance Tests must be completed by 60 days after the Facility achieves Mechanical Completion; and (b) all Final Acceptance Tests must be completed 60 days after the Facility achieves Substantial Completion (collectively, the “Acceptance Testing Period”), unless the Parties agree otherwise in writing; or (b) the Acceptance Testing Period is extended by Force Majeure, but not beyond the Delay Default Date. Contractor shall bear the costs of performing the repeat Acceptance Tests. Contractor shall give Owner and Engineer not less than the following advance notice of each Acceptance Test following the initial Acceptance Test for a Facility: (i) if the Acceptance Test is a prompt retest which merely continues a previously commenced Acceptance Test or promptly follows a failed Acceptance Test, not less than 24 hours advance notice; and (ii) if the Acceptance Test is a new Acceptance Test that follows an interim period of more than 10 Business Days during which no Acceptance Testing has occurred, then not less than three (3) Business Days advance notice, unless a shorter period is agreed to by the Parties.
11.2.4 Acceptance Test Results.
11.2.4.1 After the Testing Engineer completes an Acceptance Test, Contractor shall give written notice thereof to the Owner of such Facility and Engineer and shall provide such Owner and Engineer with all gross and reduced data for such test in accordance with Schedule III.
| -23- |
11.2.4.2 If the Testing Engineer determines that the Acceptance Test was successfully completed for a Facility, Contractor shall ensure that the Testing Engineer notifies such Facility’s Owner and the Engineer thereof promptly following determination to that effect, including providing them a copy of the written test report.
11.2.5 Contractor to Promptly Commence and Complete Acceptance Testing. Contractor shall promptly commence and complete Acceptance Testing following Mechanical Completion.
11.3 Acceptance Test Capacity Guarantee. The “Minimum Required Capacity” for each Facility for purposes of this Agreement shall be equal to 90% of the Expected Capacity of such Facility. At the end of the Acceptance Testing Period under Section 11.2.3, it is expected that each of the three Facilities shall have demonstrated the capability to produce 7.0MW-DC (5.0 MW AC), subject to final as-build system size (the “Expected Capacity”), based upon the Acceptance Testing results. Contractor hereby guarantees that each Facility shall perform at not less than 97% of the Expected Capacity by the end of the Acceptance Testing Period (the “Acceptance Test Capacity Guarantee”). Contractor and the Testing Engineer shall be entitled to conduct and verify satisfaction of the Acceptance Tests in stages and in such order as may be appropriate given the available testing conditions. In the event that a Facility fails to meet the Acceptance Test Capacity Guarantee, the following shall apply:
11.3.1 If either the actual tested performance is less than 97% of the Expected Capacity, but greater than the Minimum Required Capacity, Contractor will make (or cause to be made) the modifications, improvements, redesign, repairs or reconstruction (“Remedial Measures”) necessary to cause the Facility to meet the Acceptance Test Capacity Guarantee as evidenced by repeat Acceptance Tests. Contractor’s obligations under this Section to undertake Remedial Measures shall be counted toward and subject to the Damages Cap set forth in Section 11.8.1.
11.3.2 If the actual tested capacity of the Facility is less than the Minimum Required Capacity, Contractor shall conduct Remedial Measures until the actual tested capacity of the Facility is at least equal to the Minimum Required Capacity.
11.4 Compliance with Standards. In the event the Facility contains any design or construction defects (“Defects”) that cause it to fail to meet any design, construction or Mechanical Completion standard in the Specifications or the Agreement, then Contractor shall, at no expense to Owner (except in the case of omitted equipment and materials, as provided in this Section 11.4), make (or cause to be made) the Remedial Measures necessary to remedy the Defects. In the event the Remedial Measures include supplying equipment and materials that are necessary to the Facility to meet a change in the Mechanical Completion standards imposed by the Utility or a Governmental Authority which became effective or applicable after the execution of this Agreement, and were omitted from its construction, Owner shall pay for the costs of such omitted equipment and materials as part of the Cost of the Work if such Remedial Measure is implemented to address Defects discovered before the Facility achieves Mechanical Completion. If the Remedial Measure is implemented to address Defects discovered after the Facility achieves Mechanical Completion, Owner shall not be obligated to pay any portion of the cost of the omitted equipment and materials.
| -24- |
11.5 Contractor’s Warranties. Contractor warrants to Owner as follows:
11.5.1 Contractor warrants that, for the duration of the Warranty Period, all materials and equipment (other than the Owner-Supplied Equipment) comprising the Work will be (a) new and of the quality required by the Specifications; (b) free from defects; and (c) delivered strictly in accordance with (i) this Agreement and the Specifications and accompanying data set forth in the Scope of Work and other contract documents, (ii) all applicable Laws as in effect on the date of Substantial Completion, and (iii) applicable Authorizations and Good Industry Practices as exist on the date of Substantial Completion (collectively, the “Parts Warranty”). Contractor further warrants that, for the duration of the Warranty Period, all services provided by Contractor or any of Contractor’s personnel in connection with the Work will be (a) performed in a professional, prudent and workmanlike manner that is free from defects, errors and omissions and with the same degree of skill and care that is utilized by nationally-recognized professionals in the same field under the same or similar circumstances; and (b) performed strictly in accordance with (i) this Agreement and the Specifications and accompanying data set forth in the Scope of Work and other contract documents, (ii) all applicable Laws as in effect on the date of Substantial Completion, and (iii) applicable Authorizations and Good Industry Practices as the same exist on the date of Substantial Completion (the “Services Warranty,” and collectively with the Parts Warranty, the “Contractor Warranties”). The Contractor Warranties will remain in full force and effect for a period beginning on the date on which such material, equipment or service is provided to Owner and ending [REDACTED: Confidential and commercially sensitive information] years after Final Completion (the “Warranty Period”), [REDACTED: Confidential and commercially sensitive information]. The Parties acknowledge that the Contractor Warranties are in addition to any Subcontractor warranties that Contractor assigns to Owners pursuant to Section 11.7, and that the expiration of the Warranty Period is only applicable to the Contractor Warranties and will have no effect on any assigned Subcontractor warranties that may be of longer duration. Owner will be responsible for obtaining warranties and, after Final Completion, enforcing warranty obligations for, any Owner-Supplied Equipment. Contractor shall at all times perform its construction, installation, or commissioning activities in a manner consistent with all such warranties and shall not perform any actions that may violate such warranties. As shown on Attachment 3, “Manufacturer Warranties,” equipment and material warranties shall be provided directly by the equipment or material manufacturers and are not limited by, and may be longer, than the Warranty Period hereunder.
11.5.2 Contractor will ensure that each Facility will, at all times through the Final Completion Date, comply with all Laws. Contractor shall have no obligation for breach of warranty under this Section 11.5 to the extent any deficiencies are the result of Force Majeure, normal wear and tear, or misuse or negligence by Owner or someone other than Contractor acting on Owner’s behalf.
11.5.3 All materials procured or furnished by Contractor hereunder shall be new (unless otherwise agreed by Owner in writing), of good quality and in accordance with the Specifications set forth in this Agreement and the Schedules.
| -25- |
11.6 Repair and Replacement of Defective Work.
If an Owner discovers defects in the materials, equipment or services (excluding Owner Supplied Equipment) in a Facility or any part thereof during the Warranty Period therefor, such Owner will promptly notify Contractor of such failure in writing and make available access to that portion of the Facility and Site as necessary for correction of the defect as soon as reasonably practicable. Contractor shall thereupon, as promptly as practicably possible, but only at such times as directed by Owner (a) repair, replace, or re-perform such Work to cure such failure to Owner’s reasonable satisfaction and in accordance with applicable Law, Authorizations and Good Industry Practices; and (b) perform such tests as such Owner may require to demonstrate the cure of such failure and compliance with the warranty standards provided in Section 11.5. Contractor will bear any and all costs and expenses associated with curing any warranted Work, including all costs to disassemble, de-construct, and reassemble and re-construct the Facility as necessary or appropriate in order to remove defective parts and to install repaired or new parts under the Contractor Warranties. If a material or equipment (excluding Owner-Supplied Equipment) fails three (3) or more times due to a breach of the Parts Warranty during the Warranty Period (as extended), then, Owner may replace, or cause Contractor to replace, such item with a new replacement for the same as specified by, and from a vendor acceptable to, Owner. If Owner replaces the defective item in accordance with this Section 11.6, Owner shall charge Contractor with the full cost of such replacement either directly or by set-off of such cost from any payment then or thereafter due Contractor under this Agreement. Any Work re-performed, repaired or replaced in satisfaction of Contractor’s obligations in connection with the Contractor Warranties will be re-warranted by Contractor pursuant to the same Contractor Warranties set forth in Section 11.5, and Contractor will have the same obligations in relation thereto as set forth in Section 11.5, through the end of three (3) years from the date of Final Completion. Notwithstanding the foregoing, Contractor shall have no warranty liability under this Article 11, to the extent that a failure of a component of the Facility is attributable to a failure of the Owner to perform customary post-commissioning maintenance, and to the extent that the Owner does not engage Contractor to perform such services in a separate Operations and Maintenance Agreement.
11.7 Subcontractor Warranties; Subcontractor Protections for Owner.
Contractor will procure, from all Subcontractors providing materials and equipment and services as part of the Work, commercially reasonable warranties. Contractor will obtain and maintain all such warranties in full force and effect, and Contractor will enforce such warranties itself and/or on behalf of Owners, including through litigation at Contractor’s own expense, if necessary. At the end of the Warranty Period, Contractor will assign to Owners its rights under any and all such Subcontractor warranties that continue past the end of the Warranty Period. Contractor will secure such assignment from each Subcontractor, and Contractor will deliver to Owners copies of all Subcontracts providing for warranties enforceable by Owners. Contractor will not, and Contractor will ensure that Contractor’s personnel do not, take any action which could release, void, impair or waive any Subcontractor warranties. To the extent that any such warranty would be voided by reason of Contractor’s negligence or other fault in incorporating materials or equipment into the Work, Contractor shall be responsible for correcting such negligence or other fault and shall in any event be responsible pursuant to warranty obligations set forth in this Article 11.
| -26- |
11.8 Limitation of Liability
11.8.1 Notwithstanding any provision in this Agreement to the contrary, in no event shall the total liability of Contractor to Owner for liquidated damages and Remedial Measures under Section 11.3.1 exceed in the aggregate [REDACTED: Confidential and commercially sensitive information] provided that this limitation shall not apply to Remedial Measures under Section 11.3.2 or repairs to defects under Section 11.6, direct damages following a Contractor Event of Default pursuant to Article 13, or indemnification obligations pursuant to Section 11.9, and this limitation in no way affects Contractor’s absolute obligation to bring the Facility to Mechanical Completion. The limitation of liability to Owner for liquidated damages and those Remedial Measures set forth in Section 11.3.1 is sometimes referred to herein as the “Damages Cap”.
11.8.2 APART FROM THE GUARANTEES AND OTHER REMEDIES PROVIDED IN THIS AGREEMENT, CONTRACTOR HEREBY DISCLAIMS ANY OTHER WARRANTIES, OR PERFORMANCE GUARANTEES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11.8.3 Owner shall not be liable for any lost profits or indirect, special, multiple, or punitive damages11.9 General Indemnification.
(a) Contractor shall fully indemnify, hold harmless, release and defend each of the Owners, their affiliates and such Owners’ and affiliates’ officers, employees, and agents (each an “Owner Indemnitee”) from and against any and all actions, claims, demands, damages, disability, losses, expenses (including, but not limited to, reasonable attorneys’ fees and other defense costs) and liabilities of any nature (including, but not limited to property damage and personal and bodily injury, sickness and disease, claims by a Governmental Authority) that may be imposed on, incurred by or asserted against any Owner Indemnitee and in any way relating to or arising out of (i) Contractor’s breach of any obligation, representation or warranty contained herein, (ii) Contractor’s negligence, gross negligence or willful misconduct (including any such breach, negligence, gross negligence or willful misconduct by Contractor or its officers, employees, subcontractors and agents), (iii) violation by Contractor or its officers, employees, subcontractors and agents of any applicable Law or Authorization, (iv) any claims with respect employer’s liability or worker’s compensation filed by any employee of Contractor or any of its personnel or by any employee of a Subcontractor or any of its personnel, or (v) Contractor’s breach of a subcontract. The indemnification obligations in this Section 11.9 shall survive the expiration or termination of this Agreement.
(b) Each of the Owners shall fully indemnify, hold harmless, release and defend Contractor and Contractor’s officers, employees, and agents (each a “Contractor Indemnitee”) from and against any and all actions, claims, demands, damages, disability, losses, expenses (including, but not limited to, reasonable attorneys’ fees and other defense costs) and liabilities of any nature (including, but not limited to property damage and personal and bodily injury, sickness and disease) to the extent caused by such Owner’s (i) breach of any obligation, representation or warranty contained herein, or (ii) negligence, gross negligence or willful misconduct of such Owner (including any such breach, negligence, gross negligence or willful misconduct by such Owner’s officers, employees, subcontractors and agents). The indemnification obligations in this Section 11.9 shall survive the expiration or termination of this Agreement.
| -27- |
11.10 Indemnity Against Intellectual Property Infringement. Contractor shall defend, indemnify and hold harmless Owners and their affiliates against all liabilities, claims, losses, damages and expenses (including attorneys’ fees and court costs) arising from any claim or legal action for unauthorized disclosure or use of any trade secrets, or of patent, copyright or trademark infringement arising from Contractor’s performance that either (a) concerns any equipment, materials, supplies, or other items provided by Contractor under this Agreement or (b) is based upon or arises out of the performance of the Work by Contractor or any Subcontractor. Owners shall provide Contractor with reasonably prompt notice of any claim or legal action relating to the foregoing. The indemnification obligations in this Section 11.10 shall survive the expiration or termination of this Agreement.
11.11 Environmental, Law and Permit Indemnity.
| (a) | Owner shall defend, indemnify and hold harmless Contractor and Contractor’s officers, employees, and agents from and against any and all actions, claims, demands, damages, disability, losses, expenses (including, but not limited to, reasonable attorneys’ fees and other defense costs) and liabilities of any nature (including, but not limited to property damage and personal and bodily injury, sickness and disease) arising out of: (a) any and all environmental related liability or cost arising from or related to Hazardous Materials on the Site that existed prior to the commencement of the Work, including any actual or alleged injury to persons or property related thereto or any remedial activity (except to the extent the same was caused by the acts or omissions of such indemnitee in connection with its performance of the Work or to the extent the Contractor is required to indemnify the Owner in accordance with Section 11.11(b) hereof); or (b) on account of any violation of any Law or Authorization to be complied with by Owners hereunder. The indemnification obligations in this Section 11.11 shall survive the expiration or termination of this Agreement. |
| (b) | Contractor shall defend, indemnify and hold harmless Owners, its affiliates and Owners’ and its affiliates officers, employees, and agents from and against any and all actions, claims, demands, damages, disability, losses, expenses (including, but not limited to, reasonable attorneys’ fees and other defense costs) and liabilities of any nature (including, but not limited to property damage and personal and bodily injury, sickness and disease) arising out of (a) any and all environmental related liability or cost arising from or related to (i) the environmental hazards or Hazardous Materials brought to the Site by Contractor or any of its Subcontractors or Suppliers and (ii) to the release of any Hazardous Materials existing on the Site prior to the commencement of the Work resulting from the negligent, reckless, or tortious act or omission or willful misconduct of Contractor or any of its Subcontractors or Suppliers, including any actual or alleged injury to persons or property related thereto or any remedial activity (except to the extent the same was caused by the negligence of such indemnitee); or (b) on account of any violation of any Law or Authorization to be complied with by Contractor or its Subcontractors hereunder. The indemnification obligations in this Section 11.11 shall survive the expiration or termination of this Agreement. |
| -28- |
11.12 Indemnification Against Liens. Contractor shall defend, indemnify and hold harmless Owners and their affiliates and Owners’ and their affiliates’ officers, employees and agents from and against (i) all Liens arising from the performance of the Work or otherwise caused by any Subcontractor or any employee, agent or affiliate of Contractor or any of its Subcontractors or anyone else entitled to file a lien under Law; and (ii) any loss, damage or liability (including, but not limited to, reasonable attorneys’ fees and other costs) in connection with any and all Liens filed in connection with the Work hereunder. This Section 11.12 shall not apply to Liens of Contractor or its Subcontractors which result from non-payment of an undisputed amount by Owners. The indemnification obligations in this Section 11.12 shall survive the expiration or termination of this Agreement.
11.13 Notice and Legal Defense by Contractor; Failure to Defend. Promptly after receipt by an Owner Indemnitee of any claim or notice of the commencement of any action, administrative or legal proceeding, or investigation in connection with an actual or potential claim from a third party as to which any indemnity provided for by Contractor in this Article 11 may apply, the Owner Indemnitee will notify Contractor in writing of such fact. Any delay in an Owner Indemnitee’s notifying Contractor of any such claim or notice will not excuse Contractor of its obligations hereunder. Upon Contractor’s receipt of such notice, Contractor shall assume on behalf of the Owner Indemnitee, and conduct with due diligence and in good faith, the defense thereof with counsel reasonably satisfactory to the Owner Indemnitee; provided, that the Owner Indemnitee shall have the right to be represented therein by advisory counsel of its own selection at its own expense; and provided further, that if the defendants in any such action include both Contractor and the Owner Indemnitee, and if the Owner Indemnitee shall have reasonably concluded that there may be legal defenses available to it which are different from, additional to or inconsistent with those available to Contractor, then the Owner Indemnitee shall have the right to select separate counsel to participate in the defense of such action on its own behalf and at Contractor’s expense. If any third party claim arises as to which any indemnity provided for in this Article 11 may apply, and Contractor fails to assume the defense of such claim promptly after the receipt by Contractor of notification thereof, then the Owner Indemnitee against which the claim is instituted or commenced may, at Contractor’s expense, contest, or (with the prior written consent of Contractor, not to be unreasonably withheld) settle, such claim; provided, that no such contest need be made, and settlement or full payment of any such claim may be made without Contractor’s consent (with Contractor remaining obligated to indemnify the Owner Indemnitee under this Article 11) if, in the written opinion of the Owner Indemnitee’s counsel, such claim is meritorious. All costs and expenses incurred by Owner or the Owner Indemnitee in connection with any such contest, settlement or payment may be deducted from any amounts due to Contractor under this Agreement, with all such costs in excess of the amount deducted to be reimbursed by Contractor to Owner or the Owner Indemnitee promptly following, but not later than thirty (30) Days following, Owner’s or Owner Indemnitee’s demand therefor. The indemnification obligations in this Section 11.13 shall survive the expiration or termination of this Agreement.
| -29- |
ARTICLE 12 - DISPUTE RESOLUTION
12.1 In General. The Parties shall attempt to settle every Dispute (defined in Section 12.1.1), by following the dispute resolution process set forth below in this Article 12, to the extent permitted by Law.
12.1.1 Mutual Discussions. If any dispute or difference of any kind whatsoever arises between the Parties in connection with, or arising out of, this Agreement (“Dispute”), the Parties shall, within 30 days, attempt to settle such Dispute in the first instance by mutual discussions between Owner and Contractor.
12.1.2 Further Procedures. If the Dispute cannot be settled within 30 days by mutual discussions, then the Dispute shall be finally settled under the provisions of this Section 12.1.2 or Section 12.1.3. If the Parties fail to resolve any dispute through discussions within an additional 10 Business Days, either Party shall have the right to provide written notice of the Dispute to the President (in the case of Contractor) and Vice President of Global Remediation (in the case of Owner) “Senior Management” of the other Party. Upon a timely referral, the Senior Management of the Parties shall consider the Dispute, review such relevant information as they may determine and issue their decision (which decision shall be confirmed in writing) within five (5) Business Days after receiving the referral. If the Senior Management of the Parties cannot resolve the issue within the five (5) Business Day period, then the Parties shall have the rights set forth below in Section 12.1.3.
12.1.3 Arbitration. Subject as hereinafter provided, any Dispute arising out of, or in connection with, this Agreement and not settled by Section 12.1.1 or Section 12.1.2 of this Agreement may (regardless of the nature of the Dispute) be submitted by either Party for arbitration to the offices of the American Arbitration Association (“AAA”) located closest to Owner’s principal offices at the time of such demand. The arbitration shall be governed exclusively by the United States Arbitration Act (9 U.S.C. § 1, et seq.), without reference to any state arbitration statutes. The arbitration proceedings shall be conducted in the city closest to Owner’s principal place of business (currently, Charlotte, North Carolina) and shall be conducted in accordance with the then-current commercial arbitration rules of the AAA, except as modified by this Agreement. The Parties shall be entitled to limited discovery at the discretion of the arbitrator(s) who may, but are not required to, allow depositions. The Parties acknowledge that the arbitrators’ subpoena power is not subject to geographic limitations.
12.2 Continued Performance. During the conduct of dispute resolution procedures pursuant to this Article 12, (a) the Parties shall continue to perform their respective obligations under this Agreement, and (b) no Party shall exercise any other remedies hereunder arising by virtue of the matters in dispute.
ARTICLE 13 - DEFAULTS; REMEDIES; TERM; TERMINATION
13.1 Contractor Default. The occurrence of any of the events set forth below shall constitute a “Contractor Event of Default” under this Agreement:
13.1.1 Bankruptcy. Contractor becomes insolvent, or becomes the subject of any bankruptcy, insolvency or similar proceeding, which, in the case of any such proceeding that a third party brings against them, has not been terminated, stayed, or dismissed within 60 Business Days after it was commenced, unless the affected Party provides evidence to Owner of that Party’s ability to perform all of its obligations under this Agreement; or
| -30- |
13.1.2 Failure to Maintain Insurance. Contractor fails to maintain the insurance coverages required under Section 4.20 as set forth in Schedule II hereto; or
13.1.3 Failure to Perform. Contractor shall have failed to perform or comply with the terms and conditions of this Agreement (other than a payment default), including breach of an covenant contained herein, and shall have failed to cure such default within 30 days following delivery to Contractor of a Notice from Owner to cure such default, or if a cure cannot be effected within such 30 day period, such period shall extend for a reasonable period of time, but not to exceed a total of 60 days, unless otherwise agreed in writing, so long as Contractor is proceeding diligently to cure such default throughout such period; or
13.1.4 Representation False. Any representation or warranty made by Contractor herein shall have been false or misleading in any material respect when made; or
13.1.5 Failure to Achieve Mechanical Completion. If Mechanical Completion is not achieved by the Delay Default Date; or
13.1.6 Failure to Achieve Substantial Completion. If Substantial Completion is not achieved by December 31, 2024; or
13.1.7 Failure to Achieve Final Completion. If Final Completion is not achieved within thirty (30) days of the date upon which Substantial Completion is actually achieved; or
13.1.8 Failure to Obtain Authorization. The Facility cannot proceed to completion as the ultimate result of a refusal of Governmental Authority to approve the Facility or any other Authorization, which refusal is due solely to the negligence or willful misconduct of Contractor; or
13.1.9 Failure to Remove or Obtain Release of Lien. If any lien is placed upon a Facility, the Site, the Work or any equipment by Contractor or Subcontractor, laborer, or Supplier of Contractor, which either (i) is not removed by Contractor within five (5) Business Days of Contractor’s receipt of notice from Owner of the existence of such lien, or (ii) Contractor does not challenge and use its commercially reasonable efforts to obtain the release of (in each case excluding any liens filed by any Subcontractor, laborer, or Supplier of Contractor as a condition to the commencement of Work and prior to the failure of Contractor to pay such party within terms); or
13.1.10 Abandonment. If Contractor abandons the Work, where “abandonment” for the purposes of this Section 13 shall mean that Contractor has substantially reduced personnel at the Site or removed required equipment from the Site such that, in the opinion of an experienced construction manager, Contractor would not be capable of completing the Milestones in the Project Schedule.
13.1.11 Failure to Make Payments. If Contractor fails to make any payment required to be made to Owner under this Agreement within ten (10) Business Days after receipt of written notice from Owners of Contractor’s failure to make such payment.
13.1.12 Failure to pay Subcontractors. If Contractor fails to make prompt payments when due to Subcontractors or vendors for labor, materials or equipment for the Project.
13.1.13 Unauthorized Assignment or Transfer. If Contractor assigns or transfers any rights and/or obligations of Contractor hereunder, except for an assignment permitted hereunder, or a transfer of all or a substantial portion of the assets or obligations of Contractor, except where the transferee expressly assumes the transferred obligations and such and such transfer does not materially adversely affect the ability of Contractor or the transferee, as applicable, to perform its obligations under the this Agreement, as determined by Owners in their sole discretion.
| -31- |
13.2 Owner’s Default Remedies Against Contractor. If a Contractor Event of Default shall have occurred and be continuing, Owner shall have the right to terminate this Agreement by notice to Contractor. In the event of such termination:
13.2.1 if requested by Owner, Contractor shall withdraw from the Site, shall assign to the Owner (without future recourse to Contractor) such of Contractor’s subcontracts as Owner may request, and shall remove such materials, equipment, tools and instruments used and any debris or waste materials generated by Contractor in the performance of the Work as Owner may direct, and Contractor shall promptly deliver to Owner all designs, drawings, and other documents related to the Project. In the event of such termination, Contractor shall deliver to Owner all materials and data for which title has passed to Owner. To the extent any specific item of the Work is partially complete at the time of termination, at the option of Owner, Contractor shall complete such partially completed Work. In such event, Owner shall pay Contractor the amount that Owner would have otherwise paid to Contractor for such item of Work had such termination not occurred, less any damages payable hereunder;
13.2.2 Owner, without incurring any liability to Contractor, shall have the right to have the Facility brought to Final Completion. In such event, Contractor shall be liable to Owner, at its own expense, for the reasonably incurred costs to Owner of (i) achieving Mechanical Completion, including costs of accelerated or expedited construction activities actually performed in an attempt to achieve Mechanical Completion (by the Delay Default Date if not yet past, or otherwise as expeditiously as practicable) and/or to mitigate any delay by Contractor, and (ii) actual costs of administering any subcontract, legal fees associated with the termination, any cancellation fees, restocking fees, non-refundable deposits or balances due on material which cannot be cancelled, any termination charges imposed by Subcontractors as a result of the termination and any other costs reasonably incurred solely as a result of the termination Such costs and fees for which Contractor is liable as set forth above (and for failure to perform as may be requested pursuant to Section 13.2.1 above) may be deducted by Owner out of monies due, or that may at any time thereafter become due, to Contractor. If such costs exceed the sum that would have otherwise been payable to Contractor under this Agreement, then Contractor shall be liable for, and shall promptly, but in any event not more than 30 days after Notice from Owner, pay to Owner the amount of such excess excluding changes in the Work approved by Owner following such Contractor Event of Default;
13.2.3 upon termination of the Work pursuant to this Article 13, Contractor shall promptly submit to Owner an accounting of Contractor’s actual costs for the Work performed prior to the date of termination. If Owner exercises its right to have the Work finished, such amounts may be withheld until the Work is completed and shall be used to offset any amounts due Owner pursuant to Section 13.2.2. Notwithstanding the foregoing such amounts may be withheld and applied to any liability hereunder;
13.2.4 notwithstanding the availability and/or exercise of the foregoing remedies, Owner shall have all such other remedies available under applicable Law; and
| -32- |
13.2.5 in exercising any of the foregoing remedies, the Owner shall use reasonable efforts to mitigate its damages.
13.3 Owner’s Event of Default. Each of the following shall constitute an “Owner’s Event of Default” under this Agreement:
13.3.1 Failure to Make a Payment to Contractor When Due. The failure of Owner to make the full amount of the payment to Contractor required under this Agreement within 45 Business Days following notice of failure to pay; or
13.3.2 Bankruptcy. Owner becomes insolvent, or becomes the subject of any bankruptcy, insolvency or similar proceeding, which, in the case of any such proceeding that a third party brings against them, has not been terminated, stayed, or dismissed within 60 Business Days after it was commenced, unless the affected Party provides evidence to Contractor of that Party’s ability to perform all of its obligations under this Agreement; or
13.3.3 Representation False. Any material representation made by Owner herein shall have been false or misleading in any material respect when made; or
13.3.4 Failure to Perform. Owner’s failure to perform any of its respective non-payment obligations under this Agreement, and such failure is not cured within 30 days after receipt of written notice thereof, or if a cure cannot be effected within such 30-day period, such period shall extend for a reasonable period of time, but not to exceed a total of 60 days, unless otherwise agreed in writing, so long as Owner is proceeding diligently to cure such default throughout such period; or
13.3.5 Failure to Maintain Insurance. If Owner fails to obtain and maintain in effect through the Commercial Operation Date such insurance as it is required by this Agreement to obtain and maintain; or
13.4 Contractor Remedies for Owner Event of Default. Subject to the rights granted in Section 13.5 below, upon the occurrence of an Owner Event of Default, Contractor shall have the right to terminate this Agreement, to order all Subcontractors to stop Work and remove all their tools and equipment from the Site, and/or pursue all such remedies as may be allowed under this Agreement, at law or in equity. In addition, and without limiting the foregoing remedies, Owner shall pay to Contractor the amounts payable upon termination under Section 13.7 of this Agreement.
13.5 Force Majeure; Failure of Authorizations.
13.5.1 Effect. Any delays in or failure of performance by a Party, other than the obligations to pay monies hereunder, shall not constitute a default hereunder if and to the extent such delays or failures of performance are caused by Force Majeure events.
13.5.2 Notice of Occurrence and Effect.
13.5.2.1 Notice of Occurrence. Any Party claiming that a Force Majeure condition has arisen shall immediately notify the other Party of the same, shall act diligently to overcome, remove and/or mitigate the effects of the event of Force Majeure, shall notify the other Party on a continuing basis of its efforts to overcome, remove and/or mitigate the event of Force Majeure and shall notify the other Party immediately when said condition has ceased.
| -33- |
13.5.2.2 Notice of Impact. In addition to its obligations under Section 13.5.2.1, if Contractor claims there is a Force Majeure condition, Contractor shall (i) promptly notify Owner, in writing of the nature, cause and cost of such Force Majeure condition, (ii) state whether and to what extent the condition will delay the Delay Default Date, the Substantial Completion Date or Final Completion Date, (iii) state the date and time the Force Majeure condition commenced; and (iii) state whether Contractor recommends that Owner initiate a Change Order pursuant to Article 8.
13.5.3 Effect of Force Majeure. No failure or delay in performance under this Agreement shall be deemed to be a breach hereof to the extent such failure or delay is occasioned by or due to Force Majeure. With respect to delay in performance, a Force Majeure condition shall excuse such delay in performance on a day for day basis for a period of time equal to the duration of the Force Majeure condition or the period needed to remedy its effects, to the extent that such Force Majeure condition causes a delay in the Work.
13.5.4 Termination. In the event that (a) Contractor or Owner are denied any required Authorizations, or such Authorizations are obtained, but are withdrawn, or contain restrictions, qualifications, or conditions that would have a material adverse effect on the benefits or obligations of the Parties, and such denial or restrictions, qualifications or conditions are not the result of Contractor’s actions, failure to act or error or omission, and the Parties are unable to reform this Agreement or agree upon other mutually acceptable arrangements, or (b) if a Force Majeure event continues for more than 180 days after notice of the event of Force Majeure is given under Section 13.5.2, or (c) the Project cannot proceed to completion as the ultimate result of a refusal of a Governmental Authority to approve a Facility or to provide any other Authorization, which refusal or failure is not due solely to the negligence or willful misconduct of the terminating Party, then such Party may terminate this Agreement, in its sole discretion, within 60 days after the conditions in (a), (b) or (c), by giving at least 10 Business Days prior written notice to the other Parties.
13.6 Right to Termination. No Party shall have the right to terminate this Agreement for cause or otherwise except as described in Section 13.2, Section 13.4, Section 13.5, and Section 14.2.
13.7 Effect of Termination Under Sections 13.4, 13.5 & 14.2. In the event that this Agreement is terminated pursuant to Sections 13.4 13.5, or 14.2, Owner shall pay to Contractor an amount equal to the sum of (1) the Cost of the Work incurred by Contractor in connection with the Work and the Project as of the date of termination, (which would include any cancellation fees, restocking fees, non -refundable deposits or balances due on material which cannot be cancelled) plus (2) to the extent not already reflected in (1), any termination charges incurred by Contractor that are imposed by Subcontractors as a result of the termination and any other costs reasonably incurred by Contractor solely as a result of the termination to the extent that this sum is not reimbursed pursuant to insurance policies maintained by Contractor pursuant to Schedule II (it being specifically understood that Owner shall be responsible for the payment of all deductible amounts under any said insurance policies to the extent provided in Schedule II). Upon such payment by Owner, Owner shall have exclusive ownership of the Facility and the Work and Contractor shall have no further obligations with respect thereto.
13.8 Completion; Survival. Unless earlier terminated pursuant to the terms of this Article 13, this Agreement shall be deemed to be completed when both of the following have taken place: (a) the Final Completion Date has occurred, and (b) Owner has paid the Cost of the Work in full pursuant to Article 9. Notwithstanding the foregoing, Contractor’s obligations under Section 5.4.2 shall continue until the date that is seven (7) years after the Final Completion Date and Contractor’s obligations under Section 11.7 shall continue until the expiration of the applicable warranty periods. Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 11.9, 11.10, 11.11, 11.2, and 11.13 and Article 12 shall survive the completion or termination of this Agreement and nothing in this Agreement shall be deemed to limit the applicable statute of limitations period within which any Party may bring a claim for breach of this Agreement.
| -34- |
ARTICLE 14 - UTILITY MODIFICATIONS
14.1 Utility Modifications. The Parties acknowledge that this Agreement will be executed, and will require the Parties to make substantial contractual commitments and incur significant costs, in advance of the interconnection of the Facility and the Utility’s final reconciliation of the interconnection costs in accordance with the New York State Standardized Interconnection Requirements, and that the current EPC Price is based on estimated interconnection costs. The Parties agree that in the event that a final reconciliation by the Utility in accordance with the Standardized Interconnection Requirements results in the increase or decrease of the estimated interconnection costs for the Facility, the EPC Price shall be adjusted upwards or downwards accordingly (the “Interconnection Adjustment”).
14.2 Conditional Right to Terminate Upon Material Reallocation of Costs. In the event that the Utility’s final reconciliation of the interconnection costs for a Facility results in an increase in the EPC Price that is greater than or equal to Fifty Thousand Dollars ($50,000), then Owner shall thereupon have the right, exercisable upon not less than three (3) Business Days advance written notice to Contractor, to terminate this Agreement.
ARTICLE 15 - GOVERNING LAW; INTERPRETATION
15.1 Governing Law. This Agreement shall be construed in accordance with the laws of New York.
15.2 Interpretation.
15.2.1 Schedules are Part of Agreement. This Agreement includes the attached Schedules I through VIII.
15.2.2 Entire Agreement. This Agreement, together with the Schedules attached hereto and the Collateral Agreements, constitutes the entire agreement and complete understanding between Contractor and Owners with respect to the subject matter described herein and therein and supersedes all other understandings and agreements between the Parties with respect to such subject matter.
15.2.3 Order of Interpretation. In the event of any inconsistencies between the terms and conditions of the body of this Agreement and the Schedules, the provision of the body of this Agreement shall prevail over the terms of any Schedule.
15.2.4 Captions. Captions or headings to Articles, Sections or paragraphs of this Agreement are inserted for convenience of reference only and shall not affect the interpretation or construction hereof.
| -35- |
15.2.5 Additional Principles of Construction. The Agreement shall be interpreted in a manner as to be consistent with the following principles:
15.2.5.1 Use of Good Industry Practice. It is the intent of the Agreement to require the application of Good Industry Practice to the Work where details of such Work are not included, are incomplete, are not specified, or are not clearly defined in the Specifications.
15.2.5.2 Integration of Project Documents. It is the intent of the Parties that the Specifications for the Facility, this Agreement, and the Schedules hereto (the “Project Documents”) are to be interpreted as an integrated whole. Where work or obligations are referenced in one of the Project Documents but not in another, Contractor shall coordinate the design and installation of the Work as if it were shown on both to the extent required to comply with the Acceptance Tests and Good Industry Practice.
15.3 Drafting Ambiguities. Each Party to the Agreement has reviewed and revised the Agreement. The rule of construction that any ambiguities are to be resolved against the drafting parties shall not be employed in the interpretation of the Agreement, or any amendment thereto.
ARTICLE 16 - MISCELLANEOUS
16.1 Third Party Beneficiaries. Except with respect to the provisions of the Agreement pertaining to assignment, the Agreement is not intended to and shall not create rights of any character whatsoever in favor of any person other than the Parties to the Agreement.
16.2 Good Faith and Fair Dealing. Whenever the Agreement grants to any Party the right to take action, exercise discretion, or determine whether to approve a proposal of any other Party, the Party possessing the right shall act in good faith and shall deal fairly with the other Party. In the event of a Dispute, the Parties shall be obligated to make a reasonable and diligent effort to resolve the Dispute at the appropriate level before invoking the dispute resolution procedures in Article 12. Each of the Parties further expressly agrees that at all times it will exercise its good faith in the administration of this Agreement, and all actions of the Parties shall be designed to facilitate the successful completion of the Work by Contractor and to promote the effective and efficient administration of this Agreement, and to achieve the objective of providing efficient, reliable and economical long term energy production. The Parties further commit to act in a timely fashion, consistent with maintaining the Project Schedule to: (a) review all documents, (b) respond to all requests for information, (c) support all applications for Authorizations; (d) respond to requests for access to offsite support facilities and other assistance; and (e) resolve all differences and Disputes in a timely fashion.
16.3 Severability. Every part, term or provision of the Agreement is severable from others. Notwithstanding any possible future finding by a duly constituted authority that a particular part, term or provision is invalid, void or unenforceable (but subject to the effect of the Parties’ agreements in Section 5.3 and Article 14), the Agreement has been made with the clear intention that the validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby.
16.4 Survival. All representations and warranties, and all agreements by the Parties in this Agreement to indemnify each other shall survive the termination of this Agreement. The termination of this Agreement shall not limit or otherwise affect the respective rights and obligations of the Parties which accrued prior to the date of termination, and which continue to exist following the termination of this Agreement.
| -36- |
16.5 Technical or Trade Usage. When words that have a well-known technical or trade meaning are used to describe materials, equipment or services, such words will be interpreted in accordance with such meaning. Reference to such standard specifications, manuals, or codes of any technical society, organization or association, or to the code of any Governmental Authority, whether such references be specific or by implication, shall mean the latest standard specification, manual or code (whether or not specifically incorporated by reference in the contract documents). Performance shall conform to the standards in effect at the time of performance and may change the duties and responsibilities of Contractor or Owners, or any of their agents, consultants, or employees from those set forth in the Agreement.
16.6 Amendments and Waivers. This Agreement may be amended only by a written instrument signed by a duly authorized representative of each Party. The failure of any Party to insist on one or more occasions upon strict performance of the obligations owed it by the other Parties shall not waive or release such Party’s right to insist on strict performance of such obligation or any other obligation in the future.
16.7 Notices. Except as expressly provided otherwise in this Agreement, all notices given to any of the Parties pursuant to or in connection with this Agreement shall be in writing, shall be delivered by hand, by certified or registered mail, return receipt requested, by facsimile transmission with confirmation, or by Federal Express, Express Mail, or other nationally recognized overnight carrier, or transmitted by e-mail if receipt of such transmission by e-mail is specifically acknowledged by the recipient (automatic responses not being sufficient for acknowledgment). Notices are effective when received (“Notice”). Notice addresses are as follows:
If to Contractor:
Abundant Solar Power Inc.
700 West Metro Park
Rochester, NY 14623-2678
Attention: Dr. Richard Lu
If to Owners:
Honeywell International Inc.
16.8 Change of Address. Any Party may, by written notice to the other Parties given in accordance with the foregoing, change its address for notices.
16.9 Successors; Assignment. This Agreement shall be binding upon the Parties and their respective successors and permitted assigns. No Party shall make any sale, assignment, mortgage, pledge or other transfer of all or any portion of its rights or obligations under this Agreement, whether voluntarily or involuntarily, by operation of law or otherwise, without the prior written consent of the other Party; provided, however, that: (a) any Party may make a collateral assignment of its interest in this Agreement to a Financing Party; and (b) this Section 16.9 shall not require prior written consent for any voluntary transfer in connection with a change in ownership, or the merger, restructuring or consolidation of Contractor, so long as the Agreement is transferred to an affiliate and a parent guarantee to guarantee performance of the Agreement is put in place, as so voluntarily transferred. Any successor to Contractor’s or Owners’ respective interests under this Agreement shall assume in writing all responsibilities of Contractor or Owners, as the case may be under this Agreement.
| -37- |
16.10 Counterparts. This Agreement may be signed in counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute the same instrument.
16.11 Further Assurances. Each Party agrees to execute and deliver any such instruments and to perform any such acts as may be necessary or reasonably requested by any other Party in order to give full effect to the terms of this Agreement.
16.12 Interest. Past due payments hereunder not contested in good faith shall bear interest from the due date until paid at the Late Payment Rate.
16.13 Relationship to Other Agreements.
16.13.1 The Parties recognize that this Agreement and other related agreements relating to the Facility entered into between Owners and Contractor and others (the “Collateral Agreements”) constitute an integrated and comprehensive set of agreements that are intended to facilitate the construction and operation of the Facility to provide efficient, reliable and economic long-term electricity production. To the extent permitted by Law, all of the Collateral Agreements shall be read together to achieve these objectives and the Parties agree to support all such documents, regardless of whether they are a party to a particular Collateral Agreement.
16.13.2 Notwithstanding Section 16.15, the Agreement and the Collateral Agreements are separate and independent undertakings by the Parties. Termination of one of these agreements shall not affect or impair the rights or obligation of the Parties under the Collateral Agreements, except as otherwise specifically provided herein and in the Collateral Agreements.
16.14 No Partnership; Third Party Beneficiaries. The Parties hereby expressly disclaim any intention to create a joint venture or partnership relation between the Parties. Except as expressly stated in this Agreement, there are no third-party beneficiaries to this Agreement.
16.15 Further Documents and Actions. Each Party shall promptly execute and deliver such further documents and assurances for and take such further actions reasonable requested by the other Parties as may be reasonably necessary to carry out the intent and purpose of this Agreement.
16.16 Time of the Essence; Cooperation to Control Costs. The Parties recognize that time is of the essence in designing and completing construction of the Facility. The Parties agree to use their good faith efforts to cooperate with each other and, where applicable, with Subcontractors to keep the Project on schedule, to control Project costs and to refrain from actions that drive up the Project costs or inject delay into the Project Schedule.
16.17 Failure to Promptly Respond Deemed Approval. In all instances in this Agreement where Owner has the right to provide feedback or approve of the actions of Contractor with respect to the construction process, including without limitation, the Owners’ feedback and approval rights under Section 4.2.4 (Prime Subcontractors), Section 4.2.5 (QA/QC Director), and Section 4.2.6 (Safety Director), Owner shall use commercially reasonable efforts to promptly respond, with due regard to the time sensitivity of the particular situation. Unless expressly provided otherwise in this Agreement, in the event any of the Owners fail to respond with its approval or disapproval under Section 4.2.4, 4.2.5 or 4.2.6 within ten (10) Business Days of the delivery of the information or notice that triggers such Owner’s right to approve or provide feedback, the Parties agree that such Owner shall be deemed to have approved the item in question or to have waived its right to provide feedback, as the case may be.
[SIGNATURE PAGE FOLLOWS]
| -38- |
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first set forth above*.
| CONTRACTOR: | ||
| Abundant Solar Power Inc. | ||
| By: | “Richard “Lu” | |
| Name: | Richard Lu | |
| Its: | CEO | |
| OWNERS: | ||
| Abundant Solar Power (SB13W) LLC | ||
| By: | Honeywell International Inc, sole member | |
| By: | “Benny “Dehghi” | |
| Name: | Benny Dehghi | |
| Its: | VP Remediation | |
| Abundant Solar Power (SB13N) LLC | ||
| By: | Honeywell International Inc, sole member | |
| By: | “Benny “Dehghi” | |
| Name: | Benny Dehghi | |
| Its: | VP Remediation | |
| Abundant Solar Power (SB14-4) LLC | ||
| By: | Honeywell International Inc, sole member | |
| By: | “Benny “Dehghi” | |
| Name: | Benny Dehghi | |
| Its: | VP Remediation | |
*Executed on September 18, 2023
| -39- |
Attached Schedules:
Schedule I – Definitions
Schedule II – Insurance
Schedule III – Acceptance Testing
Schedule IV – Payment Milestone Schedule
Schedule V – Site Plans
Schedule VI – Project Budget
Schedule VII – The Work
Schedule VIII – Governmental Authorizations to be Obtained
Schedule IX – Project Schedule
| -40- |
Schedule I
Definitions
“AAA” shall have the meaning set forth in Section 12.1.3.
“Acceptance Tests/Acceptance Testing” shall mean the Initial Acceptance Test and the Final Acceptable Test.
“Acceptance Test Capacity Guarantee” shall have the meaning assigned to it in Section 11.3.
“Acceptance Testing Period” shall have the meaning set forth in Section 11.2.3.
“Addendum” or “Addenda” shall have the meaning assigned to it in Section 8.1.
“Advance” shall mean any amount provided by Honeywell International Inc. to Contractor pursuant to the Grid Note for deposits and advance payments relating to the Work.
“Affiliate” shall mean (i) any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a Party.
“Agreement” shall have the meaning assigned to it in the first paragraph of this Agreement.
“Anticipated Sales Tax Amount” shall have the meaning assigned to it in Section 4.3.
“Authorization” shall mean any license, permit, approval, filing, waiver, exemption, variance, clearance, entitlement, allowance, franchise, or other authorization required by a Governmental Authority
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which either the state or national banks in the State of Delaware are not open for the conduct of normal banking business.
“Change Order” shall mean a document issued pursuant to Article 8, which describes changes in or to the Work.
“Collateral Agreements” shall have the meaning given it in Section 16.13.1.
“Commercial Operation” shall have the meaning given it in Section 10.4.
“Contractor” shall have the meaning assigned to it in the first paragraph of this Agreement.
“Contractor Indemnitee” shall have the meaning assigned to it in Section 11.9.
“Contractor Event of Default” shall have the meaning assigned to it in Section 13.1.
“Cost of the Work” shall mean the actual costs incurred for the performance of the Work under this Agreement.
“Damages Cap” shall have the meaning set forth in Section 11.8.1.
“Defects”, individually a “Defect”, shall have the meaning assigned to it in Section 11.4.
“Delay Default Date” shall mean December 20, 2024, as such date may be extended by any Force Majeure condition.
“Dispute” shall have the meaning assigned to it in Section 12.1.1.
| -41- |
“Easement Areas” shall have the meaning assigned to it in Section 4.10.
“Effective Date” shall mean the date that this Agreement has been signed by Contractor and Owner.
“Engineer” shall have the meaning assigned to it in Section 4.2.1.
“EPC Price” shall have the meaning assigned to it in Section 7.1.
“Equipment Instruction Manual” shall mean the manual or manuals provided by Contractor to Owner pursuant to Section 3.1.6, including operation requirements, guidelines and manuals established by the manufacturers of the major equipment for the Facility.
“Excluded EPC Costs” shall have the meaning given the term in Section 7.2.
“Facility” shall mean the solar energy facility, as more particularly described in the Recitals to this Agreement.
“Facility Lease” shall mean the lease entered into between the property owner and the Owner, as amended from time to time.
“Facility Start Up” shall mean the activities following completion of construction of the Facility, but prior to Acceptance Testing, that are necessary to accomplish the initial startup of the equipment within the Facility that generates electricity, including, without limitation, filling equipment with oils and other fluids, and the provision of any equipment vendor services relating thereto.
“Final Acceptance Test” shall mean the performance tests, to be performed on the Facility as more particularly set forth on Schedule III, including any adjustments thereto as provided in this Agreement or as otherwise agreed to by the Parties to address the conditions present at the time the Facility is available for testing.
“Final Completion” shall have the meaning assigned to it in Section 10.6.
“Final Completion Date” shall mean the date Final Completion occurs.
“Final Payment” shall have the meaning assigned to it in Section 9.2.
“Financing Party” shall mean any Person, other than Parties, providing debt or equity financing (including equity contributions or commitments) refinancing of any guarantees, insurance or credit support for or in connection with such a financing or refinancing, in connection with the development, construction, ownership or leasing operation or maintenance of the Facility, or any part thereof including any trustee or agent acting on any such Person’s behalf.
“Force Majeure” shall mean in respect of any Party an event not reasonably anticipated as of the date of this Agreement, which is beyond the reasonable control of such Party which prevents or delays such Party from performing its obligations under this Agreement (except for the obligation to pay money) or which materially increases its costs of performing those obligations, and which could not have been avoided by the exercise of due diligence, is not the result of the failure to act or the negligence or willful misconduct of such Party and for which, by the exercise of due diligence, the affected Party is unable to overcome or obtain, or cause to be obtained, a commercially reasonable substitute. Force Majeure events include, to the extent they otherwise meet the foregoing definition, the following: war, hostilities, civil disturbances, any kind of local or national emergency, riot, fire, flood, hurricane, tornado, earthquake, power failure, epidemic, explosion, sabotage, act of God, strike or other labor unrest of a national or regional nature (excluding a localized strike against an individual employer), embargo, change in any applicable Law or Authorization by a Governmental Authority after the Effective Date of this Agreement that would prohibit the use of the Site for the performance of the Work, any , or expropriation or confiscation of facilities. The effect of Force Majeure upon the EPC Price and upon the Delay Default Date shall be limited as more particularly set forth in Sections 7.2 and 13.5.3. Force Majeure shall not include breach of contract by Subcontractors or Suppliers.
| -42- |
“Good Industry Practice” shall mean, at any particular time, (a) any of the practices, methods and acts engaged in or approved by a significant portion of the United States solar electric power generating industry prior to such time and by constructors, Owner, operators or maintainers of facilities similar in size and operational characteristics to the Facility, or (b) any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable costs consistent with applicable Law and the Authorizations, environmental considerations, good business practices, reliability, safety, expedition and the manufacturer’s maintenance requirements, provided that “Good Industry Practice” is not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to be a spectrum of the acceptable practices methods or acts generally accepted in such industry having due regard for, among other things, the manufacturer’s maintenance requirements, the requirements of Governmental Authorities and any applicable agreements.
“Governmental Authority” shall mean any federal, state or local governmental department, body, political subdivision, commission, agency, instrumentality, court, judicial or administrative body, taxing authority, or other authority thereof having jurisdiction over either Party, the Work, the Facilities or the Site, whether acting under actual or assumed authority. Permits, orders or other approvals given by such bodies are “Governmental Authorizations”.
“Grid Note” shall mean a certain Optional Advance Demand Promissory Grid Note given by Contractor to Honeywell International Inc. dated as of August 18, 2023 regarding any Advance.
“Hazardous Substances” shall mean, collectively, any petroleum or petroleum product, asbestos in any form that is or could become friable, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs), hazardous waste, hazardous material, hazardous substance, toxic substance, contaminant or pollutant, as defined or regulated under any federal, state or local law relating to the protection of the environment, including the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901 et seq., the Comprehensive Environmental Response Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq., or any similar state statute.
“IDA” shall mean the Onondaga County Industrial Development Agency.
“IDA Exemption” shall have the meaning assigned to it in Section 4.3 hereof, and shall further mean the exemption from state and local sales and use taxes created by Section 478 of the New York General Municipal Law.
“Incentives” shall have the meaning assigned to it in Section 4.21.
| -43- |
“Independent Engineer” shall mean a qualified independent engineering firm mutually agreeable to Contractor and the State, to be selected by them not later than ten (10) days prior to the commencement of construction. The Parties shall employ the Independent Engineer, whose compensation shall be a part of the Cost of the Work, to verify that Mechanical Completion has occurred and to resolve any disputes among the Parties as to the items that should appear on the Punch List.
“Initial Acceptance Test” shall have the meaning assigned to it in Section 11.2.1.1.
“Interconnection Adjustment” shall have the meaning assigned to it in Section 14.1.
“Late Payment Rate” shall mean 1% per month.
“Law” shall mean (i) any law, legislation, statute, act, rule, ordinance, decree, treaty, regulation, order, judgment, or other similar legal requirement, or (ii) any legally binding announcement, directive or published practice or interpretation thereof, enacted, issued or promulgated by any Governmental Authority.
“Lay Down Areas” shall have the meaning assigned to it in Section 4.10.
“Major Equipment Suppliers” shall have the meaning assigned to it in Section 4.2.3.
“Mechanical Completion” shall have the meaning set forth in Section 10.3.
“Minimum Required Capacity” shall have the meaning assigned to it in Section 11.3.1.
“Notice” shall have the meaning assigned to it in Section 16.7.
“Operator” shall mean the operator of the Facility under a separate Operation and Maintenance Agreement.
“Owner” shall have the meaning assigned to it in the first paragraph of this Agreement.
“Owner Indemnitee” shall have the meaning assigned to it in Section 11.9.
“Owner’s Event of Default” shall have the meaning assigned to it in Section 13.3.
“Parties” shall mean Contractor and Owner when referred to collectively and “Party” shall mean any one of the Parties referred to singly.
“Payment Due Date” shall have the meaning assigned to it in Section 9.1.3.
“Payment Milestones” shall mean those milestones set in Schedule IV.
“Payment Milestone Schedule” shall mean Schedule IV.
“Payment Period” shall have the meaning assigned to it in Section 9.1.1.1.
“PCO” shall have the meaning assigned to it in Section 4.2.2.
“Person” shall mean any individual, firm, company, association, general partnership, limited partnership, limited liability company, trust, business trust, corporation, public body, or other legal entity.
“PM/CM” shall have the meaning assigned to it in Section 4.2.2.
“PM/CM’s Contract” shall have the meaning assigned to it in Section 4.2.2.
“Prime Subcontractor” shall have the meaning assigned to it in Section 4.2.4.
“Prime Subcontractor Contracts” shall have the meaning assigned to it in Section 4.2.4.
“Progress Report” shall have the meaning assigned to it in Section 9.1.1.1.
| -44- |
“Project” shall mean the development of the Facilities at the Site by the Contractor and shall include the Work.
“Project Budget” shall have the meaning assigned to it in Schedule VI.
“Project Documents” shall have the meaning assigned to it in Section 15.2.5.2.
“Project Schedule” shall mean the schedule of activities (including all amendments or supplements thereto following the Effective Date of this Agreement) during the Project that coordinates all aspects of the Project, including without limitation, permitting, engineering, procurement of equipment and materials, construction, Facility Start Up, Mechanical Completion, Acceptance Testing, Substantial Completion, completion of the Punch List, Final Completion and Project close out. The Project Schedule will include, without limitation, the initial Project Schedule included in Schedule IX hereto, and sub-Project schedules for each of the major participants in the Project, and all amendments or supplements thereto following the Effective Date of this Agreement.
“Punch List” shall have the meaning assigned to it in Section 10.5.
“Punch List Holdback Amount” shall have the meaning assigned to it in Section 10.5.
“QA/QC Director” shall have the meaning assigned to it in Section 4.2.5.
“Remedial Measures” shall have the meaning assigned to it in Section 11.3.1.
“Retainage” shall have the meaning assigned to it in Section 9.1.2.
“Safety Director” shall have the meaning assigned to it in Section 4.2.6.
“Safety Plan” shall have the meaning assigned to it in Section 4.8.
“Sales Tax Savings” shall have the meaning assigned to it in Section 4.3.
“Security Plan” shall have the meaning assigned to it in Section 4.9.
“Site” shall mean the following piece of land: the site located at [REDACTED: address]
“Soil Disposal Area” shall have the meaning assigned to it in Section 4.10.
“Specifications” shall mean the issued for construction document package and all plans, drawings and specifications prepared by Engineer for the Facilities and the Work, which are incorporated into this Agreement by this reference, and any supplements or amendments thereto that may be agreed to by the Parties after execution of this Agreement. The Specifications shall further include any Change Orders and other changes to the Work authorized in accordance with Article 8 of this Agreement.
“Standardized Interconnection Requirements” means the New York State Standardized Interconnection Requirements and Application Process for New Distributed Generators and/or Energy Storage Systems 5 MW or Less Connected in Parallel with Utility Distribution Systems, as adopted by the New York State Public Service Commission, and as most recently modified, effective May 1, 2023.
“Subcontractor” shall mean every Person (other than employees of Contractor) employed or engaged by Contractor or any Person (other than Owner) directly or indirectly in privity with Contractor (including every sub-subcontractor of whatever tier) to perform any portion of the Work, whether the furnishing of labor, materials, equipment, services or otherwise.
“Subcontractor Protections” shall have the meaning assigned to it in Section 11.7.
| -45- |
“Substantial Completion Date” shall mean the date on which the Facility achieves Commercial Operation.
“Suppliers” shall mean a manufacturer, fabricator, supplier, distributor, materialman or vendor having a direct contract with Contractor or with any Subcontractor to furnish materials or equipment to be incorporated in the Work by Contractor or any Subcontractor.
“Taxes” means all taxes, assessments, customs, imposts, charges, tariffs, imposts, duties, fees, levies and other governmental charges effective or enacted (whether in the United States or elsewhere and including, without limitation, any of the foregoing related to the importation of any items into the United States) as of the date of this Agreement or thereafter, including, without limitation, income, franchise, capital stock, property tax, sales and use taxes, utility, tangible, withholding, employment, payroll, social security, social contribution, unemployment compensation, disability, transfer, sales, use, fuel, excise, gross receipts, net worth, value-added and all other taxes of any kind and any charges, interest, additions to tax, penalties, or any other amounts imposed by any Governmental Authority, whether such amounts are normally included in the purchase price of an item or service, or are normally stated separately.
“Term” shall mean the duration of this Agreement, from the Effective Date until Final Completion.
“Testing Engineer” shall have the meaning set forth in Section 11.1.
“Traffic Control Plan” shall have the meaning set forth in Section 4.7.
“Uninsured Force Majeure” shall mean any event of Force Majeure, or portion thereof, not covered by the insurance required to be carried in connection with the Project.
“Utility” shall mean the utility that provides retail electric service in the geographic area encompassing the Site.
“Warranty Period” shall mean, with respect to any component, the applicable length of any warranties provided by the related Subcontractor.
“Work” shall mean all design, engineering, procurement, construction, erection, installation, interconnection, training, start-up and testing activities and services necessary to achieve a complete and operable Facility in accordance with the terms of this Agreement, to achieve Mechanical Completion, Substantial Completion, and Final Completion, and shall include all activities and services described in Schedule VII and in Section 3.1.
| -46- |
Schedule II
Insurance
[REDACTED: Confidential insurance requirements]
| -47- |
Schedule III
Acceptance Testing
[REDACTED: Confidential and commercially sensitive information regarding acceptance testing]
| -48- |
Schedule IV
Payment Milestone Schedule
[REDACTED: Confidential and commercially sensitive information regarding payment milestones]
| -49- |
Schedule V: Site Plans
[REDACTED: Confidential and commercially sensitive information regarding site plans]
| -50- |
Schedule VI
EPC Price
| Total Contract Value (including purchase price payable under the MIPA): | $ | 41,288,430 | ||
| [REDACTED: Confidential and commercially sensitive information regarding the contract price allocation] |
| -51- |
Schedule VII
The Scope of Work
[REDACTED: Confidential and commercially sensitive information regarding the scope of work]
| -52- |
Schedule VIII
Governmental Authorizations Obtained
National Grid CESIR Report SB13-1 obtained June 6, 2023
National Grid CESIR Report SB13-2 obtained June 6, 2023
National Grid CESIR Report SB14 obtained June 6, 2023
Town of Camillus Building Permit obtained June 15, 2023
Town of Camillus Planning Board Resolution obtained June 20, 2023, including letter
from Town of Engineer incorporated by reference in this Resolution
City of Syracuse Three Mile Review Subdivision Approval
Onondaga County Planning Board Resolution obtained June 7, 2023
| -53- |
SCHEDULE IX
Initial Project Schedule
[REDACTED: Confidential and commercially sensitive information]
| -54- |
Exhibit 99.67
SolarBank Completes Sale of 21MW Community Solar Sites in Upstate New York to Honeywell International
● Total transaction value is US$41 million.
● Projects are construction ready and SolarBank will act as EPC Contractor.
● Expected to operate as community solar sites, selling credits to subscribers.
● Expected to be eligible to participate in the NYSUN program to receive NYSERDA incentives.
This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated June 29, 2023 to its short form base shelf prospectus dated May 2, 2023.
Toronto, Ontario, September 19, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that Honeywell International (“Honeywell”) has acquired the Company’s proposed 21 MW DC ground-mount solar power projects that are under development in upstate New York (the “Projects”). The Projects are known as SB 13-1, SB 13-2 and SB-14.
SolarBank originated the sites in upstate New York and the Projects have received positive interconnection results via a completed Coordinated Electric System Interconnection Review (CESIR). The Projects will be developed as three separate 7 MW DC solar power projects. The Company will now continue to build the Projects for Honeywell to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. The sale of the Projects and EPC agreement have a total value of approximately US$41 million. The Company also expects that it will retain an operations and maintenance contract for the Projects following the completion of construction.
“The relationship between Honeywell and SolarBank continues to grow and these projects represent the largest to date that will be constructed by the Company for Honeywell,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “We look forward to partnering and supporting the transition away from fossil fuels while reducing impacts to the electrical grid and lowering greenhouse gas emissions.”
Once completed, the Projects will be operated as community solar projects. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home. The Projects are expected to be eligible for incentives under the New York State Energy Research and Development Authority (NYSERDA) NY-Sun Program.
The Company previously announced that it had entered into a funding arrangement with Honeywell whereby Honeywell provided funding for deposits/advance payments by the Company’s subsidiaries that currently own the Projects (the “Project Companies”) to vendors in furtherance of the development of the Projects. These advances, which total approximately US$2.668 million, will be offset against the money due from Honeywell to the Company under the definitive agreements for the Projects.
There are several risks associated with the development of the Projects. The development of any project is subject to the continued availability of third-party financing arrangements for the project owner and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
About Honeywell
Honeywell (www.honeywell.com) delivers industry-specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Honeywell technologies help aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power projects mentioned in this press release; the reduction of carbon emissions; the receipt of incentives for the Projects; the expected value of the EPC Contract; the retention of an operations and maintenance contract for the Projects; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.68
SolarBank Executes Lease on 16.817MW Ground Mount Site in Alberta
| ● | The project represents SolarBank’s first organic development in the Province of Alberta | |
| ● | The project is expected to generate carbon offsets under Alberta’s TIER Regulations |
Toronto, Ontario, September 21, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has executed a lease agreement on a 74.93 acre site located in Sturgeon County, Alberta. SolarBank intends to develop a ground-mount solar power project located on the site with an installed capacity of 16.817MW DC (the “Project”).
The Company has submitted its initial interconnection request for the Project and is awaiting the results of that process which is discussed further below. meanwhile, the Company has started environmental studies for the future permitting process. The intention upon completion of the Project is that it will operate as a Small Scale Generator selling electricity directly to the grid. The Company expects that upon the Project successfully commencing operation that it will generate steady long-term revenues, and in addition, carbon offsets under Alberta’s TIER system.
Alberta has established the Technology Innovation and Emissions Reduction (TIER) Regulation, which is at the core of emissions management in Alberta. The TIER system implements Alberta’s industrial carbon pricing and emissions trading system. TIER helps industrial facilities find innovative ways to reduce emissions and invest in clean technology to stay competitive and save money.
“We are excited to be proceeding with our first organic project in the Province of Alberta, expanding SolarBank’s geographic reach,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “We are happy to be developing a project that should be able to support Alberta’s TIER system which achieves emissions reductions using an approach that is cost-efficient and tailored to Alberta’s industries and priorities.”
The Alberta Utilities Commission (“AUC”) has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024, and that it will review policies and procedures for the development of renewable electricity generation. This pause will impact the Company’s receipt of interconnection approval for the Project from the AUC until it is over, but in the interim the Company will advance its environmental and other studies, along with permits that are unrelated to the AUC.
There are several risks associated with the development of the Project. The development of any project is subject to receipt of interconnection approval, receipt of required permits, the continued availability of third-party financing arrangements for the Company, the length of the AUC announced pause on approval of new renewable electricity generation projects and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the reduction of carbon emissions; the qualification of the Project for carbon offsets under the TIER system; the receipt of interconnection approval, permits and financing to be able to construct the Project; and the length and implications of the AUC announced pause on approval of new renewable electricity generation projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the AUC announced pause on approval of new renewable electricity generation projects ends on February 29, 2024; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the AUC announced pause on approval of new renewable electricity generation projects is extended or results in a restrictive permitting process that makes the Project unviable; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.69
Exhibit 99.70
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| September 18, 2023 | |
| 3. | News Release |
| A news release was disseminated on September 19, 2023 via Cision. | |
| 4. | Summary of Material Change |
Honeywell International (“Honeywell”) has acquired the Company’s proposed 21 MW DC ground-mount solar power projects that are under development in upstate New York (the “Projects”). The Projects are known as SB 13-1, SB 13-2 and SB-14. SolarBank originated the sites in upstate New York and the Projects have received positive interconnection results via a completed Coordinated Electric System Interconnection Review (CESIR). The Projects will be developed as three separate 7 MW DC solar power projects. The Company will now continue to build the Projects for Honeywell to commercial operation via an engineering, procurement, and construction (“EPC”) agreement. The sale of the Projects and EPC agreement have a total value of US$41,288,430 that will be payable in instalments based on the construction schedule which has a forecasted completion by January 30, 2025.
| |
| 5.1 | Full Description of Material Change |
Honeywell has acquired the Company’s proposed 21 MW DC ground-mount solar power projects that are under development in upstate New York. The Projects are known as SB 13-1, SB 13-2 and SB-14. SolarBank originated the sites in upstate New York and the Projects have received positive interconnection results via a completed Coordinated Electric System Interconnection Review (CESIR). The Projects will be developed as three separate 7 MW DC solar power projects. The Company will now continue to build the Projects for Honeywell to commercial operation via an EPC agreement (the “EPC Agreement”).
The sale of the Projects was completed by way of the sale of three subsidiary companies of the Company to Honeywell pursuant to a Membership Interest Purchase Agreement (“MIPA”) dated effective September 15, 2023 and executed on September 13, 2023. The EPC Agreement is dated effective September 15, 2023 and executed on September 13, 2023. The MIPA and the EPC agreement have a total value of US$41,288,430. The amount due under the EPC Agreement will be payable in instalments based on the construction schedule which has a forecasted completion by January 30, 2025. The Company also expects that it will retain an operations and maintenance contract for the Projects following the completion of construction.
The Company previously announced on August 21, 2023 that it had entered into a funding arrangement with Honeywell whereby Honeywell provided funding for deposits/advance payments by the Company’s subsidiaries that currently own the Projects (the “Project Companies”) to vendors in furtherance of the development of the Projects. These advances, which total approximately US$2.668 million, was offset in full against the purchase price pursuant to the MIPA and a partial credit against the amounts due under the EPC Agreement. |
| 2 |
Once completed, the Projects will be operated as community solar projects. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home. The Projects are expected to be eligible for incentives under the New York State Energy Research and Development Authority (NYSERDA) NY-Sun Program. | |
| There are several risks associated with the development of the Projects. The development of any project is subject to the continued availability of third-party financing arrangements for the project owner and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Information” for additional discussion of the assumptions and risk factors associated with the statements in this report. | |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. | |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
| The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is: | |
| Sam Sun, Chief Financial Officer | |
| (416) 494-9559 | |
| sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| September 28, 2023 |
Forward-Looking Information
This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power projects mentioned in this report; the reduction of carbon emissions; the receipt of incentives for the Projects; the expected value of the EPC Contract; the retention of an operations and maintenance contract for the Projects; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report.
| 3 |
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.71
SOLARBANK CORPORATION
(Formerly Abundant Solar Energy Inc.)
Condensed Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
For the three months ended September 30,2023 and 2022
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
| Notes | September 30, 2023 | June 30, 2023 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 621,151 | $ | 749,427 | ||||||
| Short-term investment | 3 | 1,120,000 | 6,550,000 | |||||||
| Trade and other receivables | 4 | 3,964,550 | 3,837,207 | |||||||
| Unbilled revenue | 9,207,041 | 7,405,866 | ||||||||
| Prepaid expenses and deposits | 5 | 5,163,783 | 3,054,678 | |||||||
| Contract fulfilment costs | 7 | 196,355 | - | |||||||
| Inventory | 8 | 808,902 | 448,721 | |||||||
| 21,081,782 | 22,045,899 | |||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment | 6 | 939,484 | 950,133 | |||||||
| Right-of-use assets | 12 | 133,080 | 144,487 | |||||||
| Development asset | 9 | 4,834,596 | 1,106,503 | |||||||
| Investment | 19 | 3,187,515 | 722,515 | |||||||
| 9,094,675 | 2,923,638 | |||||||||
| Total assets | $ | 30,176,457 | $ | 24,969,537 | ||||||
| Liabilities and Shareholder’s equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 10 | $ | 6,391,837 | $ | 4,713,497 | |||||
| Unearned revenue | 11 | 2,756,895 | 1,150,612 | |||||||
| Current portion of long-term debt | 13 | 151,111 | 151,111 | |||||||
| Tax payable | 290,089 | 929,944 | ||||||||
| Current portion of lease liability | 12 | 47,203 | 44,961 | |||||||
| Current portion of tax equity | 14 | 88,791 | 93,751 | |||||||
| 9,725,926 | 7,083,876 | |||||||||
| Non-current liabilities: | ||||||||||
| Long-term debt | 13 | 731,482 | 759,259 | |||||||
| Deferred tax liabilities | - | - | ||||||||
| Lease liability | 12 | 115,876 | 128,350 | |||||||
| Tax equity | 14 | 353,755 | 366,856 | |||||||
| 1,201,113 | 1,254,465 | |||||||||
| Total liabilities | $ | 10,927,039 | $ | 8,338,341 | ||||||
| Shareholders’ equity: | ||||||||||
| Share capital | 16 | 6,917,984 | 6,855,075 | |||||||
| Contributed surplus | 3,431,503 | 3,001,924 | ||||||||
| Accumulated other comprehensive income | (29,993 | ) | (116,759 | ) | ||||||
| Retained earnings | 8,687,170 | 6,652,551 | ||||||||
| Equity attributable to shareholders of the company | 19,006,664 | 16,392,791 | ||||||||
| Non-controlling interest | 18 | 242,754 | 238,405 | |||||||
| Total equity | 19,249,418 | 16,631,196 | ||||||||
| Total liabilities and shareholders’ equity | $ | 30,176,457 | $ | 24,969,537 | ||||||
Approved and authorized for issuance on behalf of the Board of Directors on November 29, 2023 by:
| “Richard Lu” | “Sam Sun” | |
| Richard Lu, CEO, and Director | Sam Sun, CFO |
See accompanying notes to these condensed interim consolidated financial statements.
| 2 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Expressed in Canadian dollars)
(Unaudited)
| Three Months Ended September 30 | ||||||||||
| Notes | 2023 | 2022 | ||||||||
| Revenue from EPC services | $ | 5,613,015 | $ | 5,465,542 | ||||||
| Revenue from development fees | 2,011,750 | - | ||||||||
| Revenue from O&M services | 56,496 | 14,910 | ||||||||
| 7,681,261 | 5,480,452 | |||||||||
| Cost of goods sold | (5,334,566 | ) | (4,917,533 | ) | ||||||
| Gross profit | 2,346,695 | 562,919 | ||||||||
| Operating expense: | ||||||||||
| Advertising and promotion | (503,809 | ) | - | |||||||
| Depreciation | (21,978 | ) | (9,746 | ) | ||||||
| Insurance | (39,246 | ) | (23,786 | ) | ||||||
| Office, rent and utilities | (84,244 | ) | (85,662 | ) | ||||||
| Professional fees | (300,591 | ) | (45,803 | ) | ||||||
| Consulting fees | (150,600 | ) | (173,469 | ) | ||||||
| Salary and Wages | (202,081 | ) | (66,903 | ) | ||||||
| Stock based compensation | (429,580 | ) | - | |||||||
| Travel and events | (44,263 | ) | (20,883 | ) | ||||||
| Total operating expenses | (1,776,392 | ) | (426,252 | ) | ||||||
| Other income (loss) | ||||||||||
| Interest income | 83,169 | 38 | ||||||||
| Interest expense | (24,081 | ) | (32,820 | ) | ||||||
| Other income | 4 | 1,371,837 | 122,072 | |||||||
| Net income before taxes | $ | 2,001,228 | $ | 225,957 | ||||||
| Income tax recovery | 37,740 | - | ||||||||
| Net income | $ | 2,038,968 | $ | 225,957 | ||||||
| Current translation adjustments, net of tax of $nil | 86,766 | (61,475 | ) | |||||||
| Net income and comprehensive income | $ | 2,125,734 | $ | 164,482 | ||||||
| Net income attributable to: | ||||||||||
| Shareholders of the company | 2,034,619 | 225,957 | ||||||||
| Non-controlling interest | 4,349 | - | ||||||||
| Net income | $ | 2,038,968 | $ | 225,957 | ||||||
| Total income and comprehensive income attributable to: | ||||||||||
| Shareholders of the company | 2,125,734 | 164,482 | ||||||||
| Non-controlling interest | - | - | ||||||||
| Total income and comprehensive income | $ | 2,125,734 | $ | 164,482 | ||||||
| Net income per share | ||||||||||
| Basic | 0.08 | 0.01 | ||||||||
| Diluted | 0.05 | 0.01 | ||||||||
| Weighted average number of common shares outstanding | ||||||||||
| Basic | 26,806,183 | 16,000,000 | ||||||||
| Diluted | 37,122,800 | 16,000,000 | ||||||||
See accompanying notes to these condensed interim consolidated financial statements
| 3 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian Dollars)
(Unaudited)
| Note | Share Capital | Share Capital | Share Option Reserve | Retained Earnings | Accumulated OCI | Total Shareholders’ Equity | Non- Controlling Interest | Total Equity | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | $ | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | ||||||||||||||||||
| Net income for the period | - | - | 225,957 | - | 225,957 | - | 225,957 | |||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | (61,475 | ) | (61,475 | ) | - | (61,475 | ) | ||||||||||||||||||||||||
| Balance at September 30,2022 | 16,000,000 | $ | 1,000 | $ | - | $ | 4,636,522 | $ | 12,292 | $ | 4,649,814 | $ | (44,717 | ) | $ | 4,605,097 | ||||||||||||||||||
| Balance at June 30, 2023 | 26,800,000 | $ | 6,855,075 | $ | 3,001,924 | $ | 6,652,551 | $ | (116,759 | ) | $ | 16,392,791 | $ | 238,405 | $ | 16,631,196 | ||||||||||||||||||
| Net income for the period | - | - | - | 2,034,619 | - | 2,034,619 | 4,349 | 2,038,968 | ||||||||||||||||||||||||||
| Common shares issued, net of costs | 2,200 | 21,659 | - | - | - | 21,659 | - | 21,659 | ||||||||||||||||||||||||||
| Warrant exercised | 16(c) | 55,000 | 41,250 | - | - | - | 41,250 | - | 41,250 | |||||||||||||||||||||||||
| RSU granted | 16(e) | - | - | 48,181 | - | - | 48,181 | - | 48,181 | |||||||||||||||||||||||||
| Share-based compensation | 16(d) | - | - | 381,398 | - | - | 381,398 | - | 381,398 | |||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | 86,766 | 86,766 | - | 86,766 | ||||||||||||||||||||||||||
| Balance at September 30,2023 | 26,857,200 | $ | 6,917,984 | $ | 3,431,503 | $ | 8,687,170 | $ | (29,993 | ) | $ | 19,006,664 | $ | 242,754 | $ | 19,249,418 | ||||||||||||||||||
See accompanying notes to condensed interim consolidated financial statements
| 4 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Unaudited
| Three months ended September 30, | ||||||||
| In Canadian Dollars | 2023 | 2022 | ||||||
| Operating activities: | ||||||||
| Net income (loss) | $ | 2,038,968 | $ | 225,957 | ||||
| Items not involving cash: | ||||||||
| Depreciation | 21,978 | 9,746 | ||||||
| Interest expenses | 14,608 | 31,338 | ||||||
| Changes in ITC Distribution | (34,643 | ) | ||||||
| Share-based compensation | 429,580 | - | ||||||
| 2,470,491 | 267,043 | |||||||
| Changes in non-cash working capital balances: | ||||||||
| Trade and other receivable | (1,711,627 | ) | (1,000,051 | ) | ||||
| Contract fulfilment costs | (194,781 | ) | 3,594,531 | |||||
| Inventory | (349,550 | ) | (182,591 | ) | ||||
| Prepaids | (2,045,404 | ) | (138,886 | ) | ||||
| Trade and other payables | 1,605,915 | (802,165 | ) | |||||
| Advance from customer | 1,593,413 | - | ||||||
| Income tax payable | (658,627 | ) | 17,994 | |||||
| Changes in due to related parties | (155,673 | ) | 833,786 | |||||
| Cash provided by operating activities | 554,157 | 2,589,661 | ||||||
| Investing activities: | ||||||||
| Acquisition of development asset | (3,675,008 | ) | - | |||||
| Redemption of GIC | 5,430,000 | - | ||||||
| Investment in partnership units | (2,465,000 | ) | - | |||||
| Cash used in investing activities | (710,008 | ) | - | |||||
| Financing activities: | ||||||||
| Net proceeds from convertible loan | - | 825,000 | ||||||
| Proceeds from issuance of common shares, net transaction costs | 21,659 | - | ||||||
| Net proceeds from broker warrants exercised | 41,250 | - | ||||||
| Repayment of lease obligation | (14,484 | ) | (4,697 | ) | ||||
| Repayment of short-term loans | - | (583,756 | ) | |||||
| Repayment of long-term debts | (27,778 | ) | (37,578 | ) | ||||
| Cash provided by (used in) financing activities | 20,647 | 198,969 | ||||||
| Effect of changes in exchange rates on cash | 6,928 | 143,854 | ||||||
| Increase (decrease) in cash | (128,276 | ) | 2,932,483 | |||||
| Cash and cash equivalents, beginning | 749,427 | 931,977 | ||||||
| Cash and cash equivalents, ending | 621,151 | 3,864,461 | ||||||
| Supplementary of cash flow provided by operating activities: | ||||||||
| Interest received | 83,169 | 38 | ||||||
| Interest paid | 9,472 | 15,474 | ||||||
| Income tax paid | 576,207 | 25,855 | ||||||
See accompanying notes to condensed interim consolidated financial statements.
| 5 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 1. | Nature of operations: |
SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.
The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.
On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
| 2. | Material accounting policy information |
| (a) | Statement of compliance and basis of preparation: |
These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2023.
These condensed interim consolidated financial statements were prepared on a going concern basis.
The board approved these condensed interim consolidated financial statements of directors for issue on November 29, 2023.
| (b) | Basis of consolidation: |
These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
Balance, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
| 6 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Material accounting policy information (continued) |
Details of the Company’s significant subsidiaries which are consolidated are as follows:
| Name | Method of accounting | Ownership interest | ||
| Abundant Solar Power Inc. | Consolidation | 100% | ||
| Abundant Construction Inc. | Consolidation | 100% | ||
| Abundant Energy Solutions Ltd. | Consolidation | 100% | ||
| 2467264 Ontario Inc. | Consolidation | 49.9% | ||
| Solar Alliance Energy DevCo LLC | Consolidation | 67% | ||
| Solar Alliance TE HoldCo 1, LLC | Consolidation | 67% | ||
| Solar Alliance VC1 LLC | Consolidation | 67% | ||
| Abundant Solar Power (US1) LLC | Consolidation | 67% | ||
| Abundant Solar Power (New York) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Maryland) LLC | Consolidation | 100% | ||
| Abundant Solar Power (RP) LLC | Consolidation | 100% | ||
| SUNN 1011 LLC | Consolidation | 100% | ||
| SUNN 1012 LLC | Consolidation | 100% | ||
| Abundant Solar Power (CNY) LLC | Consolidation | 100% | ||
| SUNN 1016 LLC | Consolidation | 100% | ||
| Abundant Solar Power (TZ1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (M1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (J1) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Steuben) LLC | Consolidation | 100% | ||
| ABUNDANT SOLAR POWER (USNY-MARKHAM HOLLOW RD-001) LLC | Consolidation | 100% | ||
| SUNN 1015 LLC | Consolidation | 100% | ||
| SUNN 1002 LLC | Consolidation | 100% | ||
| SUNN 1003 LLC | Consolidation | 100% | ||
| ABUNDANT SOLAR POWER (USNY-Richmond-002) LLC | Consolidation | 100% | ||
| ABUNDANT SOLAR POWER (USNY-Richmond-003) LLC | Consolidation | 100% | ||
| SUNN 1006 LLC | Consolidation | 100% | ||
| SUNN 1007 LLC | Consolidation | 100% | ||
| SUNN 1008 LLC | Consolidation | 100% | ||
| SUNN 1009 LLC | Consolidation | 100% | ||
| SUNN 1010 LLC | Consolidation | 100% | ||
| SUNN (203 Fuller Rd) LLC | Consolidation | 100% | ||
| SUNN 1001 LLC | Consolidation | 100% | ||
| Abundant Solar Power (USNY-6882 Rice Road-001) LLC | Consolidation | 100% | ||
| Abundant Solar Power (LCP) LLC | Consolidation | 100% | ||
| Abundant Solar Power (SB13W) LLC | Consolidation | 100% | ||
| Abundant Solar Power (SB13N) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Dutch Hill 2) LLC | Consolidation | 100% | ||
| Abundant Solar Power (Dutch Hill 3) LLC | Consolidation | 100% | ||
| SUNN 1004 LLC | Consolidation | 100% |
| 7 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Material accounting policy information (continued) |
| (c) | New standards and amendments adopted by the Company: |
The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended June 30, 2023, except for the adoption of new standards effective as of July 1, 2023. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
The amendments below apply for the first time effective July 1, 2023, but do not have an impact on the condensed interim consolidated financial statements of the Company.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.
IAS 1 – Presentation of Financial Statements
In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.
| 8 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Short-term investments |
Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase.
As at September 30, 2023, the Company has one GIC in short-term investment of $1,120,000. The GIC has one year term and with interest rate of 4.95%.
As at June 30, 2023, the Company has two GICs in short-term investment totaling $6,550,000. The GIC of $2,980,000 has one year term and with interest rate of 4.7%. The GIC of $3,570,000 has one year term and with interest rate of 4.95%.
| 4. | Trade and other receivables |
| September 30, 2023 | June 30, 2023 | |||||||
| Accounts receivable, net | $ | 3,857,400 | $ | 1,978,834 | ||||
| Receivable from Solar Flow-Through (1) | - | 1,537,357 | ||||||
| Other receivable | 107,150 | 321,016 | ||||||
| $ | 3,964,550 | $ | 3,837,207 | |||||
| (1) | In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. The aged receivable of $1,457,489 from SFT as at June 30, 2023 was collected during the three months ended September 30, 2023. Additional $1,195,012 was collected and recorded in other income as accounts receivable recovery for the three months ended September 30, 2023. The Company owns partnership units in SFT, see Note 19. |
| 5. | Prepaid expenses and deposits |
| September 30, 2023 | June 30, 2023 | |||||||
| Interconnection deposits(1) | $ | 388,952 | $ | 469,725 | ||||
| Construction in progress deposit(2) | 3,920,369 | 1,623,209 | ||||||
| Security deposits | 12,352 | 12,352 | ||||||
| Prepaid insurance | 35,941 | 74,373 | ||||||
| Prepaid marketing expenses(3) | 709,745 | 782,101 | ||||||
| Other prepaids and deposits | 96,424 | 92,918 | ||||||
| $ | 5,163,783 | $ | 3,054,678 | |||||
| (1) | Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation. | |
| (2) | Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Manlius and Geddes, located in New York, USA. | |
| (3) | The Company hired two investor relations and marketing consultant companies to increase the Company’s visibility in the market and to explore over-seas markets. The balance is related to the payment made to these two marketing consultant companies. |
| 9 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 6. | Property, Plant and Equipment |
| Computer equipment | Furniture and equipment | IPP facilities | Total | |||||||||||||
| Cost: | ||||||||||||||||
| Balance, June 30 and September 30, 2022 | $ | 59,984 | $ | 83,706 | $ | - | $ | 143,690 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2022 | $ | 49,973 | $ | 68,603 | $ | - | $ | 118,576 | ||||||||
| Amortization | 1,377 | 763 | - | 2,140 | ||||||||||||
| Balance, September 30, 2022 | $ | 51,350 | $ | 69,366 | $ | - | $ | 120,716 | ||||||||
| Net Book Value, September 30, 2022 | $ | 8,634 | $ | 14,340 | $ | - | $ | 22,974 | ||||||||
| Cost: | ||||||||||||||||
| Balance, June 30, 2023 | $ | 19,256 | $ | 50,253 | $ | 937,194 | $ | 1,006,703 | ||||||||
| Additions | - | - | - | - | ||||||||||||
| Balance, September 30, 2023 | $ | 50,808 | $ | 83,706 | $ | 937,194 | $ | 1,006,703 | ||||||||
| Accumulated amortization: | ||||||||||||||||
| Balance, June 30, 2023 | $ | 13,876 | $ | 42,694 | $ | - | $ | 56,570 | ||||||||
| Amortization | 706 | 372 | 9,493 | 10,571 | ||||||||||||
| Foreign currency impact | 78 | 78 | ||||||||||||||
| Balance, September 30, 2023 | $ | 14,582 | $ | 43,066 | $ | 9,571 | $ | 67,219 | ||||||||
| Net Book Value, September 30, 2023 | $ | 4,674 | $ | 7,187 | $ | 927,623 | $ | 939,484 | ||||||||
| 10 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 7. | Contract fulfilment costs |
As of September 30, 2023, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.
| Balance, June 30, 2023 | $ | - | ||
| Additions: EPC costs | 2,790,025 | |||
| Utilised during the period | (2,595,243 | ) | ||
| Foreign currency Impact | 1,573 | |||
| Balance, September 30, 2023 | $ | 196,355 |
| 8. | Inventory |
As of September 30, 2023 and 2022, the Company’s inventory is comprised of development costs for the solar projects.
| 2022 | ||||
| Balance, June 30, 2022 | 195,920 | |||
| Additions: development costs | 264,436 | |||
| Minus: development costs expensed to cost of goods sold | - | |||
| FX Impact | 8,947 | |||
| Balance, September 30, 2022 | $ | 469,303 | ||
| 2023 | ||||
| Balance, June 30, 2023 | 448,721 | |||
| Additions: development costs | 484,496 | |||
| Minus: development costs expensed to cost of goods sold | (134,947 | ) | ||
| FX Impact | 10,632 | |||
| Balance, September 30, 2023 | $ | 808,902 | ||
| 9. | Development asset |
Development projects are depreciated over the useful lives of the resulting assets once they become operational. The balance in development assets include costs incurred on self-owned projects. Detail of costs as at September 30, 2023 are as follows:
| Interconnection and Permitting | $ | 1,082,538, | ||
| Modules | 2,064,866 | |||
| Inverter | 178,924 | |||
| Racking | 866,533 | |||
| Datalogger | 24,138 | |||
| Engineering | 25,350 | |||
| Installation | 526,827 | |||
| Balance of System | 65,420 | |||
| $ | 4,834,596 |
| 11 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 10. | Trade and other payables |
| September 30, 2023 | June 30, 2023 | |||||||
| Accounts payable and accrued liabilities | $ | 3,937,740 | $ | 1,542,849 | ||||
| Due to related party | 41,480 | 63,754 | ||||||
| Other payable (1) | 2,412,617 | 3,106,894 | ||||||
| $ | 6,391,837 | $ | 4,713,497 | |||||
| (1) | Balance includes $2,168,122 NYSERDA grants to be paid to various projects. |
| 11. | Unearned revenue |
As of September 30, 2023, the Company’s unearned revenue mostly consists of payments received for EPC projects not started yet.
| Balance, June 30, 2023 | $ | 1,150,612 | ||
| Additional payments received | 1,606,283 | |||
| Recognized to revenue | - | |||
| Balance, September 30, 2023 | $ | 2,756,895 | ||
| 12 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 12. | Right of use assets and lease liabilities |
The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.
The continuity of the right-of-use as of September 30, 2023 and June 30, 2023 is as follows:
| Right-of- use assets | Office | |||
| Cost: | ||||
| Balance, June 30, 2023 | $ | 197,719 | ||
| Addition | - | |||
| Balance, September 30, 2023 | $ | 197,719 | ||
| Accumulated amortization: | ||||
| Balance, June 30, 2023 | $ | 53,232 | ||
| Amortization: | 11,407 | |||
| Balance, September 30, 2023 | $ | 64,639 | ||
| Net Book Value, September 30, 2023 | $ | 133,080 | ||
The continuity of the lease liabilities as of September 30, 2023 is as follows:
| Lease liabilities | Office | |||
| Balance, June 30, 2023 | $ | 173,311 | ||
| Payments: | (14,484 | ) | ||
| Interest accretion: | 4,252 | |||
| Balance, September 30, 2023 | $ | 163,079 | ||
| Current | 47,203 | |||
| Long term | 115,876 | |||
| Net Book Value, September 30, 2023 | $ | 163,079 | ||
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of September 30, 2023 is as follows:
| 2024 | $ | 45,818 | ||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 189,389 |
| 13 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 13. | Long-term debt |
| September 30, 2023 | June 30, 2023 | |||||||
| Highly Affected Sectors Credit Availability Program (1) | $ | 842,593 | $ | 870,370 | ||||
| Canadian Emergency Business Account (2) | 40,000 | 40,000 | ||||||
| Total | 882,593 | 910,370 | ||||||
| Less: current portion | 151,111 | 151,111 | ||||||
| Long-term portion | $ | 731,482 | $ | 759,259 | ||||
| (1) | In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months ended September 30, 2023, the interest recorded and paid was $8,680 (3-month period ended September 30, 2022 - $9,797). |
| (2) | The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. |
The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.
Estimated principal repayments are as follows:
| 2024 | $ | 123,333 | ||
| 2025 | 111,111 | |||
| 2026 | 111,111 | |||
| 2027 | 111,111 | |||
| 2027 onwards | 425,926 | |||
| Total | $ | 882,592 |
| 14 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 14. | Tax equity |
On June 20, 2023, the Company acquired 67% membership interest in an entity which owns and operates certain solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the capital cost of the solar facilities. Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the effective interest rate (“EIR”) method. Amortized cost is affected by the allocation of ITCs, taxable income, and accelerated tax depreciation. Financing expenses represent the interest accretion using the EIR. The EIR of the tax equity was determined to be 9%, the loan value was $549,061 (USD 414,699), with a maturity date (representing the expected flip point as estimated) of 2028 and the percentage of ownership between 99%, reflecting the allocation of taxable income or loss prior to the flip date.
Tax equity investors in US solar projects generally require sponsor guarantees as a condition to their investment. To support the tax equity investments, the Company executed guarantees indemnifying the tax equity investors against certain breaches of project level representations, warranties and covenants and other events. The Company believe these indemnifications cover matters which are substantially under its control and are very unlikely to occur.
| 15. | Financial instruments |
The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt.
| (a) | Fair value: |
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices. Iin active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended September 30, 2023.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
| (b) | Financial risk management: |
| (i) | Credit risk and economic dependence: |
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
| 15 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 15. | Financial instruments (continued) |
| (ii) | Concentration risk and economic dependence: |
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Three months ended September 30, 2023 | Revenue | % of Total Revenue | ||||||
| Customer D | $ | 5,318,304 | 69 | % | ||||
| Customer E | $ | 2,011,750 | 27 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer D | $ | 3,427,942 | 86 | % | ||||
| Three months ended September 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,883,451 | 71 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,448,145 | 57 | % | ||||
| Customer C | $ | 900,089 | 36 | % | ||||
| (iii) | Liquidity risk: |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
| (iv) | Interest rate risk: |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
| 16 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Share Capital |
| (a) | Authorized |
Unlimited number of common shares with no par value.
| (b) | Issued and outstanding share capital |
At September 30, 2023, the Company had 26,857,200 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity.
During the three-months ended September 30, 2023, the Company issued the following shares:
| i. | On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share. |
| ii. | In September, 2023, the Company sold total of 2,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $22,000. |
| (c) | Warrants |
The following table reflects the warrants issued and outstanding as of September 30, 2023:
| (d) | Stock Options |
The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.
Details of the stock option outstanding as at September 30, 2023 are as follows:
| Date granted | Expiry | Exercise price (CAD) | Granted | Exercised | Expired/ Cancelled | Balance at September 30, 2023 | ||||||||||||||||
| 04-Nov-2022 | 04-Nov-2027 | $ | 0.75 | 2,759,000 | - | 2,759,000 | ||||||||||||||||
| 2,759,000 | - | - | 2,759,000 | |||||||||||||||||||
As at September 30, 2023, no stock options were exercisable.
| 17 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Share Capital (continued) |
| (e) | Restricted Stock Units |
Details of the Restricted Stock Units (RSU) outstanding as at September 30, 2023 are as follows:
| Date granted | Vesting Date | Granted | Distributed | Forfeited | Balance at September 30, 2023 | |||||||||||||
| 4-Nov-2022 | 02-Aug-20 | 250,000 | - | - | 250,000 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2024 | 7,500 | - | - | 7,500 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2025 | 7,500 | - | - | 7,500 | |||||||||||||
| 265,000 | - | - | 265,000 | |||||||||||||||
The weight average grant date price per share is $0.86.
| 17. | Acquisitions |
Abundant Solar Power (“ASP”) has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects reached PTO (permission to operation) in December 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects were reached PTO.
On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.
On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo, a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.
The provisional allocation of the purchase consideration to the total fair value of net assets acquired is as follows:
| Fair value of net assets acquired | $ | |||
| Accounts receivable | 407,210 | |||
| Capital assets | 937,194 | |||
| Accounts payable | (25,851 | ) | ||
| Tax equity liability | (460,607 | ) | ||
| Identifiable net assets acquired | 857,946 | |||
| Non-controlling interest | (283,122 | ) | ||
| Purchase consideration transferred | 574,824 | |||
| 18 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 17. | Acquisitions (continued) |
On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit and loss in the fiscal year ended June 30, 2023.
The Company also recognized $4,349 for 33% non-controlling interest in Solar Alliance DevCo for the three months ended September 30, 2023.
| 18. | Non-Controlling Interest |
The following items affects non-controlling interest for the year ended September 30, 2023:
Solar Alliance DevCo LLC
On June 20, 2023, the Company acquired 67% membership interest in two solar facilities. Upon consolidation, the 33% non-controlling portion of the facilities are disclosed separately at fair value. For the three-months ended September, 33% of net income or $4,349 was allocated to non-controlling interest.
| 19. | Investment |
On June 1, 2023, the Company acquired 200 limited partnership units of Solar Flow-Through 2012-I Limited Partnership from former partner unitholders for an aggregate purchase price of $4,200, and 31,230 limited partnership units of Solar Flow-Through 2013-I Limited Partnership for an aggregate purchase price of $718,290. On July 5, 2023, the Company acquired 42,500 limited partnership units of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000.
The Company does not have significant influence over Solar Flow-Through Limited Partnerships subsequent to the purchase of units. No fair value adjustment is required as at September 30, 2023.
| 20. | Related Party Transactions |
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Compensation of key management personnel
The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended September 30, 2023 and 2022 were as follows:
| Three Month Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 299,599 | $ | 235,982 | ||||
| Share-based compensation | 180,546 | - | ||||||
Short-term employee benefits include consulting fees and salaries made to key management personnel.
| 19 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 21. | Capital Management |
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| September 30, 2023 | June 30, 2023 | |||||||
| Long-term debt -non-current portion (note 13) | $ | 731,482 | 759,259 | |||||
| Shareholders’ equity | $ | 19,249,418 | 16,631,196 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
| 22. | Segment reporting |
The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.
The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three months ended and as at September 30, 2022 and 2021 are as follows:
| Revenue from external customers | Non-current assets | |||||||||||||||
| Three Months Ended September 30, | September 30, | June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2023 | |||||||||||||
| Canada | $ | 336,311 | 14,910 | $ | 3,332,456 | 879,941 | ||||||||||
| United States | 7,344,950 | 5,465,542 | 5,762,219 | 2,043,697 | ||||||||||||
| $ | 7,681,261 | 5,480,452 | $ | 9,094,675 | 2,923,638 | |||||||||||
| Total assets | Total liabilities | |||||||||||||||
| September 30, 2023 | June 30, 2023 | September 30, 2023 | June 30, 2023 | |||||||||||||
| Canada | $ | 6,401,173 | 11,219,868 | $ | 1,694,972 | 2,603,271 | ||||||||||
| United States | 23,775,284 | 13,739,128 | 9,232,067 | 5,724,529 | ||||||||||||
| $ | 30,176,457 | 24,958,996 | $ | 10,927,039 | 8,327,800 | |||||||||||
| 20 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the three months ended September 30, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 23. | Provisions and contingent liabilities |
In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company.
| 24. | Subsequent events |
| (a) | On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects (the “BESS Projects”) with a total contract value of approximately $36 million. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario. |
| (b) | The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction. |
| 21 |
Exhibit 99.72
SolarBank Commences Major Construction on 3.7 MW Geddes Project – Largest Project to Date to be Owned by SolarBank
| ● | Once operational is expected to provide green energy for over 500 homes |
Toronto, Ontario, October 2, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has commenced major construction on the Geddes project that is being developed by the Company in Geddes, New York. Current activities include civil work and the commencement of the racking and module installation. Subject to receipt of financing, the Company intends to own and operate the Geddes project.
The Geddes project which has a designed capacity of 3.7 megawatts (MW) DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. Based on its forecast project schedule, the Company anticipates that construction of the Geddes project will be completed in the 1st quarter of calendar 2024.
Dr. Richard Lu, CEO of SolarBank commented: “Commencement of major construction on the Geddes project is a great accomplishment as it will be the largest project to date that would be owned and operated by the Company as an independent power producer. I am pleased that SolarBank is going to be able to turn a closed landfill into a solar project that will generate clean renewable energy for years to come.”
There are several risks associated with the development of the project disclosed in this press release. The development of any project is subject to the availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the Company’s ownership of the Geddes project; the timeline for completion of construction of the Geddes Project; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.73
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
BY AND BETWEEN
1000234763 ONTARIO INC.
AND
SOLARBANK CORPORATION
DATED AS OF THIS 3rd DAY OF OCTOBER, 2023
TABLE OF CONTENTS
| ARTICLE 1 DEFINITIONS | 1 | |
| 1.1 | Defined Terms | 1 |
| 1.2 | Schedules | 12 |
| ARTICLE 2 NOTICE TO PROCEED | 12 | |
| 2.1 | Notice to Proceed | 12 |
| 2.2 | Limited Notice to Proceed | 13 |
| ARTICLE 3 GENERAL PROVISIONS | 13 | |
| 3.1 | Scope of Work | 13 |
| 3.2 | Contractor Review of Project Requirements | 13 |
| 3.3 | Priority of Agreement Provisions | 14 |
| 3.4 | Independent Contractor | 14 |
| ARTICLE 4 CONTRACTOR’S SERVICES | 14 | |
| 4.1 | General Requirements | 14 |
| 4.2 | Design and Engineering Work | 19 |
| 4.3 | Procurement and Construction Work | 21 |
| 4.4 | Coordination with Owner, Authorities and Subcontractors | 23 |
| 4.5 | Local Communities | 24 |
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices | 24 |
| 4.7 | Entrance, Routing and Transportation to the Job Site | 24 |
| 4.8 | Importing | 25 |
| ARTICLE 5 OWNER | 25 | |
| 5.1 | Rights, Duties & Obligations | 25 |
| ARTICLE 6 PROJECT SCHEDULE | 27 | |
| 6.1 | Commencement | 27 |
| 6.2 | Substantial Performance | 27 |
| 6.3 | Project Schedule | 27 |
| ARTICLE 7 LIQUIDATED DAMAGES | 28 | |
| 7.1 | Delay Liquidated Damages | 28 |
| 7.2 | Substantial Performance and Minimum Performance Criteria | 28 |
| 7.3 | Exclusivity of Liability | 28 |
| 7.4 | Invoicing and Payment of Liquidated Damages | 28 |
| 7.5 | Liquidated Damages Not Penalty | 28 |
| ARTICLE 8 LIMITATION OF LIABILITY | 29 | |
| 8.1 | Consequential Damages | 29 |
| 8.2 | Overall Limitation | 29 |
| 8.3 | Exceptions to Caps on Liability | 29 |
| 8.4 | Remedies Non-Exclusive | 30 |
| 8.5 | Limitations | 30 |
| ARTICLE 29 MISCELLANEOUS PROVISIONS | 70 | |
| 29.1 | Governing Law | 70 |
| 29.2 | Meaning of Terms | 70 |
| 29.3 | Entire Agreement | 70 |
| 29.4 | Successors and Assigns | 71 |
| 29.5 | Third Parties | 71 |
| 29.6 | Contractual Relationship | 71 |
| 29.7 | Costs and Expenses | 71 |
| 29.8 | Severability | 71 |
| 29.9 | Waiver of Rights | 71 |
| 29.10 | Remedies Cumulative | 72 |
| 29.11 | Notices | 72 |
| 29.12 | Headings and Table of Contents | 72 |
| 29.13 | Time of Essence | 73 |
| 29.14 | Interpretation | 73 |
| 29.15 | References | 73 |
| 29.16 | Incorporation by Reference | 73 |
| 29.17 | Publicity | 73 |
| 29.18 | Further Assurances | 74 |
| 29.19 | Number and Gender | 74 |
| 29.20 | Counterparts | 74 |
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
THIS ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT is made as of this 3rd day of October, 2023 by and between 1000234763 Ontario Inc., each a corporation established under the laws of the Province of Ontario (each an “Owner” and collectively, the “Owners”), and SolarBank Corporation, a corporation established under the laws of the Province of Ontario (the “Contractor”).
RECITALS
WHEREAS the IESO awarded the Owners an Expedited Long-Term Reliability Services (“E-LT1”) Contract which formalizes the long-term contractual arrangements for the Owner to develop, construct, operate and maintain the Project described in Schedule 1.
AND WHEREAS the Owner wishes to engage the Contractor to furnish, and the Contractor desires to furnish, on a fixed-price turnkey basis, the BESS, including but not limited to the engineering, design, procurement, construction management, installation, construction, operator training, testing and commissioning services necessary to construct, install, commission, test and initially operate the BESS according to the specifications set forth herein and perform the remainder of the Work as more fully described herein;
NOW, THEREFORE, for and in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
| 1.1 | Defined Terms |
For purposes of this Agreement, the terms set forth in the following clauses shall have the meanings ascribed to them:
“Acceptance Date” means the date on which the Owner delivers to the Contractor the Owner Substantial Performance Notice.
“Actual Cost” has the meaning set forth in Section 16.5(b).
“ADR Institute of Canada” means the ADR Institute of Canada, Inc. and its permitted successors and assigns.
“Affiliate” means, with respect to either Party, any Person directly or indirectly controlled by, controlling or under common control with such Party. For the purposes of this definition, “control” of any Person includes (i) with respect to any corporation or other Person having voting shares or the equivalent equity interest, the ownership or power to vote, directly or indirectly, shares or the equivalent equity interest representing fifty percent (50%) or more of the power to vote in the election of directors, managers or persons performing similar supervisory and management functions, (ii) ownership of more than fifty percent (50%) of the equity or beneficial interest in that Person, or (iii) the ability to direct the business and affairs of any Person by acting as a general partner, manager or otherwise.
| - 2 - |
“Agreement” means and refers to this Agreement including all schedules, exhibits and documents incorporated by attachment or reference thereto and any Modifications issued after the execution of this Agreement.
“Application for Payment” has the meaning set forth in Section 10.1.1 and shall be in the form of Schedule 14 hereto.
“Approval Date” has the meaning set forth in Section 16.2.
“Arbitration Notice” has the meaning set forth in Section 27.3.2.
“Authority” means any country or any foreign, national, federal, provincial, state, county, territory, municipality, region or other political subdivision thereof, or any government, quasi-government, administrative department or regulatory authority, agency, ministry, board, body, commission, instrumentality, court or tribunal thereof or any central bank (or similar monetary or regulatory authority), any tax authority, any ministry or department or agency of the foregoing, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any Person acting under the authority of any Authority.
“Battery energy storage facility AC nameplate capacity” means the total storage facility AC energy for the project, measured as the total installed energy in MWh when taking into account the batteries, inverters, transformers and controls, and assuming an RTE of eighty five percent (85%) at POI. Battery energy storage facility AC energy capacity will be verified at time of commissioning in accordance with the Site Acceptance Test.
“Battery energy storage facility DC energy capacity” means the total DC energy storage facility for the project, calculated as the total installed energy in MWh when taking into account the battery and battery controls. Battery energy storage capacity is not verified, but is calculated.
“BESS” means and refers to a new fully functioning and complete 4.99 MW and 22.572 MWh Battery energy storage facility DC energy capacity) Battery energy storage facility AC nameplate capacity, which corresponds to 19.96 MWh usable AC battery energy storage facility composed of a direct current power storage system, all necessary batteries, inverters, transformers, controls, auxiliary and support systems and facilities including the Electric Interconnection Facilities and those described in detail in, the Statement of Requirements to be engineered, procured, constructed and/or installed by the Contractor on the Job Site in accordance with the Project Requirements.
“Certificate of Final Completion” has the meaning set forth in Section 13.1.
“Certificate of Substantial Performance” has the meaning set forth in Section 12.2.
“Change in Work” means an addition, modification, alteration, substitution, variation, deduction or cancellation of Work together with any resulting changes in the Fixed Contract Price and the Project Schedule, as applicable, and as instructed by the Owner in writing pursuant to Article 16 or as otherwise permitted in accordance with the terms of this Agreement.
“Change Order” has the meaning set forth in Section 16.3.
| - 3 - |
“Commercial Operation” has the meaning set forth in paragraph (c) of the definition of Substantial Performance.
“Commercially Reasonable Efforts” means efforts which are designed to enable a Party, directly or indirectly, to satisfy a condition to, or otherwise assist in the consummation of, the obligations contemplated by this Agreement and which do not require the performing Party to expend any funds or assume liabilities, other than expenditures and liabilities which are reasonable in nature and amount in the context of the obligations assumed by a Party under the terms and conditions of this Agreement.
“Completion Plan” means a plan developed pursuant to Section 12.4.
“Components” means and refers to all the tangible materials, equipment, apparatus, structures, tools, supplies or goods, including systems, subsystems, subassemblies and components supplied by the Contractor or any Subcontractor as required by this Agreement which shall include each element of the BESS.
“Confidential Information” has the meaning set forth in Section 15.2.1.
“Construction Change Directive” has the meaning set forth in Section 16.4.
“Constructor” has the meaning set forth in Section 20.1.3(a)
“Contractor” has the meaning given in the preamble.
“Contractor Event of Default” has the meaning set forth in Section 28.2.1.
“Contractor Permits” has the meaning set forth in Section 4.1.8
“Contractor Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Contractor’s Representative” has the meaning set forth in Section 4.1.5.
“CSTS” has the meaning set forth in Section 20.2.14(a).
“Daily Rate” means, with respect to the period by which Substantial Performance Date is delayed, from and including the Guaranteed Substantial Performance Date:
| (a) | for the first ninety (90) days of such period, [REDACTED: Dollar amount] per Business Day; and |
| (b) | for each day after ninety (90) calendar days of such period, [REDACTED: Dollar amount] per Business Day. |
“Day” or “day” means and refers to a calendar day.
“Delay Liquidated Damages” has the meaning set forth in Section 7.1.
“$” means Canadian currency, except as specifically indicated otherwise herein.
| - 4 - |
“Design & Engineering Documents” means those documents identified in the Statement of Requirements.
“Design Materials” has the meaning set forth in Section 15.1.1.
“Detail Design Documents” means the drawings, specifications and other design documents that are to be prepared by the Contractor for the Project.
“Directive Date” has the meaning set forth in Section 16.2.
“Dispute” has the meaning set forth in Section 27.3.1.
“Electric Interconnection Facilities” means all structures, facilities, equipment, auxiliary equipment, devices and apparatus directly or indirectly required to interconnect the BESS to the distribution system and to existing electrical infrastructure at the following points identified in the Statement of Requirements.
“Environment” means the environment or natural environment as defined in any Environmental Laws and including air, surface, water, ground water, land surface, oil, rock, bedrock, subsurface strata, sediment, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource, any sewer system and the environment in the workplace.
“Environmental Laws” means all Laws relating to the Environment, or public or worker health or safety, and including Laws relating to (a) the assessment, review or approval of projects or undertakings; (b) the storage, generation, use, handling, manufacture, processing, labelling, advertising, sale, display, transportation, treatment, reuse, recycling, release and disposal of Hazardous Substances; and (c) the Environmental Protection Act (Ontario).
“Environmental Permits” means those air and noise, stormwater and industrial sewage permits, certificates, licenses, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals permits, certificates, licences, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals or other rights in each case made, issued, granted, conferred or required pursuant to any Environmental Law.
“Extended Warranty Period” has the meaning set forth in Section 23.1.4.
“Final Completion” shall be deemed to have occurred when (a) Substantial Performance has occurred and all conditions required for Substantial Performance continue to be satisfied, (b) all items identified on the Punch List have been completed (except for such items that Owner waives in writing), (c) all documents and deliverables which are required for Final Completion under this Agreement have been delivered, including final Operation and Maintenance Manuals, schematics, spare parts lists, drawings, Design and Engineering Documents, Detail Design Documents, “as- built” drawings and surveys (including, without limitation, the site plan survey of the property on which the BESS is located with the actual location of improvements and other structures) and Permits (d) all other duties and obligations of the Contractor under this Agreement have been fully performed, except for the Contractor’s warranty obligations which by their terms are to be performed after the Final Completion Date, (e) all the Contractor’s (and its Subcontractors’) personnel, supplies, tools, equipment, surplus materials, waste materials, rubbish, debris and temporary facilities have been cleaned up and removed from the Job Site, (f) there exists no Contractor Event of Default, and (g) the Owner has received from the Contractor evidence satisfactory to the Owner that all payments due to its Subcontractors and all payrolls, bills, holdbacks, workers compensation board claims and other costs and expenses relating to the Work have been paid or otherwise satisfied (including, but not limited to, statutory declarations from the Contractor in the form attached as Schedule 7).
| - 5 - |
“Final Completion Date” means the date the Contractor sent the last Notice to the Owner indicating achievement of Final Completion which is executed by Owner.
“Fixed Contract Price” has the meaning set forth in Section 9.1.
“Force Majeure” has the meaning set forth in Section 24.1.1.
“Good Engineering and Operating Practices” means any of the practices, methods, specifications, acts and standards of safety, performance, dependability, efficiency and economy which should be adopted by a Person exercising that degree of knowledge, skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from an engineering, procurement and construction contractor engaged in work similar to the Work, including multi- disciplinary design/build project execution including design, engineering, procurement, transportation, fabrication, construction, start-up, testing, operating, maintenance and repair, and training in respect of facilities the same as or similar to the Project under the same or similar circumstances, including the applicable IESO and Market Rule standards in place as of the date of execution of this Agreement and such other practices, methods or acts which, in the exercise of reasonable and prudent judgment by those in the engineering, procurement and construction industry in light of facts know at the time a decision is made and intending to comply with contractual obligations to which they are subject, would be expected to accomplish the result intended and consistent with Law, reliability, safety and expedition.
“Guaranteed Capacity” means 4.74 MW of power capacity and 18.96 MWh of AC energy capacity in respect of the BESS as specified in the Statement of Requirements, as measured at the inverter AC output demarcation point as described in the Statement of Requirements.
“Guaranteed Capacity Test” means the capacity test to be performed by Contractor pursuant to the Site Acceptance Test to demonstrate if the BESS satisfies the Guaranteed Capacity.
“Guaranteed Substantial Performance Date” means May 1, 2025, such date to be adjusted if and to the extent applicable and permitted pursuant to the terms and provisions of Article 16 of this Agreement.
“Hazardous Substance” means and refers to (a) any substance which is listed, defined, designated or classified under any Environmental Law as a (i) hazardous material, substance, constituent or waste, (ii) toxic material, substance, constituent or waste, (iii) radioactive material, substance, constituent or waste, (iv) dangerous material, substance, constituent or waste, (v) pollutant, (vi) contaminant, or (vii) special waste; (b) any material, substance, constituent or waste regulated under any Environmental Laws; or (c) petroleum, petroleum products, radioactive matters, polychlorinated biphenyl, pesticides, asbestos, or asbestos-containing materials.
“Health and Safety Plan” has the meaning set forth in Section 20.1.1.
| - 6 - |
“HST” means the goods and services tax or harmonised sales tax imposed under Part IX of the Excise Tax Act (Canada), as amended, or any similar provincial value-added tax which may be imposed now or in the future.
“Hydro One” means Hydro One Networks Inc., the local transmission system operator.
“IESO” means the Independent Electricity System Operator.
“Initial Warranty Period” has the meaning set forth in Section 23.1.5.
“Initiating Party” has the meaning set forth in Section 27.3.2.
“Inspection Date” has the meaning set forth in Section 5.1.6(b).
“Institute” has the meaning set forth in Section 27.3.1.
“Intellectual Property Rights” means and refers to all patents and patent rights, inventions, copyrights, works of authorship, trademarks, service marks, trade secrets and all similar and related intellectual property rights protected under any Law and, for greater certainty, includes all technical information, know-how, processes, procedures, compositions, devices, methods, models, formulas, protocols, techniques, software, designs, plans, methodologies, drawings or data created or owned by Contractor or its Subcontractors.
“ITC” means Investment Tax Credits for green technology projects provided by the Government of Canada or Provincial Government of Ontario.
“Job Site” means the job site shown on the site drawings included in Schedule 2 and otherwise described in this Agreement together with such additional areas as may, from time to time, be designated in writing by Owner for the Contractor’s use (including laydown areas) hereunder.
“kV” means kilovolts.
“kW” means kilowatt.
“Limited Notice to Proceed” has the meaning set forth in Section 2.2.
“MW” means megawatt.
“MWh” means megawatt-hour.
“Landlord” refers to the property owner of the Job Site.
“Law” means and refers to any constitution, charter, statute, legislation, treaty, act, law, ordinance, Permit rule, regulation, code, rule, order, decree, permit, judgment, injunction, directive, ruling, decision, order, guideline, resolution, declaration or other requirement, decision or determination of any Authority, or any interpretation or application thereof by any such Authority.
“Liabilities” means actions, causes of action, proceedings claims, demands, complaints, grievances, suits, charges, indictments, prosecutions, investigations, informations, assessments, reassessments or similar process or any damages, costs, losses, expenses, penalties, royalties, payments, fines, assessments, charges or liabilities whatsoever suffered, sustained, paid or incurred (including in connection with the death of or injury to any individual or damage to or loss of any property, including property of the Owner) and “Liability” shall be construed accordingly.
| - 7 - |
“Lien Holdback Amount” means the holdback amount pursuant to Section 22 of the Construction Act (Ontario).
“Liens” means all mortgages, deeds of trust, liens, debentures, security interests, pledges, conditional sale contracts, proceedings, orders, rights of first refusal, options, charges, agreements, easements, rights-of-way, limitations, reservations, restrictions, community property interests, equitable interests, building-use restrictions, exceptions, variances, and other encumbrances or restrictions of any kind, whether recorded or unrecorded, including restrictions on use, transfer, receipt of income, or exercise of any other attribute of ownership.
“Liquidated Damages” means the amounts payable by the Contractor expressed to be liquidated damages including the Delay Liquidated Damages and such other amounts prescribed in Section 7.1.
“Major Component” means the Components listed on the Major Component Procurement Plan.
“Major Component Procurement Plan” means the procurement plan for Major Components described in Section 4.3.9 hereof, which shall be in the form attached hereto as Schedule 5.
“Market Rules” means the rules and regulations governing the distribution system, transmission system and markets, together with all market manuals, policies, and guidelines issued by the IESO, the Ontario Energy Board, Owner or any Authority, all as amended or replaced from time to time.
“Maximum Liability Amount” has the meaning set forth in Section 8.2.
“Milestone Completion Certificate” means the applicable certificate in the form attached hereto as Schedule 9.
“Modification” means and refers to (i) a written amendment to this Agreement signed by all Parties hereto, (ii) a Change Order, or (iii) a Construction Change Directive.
“Monthly Updated Schedule” has the meaning set forth in Section 6.3.
“Notice” means a written communication between the parties required or permitted by this Agreement and conforming to the requirements of Section 29.11 of this Agreement.
“Operation and Maintenance Manuals” means and refers to detailed and comprehensive procedures, guidelines and instructions explaining each aspect of the proper operation and maintenance of each component and each system comprising the BESS, as well as the BESS as a whole. Any such manuals supplied by Vendors and manufacturers of the Components shall be collected together with the sequence of operations manuals to be prepared by the Contractor, all in an organized set of binders.
“Owner” has the meaning given in the preamble.
“Owner Caused Delay” has the meaning set forth in Section 24.2.
| - 8 - |
“Owner’s Engineer” means the engineer (or engineers) designated by the Owner to provide advice and assistance to the Owner in whatever manner or function the Owner may decide from time to time.
“Owner Event of Default” has the meaning set forth in Section 28.3.1.
“Owner Indemnitees” has the meaning set forth in Section 26.1.1.
“Owner Permits” has the meaning set forth in Section 4.1.8.
“Owner Policy” means the Owner’s and Contractor’s respective Code of Business Conduct, Environmental Policy and Occupational Health & Safety Policy.
“Owner’s Representative” has the meaning set forth in Section 5.1.1.
“Owner Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Parties” means the Owner and the Contractor.
“Permits” has the meaning set forth in Section 4.1.8.
“Person” means any individual, corporation, company, voluntary association, partnership, incorporated organization or Authority.
“Pre-Existing Hazardous Substance(s)” means and refers to a Hazardous Substance existing at any Job Site as of the date of execution of this Agreement.
“Prime Rate” means the floating annual rate of interest publicly announced by the Royal Bank of Canada as its prime rate in Canadian dollar loans to customers in Canada and designated as its prime rate and the Prime Rate shall change when and as such prime rate changes.
“Project” means and refers to the provision of the Work in relation to the BESS as described in this Agreement.
“Project Agreements” means this Agreement and any other agreement or document necessary for the construction, startup or testing of the Project.
“Project Requirements” means and refers to (i) applicable Laws, (ii) the terms and conditions of this Agreement and, as applicable, the Project Agreements, (iii) written recommendations and requirements of the Contractor’s suppliers or Vendors, (iv) all Permits obtained by or on behalf of the Owner or by the Contractor or required to be obtained pursuant to Section 4.1.8, (v) the Good Engineering and Operating Practices, and (vi) the Technical Requirements.
“Project Schedule” means the schedule attached hereto as Schedule 10 describing all significant engineering, procurement and construction activities, milestones and events, permitting activities, certain significant Owner’s milestone events, including the estimated time of completion of project milestones by the Contractor and as amended where expressly provided for in the Agreement. Whenever herein there is a reference to an adjustment to the Guaranteed Substantial Performance Date, such adjustment shall also contemplate an equitable adjustment to the Project Schedule.
| - 9 - |
“Punch List” means and refers to a comprehensive list agreed to by the Contractor and the Owner upon Substantial Performance identifying those insubstantial details of construction and mechanical adjustment which require repair, completion, correction or re-execution, the non- completion of which does not interfere with the Owner’s safe and reliable occupancy, use and commercial operation of the BESS such as completion of painting, final clean-up and rubbish removal.
“Recipient” has the meaning set forth in Section 27.3.3.
“RTE” means “Round Trip Efficiency” and is the ratio of the AC energy in percentage between the energy supplied to the storage system(measured in MWh) and the energy retrieved from it in MWh, taking into account the one-way efficiencies of the batteries, the inverter, the transformer, and other components. A reasonable assumption of RTE for the Project is [REDACTED: Percentage amount]
“Sales Taxes” has the meaning set forth in Section 9.1.
“Schedules” means schedules to this Agreement.
“Separate Contractor” has the meaning set forth in Section 21.1.
“Site Acceptance Test” means the site acceptance test prepared by Contractor and agreed to by Owner in accordance with the Statement of Requirements.
“Statement of Requirements” means the Owner’s statement of requirements for the Project as set out in Schedule 1.
“Subcontractor” means and refers to any Person or entity, including a Components supplier or Vendor, who performs a portion of the Work or supplies materials, Components or other items in relation to the Work.
“Substantial Performance” shall be deemed to have occurred when:
| (a) | the Contractor has delivered to the Owner, immediately when available, the following: (1) the raw data collected upon the completion of the Guaranteed Capacity Test, (2) test results of the Guaranteed Capacity Test and (3) a certificate from the Contractor certifying that the test results of the Guaranteed Capacity Tests are true and accurate and such tests have been performed in accordance with the Site Acceptance Test; |
| (b) | in accordance with the procedures set forth in Article 12, the Contractor has completed the Guaranteed Capacity Test in conformance with this Agreement and the data from the Guaranteed Capacity Test shall demonstrate that the BESS satisfied the Guaranteed Capacity and the requirements as set out in the Site Acceptance Test; |
| (c) | the Work is available for full commercial operation as intended by the Project Requirements in compliance with all applicable Laws then in effect and Permits (“Commercial Operation”), and the construction of the Work complies with all Permits issued with respect to the BESS; |
| (d) | the Work and its operations complies with all applicable Laws and Permits then in effect; |
| - 10 - |
| (e) | the Contractor has notified Owner in writing that the Contractor knows of no defects and/or deficiencies in the Work that affects the performance of the BESS and that the Owner has received a certificate from the Owner’s Engineer representing that the Work at the Job Site has been completed in all material respects, excepting items either individually or collectively that do not materially and adversely affect the operation of the work as set out in the Punch List; |
| (f) | necessary system adjustments or repairs to the Components identified during start-up, commissioning and testing process have been completed for the BESS to commence Commercial Operation at the performance levels obtained in Guaranteed Capacity Test upon which Commercial Operation is based; |
| (g) | the BESS is ready to be occupied and safely operated in accordance with the Project Agreements, for the use for which the BESS was intended in accordance with this Agreement; |
| (h) | all operators have been trained, to the Owner’s satisfaction; |
| (i) | all special tools and spare parts purchased by the Contractor, as provided herein have been delivered to the Owner; |
| (j) | the Contractor has closed out all building permits associated with the Project; |
| (k) | all approvals, authorizations and permits required from the Electrical Safety Authority to operate the system have been received; |
| (l) | all applicable CSA, ULc orUL certifications required under the Ontario Electric Safety Code have been met and confirmed by the Electrical Safety Authority; |
| (m) | [deleted]; |
| (n) | all deliverables required to be submitted to the Owner on or before the Substantial Performance Date have been submitted; |
| (o) | the Punch List has been mutually agreed upon by the Owner and the Contractor in accordance with Section 12.2, provided that the cost to complete incomplete items or rectify known defects shall not exceed five percent (5%) of the Fixed Contract Price; |
| (p) | the Owner has received from the Contractor evidence satisfactory to the Owner that all payrolls, bills and other costs and expenses relating to the Work have been paid or otherwise satisfied; |
| (q) | there exists no Contractor Event of Default and no event which, with the passage of time or the giving of notice or both, would be a Contractor Event of Default; |
| (r) | the Contractor has completed the performance of the Work applicable to Substantial Performance according to all of the provisions of this Agreement, with the exception of those items specified in the Punch List and the Contractor’s warranty obligations which by their terms are to be performed after the Substantial Performance Date; |
| - 11 - |
| (s) | the Contractor has successfully completed and passed all tests set out in the Site Acceptance Test; |
| (t) | the Contractor has delivered an executed conditional assignment of Subcontractor warranties in accordance with Section 23.1.7; |
| (u) | the Contractor has delivered and executed an unconditional assignment of warranties in the form set out in Schedule 22; |
| (v) | payment of Liquidated Damages, if any; and |
| (w) | the Contractor has provided to the Owner a certificate executed by an officer of the Contractor certifying the occurrence of each of the preceding conditions set forth in this definition of Substantial Performance and has separately delivered a certificate certifying satisfaction of the requirements for “substantial performance of the work” in accordance with Section 2 of the Construction Act (Ontario), |
“Substantial Performance Date” has the meaning set forth in Section 12.2.
“Taxes” has the meaning set forth in Section 9.3.1.
“Technical Documentation” means all drawings, designs, diagrams, specifications and other design and engineering documents and data, including operating and maintenance manuals, that the Contractor is required to prepare and deliver under the Agreement.
“Technical Requirements” means and refers to those requirements set forth in the Statement of Requirements, the Site Acceptance Test and in the documents identified in the Statement of Requirements, which Schedules and documents define the Work specifications and the design, construction, scope, performance requirements and intent for the BESS and Project.
“Toxic Substance” means toxic substance as defined by the Canadian Environmental Protection Act (Canada) as amended from time to time and including any regulations thereunder and successor or replacement legislation.
“Unanticipated Tariff” has the meaning set forth in Section 9.2.9.
“Utilities” means electric power, water and storm and sewer discharge systems.
“Vendor” means any Person at any tier that supplies machinery, equipment, materials or services related thereto to the Contractor or any Subcontractor in connection with the performance of the Work.
“Warranty Periods” means the periods of duration of the Contractor’s repair obligations, including any extensions and re-warranty periods, as set forth in Article 23.
| - 12 - |
“Work” means with respect to each BESS, all labour, design, engineering, procurement of Components and, tools, Components transportation, installation, supervision, construction, commissioning, start-up, testing, personnel training and other services and items identified in the Statement of Requirements or which are necessary, appropriate, or inferable to execute and complete the Components and BESS in accordance with this Agreement, all in accordance with and to meet the Project Schedule.
“Working Days” means Monday to Friday, inclusive, excluding statutory holidays in Ontario.
| 1.2 | Schedules |
The following Schedules are incorporated by reference into this Agreement and bind the Parties as if set out herein:
ARTICLE 2
NOTICE TO PROCEED
| 2.1 | Notice to Proceed |
2.1.1 Subject to Sections 2.1.2 and 2.1.2(a) the Contractor shall commence Work upon receipt of a notice to proceed duly executed by the Owner and thereafter diligently continue the Work in accordance with the Project Schedule.
2.1.2 The Owner shall have no obligation to issue a notice to proceed pursuant to Section 2.1.1 and for the avoidance of doubt, the Owner shall not in any event issue the notice to proceed before the satisfaction or waiver by the Owner of the following conditions precedent:
| (a) | approval by Owner with respect to the Fixed Contract Price and identity of the Subcontractors; and |
| (b) | approval by Owner’s management of the terms of this Agreement and the activities proposed to be conducted pursuant to the terms hereof. |
| - 13 - |
2.1.3 If the Owner anticipates that it shall not issue a notice to proceed pursuant to Section 2.1.1 until after October 3, 2023, the Contractor and the Owner, both acting reasonably, shall initiate good faith negotiations as to the affect such delay may have on the Project Schedule and the Guaranteed Substantial Performance Date.
2.1.4 If the Owner does not issue a notice to proceed pursuant to Section 2.1.1 by October 3, 2023then the Parties shall, both acting reasonably and in good faith, endeavour to renegotiate the Agreement but anytime thereafter either Party may terminate the Agreement on fifteen (15) Days’ Notice to the other. Any such termination by either Party shall be without Liability and neither Party shall have any Liability to the other Party following any such termination.
| 2.2 | Limited Notice to Proceed |
2.2.1 Notwithstanding the foregoing, Owner may elect to issue a notice to proceed instructing the Contractor to procure the Components for the Project (the “Limited Notice to Proceed” or “LNTP”). Upon receipt of the LNTP, Contractor shall immediately procure the Components from “EVLO Energy Storage Inc.”. For greater certainty, the Contractor and the Owner hereby agree that the purpose of Owner issuing the LNTP is to ensure the delivery of the Components on a timely basis and in any event on the date set out in the Project Schedule.
ARTICLE 3
GENERAL PROVISIONS
| 3.1 | Scope of Work |
3.1.1 On a fixed price, lump sum “turnkey” basis, the Contractor shall design, engineer, procure, construct, start-up, test, and provide personnel training for the operation and maintenance of the BESS that is in conformance with the Project Requirements and the other requirements of this Agreement. The BESS will be located on the Job Site listed in Schedule 1. The scope of the Contractor’s responsibilities hereunder is set forth more particularly in this Agreement and includes furnishing all services, supervision, labour, materials, supplies, Components and other equipment and machinery required to complete, start up and test the BESS.
| 3.2 | Contractor Review of Project Requirements |
3.2.1 The Contractor represents and warrants to the Owner (a) that it has carefully and thoroughly reviewed, analyzed, compared and familiarized itself with the Project Requirements, (b) that it is satisfied that the Project Requirements are in accordance with generally accepted engineering standards, and (c) that the Project Requirements contain all information, data, measurements, instructions, direction and guidance (or such information, data, measurements, instructions, direction and guidance reasonably inferable from the Project Requirements) as is necessary for the Contractor to prepare the Design & Engineering Documents and to complete the Work in accordance with the terms and provisions of this Agreement and for the Fixed Contract Price, by the Guaranteed Substantial Performance Date.
| - 14 - |
3.2.2 The Contractor acknowledges and agrees that the Project Requirements do not contain any errors, omissions, mistakes, discrepancies or defects. In the event the Contractor discovers an error, omission, mistake, discrepancy or defect in the Project Requirements, the Contractor shall promptly report the same to the Owner and shall propose a resolution thereof for the Owner’s review and approval. The Contractor shall not be entitled to a Change Order in the event that the error, omission, mistake, discrepancy or defect has caused an increase in the Fixed Contract Price and/or delay in the Project Schedule.
| 3.3 | Priority of Agreement Provisions |
In the event of a conflict or inconsistency of provisions in this Agreement, the following order of precedence shall govern the interpretation of such documents:
3.3.1 the body of this Agreement (excluding the Schedules and the Design & Engineering Documents), as amended from time to time via a Modification;
3.3.2 the approved Design & Engineering Documents;
3.3.3 the Schedules in each case as amended from time to time in the following order of priority: 1, 10, 13, 20, 2, 3, 5, 8, 9, 4, 6, 12, 14, 7, 16, 15, 21, 11, 17, 18, 19 and 22;
3.3.4 the Detail Design Documents (other than the Schedules), as amended from time to time; and
3.3.5 in the event of an ambiguity or inconsistency within this Agreement or among the various Project Requirements as to quantity or quality, the greater quantity and the better quality shall govern; except, however, that computed or figured dimensions shall take precedence over scale dimensions, and large scale drawings shall take precedence over small scale drawings. In the event the Contractor becomes aware of any conflict between the main body of this Agreement and any Schedules (or the Technical Requirements) of this Agreement or between any of the Schedules (or the Technical Requirements) of this Agreement, the Contractor shall notify the Owner within forty-eight (48) hours of such conflict in writing, pursuant to the notification provisions set forth in Section 29.11.
| 3.4 | Independent Contractor |
In performing its duties and obligations under this Agreement, the Contractor shall, at all times, act in the capacity of an independent contractor, and shall not in any respect be deemed (or act as) an agent of the Owner for any purpose or reason whatsoever.
ARTICLE 4
CONTRACTOR’S SERVICES
| 4.1 | General Requirements |
4.1.1 Performance of the Work. The Contractor hereby covenants and agrees that it shall duly and properly perform and complete the Work in accordance with the Project Requirements, including the Technical Requirements. The Contractor further covenants and agrees that it shall provide and pay for all items or services necessary for the proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated into the Work, including, but not limited to, all design, engineering, procurement, installation and construction services, all administration, management, training and coordination services, all labour, materials, furnishings, office trailers, Components, supplies, insurance, bonds, Permits (other than Owner Permits), tests, inspections, tools, machinery, water, heat, Utilities and transportation, and all other items, facilities and services. As part of the Work, the Contractor shall supply all oils, chemicals, grease, fills and other consumables necessary to achieve Substantial Performance and the BESS shall be fully loaded with such consumables at the Acceptance Date.
| - 15 - |
4.1.2 Professional Standard. The Contractor’s services shall be performed (a) with due care and diligence in a good and workmanlike manner, (b) in accordance with Good Engineering and Operating Practices, and (c) as expeditiously and economically as is consistent with the best interests of the Owner and with the preceding standards.
4.1.3 Licensing and Other Qualifications. The Contractor covenants and agrees that any individuals and entities who will perform or be in charge of professional, architectural, design and engineering services for the Work shall have experience with the type of project being undertaken and shall be duly licensed to practice under the Laws of Ontario. . Similarly, all construction services shall be undertaken and performed by qualified and licensed construction contractors, vendors and suppliers.
4.1.4 Sufficient Personnel. The Contractor shall, at all times during the term of this Agreement, keep sufficient personnel employed so that the Work to be performed by the Contractor hereunder is completed in an efficient, prompt, economical and professional manner.
4.1.5 Contractor’s Key Personnel. Attached hereto as Schedule 8 is a list of the Contractor’s key personnel who will be responsible for supervising the performance of the Contractor’s Work hereunder. Among such individuals, there shall be appointed a full-time on-site principal representative of the Contractor (the “Contractor’s Representative”), who shall be the Contractor’s authorized representative and who shall receive and initiate all communications from and with the Owner and be authorized to render binding decisions related to the Project. Contractor may remove key personnel from the Project upon written notice to the Owner. If, after execution of this Agreement, the Owner reasonably objects in writing to any of the Contractor’s personnel, the Contractor shall promptly remove such disapproved personnel. If any of the Contractor’s key personnel are removed as provided above, any replacement personnel shall be subject to the prior written approval of the Owner, which approval shall not be unreasonably withheld.
4.1.6 Local Conditions. The Contractor represents that it has taken steps reasonably necessary to ascertain the nature and location of the Work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the Project, the Job Site and/or the performance of the Work, including but not limited to (a) existing and Project conditions bearing upon transportation, disposal, handling, and storage of materials and Components; (b) the availability of labour, water, electric power, Utilities and roads; (c) uncertainties of weather, noise limitations or similar conditions at the Job Site; (d) the adequacy and limitations of the Job Site for lay-down, storage and operations; (e) the character of construction equipment and construction facilities needed prior to and during the performance of the Work; and (f) all Job Site dimensions and all measurements relevant to the Work and the Job Site. The Owner acknowledges that the Contractor has assumed no risk or liability for Pre-Existing Hazardous Substances which are encountered at the Job Site subject always to the provisions of Article 25.
4.1.7 Legal Requirements. The Contractor shall comply, and shall cause the Subcontractors to comply, in all material respects, with all Permits and all existing and future Laws which are applicable to the Work and/or the Job Site and shall give all notices pertaining thereto.
| - 16 - |
4.1.8 Permits and Licenses. The Contractor shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances, if applicable, set forth in Schedule 1 and such other permits as relate to the Contractor’s performance of the Work and completion and operation of the BESS (“Contractor Permits”). The Contractor shall pay for the Contractor Permits. The Owner shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances set forth in Schedule 1 (“Owner Permits”, and together with the Contractor Permits, the “Permits”). The Owner shall pay for the Owner Permits. Each Party shall provide any assistance reasonably requested by the other Party to obtain or maintain such Permits and the Contractor acknowledges and agrees it will, as part of the Work, be required to provide all necessary design documents that will be required by Owner to obtain the Owner Permits. The Contractor acknowledges and agrees that the Permits listed in Schedule 1 are all permits, registrations, licences, certifications, authorization inspections, approvals, consents, governmental fees and variances that must be obtained under all applicable Laws for the design, engineering, procurement, construction, start-up, testing, completion and operation of the BESS. The Contractor and the Owner will provide the other with copies of the Permits it secures. The Owner is responsible for all costs associated with permit fees for the Owner Permits.
4.1.9 Periodic Reports and Meetings; Office. The Contractor shall prepare and submit to the Owner on or prior to the Wednesday of each week a written status report in the form set out in Schedule 12 regarding the Project and the progress of the Work in the preceding one (1) week (Sunday to Saturday (inclusive)) period, which, in addition to the requirements set out in Schedule 1, will include:
| (a) | any events of material significance to the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date; |
| (b) | such items required by the Statement of Requirements to be reported upon in such reports; and |
| (c) | any items impacting the Project Schedule or any other items that the Owner reasonably requests. The Contractor shall also immediately notify the Owner of any events that may reasonably be expected to adversely affect the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date. Further, upon the Owner’s specific request, the Contractor agrees to provide to the Owner any other information reasonably requested by the Owner within five (5) Working Days of the request. |
Until Final Completion, the Contractor will attend and participate in weekly progress meetings with the Owner that will occur on the last Working Day of each week at the Job Site (or on a different day or location as the Owner may elect) for the purpose of discussing the status of the Work, anticipating and resolving any problems and reviewing a performance scorecard prepared by Owner and agreeing on a course of action the Contractor shall take to address any deficiencies identified in such scorecard.
4.1.10 Patents and Other Proprietary Rights. The Contractor shall pay all royalties and other fees for any Intellectual Property Rights necessary for the execution and completion of the Work and for the Owner to own, operate, maintain, repair and modify the BESS following Substantial Performance. The Contractor shall indemnify, defend and as a separate covenant hold harmless the Owner Indemnitees from and against any and all losses, damages, claims or expenses, including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis, arising or resulting from any claim or legal action that any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement, or the use thereof, constitutes an infringement and/or violation of any Intellectual Property Right or other proprietary right. If any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement or the use thereof is held to constitute an infringement or violation of the rights of any Person in any Intellectual Property Right or proprietary right, and the use of such item is enjoined, the Contractor shall, at its own expense (in addition to the Contractor’s indemnification obligation described above and any other remedies the Owner may have under this Agreement), either procure the right to use the infringing item, or replace the same with a substantially equal but non-infringing item, or modify the same to be non-infringing, provided that any substitute or modified item shall meet all the requirements and be subject to all the provisions of this Agreement. The terms and provisions of this Section shall survive the termination or expiration of this Agreement.
| - 17 - |
4.1.11 Supervision. The Contractor shall supervise, coordinate and direct the Work using Good Engineering and Operating Practices. The Contractor shall employ, or cause to be employed, only supervisory personnel who are appropriately qualified, trained and experienced in safety, efficiency and quality of work supervision, and if requested by the Owner, accredited or enrolled in a program for accreditation with respect to appropriate qualifications specified by the Owner. Notwithstanding the foregoing, the Contractors shall ensure that any person employed by the Contractor or any Subcontractor at the Job Site shall also complete any training or other site specific requirements that may pertain to the Job Site, whether imposed by Owner or any other Person with authority over or ownership or control of the Job Site.
4.1.12 Responsibility. The Contractor shall be responsible to the Owner for acts and omissions of the Contractor, Subcontractors, their respective agents and employees, and any other Persons performing portions of the Work, or claiming by, through or under the Contractor, and shall be responsible to the Owner for any Liabilities resulting from such acts or omissions. The exercise by the Contractor of the right to subcontract will not in any way increase the costs, expenses or Liabilities of the Owner. Further, nothing contained in this Agreement is intended to or will create any contractual relation between any Subcontractor and the Owner or any obligation on the part of the Owner to pay or see to the payment of any moneys due to any Subcontractor or its personnel.
4.1.13 Discipline. The Contractor shall enforce strict discipline and good order among the Contractor’s employees, Subcontractors’ employees and any other Persons carrying out the Work. The Contractor shall not permit the employment of unfit Persons or Persons not skilled in tasks assigned to them and shall require all Work to be in accordance with Good Engineering and Operating Practices. The Contractor shall remove any employee or other individual that the Owner, acting reasonably, deems incompetent, careless, negligent, unreasonable, uncooperative, unfit, or under the influence or in possession of drugs or alcohol. Any costs or increased costs or expenses associated with any such removal of employees or other individuals shall be borne solely by the Contractor. The Contractor shall be responsible for peaceful labour relations at the Job Site, shall at all times exert its Commercially Reasonable Efforts and judgment as an experienced contractor to adopt and implement policies and practices designed to avoid work stoppages, slowdowns, disputes or strikes where reasonably possible and practical under the circumstances, and shall at all times exert its Commercially Reasonable Efforts to maintain Project- wide labour harmony.
4.1.14 Labour Agreements. In satisfying the requirement in Section 4.1.13, and in-line with ITC labour requirement, the Contractor will pay as part of its labour subcontracts a total compensation package that equates to the prevailing wage. Additionally, at least ten per cent of the tradesperson hours worked must be performed by registered apprentices in the Red Seal trades.
| - 18 - |
4.1.15 Co-operation. The Contractor shall co-operate with and assist the Owner, its advisors, consultants, lawyers, employees, agents, contractors and representatives, including Authorities at all times during the term of this Agreement so as to complete the Projects in an efficient, timely and economical manner. Such co-operation and assistance shall include, without limitation, any reasonable co-operation or assistance required by the Owner in connection with its arrangements for the provision of services to the Contractor in relation to the construction of the BESS.
4.1.16 Work Plans.
| (a) | The Contractor shall develop and implement comprehensive management and work plans for the Project which are relative to (among other matters) Project safety and security; quality assurance and quality control; management and control of the design, engineering, procurement and construction services; and management and control of Subcontractors and their subcontracts; inspection and testing plans, method statements and work instructions and non-conformance control and corrective action process (the “Quality Plans”). |
| (b) | All Quality Plans will be consistent with the requirements of the Project Requirements and the Contractor shall prepare and implement the Quality Plans and shall cause to be performed the Work in compliance with the Quality Plans. |
| (c) | The Contractor shall submit to the owner the initial Quality Plans and any changes to any of the Quality Plans it proposes to make from time to time, and may amend such plans further to such reasonable comments and instructions the Owner may propose. |
| (d) | Without limiting Owner’s other rights pursuant to this Agreement, the Owner may, from time to time, directly or indirectly, perform periodic monitoring, spot checks and auditing the Contractors quality management systems, including all relevant Quality Plans and any quality manuals and procedures. |
4.1.17 Signage. The Contractor shall not display, install, erect or maintain any advertising or other signage at the Job Site without the Owner’s prior written approval as to the same.
4.1.18 Notice of Claims. The Contractor shall promptly notify the Owner of any claims, suits or actions filed or asserted in writing against the Contractor in relation to the Work, the Job Site and/or this Agreement.
4.1.19 Discoveries of Historical Interest. The Contractor shall take reasonable precautions to prevent its workers, its Subcontractors or any other Persons from removing or damaging any artefact, fossil, article of value or antiquity and structures and other remains or things of geological or archaeological interest or cultural evidence discovered during the course of the Work. Upon discovery of the same, the Contractor shall immediately notify the Owner of same, and shall stop all construction work around the affected area, until all appropriate action has been taken by the Owner. Upon request by and at the expense of the Owner, the Contractor shall protect the discovery undisturbed. Any such discovery shall be, as between the Owner and the Contractor, the absolute property of the Owner. To the extent permitted by applicable Law, the Contractor shall carry out the Owner’s orders as to the disposal of the same. If arising from any such discovery the Guaranteed Substantial Performance Date or Project Schedule may be impacted, the Contractor shall use its Commercially Reasonable Efforts to devise a work around plan in an attempt to maintain the original schedule. The work around plan shall be subject to approval by the Owner.
| - 19 - |
The additional costs of preparing and implementing the work around plan shall be treated as a Change in Work. If, despite these efforts and the work around plan or if the Owner does not approve the work around plan and it is determined that the Guaranteed Substantial Performance Date and the Project Schedule will be impacted negatively, the Contractor and the Owner shall discuss the amount of time by which the schedule was directly impacted and the Owner will grant an appropriate extension of time as the Owner acting reasonably considers fair by issuing a Change Order pursuant to Article 16. The requirements of this Section 4.1.19 are in addition to any obligation imposed by any Law with regard to objects or places of a historical or cultural nature.
4.1.20 Interconnection Studies. The Contractor herby covenants and agrees to perform the Work in accordance with any connection impact or system impact studies prepared in relation to the BESS from time to time by the Owner or the IESO as applicable.
4.1.21 Books and Records. The Contractor shall keep full and detailed books, records, and accounts as necessary for proper financial management under this Agreement and such obligation shall continue for up to seven (7) years after the Substantial Performance Date. The Owner shall have the right to access, audit, inspect, and copy the Contractor’s books, records, and accounts at any time, upon reasonable prior notice, within such period for the purpose of verifying payments and compliance with the requirements of this Agreement, including in connection with Taxes payable by the Owner or the Contractor.
| 4.2 | Design and Engineering Work |
4.2.1 Scope Design & Engineering Documents
| (a) | The Statement of Requirements identifies certain design and engineering documents to be prepared by the Contractor and the Contractor shall prepare such documents accordingly and submit them to the Owner for review (the “Design and Engineering Documents”). The Design and Engineering documents do not need to be submitted to the Owner as a single complete set, but may be submitted in successive packages, each of which may address separate systems available to the Project. The Owner will promptly review such documents and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall reasonably consider any comments provided by the Owner and make such changes to the Design and Engineering Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Design and Engineering Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicted above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Design and Engineering Documents are in conformity with the Project Requirements, and the Owner may require amendments to the Design and Engineering documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of the Contractor’s Work under this Agreement. Further to the review and comment by the Owner and any changes thereafter made by the Contractor, the Design and Engineering Documents shall serve as the basis for all of the Contractor’s detail design for the work. The Design and Engineering Documents shall be stamped by a professional engineer (Ontario). |
| - 20 - |
| (b) | After finalization of the Design and Engineering Documents in accordance with Section 4.2.1(a) the Contractor shall prepare detailed design documents consistent with the Design and Engineering Documents and all vendor specifications and shall be consistent with (and develop in detail) the intent of the Statement of Requirements shall include all necessary drawings, specifications, schedules, diagrams and plans, and shall contain such content and detail as is necessary to obtain all Permits and to properly complete the construction of the Project in accordance with the terms of this Agreement (the “Detail Design Documents”). The Detail Design Documents shall provide information customarily necessary for the use of such documents by those in the building trades. All civil, structural, mechanical, electrical, architectural and landscape drawing and specifications shall be stamped by a professional engineer licensed to practice in Ontario or other suitable design professional licenced to practice in Ontario. Procured items such as batteries, inverters, electrical cabinets, reinforced steel shop drawings, etc. will not require a stamp. In connection therewith, the Contractor shall, in preparing the Detail Design Documents, submit an electronic copy of drawings to the Owner for information within five (5) Working Days of preparation. |
| (c) | The Owner will promptly review the Detail Design Documents provided to it by the Contractor pursuant to Section 4.2.1(b) and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall consider any comments provided by the Owner and make such changes to the Detail Design Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Detail Design Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicated above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Detail Design Documents are in conformity with the Statement of Requirements, Design and Engineering Documents and the other Project Requirements and the Owner may suggest amendments to the Detail Design Documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of this Agreement. |
4.2.2 Compliance with Laws. The Contractor covenants and agrees that the Design & Engineering Documents and the Detail Design Documents shall be prepared in accordance with the professional standard defined in Section 4.1.2, and shall be in compliance with and accurately reflect all applicable Laws. The Contractor shall, at no expense to the Owner, promptly modify any such documents which are not in accordance with the requirements of the Agreement.
4.2.3 Shop Drawings.
| (a) | Shop drawings are drawings, diagrams, illustrations, schedules, performance charts, brochures, product, and other data which illustrate details of a portion of the Work (“shop drawings”). |
| (b) | The Contractor shall provide shop drawings as described in the Statement of Requirements or as the Owner may reasonably request. |
| - 21 - |
| (c) | The Contractor shall review all shop drawings it provides to Owner pursuant to this Section 4.2.3. The Contractor represents by this review that the Contractor has determined and verified all field measurements and field construction conditions (or will do so), Component requirements, catalogue numbers and similar data and that the Contractor has checked and coordinated each shop drawing with the requirements of the Work and of the Project Requirements. |
| (d) | Shop drawings which require approval of any Authority having jurisdiction shall be submitted to such Authority by the Contractor. |
| (e) | The Contractor shall submit shop drawings to the Owner for review with reasonable promptness in an orderly sequence, and sufficiently in advance so as to cause no delay in the Work or in the work of other contractors. The Contractor shall, acting expeditiously and with diligence and as soon as practicable after receiving authorization to proceed with the Work, prepare a schedule of the dates for submission and return of shop drawings for the Owner’s review and approval. Shop drawings shall be submitted in the form of reproducible transparencies or prints as the Owner may reasonable direct. Contractor shall allow the Owner twelve (12) Working Days to review shop drawings from the date of receipt. At the time of submission, the Contractor shall specifically draw to the attention of the Owner, in writing, any deviations in the shop drawings from the Project Requirements. |
| (f) | The Owner’s review under Section 4.2.3(e) is for conformity to the intent of the Project Requirements and for general arrangement only. Such review shall not limit relieve, waive, or diminish the Contractor’s duties and liabilities under this Agreement to perform the Work so that the Project when complete satisfies all requirements of this Agreement. |
| (g) | Upon the request of the Owner, the Contractor shall revise and resubmit shop drawings which the Owner rejects as being inconsistent with the Project Requirements within the time period reasonably required by the person rejecting such drawings. At the time of resubmission, the Contractor shall specifically draw to the attention of the Owner, in writing, any material revision in the shop drawings other than those specifically requested. |
| 4.3 | Procurement and Construction Work |
4.3.1 Control. The Contractor shall be solely responsible for and shall have control over all construction means, methods, techniques, sequences and procedures, and for coordinating all portions of the Work.
4.3.2 Inspection and Delivery of Materials, Components and Manufacturer’s Requirements. The Contractor shall perform a detailed inspection of all materials and Components located on or off the Job Site that comprise or will comprise a portion of the Work, and the Owner’s Representative may perform a detailed inspection of all materials and Components located on the Job Site that comprise or will comprise a portion of the Work, at intervals appropriate to the stage of construction or fabrication, as necessary to ensure that the Work is proceeding in accordance with this Agreement. On the basis of such inspections, the Contractor shall keep the Owner informed of the progress and quality of the Work and shall provide the Owner with reports of any material defects or deficiencies discovered during any inspection in which event Article 17 shall apply and Contractor shall, at the earliest practical opportunity cause such defects or deficiencies to be corrected. The Contractor shall expedite the delivery of all materials and Components and shall handle (including unloading the Components), store on-site and install all materials and Components in strict accordance with the manufacturer’s or vendors’ instructions and specifications. The Contractor acknowledges and agrees to bear all risks (including delay, schedule and performance risks) with respect to the Components. The Contractor shall be responsible for loading and transporting all Components to the Job Site as further described in Article 20. All Components incorporated into the Work will be new and will meet the requirements of this Agreement.
| - 22 - |
4.3.3 Access by the Owner and Others. The Contractor shall provide the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants access to the Work at all times during Working Days in accordance with the requirements of the Statement of Requirements; provided that the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants shall comply with reasonable security or safety restrictions imposed by the Contractor so as not to unduly interfere with the Work and the Owner shall not hold the Contractor liable for any such undue interference.
4.3.4 Clearing Job Site. The Contractor shall be responsible for all clearing, excavation, grading and similar work necessary to complete the Work.
4.3.5 Cutting, Coring, Excavation & Backfill. The Contractor shall be responsible for all cutting, fitting, coring, excavation and backfilling which is required to complete the Work or to make its parts fit together properly. It is the intent of this Agreement that all areas requiring cutting, fitting, coring, excavation and backfilling shall be restored to a completely finished condition which match and/or blend with its surroundings and pre-existing finishes such as asphalt, gravel, etc.
4.3.6 Cleaning Up. The Contractor shall, at all times during the term of this Agreement, keep the Job Site and surrounding streets, properties, sidewalks and other areas free from waste materials, rubbish, debris and other garbage resulting from the construction of the BESS, and shall employ adequate dust control measures. The Contractor shall properly and regularly dispose of unneeded materials used, generated or excavated in the performance of the Work. As soon as reasonably practicable following Substantial Performance and no later than Final Completion, the Contractor shall remove from the Job Site all tools, equipment, machinery, surplus materials, waste materials and rubbish, and shall clean all glass (inside and out), remove all material paint spots and other smears, stains or scuff marks, clean all plumbing and lighting fixtures, wash all concrete, tile and finished floors, and otherwise leave the Project and the Job Site in a neat and clean condition. All waste disposal and other clean-up shall be performed, at a minimum, in accordance with all applicable Laws. If the Contractor fails to clean the BESS and Job Site as provided herein, the Owner may do so upon five (5) days’ prior written Notice to the Contractor and the cost thereof shall be promptly reimbursed to the Owner by the Contractor on demand or may be set-off against any payments due to the Contractor. For clarity, all grading of property in or around the BESS shall be graded to the extent that minimizes any inconvenience to the Landlord.
4.3.7 Noise Controls. The Contractor shall make every effort to minimize the noise levels while construction of the Work is proceeding and shall comply with the specific requirements of the Statement of Requirements in this regard. The Contractor will be responsible for providing the BESS that complies with all noise Laws and Permits.
4.3.8 Records. The Contractor shall maintain in good order at the Job Site at least one copy (in hard copy and electronic formats as reasonably requested by the Owner) of the Design & Engineering Documents, the Detail Design Documents, drawings, specifications, product data, samples, shop drawings, Modifications and all other documents in connection with the Work being carried at the Job Site, marked currently to record changes made during construction. These documents shall be available at all times to the Owner and its representatives for their review and/or inspection. Prior to Final Completion, all of the preceding items which are applicable to the completed portion of the Work shall be delivered to the Owner, as well as a set of “as-built” drawings for each BESS (in hard copy and on computer disk) showing all changes made to the drawings during construction. The Contractor shall also provide to the Owner, prior to Final Completion, an “as-built” survey for each BESS at the Job Site, indicating the actual location of the improvements as constructed and as situated on the Job Site.
| - 23 - |
4.3.9 Purchasing Schedule. The Contractor shall prepare and deliver to the Owner a purchasing schedule and update at the Work progress meetings of the Owner and the Contractor described in Section 4.1.9 such purchasing schedule and the Major Component Procurement Plan. The purchasing schedule prepared by the Contractor under this Section 4.3.9 and the Major Component Procurement Plan shall identify each item to be purchased or procured, and shall with respect to each such item, describe (a) proposed date of purchase; (b) manufacturer and manufacturer’s location; (c) proposed shipping date; and (d) date delivery is due at the Job Site. The Major Component Procurement Plan shall cover the procurement of all Components to which the Technical Requirements described in the Statement of Requirements apply and shall include detailed provision for the quality testing and procurement by the Contractor of such Components, including but not limited to plans for pre-shipment quality testing of Components to be procured out of storage. The purchasing schedule and the Major Component Procurement Plan shall together provide for the supply of all Components and materials to be furnished by the Contractor and the Owner and incorporated into the Work by the Contractor.
4.3.10 The Contractor’s Responsibility for Proper Layout. The Contractor shall be strictly responsible for the proper layout, location, performance, and accuracy of the lines and levels required for the proper performance of the Work and for any loss or damage to the Owner resulting from the Contractor’s failure to properly perform the same if a problem arises. For greater clarity this includes the placement of the BESS as per Design & Engineering Documents.
| 4.4 | Coordination with Owner, Authorities and Subcontractors |
4.4.1 Notwithstanding Section 4.3.1, the Contractor acknowledges and agrees that the Job Site may be located on lands designated, in part, as agricultural lands used, in part, for farming purposes by the Landlord. The Contractor agrees to coordinate the Work with representatives of the Owner that will be assigned for this purpose to ensure that the Work and any farming operations at the Job Site are not disrupted. The Contractor acknowledges and agrees such coordination activities shall be included in the Work and may include periodic (weekly or more frequent) coordination meetings with the Job Site representative.
4.4.2 Subject to any other term in this Agreement, the Contractor shall have complete responsibility for coordination of the Work with all Authorities and any other Persons, as necessary, and the administration of any testing or taking of any other action necessary to demonstrate the Work’s compliance with all applicable permits and applicable Laws prior to and as at Substantial Performance.
4.4.3 The Contractor shall provide such reasonable assistance as may be requested by the Owner in dealing with any other contractors having access to the Job Site from time to time in relation to the Work.
4.4.4 The Contractor shall inform the Owner, and shall keep the Owner fully apprised, of any and all contact with any Authority, if applicable, in each of its reports issued to the Owner pursuant to Section 4.1.9.
| - 24 - |
4.4.5 The Contractor shall promptly provide the Owner with any correspondence the Contractor receives from any Authority and the Contractor shall provide any correspondence or submittals to the Owner for its review and approval prior to the Contractor delivering or issuing such to any Authority.
| 4.5 | Local Communities |
The Contractor shall use its Commercially Reasonable Efforts to cooperate and assist the Owner in its efforts to explore opportunities with, management of, or otherwise in obtaining involvement of, local communities in connection with the Work.
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices |
4.6.1 The Owner may require the placement of no greater than two (2) of the Owner’s personnel in the Contractor’s engineering phase of the Work at the Contractor’s offices to enable Owner to acquire knowledge about the Project design and engineering.
4.6.2 In addition to the requirements of Section 4.6.1, the Owner may require the placement of no greater than one (1) of the Owner’s personnel at the Job Site during the performance of any of the Work at the Job Site to enable the Owner to acquire knowledge about, among other things, the Project through the construction, start-up and commissioning of the BESS.
4.6.3 The Contractor shall be responsible for providing, at the Contractor’s sole cost and expense, any of the Owner’s personnel in the Contractor’s engineering and design offices with continuous access to office space, parking, basic office furniture, telephones and active telephone lines (including direct external lines, speakers for hands free operation and electronic voicemail), internet access, photocopiers, scanner and printers.
4.6.4 Notwithstanding any such attendance by the Owner’s personnel referred to in this Section 4.6 the Contractor shall retain sole responsibility for the Work.
4.6.5 The Contractor acknowledges that it shall not be provided with any specific space for any furnished facilities or any dedicated furnished facilities, at the Job Site and any space made available by the Owner shall be on an entirely discretionary basis from time to time as the Contractor may agree with the Owner.
| 4.7 | Entrance, Routing and Transportation to the Job Site |
The Owner shall provide all entrance(s) to the Job Site required for ingress and egress of all personnel, equipment, Components, materials and vehicles to and from the Job Site. The Contractor is responsible for the appropriateness of all routing and transport corridors for delivery of the Components, and any other materials or equipment to the Job Site and preparation of all transportation studies, and the Contractor shall be liable and shall indemnify the Owner from and against any and all Liabilities arising from the Contractor’s development, use or closure of routing and transport corridors, including any heavy-haul routes. Any transportation study, report or other information provided by the Owner prior to the effective date of this Contract in respect of such routing and transportation is provided as background information only and as an accommodation to the Contractor without limiting the Contractor’s obligations under this Contract, and shall not affect the obligations of the Contractor under this Section 4.7.
| - 25 - |
| 4.8 | Importing |
The Contractor shall be the importer of record with respect to all Components originating from a location outside of Canada which the Contractor accepts delivery of at a location outside of Canada.
ARTICLE 5
OWNER
| 5.1 | Rights, Duties & Obligations |
5.1.1 Owner’s Representative. The Owner shall designate in writing, from time to time, one or more individuals who shall act on behalf of the Owner in connection with the Projects, together with the scope of their authority. Among such designees, there shall be appointed a principal representative of the Owner (the “Owner’s Representative”), who shall be the Owner’s authorized representative and who shall receive and initiate all communications from and with the Contractor and be authorized to render binding decisions related to the Projects. Owner’s Representative shall not be authorised to enter into any Modifications on behalf of the Owner or any other amendment, variation, or waiver to any provision of this Agreement.
5.1.2 Owner Approvals. The Contractor acknowledges and agrees that any review, inspection, acceptance, comment or evaluation by the Owner of any plans, drawings, specifications, other documents, Components or other Work prepared by or on behalf of the Contractor shall be solely for the Owner’s determining for the Owner’s own satisfaction the suitability of the Projects generally for the purposes intended therefor by the Owner and may not be relied upon by the Contractor, Subcontractors, or any other third party as a substantive review or approval thereof. The Owner, in reviewing, inspecting, commenting on or evaluating any plans, drawings, specifications, other documents, Components or other Work, shall have no responsibility or Liabilities for the accuracy or completeness of such documents or Work, for any defects, deficiencies or inadequacies therein or for any failure of such documents or Work to comply with the requirements set forth in this Agreement; the responsibility for all of the foregoing matters being the sole Liability and obligation of the Contractor. In no event shall any review, inspection, comment, evaluation or approval by the Owner relieve the Contractor of any Liability, obligation or responsibility under this Agreement, it being understood that the Owner is at all times ultimately relying upon the Contractor’s skill, knowledge and professional training and experience.
5.1.3 Co-operation with the Contractor. Whenever the Owner’s co-operation is required by the Contractor in order to carry out the Contractor’s obligations hereunder, the Owner agrees that it shall act in good faith in so cooperating with the Contractor.
5.1.4 Rights to Access Project. The Owner has secured or shall secure all property rights required to permit the Contractor to access the Job Site as necessary for the performance of the Work.
5.1.5 Construction Means & Methods. The Owner shall have no control over or charge of, and shall not be responsible for, construction means, methods, techniques, sequences or procedures, or for safety precautions or programs, in connection with the Work, all of which are the sole responsibility of the Contractor. However, the Owner may consult with the Contractor on such matters and the Contractor will consider such matters in its reasonable judgment. The Contractor acknowledges and agrees with the Owner’s commitment to safety and acknowledges the Owner’s expectation of the compliance by the Contractor and its Subcontractors in relation to the same.
| - 26 - |
5.1.6 Inspection of Work
| (a) | The Contractor shall ensure that the Owner, and its respective employees, agents, advisors, representatives and designees shall be granted access to the Contractor’s Work, whether at the Job Site or off-site, at all times during the Working Days upon twenty-four (24) hours’ prior Notice so as to enable such parties to witness and inspect the Work (including, without limitation, any item of design, equipment, material, service or workmanship to be provided as part of the Work); provided that the Owner and its employees, agents, advisors representatives and designees shall comply with reasonable restrictions imposed by the Contractor so as not to unduly interfere with the Work. The Contractor shall make all arrangements necessary to permit such inspections at the Contractor’s Work place or at any location where any material, Components or piece of machinery is being manufactured or fabricated. The Owner and its employees, agents, advisors, representatives and designees will have the right to be present during all start- up, testing and commissioning, whether on or off the Job Site, and will, by way of example and not limitation, have timely access to all test procedures, quality control reports, and test reports and data, including all Components adjustment, installation and alignment data. The Contractor will provide safe and proper facilities for such access and inspection. Further, to allow the Owner and the Owner’s employees, agents, advisors, representatives and designees to be present, the Contractor will give the Owner ten (10) Working Days advance Notice of any system, Components or BESS check-out or testing, including any factory acceptance test of the batteries, power converters or transformers and with respect to any such factory acceptance test, the Contractor will cause the relevant Vendor to permit Owner and Owner’s employees, agents, advisors, representatives and designees to be present at such factory acceptance tests. The Contractor will permit the Owner and any Person authorised in writing by the Owner to inspect and review all field work including Component installation, start-up and commissioning. |
| (b) | Prior to covering or burying any Utility, the Contractor shall provide the Owner with at least ten (10) Working Days’ Notice and the Owner shall have an opportunity to inspect (the “Inspection Date”), such Utility. If any Utility has been covered prior to the Inspection Date, it shall be uncovered at the written request of the Owner for its observation and recovered at the Contractor’s sole cost and expense. If (i) a portion of the Work (other than such Utility) has been covered (which the Parties acknowledge and agree is not required to be observed prior to being covered) or (ii) the Owner elects not to inspect any Utility prior to burying or covering, the Owner may request in writing to see such Work and it shall be uncovered by the Contractor for inspection by the Owner. If the uncovered Work referred to in this Section 5.1.6(b) is found to be in accordance with this Agreement, (i) the costs of uncovering and recovering shall, by appropriate Change Order, be charged to and paid by the Owner and, in addition, (ii) the Contractor shall be entitled to an equitable adjustment to the Project Schedule and the Guaranteed Substantial Performance Date, as applicable. If the Work referred to in this Section 5.1.6(b) is found to be defective, the Contractor shall be responsible for the cost of uncovering, correcting and re-covering this Work, and no schedule adjustment in connection therewith shall be required. Nothing contained in this Section 5.1.6(b) shall alter the Contractor’s obligations to correct defective Work as set forth in Article 17. |
| - 27 - |
| (c) | The Owner may from time to time audit all safety, construction and other health and safety plans maintained by the Contractor in relation to the Work and the Job Site, including the Quality Plans, and the Health and Safety Plan and the Contractor shall promptly review and remedy any deficiencies reasonably identified by the Owner in the course of any such audit. |
| (d) | No inspection, audit or review of, or failure to inspect or review, the Work by any individual or entity referenced in this Section 5.1.6 shall relieve the Contractor of its obligation to properly execute and complete the Work. |
5.1.7 Owner’s Right to Carry Out the Work. If the Contractor defaults under this Agreement or neglects to carry out the Work in accordance with this Agreement (including, without limitation, any failure to immediately eliminate an unsafe or hazardous condition as required by Section 20.1.4) and fails within a five (5) Working Day period after receipt of written Notice from the Owner to correct such default or neglect or, if the default or neglect cannot be corrected in such five (5) day period, commence and continue correction of such default or neglect with diligence and promptness in accordance with a schedule to be agreed upon between the Owner and the Contractor, or fails within a five (5) Working Day period after receipt of written Notice from the Owner to eliminate (or diligently commence to eliminate) the cause of any stop work order issued, the Owner may, without prejudice to any other rights or remedies the Owner may have, and with or without terminating this Agreement, after good faith consultation with the Contractor, correct such deficiencies in a prudent and reasonably efficient manner, and deduct an amount equal to the expenditures reasonably incurred by the Owner in so doing from amounts due or to become due to the Contractor. If the payments then or thereafter due to the Contractor are not sufficient to cover the amount of the deduction, the Contractor shall pay the difference to the Owner on demand.
ARTICLE 6
PROJECT SCHEDULE
| 6.1 | Commencement |
The Contractor shall commence its obligations under this Agreement upon receipt of the notice to proceed pursuant to Section 2.1.
| 6.2 | Substantial Performance |
The Contractor acknowledges and agrees that achievement of Substantial Performance on or before the Guaranteed Substantial Performance Date to be of critical importance to the Owner.
| 6.3 | Project Schedule |
The Contractor has prepared the Project Schedule which is a detailed schedule for the Work for the Project. The Contractor shall update the Project Schedule on a monthly basis to reflect the actual progress to date (“Monthly Updated Schedule”); provided, however, that the Contractor may not modify the Guaranteed Substantial Performance Date or the Final Completion Date listed in Schedule 9 without a Change Order being executed pursuant to this Agreement, nor shall the Contractor change any dates that relate to the Owner’s obligations without obtaining the Owner’s prior written consent. If the Contractor changes the schedule logic or any durations with respect to any part of the Work, the Contractor shall provide the Owner with a written explanation of each such change along with such Monthly Updated Schedule. The Monthly Updated Schedule shall be in the same detail and form as required by the Project Schedule. The Contractor shall perform the Work in accordance with the Project Schedule as updated from time to time.
| - 28 - |
ARTICLE 7
LIQUIDATED DAMAGES
| 7.1 | Delay Liquidated Damages |
7.1.1 If Substantial Performance does not occur by or before the Guaranteed Substantial Performance Date, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner delay liquidated damages at the Daily Rate plus Sales Taxes for each day of such delay from and including the Guaranteed Substantial Performance Date until but not including the day on which the Contractor achieves Substantial Performance (the “Delay Liquidated Damages”). The Contractor shall have no obligation to pay Delay Liquidated Damages to the extent that such delay in achieving Substantial Performance is due to an Owner Caused Delay. Notwithstanding and in addition to the foregoing provisions of this Section 7.1, if Substantial Performance does not occur on or before May 1, 2025, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner as a lump sum, liquidated damages equal to two percent (2%) of the Fixed Contract Price, in addition to any other Delay Liquidated Damages that may be payable by Contractor to Owner from time to time.
| 7.2 | Substantial Performance and Minimum Performance Criteria |
Notwithstanding anything to the contrary contained in this Agreement, the Contractor shall not be permitted to satisfy its obligation to achieve Substantial Performance by the payment of Liquidated Damages.
| 7.3 | Exclusivity of Liability |
7.3.1 Subject always to Section 5.1.7, Article 17 and Article 28, the payment of Liquidated Damages as provided in this Article 7 shall constitute the sole and exclusive Liability of the Contractor for Substantial Performance occurring after the Guaranteed Substantial Performance Date.
7.3.2 Maximum Overall Liquidated Damages. Notwithstanding anything herein to the contrary, the Contractor’s maximum liability for Liquidated Damages shall not exceed, under any circumstances, [REDACTED: Percentage amount] of the Fixed Contract Price.
| 7.4 | Invoicing and Payment of Liquidated Damages |
7.4.1 Subject always to any bona fide disputes relating to the payment of Liquidated Damages, if Liquidated Damages are payable from the Contractor to the Owner, the Owner shall submit monthly invoices as required to the Contractor specifying the Liquidated Damages to be paid by the Contractor. The Liquidated Damages specified in such invoice shall be due from the Contractor no later than thirty (30) days after the receipt of such invoice.
7.4.2 The Owner may set off against amounts due to the Contractor hereunder any Liquidated Damages owed by the Contractor hereunder.
| 7.5 | Liquidated Damages Not Penalty |
The Parties acknowledge and agree that because of the nature of the Project it is difficult or impossible to determine with precision of the amount of damages that would or might be incurred by the Owner as a result of Substantial Performance being achieved after the Guaranteed Substantial Performance Date. It is understood and agreed by the Parties that (i) the Owner shall be damaged by such matters, (ii) it would be difficult or impossible to fix the actual damages resulting therefrom, (iii) any sums which would be payable under this Article 7 are in the nature of liquidated damages and not penalties, and are fair and reasonable, and (iv) such payments represent a reasonable pre-estimate of fair compensation for the losses that may reasonably be anticipated from such delay. Notwithstanding the foregoing, in the event the Liquidated Damages are held to be unenforceable by any Authority, the Owner shall be permitted to make a claim and recover against the Contractor for the amount of any Liabilities arising from the relevant matter for which Liquidated Damages were payable.
| - 29 - |
ARTICLE 8
LIMITATION OF LIABILITY
| 8.1 | Consequential Damages |
Except as covered by Liquidated Damages and notwithstanding anything to the contrary contained in this Agreement, the Owner and the Contractor hereby waive all claims against the other party (and against its Affiliates, employees, directors, officers, members, contractors, subcontractors, consultants and agents) and neither Party shall be liable to the other for loss of anticipated revenues or profits, damages by reason of loss of opportunity or for any consequential, special, incidental, indirect or punitive damages, and regardless of whether any such claim arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory even if a Party was advised of the possibility of such loss or damage occurring. Provided always that any Liability of a Party to any third party for which indemnification or recovery is sought against the other Party hereunder shall not be considered a consequential, special, incidental or indirect loss solely because such third party claim included a claim for consequential, special, incidental or indirect loss.
| 8.2 | Overall Limitation |
Except for the exceptions set out in Section 8.3 and notwithstanding anything to the contrary contained in this Agreement, the aggregate Liability of the Contractor to the Owner or the Owner Indemnitees with respect to this Agreement, whether such Liability arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory, shall not exceed an amount equal to [REDACTED: Confidential and commercially sensitive information regarding liability cap] “Maximum Liability Amount”).
| 8.3 | Exceptions to Caps on Liability |
Notwithstanding anything herein to the contrary, the Maximum Liability Amount shall not apply to and the Contractor’s Liability shall be:
8.3.1 unlimited with respect to its:
| (a) | fraud; or |
| (b) | wilful misconduct or gross negligence which results in death or personal injury; |
8.3.2 limited to [REDACTED: Dollar amount] with respect to claims relating to its gross negligence, wilful misconduct or pursuant to Section 26.1.4.
| - 30 - |
| 8.4 | Remedies Non-Exclusive |
Except as otherwise provided in Section 7.2, the remedies available to Contractor or Owner in connection with this Agreement, whether arising in contract or in tort are in addition to all other remedies provided by the laws of Ontario but excepting those remedies which have been expressly excluded in this Agreement.
| 8.5 | Limitations |
Nothing in this Agreement shall be construed to extend the limitation period applicable to the pursuit of any claim pursuant to this Agreement as set out in the Limitations Act (Ontario).
ARTICLE 9
CONTRACTOR’S COMPENSATION
| 9.1 | Fixed Contract Price |
In consideration of the Contractor’s performance of the Work pursuant to this Agreement, the Owner shall pay to the Contractor as compensation therefore, no more than the sum of twelve million one thousand three hundred eighty-two dollars ($12,001,382) (the “Fixed Contract Price”), subject to adjustment and final reconciliation pursuant to the terms of this Agreement and all applicable sales, use, purchase or similar taxes (collectively, the “Sales Taxes”). The breakdown of the Fixed Contract Price is attached hereto as Schedule 6.
The Parties expressly agree that Schedule 6 is based upon certain reasonable cost assumptions. On a monthly basis, Actual Costs shall be reconciled against the Fixed Contract Price.
| 9.2 | All Inclusive |
The Fixed Contract Price includes:
9.2.1 all Components, labour, services, import taxes and duties, supplies, Utilities supplied during construction (including water and electricity) and Intellectual Property Rights to be provided hereunder or required to perform the Work;
9.2.2 all federal, provincial, and local taxes arising out of the Contractor’s performance of the Work (except for those referred to in Section 9.3);
9.2.3 any duties including import duties and taxes, fees, licenses and royalties imposed with respect to any Contractor Permits, Components, other equipment, materials, labour, services, supplies or Utilities;
9.2.4 all transportation costs relating to any Components, other equipment and loading and offloading fees;
9.2.5 costs of necessary third party inspection and certification including by any Authorities;
9.2.6 everything contingently and indispensably necessary to construct and complete the Work, and shall include consideration of all geographical and other restrictions associated with performance of the Work;
| - 31 - |
9.2.7 Contractor’s entire profit for completing the Work in accordance with the requirements of the Agreement, as well as all costs, overhead, contingency, expenses and allowances in connection with performance of the Work, including:
| (a) | all project management, engineering specialist services, consumables (including all required fuel) and direct and indirect labour required to perform the Work in accordance with the Agreement; |
| (b) | all construction aids and consumables required for provision of the Work. This shall include, but not be limited to: |
| (i) | design development of purchase orders; |
| (ii) | procuring, expediting, receiving, handling, inspection and the like; and |
| (iii) | all costs, overheads and contributions to profit related to such items; |
| (c) | all costs associated with complying with health and safety requirements; |
| (d) | the total cost for all Subcontractor management and utilization; |
| (e) | any Contractor or Subcontractors’ yard modifications, upgrades to equipment, facilities and the like; |
| (f) | costs for royalties, duties, licence fees, know-how fees, usage of proprietary information and all similar items; |
| (g) | costs for research and development (including those related to the development of computer systems); |
| (h) | corporate and administrative services such as legal, advertising, recruiting, general procurement, corporate accounting, marketing, industrial relations, sales and their related office costs; |
| (i) | all payrolls, employment, travel, subsistence accommodation and like costs for Contractor and Subcontractor personnel directly or indirectly engaged in the performance of the Work. This shall include salaries, wages, payroll burdens, escalation, bonus programs, vacations, holidays, sick leave, overtime, employment premiums, redundancy provisions, leave allowances, qualification payments, fares and expenses, employment insurance, retirement funds, payments or benefits under national or local agreements, government taxes, social security contributions, safety and welfare programs, protective clothing, all overheads and profits; and |
9.2.8 Notwithstanding the above, the Parties acknowledge and agree that the costs for items (a) and (b) below are estimates only and the Fixed Contract Price will be adjusted up or down based on Actual Costs: [REDACTED: Confidential and commercially sensitive exclusions from Fixed Contract Price]
9.2.9 Notwithstanding Section 9.2.7(f), the Fixed Contract Price shall not include any tariffs or duties imposed after the date of this Agreement pursuant to the Customs Tariff (S.C. 1991, c.36) (“Unanticipated Tariff”). Notwithstanding the first sentence of this Section 9.2.9, any tariff or duty which prior to the date of this Agreement (i) has been introduced as a bill in the Parliament of Canada in a form similar as such statute takes when it has legal effect, or (ii) has been made public in a discussion or consultation paper, press release or announcement issued by the Government of Canada shall not constitute an Unanticipated Tariff.
| - 32 - |
| 9.3 | Taxes |
9.3.1 The Fixed Contract Price includes payment by the Contractor and its Subcontractors for Sales Taxes applicable to any portion of the Work (but excluding those applicable directly to the Fixed Contract Price as provided in Section 9.1), any and all fees (including licence, documentation and registration fees), taxes (including income, gross, receipt, sales, rental, use turnover, value added, property (tangible and intangible), excise and stamp taxes), licences, royalties, custom duties, value added taxes, fees, levies, imposts, duties, recording charges, charges, assessments, withholdings and other governmental charges of any nature whatsoever, whether federal, provincial, local, territorial or foreign, together with any and all assessments, penalties, fines, additions and interest thereon, (except for interests and penalties not paid or remitted by the Contractor at the specific written request of the Owner), payable or due, in relation to the Work, including any of the foregoing related to the import by the Contractor or its Subcontractors of any items into Canada, or other Work (collectively referred to as “Taxes”). The Fixed Contract Price shall not be increased with respect to any of the foregoing items or with respect to any withholdings in respect of any of the foregoing items that the Owner may be required to make. Notwithstanding any of the foregoing, the Contractor shall not be liable for, and the Contract Price shall not include any Taxes for which the Owner is responsible pursuant to Section 9.1. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of Sales Taxes will be paid on the Work. The Contractor shall indemnify and save the Owner harmless from and against any and all claims, costs, losses and damages (including interest and penalties) suffered or incurred by the Owner as a result of the Contractor’s non-compliance with any of its obligations in respect of Taxes.
9.3.2 The Parties acknowledge and agree that all purchases, sales, leases and uses of any property or services by the Contractor as part of the Work are not incurred as agent for the Owner.
9.3.3 The Contractor shall timely administer and pay all Taxes for which the Contractor is responsible, and shall timely furnish to the appropriate taxing authorities all required information and reports in connection with such Taxes. Upon receipt of an invoice submitted by the Contractor, the Owner shall pay, on the due date for the undisputed invoice determined in accordance with this Agreement, the amounts of HST payable pursuant to Section 9.1 to Contractor who shall remit the HST paid to the relevant Authority at the time required by Law. The amount of HST payable by the Owner shall be separately stated in all invoices to the Owner. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of HST shall be paid with respect to the Work. In the event that transactions involving the Owner may be exempt from some Taxes or HST under applicable Laws, at the direction of the Owner, the Contractor shall provide all necessary information to any Authority and complete all necessary forms to allow the Owner to secure such exemption. The Owner shall hold harmless and indemnify the Contractor with regard to the instructions the Owner provides for such transactions.
9.3.4 In the event that any amount becomes payable as a result of a breach, modification or termination of the Agreement, and if section 182 of the Excise Tax Act (Canada) applies to that payment, then the amount payable shall be increased by an amount equal to the HST percentage rate multiplied by the amount payable and the payor shall pay the increased amount.
| - 33 - |
ARTICLE 10
PROCEDURE FOR PAYMENTS
| 10.1 | Payments & Applications for Payment |
10.1.1 Application for Payment. No earlier than the fifth (5th) day of any month and no later than the tenth (10th) day of any month following a month in which the Contractor has achieved a milestone set out in Schedule 9, the Contractor shall submit to the Owner an application for payment detailing the milestone completed during the previous month, including (for information purposes only) a detailed schedule of the number of man-hours expended on the Work completed during the previous month together with the applicable executed Milestone Completion Certificate (each, an “Application for Payment”). Each Application for Payment shall properly represent the portion of the Work which has been achieved. All Applications for Payment shall be based on the relevant percentage of the Fixed Contract Price payable in respect of the relevant payment milestone satisfied in the preceding month, as set forth on the Schedule of Milestones attached as Schedule 9. Applications for Payment shall not be made more frequently than monthly.
10.1.2 Lien Holdback
| (a) | The Owner shall withhold from each payment with respect to the Fixed Contract Price due to the Contractor during the Project, the Lien Holdback Amount. The Owner may increase the Lien Holdback Amount by the amount of any holdback necessary or desirable as a result of registered Liens or claims for Liens, notice of which may have been received by the Owner. |
| (b) | Subject to the provisions of the Construction Act (Ontario) and the submission by Contractor of a certificate containing the following documents: |
| (i) | a written undertaking by Contractor to complete expeditiously any outstanding Work (including Punch List items) and to discharge all unfulfilled obligations under this Agreement; |
| (ii) | an executed statutory declaration in the form set out in Schedule 7; |
| (iii) | an invoice specifying the aggregate amount of the Lien Holdback Amounts held by the Owner, |
the aggregate of the Lien Holdback Amounts (other than the Lien Holdback Amount for finishing work as per section 22(2) of the Construction Act) is payable within (5) Business Days following the first date upon which both of the following conditions have been satisfied:
| (iv) | the Work has achieved Substantial Performance; and |
| (v) | forty (40) days have elapsed from the date that Contractor has published a notice of Substantial Performance of the Work in respect of which the applicable Lien Holdback Amounts were retained, as provided in the Construction Act (Ontario), |
| - 34 - |
provided that if, prior to the expiry of the period set forth in this Section 10.1.2(b)(v) Liens have been registered or the Owner has received written notice of any Liens in connection with the Work which have not been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario) by the date otherwise determined pursuant to this Section 10.1.2(b), the date of payment otherwise shall be extended until the date that such Liens have been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario).
10.1.3 Supporting Documentation. Each Application for Payment shall be accompanied by the following, all in form and substance reasonably satisfactory to the Owner:
| (a) | an invoice and a duly executed and acknowledged statement showing all Subcontractors with whom the Contractor has entered into subcontracts, the amount of each such Subcontract, the amount requested for any Subcontractor in the Application for Payment and the amount to be paid to the Contractor and each Subcontractor from such payment(s); |
| (b) | duly executed statutory declaration in the form of Schedule 7 from the Contractor; and |
| (c) | such other information, instruments, documents or other materials (i) as may be required by the Laws or customs of the Province of Ontario in order to protect the Owner from construction or similar Liens or claims, or (ii) as the Owner may reasonably request. |
10.1.4 Title. The Contractor warrants that title to all Work and Components shall pass to the Owner, free and clear of all Liens, claims, charges, security interests and encumbrances whatsoever on the earlier of payment by the Owner therefor or when it is delivered to the Job Site. Notwithstanding such passing of title, the Components shall be at the risk of the Contractor until the earlier of the Substantial Performance Date or termination of the Agreement. The passing of title in any Components to the Owner shall in no way affect, limit, alter or reduce the Contractor’s duties and obligations or the Owner’s rights under the Agreement.
| 10.2 | Payment |
10.2.1 Issuance of Payment. Invoices for any amounts payable by the Owner pursuant to this Article 10 must be sent by the Contractor electronically to: The Owner shall only be required to make payments pursuant to electronic funds transfer. In order for Owner to make payment to Contractor via electronic funds transfer, Contractor must provide Owner with, in the case of the first payment only, (i) a void cheque, pre-printed deposit slip or bank confirmation letter and (ii) the email address where Contractor wishes to receive remittance information (together, “EFT Information”). EFT Information must be sent electronically to, [REDACTED: Email address]. Subject to Section 10.2.2 and any right of set-off or withholding, the Owner shall, within twenty eight (28) days after the receipt of the Contractor’s Application for Payment (and all supporting documentation), issue payment to the Contractor for such amount as the Owner determines is properly due, via electronic funds transfer. If the amount so determined by the Owner is less than the amount requested by the Contractor, the Owner shall notify the Contractor in writing within fourteen (14) days of receipt of the Contractor’s Application for Payment of the reasons for withholding payment in whole or in part as permitted in this Agreement.
| - 35 - |
10.2.2 Withholding Payments. The Owner may withhold, or cause to be withheld, any payment due to the Contractor in whole or in part if the Work corresponding to such payment is not properly completed or as may be reasonably necessary to protect the Owner from material loss because of (a) defective, deficient or nonconforming Work not remedied in accordance with this Agreement, (b) unresolved construction Liens filed by any Person (c) failure of the Contractor to make payments properly to Subcontractors or other Persons for labour, materials, Components or other Work without just cause, (d) damage to the Owner caused by the Contractor or Subcontractors, (e) the Contractor’s failure to carry out the Work in accordance with this Agreement following the Owner’s written Notice to the Contractor, (f) errors, discrepancies, inconsistencies or irregularities in any Application for Payment, (g) unauthorised deviations from the Project Requirements by the Contractor in the prosecution of the Work or otherwise prosecution of the Work in non-compliance with the Project Requirements. The Owner shall not be deemed in default by reason of withholding a payment in whole or in part while any of the above matters remains uncured to its satisfaction (acting reasonably), provided that the amount of such withholding is a good faith estimate of allowable damages hereunder that may be incurred by the Owner as a result thereof. When the Contractor believes that it has cured the reason for any such withholding, the Contractor shall resubmit an Application for Payment for the amount that was withheld and if the Owner agrees that the reason for withholding has been cured, payment for the withheld amount shall be made within thirty (30) days after Owner’s receipt of such Application for Payment.
10.2.3 Set-Off. The Owner shall have the right to deduct as a set-off from any Contractor’s invoice an amount reasonably sufficient to protect the Owner from any unfulfilled obligations of the Contractor under this Agreement, any defective Components or any other breaches of this Agreement by the Contractor. Notwithstanding the foregoing, no set-off shall be made unless and until the Owner has provided the Contractor with written Notice of the unfulfilled obligation and given the Contractor a reasonable opportunity of at least thirty (30) days to commence a cure of such obligation.
10.2.4 Punch List The Owner shall be permitted to withhold from any payment properly due and payable to Contractor hereunder two hundred percent (200%) of the value of the Punch List determined pursuant to Section 12.2.
| 10.3 | Payments |
10.3.1 Subcontractors. The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor’s portion of the Work, the amount to which said Subcontractor is entitled. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to in a similar manner. The Owner shall not have an obligation to pay or to see to the payment of money to a Subcontractor or Vendor.
10.3.2 No Acceptance. No payment made by the Owner under this Agreement will constitute a waiver of any claim or right the Owner may have at that time or thereafter, including claims regarding unsettled Liens, warranty rights and indemnification obligations of the Contractor. No Payment made by the Owner under this Agreement will be considered or deemed to represent that the Owner has inspected the Work, accepted or checked the quality or quantity of the Work or that the Owner knows or has ascertained how or for what purpose the Contractor has used sums previously paid, and will not be deemed or construed as an approval or acceptance of any Work, or to relieve the Contractor of any of the Contractor’s obligations under this Agreement, or as a waiver of any claim or right that the Owner may have under this Agreement. All payments will be subject to correction or adjustment in subsequent payments with a detailed explanation submitted by the Owner to the Contractor describing such correction or adjustment.
10.3.3 Dispute. In the event of a dispute between the Contractor and the Owner, the Owner shall continue to make payments hereunder of amounts not in dispute without resubmittal of the Application for Payment.
| - 36 - |
10.3.4 Interest. Payments due and unpaid hereunder, except payments legitimately withheld, shall bear interest from the date payment is due at the Prime Rate.
10.3.5 Payment Preconditions. A precondition to the Owner making any payment under this Agreement:
| (a) | is that all policies of insurance set out in Section 18.1 are in full force and effect and Owner shall have been provided with certificates of insurance in accordance with Section 18.2.1 which continue to be valid; |
| (b) | in respect of all or any part of the Components, is that such Components have been delivered to the Job Site or appropriately and effectively identified as property of the Owner, and the Contractor shall, at the request of the Owner, provide satisfactory evidence that this precondition has been met; and |
| (c) | is that each payment will be paid to a segregated account established and controlled by the Contractor for this Agreement and from which the Contractor shall make all payments for Work performed. |
| 10.4 | Final Completion & Final Payment |
10.4.1 Final Completion. Provided that the Owner has received a final Application for Payment from the Contractor requesting payment of the remainder of the unpaid Fixed Contract Price, the Owner shall, subject to this Section 10.4, issue final payment.
10.4.2 Conditions to Final Payment. The final Application for Payment shall be delivered by the Contractor to the Owner following issuance of the Certificate of Substantial Performance (excluding any Lien Holdback Amount which shall be paid in accordance with the Construction Act (Ontario)) and payment shall be made, or caused to be made, by the Owner to the Contractor within twenty-eight (28) days of receipt of such Application for Payment and receipt of compliance with the Workplace Safety and Insurance Act (Ontario) in accordance with Section 10.5.1.
10.4.3 Acceptance of Final Payment. Acceptance of final payment by the Contractor shall constitute a final and complete waiver of claims by the Contractor, except those previously made in writing and identified by the Contractor as unsettled at the time of the final payment.
10.4.4 Punch List. Upon the completion by the Contractor of all of the Punch List items with the exception of those waived by the Owner in writing, the Owner shall pay, or cause to be paid, to the Contractor the value retained by the Owner pursuant to Section 10.2.4 in respect of such Punch List within twenty-eight (28) days after the Owner’s receipt of a corresponding Application for Payment (and all supporting information) and upon the Owner’s agreement that all work relating to Punch List items is complete but subject always to the provisions of Sections 10.2 and 10.3. The Owner shall give the Contractor reasonable access to each BESS and the Job Sites during normal working hours so as to give the Contractor sufficient opportunity to complete the Punch List items.
10.4.5 Holdback. Any Lien Holdback Amount held back by the Owner with respect to payments of the Fixed Contract Price made after the Substantial Performance Date shall become due and payable and shall be released to the Contractor in accordance with the Construction Act (Ontario), provided that the Contractor has submitted to the Owner a sworn statement that all accounts to Subcontractors and any other indebtedness which may have been incurred by the Contractor up to and including Final Completion and for which the Owner might in any way be held responsible have been paid in full except Lien holdback monies properly retained.
| - 37 - |
| 10.5 | Workers’ Compensation |
10.5.1 Prior to (a) commencing the Work; (b) the Contractor’s application for release of any Lien Holdback Amount; and (c) the Contractor’s application for final payment, the Contractor shall provide evidence of compliance with the Workplace Safety and Insurance Act (Ontario) at the Job Site, including payments due thereunder.
10.5.2 At any time during the term of this Agreement, when requested by the Owner, the Contractor shall provide such evidence of compliance by the Contractor and Subcontractors with Workplace Safety and Insurance Act (Ontario).
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
| 11.1 | The Contractor |
In addition to any other representations and warranties made herein, the Contractor hereby represents and warrants the following to the Owner, which representations and warranties shall survive the execution and delivery of this Agreement, any termination of this Agreement and the Final Completion of the Work:
| (a) | that the Contractor has carefully and thoroughly reviewed this Agreement (including, without limitation, the Technical Requirements) and that: (i) this Agreement does not contain any inconsistencies, discrepancies, errors or omissions; and (ii) this Agreement identifies (and permits the reasonable inference of) the scope which is necessary to complete the Work and the BESS within the Fixed Contract Price and by the Guaranteed Substantial Performance Date; |
| (b) | that the Contractor is able to furnish the personnel, tools, materials, supplies, Components, labour and design, engineering and construction services required to complete the Work, that it has the requisite technical, financial and legal ability to perform the Work, that it is familiar with and knowledgeable of all applicable Laws, and that it has and shall maintain the capability, expertise, competence and experience to perform the Work; |
| (c) | that the Contractor is a corporation duly organized, validly existing and in good standing under the Laws of Canada, and is duly qualified to do business in the Province of Ontario; |
| (d) | that the Contractor is authorized to do business in the Province of Ontario and properly licensed and approved by all Authorities having jurisdiction over the Contractor, the Work and/or the Project; |
| (e) | that the Contractor has visited the Job Sites, familiarized itself with the local conditions under which the Work is to be performed and correlated its observations with the requirements of this Agreement; |
| - 38 - |
| (f) | that the Contractor is capable of properly completing the Work and the BESS within the Fixed Contract Price, all in accordance with the terms and provisions of this Agreement; |
| (g) | that the Contractor has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (h) | that the Contractor’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (i) | that the Contractor has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Contractor’s authorization, execution, delivery and performance of the terms of this Agreement; |
| (j) | that there are no actions, suits, proceedings or investigations pending or, to the Contractor’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Contractor has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment; |
| (k) | that the Contractor is and will continue to be during the term of this agreement a registrant under the Excise Tax Act (Canada) with HST business number 846676377 RC0001; and |
| (l) | the Contractor is not and will not become during the term of this Agreement a non-resident of Canada for the purposes of the Income Tax Act (Canada). |
| 11.2 | The Owner |
The Owner hereby represents and warrants the following to the Contractor, which representations and warranties shall survive the execution and delivery of this Agreement, and any termination of this Agreement and the final completion of the Work:
| (a) | that the Owner is a corporation duly incorporated, validly existing and in good standing under the Laws of the Province of Ontario, and is duly qualified to do business in the Province of Ontario; |
| - 39 - |
| (b) | that the Owner has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (c) | that the Owner’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (d) | that the Owner has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Owner’s authorization, execution, delivery and performance of the terms of this Agreement, which has not already been obtained or will be timely obtained; and |
| (e) | that there are no actions, suits, proceedings or investigations pending or, to the Owner’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Owner has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment. |
ARTICLE 12
TESTING AND SUBSTANTIAL PERFORMANCE
| 12.1 | Guarantee Performance Tests |
12.1.1 Site Acceptance Test Protocols. Contractor agrees to prepare a draft Site Acceptance Test in accordance with the Statement of Requirements and once Owner confirms that such draft is agreed, it shall constitute the Site Acceptance Test for the purposes of this Agreement. On or before the date which is twenty (20) Working Days prior to the date that the Contractor is expected to commence the Guaranteed Capacity Test and any other testing provided for in the Site Acceptance Test, the Contractor shall provide the Owner with a draft testing program and procedures in accordance with the Site Acceptance Test and the Statement of Requirements. Such testing program and procedures shall include a protocol established by Contractor which shall address how the Contractor shall conduct the Site Acceptance Test and the Guaranteed Capacity Test in particular. The Contractor shall provide the Owner with the final testing program and procedures before the Site Acceptance Test is commenced.
12.1.2 Testing. At such time as the Contractor believes that the BESS will be ready for the Site Acceptance Test, the Contractor shall notify the Owner of testing no later than ten (10) Working Days prior to the date of each Site Acceptance Test so that the Owner, its employees, agents, advisors, representatives and the Owner’s Engineer may observe and participate in the same.
| - 40 - |
12.1.3 Performance Testing. The Contractor shall complete all elements of the Site Acceptance Test as soon as is reasonably possible after the commencement of the first such test. The Contractor must demonstrate that the Guaranteed Capacity Test and Permit conditions have been met (at least to the extent the same are required to have been met to achieve Substantial Performance) simultaneously. The Site Acceptance Test shall be conducted (a) in the presence of the Owner’s Representative and, at the request of any Authority in the presence of such Authority, (b) utilizing the personnel, who shall act under the supervision and direction of the Contractor, and (c) in conformance with the Project Requirements. In the event that any test required by the Site Acceptance Test fails as a result of a defect in any Component, the Contractor shall promptly remedy the defect in the Component. No auxiliary, standby or temporary equipment or machinery may be used during the performance of the Site Acceptance Test unless otherwise approved in writing by the Owner. Each BESS will be operated in its normal mode of operation while the Site Acceptance Test is being conducted, which shall consist of (a) the operation of the BESS as a whole, (b) the concurrent operation of BESS systems, and (c) the operation of all BESS systems within the manufacturers’ specifications and without over-stressing or over-pressurizing any such systems. Within seven (7) days following the conduct of each element of the Site Acceptance Test, the Contractor shall submit to the Owner a preliminary report explaining and analyzing the tests.
| 12.2 | Substantial Performance |
When the Contractor believes that it has achieved Substantial Performance, the Contractor shall submit written notice (the “Contractor Substantial Performance Notice”) to the Owner so certifying such event (which notice shall be accompanied by a report as to the results of the Site Acceptance Test any other information deemed reasonably necessary by the Contractor and a proposed Punch List) and certifying as to the items required by the definition of Substantial Performance, such certification of the items required by the definition of Substantial Performance to be in the form attached hereto as Schedule 4. Immediately thereafter, the Owner shall conduct those investigations and inspections as it deems necessary or appropriate to determine if Substantial Performance has in fact been achieved. The Contractor shall furnish to the Owner any additional supporting information reasonably requested by the Owner. In the event that Owner determines that Substantial Performance has not been achieved, it shall within ten (10) Working Days of receipt of Contractor’s notice by the Owner state the reasons therefor and/or provide comments to the proposed Punch List. In the event that Owner determines that Substantial Performance has been achieved, it shall within fifteen (15) Working Days after the receipt of the Contractor’s notice by the Owner notify the Contractor that Substantial Performance has been achieved by providing a notice substantially in the form of the notice attached hereto as Schedule 15. In the event that the Owner provides written notice that Substantial Performance has been achieved (the “Owner Substantial Performance Notice”), the Contractor and the Owner shall execute a “Certificate of Substantial Performance” establishing and identifying the “Substantial Performance Date” as the date on which the Contractor delivered the final Contractor Substantial Performance Notice. In the event that the Owner provides written notice that Substantial Performance has not been achieved, the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions in the Work which so prevent Substantial Performance. Upon completion of any such corrective and/or remedial actions and upon not less than five (5) Working Days prior written Notice to the Owner, the Contractor shall re- perform the Site Acceptance Test as provided in Section 12.1.
| - 41 - |
| 12.3 | Possession |
Upon the Acceptance Date, the Owner shall take possession of, and shall assume care, custody and control over, the Project.
| 12.4 | Completion Plan |
If any BESS has not achieved Substantial Performance by the Guaranteed Substantial Performance Date or it is known to the Parties that Substantial Performance will not be achieved by the Guaranteed Substantial Performance Date, the Contractor shall, within three (3) days, submit for review and approval by the Owner a written completion plan (the “Completion Plan”) detailing steps the Contractor will take to complete all necessary Work to meet the requirements of Substantial Performance. The Owner shall provide written approval or rejection (with comments) to the Contractor within five (5) Working Days of receipt of the Completion Plan. If rejected, the Contractor shall then resubmit to the Owner within the next five (5) Working Days a revised Completion Plan addressing such comments as shall have been provided by the Owner. The Owner shall provide written comment and, within the next three (3) Working Days after receipt of the Owner’s written comment, the Contractor shall revise and resubmit the Completion Plan within these time limits until the Contractor has addressed all comments of the Owner, and the Contractor shall then promptly proceed with such Work as may be required under the Completion Plan. The preparation, review and revision of a Completion Plan and performance of Work as required by the Completion Plan shall not be deemed in any way to have relieved the Contractor of its obligation to achieve Substantial Performance expeditiously or be a basis for an increase in the Fixed Contract Price.
| 12.5 | Post Substantial Performance Remediation |
12.5.1 Remediation. In the event the result of any test required by the Site Acceptance Test results in the satisfaction of the Guaranteed Capacity Test and all requirements for Commercial Operation of the BESS but not all the components of the Site Acceptance Test and provided the Substantial Performance Date occurs in accordance with this Agreement or as otherwise agree by the Parties, notwithstanding the occurrence of the Substantial Performance Date, the Contractor shall with the Owner’s prior written consent promptly and diligently correct the defect, failure, deficiency or breach which has prevented satisfaction of the relevant portions of the Site Acceptance Test at the Contractor’s sole cost and expense which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of the BESS. The Contractor shall remedy any such defect, failure, deficiency or breach so as to minimise disruptions to the Landlord’s operations at the Job Site. The Contractor shall perform further Site Acceptance Tests and continue the remedial work referred to in this Section 12.5 until each element of the Site Acceptance Test is satisfied in its entirety.
12.5.2 Performance Testing. If the Contractor wishes to conduct further Site Acceptance Tests pursuant to Section 12.5.1, the Contractor shall so notify the Owner (which Notice shall include a detailed schedule for the performance of such tests). The Contractor and Owner each acting reasonably shall thereafter schedule such further Site Acceptance Tests and the Contractor acknowledges and agrees that it will make Commercially Reasonable Efforts to minimise revenue loss to the Owner. All such tests shall be conducted in the presence of the Owner’s Representative in conformance with the Project Requirements. No auxiliary, standby, temporary equipment or machinery may be used during the performance of any such Site Acceptance Test and each BESS will be operated in its normal mode of operation which shall consist of (a) operation of the BESS as a whole and (b) without over-stressing or over-pressuring the BESS systems.
| - 42 - |
ARTICLE 13
FINAL COMPLETION
| 13.1 | Establishing Final Completion |
When the Contractor believes that it has achieved Final Completion, the Contractor shall submit Notice to the Owner so certifying such event and the other items required by the definition of Final Completion, including supporting documentation as reasonably required by the Owner. Immediately thereafter, the Owner shall conduct those investigations and inspections as they deem necessary or appropriate to determine if Final Completion has in fact been achieved. Within ten (10) Working Days after the receipt of the Contractor’s Notice by the Owner, the Owner shall either (a) notify the Contractor that Final Completion has been achieved, or (b) notify the Contractor in writing that Final Completion has not been achieved and stating the reasons therefor. In the event that the Owner provides written Notice that Final Completion has been achieved, the Contractor and the Owner shall execute a “Certificate of Final Completion” establishing and identifying the Final Completion Date in the form attached hereto as Schedule 20, unless the Owner provides written Notice that Final Completion has not been achieved, in which case the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions which so prevent Final Completion. Upon completion of such corrective and/or remedial actions, the Contractor shall resubmit its Notice certifying that it believes Final Completion has been achieved (together with the other items required by the definition of Final Completion) and the foregoing procedures shall be repeated until Final Completion has in fact been achieved.
ARTICLE 14
SUBCONTRACTORS
| 14.1 | Subcontracting |
Except as otherwise provided below, the Contractor shall not delegate or subcontract all or any portion of the Work to be performed on the Job Site to any Subcontractor which is not listed in Schedule 16. If the Contractor wishes to use a Subcontractor not listed in Schedule 16, the Contractor shall notify the Owner of the Subcontractor and consider any comments the Owner may have in relation to such Person prior to engaging it. Contractor is and shall ensure that all subcontractors at the Job Site comply with the ITC labour requirements.
| 14.2 | The Contractor’s Responsibility |
The Contractor shall be liable for the acts, omissions, defaults or neglects of its Subcontractors, its or their agents, employees or consultants as fully as if they were the acts, omissions, defaults or neglects of the Contractor. The Contractor shall be solely responsible for the engagement, management and payment of Subcontractors in the performance of the Work. The Owner shall have no obligation to pay or see to the payment of any monies to any Subcontractor, except for those required pursuant to the Construction Act (Ontario) as permitted under this Agreement. Notwithstanding any subcontract, vendor agreement, purchase order or agreement with any Subcontractor:
| (a) | the Contractor shall remain fully liable to the Owner to perform all of the duties and obligations or liabilities of the Subcontractor thereunder; |
| - 43 - |
| (b) | nothing in any such subcontract, vendor agreement, purchase order or agreement shall in any way diminish or relieve the Contractor of its duties and obligations under this Agreement; |
| (c) | the Contractor shall be responsible for and shall ensure that the Subcontractors obtain and pay for all necessary permits, fees, licences and certificates of inspection and insurance in connection with the Work they are to perform; and |
| (d) | the Contractor shall ensure all Subcontractors comply with the Owner Policy in connection with performance of any work on the Job Site or otherwise relating to the Project. |
| 14.3 | Intentionally Left Blank |
| 14.4 | Contingent Assignment |
Each subcontract agreement to the extent applicable to the Work and for the applicable portion of the Work is hereby assigned by the Contractor to the Owner provided that:
14.4.1 the assignment is effective only after termination of this Agreement by the Owner or expiry of the Warranty Periods and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing;
14.4.2 [intentionally deleted]
14.4.3 upon such assignment becoming effective, all of the rights of the Contractor under the subcontract shall be assigned to the Owner and the Subcontractor shall perform its duties and obligations thereunder, provided that the Owner or its designee makes payment of any amounts due thereunder as and when due and payable with respect to the same, less such amounts as therefore paid by the Owner to the Contractor applicable to the subcontract.
14.4.4 The Contractor shall execute and deliver to the Owner any instruments reasonably required by the Owner to confirm and evidence any of the preceding contingent assignments. The Contractor shall also make available for the Owner’s inspection true and correct copies of the executed subcontracts during regular business hours. In the event that after using its Commercially Reasonable Efforts to give effect to the foregoing provisions of this Section 14.4 the Contractor is unable to contingently assign a subcontract to the Owner as provided in this Section 14.4:
14.4.5 each such subcontract (a “Non-Assigned Contract”) will be deemed not to have been contingently assigned by the Contractor to the Owner under this Agreement;
14.4.6 in event of the termination of this Agreement or expiry of the Warranty Periods, the Contractor shall upon Notice from the Owner, and to the extent applicable to the Work, hold the Non- Assigned Contract for the exclusive benefit of the Owner;
14.4.7 the Contractor shall, at the request and expense and under the direction of the Owner, acting reasonably, do all things or cause all things to be done that the Owner, acting reasonably, considers necessary or desirable to perform the obligations of the Contractor under the Non-Assigned Contracts in a manner that preserves the value of the rights, remedies and benefits under the Non-Assigned Contract and ensures that those rights, remedies and benefits will enure to the benefit of the Owner, and ensure that all services, amounts and other consideration receivable under the Non-Assigned Contracts will be received by the Owner;
| - 44 - |
14.4.8 the Contractor shall promptly pay over to the Owner all amounts collected by the Contractor under the Non-Assigned Contracts and the Owner shall pay any amounts due thereunder for the performance by the Subcontractor of its duties and obligations thereunder, as and when due and payable, less any such amounts paid by the Owner to the Contractor which are applicable to the Non-Assigned Contract;
14.4.9 the Contractor and the Owner shall make reasonable efforts and cooperate with each other in good faith to obtain any necessary consents under the Non-Assigned Contracts to assign the same to the Owner, where the Owner wishes to take assignment; and
14.4.10 if the Contractor obtains the necessary consent referred to in Section 14.4.9 in form satisfactory to the Owner, effective as of the date the Owner receives a copy of that consent from the Contractor, that Non-Assigned Contract will be deemed to have been assigned and transferred by the Contractor to the Owner and the Contractor and the Owner will be relieved of any further obligations under any agreement made between them in respect of that Non-Assigned Contract (including under these Sections 14.4.5 to 14.4.9).
ARTICLE 15
OWNERSHIP AND CONFIDENTIALITY
| 15.1 | Ownership |
15.1.1 Design Materials. The copies and other tangible embodiments of the Design & Engineering Documents, and any other drawings, specifications, designs, plans, “architectural work” and other documents, specifically prepared by or on behalf of the Owner, the Contractor or the Subcontractors in connection with the Project or the Work (collectively, the “Design Materials”) are and shall remain the property of the Owner. The Contractor shall use its Commercial Reasonable Efforts to ensure that all copies of the Design Materials are delivered or returned to the Owner or suitably accounted for upon Final Completion. The Contractor may retain one copy of the Design Materials for its records. Any use of such Design Materials by the Contractor on other projects shall be at the Contractor’s sole risk and liability. The Intellectual Property Rights, if any, relating to the Design Materials or the contents of or concepts embodied in the Design Materials shall remain with and belong to the Contractor or its Subcontractors as the case may be.
15.1.2 Licence. As Design Materials and any portion of the Work deemed subject to any form of Intellectual Property Rights, the Contractor hereby grants and shall cause to be granted and delivered to the Owner from Subcontractors, whichever is appropriate, a fully paid-up, non-exclusive, worldwide, irrevocable, transferable licence, for the term of the Intellectual Property Rights, for the Owner to use, amend, reproduce and have reproduced, and for the Owner to allow others to use, amend, reproduce and have reproduced, such Design Materials and any derivative thereof and the Work, subject to the restrictions set forth below:
| (a) | all Intellectual Property Rights referred to this Section 15.1.2 shall remain the property of the Contractor or the appropriate Subcontractor, whether or not the BESS is constructed; |
| - 45 - |
| (b) | in no event will the Owner require the Contractor or any subcontractor or sub-subcontractor to grant a license to, or produce any software source code; and |
| (c) | the Owner shall not, without the prior written consent of the Contractor, use the Design Materials, in whole or in part, for the construction of any other project or for any purpose except as set forth in the following sentence. The Owner may, however, at no cost to the Owner, use such Design Materials (i) for completion of the Project by others upon termination of this Agreement and (ii) for the construction, operation and maintenance of (and for additions, improvements, expansions, changes or alterations to) the BESS after its completion. |
15.1.3 Delivery. Upon Final Completion or the date of termination of this Agreement, the Contractor shall deliver to the Owner any Design Materials which have not been previously submitted to the Owner.
15.1.4 Title. In confirmation and furtherance of the terms and provisions of this Article 15, ownership and title to the Design Materials shall vest in the Owner immediately upon the creation in whole or in part of any Design Materials. In addition, the licence granted to the Owner pursuant to Section 15.1.2 shall be deemed to be granted immediately upon creation of any of the Intellectual Property Rights to which it pertains.
15.1.5 Moral Rights. The Contractor shall require each employee, consultant or designer to execute a waiver of moral rights in a form reasonably satisfactory to the Owner and with respect to the preparation by employees, consultants and other individuals engaged by the designers in preparation of the Design & Engineering Documents, the Detail Design Documents and the Work.
| 15.2 | Confidentiality |
15.2.1 Confidential Information. The Owner and the Contractor each agree to keep confidential the terms and conditions of this Agreement and upon receipt from the other Party any documentation or information (a) provided by such Party to the other Party, whether or not it is marked as “proprietary” or “confidential”; (b) which is supplied orally with a contemporaneous confidential designation; or (c) which is known by the receiving party to be confidential or proprietary information or documentation of the disclosing party (“Confidential Information”). The Parties shall have no obligation with respect to any such Confidential Information which (a) is or becomes publicly known through no act of the receiving party, (b) is approved for release by written authorization of the disclosing party; or (c) is disclosed by the receiving party pursuant to a legal or regulatory process.
| - 46 - |
15.2.2 Use of Confidential Information. The Owner and the Contractor shall not use or disclose Confidential Information for any purpose other than for the design, development, construction, financing, transfer or operation of the Project. Notwithstanding the foregoing, the Owner may use and disclose Confidential Information of the Contractor for the completion, repair, operation and maintenance of, and additions, improvements, expansions, changes or alterations to, the BESS, provided that the Owner makes any third party with which such Confidential Information is shared subject to a written confidentiality provision with terms similar to those set forth herein, unless the recipient is already bound by a professional obligation not to disclose such Confidential Information. The Owner shall co-operate with the Contractor in enforcing such confidentiality provisions. Each Party agrees to utilize the same standards and procedures with respect to Confidential Information received from the other Party which it applies to its own Confidential Information, but not less than reasonable care. Each Party shall limit access to received Confidential Information to those of its Affiliates and its and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who need to know about or participate in the design, development, construction, ownership financing, or operation of the Project and disclosure shall be limited to only Confidential Information necessary for performance under this Agreement. Each Party agrees to inform each of its Affiliates and it and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who receive Confidential Information of the secret and confidential nature thereof and of the obligations imposed by this Agreement, and shall disclose to the other Party the identities of any lenders, subcontractors, suppliers, agents, and consultants who will have access to or have received Confidential Information. Unless otherwise agreed by the Owner, no Confidential Information received from the Owner shall be disclosed by the Contractor or its Subcontractors to lenders, contractors, subcontractors, suppliers, agents, and consultants until and unless those individuals or entities have executed a mutually agreeable confidentiality agreement with the Owner. The Contractor agrees that any Confidential Information provided to the Owner may be disclosed by the Owner to any bona fide potential purchaser, investor, lender or operator of the BESS. Each Party shall be liable for unauthorized use or disclosure of received Confidential Information by any Person to which such Confidential Information is disclosed by it. Confidential Information shall not be reproduced without written agreement of the Parties. Notwithstanding the foregoing, Confidential Information may be disclosed by the Owner pursuant to a subpoena or other legal or regulatory process or proceeding to which the Owner is a party or pursuant to the order of an Authority.
| 15.3 | Survival |
The terms and provisions of Section 15.2 shall survive the termination or expiration of this Agreement for a period of two (2) years.
ARTICLE 16
CHANGES IN WORK
| 16.1 | Changes in the Work |
Changes in Work may be accomplished after execution of this Agreement and without invalidating this Agreement, by Change Order or Construction Change Directive. A Change Order shall be based upon agreement between the Owner and the Contractor; a Construction Change Directive may be issued by the Owner alone and may or may not be agreed to by the Contractor. Changes in Work shall be performed under applicable provisions of this Agreement, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order or Construction Change Directive.
| - 47 - |
| 16.2 | Owner Initiated Changes |
The Owner may request changes in the Work within the general scope of this Agreement consisting of additions, deletions or other revisions. If the Owner so desires to change the Work, it shall promptly contact the Contractor to discuss the proposed changes to determine appropriate changes to the course of and impact on the Work. In addition, the Owner shall promptly submit a change request to the Contractor in writing in the form set out in Schedule 11. Within five (5) Working Days of its receipt of any such request, the Contractor shall submit a detailed proposal to the Owner in the form set out in Schedule 11 stating (i) the proposed increase, if any, in the Fixed Contract Price which would result from such a Change in Work, (ii) the effect, if any, upon the Guaranteed Substantial Performance Date by reason of such proposed Change in Work, and (iii) any other effect that the change would have on the provisions of this Agreement, together with supporting data and documentation, including any reasonably requested by the Owner in its request for the Change in Work. If the Contractor does submit a proposal within the preceding five (5) Working Day time period, the Owner shall, within three (3) Working Days following its receipt of such proposal, notify the Contractor as to whether the Owner agrees with such proposal and wishes to accept the Contractor’s proposal for the Change in Work (for purposes of this Section 16.2, the “Approval Date”). If the Owner agrees with such proposal and wishes to accept the same, the Owner and the Contractor promptly shall execute a Change Order pursuant to Section 16.3 below. In the event that the Owner disagrees with the Contractor’s proposal for the Change in Work, the Owner may either (i) notify the Contractor that the Owner has decided to withdraw its requested change, or (ii) issue a Construction Change Directive pursuant to Section 16.4 below (the “Directive Date”). Notwithstanding the time frame for formalizing any changes described above, the Parties agree to consult with one another throughout the process with respect to such changes.
| 16.3 | Change Orders |
In the event that the Owner agrees to accept the Contractor’s proposal in relation to the Owner’s request for a change in the Work, the Parties shall execute a “Change Order” in the form set out in Schedule11, which shall be a written instrument signed by the Owner and the Contractor, stating their agreement upon all of the following:
| (a) | the relevant Change in Work; |
| (b) | the amount of the adjustment in the Fixed Contract Price, if any; |
| (c) | the extent of the adjustment in the Project Schedule and the Guaranteed Substantial Performance Date, if any; and |
| (d) | all other effects the change has on the provisions of this Agreement. |
In addition to the circumstances described above, the Parties may enter into a Change Order in relation to a Force Majeure to the extent provided in Article 24 of this Agreement.
| 16.4 | Construction Change Directives |
In the event that the Owner disagrees with the Contractor’s proposal in relation to the Owner’s request for a Change in Work pursuant to Section 16.2, the Owner may issue a written order directing a Change in Work (a “Construction Change Directive”), whereupon the Owner and the Contractor shall also equitably adjust the Fixed Contract Price, the Guaranteed Substantial Performance Date, the Project Schedule as provided in this Section 16.4. To the extent any costs are actually incurred by the Contractor by virtue of and in accordance with the Change in Work required by a Construction Change Directive, the Fixed Contract Price will be adjusted in accordance with Section 16.5, and such extra costs, plus in the case of the costs identified in Section 16.5(b)(i) the Contractor’s profit and overhead thereon at a rate of five percent (5%), shall be invoiced by the Contractor monthly and paid by the Owner as required for payments hereunder. Unless otherwise stated in the Construction Change Directive, the Contractor shall begin the Work described in a Construction Change Directive promptly upon receipt of the same.
| 16.5 | Adjustment |
| (a) | The adjustment to the Fixed Contract Price resulting from the issuance of a Construction Change Directive shall be based on actual costs. |
| - 48 - |
| (b) | The Contractor shall keep and present, in such form as the Owner may prescribe, an itemized accounting of the “actual cost” together with appropriate supporting data, such as timesheets, invoices, time cards, payroll stubs, purchase orders, receipts and similar documentation. For the purposes of this Section 16.5, “actual cost” shall be defined and limited to the cost of the following: |
| (i) | costs of labour, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers’ or workmen’s compensation insurance; |
| (ii) | costs of materials, supplies and Components, including cost of transportation, whether incorporated or consumed; |
| (iii) | reasonable rental costs of machinery and equipment to be used in relation to the Work identified in the Construction Change Directive, whether rented from the Contractor or others (including small tools); |
| (iv) | costs for subsistence, travel time and per diems, if necessary for the performance of the Work; |
| (v) | costs of premiums for all bonds and insurance and fees for Permits related to the Work; |
| (vi) | as to the Contractor, payments made to Subcontractors for Work performed or furnished by Subcontractors; and |
| (vii) | costs related to changes that are required to be made to Work impacted by the change set out in the Construction Change Directive. |
| 16.6 | Guaranteed Substantial Performance Date |
The Owner shall propose a basis for adjustment, if any, in the Guaranteed Substantial Performance Date in the Construction Change Directive it issues to the Contractor. If the Contractor does not agree with such proposed adjustment, then any such adjustment in the Project Schedule shall be determined in accordance with Article 27 of this Agreement.
| 16.7 | Adjustments Final |
When the adjustments in the Fixed Contract Price and the Project Schedule are determined as provided in this Article 16, such determination shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order.
| 16.8 | Fixed Contract Price & Schedule |
Notwithstanding anything to the contrary contained in this Agreement, an increase in the Fixed Contract Price and the Guaranteed Substantial Performance Date may only be adjusted by Change Order or Construction Change Directive.
| - 49 - |
ARTICLE 17
CORRECTION OF WORK
| 17.1 | Correction of Work |
Prior to the date of Final Completion, the Contractor shall, at the earliest practical opportunity, correct Work (including any drawings, plans, specifications, items of construction or fabrication, or any other product constituting a part, system or component of the Work) (a) which the Owner, by providing written Notice to the Contractor, rejects as defective, deficient or failing to conform in all respects to this Agreement (whether arising from a design or construction defect, error, omission or deficiency), or (b) which is otherwise known by the Contractor or any Subcontractor to be defective or failing to conform to this Agreement. If other portions of the Work are adversely affected by or are damaged by such defective Work, the Contractor shall, at its sole cost and expense and at the earliest practical opportunity, correct, repair or replace such affected or damaged Work, as well as any other property damaged by such defective or nonconforming Work. All corrections to the Work shall be performed in accordance with this Agreement and the Project Requirements. The Contractor shall bear all costs of correcting such defective or nonconforming Work, including additional testing and inspections (including those necessary to demonstrate cure of the defective Work) and compensation for any design or engineering services and expenses made necessary thereby.
| 17.2 | Failure to Correct Work |
If the Contractor fails to correct defective or nonconforming Work, or any damaged Work or other property specified in Section 17.1 hereof, the Owner may correct it in accordance with Section 5.1.7.
ARTICLE 18
INSURANCE
[REDACTED: Confidential and commercially sensitive insurance provisions]
ARTICLE 19
[Intentionally left blank]
ARTICLE 20
PROTECTION OF PERSONS AND PROPERTY
| 20.1 | Safety |
20.1.1 Safety Programs. The Contractor shall be responsible for initiating, maintaining and supervising safety precautions and appropriate programs in connection with the performance of this Agreement, including, without limitation, appropriate precautions and programs for areas in and around the Job Site. Such precautions shall include the development of comprehensive environmental health and safety plan in accordance with the Statement of Requirements which shall relate specifically to the Project, the Work and the Job Site, which shall be developed and delivered to the Owner for approval by no later than delivery of the notice to proceed pursuant to Section 2.1 and the Contractor will comply with such environmental health and safety plan (the “Health and Safety Plan”). The Contractor shall have the highest regard for safety, emergency procedures and loss management at all times during the performance of the Work. Accordingly, the Contractor shall at all times be solely responsible for safety and loss management in the performance of the Work, including, but not limited to, protecting the Contractor, Separate Contractors, Subcontractors, visitors to the Job Site and the general public from injury or death and protecting the Job Site, the Owner’s property and the property of third parties from loss or damage. Without limiting the generality of the foregoing, the Contractor shall comply with all safety requirements specified in this Agreement.
| - 50 - |
20.1.2 Applicable Laws. The Contractor shall give Notices and comply with all applicable Laws bearing on the safety of persons or property or their protection from damage, injury or loss, including, without limitation, the Occupational Health and Safety Act (Ontario).
20.1.3 Constructor.
| (a) | The Contractor shall be the “constructor” at the Job Site and with respect to the Work for the purposes of the Occupational Health and Safety Act (Ontario) and shall nominate from among its personnel a contact person for issues relevant to such constructor role. As constructor Contractor shall do everything that is reasonably practicable to establish and maintain a system or process at the worksite that shall promote compliance with the applicable Occupational Health and Safety Act (Ontario) and its regulations. |
| (b) | The Contractor shall advise anyone performing the Work who may enter the Job Site, prior to their commencement of their portion of the Work as well as any Separate Contractors, that it is the constructor, that they shall comply with the requirements of the Occupational Health and Safety Act (Ontario) and cooperate with the Contractor’s directions with respect to the Occupational Health and Safety Act (Ontario) and directives that are safety related and that failure to do so could result in termination of their contracts. |
| (c) | The Owner may, at its sole and absolute discretion for reasons of health and safety, cause parts of, or all of, the Work or Project to be stopped, or Subcontractors or any construction aids to be removed or excluded from the Job Site. |
| (d) | The Contractor shall have complete and sole responsibility for all health and safety matters regarding the Work including compliance with all requirements pursuant to applicable Laws, familiarizing all relevant Persons with the provisions of the Occupational Health and Safety Act (Ontario) that apply to the Work and all potential or actual dangers to health and safety in the workplace and as otherwise set out in this Agreement. |
| (e) | The Contractor shall initiate, maintain and take complete responsibility for supervising health and safety precautions and programs necessary to comply with Laws and to prevent injury to Persons or damage to property on, about or adjacent to the Job Site and shall be responsible for submission of the required notice of project and registration form under the Occupational Health and Safety Act (Ontario). |
20.1.4 Elimination of Unsafe Conditions. Upon becoming aware of any unsafe or hazardous (or potentially unsafe or hazardous) condition in or around the Job Site, the Contractor shall immediately take any and all actions reasonably necessary to eliminate such condition and render the Job Site and surrounding areas safe. Notwithstanding the foregoing, responsibility for Hazardous Substances shall be as set forth in Article 25.
| - 51 - |
| 20.2 | Safety of Persons and Property |
20.2.1 Safety Precautions. The Contractor shall take all reasonable precautions for safety of, and shall provide all reasonable protection to prevent damage, injury or loss to:
| (a) | employees, Subcontractors, other Persons performing the Work, anyone in the vicinity of the Job Site (including, without limitation, members of the public or people in and around buildings and areas adjacent to the Job Site) and other Persons who may be affected thereby; |
| (b) | the Work, materials and Components to be incorporated therein, whether in storage on or off the Job Site by the Contractor or under the care, custody or control of the Contractor or any Subcontractor; and |
| (c) | other property at the Job Site and adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, parking lots, adjacent buildings, vehicles, structures, utility pipes, poles, conduits, wires, waterways, culverts, monuments and railroads. |
20.2.2 Safeguards. The Contractor shall erect and maintain, as required by existing conditions and the performance of this Agreement, all reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations, notifying members of the public, owners and people in and around buildings and areas adjacent to the Job Site and implementing safety precautions and measures (including, without limitation, fencing, overhead protection and similar measures) to ensure the safety of members of the public, owners and people in and around buildings and areas adjacent to the Job Site.
20.2.3 Intentionally Left Blank
20.2.4 Material Safety Data Sheets. If the Contractor or any Subcontractor intends to use or uses materials or substances in connection with the Work for which material safety data sheets are required pursuant to the Workplace Hazard Materials Information System, the Contractor shall submit copies of all such material safety data sheets to the Owner in advance of the use of such materials or substances. When possible, the Contractor shall submit material safety data sheets no less than thirty (30) days in advance of the use of such materials or substances and in no event shall any material safety data sheet be submitted to the Owner less than five (5) days prior to the use of such materials or substances.
20.2.5 Damage to Property. The Contractor shall promptly remedy any damage and loss to the Job Site and any other property (including, without limitation, the Project) to the extent caused in whole or in part by the Contractor, a Subcontractor or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable. The foregoing obligations of the Contractor are in addition to the Contractor’s indemnity obligations under Article 26.
20.2.6 Safety Personnel. The Contractor shall designate a responsible member of the Contractor’s organization the Job Site whose duty shall be the prevention of accidents.
20.2.7 Loading. The Contractor shall not load or permit any part of any construction aid or machinery to be loaded so as to endanger the safety of Persons or property.
20.2.8 Notices to the Owner. The Contractor shall promptly report in writing to the Owner all accidents arising out of or in connection with the Work which cause death, bodily injury or property damage of any severity, giving full details and statements of any witnesses. In addition, if death or serious bodily injuries or serious damages are caused, the accident shall be reported immediately by telephone to the Owner.
| - 52 - |
20.2.9 Emergencies. In an emergency affecting safety of Persons or property, the Contractor shall act, at the Contractor’s discretion, to prevent threatened damages, injury or loss. During the performance of the Work, the Contractor shall comply fully with the Agreement and the Owner’s safety and emergency instructions and guidelines.
20.2.10 Security. The Contractor shall take all precautions and measures as may be reasonably necessary to secure the Job Site at all hours and prevent trespassing, including evenings, holidays, work and non-work hours provided that the approval of Owner is obtained by the Contractor before taking any such precautions and measures. Such precautions may include (a) co-operating with existing security; (b) establishing and maintaining a worker identification system; (c) the provision of security guards and checking identification of all persons entering the Job Site; and (d) restriction of the Job Site to authorized personnel, equipment and materials.
20.2.11 Fencing. Subject to approval being granted by Owner, the Contractor shall provide and maintain a secure fence around the Job Site to prevent unauthorized access to the Project with required manway entrances and emergency exits.
20.2.12 Protection of Parties in Vicinity of Project. The Contractor acknowledges and understands that areas adjacent to and around the Job Site may be occupied by members of the public and other parties associated with adjacent businesses and operations while the Contractor performs the Work. The Contractor covenants and agrees that it shall at all times perform the Work, and cause all Subcontractors and representatives of the Contractor to perform the Work, so as to prevent interference with such parties, including, without limitation, the following types of interference: (a) fumes, odours, dust, debris, noise and safety hazards, (b) obstructions of access and obstructions of traffic flow to or from any building, roadway, entryway or parking lot in the vicinity of the Job Site, and (c) interruption in the availability and normal operation of water, sewer, electricity, gas, telephone, HVAC systems, computer systems and other utility services and systems relating to properties adjacent to and around the Job Site.
20.2.13 Intentionally Left Blank
20.2.14 Training.
| (a) | Prior to commencement of the Work, the Contractor shall submit to the Owner: |
| (i) | documentation of a valid Workplace Safety and Insurance Board clearance certificate; and |
| (ii) | a copy of the notice of Project filed with the Ministry of Labour. |
(b) without prejudice to the forgoing provisions of this Section 20.2.14, the Contractor hereby represents and warrants to the Owner that appropriate health and safety instruction and training have been provided or will be provided to the Contractor employees and Subcontractors and anyone for whom the Contractor is responsible, before the Work is commenced and agrees to provide to the Owner, if requested, proof of such instruction and training.
| - 53 - |
(c) The Contractor shall tour the appropriate area to familiarize itself with the Job Site prior to commencement of the Work.
(d) The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any claims, actions, proceedings, losses, damages, Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including legal fees on a solicitor and own client indemnity basis and expenses, based upon or arising out of or in connection with any safety infractions under the Occupational Health and Safety Act (Ontario), and regulations thereto, save and except to the extent such Liabilities arise from the negligent actions or inactions of the Owner, its agents officers, directors, employees, contractors, subcontractors or consultants or from any policy, plan or requirement instituted by the Owner with respect to health and safety.
20.2.15 General. The Contractor shall otherwise comply with the safety related requirements of the Statement of Requirements.
ARTICLE 21
[Intentionally left blank]
ARTICLE 22
TESTS AND INSPECTIONS
| 22.1 | Required Testing and Inspections |
In addition to the performance testing required in Article 12 hereof, the Contractor shall perform and/or obtain all tests and inspections necessary for the proper execution and completion of the Work, including, without limitation, all tests and inspections required by any applicable Laws and the Contractor shall provide the Owner with Notice at least five (5) Working Days prior to any such tests or inspections in each case so that the Owner and its designees may witness the same.
ARTICLE 23
WARRANTY
| 23.1 | Warranties |
23.1.1 Warranty. The Contractor warrants to the Owner that all design, engineering and other professional services, all construction services and all other Work, shall be performed in accordance with Good Engineering and Operating Practices and in a good and workmanlike manner, that all materials, supplies and Components furnished under this Agreement shall be of good quality and new, that the Work (including, without limitation, each item of Components incorporated therein) shall be of good and workmanlike quality and free from all faults, defects and deficiencies and shall be free from any encumbrances, Liens, security interests, or other defects in title upon conveyance of title to the Owner (other than those imposed by action of the Owner), and that the Work and the Components shall conform with the Project Requirements and designed and fit for the purpose of receiving, storing, dispatching and conditioning electrical power.
| - 54 - |
23.1.2 The Owner acknowledges and agrees that the obligations of the Contractor under this Article 23 may be impacted by the operation of the BESS and in this regard, agrees to provide access to the Contractor to a system user interface so that it may monitor the operation of the BESS by the Owner or its contractors. In the event that the Owner wilfully fails to provide such access to the Contractor within twenty (20) Working Days of Notice from the Contractor that such access has not been or is no longer provided to the Contractor, such failure shall not relieve the Contractor from its obligations under this Article 23, except to the extent and only to the extent to which such failure has increased the Liability of the Contractor under this Article 23.
23.1.3 The Contractor’s warranty excludes:
| (a) | remedy for damage or defect caused by negligence, improper operation or improper or insufficient maintenance by the Owner or normal wear and tear under normal usage after the Substantial Performance Date; |
| (b) | Components which are consumables that are consumed in operation or due to normal wear and tear; |
| (c) | the warranties and performance guarantees which are assigned to Owner in accordance with Section 23.1.10; |
| (d) | parts which inherently have a shorter normal useful life than the Warranty Periods and the Contractor has advised Owner of the duration of such useful life prior to the date hereof, except where any such parts are damaged or defective or subject to coverage under this Section 23.1.3 prior to the expiration of such useful life. |
23.1.4 Repair; Replacement; Correction. Any portion of the Work which has been repaired, replaced or otherwise corrected during the Initial Warranty Period set forth in Section 23.1.5 shall automatically be re-warranted by the Contractor in conformity with all warranty requirements set forth in this Article 23, and the Contractor shall have the same obligations in relation thereto as set forth in this Article 23, for a period (the “Extended Warranty Period”) the duration of which shall be the later of (a) the remainder of the original warranty period as set forth in Section 23.1.5 or (b) three hundred and sixty-five (365) days from the date of completion of such repair, replacement or correction; provided that in no event shall a warranty in this Section 23.1.4 extend beyond three (3) years after the Substantial Performance Date. Notwithstanding the foregoing, if a chronic failure of components (two or more failures of the same component) occurs during the Warranty Periods, the Contractor shall be responsible to determine the root cause of the chronic failure, and shall make the necessary repair or replacement of the Work to correct the root cause regardless of the expiry of the Warranty Periods.
| - 55 - |
23.1.5 Breach of Warranty. If, at any time prior to the expiration of [REDACTED: Time period] after the Substantial Performance Date (the “ Initial Warranty Period”) or any Extended Warranty Period set forth in Section 23.1.4, the Owner shall discover any defect, failure or breach of the Contractor’s warranties set out in this Agreement, the Contractor shall, upon written Notice from the Owner and at the Contractor’s sole cost and expense, immediately correct such defect, failure or breach (which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of any part or portion of the Work and any other property damaged or affected by such failure, breach or corrective action). The Contractor shall remedy any such defect, failure or breach diligently and promptly so as to minimize revenue loss to the Owner and to avoid disruption to operations at the Job Site and from the BESS. In the event the Contractor has more than one method of performing corrective action necessary to remedy such defect, failure or breach, the Contractor shall select the method which is most likely to ensure that further corrective action is not required or, if that is not possible, that further corrective action is not required for the longest period of time. In the event that the Contractor fails to initiate and diligently pursue corrective action within five (5) days of the Contractor’s receipt of the Owner’s Notice (other than in the event of a Force Majeure or Owner Caused Delay), the Owner may undertake such corrective action at the Contractor’s expense; provided, however, if such failure or breach of the Contractor’s warranties materially affects the operation or use of any of the Work or the BESS or presents an imminent threat to the safety or health of any Person and the Owner knows of such breach or failure, the Owner may pursue corrective action without giving prior written Notice to the Contractor, and, in that event, the Contractor shall be liable to the Owner for all reasonable actual costs and expenses incurred by the Owner in connection with such corrective action and arising out of or relating to such corrective action and shall pay the Owner an amount equal to such costs and expenses. If correction or remedy, by either the Contractor or the Owner, of any such failure or breach requires or otherwise results in the shutdown of the Owner’s operations at the Job Site, the Warranty Periods and the warranty periods set forth in Section 23.1.4 shall be extended by a period of time at least equal to the period of time of such shutdown.
23.1.6 Primary Liability. Subject always to Section 23.1.3(c), the Contractor shall have primary liability with respect to its warranties set forth in this Agreement whether or not any defect, deficiency or other matter is also covered by a warranty of a Subcontractor or Vendor, and the Owner shall only be required to make claim and seek recourse from the Contractor for corrective action. In addition, the Contractor’s warranties expressed herein shall not be restricted in any manner by any warranty of a Subcontractor or Vendor, and the refusal of a Subcontractor or Vendor to correct defective, deficient or nonconforming Work shall not constitute Force Majeure nor excuse the Contractor from its liability as to its warranties provided herein.
23.1.7 Subcontractor Warranties. The Contractor shall, at its cost, obtain warranties for the benefit of the Contractor and the Owner from all Subcontractors and Vendors in relation to their respective portions of the Work. The Contractor shall in addition, at its cost, obtain warranties from all such individuals or entities which (a) are coterminous with the Contractor’s Warranty Periods, (b) warrant against defects and deficiencies in each such parties’ work and (c) are ultimately assignable to the Owner pursuant to an assignment conditional upon the earlier to occur of (i) the termination of this Agreement, or (ii) the expiration of the Warranty Periods if such warranty or warranties are still in effect at such time. Within ten (10) Working Days of receipt by the Contractor from the Owner of a Notice of a failure of any of the Work to satisfy any Subcontractor or Vendor covenant, guarantee or obligation required by this Agreement but excluding any of the foregoing referred to in Section 23.1.3(c), the Contractor shall be responsible for enforcing or performing any such covenant, guarantee or obligation, failing which, the Owner may, at its option and without derogating from the Contractor’s responsibilities, directly enforce any such covenant, guarantee or obligation against any Subcontractor or Vendor. The Contractor acknowledges and agrees that the Initial Warranty Period set forth in Section 23.1.5 above shall not serve to limit any warranties obtained from Subcontractors that may be of longer duration. Any warranty referred to in this Section 23.1.7 shall be assignable by the Owner to a third party on notice to the Contractor or the relevant Subcontractor.
23.1.8 Equipment Warranties. The Contractor shall obtain warranties and performance guarantees for the benefit of the Contractor and the Owner of no less than [REDACTED: Tim period] from the date of delivery to the Job Site for the BESS, 3 years from the date of delivery to the Job Site for the transformers, and 1 year from the date of delivery to the Job Site for the switchgear. For purposes of this Section 23.1.8, major equipment or Components shall mean each individual piece of equipment or Component which is obtained from a third party at a cost of [REDACTED: Dollar amount] or more. In the event the Owner requires the warranty coverage referred to in this Section 23.1.8 for a duration of more than the terms of the equipment warranties above, it shall be permitted to request such Change in Work pursuant to Section 16.2.
| - 56 - |
23.1.9 Records. The Contractor shall keep written records of any defect, failure or breach of any Work and all repairing, replacing or re-performing of same.
23.1.10 Assignment of Warranties. Upon Substantial Completion, Contractor shall assign all Component and subcontractor warranties, including all products and services warranties provided under this Agreement, to the Owner.
ARTICLE 24
FORCE MAJEURE AND OWNER CAUSED DELAY
| 24.1 | Force Majeure |
24.1.1 Definition. For the purposes of this Agreement, the term “Force Majeure” means any act, event, cause or condition that directly prevents a Party from performing its obligations (other than payment obligations) hereunder, that is beyond the affected Party’s reasonable control, and shall include:
| (a) | acts of God, including extreme wind, snow (≥ 100 cm/day), rain (≥ 30 cm/day ), temperatures ≤ -30º, ice, lightning or other storms, earthquakes, tornadoes, hurricanes, cyclones, landslides, drought, floods and washouts; |
| (b) | fires or explosions unless caused by the Contractor or its Subcontractors; |
| (c) | local, regional or national states of emergency; |
| (d) | strikes and other labour disputes (other than legal strikes or labour disputes by employees of such Party or a third party invoking Force Majeure, unless such strikes or other labour disputes are the result or part of a general industry strike or labour dispute); |
| (e) | civil disobedience or disturbances, war (whether declared or not), acts of sabotage, blockades, insurrections, terrorism, revolution, riots or epidemics; |
| (f) | subject to Section 24.1.4(c), an order, judgment, legislation, ruling or direction by Authorities restraining a Party, provided that the affected Party has not applied for or assisted in the application for and has used Commercially Reasonable Efforts to oppose said order, judgment, legislation, ruling or direction; |
| (g) | any inability to obtain, or to secure the renewal or amendment of after the exercise of all reasonable diligence, any Permit, certificate, impact assessment, license or approval of any Authority, required to perform or comply with any obligation under this Agreement, unless the revocation or modification of any such necessary permit, certificate, impact assessment, licence or approval was caused by the violation of the terms thereof or consented to by the Party invoking Force Majeure; |
| (h) | restraint, order or decree by an Authority to the extent such restraint, order or decree arises from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the affected Party, its Subcontractors or other Persons for whom they may respectively be liable, |
provided always that any such event shall have actually and directly prevented the affected Party from performing its obligations (other than payment obligations) hereunder and shall be beyond the affected Party’s reasonable control.
| - 57 - |
24.1.2 Resumption of Activities. Each Party shall resume its obligations as soon as the event of Force Majeure has terminated.
24.1.3 Performance Excused
| (a) | If a Party is unable, wholly or partially, to perform or comply with its obligations hereunder, then the Party so affected by Force Majeure shall be excused and relieved from performing or complying with such obligations, but not its other obligations hereunder not affected by Force Majeure, and shall not be liable for any Liabilities, damages, losses, payments, costs, expenses to, or incurred by, the other Party in respect of or relating to such Force Majeure and such Party’s failure to so perform or comply during the continuance and to the extent of the inability so caused from and after the invocation of Force Majeure. |
| (b) | A Party shall be deemed to have invoked Force Majeure with effect from the commencement of the event or circumstances constituting Force Majeure when that Party gives to the other Party prompt Notice, written or oral (but if oral, promptly confirmed in writing) of the effect of the Force Majeure and reasonably full particulars of the cause thereof, provided that such Notice shall be given within five (5) Working Days of the date that the Party invoking Force Majeure knows or ought to have known that the event of circumstances constituting Force Majeure could have an effect on the Project Schedule. For greater certainty, the reporting or discussion of a Force Majeure event provided in a periodic report from the Contractor to the Owner under this Agreement shall not constitute sufficient initial Notice of the occurrence of a Force Majeure event. The burden of proof as to whether a Force Majeure has occurred shall be on the Party invoking the Force Majeure and it shall respond to all requests of the other Party with respect to the Force Majeure in compliance with the terms of this Article 24. |
| (c) | The Party invoking Force Majeure shall use Commercially Reasonable Efforts to remedy and mitigate the effects of the Force Majeure and remove, so far as possible and with reasonable dispatch, the Force Majeure, but the decision as to whether to settle strikes, lockouts and other labour disturbances shall be wholly within the sole discretion of the Party involved. |
| (d) | The Party invoking Force Majeure shall provide reports to the other Party from time to time (and at least every ten (10) Working Days) with respect to the status of the Force Majeure, the steps taken by the affected Party to remedy the Force Majeure and the anticipated termination date of the Force Majeure. The Party invoking Force Majeure shall give prompt written Notice of the termination of the event of Force Majeure and agrees to resume performance of the obligations affected immediately upon such termination of the Force Majeure event. |
| - 58 - |
| (e) | Nothing in this Section 24.1.3 shall relieve a Party of its obligations to make payments of any amounts that were due and owing before the occurrence of the Force Majeure or that otherwise may become due and payable during any period of Force Majeure. In addition a Party shall not be relieved from any obligation not affected by the event of Force Majeure and shall continue to perform such obligations hereunder. |
| (f) | If, by reason of Force Majeure, the Substantial Performance Date is delayed by more than six (6) months after the original Guaranteed Substantial Performance Date, prior to any extension pursuant to Section 24.1.3(a), then notwithstanding anything in this Agreement to the contrary, the Owner may terminate this Agreement upon Notice to the Contractor and without any costs or payments of any kind to either Party and all security shall be returned forthwith. |
24.1.4 Certain Obligations Not Excused. A Party shall not be entitled to invoke Force Majeure under this Section 24.1, nor shall it be relieved of its obligations hereunder in any of the following circumstances:
| (a) | if and to the extent the Party seeking to invoke Force Majeure has caused the applicable event of Force Majeure by its fault, negligence or breach of this Agreement; |
| (b) | if and to the extent the Party seeking to invoke Force Majeure has failed to use Commercially Reasonable Efforts to avoid, prevent, mitigate or remedy the event of Force Majeure and remove, so far as possible and within a reasonable time period, the Force Majeure (except in the case of strikes, lockouts and other labour disturbances, the settlement of which shall be wholly within the sole discretion of the Party involved); |
| (c) | if and to the extent that the Party seeking to invoke Force Majeure because of arrest or restraint by an Authority, such arrest or restraint was the result of a breach by such Party of applicable Laws; |
| (d) | if the Force Majeure was caused by a lack of funds or other financial cause; |
| (e) | if the Party invoking Force Majeure fails to comply with the notice provisions in Sections 24.1.3(b) and 24.1.3(d); |
| (f) | if the Force Majeure arises as a result of labour shortages; |
| (g) | in the case of the Contractor, if the Force Majeure arises as a result of its design engineering, procurement or construction of the BESS or the lack of availability, failure or mechanical breakdown of any equipment required for the design or construction of the BESS; |
| (h) | in the case of the Contractor, with respect to its inability to procure any Component for any reason (the risk of which is assumed by Contractor) or the failure, mechanical breakdown or underperformance of any Component; |
| (i) | any acts or omissions of any third party, including any vendor, materialman, customer or supplier, unless such acts or omissions are themselves excused by reason of an independently identifiable event of Force Majeure; |
| - 59 - |
| (j) | changes in market conditions that affect the cost of supplies; or |
| (k) | weather events such as rain, heat or snow that a Party could reasonably anticipate as being likely in any given period of time at the Job Site. |
24.1.5 The Owner May Recommend the Contractor to Take Action. If, within a reasonable time after a Force Majeure occurrence that has caused the Contractor to suspend or delay performance of any part of the Work, the Owner or its representative has by Notice to the Contractor identified and recommended action to be undertaken by the Contractor at the expense of the Owner or otherwise to remove or relieve either the Force Majeure occurrence or its direct or indirect effects and the Contractor has failed to take such action, the Owner may, in its reasonable discretion and after written Notice to the Contractor, initiate such reasonable measures as will be designed to remove or relieve such Force Majeure occurrence or its direct or indirect effects and thereafter by Notice to the Contractor require the Contractor to resume full or partial performance of the Work. Such measures shall be undertaken at the Owner’s expense except to the extent that the Contractor’s failure to take such measures results in expense in addition to what the Owner would have incurred under this Section 24.1.5 had the Contractor taken such measures, which additional expense shall be for the Contractor’s account.
24.1.6 Change Order – The Contractor
| (a) | If an event of Force Majeure occurs that is covered by this Article 24 and the cumulative Force Majeure delays invoked by the Contractor are thirty (30) Days or more, the Contractor and the Owner shall execute a Change Order pursuant to Article 16 to address the following matters, if and to the extent applicable: |
| (i) | the Guaranteed Substantial Performance Date shall be extended by a period equal to the amount of time reasonably determined by mutual agreement of the Owner and the Contractor, to be necessary to allow for the actual delay the Contractor reasonably demonstrates has been caused to the proposed Substantial Performance Date in the Project Schedule, including the cumulative effect of a number of Force Majeure delays; and |
| (ii) | the Project Schedule shall be adjusted as appropriate as a result of the new Guaranteed Substantial Performance Date, but the Fixed Contract Price shall not be adjusted in such circumstances. |
24.1.7 Duty to Avoid. Each Party shall take all reasonable measures to anticipate and avoid Force Majeure events, wherever possible, and keep the other fully informed of all potential Force Majeure situations, particularly potential strikes and labour disturbances, to enable the Parties to consult and endeavour to take steps to mitigate their effect on the Work.
| 24.2 | Owner Caused Delays |
24.2.1 The occurrence of any of the following events, to the extent such events have not been caused by any act or omission of the Contractor or are beyond the Contractor’s reasonable control, shall constitute an “Owner Caused Delay”:
| (a) | delays resulting from the breach by the Owner of its obligations hereunder or the acts or omissions of the Owner or its Separate Contractors performing work to the extent such delays arise from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the Contractor, its Subcontractors or other Persons for whom they may respectively be liable; |
| - 60 - |
| (b) | delays resulting from the late receipt of Owner Permits following any milestones for receipt of the same set out in the Project Schedule; or |
| (c) | the suspension of the Work in whole or in part by the Owner other than as a result of any act or omission of the Contractor in breach of this Agreement. |
24.2.2 In the event of an Owner Caused Delay that adversely impacts the cost or schedule for performing the Work, the Owner and the Contractor will use good faith efforts to agree on the extent to which the Project Schedule has been impacted or costs of performance have increased as a result of the Owner Caused Delay, and shall execute a Change Order adjusting the Project Schedule, the Guaranteed Substantial Performance Date, and/or the Fixed Contract Price as necessary to compensate the Contractor for such impact. To the extent that the Owner and the Contractor cannot reach agreement on the adjustments required to compensate for the impacts resulting from the Owner Caused Delay, the matter shall be resolved in accordance with the dispute resolution procedures contained in Article 27. The Contractor acknowledges and agrees that any adverse impacts on the cost or schedule for performing the Work can be affected by the Contractor and it will make all Commercially Reasonable Efforts to mitigate such adverse impacts.
ARTICLE 25
HAZARDOUS SUBSTANCES
| 25.1 | Hazardous Substances |
25.1.1 If, in the course of performance of the Work, the Contractor encounters on the Job Site any matter which it reasonably believes is a Hazardous Substance that may require response, removal, cleanup or other remedial action under applicable Environmental Laws and/or Job Site specific environmental requirements, the Contractor shall immediately suspend the Work in the area affected and report the condition to the Owner by telephone and in writing. In any such event, the obligations and duties of the parties hereto shall be as follows:
| (a) | if the Owner determines that such condition involves a Pre-Existing Hazardous Substance, then the Contractor shall have no obligation with respect to such condition and the Owner, at its sole discretion, shall respond in the manner which it deems appropriate; |
| (b) | the Owner determines that such condition involves a Pre-Existing Hazardous Substance, which was harmless or stored, contained or otherwise dealt with in accordance with Environmental Law, which has been dealt with in a manner by the Contractor or its Subcontractors or any Person for whom they are responsible in a manner which did not comply with Environmental Law, any response, removal, clean-up or other remedial action required by Environmental Laws shall be performed by the Contractor at its sole cost and expense. If the location of a Pre-Existing Hazardous Substance on the Job Site is not obvious from inspection, the provisions of this Section 25.1.1(b) shall only apply if the Owner has first notified the Contractor of the location of the Pre-Existing Hazardous Substance and the nature of the same. Except as to Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; |
| - 61 - |
| (c) | if the Owner determines that such condition involves a Hazardous Substance introduced to the Job Site after the date of this Agreement by the Contractor, its Subcontractors or any Person for whom they are responsible, then any response, removal, cleanup or other remedial action required by applicable Environmental Laws shall be performed by the Contractor at its sole cost and expense. Except as to the Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; or |
| (d) | if the Owner determines that the condition does not involve a Pre-Existing Hazardous Substance that requires response, removal, cleanup or other remedial action under applicable Environmental Laws, the Contractor shall, promptly after receiving written Notice from the Owner authorizing the Contractor to recommence site activities in the subject area, resume the portion of the Work that had been suspended. |
25.1.2 The Parties acknowledge and agree that the Contractor shall not commence or continue any construction activities on any portion of the Job Site on, in or under which remedial actions are to be (or are being) performed until such remedial actions are to the point where construction activities will not interfere with such remedial actions, as evidenced by appropriate certifications from the applicable environmental engineer and/or remediation contractor and any required approvals of any applicable Authorities. The Contractor agrees to use good faith diligent efforts to continue the unaffected portions of the Work and to adjust and reschedule its activities at the Job Site so as to minimize, to the extent reasonably practicable, any adverse effect on the progress of the Work resulting from the performance of any remedial actions.
25.1.3 The Contractor shall not bring or store (and shall prohibit Subcontractors from bringing or storing) Hazardous Substances to or on the Job Site, and shall not utilize any construction materials containing radioactivity, asbestos, polychlorinated biphenyls or urea formaldehyde; provided, however, that the Contractor may use and store in reasonable quantities the following substances required to perform the Work, but only in accordance with applicable Environmental Laws: gasoline, diesel fuel, fuel oil, grease, lube oil, sealants, form oil, solvents, adhesives and other substances of a type and quantity consistent with normal and customary construction practices for construction of a project similar in nature and scope to the Project. Any other Hazardous Substances to be brought to, generated, released or stored on any Job Site shall require specific written authorization of the Owner. The Contractor shall comply, and shall cause its Subcontractors to comply, with all applicable Environmental Laws.
25.1.4 The Contractor shall be entitled to receive an equitable adjustment to the Project Schedule due to any impact on the Contractor’s schedule of performance due to Pre-Existing Hazardous Substances in accordance with Section 25.1.2.
25.1.5 The Contractor shall immediately upon receipt thereof provide the Owner with copies of all summons, citations, directives, information, inquiries or requests, notices of violation or deficiency, orders or decrees, claims, complaints, investigations, judgments, letters, reports (including any reports of releases required under applicable Environmental Laws), notices of environmental liens or response actions in progress, and other communications, written or oral, and responses thereto, to or from any Authority or any other entity or individual (including environmental reports commissioned by legal counsel but excluding other privileged communications between the a Party and its legal counsel), concerning:
| (a) | any Hazardous Substance contamination on, in or under any part of a Job Site; |
| - 62 - |
| (b) | any actual or alleged violation by the Contractor of, or responsibility of the Contractor under, any Environmental Laws in connection with its operations at a Job Site; or |
| (c) | any actual or alleged liability of the Contractor for its operations at a Job Site under any theory of tort, including without limitation, negligence, trespass, nuisance, strict liability, or ultra-hazardous activity, |
provided that in the event the communication in question includes information not required to be disclosed under this Section 25.1.5, the Contractor may transmit relevant portions of the communication rather than the entire communication.
ARTICLE 26
INDEMNIFICATION
| 26.1 | Contractor’s Indemnity |
26.1.1 The Contractor. To the fullest extent permitted by Law, the Contractor shall indemnify, defend and hold harmless the Owner and its respective assigns, officers, directors, employees, agents, Affiliates and representatives, and anyone else acting for or on behalf of the Owner (the “Owner Indemnitees”), from and against any and all third party claims, demands, suits, Liabilities (including, without limitation, as a result of claims or allegations of infringement, misappropriation, misuse or violation of any Intellectual Property Rights used by the Contractor in the performance of the Work including curative action under warranty), death, injuries (personal or bodily), property damage (including public property), and all expenses including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis incidental to any of the foregoing, to the extent caused by (i) the performance by the Contractor of its duties and obligations under this Agreement, (ii) the inaccuracy of any warranty or representation of the Contractor contained in this Agreement, (iii) any negligent act or omission to act by the Contractor, its Subcontractors or any Person directly or indirectly employed by them or anyone for whose acts they may be responsible, and/or (iv) any breach, default, violation or non-performance by the Contractor of any term, covenant, condition, duty or obligation provided in this Agreement provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.1. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.2 Indemnification for Violation of Law. The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and his own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or whom they may be responsible of any Law or rule promulgated by an Authority including, without limitation, the failure to comply with the Occupational Health and Safety Act (Ontario) provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.2. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
| - 63 - |
26.1.3 Indemnification for Violation of Taxing Authorities. The Contractor shall indemnify and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible of any order, rule or requirement of any taxing Authority, based on gross receipts or on income of the Contractor or in respect of any deductions, remittances or assessments in respect of any employees, as applicable, or that arise against the Owner for any sales taxes, including HST payable in connection with the Work, provided that the foregoing shall in no way release the Owner from paying HST in the manner set for in this Agreement and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees.
26.1.4 Environmental Indemnification. Subject to and other than with respect to the Owner’s obligations under Article 25, the Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with any non-compliance with Environmental Laws or any Hazardous Substance brought onto the Job Site in each case in connection with the construction or operation of the Project or the performance of the Work or during curative action under warranty by the Contractor, Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible including any negligent handling of Hazardous Substances on the Job Site and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way (except by Section 8.3.2) by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.5 Lien Indemnification. The Contractor agrees to indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with all Liens or Lien claims made, recorded, asserted or filed on the Work or any property on which it is being performed, on account of any labour performed or materials furnished by the Contractor, Subcontractors or any other Person in connection with the Work to the extent that the Owner has made payment to the Contractor therefor except to the extent such Liens are attributable to the willful misconduct of the Owner and exclusive of Liens by fault of the Owner. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for Contractor or any Subcontractor under worker’s compensation acts, disability acts or other employment benefit acts.
| - 64 - |
26.1.6 Lien Removal.
| (a) | The Contractor will, at its own cost and expense, cause any and all Liens filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located, to be released, vacated or discharged no later than thirty (30) days after the earlier of the Owner having sent the Contractor written Notice of any claim of Lien and the Contractor having become aware of a claim for Lien except to the extent such Liens are attributable to the non-payment by the Owner of amounts due and payable hereunder or which are attributable to the willful misconduct of the Owner. If the Lien is merely vacated, the Contractor shall, if requested, undertake the Owner’s defence of any subsequent lawsuit commenced in respect of the lien at the Contractor’s sole expense. |
| (b) | If the Contractor shall fail to vacate or discharge promptly any proceedings or claim of Lien filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located within the period specified in Section 26.1.6(a), the Owner may exercise its rights under the Construction Act (Ontario) to have the claim of Lien vacated by making a payment into court or posting security and may offset the amount of any such payment and all costs and expenses incurred by the Owner in making such payment or posting such security, including administrative costs, legal fees and other expenses, against amounts due or to become due to the Contractor under the Agreement. |
| 26.2 | Limitation and Survival |
26.2.1 Notwithstanding anything else expressed or implied in this Agreement, the indemnification obligations in Article 26 will not apply and the Contractor shall have no further obligations under this Article 26 after two (2) years from the Substantial Performance Date.
26.2.2 This Section 26.2 shall survive the termination or expiration of this Agreement.
ARTICLE 27
DISPUTE RESOLUTION
| 27.1 | Negotiations |
Both during and after the performance of the Work under the Agreement, the Parties each shall, using their respective senior management, make bona fide efforts to resolve any disputes arising between them by amicable negotiations, and provide frank, candid and timely disclosure of all relevant facts, information and documents to facilitate those negotiations. If a dispute remains unresolved twenty-one (21) days after escalation to each Parties’ respective senior management, it may, if agreed by the Parties, be first submitted to non-binding mediation as contemplated in Section 27.2. If the Parties do not elect to pursue non-binding mediation, the dispute shall, at the request of either Party, be referred to arbitration in accordance with Section 27.3.
| - 65 - |
| 27.2 | Mediation |
27.2.1 To the extent any dispute is not resolved through negotiation by senior management, the Parties may pursue non-binding mediation to attempt to resolve all disputes arising out of or in connection with the Agreement, or in respect of any defined legal relationship arising out of or in connection with the Agreement, by structured negotiation with the assistance of a mediator, in accordance with the following provisions.
27.2.2 Unless the Parties otherwise agree, the mediator shall have the following qualifications:
| (a) | a legal background; |
| (b) | knowledge and experience in the type of matter that is the subject of the dispute; |
| (c) | be held in high regard by the Ontario community; |
| (d) | have no interest or perceived interest in the Parties or the subject matter of the dispute and have so confirmed in writing to the Parties; and |
| (e) | have experience as a mediator or facilitator. |
27.2.3 If the Parties are unable to agree on the appointment of a mediator within ten (10) Days after either Party has given Notice to the other Party requesting the appointment of a mediator, either Party may request the ADR Institute of Canada or its successor, if any, to appoint a mediator with the above qualifications in accordance with its appointment procedures. If ADR Institute of Canada does not exist and the Parties are not able to agree on a similar body to appoint the mediator, then the dispute shall be referred to arbitration under Section 27.3.
27.2.4 The mediation shall continue until the earlier of agreement between the Parties on the resolution of the dispute and one (1) calendar month after commencement of the mediation. The Parties may agree to extend the period of any particular mediation.
27.2.5 The mediation process is privileged and confidential. Neither Party may call the mediator to give evidence at any arbitration under Section 27.3.
27.2.6 The Parties shall bear the costs of the mediation equally and each Party shall bear its own costs.
| 27.3 | Arbitration |
27.3.1 All disputes arising out of or in connection with this Agreement, or in respect of any legal relationship associated with or derived from this Agreement not otherwise resolved in accordance with Sections 27.1 or 27.2 (“Dispute”), will be finally resolved by arbitration under the Arbitration Rules (the “Rules”) of the ADR Institute of Canada (the “Institute”), except as modified by this Section 27.3. The Seat of arbitration will be Toronto, Ontario. The language of the arbitration will be English.
27.3.2 A Party (the “Initiating Party”) wishing to submit the Dispute to arbitration shall select one (1) arbitrator, which arbitrator shall not be, or have been within the previous five (5) years, an employee, officer or director of the Initiating Party or of any Affiliate of the Initiating Party. The Initiating Party shall send a Notice of a Request to Arbitrate in the form prescribed by the Rules (the “Arbitration Notice”) to the other party setting out the name of its nominated arbitrator. The Initiating Party shall be responsible for notifying the Institute of the arbitration under its rules and for paying the administrative fee for the arbitration to the Institute.
| - 66 - |
27.3.3 The other Party (“Recipient”) shall have seven (7) days from receipt of the Arbitration Notice to nominate one (1) arbitrator and to notify the Initiating Party of the name of the arbitrator nominated by the Recipient. The arbitrator nominated by a Recipient shall not be, or have been within the previous five (5) years, an employee, officer or director of a Recipient or of any Affiliate of a Recipient.
27.3.4 Promptly upon their selection and in any event within fourteen (14) days of notification of the appointment of the Initiating Party’s arbitrator, the arbitrators then selected shall appoint a third arbitrator who shall act as chair of the arbitration.
27.3.5 If the Recipient fails to nominate an arbitrator, or the nominated arbitrators fail to agree upon the third arbitrator, then, pursuant to the Rules, any Party or its representative may request the Institute to promptly appoint the third Arbitrator and to notify the Party of such appointment.
27.3.6 Each arbitrator nominated pursuant to this Section 27.3 shall be qualified by education and experience to determine the matter in Dispute.
27.3.7 The Parties shall agree in advance as to the manner in which the arbitrators shall promptly hear witnesses and arguments, review documents and otherwise conduct the arbitration procedures. Failing such agreement within ten (10) days from the date of selection or appointment of the third arbitrator, the arbitrators shall use the Rules and promptly commence and expeditiously conduct the arbitration proceeds.
27.3.8 Nothing in this Section 27.3 shall prevent a Party from applying to a court of competent jurisdiction pending final disposition of the arbitration proceeding for such relief as may be necessary to assist the arbitration process, to ensure that the arbitration is carried out in accordance with the Rules or to prevent manifestly unfair or unequal treatment of any Parties to the arbitration.
27.3.9 In no event shall the arbitrators have the jurisdiction to amend or vary the terms of this Section 27.3 or of the Rules.
27.3.10 The arbitration award shall be given in writing, shall be final and binding on the Parties, not be subject to any appeal and shall deal with the question of costs of the arbitration and all other related matters.
27.3.11 Judgment upon the arbitration award may be entered in any court having jurisdiction, or, application may be made to such court for a judicial recognition of the arbitration award or an order of enforcement thereof, as the case may be.
27.3.12 Subject to Section 27.3.8, the Parties agree that the arbitration conducted pursuant to this Section 27.3 shall be the final and exclusive forum for the resolution of such a Dispute.
| 27.4 | Third Party Claims |
Any dispute between the Owner and the Contractor which also involves claims by or against third parties, or which requires the presence of third parties for full adjudication, and which is not subject to arbitration by all parties including any third party, shall be resolved by litigation in an appropriate court which has jurisdiction over all parties.
| - 67 - |
| 27.5 | Performance to Continue |
Performance of this Agreement shall continue during any negotiations, mediations or arbitration proceedings unless the Owner shall order suspension under Article 28, in which case adjustments shall be made as provided in Article 28, to the extent applicable.
| 27.6 | No Withholding of Undisputed Payments |
No undisputed payment due or payable by the Owner shall be withheld on account of a negotiation, mediation, litigation or arbitration under this Article 27.
ARTICLE 28
TERMINATION AND SUSPENSION
| 28.1 | Termination for Convenience |
The Owner may terminate this Agreement without cause upon not less than fifteen (15) days’ prior written Notice to the Contractor. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive the following: (a) payment for Work properly performed to the date of termination, (b) reimbursement for all reasonable cancellation charges incurred by the Contractor in relation to its Subcontractors, (c) reimbursement for mutually agreeable demobilization costs incurred by the Contractor, and (d) the termination charges equal to [REDACTED: Percentage amount] of the value of the Work remaining to be performed on the date of termination. For the avoidance of doubt, the performance of any portion of the Work by or on behalf of the Owner in accordance with the terms hereof shall not constitute a termination of this Agreement under this Section 28.1 in and of itself.
| 28.2 | Termination by the Owner for Cause |
28.2.1 The occurrence of any one or more of the following matters constitutes a default by the Contractor under this Agreement (a “Contractor Event of Default”):
| (a) | the Contractor becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Contractor makes a general assignment for the benefit of its creditors; |
| (c) | the Contractor shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of itself or of its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official or for all or any part of its property; |
| (d) | any case, proceeding or other action against the Contractor shall be commenced (i) seeking to have an order for relief entered against the Contractor as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for it or for all or any part of its property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within thirty (30) days after it is filed; |
| - 68 - |
| (e) | the breach of any material representation or warranty made by the Contractor herein that is not cured within thirty (30) days after Notice thereof from the Owner; |
| (f) | the Contractor attempts to assign, convey or transfer this Agreement or any interest, without the Owner’s prior written consent; |
| (g) | Intentionally Left Blank; |
| (h) | Intentionally Left Blank; |
| (i) | the Contractor fails to observe or perform any other material covenant, agreement, obligation, duty or provision of this Agreement, and such failure continues for thirty (30) days after Notice thereof from the Owner; |
| (j) | Intentionally Left Blank; |
| (k) | Substantial Performance has not occurred within sixty (60) days after the Guaranteed Substantial Performance Date; |
| (l) | failure of the Contractor to comply with its scheduling obligations under this Agreement, including those set forth in Article 6 which failure continues for ten (10) days after Notice thereof from the Owner; |
| (m) | the failure of the Contractor to comply with Law, which failure continues for ten (10) days after written Notice thereof from the Owner; or |
| (n) | the abandonment by the Contractor of the Job Site or the Work for a period of ten (10) days or more, other than in accordance with the terms of this Agreement which abandonment continues for five (5) days after Notice thereof from the Owner. |
28.2.2 Upon the occurrence of a Contractor Event of Default, the Owner may, without prejudice to any other right or remedy that the Owner may have under this Agreement, terminate the Agreement and/or the Contractor’s right to perform the Work upon not less than fifteen (15) days’ prior written Notice to the Contractor. In either such case, the Owner may, without prejudice to any other right or remedy, take possession of the Job Site and of all materials and Components and, subject to the rights of third parties, tools and machinery thereon owned by the Contractor, and may finish the Work by whatever method the Owner may deem reasonably prudent and efficient. If the unpaid balance of the Fixed Contract Price exceeds the cost of finishing the Work, then the Contractor shall be paid for all Work performed by the Contractor to the date of termination as to which there is no pending dispute (which amount shall in no event exceed the difference between the unpaid portion of the Fixed Contract Price and the Owner’s cost of completing the Work). However, if the cost of finishing the Work exceeds the unpaid balance of the Fixed Contract Price, the Contractor shall immediately pay the difference to the Owner. The cost to the Owner of completing the Work shall include the reasonable actual direct cost of any additional design, engineering, managerial and administrative services required thereby, legal fees on a substantial indemnity basis and expenses, and any other reasonable costs, expenses or damages the Owner may incur in order to complete the Work.
| - 69 - |
| 28.3 | Termination by the Contractor for Cause |
28.3.1 The occurrence of any one or more of the following matters shall constitute a default by the Owner under this Agreement (an “Owner Event of Default”):
| (a) | the Owner becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Owner makes a general assignment for the benefit of its creditors; |
| (c) | the Owner shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or of the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official for the Owner or for all or any part of the Owner’s property; |
| (d) | any case, proceeding or other action against the Owner shall be commenced (i) seeking to have an order for relief entered against the Owner as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for the Owner or for all or any part of the Owner’s property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within ninety (90) days after it is filed; or |
| (e) | the Owner fails to make any payment to the Contractor when due and not being disputed in good faith and such failure continues for sixty (60) days after the Owner’s receipt of written Notice thereof from the Contractor. |
28.3.2 Upon the occurrence of an Owner Event of Default, the Contractor shall provide Notice of default to owner, following which the Owner shall have fifteen (15) days to cure any such default. The Contractor may only terminate this Agreement in the event that the Owner fails to cure such default within such fifteen (15) day period or if such default cannot reasonably be cured within such period and the Owner fails to promptly commence, following receipt of such Notice and, thereafter diligently pursue, a cure. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive (a) payment for Work properly performed to the date of termination; (b) reimbursement for all cancellation charges incurred by the Contractor in relation to its Subcontractors and vendors; and (c) reimbursement for all demobilization costs incurred by the Contractor.
| 28.4 | Actions Upon Termination |
28.4.1 Upon termination of this Agreement or termination of the Contractor’s right to perform Work hereunder for any reason, the Contractor shall (a) cease operations as directed by the Owner; (b) take all actions necessary, or that the Owner may direct, for the protection and preservation of all Components, materials, parts, supplies and the Work and the Project (in whatever stage of completion); (c) cease entering into subcontracts and purchase orders; (d) take any actions necessary to effectuate the assignment of subcontracts to the Owner in accordance with Section 14.4 of this Agreement, if applicable; and deliver to the Owner all Design Materials, papers, documents, records, books of account and other documents and materials paid for, or otherwise owned, by the Owner; and in the event of an Owner Event of Default, the Owner shall compensate the Contractor for the costs thereof as expressed in Section 28.3.2 promptly following the termination of this Agreement and provision by the Contractor of an invoice and supporting documentation that reasonably substantiates such costs.
| - 70 - |
28.4.2 The Contractor’s obligations under this Agreement as to quality, correction and warranty of the Work pursuant to Articles 17 or 23, with respect to Work performed up to the time of termination of this Agreement shall continue in full force and effect after such termination for the longer of twenty-four (24) months from the effective date of termination or the expiry of the Warranty Periods (if applicable).
| 28.5 | Suspension of the Work |
The Owner may, without cause, order the Contractor to suspend the Work in whole or in part for such period of time as the Owner may determine. Any such suspension shall commence on or before the seventh (7th) day after the Contractor’s receipt of written Notice thereof from the Owner. The Contractor shall resume any suspended Work within five (5) days of the Owner’s written Notice directing the same. Should a suspension of the entire Work which is ordered by the Owner continue for ninety (90) or more consecutive days, either Party may thereafter terminate this Agreement by written Notice to the other Party and the rights and remedies of the Contractor shall be the same as those which are expressed in Section 28.1 hereof in the event of termination for convenience by the Owner.
ARTICLE 29
MISCELLANEOUS PROVISIONS
| 29.1 | Governing Law |
This Agreement will be construed, interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
| 29.2 | Meaning of Terms |
Words and abbreviations not defined in this Agreement which have well-known technical or design, engineering or construction industry meanings are used in this Agreement in accordance with such recognized meanings.
| 29.3 | Entire Agreement |
This Agreement represents the entire agreement between the Owner and the Contractor with respect to the subject matter hereof, and supersedes all prior understandings, agreements, representations (including misrepresentations, negligent or otherwise), negotiations, communications and discussions, written or oral, made by the Parties with respect thereto. There are no representations, warranties, terms, conditions, covenants or other understandings, express or implied, collateral, statutory or otherwise, between the Parties, except as expressly stated in this Agreement. The Parties have not relied and are not relying on any other information, discussion or understanding in entering into this Agreement. Except as provided in Article 16, this Agreement may not be amended, supplemented or otherwise modified in any respect except by written agreement signed by the Parties.
| - 71 - |
| 29.4 | Successors and Assigns |
This Agreement and any rights, interests or obligations hereunder shall not be assigned, conveyed, pledged, transferred or otherwise encumbered by a Party without the prior written consent of the other Party. Notwithstanding the foregoing, the Owner may without the Contractor’s consent, assign, transfer, sell, pledge, encumber or grant a security interest in, this Agreement or the accounts, revenues or proceeds hereof, to any Person providing any financing or financial arrangement in connection with the Project. The Contractor agrees to execute a consent to assignment with any Person providing financing in connection with the Project in a form reasonably provided by such Person and shall co-operate with any reasonable request of any such Person with respect to any such financing and the form of any such consent. The Owner may further assign its rights and obligations arising from this Agreement, in whole or in part or any rights (including warranty rights) arising from it to a potential purchaser of the Project , without the Contractors consent, subject always to provision of Notice of such assignment to the Contractor further to completion of the assignment.
| 29.5 | Third Parties |
Unless otherwise specified herein, this Agreement does not and is not intended to confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Except for Indemnified Persons, no Person other than the Parties will be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. The Parties reserve their right to vary or rescind, at any time and in any way whatsoever, the rights, if any, granted by or under this Agreement to any Person who is not a Party, without notice to or consent of that Person, including any Indemnified Person.
| 29.6 | Contractual Relationship |
Nothing contained in this Agreement shall be construed as creating a contractual relationship of any kind (i) between the Owner and a Subcontractor or Vendor (except as provided in Article 14 hereof), or (ii) between any Persons or entities other than the Owner and the Contractor. In confirmation and furtherance of the foregoing, no Subcontractor or Vendor or any other Person not a Party to this Agreement shall be deemed or construed as a third party beneficiary of this Agreement.
| 29.7 | Costs and Expenses |
Unless otherwise specified, each Party shall be responsible for all costs and expenses (including the fees and disbursements of legal counsel, bankers, investment bankers, accountants, brokers and other advisors) incurred by it in connection with this Agreement.
| 29.8 | Severability |
If any provision of this Agreement or its application to any Party or circumstance is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, it will be ineffective only to the extent of its illegality, invalidity or unenforceability without affecting the validity or the enforceability of the remaining provisions of this Agreement and without affecting its application to other parties or circumstances.
| 29.9 | Waiver of Rights |
Any waiver of any of the provisions of this Agreement will be binding only if it is in writing and signed by the Party to be bound by it, and only in the specific instance and for the specific purpose for which it has been given. The failure or delay of any Party in exercising any right under this Agreement will not operate as a waiver of that right. No single or partial exercise of any right will preclude any other or further exercise of that right or the exercise of any other right, and no waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar).
| - 72 - |
| 29.10 | Remedies Cumulative |
Unless otherwise specified, the rights and remedies of a Party under this Agreement are cumulative and in addition to and without prejudice to any other rights or remedies available to that Party at law, in equity or otherwise, and unless otherwise specified, no single or partial exercise by a Party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which that Party may be entitled provided always the foregoing remedies are all subject to the limitation of liability set out in Section 8.2.
| 29.11 | Notices |
| (a) | Any notice, direction or other communication (in this Section 29.11, a “Notice”) regarding the matters contemplated by this Agreement must be in writing and delivered personally, sent by courier or by electronic mail) , as follows: |
If to either Owner:
570 Granville St., Suite 900
Vancouver, BC. V6C 3P1
Attention: Matthew Wayrynen
Email: [REDACTED: Email]
If to the Contractor:
505 Consumers Rd., Unit 803
North York, Ontario
M2J 4V8
Attention: Richard Lu
Email: [REDACTED: Email]
| (b) | A Notice is deemed to be delivered and received (i) if delivered personally, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (ii) if sent by same day courier, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (iii) if sent by overnight courier, on the next Working Day; or (iv) if transmitted by facsimile, on the Working Day following the date of confirmation of transmission by the originating facsimile. |
| (c) | A Party may change its address for service from time to time by Notice given in accordance with the foregoing provisions. |
| 29.12 | Headings and Table of Contents |
The headings and captions used in this Agreement are inserted for reference and convenience only and the same shall not limit or construe the sections, articles or paragraphs to which they apply or otherwise affect the interpretation thereof. The headings contained herein and the Table of Contents are not part of this Agreement and are included solely for the convenience of the Parties.
| - 73 - |
| 29.13 | Time of Essence |
Time is of the essence of this Agreement.
| 29.14 | Interpretation |
In the event of any inconsistency or discrepancy between written words and specific numbers, the description of any such figures by written words shall govern.
| 29.15 | References |
In this Agreement, unless a clear, contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person or entity includes such Person’s or entity’s successors and assigns but, in the case of a party to this Agreement, only if such successors and assigns are permitted by this Agreement, and reference to a Person or entity in a particular capacity excludes such Person or entity in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of this Agreement; (e) reference to any Law means such Law as amended, modified, codified or re-enacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (f) reference to any Section means such Section of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (g) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, “from” means “from and including”, “to” means “to but excluding” and “through” means “through and including”.
| 29.16 | Incorporation by Reference |
The recitals set forth in this Agreement, as well as all Schedules attached hereto, are hereby incorporated into this Agreement by this reference and expressly made a part of this Agreement.
| 29.17 | Publicity |
Upon the reasonable request of the Owner, the Contractor shall cooperate and assist the Owner in connection with any public relations or publicity relating to the Project, including, without limitation, tours of the Project and the Job Site arranged by the Owner upon reasonable Notice and provided that any such public relations or publicity events do not interfere with the performance of the Work in the ordinary course. Neither Party shall issue any press or publicity release or otherwise release, distribute or disseminate any Confidential Information for publication concerning this Agreement or the participation of the other Party in the transactions contemplated hereby without the prior written consent of the other Party, which consent shall not be unreasonably withheld, or unless required by Law or stock exchange rule.
| - 74 - |
| 29.18 | Further Assurances |
The Contractor and the Owner agree to provide such information, execute and deliver any instruments and documents, and to take such other actions as may be necessary or reasonably requested by the other Party, which are not inconsistent with the provisions of this Agreement and which do not involve assumptions of obligations other than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of this Agreement.
| 29.19 | Number and Gender |
Where the context so requires, words importing the singular shall include the plural and vice versa, words importing the masculine shall include the feminine and neuter and all text in parentheses ( ) shall have the same effect as if parentheses were not used.
| 29.20 | Counterparts |
This Agreement may be executed in any number of counterparts (including counterparts by facsimile), each of which will be deemed to be an original and all of which, taken together, will be deemed to constitute one and the same instrument. Delivery by facsimile or by electronic transmission of an executed counterpart of this Agreement is as effective as delivery of an originally executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or by electronic transmission shall also deliver an originally executed counterpart of this Agreement, but the failure to deliver an originally executed copy does not affect the validity, enforceability or binding effect of this Agreement.
[Signing Page Follows]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.
| 1000234763 ONTARIO INC. | ||
| By: | “Matthew Wayrynen” | |
| Name: | Matthew Wayrynen | |
| Title: | CEO | |
| SOLARBANK CORPORATION | ||
| By: | “Andrew van Doorn” | |
| Name: | Andrew van Doorn | |
| Title: | Chief Operating Officer | |
SCHEDULE 1
OWNER’S STATEMENT OF REQUIREMENTS
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 2
JOB SITE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 3
SITE ACCEPTANCE TEST
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 4
CONTRACTOR’S CERTIFICATE OF SUBSTANTIAL PERFORMANCE
This Certificate of Substantial Performance is provided in accordance with Section 12.2 of the Agreement dated [date] between [●] (the “Owner” and SolarBank Corporation (the “Contractor”. Capitalized terms used in this certificate and not otherwise defined in this certificate have the meaning specified in the Agreement.
In accordance with the Agreement, the Owner hereby certified that all of the following have been satisfied in accordance with the Agreement:
 | Contractor has completed the Commissioning services; and |
| Contractor and Owner have agreed on a Punch List as to all remaining work to be completed in connection with the BESS |
In accordance with the Agreement, the Parties hereby confirm and agree that the Substantial Completion Date shall be deemed to have occurred as of [date].
| Executed as of [date] | Accepted as of [date] | |||
| SolarBank Corporation | [●] | |||
| Per: | Per: | |||
| Name: | Name: | |||
| Title: | Title: | |||
SCHEDULE 5
MAJOR COMPONENT PROCUREMENT PLAN
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 6
FIXED CONTRACT PRICE
(as per Section 9.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 7
FORM OF STATUTORY DECLARATION
(see attached)
STATUTORY DECLARATION
| Canada | IN THE MATTER OF a contract entered with |
| Province of Ontario | _____________________________________________________, |
| (Owner) | |
| by (Name of Contractor) , (Contractor), on (date ) (the “Contract”) | |
| Project Name/Number: _______________________________ | |
| I, (Name) , | |
DO SOLEMNLY DECLARE:
1. that I am (Title or Position) , of (Name of Contractor) , the Contractor named in the above mentioned Contract, and as such have personal knowledge of the fact herein declared.
2. that all accounts for labour, sub-contracts, products, materials, services and construction machinery and equipment, which have been incurred directly by the Contractor in the performance of the Work as required by the Contract, and for which the Owner might in any way be held responsible, have been discharged, except for:
| (1) | holdback monies properly retained, |
| (2) | payments deferred by agreement between the Contractor and the Owner, |
| (3) | amounts withheld by reason of legitimate dispute which have been identified to the party or parties, from whom payment has been withheld and are listed below and, (identify payees and amounts payable to each) |
_______________________________________________________________________________________________
_______________________________________________________________________________________________
_______________________________________________________________________________________________
| (4) | payments that are yet to be made because they are subject to the Contractor’s verification processes. |
3. that all accounts for labour, material suppliers and sub-contracts have been informed of the name of the construction trade newspaper, as declared.
AND I MAKE THIS SOLEMN DECLARATION conscientiously believing it to be true and knowing that it is of the same force and effect as if made under oath and by virtue of the CANADA EVIDENCE ACT.
| Declared before me at the _________________________ | |
| Of _____________________________________________ | |
| in the __________________________________________ | |
| of ____________________this _____________________ |
day of ___________________________. 20 __
| (Deponent) | ||
| A Commissioner etc. |
INSTRUCTIONS
This declaration must be sworn before a commissioner for oaths, notary public or justice of the peace.
Statutory declaration to be submitted along with application for payment to the Owner.
SCHEDULE 8
CONTRACTOR’S PERSONNEL COMMITMENT
The following individual(s) will act on behalf of the Contractor in connection with the Project, together with their scope of authority. Such designations as of the date of this Agreement as set forth below. Such individuals may be replaced, from time to time, subject to the prior approval of the Owner.
Dennis Stainton
Construction and Operations Project Manager
[REDACTED: Email address]
SCHEDULE 9
SCHEDULE OF MILESTONES (AND MILESTONE COMPLETION CERTIFICATE)
[REDACTED: Confidential and commercially sensitive information]
MILESTONE COMPLETION CERTIFICATE
This Milestone Completion Certificate (the “Certificate”) is provided in accordance with the Contract by and between ___________________ (“Owner”) and SolarBank Corporation (“Contractor”) dated ___________________, 2023 (the “Agreement”).
Capitalized terms used in this Certificate and not otherwise defined herein have the meanings specified in the Agreement.
In accordance with Article _____________, the Contractor hereby certifies that, with respect to Milestone No. ___________________ all of the requirements to achieve [Insert Title of Milestone] Completion as defined in Article
with the exception of Owner’s acceptance hereof) have been achieved.
Attached hereto is the required documentation in support of above certification.
| Executed this ___ day of _____________________, 202_. | ||
| [Contractor]______________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
Acceptance
In accordance with Article ___________, Owner on this _______ day of ________, 201__, hereby indicates its acceptance of the achievement of Milestone No. Completion.
| [Owner]_________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
SCHEDULE 10
PROJECT SCHEDULE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 11
CHANGE ORDER AND CHANGE DIRECTIVE FORM
(as per Section 16.3)
See attached.
Change Order
Project: (Name and Address)
Contract Information:
Contract for:
Date:
Change Order Information
Change Order Number:
Date:
Owner: (Name and Address)
Contractor: (Name and Address)
_______________________________________________________________________________________________
The Contract I changed as follows:
(Insert a detailed description of the change and, if applicable, attach or reference specific exhibits. Also include agreed upon adjustments attributable to executed Construction Change Directives.)
| The original (Fixed Contract Price) was | $ | |||
| The net change by previously authorized Change Orders | $ | |||
| The (Fixed Contract Price) Prior to Change was | $ | |||
| The (Fixed Contract Price) will be (increased) (decreased) | ||||
| (unchanged) by this Change Order in the amount of | $ | |||
| The new (Fixed Contract Price), including this | ||||
| Change Order, will be | $ | |||
| The Completion Plan will be (increased)(decreased)(unchanged) by | $ | |||
| The new date of Substantial Completion will be | $ |
_______________________________________________________________________________________________
NOT VALID UNTIL SIGNED BY THE CONTARTCOR AND OWNER
| OWNER | CONTRACTOR | |
| SIGNATURE | SIGNATURE | |
| NAME AND POSITION | NAME AND POSITION | |
| DATE | DATE |
SCHEDULE 12
REPORT TO OWNER
| No. | Work Completed at Week of xx, 20 (Previous Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 | ||||||||||||||
| No. | Outstanding Work from Week of xx, 20 (Previous Week) |
Comments & Impact on Following Work |
Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| No. | Work planed at Week of xx, 20 (Current Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 |
|
SCHEDULE 13
[Intentionally left blank]
SCHEDULE 14
FORM OF CONTRACTOR’S APPLICATION FOR PAYMENT
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 15
OWNER’S NOTICE OF SUBSTANTIAL PERFORMANCE
(see attached)
APPLICATION FOR SUBSTANTIAL PERFORMANCE
| To: | Date: | |||
| (Owner) | ||||
| Project: |
RE: Engineering, Procurement and Construction Agreement between Owner and SolarBank Corporation dated [date] (the “Contract”)
In accordance with the Contract requirements, I/We _________________________________ (Name of Contractor) hereby apply for:
☐ Certificate of Substantial Performance
☐ Certificate of Completion
| All work invoiced to date | $ | |||
| Payments made to date | -$ | |||
| Less holdback | -$ | |||
| Less Owner’s set-offs | -$ | |||
| Amount due | =$ |
I/We _______________________________________________________________________________ (Name of Contractor) hereby declare that the Certificate of Substantial Performance shall be published in: _______________________________________________(Name of the construction trade newspaper). The link for the construction trade newspaper is: __________________________.
I/We _______________________________________ (Name of Contractor) hereby release the Owner of all further claims related to the contract with the following exceptions:
| - | List outstanding issues | ||
I/We ____________________________________________________(Name of Contractor) hereby declare and submit with this Application a Statutory Declaration in the form provided that all liabilities incurred by the Contractor, and the Contractor’s Sub-Contractors, in carrying out the Contract have been discharged, except for the statutory holdbacks properly retained in accordance with the Construction Act.
| - | List outstanding liabilities: | ||
| Name: | Signature: | ||
| Position: | Date: |
SCHEUDLE 16
LIST OF APPROVED VENDORS AND SUBCONTRACTORS
(Section 14.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 17
[intentionally left blank]
SCHEDULE 18
[intentionally left blank]
SCHEDULE 19
NOTICE TO PROCEED
(see attached)
PROJECT NOTICE TO PROCEED
| To: | SolarBank Corporation |
| Re: | Engineering, Procurement and Construction Agreement between Solarbank Corporation and [●] dated , 202_ (the “EPC Agreement”) |
Project:
Location:
In accordance with Section 2.1.1 of the EPC Agreement, the Contractor may proceed with the Work for the Project. Any Notice to Proceed provided by the Owner does not relieve the Contractor from any responsibility or obligation for the proper performance of the Work in conformity with the requirements of the Agreement. This Notice to Proceed imposes no liability upon the Owner and is not to be interpreted as an approval or acceptance of the Work by the Owner that the Work was completed or supplied in conformance with the Agreement.
| [Owner] | ||||
| Issued by: | Time & Date: | |||
| [name] | ||||
| SolarBank Corporation | ||||
| Received by: | Time & Date: | |||
| [name] |
SCHEDULE 20
CERTIFICATE OF FINAL COMPLETION
(see attached)
CERTIFICATE OF FINAL COMPLETION
Reference is made to that certain Engineering, Procurement & Construction Agreement dated as of ______________, 2023 by and between Owner and Contractor (the “Agreement”). Capitalized terms used, but not defined, herein shall have the meanings set forth in the Agreement.
| 1. | The undersigned Contractor does hereby certify and represent as follows to Owner: |
| (a) | Contractor has delivered to Owner a certificate verifying that the Project has achieved Commercial Operation; |
| (b) | Contractor has completed all Punch List items; |
| (c) | A Substantial Completion Certificate for the Work relating to the Project has been published pursuant to Section 31(1) of the Construction Act; |
| (d) | Contractor has delivered evidence of compliance with the Workplace Safety and Insurance Act (Ontario) in form and content satisfactory to Owner; |
| (e) | All Contractor personnel (including subcontractors) shall have left the Job Site; |
| (f) | Owner has received from Contractor all warranties, data, operation and maintenance and other manuals, spare parts lists, and such other items as required by required documentation for the Work in accordance with Section 4.8; |
| (g) | Pursuant to Section 10.1.2 of the Agreement, any Lien registered against the Owner or for which the Owner has received notice in connection with the Work has been satisfied, discharged, vacated or withdrawn in accordance with the Construction Act; |
| (h) | All waste and rubbish and all surplus materials and construction facilities other than those materials and facilities to which Owner holds title shall have been removed from the Job Site; |
| (i) | The Job Site shall have been restored to the same condition that such Job Site was received. |
Executed and delivered to Owner this ___________ day of ______________, 20__.
| CONTRACTOR: | ACCEPTED BY OWNER: | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: | |||
Exhibit 99.74
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
BY AND BETWEEN
1000234813 ONTARIO INC.
AND
SOLARBANK CORPORATION
DATED AS OF THIS 3rd DAY OF OCTOBER, 2023
TABLE OF CONTENTS
| ARTICLE 1 DEFINITIONS | 1 | |
| 1.1 | Defined Terms | 1 |
| 1.2 | Schedules | 12 |
| ARTICLE 2 NOTICE TO PROCEED | 12 | |
| 2.1 | Notice to Proceed | 12 |
| 2.2 | Limited Notice to Proceed | 13 |
| ARTICLE 3 GENERAL PROVISIONS | 13 | |
| 3.1 | Scope of Work | 13 |
| 3.2 | Contractor Review of Project Requirements | 13 |
| 3.3 | Priority of Agreement Provisions | 14 |
| 3.4 | Independent Contractor | 14 |
| ARTICLE 4 CONTRACTOR’S SERVICES | 14 | |
| 4.1 | General Requirements | 14 |
| 4.2 | Design and Engineering Work | 19 |
| 4.3 | Procurement and Construction Work | 21 |
| 4.4 | Coordination with Owner, Authorities and Subcontractors | 23 |
| 4.5 | Local Communities | 24 |
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices | 24 |
| 4.7 | Entrance, Routing and Transportation to the Job Site | 24 |
| 4.8 | Importing | 25 |
| ARTICLE 5 OWNER | 25 | |
| 5.1 | Rights, Duties & Obligations | 25 |
| ARTICLE 6 PROJECT SCHEDULE | 27 | |
| 6.1 | Commencement | 27 |
| 6.2 | Substantial Performance | 27 |
| 6.3 | Project Schedule | 27 |
| ARTICLE 7 LIQUIDATED DAMAGES | 28 | |
| 7.1 | Delay Liquidated Damages | 28 |
| 7.2 | Substantial Performance and Minimum Performance Criteria | 28 |
| 7.3 | Exclusivity of Liability | 28 |
| 7.4 | Invoicing and Payment of Liquidated Damages | 28 |
| 7.5 | Liquidated Damages Not Penalty | 28 |
| ARTICLE 8 LIMITATION OF LIABILITY | 29 | |
| 8.1 | Consequential Damages | 29 |
| 8.2 | Overall Limitation | 29 |
| 8.3 | Exceptions to Caps on Liability | 29 |
| 8.4 | Remedies Non-Exclusive | 30 |
| 8.5 | Limitations | 30 |
| ARTICLE 29 MISCELLANEOUS PROVISIONS | 70 | |
| 29.1 | Governing Law | 70 |
| 29.2 | Meaning of Terms | 70 |
| 29.3 | Entire Agreement | 70 |
| 29.4 | Successors and Assigns | 71 |
| 29.5 | Third Parties | 71 |
| 29.6 | Contractual Relationship | 71 |
| 29.7 | Costs and Expenses | 71 |
| 29.8 | Severability | 71 |
| 29.9 | Waiver of Rights | 71 |
| 29.10 | Remedies Cumulative | 72 |
| 29.11 | Notices | 72 |
| 29.12 | Headings and Table of Contents | 72 |
| 29.13 | Time of Essence | 73 |
| 29.14 | Interpretation | 73 |
| 29.15 | References | 73 |
| 29.16 | Incorporation by Reference | 73 |
| 29.17 | Publicity | 73 |
| 29.18 | Further Assurances | 74 |
| 29.19 | Number and Gender | 74 |
| 29.20 | Counterparts | 74 |
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
THIS ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT is made as of this 3rd day of October, 2023 by and between 1000234813 Ontario Inc., each a corporation established under the laws of the Province of Ontario (each an “Owner” and collectively, the “Owners”), and SolarBank Corporation, a corporation established under the laws of the Province of Ontario (the “Contractor”).
RECITALS
WHEREAS the IESO awarded the Owners an Expedited Long-Term Reliability Services (“E-LT1”) Contract which formalizes the long-term contractual arrangements for the Owner to develop, construct, operate and maintain the Project described in Schedule 1.
AND WHEREAS the Owner wishes to engage the Contractor to furnish, and the Contractor desires to furnish, on a fixed-price turnkey basis, the BESS, including but not limited to the engineering, design, procurement, construction management, installation, construction, operator training, testing and commissioning services necessary to construct, install, commission, test and initially operate the BESS according to the specifications set forth herein and perform the remainder of the Work as more fully described herein;
NOW, THEREFORE, for and in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
| 1.1 | Defined Terms |
For purposes of this Agreement, the terms set forth in the following clauses shall have the meanings ascribed to them:
“Acceptance Date” means the date on which the Owner delivers to the Contractor the Owner Substantial Performance Notice.
“Actual Cost” has the meaning set forth in Section 16.5(b).
“ADR Institute of Canada” means the ADR Institute of Canada, Inc. and its permitted successors and assigns.
“Affiliate” means, with respect to either Party, any Person directly or indirectly controlled by, controlling or under common control with such Party. For the purposes of this definition, “control” of any Person includes (i) with respect to any corporation or other Person having voting shares or the equivalent equity interest, the ownership or power to vote, directly or indirectly, shares or the equivalent equity interest representing fifty percent (50%) or more of the power to vote in the election of directors, managers or persons performing similar supervisory and management functions, (ii) ownership of more than fifty percent (50%) of the equity or beneficial interest in that Person, or (iii) the ability to direct the business and affairs of any Person by acting as a general partner, manager or otherwise.
| - 2 - |
“Agreement” means and refers to this Agreement including all schedules, exhibits and documents incorporated by attachment or reference thereto and any Modifications issued after the execution of this Agreement.
“Application for Payment” has the meaning set forth in Section 10.1.1 and shall be in the form of Schedule 14 hereto.
“Approval Date” has the meaning set forth in Section 16.2.
“Arbitration Notice” has the meaning set forth in Section 27.3.2.
“Authority” means any country or any foreign, national, federal, provincial, state, county, territory, municipality, region or other political subdivision thereof, or any government, quasi-government, administrative department or regulatory authority, agency, ministry, board, body, commission, instrumentality, court or tribunal thereof or any central bank (or similar monetary or regulatory authority), any tax authority, any ministry or department or agency of the foregoing, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any Person acting under the authority of any Authority.
“Battery energy storage facility AC nameplate capacity” means the total storage facility AC energy for the project, measured as the total installed energy in MWh when taking into account the batteries, inverters, transformers and controls, and assuming an RTE of eighty five percent (85%) at POI. Battery energy storage facility AC energy capacity will be verified at time of commissioning in accordance with the Site Acceptance Test.
“Battery energy storage facility DC energy capacity” means the total DC energy storage facility for the project, calculated as the total installed energy in MWh when taking into account the battery and battery controls. Battery energy storage capacity is not verified, but is calculated.
“BESS” means and refers to a new fully functioning and complete 4.99 MW and 22.572 MWh Battery energy storage facility DC energy capacity) Battery energy storage facility AC nameplate capacity, which corresponds to 19.96 MWh usable AC battery energy storage facility composed of a direct current power storage system, all necessary batteries, inverters, transformers, controls, auxiliary and support systems and facilities including the Electric Interconnection Facilities and those described in detail in, the Statement of Requirements to be engineered, procured, constructed and/or installed by the Contractor on the Job Site in accordance with the Project Requirements.
“Certificate of Final Completion” has the meaning set forth in Section 13.1.
“Certificate of Substantial Performance” has the meaning set forth in Section 12.2.
“Change in Work” means an addition, modification, alteration, substitution, variation, deduction or cancellation of Work together with any resulting changes in the Fixed Contract Price and the Project Schedule, as applicable, and as instructed by the Owner in writing pursuant to Article 16 or as otherwise permitted in accordance with the terms of this Agreement.
“Change Order” has the meaning set forth in Section 16.3.
| - 3 - |
“Commercial Operation” has the meaning set forth in paragraph (c) of the definition of Substantial Performance.
“Commercially Reasonable Efforts” means efforts which are designed to enable a Party, directly or indirectly, to satisfy a condition to, or otherwise assist in the consummation of, the obligations contemplated by this Agreement and which do not require the performing Party to expend any funds or assume liabilities, other than expenditures and liabilities which are reasonable in nature and amount in the context of the obligations assumed by a Party under the terms and conditions of this Agreement.
“Completion Plan” means a plan developed pursuant to Section 12.4.
“Components” means and refers to all the tangible materials, equipment, apparatus, structures, tools, supplies or goods, including systems, subsystems, subassemblies and components supplied by the Contractor or any Subcontractor as required by this Agreement which shall include each element of the BESS.
“Confidential Information” has the meaning set forth in Section 15.2.1.
“Construction Change Directive” has the meaning set forth in Section 16.4.
“Constructor” has the meaning set forth in Section 20.1.3(a)
“Contractor” has the meaning given in the preamble.
“Contractor Event of Default” has the meaning set forth in Section 28.2.1.
“Contractor Permits” has the meaning set forth in Section 4.1.8
“Contractor Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Contractor’s Representative” has the meaning set forth in Section 4.1.5.
“CSTS” has the meaning set forth in Section 20.2.14(a).
“Daily Rate” means, with respect to the period by which Substantial Performance Date is delayed, from and including the Guaranteed Substantial Performance Date:
| (a) | for the first ninety (90) days of such period, [REDACTED: Dollar amount] per Business Day; and |
| (b) | for each day after ninety (90) calendar days of such period, [REDACTED: Dollar amount] per Business Day. |
“Day” or “day” means and refers to a calendar day.
“Delay Liquidated Damages” has the meaning set forth in Section 7.1.
“$” means Canadian currency, except as specifically indicated otherwise herein.
| - 4 - |
“Design & Engineering Documents” means those documents identified in the Statement of Requirements.
“Design Materials” has the meaning set forth in Section 15.1.1.
“Detail Design Documents” means the drawings, specifications and other design documents that are to be prepared by the Contractor for the Project.
“Directive Date” has the meaning set forth in Section 16.2.
“Dispute” has the meaning set forth in Section 27.3.1.
“Electric Interconnection Facilities” means all structures, facilities, equipment, auxiliary equipment, devices and apparatus directly or indirectly required to interconnect the BESS to the distribution system and to existing electrical infrastructure at the following points identified in the Statement of Requirements.
“Environment” means the environment or natural environment as defined in any Environmental Laws and including air, surface, water, ground water, land surface, oil, rock, bedrock, subsurface strata, sediment, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource, any sewer system and the environment in the workplace.
“Environmental Laws” means all Laws relating to the Environment, or public or worker health or safety, and including Laws relating to (a) the assessment, review or approval of projects or undertakings; (b) the storage, generation, use, handling, manufacture, processing, labelling, advertising, sale, display, transportation, treatment, reuse, recycling, release and disposal of Hazardous Substances; and (c) the Environmental Protection Act (Ontario).
“Environmental Permits” means those air and noise, stormwater and industrial sewage permits, certificates, licenses, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals permits, certificates, licences, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals or other rights in each case made, issued, granted, conferred or required pursuant to any Environmental Law.
“Extended Warranty Period” has the meaning set forth in Section 23.1.4.
“Final Completion” shall be deemed to have occurred when (a) Substantial Performance has occurred and all conditions required for Substantial Performance continue to be satisfied, (b) all items identified on the Punch List have been completed (except for such items that Owner waives in writing), (c) all documents and deliverables which are required for Final Completion under this Agreement have been delivered, including final Operation and Maintenance Manuals, schematics, spare parts lists, drawings, Design and Engineering Documents, Detail Design Documents, “as- built” drawings and surveys (including, without limitation, the site plan survey of the property on which the BESS is located with the actual location of improvements and other structures) and Permits (d) all other duties and obligations of the Contractor under this Agreement have been fully performed, except for the Contractor’s warranty obligations which by their terms are to be performed after the Final Completion Date, (e) all the Contractor’s (and its Subcontractors’) personnel, supplies, tools, equipment, surplus materials, waste materials, rubbish, debris and temporary facilities have been cleaned up and removed from the Job Site, (f) there exists no Contractor Event of Default, and (g) the Owner has received from the Contractor evidence satisfactory to the Owner that all payments due to its Subcontractors and all payrolls, bills, holdbacks, workers compensation board claims and other costs and expenses relating to the Work have been paid or otherwise satisfied (including, but not limited to, statutory declarations from the Contractor in the form attached as Schedule 7).
| - 5 - |
“Final Completion Date” means the date the Contractor sent the last Notice to the Owner indicating achievement of Final Completion which is executed by Owner.
“Fixed Contract Price” has the meaning set forth in Section 9.1.
“Force Majeure” has the meaning set forth in Section 24.1.1.
“Good Engineering and Operating Practices” means any of the practices, methods, specifications, acts and standards of safety, performance, dependability, efficiency and economy which should be adopted by a Person exercising that degree of knowledge, skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from an engineering, procurement and construction contractor engaged in work similar to the Work, including multi- disciplinary design/build project execution including design, engineering, procurement, transportation, fabrication, construction, start-up, testing, operating, maintenance and repair, and training in respect of facilities the same as or similar to the Project under the same or similar circumstances, including the applicable IESO and Market Rule standards in place as of the date of execution of this Agreement and such other practices, methods or acts which, in the exercise of reasonable and prudent judgment by those in the engineering, procurement and construction industry in light of facts know at the time a decision is made and intending to comply with contractual obligations to which they are subject, would be expected to accomplish the result intended and consistent with Law, reliability, safety and expedition.
“Guaranteed Capacity” means 4.74 MW of power capacity and 18.96 MWh of AC energy capacity in respect of the BESS as specified in the Statement of Requirements, as measured at the inverter AC output demarcation point as described in the Statement of Requirements.
“Guaranteed Capacity Test” means the capacity test to be performed by Contractor pursuant to the Site Acceptance Test to demonstrate if the BESS satisfies the Guaranteed Capacity.
“Guaranteed Substantial Performance Date” means May 1, 2025, such date to be adjusted if and to the extent applicable and permitted pursuant to the terms and provisions of Article 16 of this Agreement.
“Hazardous Substance” means and refers to (a) any substance which is listed, defined, designated or classified under any Environmental Law as a (i) hazardous material, substance, constituent or waste, (ii) toxic material, substance, constituent or waste, (iii) radioactive material, substance, constituent or waste, (iv) dangerous material, substance, constituent or waste, (v) pollutant, (vi) contaminant, or (vii) special waste; (b) any material, substance, constituent or waste regulated under any Environmental Laws; or (c) petroleum, petroleum products, radioactive matters, polychlorinated biphenyl, pesticides, asbestos, or asbestos-containing materials.
“Health and Safety Plan” has the meaning set forth in Section 20.1.1.
| - 6 - |
“HST” means the goods and services tax or harmonised sales tax imposed under Part IX of the Excise Tax Act (Canada), as amended, or any similar provincial value-added tax which may be imposed now or in the future.
“Hydro One” means Hydro One Networks Inc., the local transmission system operator.
“IESO” means the Independent Electricity System Operator.
“Initial Warranty Period” has the meaning set forth in Section 23.1.5.
“Initiating Party” has the meaning set forth in Section 27.3.2.
“Inspection Date” has the meaning set forth in Section 5.1.6(b).
“Institute” has the meaning set forth in Section 27.3.1.
“Intellectual Property Rights” means and refers to all patents and patent rights, inventions, copyrights, works of authorship, trademarks, service marks, trade secrets and all similar and related intellectual property rights protected under any Law and, for greater certainty, includes all technical information, know-how, processes, procedures, compositions, devices, methods, models, formulas, protocols, techniques, software, designs, plans, methodologies, drawings or data created or owned by Contractor or its Subcontractors.
“ITC” means Investment Tax Credits for green technology projects provided by the Government of Canada or Provincial Government of Ontario.
“Job Site” means the job site shown on the site drawings included in Schedule 2 and otherwise described in this Agreement together with such additional areas as may, from time to time, be designated in writing by Owner for the Contractor’s use (including laydown areas) hereunder.
“kV” means kilovolts.
“kW” means kilowatt.
“Limited Notice to Proceed” has the meaning set forth in Section 2.2.
“MW” means megawatt.
“MWh” means megawatt-hour.
“Landlord” refers to the property owner of the Job Site.
“Law” means and refers to any constitution, charter, statute, legislation, treaty, act, law, ordinance, Permit rule, regulation, code, rule, order, decree, permit, judgment, injunction, directive, ruling, decision, order, guideline, resolution, declaration or other requirement, decision or determination of any Authority, or any interpretation or application thereof by any such Authority.
“Liabilities” means actions, causes of action, proceedings claims, demands, complaints, grievances, suits, charges, indictments, prosecutions, investigations, informations, assessments, reassessments or similar process or any damages, costs, losses, expenses, penalties, royalties, payments, fines, assessments, charges or liabilities whatsoever suffered, sustained, paid or incurred (including in connection with the death of or injury to any individual or damage to or loss of any property, including property of the Owner) and “Liability” shall be construed accordingly.
| - 7 - |
“Lien Holdback Amount” means the holdback amount pursuant to Section 22 of the Construction Act (Ontario).
“Liens” means all mortgages, deeds of trust, liens, debentures, security interests, pledges, conditional sale contracts, proceedings, orders, rights of first refusal, options, charges, agreements, easements, rights-of-way, limitations, reservations, restrictions, community property interests, equitable interests, building-use restrictions, exceptions, variances, and other encumbrances or restrictions of any kind, whether recorded or unrecorded, including restrictions on use, transfer, receipt of income, or exercise of any other attribute of ownership.
“Liquidated Damages” means the amounts payable by the Contractor expressed to be liquidated damages including the Delay Liquidated Damages and such other amounts prescribed in Section 7.1.
“Major Component” means the Components listed on the Major Component Procurement Plan.
“Major Component Procurement Plan” means the procurement plan for Major Components described in Section 4.3.9 hereof, which shall be in the form attached hereto as Schedule 5.
“Market Rules” means the rules and regulations governing the distribution system, transmission system and markets, together with all market manuals, policies, and guidelines issued by the IESO, the Ontario Energy Board, Owner or any Authority, all as amended or replaced from time to time.
“Maximum Liability Amount” has the meaning set forth in Section 8.2.
“Milestone Completion Certificate” means the applicable certificate in the form attached hereto as Schedule 9.
“Modification” means and refers to (i) a written amendment to this Agreement signed by all Parties hereto, (ii) a Change Order, or (iii) a Construction Change Directive.
“Monthly Updated Schedule” has the meaning set forth in Section 6.3.
“Notice” means a written communication between the parties required or permitted by this Agreement and conforming to the requirements of Section 29.11 of this Agreement.
“Operation and Maintenance Manuals” means and refers to detailed and comprehensive procedures, guidelines and instructions explaining each aspect of the proper operation and maintenance of each component and each system comprising the BESS, as well as the BESS as a whole. Any such manuals supplied by Vendors and manufacturers of the Components shall be collected together with the sequence of operations manuals to be prepared by the Contractor, all in an organized set of binders.
“Owner” has the meaning given in the preamble.
“Owner Caused Delay” has the meaning set forth in Section 24.2.
| - 8 - |
“Owner’s Engineer” means the engineer (or engineers) designated by the Owner to provide advice and assistance to the Owner in whatever manner or function the Owner may decide from time to time.
“Owner Event of Default” has the meaning set forth in Section 28.3.1.
“Owner Indemnitees” has the meaning set forth in Section 26.1.1.
“Owner Permits” has the meaning set forth in Section 4.1.8.
“Owner Policy” means the Owner’s and Contractor’s respective Code of Business Conduct, Environmental Policy and Occupational Health & Safety Policy.
“Owner’s Representative” has the meaning set forth in Section 5.1.1.
“Owner Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Parties” means the Owner and the Contractor.
“Permits” has the meaning set forth in Section 4.1.8.
“Person” means any individual, corporation, company, voluntary association, partnership, incorporated organization or Authority.
“Pre-Existing Hazardous Substance(s)” means and refers to a Hazardous Substance existing at any Job Site as of the date of execution of this Agreement.
“Prime Rate” means the floating annual rate of interest publicly announced by the Royal Bank of Canada as its prime rate in Canadian dollar loans to customers in Canada and designated as its prime rate and the Prime Rate shall change when and as such prime rate changes.
“Project” means and refers to the provision of the Work in relation to the BESS as described in this Agreement.
“Project Agreements” means this Agreement and any other agreement or document necessary for the construction, startup or testing of the Project.
“Project Requirements” means and refers to (i) applicable Laws, (ii) the terms and conditions of this Agreement and, as applicable, the Project Agreements, (iii) written recommendations and requirements of the Contractor’s suppliers or Vendors, (iv) all Permits obtained by or on behalf of the Owner or by the Contractor or required to be obtained pursuant to Section 4.1.8, (v) the Good Engineering and Operating Practices, and (vi) the Technical Requirements.
“Project Schedule” means the schedule attached hereto as Schedule 10 describing all significant engineering, procurement and construction activities, milestones and events, permitting activities, certain significant Owner’s milestone events, including the estimated time of completion of project milestones by the Contractor and as amended where expressly provided for in the Agreement. Whenever herein there is a reference to an adjustment to the Guaranteed Substantial Performance Date, such adjustment shall also contemplate an equitable adjustment to the Project Schedule.
| - 9 - |
“Punch List” means and refers to a comprehensive list agreed to by the Contractor and the Owner upon Substantial Performance identifying those insubstantial details of construction and mechanical adjustment which require repair, completion, correction or re-execution, the non- completion of which does not interfere with the Owner’s safe and reliable occupancy, use and commercial operation of the BESS such as completion of painting, final clean-up and rubbish removal.
“Recipient” has the meaning set forth in Section 27.3.3.
“RTE” means “Round Trip Efficiency” and is the ratio of the AC energy in percentage between the energy supplied to the storage system(measured in MWh) and the energy retrieved from it in MWh, taking into account the one-way efficiencies of the batteries, the inverter, the transformer, and other components. A reasonable assumption of RTE for the Project is [REDACTED: Percentage amount]
“Sales Taxes” has the meaning set forth in Section 9.1.
“Schedules” means schedules to this Agreement.
“Separate Contractor” has the meaning set forth in Section 21.1.
“Site Acceptance Test” means the site acceptance test prepared by Contractor and agreed to by Owner in accordance with the Statement of Requirements.
“Statement of Requirements” means the Owner’s statement of requirements for the Project as set out in Schedule 1.
“Subcontractor” means and refers to any Person or entity, including a Components supplier or Vendor, who performs a portion of the Work or supplies materials, Components or other items in relation to the Work.
“Substantial Performance” shall be deemed to have occurred when:
| (a) | the Contractor has delivered to the Owner, immediately when available, the following: (1) the raw data collected upon the completion of the Guaranteed Capacity Test, (2) test results of the Guaranteed Capacity Test and (3) a certificate from the Contractor certifying that the test results of the Guaranteed Capacity Tests are true and accurate and such tests have been performed in accordance with the Site Acceptance Test; |
| (b) | in accordance with the procedures set forth in Article 12, the Contractor has completed the Guaranteed Capacity Test in conformance with this Agreement and the data from the Guaranteed Capacity Test shall demonstrate that the BESS satisfied the Guaranteed Capacity and the requirements as set out in the Site Acceptance Test; |
| (c) | the Work is available for full commercial operation as intended by the Project Requirements in compliance with all applicable Laws then in effect and Permits (“Commercial Operation”), and the construction of the Work complies with all Permits issued with respect to the BESS; |
| (d) | the Work and its operations complies with all applicable Laws and Permits then in effect; |
| - 10 - |
| (e) | the Contractor has notified Owner in writing that the Contractor knows of no defects and/or deficiencies in the Work that affects the performance of the BESS and that the Owner has received a certificate from the Owner’s Engineer representing that the Work at the Job Site has been completed in all material respects, excepting items either individually or collectively that do not materially and adversely affect the operation of the work as set out in the Punch List; |
| (f) | necessary system adjustments or repairs to the Components identified during start-up, commissioning and testing process have been completed for the BESS to commence Commercial Operation at the performance levels obtained in Guaranteed Capacity Test upon which Commercial Operation is based; |
| (g) | the BESS is ready to be occupied and safely operated in accordance with the Project Agreements, for the use for which the BESS was intended in accordance with this Agreement; |
| (h) | all operators have been trained, to the Owner’s satisfaction; |
| (i) | all special tools and spare parts purchased by the Contractor, as provided herein have been delivered to the Owner; |
| (j) | the Contractor has closed out all building permits associated with the Project; |
| (k) | all approvals, authorizations and permits required from the Electrical Safety Authority to operate the system have been received; |
| (l) | all applicable CSA, ULc orUL certifications required under the Ontario Electric Safety Code have been met and confirmed by the Electrical Safety Authority; |
| (m) | [deleted]; |
| (n) | all deliverables required to be submitted to the Owner on or before the Substantial Performance Date have been submitted; |
| (o) | the Punch List has been mutually agreed upon by the Owner and the Contractor in accordance with Section 12.2, provided that the cost to complete incomplete items or rectify known defects shall not exceed five percent (5%) of the Fixed Contract Price; |
| (p) | the Owner has received from the Contractor evidence satisfactory to the Owner that all payrolls, bills and other costs and expenses relating to the Work have been paid or otherwise satisfied; |
| (q) | there exists no Contractor Event of Default and no event which, with the passage of time or the giving of notice or both, would be a Contractor Event of Default; |
| (r) | the Contractor has completed the performance of the Work applicable to Substantial Performance according to all of the provisions of this Agreement, with the exception of those items specified in the Punch List and the Contractor’s warranty obligations which by their terms are to be performed after the Substantial Performance Date; |
| - 11 - |
| (s) | the Contractor has successfully completed and passed all tests set out in the Site Acceptance Test; |
| (t) | the Contractor has delivered an executed conditional assignment of Subcontractor warranties in accordance with Section 23.1.7; |
| (u) | the Contractor has delivered and executed an unconditional assignment of warranties in the form set out in Schedule 22; |
| (v) | payment of Liquidated Damages, if any; and |
| (w) | the Contractor has provided to the Owner a certificate executed by an officer of the Contractor certifying the occurrence of each of the preceding conditions set forth in this definition of Substantial Performance and has separately delivered a certificate certifying satisfaction of the requirements for “substantial performance of the work” in accordance with Section 2 of the Construction Act (Ontario), |
“Substantial Performance Date” has the meaning set forth in Section 12.2.
“Taxes” has the meaning set forth in Section 9.3.1.
“Technical Documentation” means all drawings, designs, diagrams, specifications and other design and engineering documents and data, including operating and maintenance manuals, that the Contractor is required to prepare and deliver under the Agreement.
“Technical Requirements” means and refers to those requirements set forth in the Statement of Requirements, the Site Acceptance Test and in the documents identified in the Statement of Requirements, which Schedules and documents define the Work specifications and the design, construction, scope, performance requirements and intent for the BESS and Project.
“Toxic Substance” means toxic substance as defined by the Canadian Environmental Protection Act (Canada) as amended from time to time and including any regulations thereunder and successor or replacement legislation.
“Unanticipated Tariff” has the meaning set forth in Section 9.2.9.
“Utilities” means electric power, water and storm and sewer discharge systems.
“Vendor” means any Person at any tier that supplies machinery, equipment, materials or services related thereto to the Contractor or any Subcontractor in connection with the performance of the Work.
“Warranty Periods” means the periods of duration of the Contractor’s repair obligations, including any extensions and re-warranty periods, as set forth in Article 23.
| - 12 - |
“Work” means with respect to each BESS, all labour, design, engineering, procurement of Components and, tools, Components transportation, installation, supervision, construction, commissioning, start-up, testing, personnel training and other services and items identified in the Statement of Requirements or which are necessary, appropriate, or inferable to execute and complete the Components and BESS in accordance with this Agreement, all in accordance with and to meet the Project Schedule.
“Working Days” means Monday to Friday, inclusive, excluding statutory holidays in Ontario.
| 1.2 | Schedules |
The following Schedules are incorporated by reference into this Agreement and bind the Parties as if set out herein:
ARTICLE 2
NOTICE TO PROCEED
| 2.1 | Notice to Proceed |
2.1.1 Subject to Sections 2.1.2 and 2.1.2(a) the Contractor shall commence Work upon receipt of a notice to proceed duly executed by the Owner and thereafter diligently continue the Work in accordance with the Project Schedule.
2.1.2 The Owner shall have no obligation to issue a notice to proceed pursuant to Section 2.1.1 and for the avoidance of doubt, the Owner shall not in any event issue the notice to proceed before the satisfaction or waiver by the Owner of the following conditions precedent:
| (a) | approval by Owner with respect to the Fixed Contract Price and identity of the Subcontractors; and |
| (b) | approval by Owner’s management of the terms of this Agreement and the activities proposed to be conducted pursuant to the terms hereof. |
| - 13 - |
2.1.3 If the Owner anticipates that it shall not issue a notice to proceed pursuant to Section 2.1.1 until after October 3, 2023, the Contractor and the Owner, both acting reasonably, shall initiate good faith negotiations as to the affect such delay may have on the Project Schedule and the Guaranteed Substantial Performance Date.
2.1.4 If the Owner does not issue a notice to proceed pursuant to Section 2.1.1 by October 3, 2023then the Parties shall, both acting reasonably and in good faith, endeavour to renegotiate the Agreement but anytime thereafter either Party may terminate the Agreement on fifteen (15) Days’ Notice to the other. Any such termination by either Party shall be without Liability and neither Party shall have any Liability to the other Party following any such termination.
| 2.2 | Limited Notice to Proceed |
2.2.1 Notwithstanding the foregoing, Owner may elect to issue a notice to proceed instructing the Contractor to procure the Components for the Project (the “Limited Notice to Proceed” or “LNTP”). Upon receipt of the LNTP, Contractor shall immediately procure the Components from “EVLO Energy Storage Inc.”. For greater certainty, the Contractor and the Owner hereby agree that the purpose of Owner issuing the LNTP is to ensure the delivery of the Components on a timely basis and in any event on the date set out in the Project Schedule.
ARTICLE 3
GENERAL PROVISIONS
| 3.1 | Scope of Work |
3.1.1 On a fixed price, lump sum “turnkey” basis, the Contractor shall design, engineer, procure, construct, start-up, test, and provide personnel training for the operation and maintenance of the BESS that is in conformance with the Project Requirements and the other requirements of this Agreement. The BESS will be located on the Job Site listed in Schedule 1. The scope of the Contractor’s responsibilities hereunder is set forth more particularly in this Agreement and includes furnishing all services, supervision, labour, materials, supplies, Components and other equipment and machinery required to complete, start up and test the BESS.
| 3.2 | Contractor Review of Project Requirements |
3.2.1 The Contractor represents and warrants to the Owner (a) that it has carefully and thoroughly reviewed, analyzed, compared and familiarized itself with the Project Requirements, (b) that it is satisfied that the Project Requirements are in accordance with generally accepted engineering standards, and (c) that the Project Requirements contain all information, data, measurements, instructions, direction and guidance (or such information, data, measurements, instructions, direction and guidance reasonably inferable from the Project Requirements) as is necessary for the Contractor to prepare the Design & Engineering Documents and to complete the Work in accordance with the terms and provisions of this Agreement and for the Fixed Contract Price, by the Guaranteed Substantial Performance Date.
| - 14 - |
3.2.2 The Contractor acknowledges and agrees that the Project Requirements do not contain any errors, omissions, mistakes, discrepancies or defects. In the event the Contractor discovers an error, omission, mistake, discrepancy or defect in the Project Requirements, the Contractor shall promptly report the same to the Owner and shall propose a resolution thereof for the Owner’s review and approval. The Contractor shall not be entitled to a Change Order in the event that the error, omission, mistake, discrepancy or defect has caused an increase in the Fixed Contract Price and/or delay in the Project Schedule.
| 3.3 | Priority of Agreement Provisions |
In the event of a conflict or inconsistency of provisions in this Agreement, the following order of precedence shall govern the interpretation of such documents:
3.3.1 the body of this Agreement (excluding the Schedules and the Design & Engineering Documents), as amended from time to time via a Modification;
3.3.2 the approved Design & Engineering Documents;
3.3.3 the Schedules in each case as amended from time to time in the following order of priority: 1, 10, 13, 20, 2, 3, 5, 8, 9, 4, 6, 12, 14, 7, 16, 15, 21, 11, 17, 18, 19 and 22;
3.3.4 the Detail Design Documents (other than the Schedules), as amended from time to time; and
3.3.5 in the event of an ambiguity or inconsistency within this Agreement or among the various Project Requirements as to quantity or quality, the greater quantity and the better quality shall govern; except, however, that computed or figured dimensions shall take precedence over scale dimensions, and large scale drawings shall take precedence over small scale drawings. In the event the Contractor becomes aware of any conflict between the main body of this Agreement and any Schedules (or the Technical Requirements) of this Agreement or between any of the Schedules (or the Technical Requirements) of this Agreement, the Contractor shall notify the Owner within forty-eight (48) hours of such conflict in writing, pursuant to the notification provisions set forth in Section 29.11.
| 3.4 | Independent Contractor |
In performing its duties and obligations under this Agreement, the Contractor shall, at all times, act in the capacity of an independent contractor, and shall not in any respect be deemed (or act as) an agent of the Owner for any purpose or reason whatsoever.
ARTICLE 4
CONTRACTOR’S SERVICES
| 4.1 | General Requirements |
4.1.1 Performance of the Work. The Contractor hereby covenants and agrees that it shall duly and properly perform and complete the Work in accordance with the Project Requirements, including the Technical Requirements. The Contractor further covenants and agrees that it shall provide and pay for all items or services necessary for the proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated into the Work, including, but not limited to, all design, engineering, procurement, installation and construction services, all administration, management, training and coordination services, all labour, materials, furnishings, office trailers, Components, supplies, insurance, bonds, Permits (other than Owner Permits), tests, inspections, tools, machinery, water, heat, Utilities and transportation, and all other items, facilities and services. As part of the Work, the Contractor shall supply all oils, chemicals, grease, fills and other consumables necessary to achieve Substantial Performance and the BESS shall be fully loaded with such consumables at the Acceptance Date.
| - 15 - |
4.1.2 Professional Standard. The Contractor’s services shall be performed (a) with due care and diligence in a good and workmanlike manner, (b) in accordance with Good Engineering and Operating Practices, and (c) as expeditiously and economically as is consistent with the best interests of the Owner and with the preceding standards.
4.1.3 Licensing and Other Qualifications. The Contractor covenants and agrees that any individuals and entities who will perform or be in charge of professional, architectural, design and engineering services for the Work shall have experience with the type of project being undertaken and shall be duly licensed to practice under the Laws of Ontario. . Similarly, all construction services shall be undertaken and performed by qualified and licensed construction contractors, vendors and suppliers.
4.1.4 Sufficient Personnel. The Contractor shall, at all times during the term of this Agreement, keep sufficient personnel employed so that the Work to be performed by the Contractor hereunder is completed in an efficient, prompt, economical and professional manner.
4.1.5 Contractor’s Key Personnel. Attached hereto as Schedule 8 is a list of the Contractor’s key personnel who will be responsible for supervising the performance of the Contractor’s Work hereunder. Among such individuals, there shall be appointed a full-time on-site principal representative of the Contractor (the “Contractor’s Representative”), who shall be the Contractor’s authorized representative and who shall receive and initiate all communications from and with the Owner and be authorized to render binding decisions related to the Project. Contractor may remove key personnel from the Project upon written notice to the Owner. If, after execution of this Agreement, the Owner reasonably objects in writing to any of the Contractor’s personnel, the Contractor shall promptly remove such disapproved personnel. If any of the Contractor’s key personnel are removed as provided above, any replacement personnel shall be subject to the prior written approval of the Owner, which approval shall not be unreasonably withheld.
4.1.6 Local Conditions. The Contractor represents that it has taken steps reasonably necessary to ascertain the nature and location of the Work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the Project, the Job Site and/or the performance of the Work, including but not limited to (a) existing and Project conditions bearing upon transportation, disposal, handling, and storage of materials and Components; (b) the availability of labour, water, electric power, Utilities and roads; (c) uncertainties of weather, noise limitations or similar conditions at the Job Site; (d) the adequacy and limitations of the Job Site for lay-down, storage and operations; (e) the character of construction equipment and construction facilities needed prior to and during the performance of the Work; and (f) all Job Site dimensions and all measurements relevant to the Work and the Job Site. The Owner acknowledges that the Contractor has assumed no risk or liability for Pre-Existing Hazardous Substances which are encountered at the Job Site subject always to the provisions of Article 25.
4.1.7 Legal Requirements. The Contractor shall comply, and shall cause the Subcontractors to comply, in all material respects, with all Permits and all existing and future Laws which are applicable to the Work and/or the Job Site and shall give all notices pertaining thereto.
| - 16 - |
4.1.8 Permits and Licenses. The Contractor shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances, if applicable, set forth in Schedule 1 and such other permits as relate to the Contractor’s performance of the Work and completion and operation of the BESS (“Contractor Permits”). The Contractor shall pay for the Contractor Permits. The Owner shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances set forth in Schedule 1 (“Owner Permits”, and together with the Contractor Permits, the “Permits”). The Owner shall pay for the Owner Permits. Each Party shall provide any assistance reasonably requested by the other Party to obtain or maintain such Permits and the Contractor acknowledges and agrees it will, as part of the Work, be required to provide all necessary design documents that will be required by Owner to obtain the Owner Permits. The Contractor acknowledges and agrees that the Permits listed in Schedule 1 are all permits, registrations, licences, certifications, authorization inspections, approvals, consents, governmental fees and variances that must be obtained under all applicable Laws for the design, engineering, procurement, construction, start-up, testing, completion and operation of the BESS. The Contractor and the Owner will provide the other with copies of the Permits it secures. The Owner is responsible for all costs associated with permit fees for the Owner Permits.
4.1.9 Periodic Reports and Meetings; Office. The Contractor shall prepare and submit to the Owner on or prior to the Wednesday of each week a written status report in the form set out in Schedule 12 regarding the Project and the progress of the Work in the preceding one (1) week (Sunday to Saturday (inclusive)) period, which, in addition to the requirements set out in Schedule 1, will include:
| (a) | any events of material significance to the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date; |
| (b) | such items required by the Statement of Requirements to be reported upon in such reports; and |
| (c) | any items impacting the Project Schedule or any other items that the Owner reasonably requests. The Contractor shall also immediately notify the Owner of any events that may reasonably be expected to adversely affect the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date. Further, upon the Owner’s specific request, the Contractor agrees to provide to the Owner any other information reasonably requested by the Owner within five (5) Working Days of the request. |
Until Final Completion, the Contractor will attend and participate in weekly progress meetings with the Owner that will occur on the last Working Day of each week at the Job Site (or on a different day or location as the Owner may elect) for the purpose of discussing the status of the Work, anticipating and resolving any problems and reviewing a performance scorecard prepared by Owner and agreeing on a course of action the Contractor shall take to address any deficiencies identified in such scorecard.
4.1.10 Patents and Other Proprietary Rights. The Contractor shall pay all royalties and other fees for any Intellectual Property Rights necessary for the execution and completion of the Work and for the Owner to own, operate, maintain, repair and modify the BESS following Substantial Performance. The Contractor shall indemnify, defend and as a separate covenant hold harmless the Owner Indemnitees from and against any and all losses, damages, claims or expenses, including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis, arising or resulting from any claim or legal action that any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement, or the use thereof, constitutes an infringement and/or violation of any Intellectual Property Right or other proprietary right. If any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement or the use thereof is held to constitute an infringement or violation of the rights of any Person in any Intellectual Property Right or proprietary right, and the use of such item is enjoined, the Contractor shall, at its own expense (in addition to the Contractor’s indemnification obligation described above and any other remedies the Owner may have under this Agreement), either procure the right to use the infringing item, or replace the same with a substantially equal but non-infringing item, or modify the same to be non-infringing, provided that any substitute or modified item shall meet all the requirements and be subject to all the provisions of this Agreement. The terms and provisions of this Section shall survive the termination or expiration of this Agreement.
| - 17 - |
4.1.11 Supervision. The Contractor shall supervise, coordinate and direct the Work using Good Engineering and Operating Practices. The Contractor shall employ, or cause to be employed, only supervisory personnel who are appropriately qualified, trained and experienced in safety, efficiency and quality of work supervision, and if requested by the Owner, accredited or enrolled in a program for accreditation with respect to appropriate qualifications specified by the Owner. Notwithstanding the foregoing, the Contractors shall ensure that any person employed by the Contractor or any Subcontractor at the Job Site shall also complete any training or other site specific requirements that may pertain to the Job Site, whether imposed by Owner or any other Person with authority over or ownership or control of the Job Site.
4.1.12 Responsibility. The Contractor shall be responsible to the Owner for acts and omissions of the Contractor, Subcontractors, their respective agents and employees, and any other Persons performing portions of the Work, or claiming by, through or under the Contractor, and shall be responsible to the Owner for any Liabilities resulting from such acts or omissions. The exercise by the Contractor of the right to subcontract will not in any way increase the costs, expenses or Liabilities of the Owner. Further, nothing contained in this Agreement is intended to or will create any contractual relation between any Subcontractor and the Owner or any obligation on the part of the Owner to pay or see to the payment of any moneys due to any Subcontractor or its personnel.
4.1.13 Discipline. The Contractor shall enforce strict discipline and good order among the Contractor’s employees, Subcontractors’ employees and any other Persons carrying out the Work. The Contractor shall not permit the employment of unfit Persons or Persons not skilled in tasks assigned to them and shall require all Work to be in accordance with Good Engineering and Operating Practices. The Contractor shall remove any employee or other individual that the Owner, acting reasonably, deems incompetent, careless, negligent, unreasonable, uncooperative, unfit, or under the influence or in possession of drugs or alcohol. Any costs or increased costs or expenses associated with any such removal of employees or other individuals shall be borne solely by the Contractor. The Contractor shall be responsible for peaceful labour relations at the Job Site, shall at all times exert its Commercially Reasonable Efforts and judgment as an experienced contractor to adopt and implement policies and practices designed to avoid work stoppages, slowdowns, disputes or strikes where reasonably possible and practical under the circumstances, and shall at all times exert its Commercially Reasonable Efforts to maintain Project- wide labour harmony.
4.1.14 Labour Agreements. In satisfying the requirement in Section 4.1.13, and in-line with ITC labour requirement, the Contractor will pay as part of its labour subcontracts a total compensation package that equates to the prevailing wage. Additionally, at least ten per cent of the tradesperson hours worked must be performed by registered apprentices in the Red Seal trades.
| - 18 - |
4.1.15 Co-operation. The Contractor shall co-operate with and assist the Owner, its advisors, consultants, lawyers, employees, agents, contractors and representatives, including Authorities at all times during the term of this Agreement so as to complete the Projects in an efficient, timely and economical manner. Such co-operation and assistance shall include, without limitation, any reasonable co-operation or assistance required by the Owner in connection with its arrangements for the provision of services to the Contractor in relation to the construction of the BESS.
4.1.16 Work Plans.
| (a) | The Contractor shall develop and implement comprehensive management and work plans for the Project which are relative to (among other matters) Project safety and security; quality assurance and quality control; management and control of the design, engineering, procurement and construction services; and management and control of Subcontractors and their subcontracts; inspection and testing plans, method statements and work instructions and non-conformance control and corrective action process (the “Quality Plans”). |
| (b) | All Quality Plans will be consistent with the requirements of the Project Requirements and the Contractor shall prepare and implement the Quality Plans and shall cause to be performed the Work in compliance with the Quality Plans. |
| (c) | The Contractor shall submit to the owner the initial Quality Plans and any changes to any of the Quality Plans it proposes to make from time to time, and may amend such plans further to such reasonable comments and instructions the Owner may propose. |
| (d) | Without limiting Owner’s other rights pursuant to this Agreement, the Owner may, from time to time, directly or indirectly, perform periodic monitoring, spot checks and auditing the Contractors quality management systems, including all relevant Quality Plans and any quality manuals and procedures. |
4.1.17 Signage. The Contractor shall not display, install, erect or maintain any advertising or other signage at the Job Site without the Owner’s prior written approval as to the same.
4.1.18 Notice of Claims. The Contractor shall promptly notify the Owner of any claims, suits or actions filed or asserted in writing against the Contractor in relation to the Work, the Job Site and/or this Agreement.
4.1.19 Discoveries of Historical Interest. The Contractor shall take reasonable precautions to prevent its workers, its Subcontractors or any other Persons from removing or damaging any artefact, fossil, article of value or antiquity and structures and other remains or things of geological or archaeological interest or cultural evidence discovered during the course of the Work. Upon discovery of the same, the Contractor shall immediately notify the Owner of same, and shall stop all construction work around the affected area, until all appropriate action has been taken by the Owner. Upon request by and at the expense of the Owner, the Contractor shall protect the discovery undisturbed. Any such discovery shall be, as between the Owner and the Contractor, the absolute property of the Owner. To the extent permitted by applicable Law, the Contractor shall carry out the Owner’s orders as to the disposal of the same. If arising from any such discovery the Guaranteed Substantial Performance Date or Project Schedule may be impacted, the Contractor shall use its Commercially Reasonable Efforts to devise a work around plan in an attempt to maintain the original schedule. The work around plan shall be subject to approval by the Owner.
| - 19 - |
The additional costs of preparing and implementing the work around plan shall be treated as a Change in Work. If, despite these efforts and the work around plan or if the Owner does not approve the work around plan and it is determined that the Guaranteed Substantial Performance Date and the Project Schedule will be impacted negatively, the Contractor and the Owner shall discuss the amount of time by which the schedule was directly impacted and the Owner will grant an appropriate extension of time as the Owner acting reasonably considers fair by issuing a Change Order pursuant to Article 16. The requirements of this Section 4.1.19 are in addition to any obligation imposed by any Law with regard to objects or places of a historical or cultural nature.
4.1.20 Interconnection Studies. The Contractor herby covenants and agrees to perform the Work in accordance with any connection impact or system impact studies prepared in relation to the BESS from time to time by the Owner or the IESO as applicable.
4.1.21 Books and Records. The Contractor shall keep full and detailed books, records, and accounts as necessary for proper financial management under this Agreement and such obligation shall continue for up to seven (7) years after the Substantial Performance Date. The Owner shall have the right to access, audit, inspect, and copy the Contractor’s books, records, and accounts at any time, upon reasonable prior notice, within such period for the purpose of verifying payments and compliance with the requirements of this Agreement, including in connection with Taxes payable by the Owner or the Contractor.
| 4.2 | Design and Engineering Work |
4.2.1 Scope Design & Engineering Documents
| (a) | The Statement of Requirements identifies certain design and engineering documents to be prepared by the Contractor and the Contractor shall prepare such documents accordingly and submit them to the Owner for review (the “Design and Engineering Documents”). The Design and Engineering documents do not need to be submitted to the Owner as a single complete set, but may be submitted in successive packages, each of which may address separate systems available to the Project. The Owner will promptly review such documents and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall reasonably consider any comments provided by the Owner and make such changes to the Design and Engineering Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Design and Engineering Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicted above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Design and Engineering Documents are in conformity with the Project Requirements, and the Owner may require amendments to the Design and Engineering documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of the Contractor’s Work under this Agreement. Further to the review and comment by the Owner and any changes thereafter made by the Contractor, the Design and Engineering Documents shall serve as the basis for all of the Contractor’s detail design for the work. The Design and Engineering Documents shall be stamped by a professional engineer (Ontario). |
| - 20 - |
| (b) | After finalization of the Design and Engineering Documents in accordance with Section 4.2.1(a) the Contractor shall prepare detailed design documents consistent with the Design and Engineering Documents and all vendor specifications and shall be consistent with (and develop in detail) the intent of the Statement of Requirements shall include all necessary drawings, specifications, schedules, diagrams and plans, and shall contain such content and detail as is necessary to obtain all Permits and to properly complete the construction of the Project in accordance with the terms of this Agreement (the “Detail Design Documents”). The Detail Design Documents shall provide information customarily necessary for the use of such documents by those in the building trades. All civil, structural, mechanical, electrical, architectural and landscape drawing and specifications shall be stamped by a professional engineer licensed to practice in Ontario or other suitable design professional licenced to practice in Ontario. Procured items such as batteries, inverters, electrical cabinets, reinforced steel shop drawings, etc. will not require a stamp. In connection therewith, the Contractor shall, in preparing the Detail Design Documents, submit an electronic copy of drawings to the Owner for information within five (5) Working Days of preparation. |
| (c) | The Owner will promptly review the Detail Design Documents provided to it by the Contractor pursuant to Section 4.2.1(b) and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall consider any comments provided by the Owner and make such changes to the Detail Design Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Detail Design Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicated above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Detail Design Documents are in conformity with the Statement of Requirements, Design and Engineering Documents and the other Project Requirements and the Owner may suggest amendments to the Detail Design Documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of this Agreement. |
4.2.2 Compliance with Laws. The Contractor covenants and agrees that the Design & Engineering Documents and the Detail Design Documents shall be prepared in accordance with the professional standard defined in Section 4.1.2, and shall be in compliance with and accurately reflect all applicable Laws. The Contractor shall, at no expense to the Owner, promptly modify any such documents which are not in accordance with the requirements of the Agreement.
4.2.3 Shop Drawings.
| (a) | Shop drawings are drawings, diagrams, illustrations, schedules, performance charts, brochures, product, and other data which illustrate details of a portion of the Work (“shop drawings”). |
| (b) | The Contractor shall provide shop drawings as described in the Statement of Requirements or as the Owner may reasonably request. |
| - 21 - |
| (c) | The Contractor shall review all shop drawings it provides to Owner pursuant to this Section 4.2.3. The Contractor represents by this review that the Contractor has determined and verified all field measurements and field construction conditions (or will do so), Component requirements, catalogue numbers and similar data and that the Contractor has checked and coordinated each shop drawing with the requirements of the Work and of the Project Requirements. |
| (d) | Shop drawings which require approval of any Authority having jurisdiction shall be submitted to such Authority by the Contractor. |
| (e) | The Contractor shall submit shop drawings to the Owner for review with reasonable promptness in an orderly sequence, and sufficiently in advance so as to cause no delay in the Work or in the work of other contractors. The Contractor shall, acting expeditiously and with diligence and as soon as practicable after receiving authorization to proceed with the Work, prepare a schedule of the dates for submission and return of shop drawings for the Owner’s review and approval. Shop drawings shall be submitted in the form of reproducible transparencies or prints as the Owner may reasonable direct. Contractor shall allow the Owner twelve (12) Working Days to review shop drawings from the date of receipt. At the time of submission, the Contractor shall specifically draw to the attention of the Owner, in writing, any deviations in the shop drawings from the Project Requirements. |
| (f) | The Owner’s review under Section 4.2.3(e) is for conformity to the intent of the Project Requirements and for general arrangement only. Such review shall not limit relieve, waive, or diminish the Contractor’s duties and liabilities under this Agreement to perform the Work so that the Project when complete satisfies all requirements of this Agreement. |
| (g) | Upon the request of the Owner, the Contractor shall revise and resubmit shop drawings which the Owner rejects as being inconsistent with the Project Requirements within the time period reasonably required by the person rejecting such drawings. At the time of resubmission, the Contractor shall specifically draw to the attention of the Owner, in writing, any material revision in the shop drawings other than those specifically requested. |
| 4.3 | Procurement and Construction Work |
4.3.1 Control. The Contractor shall be solely responsible for and shall have control over all construction means, methods, techniques, sequences and procedures, and for coordinating all portions of the Work.
4.3.2 Inspection and Delivery of Materials, Components and Manufacturer’s Requirements. The Contractor shall perform a detailed inspection of all materials and Components located on or off the Job Site that comprise or will comprise a portion of the Work, and the Owner’s Representative may perform a detailed inspection of all materials and Components located on the Job Site that comprise or will comprise a portion of the Work, at intervals appropriate to the stage of construction or fabrication, as necessary to ensure that the Work is proceeding in accordance with this Agreement. On the basis of such inspections, the Contractor shall keep the Owner informed of the progress and quality of the Work and shall provide the Owner with reports of any material defects or deficiencies discovered during any inspection in which event Article 17 shall apply and Contractor shall, at the earliest practical opportunity cause such defects or deficiencies to be corrected. The Contractor shall expedite the delivery of all materials and Components and shall handle (including unloading the Components), store on-site and install all materials and Components in strict accordance with the manufacturer’s or vendors’ instructions and specifications. The Contractor acknowledges and agrees to bear all risks (including delay, schedule and performance risks) with respect to the Components. The Contractor shall be responsible for loading and transporting all Components to the Job Site as further described in Article 20. All Components incorporated into the Work will be new and will meet the requirements of this Agreement.
| - 22 - |
4.3.3 Access by the Owner and Others. The Contractor shall provide the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants access to the Work at all times during Working Days in accordance with the requirements of the Statement of Requirements; provided that the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants shall comply with reasonable security or safety restrictions imposed by the Contractor so as not to unduly interfere with the Work and the Owner shall not hold the Contractor liable for any such undue interference.
4.3.4 Clearing Job Site. The Contractor shall be responsible for all clearing, excavation, grading and similar work necessary to complete the Work.
4.3.5 Cutting, Coring, Excavation & Backfill. The Contractor shall be responsible for all cutting, fitting, coring, excavation and backfilling which is required to complete the Work or to make its parts fit together properly. It is the intent of this Agreement that all areas requiring cutting, fitting, coring, excavation and backfilling shall be restored to a completely finished condition which match and/or blend with its surroundings and pre-existing finishes such as asphalt, gravel, etc.
4.3.6 Cleaning Up. The Contractor shall, at all times during the term of this Agreement, keep the Job Site and surrounding streets, properties, sidewalks and other areas free from waste materials, rubbish, debris and other garbage resulting from the construction of the BESS, and shall employ adequate dust control measures. The Contractor shall properly and regularly dispose of unneeded materials used, generated or excavated in the performance of the Work. As soon as reasonably practicable following Substantial Performance and no later than Final Completion, the Contractor shall remove from the Job Site all tools, equipment, machinery, surplus materials, waste materials and rubbish, and shall clean all glass (inside and out), remove all material paint spots and other smears, stains or scuff marks, clean all plumbing and lighting fixtures, wash all concrete, tile and finished floors, and otherwise leave the Project and the Job Site in a neat and clean condition. All waste disposal and other clean-up shall be performed, at a minimum, in accordance with all applicable Laws. If the Contractor fails to clean the BESS and Job Site as provided herein, the Owner may do so upon five (5) days’ prior written Notice to the Contractor and the cost thereof shall be promptly reimbursed to the Owner by the Contractor on demand or may be set-off against any payments due to the Contractor. For clarity, all grading of property in or around the BESS shall be graded to the extent that minimizes any inconvenience to the Landlord.
4.3.7 Noise Controls. The Contractor shall make every effort to minimize the noise levels while construction of the Work is proceeding and shall comply with the specific requirements of the Statement of Requirements in this regard. The Contractor will be responsible for providing the BESS that complies with all noise Laws and Permits.
4.3.8 Records. The Contractor shall maintain in good order at the Job Site at least one copy (in hard copy and electronic formats as reasonably requested by the Owner) of the Design & Engineering Documents, the Detail Design Documents, drawings, specifications, product data, samples, shop drawings, Modifications and all other documents in connection with the Work being carried at the Job Site, marked currently to record changes made during construction. These documents shall be available at all times to the Owner and its representatives for their review and/or inspection. Prior to Final Completion, all of the preceding items which are applicable to the completed portion of the Work shall be delivered to the Owner, as well as a set of “as-built” drawings for each BESS (in hard copy and on computer disk) showing all changes made to the drawings during construction. The Contractor shall also provide to the Owner, prior to Final Completion, an “as-built” survey for each BESS at the Job Site, indicating the actual location of the improvements as constructed and as situated on the Job Site.
| - 23 - |
4.3.9 Purchasing Schedule. The Contractor shall prepare and deliver to the Owner a purchasing schedule and update at the Work progress meetings of the Owner and the Contractor described in Section 4.1.9 such purchasing schedule and the Major Component Procurement Plan. The purchasing schedule prepared by the Contractor under this Section 4.3.9 and the Major Component Procurement Plan shall identify each item to be purchased or procured, and shall with respect to each such item, describe (a) proposed date of purchase; (b) manufacturer and manufacturer’s location; (c) proposed shipping date; and (d) date delivery is due at the Job Site. The Major Component Procurement Plan shall cover the procurement of all Components to which the Technical Requirements described in the Statement of Requirements apply and shall include detailed provision for the quality testing and procurement by the Contractor of such Components, including but not limited to plans for pre-shipment quality testing of Components to be procured out of storage. The purchasing schedule and the Major Component Procurement Plan shall together provide for the supply of all Components and materials to be furnished by the Contractor and the Owner and incorporated into the Work by the Contractor.
4.3.10 The Contractor’s Responsibility for Proper Layout. The Contractor shall be strictly responsible for the proper layout, location, performance, and accuracy of the lines and levels required for the proper performance of the Work and for any loss or damage to the Owner resulting from the Contractor’s failure to properly perform the same if a problem arises. For greater clarity this includes the placement of the BESS as per Design & Engineering Documents.
| 4.4 | Coordination with Owner, Authorities and Subcontractors |
4.4.1 Notwithstanding Section 4.3.1, the Contractor acknowledges and agrees that the Job Site may be located on lands designated, in part, as agricultural lands used, in part, for farming purposes by the Landlord. The Contractor agrees to coordinate the Work with representatives of the Owner that will be assigned for this purpose to ensure that the Work and any farming operations at the Job Site are not disrupted. The Contractor acknowledges and agrees such coordination activities shall be included in the Work and may include periodic (weekly or more frequent) coordination meetings with the Job Site representative.
4.4.2 Subject to any other term in this Agreement, the Contractor shall have complete responsibility for coordination of the Work with all Authorities and any other Persons, as necessary, and the administration of any testing or taking of any other action necessary to demonstrate the Work’s compliance with all applicable permits and applicable Laws prior to and as at Substantial Performance.
4.4.3 The Contractor shall provide such reasonable assistance as may be requested by the Owner in dealing with any other contractors having access to the Job Site from time to time in relation to the Work.
4.4.4 The Contractor shall inform the Owner, and shall keep the Owner fully apprised, of any and all contact with any Authority, if applicable, in each of its reports issued to the Owner pursuant to Section 4.1.9.
| - 24 - |
4.4.5 The Contractor shall promptly provide the Owner with any correspondence the Contractor receives from any Authority and the Contractor shall provide any correspondence or submittals to the Owner for its review and approval prior to the Contractor delivering or issuing such to any Authority.
| 4.5 | Local Communities |
The Contractor shall use its Commercially Reasonable Efforts to cooperate and assist the Owner in its efforts to explore opportunities with, management of, or otherwise in obtaining involvement of, local communities in connection with the Work.
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices |
4.6.1 The Owner may require the placement of no greater than two (2) of the Owner’s personnel in the Contractor’s engineering phase of the Work at the Contractor’s offices to enable Owner to acquire knowledge about the Project design and engineering.
4.6.2 In addition to the requirements of Section 4.6.1, the Owner may require the placement of no greater than one (1) of the Owner’s personnel at the Job Site during the performance of any of the Work at the Job Site to enable the Owner to acquire knowledge about, among other things, the Project through the construction, start-up and commissioning of the BESS.
4.6.3 The Contractor shall be responsible for providing, at the Contractor’s sole cost and expense, any of the Owner’s personnel in the Contractor’s engineering and design offices with continuous access to office space, parking, basic office furniture, telephones and active telephone lines (including direct external lines, speakers for hands free operation and electronic voicemail), internet access, photocopiers, scanner and printers.
4.6.4 Notwithstanding any such attendance by the Owner’s personnel referred to in this Section 4.6 the Contractor shall retain sole responsibility for the Work.
4.6.5 The Contractor acknowledges that it shall not be provided with any specific space for any furnished facilities or any dedicated furnished facilities, at the Job Site and any space made available by the Owner shall be on an entirely discretionary basis from time to time as the Contractor may agree with the Owner.
| 4.7 | Entrance, Routing and Transportation to the Job Site |
The Owner shall provide all entrance(s) to the Job Site required for ingress and egress of all personnel, equipment, Components, materials and vehicles to and from the Job Site. The Contractor is responsible for the appropriateness of all routing and transport corridors for delivery of the Components, and any other materials or equipment to the Job Site and preparation of all transportation studies, and the Contractor shall be liable and shall indemnify the Owner from and against any and all Liabilities arising from the Contractor’s development, use or closure of routing and transport corridors, including any heavy-haul routes. Any transportation study, report or other information provided by the Owner prior to the effective date of this Contract in respect of such routing and transportation is provided as background information only and as an accommodation to the Contractor without limiting the Contractor’s obligations under this Contract, and shall not affect the obligations of the Contractor under this Section 4.7.
| - 25 - |
| 4.8 | Importing |
The Contractor shall be the importer of record with respect to all Components originating from a location outside of Canada which the Contractor accepts delivery of at a location outside of Canada.
ARTICLE 5
OWNER
| 5.1 | Rights, Duties & Obligations |
5.1.1 Owner’s Representative. The Owner shall designate in writing, from time to time, one or more individuals who shall act on behalf of the Owner in connection with the Projects, together with the scope of their authority. Among such designees, there shall be appointed a principal representative of the Owner (the “Owner’s Representative”), who shall be the Owner’s authorized representative and who shall receive and initiate all communications from and with the Contractor and be authorized to render binding decisions related to the Projects. Owner’s Representative shall not be authorised to enter into any Modifications on behalf of the Owner or any other amendment, variation, or waiver to any provision of this Agreement.
5.1.2 Owner Approvals. The Contractor acknowledges and agrees that any review, inspection, acceptance, comment or evaluation by the Owner of any plans, drawings, specifications, other documents, Components or other Work prepared by or on behalf of the Contractor shall be solely for the Owner’s determining for the Owner’s own satisfaction the suitability of the Projects generally for the purposes intended therefor by the Owner and may not be relied upon by the Contractor, Subcontractors, or any other third party as a substantive review or approval thereof. The Owner, in reviewing, inspecting, commenting on or evaluating any plans, drawings, specifications, other documents, Components or other Work, shall have no responsibility or Liabilities for the accuracy or completeness of such documents or Work, for any defects, deficiencies or inadequacies therein or for any failure of such documents or Work to comply with the requirements set forth in this Agreement; the responsibility for all of the foregoing matters being the sole Liability and obligation of the Contractor. In no event shall any review, inspection, comment, evaluation or approval by the Owner relieve the Contractor of any Liability, obligation or responsibility under this Agreement, it being understood that the Owner is at all times ultimately relying upon the Contractor’s skill, knowledge and professional training and experience.
5.1.3 Co-operation with the Contractor. Whenever the Owner’s co-operation is required by the Contractor in order to carry out the Contractor’s obligations hereunder, the Owner agrees that it shall act in good faith in so cooperating with the Contractor.
5.1.4 Rights to Access Project. The Owner has secured or shall secure all property rights required to permit the Contractor to access the Job Site as necessary for the performance of the Work.
5.1.5 Construction Means & Methods. The Owner shall have no control over or charge of, and shall not be responsible for, construction means, methods, techniques, sequences or procedures, or for safety precautions or programs, in connection with the Work, all of which are the sole responsibility of the Contractor. However, the Owner may consult with the Contractor on such matters and the Contractor will consider such matters in its reasonable judgment. The Contractor acknowledges and agrees with the Owner’s commitment to safety and acknowledges the Owner’s expectation of the compliance by the Contractor and its Subcontractors in relation to the same.
| - 26 - |
5.1.6 Inspection of Work
| (a) | The Contractor shall ensure that the Owner, and its respective employees, agents, advisors, representatives and designees shall be granted access to the Contractor’s Work, whether at the Job Site or off-site, at all times during the Working Days upon twenty-four (24) hours’ prior Notice so as to enable such parties to witness and inspect the Work (including, without limitation, any item of design, equipment, material, service or workmanship to be provided as part of the Work); provided that the Owner and its employees, agents, advisors representatives and designees shall comply with reasonable restrictions imposed by the Contractor so as not to unduly interfere with the Work. The Contractor shall make all arrangements necessary to permit such inspections at the Contractor’s Work place or at any location where any material, Components or piece of machinery is being manufactured or fabricated. The Owner and its employees, agents, advisors, representatives and designees will have the right to be present during all start- up, testing and commissioning, whether on or off the Job Site, and will, by way of example and not limitation, have timely access to all test procedures, quality control reports, and test reports and data, including all Components adjustment, installation and alignment data. The Contractor will provide safe and proper facilities for such access and inspection. Further, to allow the Owner and the Owner’s employees, agents, advisors, representatives and designees to be present, the Contractor will give the Owner ten (10) Working Days advance Notice of any system, Components or BESS check-out or testing, including any factory acceptance test of the batteries, power converters or transformers and with respect to any such factory acceptance test, the Contractor will cause the relevant Vendor to permit Owner and Owner’s employees, agents, advisors, representatives and designees to be present at such factory acceptance tests. The Contractor will permit the Owner and any Person authorised in writing by the Owner to inspect and review all field work including Component installation, start-up and commissioning. |
| (b) | Prior to covering or burying any Utility, the Contractor shall provide the Owner with at least ten (10) Working Days’ Notice and the Owner shall have an opportunity to inspect (the “Inspection Date”), such Utility. If any Utility has been covered prior to the Inspection Date, it shall be uncovered at the written request of the Owner for its observation and recovered at the Contractor’s sole cost and expense. If (i) a portion of the Work (other than such Utility) has been covered (which the Parties acknowledge and agree is not required to be observed prior to being covered) or (ii) the Owner elects not to inspect any Utility prior to burying or covering, the Owner may request in writing to see such Work and it shall be uncovered by the Contractor for inspection by the Owner. If the uncovered Work referred to in this Section 5.1.6(b) is found to be in accordance with this Agreement, (i) the costs of uncovering and recovering shall, by appropriate Change Order, be charged to and paid by the Owner and, in addition, (ii) the Contractor shall be entitled to an equitable adjustment to the Project Schedule and the Guaranteed Substantial Performance Date, as applicable. If the Work referred to in this Section 5.1.6(b) is found to be defective, the Contractor shall be responsible for the cost of uncovering, correcting and re-covering this Work, and no schedule adjustment in connection therewith shall be required. Nothing contained in this Section 5.1.6(b) shall alter the Contractor’s obligations to correct defective Work as set forth in Article 17. |
| - 27 - |
| (c) | The Owner may from time to time audit all safety, construction and other health and safety plans maintained by the Contractor in relation to the Work and the Job Site, including the Quality Plans, and the Health and Safety Plan and the Contractor shall promptly review and remedy any deficiencies reasonably identified by the Owner in the course of any such audit. |
| (d) | No inspection, audit or review of, or failure to inspect or review, the Work by any individual or entity referenced in this Section 5.1.6 shall relieve the Contractor of its obligation to properly execute and complete the Work. |
5.1.7 Owner’s Right to Carry Out the Work. If the Contractor defaults under this Agreement or neglects to carry out the Work in accordance with this Agreement (including, without limitation, any failure to immediately eliminate an unsafe or hazardous condition as required by Section 20.1.4) and fails within a five (5) Working Day period after receipt of written Notice from the Owner to correct such default or neglect or, if the default or neglect cannot be corrected in such five (5) day period, commence and continue correction of such default or neglect with diligence and promptness in accordance with a schedule to be agreed upon between the Owner and the Contractor, or fails within a five (5) Working Day period after receipt of written Notice from the Owner to eliminate (or diligently commence to eliminate) the cause of any stop work order issued, the Owner may, without prejudice to any other rights or remedies the Owner may have, and with or without terminating this Agreement, after good faith consultation with the Contractor, correct such deficiencies in a prudent and reasonably efficient manner, and deduct an amount equal to the expenditures reasonably incurred by the Owner in so doing from amounts due or to become due to the Contractor. If the payments then or thereafter due to the Contractor are not sufficient to cover the amount of the deduction, the Contractor shall pay the difference to the Owner on demand.
ARTICLE 6
PROJECT SCHEDULE
| 6.1 | Commencement |
The Contractor shall commence its obligations under this Agreement upon receipt of the notice to proceed pursuant to Section 2.1.
| 6.2 | Substantial Performance |
The Contractor acknowledges and agrees that achievement of Substantial Performance on or before the Guaranteed Substantial Performance Date to be of critical importance to the Owner.
| 6.3 | Project Schedule |
The Contractor has prepared the Project Schedule which is a detailed schedule for the Work for the Project. The Contractor shall update the Project Schedule on a monthly basis to reflect the actual progress to date (“Monthly Updated Schedule”); provided, however, that the Contractor may not modify the Guaranteed Substantial Performance Date or the Final Completion Date listed in Schedule 9 without a Change Order being executed pursuant to this Agreement, nor shall the Contractor change any dates that relate to the Owner’s obligations without obtaining the Owner’s prior written consent. If the Contractor changes the schedule logic or any durations with respect to any part of the Work, the Contractor shall provide the Owner with a written explanation of each such change along with such Monthly Updated Schedule. The Monthly Updated Schedule shall be in the same detail and form as required by the Project Schedule. The Contractor shall perform the Work in accordance with the Project Schedule as updated from time to time.
| - 28 - |
ARTICLE 7
LIQUIDATED DAMAGES
| 7.1 | Delay Liquidated Damages |
7.1.1 If Substantial Performance does not occur by or before the Guaranteed Substantial Performance Date, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner delay liquidated damages at the Daily Rate plus Sales Taxes for each day of such delay from and including the Guaranteed Substantial Performance Date until but not including the day on which the Contractor achieves Substantial Performance (the “Delay Liquidated Damages”). The Contractor shall have no obligation to pay Delay Liquidated Damages to the extent that such delay in achieving Substantial Performance is due to an Owner Caused Delay. Notwithstanding and in addition to the foregoing provisions of this Section 7.1, if Substantial Performance does not occur on or before May 1, 2025, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner as a lump sum, liquidated damages equal to two percent (2%) of the Fixed Contract Price, in addition to any other Delay Liquidated Damages that may be payable by Contractor to Owner from time to time.
| 7.2 | Substantial Performance and Minimum Performance Criteria |
Notwithstanding anything to the contrary contained in this Agreement, the Contractor shall not be permitted to satisfy its obligation to achieve Substantial Performance by the payment of Liquidated Damages.
| 7.3 | Exclusivity of Liability |
7.3.1 Subject always to Section 5.1.7, Article 17 and Article 28, the payment of Liquidated Damages as provided in this Article 7 shall constitute the sole and exclusive Liability of the Contractor for Substantial Performance occurring after the Guaranteed Substantial Performance Date.
7.3.2 Maximum Overall Liquidated Damages. Notwithstanding anything herein to the contrary, the Contractor’s maximum liability for Liquidated Damages shall not exceed, under any circumstances, [REDACTED: Percentage amount] of the Fixed Contract Price.
| 7.4 | Invoicing and Payment of Liquidated Damages |
7.4.1 Subject always to any bona fide disputes relating to the payment of Liquidated Damages, if Liquidated Damages are payable from the Contractor to the Owner, the Owner shall submit monthly invoices as required to the Contractor specifying the Liquidated Damages to be paid by the Contractor. The Liquidated Damages specified in such invoice shall be due from the Contractor no later than thirty (30) days after the receipt of such invoice.
7.4.2 The Owner may set off against amounts due to the Contractor hereunder any Liquidated Damages owed by the Contractor hereunder.
| 7.5 | Liquidated Damages Not Penalty |
The Parties acknowledge and agree that because of the nature of the Project it is difficult or impossible to determine with precision of the amount of damages that would or might be incurred by the Owner as a result of Substantial Performance being achieved after the Guaranteed Substantial Performance Date. It is understood and agreed by the Parties that (i) the Owner shall be damaged by such matters, (ii) it would be difficult or impossible to fix the actual damages resulting therefrom, (iii) any sums which would be payable under this Article 7 are in the nature of liquidated damages and not penalties, and are fair and reasonable, and (iv) such payments represent a reasonable pre-estimate of fair compensation for the losses that may reasonably be anticipated from such delay. Notwithstanding the foregoing, in the event the Liquidated Damages are held to be unenforceable by any Authority, the Owner shall be permitted to make a claim and recover against the Contractor for the amount of any Liabilities arising from the relevant matter for which Liquidated Damages were payable.
| - 29 - |
ARTICLE 8
LIMITATION OF LIABILITY
| 8.1 | Consequential Damages |
Except as covered by Liquidated Damages and notwithstanding anything to the contrary contained in this Agreement, the Owner and the Contractor hereby waive all claims against the other party (and against its Affiliates, employees, directors, officers, members, contractors, subcontractors, consultants and agents) and neither Party shall be liable to the other for loss of anticipated revenues or profits, damages by reason of loss of opportunity or for any consequential, special, incidental, indirect or punitive damages, and regardless of whether any such claim arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory even if a Party was advised of the possibility of such loss or damage occurring. Provided always that any Liability of a Party to any third party for which indemnification or recovery is sought against the other Party hereunder shall not be considered a consequential, special, incidental or indirect loss solely because such third party claim included a claim for consequential, special, incidental or indirect loss.
| 8.2 | Overall Limitation |
Except for the exceptions set out in Section 8.3 and notwithstanding anything to the contrary contained in this Agreement, the aggregate Liability of the Contractor to the Owner or the Owner Indemnitees with respect to this Agreement, whether such Liability arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory, shall not exceed an amount equal to [REDACTED: Confidential and commercially sensitive information regarding liability cap] “Maximum Liability Amount”).
| 8.3 | Exceptions to Caps on Liability |
Notwithstanding anything herein to the contrary, the Maximum Liability Amount shall not apply to and the Contractor’s Liability shall be:
8.3.1 unlimited with respect to its:
| (a) | fraud; or |
| (b) | wilful misconduct or gross negligence which results in death or personal injury; |
8.3.2 limited to [REDACTED: Dollar amount] with respect to claims relating to its gross negligence, wilful misconduct or pursuant to Section 26.1.4.
| - 30 - |
| 8.4 | Remedies Non-Exclusive |
Except as otherwise provided in Section 7.2, the remedies available to Contractor or Owner in connection with this Agreement, whether arising in contract or in tort are in addition to all other remedies provided by the laws of Ontario but excepting those remedies which have been expressly excluded in this Agreement.
| 8.5 | Limitations |
Nothing in this Agreement shall be construed to extend the limitation period applicable to the pursuit of any claim pursuant to this Agreement as set out in the Limitations Act (Ontario).
ARTICLE 9
CONTRACTOR’S COMPENSATION
| 9.1 | Fixed Contract Price |
In consideration of the Contractor’s performance of the Work pursuant to this Agreement, the Owner shall pay to the Contractor as compensation therefore, no more than the sum of twelve million one thousand three hundred eighty-two dollars ($12,000,328) (the “Fixed Contract Price”), subject to adjustment and final reconciliation pursuant to the terms of this Agreement and all applicable sales, use, purchase or similar taxes (collectively, the “Sales Taxes”). The breakdown of the Fixed Contract Price is attached hereto as Schedule 6.
The Parties expressly agree that Schedule 6 is based upon certain reasonable cost assumptions. On a monthly basis, Actual Costs shall be reconciled against the Fixed Contract Price.
| 9.2 | All Inclusive |
The Fixed Contract Price includes:
9.2.1 all Components, labour, services, import taxes and duties, supplies, Utilities supplied during construction (including water and electricity) and Intellectual Property Rights to be provided hereunder or required to perform the Work;
9.2.2 all federal, provincial, and local taxes arising out of the Contractor’s performance of the Work (except for those referred to in Section 9.3);
9.2.3 any duties including import duties and taxes, fees, licenses and royalties imposed with respect to any Contractor Permits, Components, other equipment, materials, labour, services, supplies or Utilities;
9.2.4 all transportation costs relating to any Components, other equipment and loading and offloading fees;
9.2.5 costs of necessary third party inspection and certification including by any Authorities;
9.2.6 everything contingently and indispensably necessary to construct and complete the Work, and shall include consideration of all geographical and other restrictions associated with performance of the Work;
| - 31 - |
9.2.7 Contractor’s entire profit for completing the Work in accordance with the requirements of the Agreement, as well as all costs, overhead, contingency, expenses and allowances in connection with performance of the Work, including:
| (a) | all project management, engineering specialist services, consumables (including all required fuel) and direct and indirect labour required to perform the Work in accordance with the Agreement; |
| (b) | all construction aids and consumables required for provision of the Work. This shall include, but not be limited to: |
| (i) | design development of purchase orders; |
| (ii) | procuring, expediting, receiving, handling, inspection and the like; and |
| (iii) | all costs, overheads and contributions to profit related to such items; |
| (c) | all costs associated with complying with health and safety requirements; |
| (d) | the total cost for all Subcontractor management and utilization; |
| (e) | any Contractor or Subcontractors’ yard modifications, upgrades to equipment, facilities and the like; |
| (f) | costs for royalties, duties, licence fees, know-how fees, usage of proprietary information and all similar items; |
| (g) | costs for research and development (including those related to the development of computer systems); |
| (h) | corporate and administrative services such as legal, advertising, recruiting, general procurement, corporate accounting, marketing, industrial relations, sales and their related office costs; |
| (i) | all payrolls, employment, travel, subsistence accommodation and like costs for Contractor and Subcontractor personnel directly or indirectly engaged in the performance of the Work. This shall include salaries, wages, payroll burdens, escalation, bonus programs, vacations, holidays, sick leave, overtime, employment premiums, redundancy provisions, leave allowances, qualification payments, fares and expenses, employment insurance, retirement funds, payments or benefits under national or local agreements, government taxes, social security contributions, safety and welfare programs, protective clothing, all overheads and profits; and |
9.2.8 Notwithstanding the above, the Parties acknowledge and agree that the costs for items (a) and (b) below are estimates only and the Fixed Contract Price will be adjusted up or down based on Actual Costs: [REDACTED: Confidential and commercially sensitive exclusions from Fixed Contract Price]
9.2.9 Notwithstanding Section 9.2.7(f), the Fixed Contract Price shall not include any tariffs or duties imposed after the date of this Agreement pursuant to the Customs Tariff (S.C. 1991, c.36) (“Unanticipated Tariff”). Notwithstanding the first sentence of this Section 9.2.9, any tariff or duty which prior to the date of this Agreement (i) has been introduced as a bill in the Parliament of Canada in a form similar as such statute takes when it has legal effect, or (ii) has been made public in a discussion or consultation paper, press release or announcement issued by the Government of Canada shall not constitute an Unanticipated Tariff.
| - 32 - |
| 9.3 | Taxes |
9.3.1 The Fixed Contract Price includes payment by the Contractor and its Subcontractors for Sales Taxes applicable to any portion of the Work (but excluding those applicable directly to the Fixed Contract Price as provided in Section 9.1), any and all fees (including licence, documentation and registration fees), taxes (including income, gross, receipt, sales, rental, use turnover, value added, property (tangible and intangible), excise and stamp taxes), licences, royalties, custom duties, value added taxes, fees, levies, imposts, duties, recording charges, charges, assessments, withholdings and other governmental charges of any nature whatsoever, whether federal, provincial, local, territorial or foreign, together with any and all assessments, penalties, fines, additions and interest thereon, (except for interests and penalties not paid or remitted by the Contractor at the specific written request of the Owner), payable or due, in relation to the Work, including any of the foregoing related to the import by the Contractor or its Subcontractors of any items into Canada, or other Work (collectively referred to as “Taxes”). The Fixed Contract Price shall not be increased with respect to any of the foregoing items or with respect to any withholdings in respect of any of the foregoing items that the Owner may be required to make. Notwithstanding any of the foregoing, the Contractor shall not be liable for, and the Contract Price shall not include any Taxes for which the Owner is responsible pursuant to Section 9.1. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of Sales Taxes will be paid on the Work. The Contractor shall indemnify and save the Owner harmless from and against any and all claims, costs, losses and damages (including interest and penalties) suffered or incurred by the Owner as a result of the Contractor’s non-compliance with any of its obligations in respect of Taxes.
9.3.2 The Parties acknowledge and agree that all purchases, sales, leases and uses of any property or services by the Contractor as part of the Work are not incurred as agent for the Owner.
9.3.3 The Contractor shall timely administer and pay all Taxes for which the Contractor is responsible, and shall timely furnish to the appropriate taxing authorities all required information and reports in connection with such Taxes. Upon receipt of an invoice submitted by the Contractor, the Owner shall pay, on the due date for the undisputed invoice determined in accordance with this Agreement, the amounts of HST payable pursuant to Section 9.1 to Contractor who shall remit the HST paid to the relevant Authority at the time required by Law. The amount of HST payable by the Owner shall be separately stated in all invoices to the Owner. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of HST shall be paid with respect to the Work. In the event that transactions involving the Owner may be exempt from some Taxes or HST under applicable Laws, at the direction of the Owner, the Contractor shall provide all necessary information to any Authority and complete all necessary forms to allow the Owner to secure such exemption. The Owner shall hold harmless and indemnify the Contractor with regard to the instructions the Owner provides for such transactions.
9.3.4 In the event that any amount becomes payable as a result of a breach, modification or termination of the Agreement, and if section 182 of the Excise Tax Act (Canada) applies to that payment, then the amount payable shall be increased by an amount equal to the HST percentage rate multiplied by the amount payable and the payor shall pay the increased amount.
| - 33 - |
ARTICLE 10
PROCEDURE FOR PAYMENTS
| 10.1 | Payments & Applications for Payment |
10.1.1 Application for Payment. No earlier than the fifth (5th) day of any month and no later than the tenth (10th) day of any month following a month in which the Contractor has achieved a milestone set out in Schedule 9, the Contractor shall submit to the Owner an application for payment detailing the milestone completed during the previous month, including (for information purposes only) a detailed schedule of the number of man-hours expended on the Work completed during the previous month together with the applicable executed Milestone Completion Certificate (each, an “Application for Payment”). Each Application for Payment shall properly represent the portion of the Work which has been achieved. All Applications for Payment shall be based on the relevant percentage of the Fixed Contract Price payable in respect of the relevant payment milestone satisfied in the preceding month, as set forth on the Schedule of Milestones attached as Schedule 9. Applications for Payment shall not be made more frequently than monthly.
10.1.2 Lien Holdback
| (a) | The Owner shall withhold from each payment with respect to the Fixed Contract Price due to the Contractor during the Project, the Lien Holdback Amount. The Owner may increase the Lien Holdback Amount by the amount of any holdback necessary or desirable as a result of registered Liens or claims for Liens, notice of which may have been received by the Owner. |
| (b) | Subject to the provisions of the Construction Act (Ontario) and the submission by Contractor of a certificate containing the following documents: |
| (i) | a written undertaking by Contractor to complete expeditiously any outstanding Work (including Punch List items) and to discharge all unfulfilled obligations under this Agreement; |
| (ii) | an executed statutory declaration in the form set out in Schedule 7; |
| (iii) | an invoice specifying the aggregate amount of the Lien Holdback Amounts held by the Owner, |
the aggregate of the Lien Holdback Amounts (other than the Lien Holdback Amount for finishing work as per section 22(2) of the Construction Act) is payable within (5) Business Days following the first date upon which both of the following conditions have been satisfied:
| (iv) | the Work has achieved Substantial Performance; and |
| (v) | forty (40) days have elapsed from the date that Contractor has published a notice of Substantial Performance of the Work in respect of which the applicable Lien Holdback Amounts were retained, as provided in the Construction Act (Ontario), |
| - 34 - |
provided that if, prior to the expiry of the period set forth in this Section 10.1.2(b)(v) Liens have been registered or the Owner has received written notice of any Liens in connection with the Work which have not been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario) by the date otherwise determined pursuant to this Section 10.1.2(b), the date of payment otherwise shall be extended until the date that such Liens have been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario).
10.1.3 Supporting Documentation. Each Application for Payment shall be accompanied by the following, all in form and substance reasonably satisfactory to the Owner:
| (a) | an invoice and a duly executed and acknowledged statement showing all Subcontractors with whom the Contractor has entered into subcontracts, the amount of each such Subcontract, the amount requested for any Subcontractor in the Application for Payment and the amount to be paid to the Contractor and each Subcontractor from such payment(s); |
| (b) | duly executed statutory declaration in the form of Schedule 7 from the Contractor; and |
| (c) | such other information, instruments, documents or other materials (i) as may be required by the Laws or customs of the Province of Ontario in order to protect the Owner from construction or similar Liens or claims, or (ii) as the Owner may reasonably request. |
10.1.4 Title. The Contractor warrants that title to all Work and Components shall pass to the Owner, free and clear of all Liens, claims, charges, security interests and encumbrances whatsoever on the earlier of payment by the Owner therefor or when it is delivered to the Job Site. Notwithstanding such passing of title, the Components shall be at the risk of the Contractor until the earlier of the Substantial Performance Date or termination of the Agreement. The passing of title in any Components to the Owner shall in no way affect, limit, alter or reduce the Contractor’s duties and obligations or the Owner’s rights under the Agreement.
| 10.2 | Payment |
10.2.1 Issuance of Payment. Invoices for any amounts payable by the Owner pursuant to this Article 10 must be sent by the Contractor electronically to: The Owner shall only be required to make payments pursuant to electronic funds transfer. In order for Owner to make payment to Contractor via electronic funds transfer, Contractor must provide Owner with, in the case of the first payment only, (i) a void cheque, pre-printed deposit slip or bank confirmation letter and (ii) the email address where Contractor wishes to receive remittance information (together, “EFT Information”). EFT Information must be sent electronically to, [REDACTED: Email address]. Subject to Section 10.2.2 and any right of set-off or withholding, the Owner shall, within twenty eight (28) days after the receipt of the Contractor’s Application for Payment (and all supporting documentation), issue payment to the Contractor for such amount as the Owner determines is properly due, via electronic funds transfer. If the amount so determined by the Owner is less than the amount requested by the Contractor, the Owner shall notify the Contractor in writing within fourteen (14) days of receipt of the Contractor’s Application for Payment of the reasons for withholding payment in whole or in part as permitted in this Agreement.
| - 35 - |
10.2.2 Withholding Payments. The Owner may withhold, or cause to be withheld, any payment due to the Contractor in whole or in part if the Work corresponding to such payment is not properly completed or as may be reasonably necessary to protect the Owner from material loss because of (a) defective, deficient or nonconforming Work not remedied in accordance with this Agreement, (b) unresolved construction Liens filed by any Person (c) failure of the Contractor to make payments properly to Subcontractors or other Persons for labour, materials, Components or other Work without just cause, (d) damage to the Owner caused by the Contractor or Subcontractors, (e) the Contractor’s failure to carry out the Work in accordance with this Agreement following the Owner’s written Notice to the Contractor, (f) errors, discrepancies, inconsistencies or irregularities in any Application for Payment, (g) unauthorised deviations from the Project Requirements by the Contractor in the prosecution of the Work or otherwise prosecution of the Work in non-compliance with the Project Requirements. The Owner shall not be deemed in default by reason of withholding a payment in whole or in part while any of the above matters remains uncured to its satisfaction (acting reasonably), provided that the amount of such withholding is a good faith estimate of allowable damages hereunder that may be incurred by the Owner as a result thereof. When the Contractor believes that it has cured the reason for any such withholding, the Contractor shall resubmit an Application for Payment for the amount that was withheld and if the Owner agrees that the reason for withholding has been cured, payment for the withheld amount shall be made within thirty (30) days after Owner’s receipt of such Application for Payment.
10.2.3 Set-Off. The Owner shall have the right to deduct as a set-off from any Contractor’s invoice an amount reasonably sufficient to protect the Owner from any unfulfilled obligations of the Contractor under this Agreement, any defective Components or any other breaches of this Agreement by the Contractor. Notwithstanding the foregoing, no set-off shall be made unless and until the Owner has provided the Contractor with written Notice of the unfulfilled obligation and given the Contractor a reasonable opportunity of at least thirty (30) days to commence a cure of such obligation.
10.2.4 Punch List The Owner shall be permitted to withhold from any payment properly due and payable to Contractor hereunder two hundred percent (200%) of the value of the Punch List determined pursuant to Section 12.2.
| 10.3 | Payments |
10.3.1 Subcontractors. The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor’s portion of the Work, the amount to which said Subcontractor is entitled. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to in a similar manner. The Owner shall not have an obligation to pay or to see to the payment of money to a Subcontractor or Vendor.
10.3.2 No Acceptance. No payment made by the Owner under this Agreement will constitute a waiver of any claim or right the Owner may have at that time or thereafter, including claims regarding unsettled Liens, warranty rights and indemnification obligations of the Contractor. No Payment made by the Owner under this Agreement will be considered or deemed to represent that the Owner has inspected the Work, accepted or checked the quality or quantity of the Work or that the Owner knows or has ascertained how or for what purpose the Contractor has used sums previously paid, and will not be deemed or construed as an approval or acceptance of any Work, or to relieve the Contractor of any of the Contractor’s obligations under this Agreement, or as a waiver of any claim or right that the Owner may have under this Agreement. All payments will be subject to correction or adjustment in subsequent payments with a detailed explanation submitted by the Owner to the Contractor describing such correction or adjustment.
10.3.3 Dispute. In the event of a dispute between the Contractor and the Owner, the Owner shall continue to make payments hereunder of amounts not in dispute without resubmittal of the Application for Payment.
| - 36 - |
10.3.4 Interest. Payments due and unpaid hereunder, except payments legitimately withheld, shall bear interest from the date payment is due at the Prime Rate.
10.3.5 Payment Preconditions. A precondition to the Owner making any payment under this Agreement:
| (a) | is that all policies of insurance set out in Section 18.1 are in full force and effect and Owner shall have been provided with certificates of insurance in accordance with Section 18.2.1 which continue to be valid; |
| (b) | in respect of all or any part of the Components, is that such Components have been delivered to the Job Site or appropriately and effectively identified as property of the Owner, and the Contractor shall, at the request of the Owner, provide satisfactory evidence that this precondition has been met; and |
| (c) | is that each payment will be paid to a segregated account established and controlled by the Contractor for this Agreement and from which the Contractor shall make all payments for Work performed. |
| 10.4 | Final Completion & Final Payment |
10.4.1 Final Completion. Provided that the Owner has received a final Application for Payment from the Contractor requesting payment of the remainder of the unpaid Fixed Contract Price, the Owner shall, subject to this Section 10.4, issue final payment.
10.4.2 Conditions to Final Payment. The final Application for Payment shall be delivered by the Contractor to the Owner following issuance of the Certificate of Substantial Performance (excluding any Lien Holdback Amount which shall be paid in accordance with the Construction Act (Ontario)) and payment shall be made, or caused to be made, by the Owner to the Contractor within twenty-eight (28) days of receipt of such Application for Payment and receipt of compliance with the Workplace Safety and Insurance Act (Ontario) in accordance with Section 10.5.1.
10.4.3 Acceptance of Final Payment. Acceptance of final payment by the Contractor shall constitute a final and complete waiver of claims by the Contractor, except those previously made in writing and identified by the Contractor as unsettled at the time of the final payment.
10.4.4 Punch List. Upon the completion by the Contractor of all of the Punch List items with the exception of those waived by the Owner in writing, the Owner shall pay, or cause to be paid, to the Contractor the value retained by the Owner pursuant to Section 10.2.4 in respect of such Punch List within twenty-eight (28) days after the Owner’s receipt of a corresponding Application for Payment (and all supporting information) and upon the Owner’s agreement that all work relating to Punch List items is complete but subject always to the provisions of Sections 10.2 and 10.3. The Owner shall give the Contractor reasonable access to each BESS and the Job Sites during normal working hours so as to give the Contractor sufficient opportunity to complete the Punch List items.
10.4.5 Holdback. Any Lien Holdback Amount held back by the Owner with respect to payments of the Fixed Contract Price made after the Substantial Performance Date shall become due and payable and shall be released to the Contractor in accordance with the Construction Act (Ontario), provided that the Contractor has submitted to the Owner a sworn statement that all accounts to Subcontractors and any other indebtedness which may have been incurred by the Contractor up to and including Final Completion and for which the Owner might in any way be held responsible have been paid in full except Lien holdback monies properly retained.
| - 37 - |
| 10.5 | Workers’ Compensation |
10.5.1 Prior to (a) commencing the Work; (b) the Contractor’s application for release of any Lien Holdback Amount; and (c) the Contractor’s application for final payment, the Contractor shall provide evidence of compliance with the Workplace Safety and Insurance Act (Ontario) at the Job Site, including payments due thereunder.
10.5.2 At any time during the term of this Agreement, when requested by the Owner, the Contractor shall provide such evidence of compliance by the Contractor and Subcontractors with Workplace Safety and Insurance Act (Ontario).
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
| 11.1 | The Contractor |
In addition to any other representations and warranties made herein, the Contractor hereby represents and warrants the following to the Owner, which representations and warranties shall survive the execution and delivery of this Agreement, any termination of this Agreement and the Final Completion of the Work:
| (a) | that the Contractor has carefully and thoroughly reviewed this Agreement (including, without limitation, the Technical Requirements) and that: (i) this Agreement does not contain any inconsistencies, discrepancies, errors or omissions; and (ii) this Agreement identifies (and permits the reasonable inference of) the scope which is necessary to complete the Work and the BESS within the Fixed Contract Price and by the Guaranteed Substantial Performance Date; |
| (b) | that the Contractor is able to furnish the personnel, tools, materials, supplies, Components, labour and design, engineering and construction services required to complete the Work, that it has the requisite technical, financial and legal ability to perform the Work, that it is familiar with and knowledgeable of all applicable Laws, and that it has and shall maintain the capability, expertise, competence and experience to perform the Work; |
| (c) | that the Contractor is a corporation duly organized, validly existing and in good standing under the Laws of Canada, and is duly qualified to do business in the Province of Ontario; |
| (d) | that the Contractor is authorized to do business in the Province of Ontario and properly licensed and approved by all Authorities having jurisdiction over the Contractor, the Work and/or the Project; |
| (e) | that the Contractor has visited the Job Sites, familiarized itself with the local conditions under which the Work is to be performed and correlated its observations with the requirements of this Agreement; |
| - 38 - |
| (f) | that the Contractor is capable of properly completing the Work and the BESS within the Fixed Contract Price, all in accordance with the terms and provisions of this Agreement; |
| (g) | that the Contractor has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (h) | that the Contractor’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (i) | that the Contractor has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Contractor’s authorization, execution, delivery and performance of the terms of this Agreement; |
| (j) | that there are no actions, suits, proceedings or investigations pending or, to the Contractor’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Contractor has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment; |
| (k) | that the Contractor is and will continue to be during the term of this agreement a registrant under the Excise Tax Act (Canada) with HST business number 846676377 RC0001; and |
| (l) | the Contractor is not and will not become during the term of this Agreement a non-resident of Canada for the purposes of the Income Tax Act (Canada). |
| 11.2 | The Owner |
The Owner hereby represents and warrants the following to the Contractor, which representations and warranties shall survive the execution and delivery of this Agreement, and any termination of this Agreement and the final completion of the Work:
| (a) | that the Owner is a corporation duly incorporated, validly existing and in good standing under the Laws of the Province of Ontario, and is duly qualified to do business in the Province of Ontario; |
| - 39 - |
| (b) | that the Owner has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (c) | that the Owner’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (d) | that the Owner has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Owner’s authorization, execution, delivery and performance of the terms of this Agreement, which has not already been obtained or will be timely obtained; and |
| (e) | that there are no actions, suits, proceedings or investigations pending or, to the Owner’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Owner has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment. |
ARTICLE 12
TESTING AND SUBSTANTIAL PERFORMANCE
| 12.1 | Guarantee Performance Tests |
12.1.1 Site Acceptance Test Protocols. Contractor agrees to prepare a draft Site Acceptance Test in accordance with the Statement of Requirements and once Owner confirms that such draft is agreed, it shall constitute the Site Acceptance Test for the purposes of this Agreement. On or before the date which is twenty (20) Working Days prior to the date that the Contractor is expected to commence the Guaranteed Capacity Test and any other testing provided for in the Site Acceptance Test, the Contractor shall provide the Owner with a draft testing program and procedures in accordance with the Site Acceptance Test and the Statement of Requirements. Such testing program and procedures shall include a protocol established by Contractor which shall address how the Contractor shall conduct the Site Acceptance Test and the Guaranteed Capacity Test in particular. The Contractor shall provide the Owner with the final testing program and procedures before the Site Acceptance Test is commenced.
12.1.2 Testing. At such time as the Contractor believes that the BESS will be ready for the Site Acceptance Test, the Contractor shall notify the Owner of testing no later than ten (10) Working Days prior to the date of each Site Acceptance Test so that the Owner, its employees, agents, advisors, representatives and the Owner’s Engineer may observe and participate in the same.
| - 40 - |
12.1.3 Performance Testing. The Contractor shall complete all elements of the Site Acceptance Test as soon as is reasonably possible after the commencement of the first such test. The Contractor must demonstrate that the Guaranteed Capacity Test and Permit conditions have been met (at least to the extent the same are required to have been met to achieve Substantial Performance) simultaneously. The Site Acceptance Test shall be conducted (a) in the presence of the Owner’s Representative and, at the request of any Authority in the presence of such Authority, (b) utilizing the personnel, who shall act under the supervision and direction of the Contractor, and (c) in conformance with the Project Requirements. In the event that any test required by the Site Acceptance Test fails as a result of a defect in any Component, the Contractor shall promptly remedy the defect in the Component. No auxiliary, standby or temporary equipment or machinery may be used during the performance of the Site Acceptance Test unless otherwise approved in writing by the Owner. Each BESS will be operated in its normal mode of operation while the Site Acceptance Test is being conducted, which shall consist of (a) the operation of the BESS as a whole, (b) the concurrent operation of BESS systems, and (c) the operation of all BESS systems within the manufacturers’ specifications and without over-stressing or over-pressurizing any such systems. Within seven (7) days following the conduct of each element of the Site Acceptance Test, the Contractor shall submit to the Owner a preliminary report explaining and analyzing the tests.
| 12.2 | Substantial Performance |
When the Contractor believes that it has achieved Substantial Performance, the Contractor shall submit written notice (the “Contractor Substantial Performance Notice”) to the Owner so certifying such event (which notice shall be accompanied by a report as to the results of the Site Acceptance Test any other information deemed reasonably necessary by the Contractor and a proposed Punch List) and certifying as to the items required by the definition of Substantial Performance, such certification of the items required by the definition of Substantial Performance to be in the form attached hereto as Schedule 4. Immediately thereafter, the Owner shall conduct those investigations and inspections as it deems necessary or appropriate to determine if Substantial Performance has in fact been achieved. The Contractor shall furnish to the Owner any additional supporting information reasonably requested by the Owner. In the event that Owner determines that Substantial Performance has not been achieved, it shall within ten (10) Working Days of receipt of Contractor’s notice by the Owner state the reasons therefor and/or provide comments to the proposed Punch List. In the event that Owner determines that Substantial Performance has been achieved, it shall within fifteen (15) Working Days after the receipt of the Contractor’s notice by the Owner notify the Contractor that Substantial Performance has been achieved by providing a notice substantially in the form of the notice attached hereto as Schedule 15. In the event that the Owner provides written notice that Substantial Performance has been achieved (the “Owner Substantial Performance Notice”), the Contractor and the Owner shall execute a “Certificate of Substantial Performance” establishing and identifying the “Substantial Performance Date” as the date on which the Contractor delivered the final Contractor Substantial Performance Notice. In the event that the Owner provides written notice that Substantial Performance has not been achieved, the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions in the Work which so prevent Substantial Performance. Upon completion of any such corrective and/or remedial actions and upon not less than five (5) Working Days prior written Notice to the Owner, the Contractor shall re- perform the Site Acceptance Test as provided in Section 12.1.
| - 41 - |
| 12.3 | Possession |
Upon the Acceptance Date, the Owner shall take possession of, and shall assume care, custody and control over, the Project.
| 12.4 | Completion Plan |
If any BESS has not achieved Substantial Performance by the Guaranteed Substantial Performance Date or it is known to the Parties that Substantial Performance will not be achieved by the Guaranteed Substantial Performance Date, the Contractor shall, within three (3) days, submit for review and approval by the Owner a written completion plan (the “Completion Plan”) detailing steps the Contractor will take to complete all necessary Work to meet the requirements of Substantial Performance. The Owner shall provide written approval or rejection (with comments) to the Contractor within five (5) Working Days of receipt of the Completion Plan. If rejected, the Contractor shall then resubmit to the Owner within the next five (5) Working Days a revised Completion Plan addressing such comments as shall have been provided by the Owner. The Owner shall provide written comment and, within the next three (3) Working Days after receipt of the Owner’s written comment, the Contractor shall revise and resubmit the Completion Plan within these time limits until the Contractor has addressed all comments of the Owner, and the Contractor shall then promptly proceed with such Work as may be required under the Completion Plan. The preparation, review and revision of a Completion Plan and performance of Work as required by the Completion Plan shall not be deemed in any way to have relieved the Contractor of its obligation to achieve Substantial Performance expeditiously or be a basis for an increase in the Fixed Contract Price.
| 12.5 | Post Substantial Performance Remediation |
12.5.1 Remediation. In the event the result of any test required by the Site Acceptance Test results in the satisfaction of the Guaranteed Capacity Test and all requirements for Commercial Operation of the BESS but not all the components of the Site Acceptance Test and provided the Substantial Performance Date occurs in accordance with this Agreement or as otherwise agree by the Parties, notwithstanding the occurrence of the Substantial Performance Date, the Contractor shall with the Owner’s prior written consent promptly and diligently correct the defect, failure, deficiency or breach which has prevented satisfaction of the relevant portions of the Site Acceptance Test at the Contractor’s sole cost and expense which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of the BESS. The Contractor shall remedy any such defect, failure, deficiency or breach so as to minimise disruptions to the Landlord’s operations at the Job Site. The Contractor shall perform further Site Acceptance Tests and continue the remedial work referred to in this Section 12.5 until each element of the Site Acceptance Test is satisfied in its entirety.
12.5.2 Performance Testing. If the Contractor wishes to conduct further Site Acceptance Tests pursuant to Section 12.5.1, the Contractor shall so notify the Owner (which Notice shall include a detailed schedule for the performance of such tests). The Contractor and Owner each acting reasonably shall thereafter schedule such further Site Acceptance Tests and the Contractor acknowledges and agrees that it will make Commercially Reasonable Efforts to minimise revenue loss to the Owner. All such tests shall be conducted in the presence of the Owner’s Representative in conformance with the Project Requirements. No auxiliary, standby, temporary equipment or machinery may be used during the performance of any such Site Acceptance Test and each BESS will be operated in its normal mode of operation which shall consist of (a) operation of the BESS as a whole and (b) without over-stressing or over-pressuring the BESS systems.
| - 42 - |
ARTICLE 13
FINAL COMPLETION
| 13.1 | Establishing Final Completion |
When the Contractor believes that it has achieved Final Completion, the Contractor shall submit Notice to the Owner so certifying such event and the other items required by the definition of Final Completion, including supporting documentation as reasonably required by the Owner. Immediately thereafter, the Owner shall conduct those investigations and inspections as they deem necessary or appropriate to determine if Final Completion has in fact been achieved. Within ten (10) Working Days after the receipt of the Contractor’s Notice by the Owner, the Owner shall either (a) notify the Contractor that Final Completion has been achieved, or (b) notify the Contractor in writing that Final Completion has not been achieved and stating the reasons therefor. In the event that the Owner provides written Notice that Final Completion has been achieved, the Contractor and the Owner shall execute a “Certificate of Final Completion” establishing and identifying the Final Completion Date in the form attached hereto as Schedule 20, unless the Owner provides written Notice that Final Completion has not been achieved, in which case the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions which so prevent Final Completion. Upon completion of such corrective and/or remedial actions, the Contractor shall resubmit its Notice certifying that it believes Final Completion has been achieved (together with the other items required by the definition of Final Completion) and the foregoing procedures shall be repeated until Final Completion has in fact been achieved.
ARTICLE 14
SUBCONTRACTORS
| 14.1 | Subcontracting |
Except as otherwise provided below, the Contractor shall not delegate or subcontract all or any portion of the Work to be performed on the Job Site to any Subcontractor which is not listed in Schedule 16. If the Contractor wishes to use a Subcontractor not listed in Schedule 16, the Contractor shall notify the Owner of the Subcontractor and consider any comments the Owner may have in relation to such Person prior to engaging it. Contractor is and shall ensure that all subcontractors at the Job Site comply with the ITC labour requirements.
| 14.2 | The Contractor’s Responsibility |
The Contractor shall be liable for the acts, omissions, defaults or neglects of its Subcontractors, its or their agents, employees or consultants as fully as if they were the acts, omissions, defaults or neglects of the Contractor. The Contractor shall be solely responsible for the engagement, management and payment of Subcontractors in the performance of the Work. The Owner shall have no obligation to pay or see to the payment of any monies to any Subcontractor, except for those required pursuant to the Construction Act (Ontario) as permitted under this Agreement. Notwithstanding any subcontract, vendor agreement, purchase order or agreement with any Subcontractor:
| (a) | the Contractor shall remain fully liable to the Owner to perform all of the duties and obligations or liabilities of the Subcontractor thereunder; |
| - 43 - |
| (b) | nothing in any such subcontract, vendor agreement, purchase order or agreement shall in any way diminish or relieve the Contractor of its duties and obligations under this Agreement; |
| (c) | the Contractor shall be responsible for and shall ensure that the Subcontractors obtain and pay for all necessary permits, fees, licences and certificates of inspection and insurance in connection with the Work they are to perform; and |
| (d) | the Contractor shall ensure all Subcontractors comply with the Owner Policy in connection with performance of any work on the Job Site or otherwise relating to the Project. |
| 14.3 | Intentionally Left Blank |
| 14.4 | Contingent Assignment |
Each subcontract agreement to the extent applicable to the Work and for the applicable portion of the Work is hereby assigned by the Contractor to the Owner provided that:
14.4.1 the assignment is effective only after termination of this Agreement by the Owner or expiry of the Warranty Periods and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing;
14.4.2 [intentionally deleted]
14.4.3 upon such assignment becoming effective, all of the rights of the Contractor under the subcontract shall be assigned to the Owner and the Subcontractor shall perform its duties and obligations thereunder, provided that the Owner or its designee makes payment of any amounts due thereunder as and when due and payable with respect to the same, less such amounts as therefore paid by the Owner to the Contractor applicable to the subcontract.
14.4.4 The Contractor shall execute and deliver to the Owner any instruments reasonably required by the Owner to confirm and evidence any of the preceding contingent assignments. The Contractor shall also make available for the Owner’s inspection true and correct copies of the executed subcontracts during regular business hours. In the event that after using its Commercially Reasonable Efforts to give effect to the foregoing provisions of this Section 14.4 the Contractor is unable to contingently assign a subcontract to the Owner as provided in this Section 14.4:
14.4.5 each such subcontract (a “Non-Assigned Contract”) will be deemed not to have been contingently assigned by the Contractor to the Owner under this Agreement;
14.4.6 in event of the termination of this Agreement or expiry of the Warranty Periods, the Contractor shall upon Notice from the Owner, and to the extent applicable to the Work, hold the Non- Assigned Contract for the exclusive benefit of the Owner;
14.4.7 the Contractor shall, at the request and expense and under the direction of the Owner, acting reasonably, do all things or cause all things to be done that the Owner, acting reasonably, considers necessary or desirable to perform the obligations of the Contractor under the Non-Assigned Contracts in a manner that preserves the value of the rights, remedies and benefits under the Non-Assigned Contract and ensures that those rights, remedies and benefits will enure to the benefit of the Owner, and ensure that all services, amounts and other consideration receivable under the Non-Assigned Contracts will be received by the Owner;
| - 44 - |
14.4.8 the Contractor shall promptly pay over to the Owner all amounts collected by the Contractor under the Non-Assigned Contracts and the Owner shall pay any amounts due thereunder for the performance by the Subcontractor of its duties and obligations thereunder, as and when due and payable, less any such amounts paid by the Owner to the Contractor which are applicable to the Non-Assigned Contract;
14.4.9 the Contractor and the Owner shall make reasonable efforts and cooperate with each other in good faith to obtain any necessary consents under the Non-Assigned Contracts to assign the same to the Owner, where the Owner wishes to take assignment; and
14.4.10 if the Contractor obtains the necessary consent referred to in Section 14.4.9 in form satisfactory to the Owner, effective as of the date the Owner receives a copy of that consent from the Contractor, that Non-Assigned Contract will be deemed to have been assigned and transferred by the Contractor to the Owner and the Contractor and the Owner will be relieved of any further obligations under any agreement made between them in respect of that Non-Assigned Contract (including under these Sections 14.4.5 to 14.4.9).
ARTICLE 15
OWNERSHIP AND CONFIDENTIALITY
| 15.1 | Ownership |
15.1.1 Design Materials. The copies and other tangible embodiments of the Design & Engineering Documents, and any other drawings, specifications, designs, plans, “architectural work” and other documents, specifically prepared by or on behalf of the Owner, the Contractor or the Subcontractors in connection with the Project or the Work (collectively, the “Design Materials”) are and shall remain the property of the Owner. The Contractor shall use its Commercial Reasonable Efforts to ensure that all copies of the Design Materials are delivered or returned to the Owner or suitably accounted for upon Final Completion. The Contractor may retain one copy of the Design Materials for its records. Any use of such Design Materials by the Contractor on other projects shall be at the Contractor’s sole risk and liability. The Intellectual Property Rights, if any, relating to the Design Materials or the contents of or concepts embodied in the Design Materials shall remain with and belong to the Contractor or its Subcontractors as the case may be.
15.1.2 Licence. As Design Materials and any portion of the Work deemed subject to any form of Intellectual Property Rights, the Contractor hereby grants and shall cause to be granted and delivered to the Owner from Subcontractors, whichever is appropriate, a fully paid-up, non-exclusive, worldwide, irrevocable, transferable licence, for the term of the Intellectual Property Rights, for the Owner to use, amend, reproduce and have reproduced, and for the Owner to allow others to use, amend, reproduce and have reproduced, such Design Materials and any derivative thereof and the Work, subject to the restrictions set forth below:
| (a) | all Intellectual Property Rights referred to this Section 15.1.2 shall remain the property of the Contractor or the appropriate Subcontractor, whether or not the BESS is constructed; |
| - 45 - |
| (b) | in no event will the Owner require the Contractor or any subcontractor or sub-subcontractor to grant a license to, or produce any software source code; and |
| (c) | the Owner shall not, without the prior written consent of the Contractor, use the Design Materials, in whole or in part, for the construction of any other project or for any purpose except as set forth in the following sentence. The Owner may, however, at no cost to the Owner, use such Design Materials (i) for completion of the Project by others upon termination of this Agreement and (ii) for the construction, operation and maintenance of (and for additions, improvements, expansions, changes or alterations to) the BESS after its completion. |
15.1.3 Delivery. Upon Final Completion or the date of termination of this Agreement, the Contractor shall deliver to the Owner any Design Materials which have not been previously submitted to the Owner.
15.1.4 Title. In confirmation and furtherance of the terms and provisions of this Article 15, ownership and title to the Design Materials shall vest in the Owner immediately upon the creation in whole or in part of any Design Materials. In addition, the licence granted to the Owner pursuant to Section 15.1.2 shall be deemed to be granted immediately upon creation of any of the Intellectual Property Rights to which it pertains.
15.1.5 Moral Rights. The Contractor shall require each employee, consultant or designer to execute a waiver of moral rights in a form reasonably satisfactory to the Owner and with respect to the preparation by employees, consultants and other individuals engaged by the designers in preparation of the Design & Engineering Documents, the Detail Design Documents and the Work.
| 15.2 | Confidentiality |
15.2.1 Confidential Information. The Owner and the Contractor each agree to keep confidential the terms and conditions of this Agreement and upon receipt from the other Party any documentation or information (a) provided by such Party to the other Party, whether or not it is marked as “proprietary” or “confidential”; (b) which is supplied orally with a contemporaneous confidential designation; or (c) which is known by the receiving party to be confidential or proprietary information or documentation of the disclosing party (“Confidential Information”). The Parties shall have no obligation with respect to any such Confidential Information which (a) is or becomes publicly known through no act of the receiving party, (b) is approved for release by written authorization of the disclosing party; or (c) is disclosed by the receiving party pursuant to a legal or regulatory process.
| - 46 - |
15.2.2 Use of Confidential Information. The Owner and the Contractor shall not use or disclose Confidential Information for any purpose other than for the design, development, construction, financing, transfer or operation of the Project. Notwithstanding the foregoing, the Owner may use and disclose Confidential Information of the Contractor for the completion, repair, operation and maintenance of, and additions, improvements, expansions, changes or alterations to, the BESS, provided that the Owner makes any third party with which such Confidential Information is shared subject to a written confidentiality provision with terms similar to those set forth herein, unless the recipient is already bound by a professional obligation not to disclose such Confidential Information. The Owner shall co-operate with the Contractor in enforcing such confidentiality provisions. Each Party agrees to utilize the same standards and procedures with respect to Confidential Information received from the other Party which it applies to its own Confidential Information, but not less than reasonable care. Each Party shall limit access to received Confidential Information to those of its Affiliates and its and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who need to know about or participate in the design, development, construction, ownership financing, or operation of the Project and disclosure shall be limited to only Confidential Information necessary for performance under this Agreement. Each Party agrees to inform each of its Affiliates and it and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who receive Confidential Information of the secret and confidential nature thereof and of the obligations imposed by this Agreement, and shall disclose to the other Party the identities of any lenders, subcontractors, suppliers, agents, and consultants who will have access to or have received Confidential Information. Unless otherwise agreed by the Owner, no Confidential Information received from the Owner shall be disclosed by the Contractor or its Subcontractors to lenders, contractors, subcontractors, suppliers, agents, and consultants until and unless those individuals or entities have executed a mutually agreeable confidentiality agreement with the Owner. The Contractor agrees that any Confidential Information provided to the Owner may be disclosed by the Owner to any bona fide potential purchaser, investor, lender or operator of the BESS. Each Party shall be liable for unauthorized use or disclosure of received Confidential Information by any Person to which such Confidential Information is disclosed by it. Confidential Information shall not be reproduced without written agreement of the Parties. Notwithstanding the foregoing, Confidential Information may be disclosed by the Owner pursuant to a subpoena or other legal or regulatory process or proceeding to which the Owner is a party or pursuant to the order of an Authority.
| 15.3 | Survival |
The terms and provisions of Section 15.2 shall survive the termination or expiration of this Agreement for a period of two (2) years.
ARTICLE 16
CHANGES IN WORK
| 16.1 | Changes in the Work |
Changes in Work may be accomplished after execution of this Agreement and without invalidating this Agreement, by Change Order or Construction Change Directive. A Change Order shall be based upon agreement between the Owner and the Contractor; a Construction Change Directive may be issued by the Owner alone and may or may not be agreed to by the Contractor. Changes in Work shall be performed under applicable provisions of this Agreement, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order or Construction Change Directive.
| - 47 - |
| 16.2 | Owner Initiated Changes |
The Owner may request changes in the Work within the general scope of this Agreement consisting of additions, deletions or other revisions. If the Owner so desires to change the Work, it shall promptly contact the Contractor to discuss the proposed changes to determine appropriate changes to the course of and impact on the Work. In addition, the Owner shall promptly submit a change request to the Contractor in writing in the form set out in Schedule 11. Within five (5) Working Days of its receipt of any such request, the Contractor shall submit a detailed proposal to the Owner in the form set out in Schedule 11 stating (i) the proposed increase, if any, in the Fixed Contract Price which would result from such a Change in Work, (ii) the effect, if any, upon the Guaranteed Substantial Performance Date by reason of such proposed Change in Work, and (iii) any other effect that the change would have on the provisions of this Agreement, together with supporting data and documentation, including any reasonably requested by the Owner in its request for the Change in Work. If the Contractor does submit a proposal within the preceding five (5) Working Day time period, the Owner shall, within three (3) Working Days following its receipt of such proposal, notify the Contractor as to whether the Owner agrees with such proposal and wishes to accept the Contractor’s proposal for the Change in Work (for purposes of this Section 16.2, the “Approval Date”). If the Owner agrees with such proposal and wishes to accept the same, the Owner and the Contractor promptly shall execute a Change Order pursuant to Section 16.3 below. In the event that the Owner disagrees with the Contractor’s proposal for the Change in Work, the Owner may either (i) notify the Contractor that the Owner has decided to withdraw its requested change, or (ii) issue a Construction Change Directive pursuant to Section 16.4 below (the “Directive Date”). Notwithstanding the time frame for formalizing any changes described above, the Parties agree to consult with one another throughout the process with respect to such changes.
| 16.3 | Change Orders |
In the event that the Owner agrees to accept the Contractor’s proposal in relation to the Owner’s request for a change in the Work, the Parties shall execute a “Change Order” in the form set out in Schedule11, which shall be a written instrument signed by the Owner and the Contractor, stating their agreement upon all of the following:
| (a) | the relevant Change in Work; |
| (b) | the amount of the adjustment in the Fixed Contract Price, if any; |
| (c) | the extent of the adjustment in the Project Schedule and the Guaranteed Substantial Performance Date, if any; and |
| (d) | all other effects the change has on the provisions of this Agreement. |
In addition to the circumstances described above, the Parties may enter into a Change Order in relation to a Force Majeure to the extent provided in Article 24 of this Agreement.
| 16.4 | Construction Change Directives |
In the event that the Owner disagrees with the Contractor’s proposal in relation to the Owner’s request for a Change in Work pursuant to Section 16.2, the Owner may issue a written order directing a Change in Work (a “Construction Change Directive”), whereupon the Owner and the Contractor shall also equitably adjust the Fixed Contract Price, the Guaranteed Substantial Performance Date, the Project Schedule as provided in this Section 16.4. To the extent any costs are actually incurred by the Contractor by virtue of and in accordance with the Change in Work required by a Construction Change Directive, the Fixed Contract Price will be adjusted in accordance with Section 16.5, and such extra costs, plus in the case of the costs identified in Section 16.5(b)(i) the Contractor’s profit and overhead thereon at a rate of five percent (5%), shall be invoiced by the Contractor monthly and paid by the Owner as required for payments hereunder. Unless otherwise stated in the Construction Change Directive, the Contractor shall begin the Work described in a Construction Change Directive promptly upon receipt of the same.
| 16.5 | Adjustment |
| (a) | The adjustment to the Fixed Contract Price resulting from the issuance of a Construction Change Directive shall be based on actual costs. |
| - 48 - |
| (b) | The Contractor shall keep and present, in such form as the Owner may prescribe, an itemized accounting of the “actual cost” together with appropriate supporting data, such as timesheets, invoices, time cards, payroll stubs, purchase orders, receipts and similar documentation. For the purposes of this Section 16.5, “actual cost” shall be defined and limited to the cost of the following: |
| (i) | costs of labour, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers’ or workmen’s compensation insurance; |
| (ii) | costs of materials, supplies and Components, including cost of transportation, whether incorporated or consumed; |
| (iii) | reasonable rental costs of machinery and equipment to be used in relation to the Work identified in the Construction Change Directive, whether rented from the Contractor or others (including small tools); |
| (iv) | costs for subsistence, travel time and per diems, if necessary for the performance of the Work; |
| (v) | costs of premiums for all bonds and insurance and fees for Permits related to the Work; |
| (vi) | as to the Contractor, payments made to Subcontractors for Work performed or furnished by Subcontractors; and |
| (vii) | costs related to changes that are required to be made to Work impacted by the change set out in the Construction Change Directive. |
| 16.6 | Guaranteed Substantial Performance Date |
The Owner shall propose a basis for adjustment, if any, in the Guaranteed Substantial Performance Date in the Construction Change Directive it issues to the Contractor. If the Contractor does not agree with such proposed adjustment, then any such adjustment in the Project Schedule shall be determined in accordance with Article 27 of this Agreement.
| 16.7 | Adjustments Final |
When the adjustments in the Fixed Contract Price and the Project Schedule are determined as provided in this Article 16, such determination shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order.
| 16.8 | Fixed Contract Price & Schedule |
Notwithstanding anything to the contrary contained in this Agreement, an increase in the Fixed Contract Price and the Guaranteed Substantial Performance Date may only be adjusted by Change Order or Construction Change Directive.
| - 49 - |
ARTICLE 17
CORRECTION OF WORK
| 17.1 | Correction of Work |
Prior to the date of Final Completion, the Contractor shall, at the earliest practical opportunity, correct Work (including any drawings, plans, specifications, items of construction or fabrication, or any other product constituting a part, system or component of the Work) (a) which the Owner, by providing written Notice to the Contractor, rejects as defective, deficient or failing to conform in all respects to this Agreement (whether arising from a design or construction defect, error, omission or deficiency), or (b) which is otherwise known by the Contractor or any Subcontractor to be defective or failing to conform to this Agreement. If other portions of the Work are adversely affected by or are damaged by such defective Work, the Contractor shall, at its sole cost and expense and at the earliest practical opportunity, correct, repair or replace such affected or damaged Work, as well as any other property damaged by such defective or nonconforming Work. All corrections to the Work shall be performed in accordance with this Agreement and the Project Requirements. The Contractor shall bear all costs of correcting such defective or nonconforming Work, including additional testing and inspections (including those necessary to demonstrate cure of the defective Work) and compensation for any design or engineering services and expenses made necessary thereby.
| 17.2 | Failure to Correct Work |
If the Contractor fails to correct defective or nonconforming Work, or any damaged Work or other property specified in Section 17.1 hereof, the Owner may correct it in accordance with Section 5.1.7.
ARTICLE 18
INSURANCE
[REDACTED: Confidential and commercially sensitive insurance provisions]
ARTICLE 19
[Intentionally left blank]
ARTICLE 20
PROTECTION OF PERSONS AND PROPERTY
| 20.1 | Safety |
20.1.1 Safety Programs. The Contractor shall be responsible for initiating, maintaining and supervising safety precautions and appropriate programs in connection with the performance of this Agreement, including, without limitation, appropriate precautions and programs for areas in and around the Job Site. Such precautions shall include the development of comprehensive environmental health and safety plan in accordance with the Statement of Requirements which shall relate specifically to the Project, the Work and the Job Site, which shall be developed and delivered to the Owner for approval by no later than delivery of the notice to proceed pursuant to Section 2.1 and the Contractor will comply with such environmental health and safety plan (the “Health and Safety Plan”). The Contractor shall have the highest regard for safety, emergency procedures and loss management at all times during the performance of the Work. Accordingly, the Contractor shall at all times be solely responsible for safety and loss management in the performance of the Work, including, but not limited to, protecting the Contractor, Separate Contractors, Subcontractors, visitors to the Job Site and the general public from injury or death and protecting the Job Site, the Owner’s property and the property of third parties from loss or damage. Without limiting the generality of the foregoing, the Contractor shall comply with all safety requirements specified in this Agreement.
| - 50 - |
20.1.2 Applicable Laws. The Contractor shall give Notices and comply with all applicable Laws bearing on the safety of persons or property or their protection from damage, injury or loss, including, without limitation, the Occupational Health and Safety Act (Ontario).
20.1.3 Constructor.
| (a) | The Contractor shall be the “constructor” at the Job Site and with respect to the Work for the purposes of the Occupational Health and Safety Act (Ontario) and shall nominate from among its personnel a contact person for issues relevant to such constructor role. As constructor Contractor shall do everything that is reasonably practicable to establish and maintain a system or process at the worksite that shall promote compliance with the applicable Occupational Health and Safety Act (Ontario) and its regulations. |
| (b) | The Contractor shall advise anyone performing the Work who may enter the Job Site, prior to their commencement of their portion of the Work as well as any Separate Contractors, that it is the constructor, that they shall comply with the requirements of the Occupational Health and Safety Act (Ontario) and cooperate with the Contractor’s directions with respect to the Occupational Health and Safety Act (Ontario) and directives that are safety related and that failure to do so could result in termination of their contracts. |
| (c) | The Owner may, at its sole and absolute discretion for reasons of health and safety, cause parts of, or all of, the Work or Project to be stopped, or Subcontractors or any construction aids to be removed or excluded from the Job Site. |
| (d) | The Contractor shall have complete and sole responsibility for all health and safety matters regarding the Work including compliance with all requirements pursuant to applicable Laws, familiarizing all relevant Persons with the provisions of the Occupational Health and Safety Act (Ontario) that apply to the Work and all potential or actual dangers to health and safety in the workplace and as otherwise set out in this Agreement. |
| (e) | The Contractor shall initiate, maintain and take complete responsibility for supervising health and safety precautions and programs necessary to comply with Laws and to prevent injury to Persons or damage to property on, about or adjacent to the Job Site and shall be responsible for submission of the required notice of project and registration form under the Occupational Health and Safety Act (Ontario). |
20.1.4 Elimination of Unsafe Conditions. Upon becoming aware of any unsafe or hazardous (or potentially unsafe or hazardous) condition in or around the Job Site, the Contractor shall immediately take any and all actions reasonably necessary to eliminate such condition and render the Job Site and surrounding areas safe. Notwithstanding the foregoing, responsibility for Hazardous Substances shall be as set forth in Article 25.
| - 51 - |
| 20.2 | Safety of Persons and Property |
20.2.1 Safety Precautions. The Contractor shall take all reasonable precautions for safety of, and shall provide all reasonable protection to prevent damage, injury or loss to:
| (a) | employees, Subcontractors, other Persons performing the Work, anyone in the vicinity of the Job Site (including, without limitation, members of the public or people in and around buildings and areas adjacent to the Job Site) and other Persons who may be affected thereby; |
| (b) | the Work, materials and Components to be incorporated therein, whether in storage on or off the Job Site by the Contractor or under the care, custody or control of the Contractor or any Subcontractor; and |
| (c) | other property at the Job Site and adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, parking lots, adjacent buildings, vehicles, structures, utility pipes, poles, conduits, wires, waterways, culverts, monuments and railroads. |
20.2.2 Safeguards. The Contractor shall erect and maintain, as required by existing conditions and the performance of this Agreement, all reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations, notifying members of the public, owners and people in and around buildings and areas adjacent to the Job Site and implementing safety precautions and measures (including, without limitation, fencing, overhead protection and similar measures) to ensure the safety of members of the public, owners and people in and around buildings and areas adjacent to the Job Site.
20.2.3 Intentionally Left Blank
20.2.4 Material Safety Data Sheets. If the Contractor or any Subcontractor intends to use or uses materials or substances in connection with the Work for which material safety data sheets are required pursuant to the Workplace Hazard Materials Information System, the Contractor shall submit copies of all such material safety data sheets to the Owner in advance of the use of such materials or substances. When possible, the Contractor shall submit material safety data sheets no less than thirty (30) days in advance of the use of such materials or substances and in no event shall any material safety data sheet be submitted to the Owner less than five (5) days prior to the use of such materials or substances.
20.2.5 Damage to Property. The Contractor shall promptly remedy any damage and loss to the Job Site and any other property (including, without limitation, the Project) to the extent caused in whole or in part by the Contractor, a Subcontractor or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable. The foregoing obligations of the Contractor are in addition to the Contractor’s indemnity obligations under Article 26.
20.2.6 Safety Personnel. The Contractor shall designate a responsible member of the Contractor’s organization the Job Site whose duty shall be the prevention of accidents.
20.2.7 Loading. The Contractor shall not load or permit any part of any construction aid or machinery to be loaded so as to endanger the safety of Persons or property.
20.2.8 Notices to the Owner. The Contractor shall promptly report in writing to the Owner all accidents arising out of or in connection with the Work which cause death, bodily injury or property damage of any severity, giving full details and statements of any witnesses. In addition, if death or serious bodily injuries or serious damages are caused, the accident shall be reported immediately by telephone to the Owner.
| - 52 - |
20.2.9 Emergencies. In an emergency affecting safety of Persons or property, the Contractor shall act, at the Contractor’s discretion, to prevent threatened damages, injury or loss. During the performance of the Work, the Contractor shall comply fully with the Agreement and the Owner’s safety and emergency instructions and guidelines.
20.2.10 Security. The Contractor shall take all precautions and measures as may be reasonably necessary to secure the Job Site at all hours and prevent trespassing, including evenings, holidays, work and non-work hours provided that the approval of Owner is obtained by the Contractor before taking any such precautions and measures. Such precautions may include (a) co-operating with existing security; (b) establishing and maintaining a worker identification system; (c) the provision of security guards and checking identification of all persons entering the Job Site; and (d) restriction of the Job Site to authorized personnel, equipment and materials.
20.2.11 Fencing. Subject to approval being granted by Owner, the Contractor shall provide and maintain a secure fence around the Job Site to prevent unauthorized access to the Project with required manway entrances and emergency exits.
20.2.12 Protection of Parties in Vicinity of Project. The Contractor acknowledges and understands that areas adjacent to and around the Job Site may be occupied by members of the public and other parties associated with adjacent businesses and operations while the Contractor performs the Work. The Contractor covenants and agrees that it shall at all times perform the Work, and cause all Subcontractors and representatives of the Contractor to perform the Work, so as to prevent interference with such parties, including, without limitation, the following types of interference: (a) fumes, odours, dust, debris, noise and safety hazards, (b) obstructions of access and obstructions of traffic flow to or from any building, roadway, entryway or parking lot in the vicinity of the Job Site, and (c) interruption in the availability and normal operation of water, sewer, electricity, gas, telephone, HVAC systems, computer systems and other utility services and systems relating to properties adjacent to and around the Job Site.
20.2.13 Intentionally Left Blank
20.2.14 Training.
| (a) | Prior to commencement of the Work, the Contractor shall submit to the Owner: |
| (i) | documentation of a valid Workplace Safety and Insurance Board clearance certificate; and |
| (ii) | a copy of the notice of Project filed with the Ministry of Labour. |
(b) without prejudice to the forgoing provisions of this Section 20.2.14, the Contractor hereby represents and warrants to the Owner that appropriate health and safety instruction and training have been provided or will be provided to the Contractor employees and Subcontractors and anyone for whom the Contractor is responsible, before the Work is commenced and agrees to provide to the Owner, if requested, proof of such instruction and training.
| - 53 - |
(c) The Contractor shall tour the appropriate area to familiarize itself with the Job Site prior to commencement of the Work.
(d) The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any claims, actions, proceedings, losses, damages, Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including legal fees on a solicitor and own client indemnity basis and expenses, based upon or arising out of or in connection with any safety infractions under the Occupational Health and Safety Act (Ontario), and regulations thereto, save and except to the extent such Liabilities arise from the negligent actions or inactions of the Owner, its agents officers, directors, employees, contractors, subcontractors or consultants or from any policy, plan or requirement instituted by the Owner with respect to health and safety.
20.2.15 General. The Contractor shall otherwise comply with the safety related requirements of the Statement of Requirements.
ARTICLE 21
[Intentionally left blank]
ARTICLE 22
TESTS AND INSPECTIONS
| 22.1 | Required Testing and Inspections |
In addition to the performance testing required in Article 12 hereof, the Contractor shall perform and/or obtain all tests and inspections necessary for the proper execution and completion of the Work, including, without limitation, all tests and inspections required by any applicable Laws and the Contractor shall provide the Owner with Notice at least five (5) Working Days prior to any such tests or inspections in each case so that the Owner and its designees may witness the same.
ARTICLE 23
WARRANTY
| 23.1 | Warranties |
23.1.1 Warranty. The Contractor warrants to the Owner that all design, engineering and other professional services, all construction services and all other Work, shall be performed in accordance with Good Engineering and Operating Practices and in a good and workmanlike manner, that all materials, supplies and Components furnished under this Agreement shall be of good quality and new, that the Work (including, without limitation, each item of Components incorporated therein) shall be of good and workmanlike quality and free from all faults, defects and deficiencies and shall be free from any encumbrances, Liens, security interests, or other defects in title upon conveyance of title to the Owner (other than those imposed by action of the Owner), and that the Work and the Components shall conform with the Project Requirements and designed and fit for the purpose of receiving, storing, dispatching and conditioning electrical power.
| - 54 - |
23.1.2 The Owner acknowledges and agrees that the obligations of the Contractor under this Article 23 may be impacted by the operation of the BESS and in this regard, agrees to provide access to the Contractor to a system user interface so that it may monitor the operation of the BESS by the Owner or its contractors. In the event that the Owner wilfully fails to provide such access to the Contractor within twenty (20) Working Days of Notice from the Contractor that such access has not been or is no longer provided to the Contractor, such failure shall not relieve the Contractor from its obligations under this Article 23, except to the extent and only to the extent to which such failure has increased the Liability of the Contractor under this Article 23.
23.1.3 The Contractor’s warranty excludes:
| (a) | remedy for damage or defect caused by negligence, improper operation or improper or insufficient maintenance by the Owner or normal wear and tear under normal usage after the Substantial Performance Date; |
| (b) | Components which are consumables that are consumed in operation or due to normal wear and tear; |
| (c) | the warranties and performance guarantees which are assigned to Owner in accordance with Section 23.1.10; |
| (d) | parts which inherently have a shorter normal useful life than the Warranty Periods and the Contractor has advised Owner of the duration of such useful life prior to the date hereof, except where any such parts are damaged or defective or subject to coverage under this Section 23.1.3 prior to the expiration of such useful life. |
23.1.4 Repair; Replacement; Correction. Any portion of the Work which has been repaired, replaced or otherwise corrected during the Initial Warranty Period set forth in Section 23.1.5 shall automatically be re-warranted by the Contractor in conformity with all warranty requirements set forth in this Article 23, and the Contractor shall have the same obligations in relation thereto as set forth in this Article 23, for a period (the “Extended Warranty Period”) the duration of which shall be the later of (a) the remainder of the original warranty period as set forth in Section 23.1.5 or (b) three hundred and sixty-five (365) days from the date of completion of such repair, replacement or correction; provided that in no event shall a warranty in this Section 23.1.4 extend beyond three (3) years after the Substantial Performance Date. Notwithstanding the foregoing, if a chronic failure of components (two or more failures of the same component) occurs during the Warranty Periods, the Contractor shall be responsible to determine the root cause of the chronic failure, and shall make the necessary repair or replacement of the Work to correct the root cause regardless of the expiry of the Warranty Periods.
| - 55 - |
23.1.5 Breach of Warranty. If, at any time prior to the expiration of [REDACTED: Time period] after the Substantial Performance Date (the “ Initial Warranty Period”) or any Extended Warranty Period set forth in Section 23.1.4, the Owner shall discover any defect, failure or breach of the Contractor’s warranties set out in this Agreement, the Contractor shall, upon written Notice from the Owner and at the Contractor’s sole cost and expense, immediately correct such defect, failure or breach (which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of any part or portion of the Work and any other property damaged or affected by such failure, breach or corrective action). The Contractor shall remedy any such defect, failure or breach diligently and promptly so as to minimize revenue loss to the Owner and to avoid disruption to operations at the Job Site and from the BESS. In the event the Contractor has more than one method of performing corrective action necessary to remedy such defect, failure or breach, the Contractor shall select the method which is most likely to ensure that further corrective action is not required or, if that is not possible, that further corrective action is not required for the longest period of time. In the event that the Contractor fails to initiate and diligently pursue corrective action within five (5) days of the Contractor’s receipt of the Owner’s Notice (other than in the event of a Force Majeure or Owner Caused Delay), the Owner may undertake such corrective action at the Contractor’s expense; provided, however, if such failure or breach of the Contractor’s warranties materially affects the operation or use of any of the Work or the BESS or presents an imminent threat to the safety or health of any Person and the Owner knows of such breach or failure, the Owner may pursue corrective action without giving prior written Notice to the Contractor, and, in that event, the Contractor shall be liable to the Owner for all reasonable actual costs and expenses incurred by the Owner in connection with such corrective action and arising out of or relating to such corrective action and shall pay the Owner an amount equal to such costs and expenses. If correction or remedy, by either the Contractor or the Owner, of any such failure or breach requires or otherwise results in the shutdown of the Owner’s operations at the Job Site, the Warranty Periods and the warranty periods set forth in Section 23.1.4 shall be extended by a period of time at least equal to the period of time of such shutdown.
23.1.6 Primary Liability. Subject always to Section 23.1.3(c), the Contractor shall have primary liability with respect to its warranties set forth in this Agreement whether or not any defect, deficiency or other matter is also covered by a warranty of a Subcontractor or Vendor, and the Owner shall only be required to make claim and seek recourse from the Contractor for corrective action. In addition, the Contractor’s warranties expressed herein shall not be restricted in any manner by any warranty of a Subcontractor or Vendor, and the refusal of a Subcontractor or Vendor to correct defective, deficient or nonconforming Work shall not constitute Force Majeure nor excuse the Contractor from its liability as to its warranties provided herein.
23.1.7 Subcontractor Warranties. The Contractor shall, at its cost, obtain warranties for the benefit of the Contractor and the Owner from all Subcontractors and Vendors in relation to their respective portions of the Work. The Contractor shall in addition, at its cost, obtain warranties from all such individuals or entities which (a) are coterminous with the Contractor’s Warranty Periods, (b) warrant against defects and deficiencies in each such parties’ work and (c) are ultimately assignable to the Owner pursuant to an assignment conditional upon the earlier to occur of (i) the termination of this Agreement, or (ii) the expiration of the Warranty Periods if such warranty or warranties are still in effect at such time. Within ten (10) Working Days of receipt by the Contractor from the Owner of a Notice of a failure of any of the Work to satisfy any Subcontractor or Vendor covenant, guarantee or obligation required by this Agreement but excluding any of the foregoing referred to in Section 23.1.3(c), the Contractor shall be responsible for enforcing or performing any such covenant, guarantee or obligation, failing which, the Owner may, at its option and without derogating from the Contractor’s responsibilities, directly enforce any such covenant, guarantee or obligation against any Subcontractor or Vendor. The Contractor acknowledges and agrees that the Initial Warranty Period set forth in Section 23.1.5 above shall not serve to limit any warranties obtained from Subcontractors that may be of longer duration. Any warranty referred to in this Section 23.1.7 shall be assignable by the Owner to a third party on notice to the Contractor or the relevant Subcontractor.
23.1.8 Equipment Warranties. The Contractor shall obtain warranties and performance guarantees for the benefit of the Contractor and the Owner of no less than [REDACTED: Tim period] from the date of delivery to the Job Site for the BESS, 3 years from the date of delivery to the Job Site for the transformers, and 1 year from the date of delivery to the Job Site for the switchgear. For purposes of this Section 23.1.8, major equipment or Components shall mean each individual piece of equipment or Component which is obtained from a third party at a cost of [REDACTED: Dollar amount] or more. In the event the Owner requires the warranty coverage referred to in this Section 23.1.8 for a duration of more than the terms of the equipment warranties above, it shall be permitted to request such Change in Work pursuant to Section 16.2.
| - 56 - |
23.1.9 Records. The Contractor shall keep written records of any defect, failure or breach of any Work and all repairing, replacing or re-performing of same.
23.1.10 Assignment of Warranties. Upon Substantial Completion, Contractor shall assign all Component and subcontractor warranties, including all products and services warranties provided under this Agreement, to the Owner.
ARTICLE 24
FORCE MAJEURE AND OWNER CAUSED DELAY
| 24.1 | Force Majeure |
24.1.1 Definition. For the purposes of this Agreement, the term “Force Majeure” means any act, event, cause or condition that directly prevents a Party from performing its obligations (other than payment obligations) hereunder, that is beyond the affected Party’s reasonable control, and shall include:
| (a) | acts of God, including extreme wind, snow (≥ 100 cm/day), rain (≥ 30 cm/day ), temperatures ≤ -30º, ice, lightning or other storms, earthquakes, tornadoes, hurricanes, cyclones, landslides, drought, floods and washouts; |
| (b) | fires or explosions unless caused by the Contractor or its Subcontractors; |
| (c) | local, regional or national states of emergency; |
| (d) | strikes and other labour disputes (other than legal strikes or labour disputes by employees of such Party or a third party invoking Force Majeure, unless such strikes or other labour disputes are the result or part of a general industry strike or labour dispute); |
| (e) | civil disobedience or disturbances, war (whether declared or not), acts of sabotage, blockades, insurrections, terrorism, revolution, riots or epidemics; |
| (f) | subject to Section 24.1.4(c), an order, judgment, legislation, ruling or direction by Authorities restraining a Party, provided that the affected Party has not applied for or assisted in the application for and has used Commercially Reasonable Efforts to oppose said order, judgment, legislation, ruling or direction; |
| (g) | any inability to obtain, or to secure the renewal or amendment of after the exercise of all reasonable diligence, any Permit, certificate, impact assessment, license or approval of any Authority, required to perform or comply with any obligation under this Agreement, unless the revocation or modification of any such necessary permit, certificate, impact assessment, licence or approval was caused by the violation of the terms thereof or consented to by the Party invoking Force Majeure; |
| (h) | restraint, order or decree by an Authority to the extent such restraint, order or decree arises from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the affected Party, its Subcontractors or other Persons for whom they may respectively be liable, |
provided always that any such event shall have actually and directly prevented the affected Party from performing its obligations (other than payment obligations) hereunder and shall be beyond the affected Party’s reasonable control.
| - 57 - |
24.1.2 Resumption of Activities. Each Party shall resume its obligations as soon as the event of Force Majeure has terminated.
24.1.3 Performance Excused
| (a) | If a Party is unable, wholly or partially, to perform or comply with its obligations hereunder, then the Party so affected by Force Majeure shall be excused and relieved from performing or complying with such obligations, but not its other obligations hereunder not affected by Force Majeure, and shall not be liable for any Liabilities, damages, losses, payments, costs, expenses to, or incurred by, the other Party in respect of or relating to such Force Majeure and such Party’s failure to so perform or comply during the continuance and to the extent of the inability so caused from and after the invocation of Force Majeure. |
| (b) | A Party shall be deemed to have invoked Force Majeure with effect from the commencement of the event or circumstances constituting Force Majeure when that Party gives to the other Party prompt Notice, written or oral (but if oral, promptly confirmed in writing) of the effect of the Force Majeure and reasonably full particulars of the cause thereof, provided that such Notice shall be given within five (5) Working Days of the date that the Party invoking Force Majeure knows or ought to have known that the event of circumstances constituting Force Majeure could have an effect on the Project Schedule. For greater certainty, the reporting or discussion of a Force Majeure event provided in a periodic report from the Contractor to the Owner under this Agreement shall not constitute sufficient initial Notice of the occurrence of a Force Majeure event. The burden of proof as to whether a Force Majeure has occurred shall be on the Party invoking the Force Majeure and it shall respond to all requests of the other Party with respect to the Force Majeure in compliance with the terms of this Article 24. |
| (c) | The Party invoking Force Majeure shall use Commercially Reasonable Efforts to remedy and mitigate the effects of the Force Majeure and remove, so far as possible and with reasonable dispatch, the Force Majeure, but the decision as to whether to settle strikes, lockouts and other labour disturbances shall be wholly within the sole discretion of the Party involved. |
| (d) | The Party invoking Force Majeure shall provide reports to the other Party from time to time (and at least every ten (10) Working Days) with respect to the status of the Force Majeure, the steps taken by the affected Party to remedy the Force Majeure and the anticipated termination date of the Force Majeure. The Party invoking Force Majeure shall give prompt written Notice of the termination of the event of Force Majeure and agrees to resume performance of the obligations affected immediately upon such termination of the Force Majeure event. |
| - 58 - |
| (e) | Nothing in this Section 24.1.3 shall relieve a Party of its obligations to make payments of any amounts that were due and owing before the occurrence of the Force Majeure or that otherwise may become due and payable during any period of Force Majeure. In addition a Party shall not be relieved from any obligation not affected by the event of Force Majeure and shall continue to perform such obligations hereunder. |
| (f) | If, by reason of Force Majeure, the Substantial Performance Date is delayed by more than six (6) months after the original Guaranteed Substantial Performance Date, prior to any extension pursuant to Section 24.1.3(a), then notwithstanding anything in this Agreement to the contrary, the Owner may terminate this Agreement upon Notice to the Contractor and without any costs or payments of any kind to either Party and all security shall be returned forthwith. |
24.1.4 Certain Obligations Not Excused. A Party shall not be entitled to invoke Force Majeure under this Section 24.1, nor shall it be relieved of its obligations hereunder in any of the following circumstances:
| (a) | if and to the extent the Party seeking to invoke Force Majeure has caused the applicable event of Force Majeure by its fault, negligence or breach of this Agreement; |
| (b) | if and to the extent the Party seeking to invoke Force Majeure has failed to use Commercially Reasonable Efforts to avoid, prevent, mitigate or remedy the event of Force Majeure and remove, so far as possible and within a reasonable time period, the Force Majeure (except in the case of strikes, lockouts and other labour disturbances, the settlement of which shall be wholly within the sole discretion of the Party involved); |
| (c) | if and to the extent that the Party seeking to invoke Force Majeure because of arrest or restraint by an Authority, such arrest or restraint was the result of a breach by such Party of applicable Laws; |
| (d) | if the Force Majeure was caused by a lack of funds or other financial cause; |
| (e) | if the Party invoking Force Majeure fails to comply with the notice provisions in Sections 24.1.3(b) and 24.1.3(d); |
| (f) | if the Force Majeure arises as a result of labour shortages; |
| (g) | in the case of the Contractor, if the Force Majeure arises as a result of its design engineering, procurement or construction of the BESS or the lack of availability, failure or mechanical breakdown of any equipment required for the design or construction of the BESS; |
| (h) | in the case of the Contractor, with respect to its inability to procure any Component for any reason (the risk of which is assumed by Contractor) or the failure, mechanical breakdown or underperformance of any Component; |
| (i) | any acts or omissions of any third party, including any vendor, materialman, customer or supplier, unless such acts or omissions are themselves excused by reason of an independently identifiable event of Force Majeure; |
| - 59 - |
| (j) | changes in market conditions that affect the cost of supplies; or |
| (k) | weather events such as rain, heat or snow that a Party could reasonably anticipate as being likely in any given period of time at the Job Site. |
24.1.5 The Owner May Recommend the Contractor to Take Action. If, within a reasonable time after a Force Majeure occurrence that has caused the Contractor to suspend or delay performance of any part of the Work, the Owner or its representative has by Notice to the Contractor identified and recommended action to be undertaken by the Contractor at the expense of the Owner or otherwise to remove or relieve either the Force Majeure occurrence or its direct or indirect effects and the Contractor has failed to take such action, the Owner may, in its reasonable discretion and after written Notice to the Contractor, initiate such reasonable measures as will be designed to remove or relieve such Force Majeure occurrence or its direct or indirect effects and thereafter by Notice to the Contractor require the Contractor to resume full or partial performance of the Work. Such measures shall be undertaken at the Owner’s expense except to the extent that the Contractor’s failure to take such measures results in expense in addition to what the Owner would have incurred under this Section 24.1.5 had the Contractor taken such measures, which additional expense shall be for the Contractor’s account.
24.1.6 Change Order – The Contractor
| (a) | If an event of Force Majeure occurs that is covered by this Article 24 and the cumulative Force Majeure delays invoked by the Contractor are thirty (30) Days or more, the Contractor and the Owner shall execute a Change Order pursuant to Article 16 to address the following matters, if and to the extent applicable: |
| (i) | the Guaranteed Substantial Performance Date shall be extended by a period equal to the amount of time reasonably determined by mutual agreement of the Owner and the Contractor, to be necessary to allow for the actual delay the Contractor reasonably demonstrates has been caused to the proposed Substantial Performance Date in the Project Schedule, including the cumulative effect of a number of Force Majeure delays; and |
| (ii) | the Project Schedule shall be adjusted as appropriate as a result of the new Guaranteed Substantial Performance Date, but the Fixed Contract Price shall not be adjusted in such circumstances. |
24.1.7 Duty to Avoid. Each Party shall take all reasonable measures to anticipate and avoid Force Majeure events, wherever possible, and keep the other fully informed of all potential Force Majeure situations, particularly potential strikes and labour disturbances, to enable the Parties to consult and endeavour to take steps to mitigate their effect on the Work.
| 24.2 | Owner Caused Delays |
24.2.1 The occurrence of any of the following events, to the extent such events have not been caused by any act or omission of the Contractor or are beyond the Contractor’s reasonable control, shall constitute an “Owner Caused Delay”:
| (a) | delays resulting from the breach by the Owner of its obligations hereunder or the acts or omissions of the Owner or its Separate Contractors performing work to the extent such delays arise from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the Contractor, its Subcontractors or other Persons for whom they may respectively be liable; |
| - 60 - |
| (b) | delays resulting from the late receipt of Owner Permits following any milestones for receipt of the same set out in the Project Schedule; or |
| (c) | the suspension of the Work in whole or in part by the Owner other than as a result of any act or omission of the Contractor in breach of this Agreement. |
24.2.2 In the event of an Owner Caused Delay that adversely impacts the cost or schedule for performing the Work, the Owner and the Contractor will use good faith efforts to agree on the extent to which the Project Schedule has been impacted or costs of performance have increased as a result of the Owner Caused Delay, and shall execute a Change Order adjusting the Project Schedule, the Guaranteed Substantial Performance Date, and/or the Fixed Contract Price as necessary to compensate the Contractor for such impact. To the extent that the Owner and the Contractor cannot reach agreement on the adjustments required to compensate for the impacts resulting from the Owner Caused Delay, the matter shall be resolved in accordance with the dispute resolution procedures contained in Article 27. The Contractor acknowledges and agrees that any adverse impacts on the cost or schedule for performing the Work can be affected by the Contractor and it will make all Commercially Reasonable Efforts to mitigate such adverse impacts.
ARTICLE 25
HAZARDOUS SUBSTANCES
| 25.1 | Hazardous Substances |
25.1.1 If, in the course of performance of the Work, the Contractor encounters on the Job Site any matter which it reasonably believes is a Hazardous Substance that may require response, removal, cleanup or other remedial action under applicable Environmental Laws and/or Job Site specific environmental requirements, the Contractor shall immediately suspend the Work in the area affected and report the condition to the Owner by telephone and in writing. In any such event, the obligations and duties of the parties hereto shall be as follows:
| (a) | if the Owner determines that such condition involves a Pre-Existing Hazardous Substance, then the Contractor shall have no obligation with respect to such condition and the Owner, at its sole discretion, shall respond in the manner which it deems appropriate; |
| (b) | the Owner determines that such condition involves a Pre-Existing Hazardous Substance, which was harmless or stored, contained or otherwise dealt with in accordance with Environmental Law, which has been dealt with in a manner by the Contractor or its Subcontractors or any Person for whom they are responsible in a manner which did not comply with Environmental Law, any response, removal, clean-up or other remedial action required by Environmental Laws shall be performed by the Contractor at its sole cost and expense. If the location of a Pre-Existing Hazardous Substance on the Job Site is not obvious from inspection, the provisions of this Section 25.1.1(b) shall only apply if the Owner has first notified the Contractor of the location of the Pre-Existing Hazardous Substance and the nature of the same. Except as to Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; |
| - 61 - |
| (c) | if the Owner determines that such condition involves a Hazardous Substance introduced to the Job Site after the date of this Agreement by the Contractor, its Subcontractors or any Person for whom they are responsible, then any response, removal, cleanup or other remedial action required by applicable Environmental Laws shall be performed by the Contractor at its sole cost and expense. Except as to the Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; or |
| (d) | if the Owner determines that the condition does not involve a Pre-Existing Hazardous Substance that requires response, removal, cleanup or other remedial action under applicable Environmental Laws, the Contractor shall, promptly after receiving written Notice from the Owner authorizing the Contractor to recommence site activities in the subject area, resume the portion of the Work that had been suspended. |
25.1.2 The Parties acknowledge and agree that the Contractor shall not commence or continue any construction activities on any portion of the Job Site on, in or under which remedial actions are to be (or are being) performed until such remedial actions are to the point where construction activities will not interfere with such remedial actions, as evidenced by appropriate certifications from the applicable environmental engineer and/or remediation contractor and any required approvals of any applicable Authorities. The Contractor agrees to use good faith diligent efforts to continue the unaffected portions of the Work and to adjust and reschedule its activities at the Job Site so as to minimize, to the extent reasonably practicable, any adverse effect on the progress of the Work resulting from the performance of any remedial actions.
25.1.3 The Contractor shall not bring or store (and shall prohibit Subcontractors from bringing or storing) Hazardous Substances to or on the Job Site, and shall not utilize any construction materials containing radioactivity, asbestos, polychlorinated biphenyls or urea formaldehyde; provided, however, that the Contractor may use and store in reasonable quantities the following substances required to perform the Work, but only in accordance with applicable Environmental Laws: gasoline, diesel fuel, fuel oil, grease, lube oil, sealants, form oil, solvents, adhesives and other substances of a type and quantity consistent with normal and customary construction practices for construction of a project similar in nature and scope to the Project. Any other Hazardous Substances to be brought to, generated, released or stored on any Job Site shall require specific written authorization of the Owner. The Contractor shall comply, and shall cause its Subcontractors to comply, with all applicable Environmental Laws.
25.1.4 The Contractor shall be entitled to receive an equitable adjustment to the Project Schedule due to any impact on the Contractor’s schedule of performance due to Pre-Existing Hazardous Substances in accordance with Section 25.1.2.
25.1.5 The Contractor shall immediately upon receipt thereof provide the Owner with copies of all summons, citations, directives, information, inquiries or requests, notices of violation or deficiency, orders or decrees, claims, complaints, investigations, judgments, letters, reports (including any reports of releases required under applicable Environmental Laws), notices of environmental liens or response actions in progress, and other communications, written or oral, and responses thereto, to or from any Authority or any other entity or individual (including environmental reports commissioned by legal counsel but excluding other privileged communications between the a Party and its legal counsel), concerning:
| (a) | any Hazardous Substance contamination on, in or under any part of a Job Site; |
| - 62 - |
| (b) | any actual or alleged violation by the Contractor of, or responsibility of the Contractor under, any Environmental Laws in connection with its operations at a Job Site; or |
| (c) | any actual or alleged liability of the Contractor for its operations at a Job Site under any theory of tort, including without limitation, negligence, trespass, nuisance, strict liability, or ultra-hazardous activity, |
provided that in the event the communication in question includes information not required to be disclosed under this Section 25.1.5, the Contractor may transmit relevant portions of the communication rather than the entire communication.
ARTICLE 26
INDEMNIFICATION
| 26.1 | Contractor’s Indemnity |
26.1.1 The Contractor. To the fullest extent permitted by Law, the Contractor shall indemnify, defend and hold harmless the Owner and its respective assigns, officers, directors, employees, agents, Affiliates and representatives, and anyone else acting for or on behalf of the Owner (the “Owner Indemnitees”), from and against any and all third party claims, demands, suits, Liabilities (including, without limitation, as a result of claims or allegations of infringement, misappropriation, misuse or violation of any Intellectual Property Rights used by the Contractor in the performance of the Work including curative action under warranty), death, injuries (personal or bodily), property damage (including public property), and all expenses including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis incidental to any of the foregoing, to the extent caused by (i) the performance by the Contractor of its duties and obligations under this Agreement, (ii) the inaccuracy of any warranty or representation of the Contractor contained in this Agreement, (iii) any negligent act or omission to act by the Contractor, its Subcontractors or any Person directly or indirectly employed by them or anyone for whose acts they may be responsible, and/or (iv) any breach, default, violation or non-performance by the Contractor of any term, covenant, condition, duty or obligation provided in this Agreement provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.1. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.2 Indemnification for Violation of Law. The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and his own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or whom they may be responsible of any Law or rule promulgated by an Authority including, without limitation, the failure to comply with the Occupational Health and Safety Act (Ontario) provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.2. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
| - 63 - |
26.1.3 Indemnification for Violation of Taxing Authorities. The Contractor shall indemnify and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible of any order, rule or requirement of any taxing Authority, based on gross receipts or on income of the Contractor or in respect of any deductions, remittances or assessments in respect of any employees, as applicable, or that arise against the Owner for any sales taxes, including HST payable in connection with the Work, provided that the foregoing shall in no way release the Owner from paying HST in the manner set for in this Agreement and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees.
26.1.4 Environmental Indemnification. Subject to and other than with respect to the Owner’s obligations under Article 25, the Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with any non-compliance with Environmental Laws or any Hazardous Substance brought onto the Job Site in each case in connection with the construction or operation of the Project or the performance of the Work or during curative action under warranty by the Contractor, Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible including any negligent handling of Hazardous Substances on the Job Site and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way (except by Section 8.3.2) by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.5 Lien Indemnification. The Contractor agrees to indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with all Liens or Lien claims made, recorded, asserted or filed on the Work or any property on which it is being performed, on account of any labour performed or materials furnished by the Contractor, Subcontractors or any other Person in connection with the Work to the extent that the Owner has made payment to the Contractor therefor except to the extent such Liens are attributable to the willful misconduct of the Owner and exclusive of Liens by fault of the Owner. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for Contractor or any Subcontractor under worker’s compensation acts, disability acts or other employment benefit acts.
| - 64 - |
26.1.6 Lien Removal.
| (a) | The Contractor will, at its own cost and expense, cause any and all Liens filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located, to be released, vacated or discharged no later than thirty (30) days after the earlier of the Owner having sent the Contractor written Notice of any claim of Lien and the Contractor having become aware of a claim for Lien except to the extent such Liens are attributable to the non-payment by the Owner of amounts due and payable hereunder or which are attributable to the willful misconduct of the Owner. If the Lien is merely vacated, the Contractor shall, if requested, undertake the Owner’s defence of any subsequent lawsuit commenced in respect of the lien at the Contractor’s sole expense. |
| (b) | If the Contractor shall fail to vacate or discharge promptly any proceedings or claim of Lien filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located within the period specified in Section 26.1.6(a), the Owner may exercise its rights under the Construction Act (Ontario) to have the claim of Lien vacated by making a payment into court or posting security and may offset the amount of any such payment and all costs and expenses incurred by the Owner in making such payment or posting such security, including administrative costs, legal fees and other expenses, against amounts due or to become due to the Contractor under the Agreement. |
| 26.2 | Limitation and Survival |
26.2.1 Notwithstanding anything else expressed or implied in this Agreement, the indemnification obligations in Article 26 will not apply and the Contractor shall have no further obligations under this Article 26 after two (2) years from the Substantial Performance Date.
26.2.2 This Section 26.2 shall survive the termination or expiration of this Agreement.
ARTICLE 27
DISPUTE RESOLUTION
| 27.1 | Negotiations |
Both during and after the performance of the Work under the Agreement, the Parties each shall, using their respective senior management, make bona fide efforts to resolve any disputes arising between them by amicable negotiations, and provide frank, candid and timely disclosure of all relevant facts, information and documents to facilitate those negotiations. If a dispute remains unresolved twenty-one (21) days after escalation to each Parties’ respective senior management, it may, if agreed by the Parties, be first submitted to non-binding mediation as contemplated in Section 27.2. If the Parties do not elect to pursue non-binding mediation, the dispute shall, at the request of either Party, be referred to arbitration in accordance with Section 27.3.
| - 65 - |
| 27.2 | Mediation |
27.2.1 To the extent any dispute is not resolved through negotiation by senior management, the Parties may pursue non-binding mediation to attempt to resolve all disputes arising out of or in connection with the Agreement, or in respect of any defined legal relationship arising out of or in connection with the Agreement, by structured negotiation with the assistance of a mediator, in accordance with the following provisions.
27.2.2 Unless the Parties otherwise agree, the mediator shall have the following qualifications:
| (a) | a legal background; |
| (b) | knowledge and experience in the type of matter that is the subject of the dispute; |
| (c) | be held in high regard by the Ontario community; |
| (d) | have no interest or perceived interest in the Parties or the subject matter of the dispute and have so confirmed in writing to the Parties; and |
| (e) | have experience as a mediator or facilitator. |
27.2.3 If the Parties are unable to agree on the appointment of a mediator within ten (10) Days after either Party has given Notice to the other Party requesting the appointment of a mediator, either Party may request the ADR Institute of Canada or its successor, if any, to appoint a mediator with the above qualifications in accordance with its appointment procedures. If ADR Institute of Canada does not exist and the Parties are not able to agree on a similar body to appoint the mediator, then the dispute shall be referred to arbitration under Section 27.3.
27.2.4 The mediation shall continue until the earlier of agreement between the Parties on the resolution of the dispute and one (1) calendar month after commencement of the mediation. The Parties may agree to extend the period of any particular mediation.
27.2.5 The mediation process is privileged and confidential. Neither Party may call the mediator to give evidence at any arbitration under Section 27.3.
27.2.6 The Parties shall bear the costs of the mediation equally and each Party shall bear its own costs.
| 27.3 | Arbitration |
27.3.1 All disputes arising out of or in connection with this Agreement, or in respect of any legal relationship associated with or derived from this Agreement not otherwise resolved in accordance with Sections 27.1 or 27.2 (“Dispute”), will be finally resolved by arbitration under the Arbitration Rules (the “Rules”) of the ADR Institute of Canada (the “Institute”), except as modified by this Section 27.3. The Seat of arbitration will be Toronto, Ontario. The language of the arbitration will be English.
27.3.2 A Party (the “Initiating Party”) wishing to submit the Dispute to arbitration shall select one (1) arbitrator, which arbitrator shall not be, or have been within the previous five (5) years, an employee, officer or director of the Initiating Party or of any Affiliate of the Initiating Party. The Initiating Party shall send a Notice of a Request to Arbitrate in the form prescribed by the Rules (the “Arbitration Notice”) to the other party setting out the name of its nominated arbitrator. The Initiating Party shall be responsible for notifying the Institute of the arbitration under its rules and for paying the administrative fee for the arbitration to the Institute.
| - 66 - |
27.3.3 The other Party (“Recipient”) shall have seven (7) days from receipt of the Arbitration Notice to nominate one (1) arbitrator and to notify the Initiating Party of the name of the arbitrator nominated by the Recipient. The arbitrator nominated by a Recipient shall not be, or have been within the previous five (5) years, an employee, officer or director of a Recipient or of any Affiliate of a Recipient.
27.3.4 Promptly upon their selection and in any event within fourteen (14) days of notification of the appointment of the Initiating Party’s arbitrator, the arbitrators then selected shall appoint a third arbitrator who shall act as chair of the arbitration.
27.3.5 If the Recipient fails to nominate an arbitrator, or the nominated arbitrators fail to agree upon the third arbitrator, then, pursuant to the Rules, any Party or its representative may request the Institute to promptly appoint the third Arbitrator and to notify the Party of such appointment.
27.3.6 Each arbitrator nominated pursuant to this Section 27.3 shall be qualified by education and experience to determine the matter in Dispute.
27.3.7 The Parties shall agree in advance as to the manner in which the arbitrators shall promptly hear witnesses and arguments, review documents and otherwise conduct the arbitration procedures. Failing such agreement within ten (10) days from the date of selection or appointment of the third arbitrator, the arbitrators shall use the Rules and promptly commence and expeditiously conduct the arbitration proceeds.
27.3.8 Nothing in this Section 27.3 shall prevent a Party from applying to a court of competent jurisdiction pending final disposition of the arbitration proceeding for such relief as may be necessary to assist the arbitration process, to ensure that the arbitration is carried out in accordance with the Rules or to prevent manifestly unfair or unequal treatment of any Parties to the arbitration.
27.3.9 In no event shall the arbitrators have the jurisdiction to amend or vary the terms of this Section 27.3 or of the Rules.
27.3.10 The arbitration award shall be given in writing, shall be final and binding on the Parties, not be subject to any appeal and shall deal with the question of costs of the arbitration and all other related matters.
27.3.11 Judgment upon the arbitration award may be entered in any court having jurisdiction, or, application may be made to such court for a judicial recognition of the arbitration award or an order of enforcement thereof, as the case may be.
27.3.12 Subject to Section 27.3.8, the Parties agree that the arbitration conducted pursuant to this Section 27.3 shall be the final and exclusive forum for the resolution of such a Dispute.
| 27.4 | Third Party Claims |
Any dispute between the Owner and the Contractor which also involves claims by or against third parties, or which requires the presence of third parties for full adjudication, and which is not subject to arbitration by all parties including any third party, shall be resolved by litigation in an appropriate court which has jurisdiction over all parties.
| - 67 - |
| 27.5 | Performance to Continue |
Performance of this Agreement shall continue during any negotiations, mediations or arbitration proceedings unless the Owner shall order suspension under Article 28, in which case adjustments shall be made as provided in Article 28, to the extent applicable.
| 27.6 | No Withholding of Undisputed Payments |
No undisputed payment due or payable by the Owner shall be withheld on account of a negotiation, mediation, litigation or arbitration under this Article 27.
ARTICLE 28
TERMINATION AND SUSPENSION
| 28.1 | Termination for Convenience |
The Owner may terminate this Agreement without cause upon not less than fifteen (15) days’ prior written Notice to the Contractor. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive the following: (a) payment for Work properly performed to the date of termination, (b) reimbursement for all reasonable cancellation charges incurred by the Contractor in relation to its Subcontractors, (c) reimbursement for mutually agreeable demobilization costs incurred by the Contractor, and (d) the termination charges equal to [REDACTED: Percentage amount] of the value of the Work remaining to be performed on the date of termination. For the avoidance of doubt, the performance of any portion of the Work by or on behalf of the Owner in accordance with the terms hereof shall not constitute a termination of this Agreement under this Section 28.1 in and of itself.
| 28.2 | Termination by the Owner for Cause |
28.2.1 The occurrence of any one or more of the following matters constitutes a default by the Contractor under this Agreement (a “Contractor Event of Default”):
| (a) | the Contractor becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Contractor makes a general assignment for the benefit of its creditors; |
| (c) | the Contractor shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of itself or of its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official or for all or any part of its property; |
| (d) | any case, proceeding or other action against the Contractor shall be commenced (i) seeking to have an order for relief entered against the Contractor as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for it or for all or any part of its property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within thirty (30) days after it is filed; |
| - 68 - |
| (e) | the breach of any material representation or warranty made by the Contractor herein that is not cured within thirty (30) days after Notice thereof from the Owner; |
| (f) | the Contractor attempts to assign, convey or transfer this Agreement or any interest, without the Owner’s prior written consent; |
| (g) | Intentionally Left Blank; |
| (h) | Intentionally Left Blank; |
| (i) | the Contractor fails to observe or perform any other material covenant, agreement, obligation, duty or provision of this Agreement, and such failure continues for thirty (30) days after Notice thereof from the Owner; |
| (j) | Intentionally Left Blank; |
| (k) | Substantial Performance has not occurred within sixty (60) days after the Guaranteed Substantial Performance Date; |
| (l) | failure of the Contractor to comply with its scheduling obligations under this Agreement, including those set forth in Article 6 which failure continues for ten (10) days after Notice thereof from the Owner; |
| (m) | the failure of the Contractor to comply with Law, which failure continues for ten (10) days after written Notice thereof from the Owner; or |
| (n) | the abandonment by the Contractor of the Job Site or the Work for a period of ten (10) days or more, other than in accordance with the terms of this Agreement which abandonment continues for five (5) days after Notice thereof from the Owner. |
28.2.2 Upon the occurrence of a Contractor Event of Default, the Owner may, without prejudice to any other right or remedy that the Owner may have under this Agreement, terminate the Agreement and/or the Contractor’s right to perform the Work upon not less than fifteen (15) days’ prior written Notice to the Contractor. In either such case, the Owner may, without prejudice to any other right or remedy, take possession of the Job Site and of all materials and Components and, subject to the rights of third parties, tools and machinery thereon owned by the Contractor, and may finish the Work by whatever method the Owner may deem reasonably prudent and efficient. If the unpaid balance of the Fixed Contract Price exceeds the cost of finishing the Work, then the Contractor shall be paid for all Work performed by the Contractor to the date of termination as to which there is no pending dispute (which amount shall in no event exceed the difference between the unpaid portion of the Fixed Contract Price and the Owner’s cost of completing the Work). However, if the cost of finishing the Work exceeds the unpaid balance of the Fixed Contract Price, the Contractor shall immediately pay the difference to the Owner. The cost to the Owner of completing the Work shall include the reasonable actual direct cost of any additional design, engineering, managerial and administrative services required thereby, legal fees on a substantial indemnity basis and expenses, and any other reasonable costs, expenses or damages the Owner may incur in order to complete the Work.
| - 69 - |
| 28.3 | Termination by the Contractor for Cause |
28.3.1 The occurrence of any one or more of the following matters shall constitute a default by the Owner under this Agreement (an “Owner Event of Default”):
| (a) | the Owner becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Owner makes a general assignment for the benefit of its creditors; |
| (c) | the Owner shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or of the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official for the Owner or for all or any part of the Owner’s property; |
| (d) | any case, proceeding or other action against the Owner shall be commenced (i) seeking to have an order for relief entered against the Owner as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for the Owner or for all or any part of the Owner’s property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within ninety (90) days after it is filed; or |
| (e) | the Owner fails to make any payment to the Contractor when due and not being disputed in good faith and such failure continues for sixty (60) days after the Owner’s receipt of written Notice thereof from the Contractor. |
28.3.2 Upon the occurrence of an Owner Event of Default, the Contractor shall provide Notice of default to owner, following which the Owner shall have fifteen (15) days to cure any such default. The Contractor may only terminate this Agreement in the event that the Owner fails to cure such default within such fifteen (15) day period or if such default cannot reasonably be cured within such period and the Owner fails to promptly commence, following receipt of such Notice and, thereafter diligently pursue, a cure. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive (a) payment for Work properly performed to the date of termination; (b) reimbursement for all cancellation charges incurred by the Contractor in relation to its Subcontractors and vendors; and (c) reimbursement for all demobilization costs incurred by the Contractor.
| 28.4 | Actions Upon Termination |
28.4.1 Upon termination of this Agreement or termination of the Contractor’s right to perform Work hereunder for any reason, the Contractor shall (a) cease operations as directed by the Owner; (b) take all actions necessary, or that the Owner may direct, for the protection and preservation of all Components, materials, parts, supplies and the Work and the Project (in whatever stage of completion); (c) cease entering into subcontracts and purchase orders; (d) take any actions necessary to effectuate the assignment of subcontracts to the Owner in accordance with Section 14.4 of this Agreement, if applicable; and deliver to the Owner all Design Materials, papers, documents, records, books of account and other documents and materials paid for, or otherwise owned, by the Owner; and in the event of an Owner Event of Default, the Owner shall compensate the Contractor for the costs thereof as expressed in Section 28.3.2 promptly following the termination of this Agreement and provision by the Contractor of an invoice and supporting documentation that reasonably substantiates such costs.
| - 70 - |
28.4.2 The Contractor’s obligations under this Agreement as to quality, correction and warranty of the Work pursuant to Articles 17 or 23, with respect to Work performed up to the time of termination of this Agreement shall continue in full force and effect after such termination for the longer of twenty-four (24) months from the effective date of termination or the expiry of the Warranty Periods (if applicable).
| 28.5 | Suspension of the Work |
The Owner may, without cause, order the Contractor to suspend the Work in whole or in part for such period of time as the Owner may determine. Any such suspension shall commence on or before the seventh (7th) day after the Contractor’s receipt of written Notice thereof from the Owner. The Contractor shall resume any suspended Work within five (5) days of the Owner’s written Notice directing the same. Should a suspension of the entire Work which is ordered by the Owner continue for ninety (90) or more consecutive days, either Party may thereafter terminate this Agreement by written Notice to the other Party and the rights and remedies of the Contractor shall be the same as those which are expressed in Section 28.1 hereof in the event of termination for convenience by the Owner.
ARTICLE 29
MISCELLANEOUS PROVISIONS
| 29.1 | Governing Law |
This Agreement will be construed, interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
| 29.2 | Meaning of Terms |
Words and abbreviations not defined in this Agreement which have well-known technical or design, engineering or construction industry meanings are used in this Agreement in accordance with such recognized meanings.
| 29.3 | Entire Agreement |
This Agreement represents the entire agreement between the Owner and the Contractor with respect to the subject matter hereof, and supersedes all prior understandings, agreements, representations (including misrepresentations, negligent or otherwise), negotiations, communications and discussions, written or oral, made by the Parties with respect thereto. There are no representations, warranties, terms, conditions, covenants or other understandings, express or implied, collateral, statutory or otherwise, between the Parties, except as expressly stated in this Agreement. The Parties have not relied and are not relying on any other information, discussion or understanding in entering into this Agreement. Except as provided in Article 16, this Agreement may not be amended, supplemented or otherwise modified in any respect except by written agreement signed by the Parties.
| - 71 - |
| 29.4 | Successors and Assigns |
This Agreement and any rights, interests or obligations hereunder shall not be assigned, conveyed, pledged, transferred or otherwise encumbered by a Party without the prior written consent of the other Party. Notwithstanding the foregoing, the Owner may without the Contractor’s consent, assign, transfer, sell, pledge, encumber or grant a security interest in, this Agreement or the accounts, revenues or proceeds hereof, to any Person providing any financing or financial arrangement in connection with the Project. The Contractor agrees to execute a consent to assignment with any Person providing financing in connection with the Project in a form reasonably provided by such Person and shall co-operate with any reasonable request of any such Person with respect to any such financing and the form of any such consent. The Owner may further assign its rights and obligations arising from this Agreement, in whole or in part or any rights (including warranty rights) arising from it to a potential purchaser of the Project , without the Contractors consent, subject always to provision of Notice of such assignment to the Contractor further to completion of the assignment.
| 29.5 | Third Parties |
Unless otherwise specified herein, this Agreement does not and is not intended to confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Except for Indemnified Persons, no Person other than the Parties will be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. The Parties reserve their right to vary or rescind, at any time and in any way whatsoever, the rights, if any, granted by or under this Agreement to any Person who is not a Party, without notice to or consent of that Person, including any Indemnified Person.
| 29.6 | Contractual Relationship |
Nothing contained in this Agreement shall be construed as creating a contractual relationship of any kind (i) between the Owner and a Subcontractor or Vendor (except as provided in Article 14 hereof), or (ii) between any Persons or entities other than the Owner and the Contractor. In confirmation and furtherance of the foregoing, no Subcontractor or Vendor or any other Person not a Party to this Agreement shall be deemed or construed as a third party beneficiary of this Agreement.
| 29.7 | Costs and Expenses |
Unless otherwise specified, each Party shall be responsible for all costs and expenses (including the fees and disbursements of legal counsel, bankers, investment bankers, accountants, brokers and other advisors) incurred by it in connection with this Agreement.
| 29.8 | Severability |
If any provision of this Agreement or its application to any Party or circumstance is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, it will be ineffective only to the extent of its illegality, invalidity or unenforceability without affecting the validity or the enforceability of the remaining provisions of this Agreement and without affecting its application to other parties or circumstances.
| 29.9 | Waiver of Rights |
Any waiver of any of the provisions of this Agreement will be binding only if it is in writing and signed by the Party to be bound by it, and only in the specific instance and for the specific purpose for which it has been given. The failure or delay of any Party in exercising any right under this Agreement will not operate as a waiver of that right. No single or partial exercise of any right will preclude any other or further exercise of that right or the exercise of any other right, and no waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar).
| - 72 - |
| 29.10 | Remedies Cumulative |
Unless otherwise specified, the rights and remedies of a Party under this Agreement are cumulative and in addition to and without prejudice to any other rights or remedies available to that Party at law, in equity or otherwise, and unless otherwise specified, no single or partial exercise by a Party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which that Party may be entitled provided always the foregoing remedies are all subject to the limitation of liability set out in Section 8.2.
| 29.11 | Notices |
| (a) | Any notice, direction or other communication (in this Section 29.11, a “Notice”) regarding the matters contemplated by this Agreement must be in writing and delivered personally, sent by courier or by electronic mail) , as follows: |
If to either Owner:
570 Granville St., Suite 900
Vancouver, BC. V6C 3P1
Attention: Matthew Wayrynen
Email: [REDACTED: Email]
If to the Contractor:
505 Consumers Rd., Unit 803
North York, Ontario
M2J 4V8
Attention: Richard Lu
Email: [REDACTED: Email]
| (b) | A Notice is deemed to be delivered and received (i) if delivered personally, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (ii) if sent by same day courier, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (iii) if sent by overnight courier, on the next Working Day; or (iv) if transmitted by facsimile, on the Working Day following the date of confirmation of transmission by the originating facsimile. |
| (c) | A Party may change its address for service from time to time by Notice given in accordance with the foregoing provisions. |
| 29.12 | Headings and Table of Contents |
The headings and captions used in this Agreement are inserted for reference and convenience only and the same shall not limit or construe the sections, articles or paragraphs to which they apply or otherwise affect the interpretation thereof. The headings contained herein and the Table of Contents are not part of this Agreement and are included solely for the convenience of the Parties.
| - 73 - |
| 29.13 | Time of Essence |
Time is of the essence of this Agreement.
| 29.14 | Interpretation |
In the event of any inconsistency or discrepancy between written words and specific numbers, the description of any such figures by written words shall govern.
| 29.15 | References |
In this Agreement, unless a clear, contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person or entity includes such Person’s or entity’s successors and assigns but, in the case of a party to this Agreement, only if such successors and assigns are permitted by this Agreement, and reference to a Person or entity in a particular capacity excludes such Person or entity in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of this Agreement; (e) reference to any Law means such Law as amended, modified, codified or re-enacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (f) reference to any Section means such Section of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (g) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, “from” means “from and including”, “to” means “to but excluding” and “through” means “through and including”.
| 29.16 | Incorporation by Reference |
The recitals set forth in this Agreement, as well as all Schedules attached hereto, are hereby incorporated into this Agreement by this reference and expressly made a part of this Agreement.
| 29.17 | Publicity |
Upon the reasonable request of the Owner, the Contractor shall cooperate and assist the Owner in connection with any public relations or publicity relating to the Project, including, without limitation, tours of the Project and the Job Site arranged by the Owner upon reasonable Notice and provided that any such public relations or publicity events do not interfere with the performance of the Work in the ordinary course. Neither Party shall issue any press or publicity release or otherwise release, distribute or disseminate any Confidential Information for publication concerning this Agreement or the participation of the other Party in the transactions contemplated hereby without the prior written consent of the other Party, which consent shall not be unreasonably withheld, or unless required by Law or stock exchange rule.
| - 74 - |
| 29.18 | Further Assurances |
The Contractor and the Owner agree to provide such information, execute and deliver any instruments and documents, and to take such other actions as may be necessary or reasonably requested by the other Party, which are not inconsistent with the provisions of this Agreement and which do not involve assumptions of obligations other than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of this Agreement.
| 29.19 | Number and Gender |
Where the context so requires, words importing the singular shall include the plural and vice versa, words importing the masculine shall include the feminine and neuter and all text in parentheses ( ) shall have the same effect as if parentheses were not used.
| 29.20 | Counterparts |
This Agreement may be executed in any number of counterparts (including counterparts by facsimile), each of which will be deemed to be an original and all of which, taken together, will be deemed to constitute one and the same instrument. Delivery by facsimile or by electronic transmission of an executed counterpart of this Agreement is as effective as delivery of an originally executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or by electronic transmission shall also deliver an originally executed counterpart of this Agreement, but the failure to deliver an originally executed copy does not affect the validity, enforceability or binding effect of this Agreement.
[Signing Page Follows]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.
| 1000234813 ONTARIO INC. | ||
| By: | “Matthew Wayrynen” | |
| Name: | Matthew Wayrynen | |
| Title: | CEO | |
| SOLARBANK CORPORATION | ||
| By: | “Andrew van Doorn” | |
| Name: | Andrew van Doorn | |
| Title: | Chief Operating Officer | |
SCHEDULE 1
OWNER’S STATEMENT OF REQUIREMENTS
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 2
JOB SITE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 3
SITE ACCEPTANCE TEST
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 4
CONTRACTOR’S CERTIFICATE OF SUBSTANTIAL PERFORMANCE
This Certificate of Substantial Performance is provided in accordance with Section 12.2 of the Agreement dated [date] between [●] (the “Owner” and SolarBank Corporation (the “Contractor”. Capitalized terms used in this certificate and not otherwise defined in this certificate have the meaning specified in the Agreement.
In accordance with the Agreement, the Owner hereby certified that all of the following have been satisfied in accordance with the Agreement:
 | Contractor has completed the Commissioning services; and |
| Contractor and Owner have agreed on a Punch List as to all remaining work to be completed in connection with the BESS |
In accordance with the Agreement, the Parties hereby confirm and agree that the Substantial Completion Date shall be deemed to have occurred as of [date].
| Executed as of [date] | Accepted as of [date] | |||
| SolarBank Corporation | [●] | |||
| Per: | Per: | |||
| Name: | Name: | |||
| Title: | Title: | |||
SCHEDULE 5
MAJOR COMPONENT PROCUREMENT PLAN
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 6
FIXED CONTRACT PRICE
(as per Section 9.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 7
FORM OF STATUTORY DECLARATION
(see attached)
STATUTORY DECLARATION
| Canada | IN THE MATTER OF a contract entered with |
| Province of Ontario | _____________________________________________________, |
| (Owner) | |
| by (Name of Contractor) , (Contractor), on (date ) (the “Contract”) | |
| Project Name/Number: _______________________________ | |
| I, (Name) , | |
DO SOLEMNLY DECLARE:
1. that I am (Title or Position) , of (Name of Contractor) , the Contractor named in the above mentioned Contract, and as such have personal knowledge of the fact herein declared.
2. that all accounts for labour, sub-contracts, products, materials, services and construction machinery and equipment, which have been incurred directly by the Contractor in the performance of the Work as required by the Contract, and for which the Owner might in any way be held responsible, have been discharged, except for:
| (1) | holdback monies properly retained, |
| (2) | payments deferred by agreement between the Contractor and the Owner, |
| (3) | amounts withheld by reason of legitimate dispute which have been identified to the party or parties, from whom payment has been withheld and are listed below and, (identify payees and amounts payable to each) |
_______________________________________________________________________________________________
_______________________________________________________________________________________________
_______________________________________________________________________________________________
| (4) | payments that are yet to be made because they are subject to the Contractor’s verification processes. |
3. that all accounts for labour, material suppliers and sub-contracts have been informed of the name of the construction trade newspaper, as declared.
AND I MAKE THIS SOLEMN DECLARATION conscientiously believing it to be true and knowing that it is of the same force and effect as if made under oath and by virtue of the CANADA EVIDENCE ACT.
| Declared before me at the _________________________ | |
| Of _____________________________________________ | |
| in the __________________________________________ | |
| of ____________________this _____________________ |
day of ___________________________. 20 __
| (Deponent) | ||
| A Commissioner etc. |
INSTRUCTIONS
This declaration must be sworn before a commissioner for oaths, notary public or justice of the peace.
Statutory declaration to be submitted along with application for payment to the Owner.
SCHEDULE 8
CONTRACTOR’S PERSONNEL COMMITMENT
The following individual(s) will act on behalf of the Contractor in connection with the Project, together with their scope of authority. Such designations as of the date of this Agreement as set forth below. Such individuals may be replaced, from time to time, subject to the prior approval of the Owner.
Dennis Stainton
Construction and Operations Project Manager
[REDACTED: Email address]
SCHEDULE 9
SCHEDULE OF MILESTONES (AND MILESTONE COMPLETION CERTIFICATE)
[REDACTED: Confidential and commercially sensitive information]
MILESTONE COMPLETION CERTIFICATE
This Milestone Completion Certificate (the “Certificate”) is provided in accordance with the Contract by and between ___________________ (“Owner”) and SolarBank Corporation (“Contractor”) dated ___________________, 2023 (the “Agreement”).
Capitalized terms used in this Certificate and not otherwise defined herein have the meanings specified in the Agreement.
In accordance with Article _____________, the Contractor hereby certifies that, with respect to Milestone No. ___________________ all of the requirements to achieve [Insert Title of Milestone] Completion as defined in Article
with the exception of Owner’s acceptance hereof) have been achieved.
Attached hereto is the required documentation in support of above certification.
| Executed this ___ day of _____________________, 202_. | ||
| [Contractor]______________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
Acceptance
In accordance with Article ___________, Owner on this _______ day of ________, 201__, hereby indicates its acceptance of the achievement of Milestone No. Completion.
| [Owner]_________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
SCHEDULE 10
PROJECT SCHEDULE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 11
CHANGE ORDER AND CHANGE DIRECTIVE FORM
(as per Section 16.3)
See attached.
Change Order
Project: (Name and Address)
Contract Information:
Contract for:
Date:
Change Order Information
Change Order Number:
Date:
Owner: (Name and Address)
Contractor: (Name and Address)
_______________________________________________________________________________________________
The Contract I changed as follows:
(Insert a detailed description of the change and, if applicable, attach or reference specific exhibits. Also include agreed upon adjustments attributable to executed Construction Change Directives.)
| The original (Fixed Contract Price) was | $ | |||
| The net change by previously authorized Change Orders | $ | |||
| The (Fixed Contract Price) Prior to Change was | $ | |||
| The (Fixed Contract Price) will be (increased) (decreased) | ||||
| (unchanged) by this Change Order in the amount of | $ | |||
| The new (Fixed Contract Price), including this | ||||
| Change Order, will be | $ | |||
| The Completion Plan will be (increased)(decreased)(unchanged) by | $ | |||
| The new date of Substantial Completion will be | $ |
_______________________________________________________________________________________________
NOT VALID UNTIL SIGNED BY THE CONTARTCOR AND OWNER
| OWNER | CONTRACTOR | |
| SIGNATURE | SIGNATURE | |
| NAME AND POSITION | NAME AND POSITION | |
| DATE | DATE |
SCHEDULE 12
REPORT TO OWNER
| No. | Work Completed at Week of xx, 20 (Previous Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 | ||||||||||||||
| No. | Outstanding Work from Week of xx, 20 (Previous Week) |
Comments & Impact on Following Work |
Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| No. | Work planed at Week of xx, 20 (Current Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 |
|
SCHEDULE 13
[Intentionally left blank]
SCHEDULE 14
FORM OF CONTRACTOR’S APPLICATION FOR PAYMENT
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 15
OWNER’S NOTICE OF SUBSTANTIAL PERFORMANCE
(see attached)
APPLICATION FOR SUBSTANTIAL PERFORMANCE
| To: | Date: | |||
| (Owner) | ||||
| Project: |
RE: Engineering, Procurement and Construction Agreement between Owner and SolarBank Corporation dated [date] (the “Contract”)
In accordance with the Contract requirements, I/We _________________________________ (Name of Contractor) hereby apply for:
☐ Certificate of Substantial Performance
☐ Certificate of Completion
| All work invoiced to date | $ | |||
| Payments made to date | -$ | |||
| Less holdback | -$ | |||
| Less Owner’s set-offs | -$ | |||
| Amount due | =$ |
I/We _______________________________________________________________________________ (Name of Contractor) hereby declare that the Certificate of Substantial Performance shall be published in: _______________________________________________(Name of the construction trade newspaper). The link for the construction trade newspaper is: __________________________.
I/We _______________________________________ (Name of Contractor) hereby release the Owner of all further claims related to the contract with the following exceptions:
| - | List outstanding issues | ||
I/We ____________________________________________________(Name of Contractor) hereby declare and submit with this Application a Statutory Declaration in the form provided that all liabilities incurred by the Contractor, and the Contractor’s Sub-Contractors, in carrying out the Contract have been discharged, except for the statutory holdbacks properly retained in accordance with the Construction Act.
| - | List outstanding liabilities: | ||
| Name: | Signature: | ||
| Position: | Date: |
SCHEUDLE 16
LIST OF APPROVED VENDORS AND SUBCONTRACTORS
(Section 14.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 17
[intentionally left blank]
SCHEDULE 18
[intentionally left blank]
SCHEDULE 19
NOTICE TO PROCEED
(see attached)
PROJECT NOTICE TO PROCEED
| To: | SolarBank Corporation |
| Re: | Engineering, Procurement and Construction Agreement between Solarbank Corporation and [●] dated , 202_ (the “EPC Agreement”) |
Project:
Location:
In accordance with Section 2.1.1 of the EPC Agreement, the Contractor may proceed with the Work for the Project. Any Notice to Proceed provided by the Owner does not relieve the Contractor from any responsibility or obligation for the proper performance of the Work in conformity with the requirements of the Agreement. This Notice to Proceed imposes no liability upon the Owner and is not to be interpreted as an approval or acceptance of the Work by the Owner that the Work was completed or supplied in conformance with the Agreement.
| [Owner] | ||||
| Issued by: | Time & Date: | |||
| [name] | ||||
| SolarBank Corporation | ||||
| Received by: | Time & Date: | |||
| [name] |
SCHEDULE 20
CERTIFICATE OF FINAL COMPLETION
(see attached)
CERTIFICATE OF FINAL COMPLETION
Reference is made to that certain Engineering, Procurement & Construction Agreement dated as of ______________, 2023 by and between Owner and Contractor (the “Agreement”). Capitalized terms used, but not defined, herein shall have the meanings set forth in the Agreement.
| 1. | The undersigned Contractor does hereby certify and represent as follows to Owner: |
| (a) | Contractor has delivered to Owner a certificate verifying that the Project has achieved Commercial Operation; |
| (b) | Contractor has completed all Punch List items; |
| (c) | A Substantial Completion Certificate for the Work relating to the Project has been published pursuant to Section 31(1) of the Construction Act; |
| (d) | Contractor has delivered evidence of compliance with the Workplace Safety and Insurance Act (Ontario) in form and content satisfactory to Owner; |
| (e) | All Contractor personnel (including subcontractors) shall have left the Job Site; |
| (f) | Owner has received from Contractor all warranties, data, operation and maintenance and other manuals, spare parts lists, and such other items as required by required documentation for the Work in accordance with Section 4.8; |
| (g) | Pursuant to Section 10.1.2 of the Agreement, any Lien registered against the Owner or for which the Owner has received notice in connection with the Work has been satisfied, discharged, vacated or withdrawn in accordance with the Construction Act; |
| (h) | All waste and rubbish and all surplus materials and construction facilities other than those materials and facilities to which Owner holds title shall have been removed from the Job Site; |
| (i) | The Job Site shall have been restored to the same condition that such Job Site was received. |
Executed and delivered to Owner this ___________ day of ______________, 20__.
| CONTRACTOR: | ACCEPTED BY OWNER: | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: | |||
Exhibit 99.75
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
BY AND BETWEEN
1000234763 ONTARIO INC.
AND
SOLARBANK CORPORATION
DATED AS OF THIS 3rd DAY OF OCTOBER, 2023
TABLE OF CONTENTS
| ARTICLE 1 DEFINITIONS | 1 | |
| 1.1 | Defined Terms | 1 |
| 1.2 | Schedules | 12 |
| ARTICLE 2 NOTICE TO PROCEED | 12 | |
| 2.1 | Notice to Proceed | 12 |
| 2.2 | Limited Notice to Proceed | 13 |
| ARTICLE 3 GENERAL PROVISIONS | 13 | |
| 3.1 | Scope of Work | 13 |
| 3.2 | Contractor Review of Project Requirements | 13 |
| 3.3 | Priority of Agreement Provisions | 14 |
| 3.4 | Independent Contractor | 14 |
| ARTICLE 4 CONTRACTOR’S SERVICES | 14 | |
| 4.1 | General Requirements | 14 |
| 4.2 | Design and Engineering Work | 19 |
| 4.3 | Procurement and Construction Work | 21 |
| 4.4 | Coordination with Owner, Authorities and Subcontractors | 23 |
| 4.5 | Local Communities | 24 |
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices | 24 |
| 4.7 | Entrance, Routing and Transportation to the Job Site | 24 |
| 4.8 | Importing | 25 |
| ARTICLE 5 OWNER | 25 | |
| 5.1 | Rights, Duties & Obligations | 25 |
| ARTICLE 6 PROJECT SCHEDULE | 27 | |
| 6.1 | Commencement | 27 |
| 6.2 | Substantial Performance | 27 |
| 6.3 | Project Schedule | 27 |
| ARTICLE 7 LIQUIDATED DAMAGES | 28 | |
| 7.1 | Delay Liquidated Damages | 28 |
| 7.2 | Substantial Performance and Minimum Performance Criteria | 28 |
| 7.3 | Exclusivity of Liability | 28 |
| 7.4 | Invoicing and Payment of Liquidated Damages | 28 |
| 7.5 | Liquidated Damages Not Penalty | 28 |
| ARTICLE 8 LIMITATION OF LIABILITY | 29 | |
| 8.1 | Consequential Damages | 29 |
| 8.2 | Overall Limitation | 29 |
| 8.3 | Exceptions to Caps on Liability | 29 |
| 8.4 | Remedies Non-Exclusive | 30 |
| 8.5 | Limitations | 30 |
| ARTICLE 29 MISCELLANEOUS PROVISIONS | 70 | |
| 29.1 | Governing Law | 70 |
| 29.2 | Meaning of Terms | 70 |
| 29.3 | Entire Agreement | 70 |
| 29.4 | Successors and Assigns | 71 |
| 29.5 | Third Parties | 71 |
| 29.6 | Contractual Relationship | 71 |
| 29.7 | Costs and Expenses | 71 |
| 29.8 | Severability | 71 |
| 29.9 | Waiver of Rights | 71 |
| 29.10 | Remedies Cumulative | 72 |
| 29.11 | Notices | 72 |
| 29.12 | Headings and Table of Contents | 72 |
| 29.13 | Time of Essence | 73 |
| 29.14 | Interpretation | 73 |
| 29.15 | References | 73 |
| 29.16 | Incorporation by Reference | 73 |
| 29.17 | Publicity | 73 |
| 29.18 | Further Assurances | 74 |
| 29.19 | Number and Gender | 74 |
| 29.20 | Counterparts | 74 |
ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT
THIS ENGINEERING, PROCUREMENT & CONSTRUCTION AGREEMENT is made as of this 3rd day of October, 2023 by and between 1000234763 Ontario Inc., each a corporation established under the laws of the Province of Ontario (each an “Owner” and collectively, the “Owners”), and SolarBank Corporation, a corporation established under the laws of the Province of Ontario (the “Contractor”).
RECITALS
WHEREAS the IESO awarded the Owners an Expedited Long-Term Reliability Services (“E-LT1”) Contract which formalizes the long-term contractual arrangements for the Owner to develop, construct, operate and maintain the Project described in Schedule 1.
AND WHEREAS the Owner wishes to engage the Contractor to furnish, and the Contractor desires to furnish, on a fixed-price turnkey basis, the BESS, including but not limited to the engineering, design, procurement, construction management, installation, construction, operator training, testing and commissioning services necessary to construct, install, commission, test and initially operate the BESS according to the specifications set forth herein and perform the remainder of the Work as more fully described herein;
NOW, THEREFORE, for and in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
| 1.1 | Defined Terms |
For purposes of this Agreement, the terms set forth in the following clauses shall have the meanings ascribed to them:
“Acceptance Date” means the date on which the Owner delivers to the Contractor the Owner Substantial Performance Notice.
“Actual Cost” has the meaning set forth in Section 16.5(b).
“ADR Institute of Canada” means the ADR Institute of Canada, Inc. and its permitted successors and assigns.
“Affiliate” means, with respect to either Party, any Person directly or indirectly controlled by, controlling or under common control with such Party. For the purposes of this definition, “control” of any Person includes (i) with respect to any corporation or other Person having voting shares or the equivalent equity interest, the ownership or power to vote, directly or indirectly, shares or the equivalent equity interest representing fifty percent (50%) or more of the power to vote in the election of directors, managers or persons performing similar supervisory and management functions, (ii) ownership of more than fifty percent (50%) of the equity or beneficial interest in that Person, or (iii) the ability to direct the business and affairs of any Person by acting as a general partner, manager or otherwise.
| - 2 - |
“Agreement” means and refers to this Agreement including all schedules, exhibits and documents incorporated by attachment or reference thereto and any Modifications issued after the execution of this Agreement.
“Application for Payment” has the meaning set forth in Section 10.1.1 and shall be in the form of Schedule 14 hereto.
“Approval Date” has the meaning set forth in Section 16.2.
“Arbitration Notice” has the meaning set forth in Section 27.3.2.
“Authority” means any country or any foreign, national, federal, provincial, state, county, territory, municipality, region or other political subdivision thereof, or any government, quasi-government, administrative department or regulatory authority, agency, ministry, board, body, commission, instrumentality, court or tribunal thereof or any central bank (or similar monetary or regulatory authority), any tax authority, any ministry or department or agency of the foregoing, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any Person acting under the authority of any Authority.
“Battery energy storage facility AC nameplate capacity” means the total storage facility AC energy for the project, measured as the total installed energy in MWh when taking into account the batteries, inverters, transformers and controls, and assuming an RTE of eighty five percent (85%) at POI. Battery energy storage facility AC energy capacity will be verified at time of commissioning in accordance with the Site Acceptance Test.
“Battery energy storage facility DC energy capacity” means the total DC energy storage facility for the project, calculated as the total installed energy in MWh when taking into account the battery and battery controls. Battery energy storage capacity is not verified, but is calculated.
“BESS” means and refers to a new fully functioning and complete 4.99 MW and 22.572 MWh Battery energy storage facility DC energy capacity) Battery energy storage facility AC nameplate capacity, which corresponds to 19.96 MWh usable AC battery energy storage facility composed of a direct current power storage system, all necessary batteries, inverters, transformers, controls, auxiliary and support systems and facilities including the Electric Interconnection Facilities and those described in detail in, the Statement of Requirements to be engineered, procured, constructed and/or installed by the Contractor on the Job Site in accordance with the Project Requirements.
“Certificate of Final Completion” has the meaning set forth in Section 13.1.
“Certificate of Substantial Performance” has the meaning set forth in Section 12.2.
“Change in Work” means an addition, modification, alteration, substitution, variation, deduction or cancellation of Work together with any resulting changes in the Fixed Contract Price and the Project Schedule, as applicable, and as instructed by the Owner in writing pursuant to Article 16 or as otherwise permitted in accordance with the terms of this Agreement.
“Change Order” has the meaning set forth in Section 16.3.
| - 3 - |
“Commercial Operation” has the meaning set forth in paragraph (c) of the definition of Substantial Performance.
“Commercially Reasonable Efforts” means efforts which are designed to enable a Party, directly or indirectly, to satisfy a condition to, or otherwise assist in the consummation of, the obligations contemplated by this Agreement and which do not require the performing Party to expend any funds or assume liabilities, other than expenditures and liabilities which are reasonable in nature and amount in the context of the obligations assumed by a Party under the terms and conditions of this Agreement.
“Completion Plan” means a plan developed pursuant to Section 12.4.
“Components” means and refers to all the tangible materials, equipment, apparatus, structures, tools, supplies or goods, including systems, subsystems, subassemblies and components supplied by the Contractor or any Subcontractor as required by this Agreement which shall include each element of the BESS.
“Confidential Information” has the meaning set forth in Section 15.2.1.
“Construction Change Directive” has the meaning set forth in Section 16.4.
“Constructor” has the meaning set forth in Section 20.1.3(a)
“Contractor” has the meaning given in the preamble.
“Contractor Event of Default” has the meaning set forth in Section 28.2.1.
“Contractor Permits” has the meaning set forth in Section 4.1.8
“Contractor Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Contractor’s Representative” has the meaning set forth in Section 4.1.5.
“CSTS” has the meaning set forth in Section 20.2.14(a).
“Daily Rate” means, with respect to the period by which Substantial Performance Date is delayed, from and including the Guaranteed Substantial Performance Date:
| (a) | for the first ninety (90) days of such period, [REDACTED: Dollar amount] per Business Day; and |
| (b) | for each day after ninety (90) calendar days of such period, [REDACTED: Dollar amount] per Business Day. |
“Day” or “day” means and refers to a calendar day.
“Delay Liquidated Damages” has the meaning set forth in Section 7.1.
“$” means Canadian currency, except as specifically indicated otherwise herein.
| - 4 - |
“Design & Engineering Documents” means those documents identified in the Statement of Requirements.
“Design Materials” has the meaning set forth in Section 15.1.1.
“Detail Design Documents” means the drawings, specifications and other design documents that are to be prepared by the Contractor for the Project.
“Directive Date” has the meaning set forth in Section 16.2.
“Dispute” has the meaning set forth in Section 27.3.1.
“Electric Interconnection Facilities” means all structures, facilities, equipment, auxiliary equipment, devices and apparatus directly or indirectly required to interconnect the BESS to the distribution system and to existing electrical infrastructure at the following points identified in the Statement of Requirements.
“Environment” means the environment or natural environment as defined in any Environmental Laws and including air, surface, water, ground water, land surface, oil, rock, bedrock, subsurface strata, sediment, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource, any sewer system and the environment in the workplace.
“Environmental Laws” means all Laws relating to the Environment, or public or worker health or safety, and including Laws relating to (a) the assessment, review or approval of projects or undertakings; (b) the storage, generation, use, handling, manufacture, processing, labelling, advertising, sale, display, transportation, treatment, reuse, recycling, release and disposal of Hazardous Substances; and (c) the Environmental Protection Act (Ontario).
“Environmental Permits” means those air and noise, stormwater and industrial sewage permits, certificates, licenses, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals permits, certificates, licences, authorisations, consents, agreements, instructions, directions, notices, registrations, approvals or other rights in each case made, issued, granted, conferred or required pursuant to any Environmental Law.
“Extended Warranty Period” has the meaning set forth in Section 23.1.4.
“Final Completion” shall be deemed to have occurred when (a) Substantial Performance has occurred and all conditions required for Substantial Performance continue to be satisfied, (b) all items identified on the Punch List have been completed (except for such items that Owner waives in writing), (c) all documents and deliverables which are required for Final Completion under this Agreement have been delivered, including final Operation and Maintenance Manuals, schematics, spare parts lists, drawings, Design and Engineering Documents, Detail Design Documents, “as- built” drawings and surveys (including, without limitation, the site plan survey of the property on which the BESS is located with the actual location of improvements and other structures) and Permits (d) all other duties and obligations of the Contractor under this Agreement have been fully performed, except for the Contractor’s warranty obligations which by their terms are to be performed after the Final Completion Date, (e) all the Contractor’s (and its Subcontractors’) personnel, supplies, tools, equipment, surplus materials, waste materials, rubbish, debris and temporary facilities have been cleaned up and removed from the Job Site, (f) there exists no Contractor Event of Default, and (g) the Owner has received from the Contractor evidence satisfactory to the Owner that all payments due to its Subcontractors and all payrolls, bills, holdbacks, workers compensation board claims and other costs and expenses relating to the Work have been paid or otherwise satisfied (including, but not limited to, statutory declarations from the Contractor in the form attached as Schedule 7).
| - 5 - |
“Final Completion Date” means the date the Contractor sent the last Notice to the Owner indicating achievement of Final Completion which is executed by Owner.
“Fixed Contract Price” has the meaning set forth in Section 9.1.
“Force Majeure” has the meaning set forth in Section 24.1.1.
“Good Engineering and Operating Practices” means any of the practices, methods, specifications, acts and standards of safety, performance, dependability, efficiency and economy which should be adopted by a Person exercising that degree of knowledge, skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from an engineering, procurement and construction contractor engaged in work similar to the Work, including multi- disciplinary design/build project execution including design, engineering, procurement, transportation, fabrication, construction, start-up, testing, operating, maintenance and repair, and training in respect of facilities the same as or similar to the Project under the same or similar circumstances, including the applicable IESO and Market Rule standards in place as of the date of execution of this Agreement and such other practices, methods or acts which, in the exercise of reasonable and prudent judgment by those in the engineering, procurement and construction industry in light of facts know at the time a decision is made and intending to comply with contractual obligations to which they are subject, would be expected to accomplish the result intended and consistent with Law, reliability, safety and expedition.
“Guaranteed Capacity” means 4.74 MW of power capacity and 18.96 MWh of AC energy capacity in respect of the BESS as specified in the Statement of Requirements, as measured at the inverter AC output demarcation point as described in the Statement of Requirements.
“Guaranteed Capacity Test” means the capacity test to be performed by Contractor pursuant to the Site Acceptance Test to demonstrate if the BESS satisfies the Guaranteed Capacity.
“Guaranteed Substantial Performance Date” means May 1, 2025, such date to be adjusted if and to the extent applicable and permitted pursuant to the terms and provisions of Article 16 of this Agreement.
“Hazardous Substance” means and refers to (a) any substance which is listed, defined, designated or classified under any Environmental Law as a (i) hazardous material, substance, constituent or waste, (ii) toxic material, substance, constituent or waste, (iii) radioactive material, substance, constituent or waste, (iv) dangerous material, substance, constituent or waste, (v) pollutant, (vi) contaminant, or (vii) special waste; (b) any material, substance, constituent or waste regulated under any Environmental Laws; or (c) petroleum, petroleum products, radioactive matters, polychlorinated biphenyl, pesticides, asbestos, or asbestos-containing materials.
“Health and Safety Plan” has the meaning set forth in Section 20.1.1.
| - 6 - |
“HST” means the goods and services tax or harmonised sales tax imposed under Part IX of the Excise Tax Act (Canada), as amended, or any similar provincial value-added tax which may be imposed now or in the future.
“Hydro One” means Hydro One Networks Inc., the local transmission system operator.
“IESO” means the Independent Electricity System Operator.
“Initial Warranty Period” has the meaning set forth in Section 23.1.5.
“Initiating Party” has the meaning set forth in Section 27.3.2.
“Inspection Date” has the meaning set forth in Section 5.1.6(b).
“Institute” has the meaning set forth in Section 27.3.1.
“Intellectual Property Rights” means and refers to all patents and patent rights, inventions, copyrights, works of authorship, trademarks, service marks, trade secrets and all similar and related intellectual property rights protected under any Law and, for greater certainty, includes all technical information, know-how, processes, procedures, compositions, devices, methods, models, formulas, protocols, techniques, software, designs, plans, methodologies, drawings or data created or owned by Contractor or its Subcontractors.
“ITC” means Investment Tax Credits for green technology projects provided by the Government of Canada or Provincial Government of Ontario.
“Job Site” means the job site shown on the site drawings included in Schedule 2 and otherwise described in this Agreement together with such additional areas as may, from time to time, be designated in writing by Owner for the Contractor’s use (including laydown areas) hereunder.
“kV” means kilovolts.
“kW” means kilowatt.
“Limited Notice to Proceed” has the meaning set forth in Section 2.2.
“MW” means megawatt.
“MWh” means megawatt-hour.
“Landlord” refers to the property owner of the Job Site.
“Law” means and refers to any constitution, charter, statute, legislation, treaty, act, law, ordinance, Permit rule, regulation, code, rule, order, decree, permit, judgment, injunction, directive, ruling, decision, order, guideline, resolution, declaration or other requirement, decision or determination of any Authority, or any interpretation or application thereof by any such Authority.
“Liabilities” means actions, causes of action, proceedings claims, demands, complaints, grievances, suits, charges, indictments, prosecutions, investigations, informations, assessments, reassessments or similar process or any damages, costs, losses, expenses, penalties, royalties, payments, fines, assessments, charges or liabilities whatsoever suffered, sustained, paid or incurred (including in connection with the death of or injury to any individual or damage to or loss of any property, including property of the Owner) and “Liability” shall be construed accordingly.
| - 7 - |
“Lien Holdback Amount” means the holdback amount pursuant to Section 22 of the Construction Act (Ontario).
“Liens” means all mortgages, deeds of trust, liens, debentures, security interests, pledges, conditional sale contracts, proceedings, orders, rights of first refusal, options, charges, agreements, easements, rights-of-way, limitations, reservations, restrictions, community property interests, equitable interests, building-use restrictions, exceptions, variances, and other encumbrances or restrictions of any kind, whether recorded or unrecorded, including restrictions on use, transfer, receipt of income, or exercise of any other attribute of ownership.
“Liquidated Damages” means the amounts payable by the Contractor expressed to be liquidated damages including the Delay Liquidated Damages and such other amounts prescribed in Section 7.1.
“Major Component” means the Components listed on the Major Component Procurement Plan.
“Major Component Procurement Plan” means the procurement plan for Major Components described in Section 4.3.9 hereof, which shall be in the form attached hereto as Schedule 5.
“Market Rules” means the rules and regulations governing the distribution system, transmission system and markets, together with all market manuals, policies, and guidelines issued by the IESO, the Ontario Energy Board, Owner or any Authority, all as amended or replaced from time to time.
“Maximum Liability Amount” has the meaning set forth in Section 8.2.
“Milestone Completion Certificate” means the applicable certificate in the form attached hereto as Schedule 9.
“Modification” means and refers to (i) a written amendment to this Agreement signed by all Parties hereto, (ii) a Change Order, or (iii) a Construction Change Directive.
“Monthly Updated Schedule” has the meaning set forth in Section 6.3.
“Notice” means a written communication between the parties required or permitted by this Agreement and conforming to the requirements of Section 29.11 of this Agreement.
“Operation and Maintenance Manuals” means and refers to detailed and comprehensive procedures, guidelines and instructions explaining each aspect of the proper operation and maintenance of each component and each system comprising the BESS, as well as the BESS as a whole. Any such manuals supplied by Vendors and manufacturers of the Components shall be collected together with the sequence of operations manuals to be prepared by the Contractor, all in an organized set of binders.
“Owner” has the meaning given in the preamble.
“Owner Caused Delay” has the meaning set forth in Section 24.2.
| - 8 - |
“Owner’s Engineer” means the engineer (or engineers) designated by the Owner to provide advice and assistance to the Owner in whatever manner or function the Owner may decide from time to time.
“Owner Event of Default” has the meaning set forth in Section 28.3.1.
“Owner Indemnitees” has the meaning set forth in Section 26.1.1.
“Owner Permits” has the meaning set forth in Section 4.1.8.
“Owner Policy” means the Owner’s and Contractor’s respective Code of Business Conduct, Environmental Policy and Occupational Health & Safety Policy.
“Owner’s Representative” has the meaning set forth in Section 5.1.1.
“Owner Substantial Performance Notice” has the meaning set forth in Section 12.2.
“Parties” means the Owner and the Contractor.
“Permits” has the meaning set forth in Section 4.1.8.
“Person” means any individual, corporation, company, voluntary association, partnership, incorporated organization or Authority.
“Pre-Existing Hazardous Substance(s)” means and refers to a Hazardous Substance existing at any Job Site as of the date of execution of this Agreement.
“Prime Rate” means the floating annual rate of interest publicly announced by the Royal Bank of Canada as its prime rate in Canadian dollar loans to customers in Canada and designated as its prime rate and the Prime Rate shall change when and as such prime rate changes.
“Project” means and refers to the provision of the Work in relation to the BESS as described in this Agreement.
“Project Agreements” means this Agreement and any other agreement or document necessary for the construction, startup or testing of the Project.
“Project Requirements” means and refers to (i) applicable Laws, (ii) the terms and conditions of this Agreement and, as applicable, the Project Agreements, (iii) written recommendations and requirements of the Contractor’s suppliers or Vendors, (iv) all Permits obtained by or on behalf of the Owner or by the Contractor or required to be obtained pursuant to Section 4.1.8, (v) the Good Engineering and Operating Practices, and (vi) the Technical Requirements.
“Project Schedule” means the schedule attached hereto as Schedule 10 describing all significant engineering, procurement and construction activities, milestones and events, permitting activities, certain significant Owner’s milestone events, including the estimated time of completion of project milestones by the Contractor and as amended where expressly provided for in the Agreement. Whenever herein there is a reference to an adjustment to the Guaranteed Substantial Performance Date, such adjustment shall also contemplate an equitable adjustment to the Project Schedule.
| - 9 - |
“Punch List” means and refers to a comprehensive list agreed to by the Contractor and the Owner upon Substantial Performance identifying those insubstantial details of construction and mechanical adjustment which require repair, completion, correction or re-execution, the non- completion of which does not interfere with the Owner’s safe and reliable occupancy, use and commercial operation of the BESS such as completion of painting, final clean-up and rubbish removal.
“Recipient” has the meaning set forth in Section 27.3.3.
“RTE” means “Round Trip Efficiency” and is the ratio of the AC energy in percentage between the energy supplied to the storage system(measured in MWh) and the energy retrieved from it in MWh, taking into account the one-way efficiencies of the batteries, the inverter, the transformer, and other components. A reasonable assumption of RTE for the Project is [REDACTED: Percentage amount]
“Sales Taxes” has the meaning set forth in Section 9.1.
“Schedules” means schedules to this Agreement.
“Separate Contractor” has the meaning set forth in Section 21.1.
“Site Acceptance Test” means the site acceptance test prepared by Contractor and agreed to by Owner in accordance with the Statement of Requirements.
“Statement of Requirements” means the Owner’s statement of requirements for the Project as set out in Schedule 1.
“Subcontractor” means and refers to any Person or entity, including a Components supplier or Vendor, who performs a portion of the Work or supplies materials, Components or other items in relation to the Work.
“Substantial Performance” shall be deemed to have occurred when:
| (a) | the Contractor has delivered to the Owner, immediately when available, the following: (1) the raw data collected upon the completion of the Guaranteed Capacity Test, (2) test results of the Guaranteed Capacity Test and (3) a certificate from the Contractor certifying that the test results of the Guaranteed Capacity Tests are true and accurate and such tests have been performed in accordance with the Site Acceptance Test; |
| (b) | in accordance with the procedures set forth in Article 12, the Contractor has completed the Guaranteed Capacity Test in conformance with this Agreement and the data from the Guaranteed Capacity Test shall demonstrate that the BESS satisfied the Guaranteed Capacity and the requirements as set out in the Site Acceptance Test; |
| (c) | the Work is available for full commercial operation as intended by the Project Requirements in compliance with all applicable Laws then in effect and Permits (“Commercial Operation”), and the construction of the Work complies with all Permits issued with respect to the BESS; |
| (d) | the Work and its operations complies with all applicable Laws and Permits then in effect; |
| - 10 - |
| (e) | the Contractor has notified Owner in writing that the Contractor knows of no defects and/or deficiencies in the Work that affects the performance of the BESS and that the Owner has received a certificate from the Owner’s Engineer representing that the Work at the Job Site has been completed in all material respects, excepting items either individually or collectively that do not materially and adversely affect the operation of the work as set out in the Punch List; |
| (f) | necessary system adjustments or repairs to the Components identified during start-up, commissioning and testing process have been completed for the BESS to commence Commercial Operation at the performance levels obtained in Guaranteed Capacity Test upon which Commercial Operation is based; |
| (g) | the BESS is ready to be occupied and safely operated in accordance with the Project Agreements, for the use for which the BESS was intended in accordance with this Agreement; |
| (h) | all operators have been trained, to the Owner’s satisfaction; |
| (i) | all special tools and spare parts purchased by the Contractor, as provided herein have been delivered to the Owner; |
| (j) | the Contractor has closed out all building permits associated with the Project; |
| (k) | all approvals, authorizations and permits required from the Electrical Safety Authority to operate the system have been received; |
| (l) | all applicable CSA, ULc orUL certifications required under the Ontario Electric Safety Code have been met and confirmed by the Electrical Safety Authority; |
| (m) | [deleted]; |
| (n) | all deliverables required to be submitted to the Owner on or before the Substantial Performance Date have been submitted; |
| (o) | the Punch List has been mutually agreed upon by the Owner and the Contractor in accordance with Section 12.2, provided that the cost to complete incomplete items or rectify known defects shall not exceed five percent (5%) of the Fixed Contract Price; |
| (p) | the Owner has received from the Contractor evidence satisfactory to the Owner that all payrolls, bills and other costs and expenses relating to the Work have been paid or otherwise satisfied; |
| (q) | there exists no Contractor Event of Default and no event which, with the passage of time or the giving of notice or both, would be a Contractor Event of Default; |
| (r) | the Contractor has completed the performance of the Work applicable to Substantial Performance according to all of the provisions of this Agreement, with the exception of those items specified in the Punch List and the Contractor’s warranty obligations which by their terms are to be performed after the Substantial Performance Date; |
| - 11 - |
| (s) | the Contractor has successfully completed and passed all tests set out in the Site Acceptance Test; |
| (t) | the Contractor has delivered an executed conditional assignment of Subcontractor warranties in accordance with Section 23.1.7; |
| (u) | the Contractor has delivered and executed an unconditional assignment of warranties in the form set out in Schedule 22; |
| (v) | payment of Liquidated Damages, if any; and |
| (w) | the Contractor has provided to the Owner a certificate executed by an officer of the Contractor certifying the occurrence of each of the preceding conditions set forth in this definition of Substantial Performance and has separately delivered a certificate certifying satisfaction of the requirements for “substantial performance of the work” in accordance with Section 2 of the Construction Act (Ontario), |
“Substantial Performance Date” has the meaning set forth in Section 12.2.
“Taxes” has the meaning set forth in Section 9.3.1.
“Technical Documentation” means all drawings, designs, diagrams, specifications and other design and engineering documents and data, including operating and maintenance manuals, that the Contractor is required to prepare and deliver under the Agreement.
“Technical Requirements” means and refers to those requirements set forth in the Statement of Requirements, the Site Acceptance Test and in the documents identified in the Statement of Requirements, which Schedules and documents define the Work specifications and the design, construction, scope, performance requirements and intent for the BESS and Project.
“Toxic Substance” means toxic substance as defined by the Canadian Environmental Protection Act (Canada) as amended from time to time and including any regulations thereunder and successor or replacement legislation.
“Unanticipated Tariff” has the meaning set forth in Section 9.2.9.
“Utilities” means electric power, water and storm and sewer discharge systems.
“Vendor” means any Person at any tier that supplies machinery, equipment, materials or services related thereto to the Contractor or any Subcontractor in connection with the performance of the Work.
“Warranty Periods” means the periods of duration of the Contractor’s repair obligations, including any extensions and re-warranty periods, as set forth in Article 23.
| - 12 - |
“Work” means with respect to each BESS, all labour, design, engineering, procurement of Components and, tools, Components transportation, installation, supervision, construction, commissioning, start-up, testing, personnel training and other services and items identified in the Statement of Requirements or which are necessary, appropriate, or inferable to execute and complete the Components and BESS in accordance with this Agreement, all in accordance with and to meet the Project Schedule.
“Working Days” means Monday to Friday, inclusive, excluding statutory holidays in Ontario.
| 1.2 | Schedules |
The following Schedules are incorporated by reference into this Agreement and bind the Parties as if set out herein:
ARTICLE 2
NOTICE TO PROCEED
| 2.1 | Notice to Proceed |
2.1.1 Subject to Sections 2.1.2 and 2.1.2(a) the Contractor shall commence Work upon receipt of a notice to proceed duly executed by the Owner and thereafter diligently continue the Work in accordance with the Project Schedule.
2.1.2 The Owner shall have no obligation to issue a notice to proceed pursuant to Section 2.1.1 and for the avoidance of doubt, the Owner shall not in any event issue the notice to proceed before the satisfaction or waiver by the Owner of the following conditions precedent:
| (a) | approval by Owner with respect to the Fixed Contract Price and identity of the Subcontractors; and |
| (b) | approval by Owner’s management of the terms of this Agreement and the activities proposed to be conducted pursuant to the terms hereof. |
| - 13 - |
2.1.3 If the Owner anticipates that it shall not issue a notice to proceed pursuant to Section 2.1.1 until after October 3, 2023, the Contractor and the Owner, both acting reasonably, shall initiate good faith negotiations as to the affect such delay may have on the Project Schedule and the Guaranteed Substantial Performance Date.
2.1.4 If the Owner does not issue a notice to proceed pursuant to Section 2.1.1 by October 3, 2023then the Parties shall, both acting reasonably and in good faith, endeavour to renegotiate the Agreement but anytime thereafter either Party may terminate the Agreement on fifteen (15) Days’ Notice to the other. Any such termination by either Party shall be without Liability and neither Party shall have any Liability to the other Party following any such termination.
| 2.2 | Limited Notice to Proceed |
2.2.1 Notwithstanding the foregoing, Owner may elect to issue a notice to proceed instructing the Contractor to procure the Components for the Project (the “Limited Notice to Proceed” or “LNTP”). Upon receipt of the LNTP, Contractor shall immediately procure the Components from “EVLO Energy Storage Inc.”. For greater certainty, the Contractor and the Owner hereby agree that the purpose of Owner issuing the LNTP is to ensure the delivery of the Components on a timely basis and in any event on the date set out in the Project Schedule.
ARTICLE 3
GENERAL PROVISIONS
| 3.1 | Scope of Work |
3.1.1 On a fixed price, lump sum “turnkey” basis, the Contractor shall design, engineer, procure, construct, start-up, test, and provide personnel training for the operation and maintenance of the BESS that is in conformance with the Project Requirements and the other requirements of this Agreement. The BESS will be located on the Job Site listed in Schedule 1. The scope of the Contractor’s responsibilities hereunder is set forth more particularly in this Agreement and includes furnishing all services, supervision, labour, materials, supplies, Components and other equipment and machinery required to complete, start up and test the BESS.
| 3.2 | Contractor Review of Project Requirements |
3.2.1 The Contractor represents and warrants to the Owner (a) that it has carefully and thoroughly reviewed, analyzed, compared and familiarized itself with the Project Requirements, (b) that it is satisfied that the Project Requirements are in accordance with generally accepted engineering standards, and (c) that the Project Requirements contain all information, data, measurements, instructions, direction and guidance (or such information, data, measurements, instructions, direction and guidance reasonably inferable from the Project Requirements) as is necessary for the Contractor to prepare the Design & Engineering Documents and to complete the Work in accordance with the terms and provisions of this Agreement and for the Fixed Contract Price, by the Guaranteed Substantial Performance Date.
| - 14 - |
3.2.2 The Contractor acknowledges and agrees that the Project Requirements do not contain any errors, omissions, mistakes, discrepancies or defects. In the event the Contractor discovers an error, omission, mistake, discrepancy or defect in the Project Requirements, the Contractor shall promptly report the same to the Owner and shall propose a resolution thereof for the Owner’s review and approval. The Contractor shall not be entitled to a Change Order in the event that the error, omission, mistake, discrepancy or defect has caused an increase in the Fixed Contract Price and/or delay in the Project Schedule.
| 3.3 | Priority of Agreement Provisions |
In the event of a conflict or inconsistency of provisions in this Agreement, the following order of precedence shall govern the interpretation of such documents:
3.3.1 the body of this Agreement (excluding the Schedules and the Design & Engineering Documents), as amended from time to time via a Modification;
3.3.2 the approved Design & Engineering Documents;
3.3.3 the Schedules in each case as amended from time to time in the following order of priority: 1, 10, 13, 20, 2, 3, 5, 8, 9, 4, 6, 12, 14, 7, 16, 15, 21, 11, 17, 18, 19 and 22;
3.3.4 the Detail Design Documents (other than the Schedules), as amended from time to time; and
3.3.5 in the event of an ambiguity or inconsistency within this Agreement or among the various Project Requirements as to quantity or quality, the greater quantity and the better quality shall govern; except, however, that computed or figured dimensions shall take precedence over scale dimensions, and large scale drawings shall take precedence over small scale drawings. In the event the Contractor becomes aware of any conflict between the main body of this Agreement and any Schedules (or the Technical Requirements) of this Agreement or between any of the Schedules (or the Technical Requirements) of this Agreement, the Contractor shall notify the Owner within forty-eight (48) hours of such conflict in writing, pursuant to the notification provisions set forth in Section 29.11.
| 3.4 | Independent Contractor |
In performing its duties and obligations under this Agreement, the Contractor shall, at all times, act in the capacity of an independent contractor, and shall not in any respect be deemed (or act as) an agent of the Owner for any purpose or reason whatsoever.
ARTICLE 4
CONTRACTOR’S SERVICES
| 4.1 | General Requirements |
4.1.1 Performance of the Work. The Contractor hereby covenants and agrees that it shall duly and properly perform and complete the Work in accordance with the Project Requirements, including the Technical Requirements. The Contractor further covenants and agrees that it shall provide and pay for all items or services necessary for the proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated into the Work, including, but not limited to, all design, engineering, procurement, installation and construction services, all administration, management, training and coordination services, all labour, materials, furnishings, office trailers, Components, supplies, insurance, bonds, Permits (other than Owner Permits), tests, inspections, tools, machinery, water, heat, Utilities and transportation, and all other items, facilities and services. As part of the Work, the Contractor shall supply all oils, chemicals, grease, fills and other consumables necessary to achieve Substantial Performance and the BESS shall be fully loaded with such consumables at the Acceptance Date.
| - 15 - |
4.1.2 Professional Standard. The Contractor’s services shall be performed (a) with due care and diligence in a good and workmanlike manner, (b) in accordance with Good Engineering and Operating Practices, and (c) as expeditiously and economically as is consistent with the best interests of the Owner and with the preceding standards.
4.1.3 Licensing and Other Qualifications. The Contractor covenants and agrees that any individuals and entities who will perform or be in charge of professional, architectural, design and engineering services for the Work shall have experience with the type of project being undertaken and shall be duly licensed to practice under the Laws of Ontario. . Similarly, all construction services shall be undertaken and performed by qualified and licensed construction contractors, vendors and suppliers.
4.1.4 Sufficient Personnel. The Contractor shall, at all times during the term of this Agreement, keep sufficient personnel employed so that the Work to be performed by the Contractor hereunder is completed in an efficient, prompt, economical and professional manner.
4.1.5 Contractor’s Key Personnel. Attached hereto as Schedule 8 is a list of the Contractor’s key personnel who will be responsible for supervising the performance of the Contractor’s Work hereunder. Among such individuals, there shall be appointed a full-time on-site principal representative of the Contractor (the “Contractor’s Representative”), who shall be the Contractor’s authorized representative and who shall receive and initiate all communications from and with the Owner and be authorized to render binding decisions related to the Project. Contractor may remove key personnel from the Project upon written notice to the Owner. If, after execution of this Agreement, the Owner reasonably objects in writing to any of the Contractor’s personnel, the Contractor shall promptly remove such disapproved personnel. If any of the Contractor’s key personnel are removed as provided above, any replacement personnel shall be subject to the prior written approval of the Owner, which approval shall not be unreasonably withheld.
4.1.6 Local Conditions. The Contractor represents that it has taken steps reasonably necessary to ascertain the nature and location of the Work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the Project, the Job Site and/or the performance of the Work, including but not limited to (a) existing and Project conditions bearing upon transportation, disposal, handling, and storage of materials and Components; (b) the availability of labour, water, electric power, Utilities and roads; (c) uncertainties of weather, noise limitations or similar conditions at the Job Site; (d) the adequacy and limitations of the Job Site for lay-down, storage and operations; (e) the character of construction equipment and construction facilities needed prior to and during the performance of the Work; and (f) all Job Site dimensions and all measurements relevant to the Work and the Job Site. The Owner acknowledges that the Contractor has assumed no risk or liability for Pre-Existing Hazardous Substances which are encountered at the Job Site subject always to the provisions of Article 25.
4.1.7 Legal Requirements. The Contractor shall comply, and shall cause the Subcontractors to comply, in all material respects, with all Permits and all existing and future Laws which are applicable to the Work and/or the Job Site and shall give all notices pertaining thereto.
| - 16 - |
4.1.8 Permits and Licenses. The Contractor shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances, if applicable, set forth in Schedule 1 and such other permits as relate to the Contractor’s performance of the Work and completion and operation of the BESS (“Contractor Permits”). The Contractor shall pay for the Contractor Permits. The Owner shall secure those permits, registrations, licences, certifications, authorizations, inspections, approvals, consents, governmental fees, and variances set forth in Schedule 1 (“Owner Permits”, and together with the Contractor Permits, the “Permits”). The Owner shall pay for the Owner Permits. Each Party shall provide any assistance reasonably requested by the other Party to obtain or maintain such Permits and the Contractor acknowledges and agrees it will, as part of the Work, be required to provide all necessary design documents that will be required by Owner to obtain the Owner Permits. The Contractor acknowledges and agrees that the Permits listed in Schedule 1 are all permits, registrations, licences, certifications, authorization inspections, approvals, consents, governmental fees and variances that must be obtained under all applicable Laws for the design, engineering, procurement, construction, start-up, testing, completion and operation of the BESS. The Contractor and the Owner will provide the other with copies of the Permits it secures. The Owner is responsible for all costs associated with permit fees for the Owner Permits.
4.1.9 Periodic Reports and Meetings; Office. The Contractor shall prepare and submit to the Owner on or prior to the Wednesday of each week a written status report in the form set out in Schedule 12 regarding the Project and the progress of the Work in the preceding one (1) week (Sunday to Saturday (inclusive)) period, which, in addition to the requirements set out in Schedule 1, will include:
| (a) | any events of material significance to the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date; |
| (b) | such items required by the Statement of Requirements to be reported upon in such reports; and |
| (c) | any items impacting the Project Schedule or any other items that the Owner reasonably requests. The Contractor shall also immediately notify the Owner of any events that may reasonably be expected to adversely affect the Contractor’s ability to achieve Substantial Performance by the Guaranteed Substantial Performance Date. Further, upon the Owner’s specific request, the Contractor agrees to provide to the Owner any other information reasonably requested by the Owner within five (5) Working Days of the request. |
Until Final Completion, the Contractor will attend and participate in weekly progress meetings with the Owner that will occur on the last Working Day of each week at the Job Site (or on a different day or location as the Owner may elect) for the purpose of discussing the status of the Work, anticipating and resolving any problems and reviewing a performance scorecard prepared by Owner and agreeing on a course of action the Contractor shall take to address any deficiencies identified in such scorecard.
4.1.10 Patents and Other Proprietary Rights. The Contractor shall pay all royalties and other fees for any Intellectual Property Rights necessary for the execution and completion of the Work and for the Owner to own, operate, maintain, repair and modify the BESS following Substantial Performance. The Contractor shall indemnify, defend and as a separate covenant hold harmless the Owner Indemnitees from and against any and all losses, damages, claims or expenses, including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis, arising or resulting from any claim or legal action that any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement, or the use thereof, constitutes an infringement and/or violation of any Intellectual Property Right or other proprietary right. If any materials, supplies, Components, processes or other portions of the Work furnished by the Contractor under this Agreement or the use thereof is held to constitute an infringement or violation of the rights of any Person in any Intellectual Property Right or proprietary right, and the use of such item is enjoined, the Contractor shall, at its own expense (in addition to the Contractor’s indemnification obligation described above and any other remedies the Owner may have under this Agreement), either procure the right to use the infringing item, or replace the same with a substantially equal but non-infringing item, or modify the same to be non-infringing, provided that any substitute or modified item shall meet all the requirements and be subject to all the provisions of this Agreement. The terms and provisions of this Section shall survive the termination or expiration of this Agreement.
| - 17 - |
4.1.11 Supervision. The Contractor shall supervise, coordinate and direct the Work using Good Engineering and Operating Practices. The Contractor shall employ, or cause to be employed, only supervisory personnel who are appropriately qualified, trained and experienced in safety, efficiency and quality of work supervision, and if requested by the Owner, accredited or enrolled in a program for accreditation with respect to appropriate qualifications specified by the Owner. Notwithstanding the foregoing, the Contractors shall ensure that any person employed by the Contractor or any Subcontractor at the Job Site shall also complete any training or other site specific requirements that may pertain to the Job Site, whether imposed by Owner or any other Person with authority over or ownership or control of the Job Site.
4.1.12 Responsibility. The Contractor shall be responsible to the Owner for acts and omissions of the Contractor, Subcontractors, their respective agents and employees, and any other Persons performing portions of the Work, or claiming by, through or under the Contractor, and shall be responsible to the Owner for any Liabilities resulting from such acts or omissions. The exercise by the Contractor of the right to subcontract will not in any way increase the costs, expenses or Liabilities of the Owner. Further, nothing contained in this Agreement is intended to or will create any contractual relation between any Subcontractor and the Owner or any obligation on the part of the Owner to pay or see to the payment of any moneys due to any Subcontractor or its personnel.
4.1.13 Discipline. The Contractor shall enforce strict discipline and good order among the Contractor’s employees, Subcontractors’ employees and any other Persons carrying out the Work. The Contractor shall not permit the employment of unfit Persons or Persons not skilled in tasks assigned to them and shall require all Work to be in accordance with Good Engineering and Operating Practices. The Contractor shall remove any employee or other individual that the Owner, acting reasonably, deems incompetent, careless, negligent, unreasonable, uncooperative, unfit, or under the influence or in possession of drugs or alcohol. Any costs or increased costs or expenses associated with any such removal of employees or other individuals shall be borne solely by the Contractor. The Contractor shall be responsible for peaceful labour relations at the Job Site, shall at all times exert its Commercially Reasonable Efforts and judgment as an experienced contractor to adopt and implement policies and practices designed to avoid work stoppages, slowdowns, disputes or strikes where reasonably possible and practical under the circumstances, and shall at all times exert its Commercially Reasonable Efforts to maintain Project- wide labour harmony.
4.1.14 Labour Agreements. In satisfying the requirement in Section 4.1.13, and in-line with ITC labour requirement, the Contractor will pay as part of its labour subcontracts a total compensation package that equates to the prevailing wage. Additionally, at least ten per cent of the tradesperson hours worked must be performed by registered apprentices in the Red Seal trades.
| - 18 - |
4.1.15 Co-operation. The Contractor shall co-operate with and assist the Owner, its advisors, consultants, lawyers, employees, agents, contractors and representatives, including Authorities at all times during the term of this Agreement so as to complete the Projects in an efficient, timely and economical manner. Such co-operation and assistance shall include, without limitation, any reasonable co-operation or assistance required by the Owner in connection with its arrangements for the provision of services to the Contractor in relation to the construction of the BESS.
4.1.16 Work Plans.
| (a) | The Contractor shall develop and implement comprehensive management and work plans for the Project which are relative to (among other matters) Project safety and security; quality assurance and quality control; management and control of the design, engineering, procurement and construction services; and management and control of Subcontractors and their subcontracts; inspection and testing plans, method statements and work instructions and non-conformance control and corrective action process (the “Quality Plans”). |
| (b) | All Quality Plans will be consistent with the requirements of the Project Requirements and the Contractor shall prepare and implement the Quality Plans and shall cause to be performed the Work in compliance with the Quality Plans. |
| (c) | The Contractor shall submit to the owner the initial Quality Plans and any changes to any of the Quality Plans it proposes to make from time to time, and may amend such plans further to such reasonable comments and instructions the Owner may propose. |
| (d) | Without limiting Owner’s other rights pursuant to this Agreement, the Owner may, from time to time, directly or indirectly, perform periodic monitoring, spot checks and auditing the Contractors quality management systems, including all relevant Quality Plans and any quality manuals and procedures. |
4.1.17 Signage. The Contractor shall not display, install, erect or maintain any advertising or other signage at the Job Site without the Owner’s prior written approval as to the same.
4.1.18 Notice of Claims. The Contractor shall promptly notify the Owner of any claims, suits or actions filed or asserted in writing against the Contractor in relation to the Work, the Job Site and/or this Agreement.
4.1.19 Discoveries of Historical Interest. The Contractor shall take reasonable precautions to prevent its workers, its Subcontractors or any other Persons from removing or damaging any artefact, fossil, article of value or antiquity and structures and other remains or things of geological or archaeological interest or cultural evidence discovered during the course of the Work. Upon discovery of the same, the Contractor shall immediately notify the Owner of same, and shall stop all construction work around the affected area, until all appropriate action has been taken by the Owner. Upon request by and at the expense of the Owner, the Contractor shall protect the discovery undisturbed. Any such discovery shall be, as between the Owner and the Contractor, the absolute property of the Owner. To the extent permitted by applicable Law, the Contractor shall carry out the Owner’s orders as to the disposal of the same. If arising from any such discovery the Guaranteed Substantial Performance Date or Project Schedule may be impacted, the Contractor shall use its Commercially Reasonable Efforts to devise a work around plan in an attempt to maintain the original schedule. The work around plan shall be subject to approval by the Owner.
| - 19 - |
The additional costs of preparing and implementing the work around plan shall be treated as a Change in Work. If, despite these efforts and the work around plan or if the Owner does not approve the work around plan and it is determined that the Guaranteed Substantial Performance Date and the Project Schedule will be impacted negatively, the Contractor and the Owner shall discuss the amount of time by which the schedule was directly impacted and the Owner will grant an appropriate extension of time as the Owner acting reasonably considers fair by issuing a Change Order pursuant to Article 16. The requirements of this Section 4.1.19 are in addition to any obligation imposed by any Law with regard to objects or places of a historical or cultural nature.
4.1.20 Interconnection Studies. The Contractor herby covenants and agrees to perform the Work in accordance with any connection impact or system impact studies prepared in relation to the BESS from time to time by the Owner or the IESO as applicable.
4.1.21 Books and Records. The Contractor shall keep full and detailed books, records, and accounts as necessary for proper financial management under this Agreement and such obligation shall continue for up to seven (7) years after the Substantial Performance Date. The Owner shall have the right to access, audit, inspect, and copy the Contractor’s books, records, and accounts at any time, upon reasonable prior notice, within such period for the purpose of verifying payments and compliance with the requirements of this Agreement, including in connection with Taxes payable by the Owner or the Contractor.
| 4.2 | Design and Engineering Work |
4.2.1 Scope Design & Engineering Documents
| (a) | The Statement of Requirements identifies certain design and engineering documents to be prepared by the Contractor and the Contractor shall prepare such documents accordingly and submit them to the Owner for review (the “Design and Engineering Documents”). The Design and Engineering documents do not need to be submitted to the Owner as a single complete set, but may be submitted in successive packages, each of which may address separate systems available to the Project. The Owner will promptly review such documents and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall reasonably consider any comments provided by the Owner and make such changes to the Design and Engineering Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Design and Engineering Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicted above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Design and Engineering Documents are in conformity with the Project Requirements, and the Owner may require amendments to the Design and Engineering documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of the Contractor’s Work under this Agreement. Further to the review and comment by the Owner and any changes thereafter made by the Contractor, the Design and Engineering Documents shall serve as the basis for all of the Contractor’s detail design for the work. The Design and Engineering Documents shall be stamped by a professional engineer (Ontario). |
| - 20 - |
| (b) | After finalization of the Design and Engineering Documents in accordance with Section 4.2.1(a) the Contractor shall prepare detailed design documents consistent with the Design and Engineering Documents and all vendor specifications and shall be consistent with (and develop in detail) the intent of the Statement of Requirements shall include all necessary drawings, specifications, schedules, diagrams and plans, and shall contain such content and detail as is necessary to obtain all Permits and to properly complete the construction of the Project in accordance with the terms of this Agreement (the “Detail Design Documents”). The Detail Design Documents shall provide information customarily necessary for the use of such documents by those in the building trades. All civil, structural, mechanical, electrical, architectural and landscape drawing and specifications shall be stamped by a professional engineer licensed to practice in Ontario or other suitable design professional licenced to practice in Ontario. Procured items such as batteries, inverters, electrical cabinets, reinforced steel shop drawings, etc. will not require a stamp. In connection therewith, the Contractor shall, in preparing the Detail Design Documents, submit an electronic copy of drawings to the Owner for information within five (5) Working Days of preparation. |
| (c) | The Owner will promptly review the Detail Design Documents provided to it by the Contractor pursuant to Section 4.2.1(b) and within twelve (12) Working Days after its receipt of such documents, provide its comments thereto to the Contractor. The Contractor shall consider any comments provided by the Owner and make such changes to the Detail Design Documents as may be prudent or desirable in such circumstances. Any subsequent review of the Detail Design Documents will be completed by the Owner as promptly as possible, not to exceed twelve (12) Working Days. If the Owner fails to provide comments within the time frames indicated above, such failure will be deemed to mean the Owner has no comments on the documents submitted. The Owner shall review such documents for the purpose of determining whether such Detail Design Documents are in conformity with the Statement of Requirements, Design and Engineering Documents and the other Project Requirements and the Owner may suggest amendments to the Detail Design Documents to satisfy the obligations of the Contractor hereunder. Review and comment by the Owner shall not limit, relieve, waive or diminish the Contractor’s duties or liabilities under this Agreement to perform the Work so that the Project, when complete, satisfies all the requirements of this Agreement. |
4.2.2 Compliance with Laws. The Contractor covenants and agrees that the Design & Engineering Documents and the Detail Design Documents shall be prepared in accordance with the professional standard defined in Section 4.1.2, and shall be in compliance with and accurately reflect all applicable Laws. The Contractor shall, at no expense to the Owner, promptly modify any such documents which are not in accordance with the requirements of the Agreement.
4.2.3 Shop Drawings.
| (a) | Shop drawings are drawings, diagrams, illustrations, schedules, performance charts, brochures, product, and other data which illustrate details of a portion of the Work (“shop drawings”). |
| (b) | The Contractor shall provide shop drawings as described in the Statement of Requirements or as the Owner may reasonably request. |
| - 21 - |
| (c) | The Contractor shall review all shop drawings it provides to Owner pursuant to this Section 4.2.3. The Contractor represents by this review that the Contractor has determined and verified all field measurements and field construction conditions (or will do so), Component requirements, catalogue numbers and similar data and that the Contractor has checked and coordinated each shop drawing with the requirements of the Work and of the Project Requirements. |
| (d) | Shop drawings which require approval of any Authority having jurisdiction shall be submitted to such Authority by the Contractor. |
| (e) | The Contractor shall submit shop drawings to the Owner for review with reasonable promptness in an orderly sequence, and sufficiently in advance so as to cause no delay in the Work or in the work of other contractors. The Contractor shall, acting expeditiously and with diligence and as soon as practicable after receiving authorization to proceed with the Work, prepare a schedule of the dates for submission and return of shop drawings for the Owner’s review and approval. Shop drawings shall be submitted in the form of reproducible transparencies or prints as the Owner may reasonable direct. Contractor shall allow the Owner twelve (12) Working Days to review shop drawings from the date of receipt. At the time of submission, the Contractor shall specifically draw to the attention of the Owner, in writing, any deviations in the shop drawings from the Project Requirements. |
| (f) | The Owner’s review under Section 4.2.3(e) is for conformity to the intent of the Project Requirements and for general arrangement only. Such review shall not limit relieve, waive, or diminish the Contractor’s duties and liabilities under this Agreement to perform the Work so that the Project when complete satisfies all requirements of this Agreement. |
| (g) | Upon the request of the Owner, the Contractor shall revise and resubmit shop drawings which the Owner rejects as being inconsistent with the Project Requirements within the time period reasonably required by the person rejecting such drawings. At the time of resubmission, the Contractor shall specifically draw to the attention of the Owner, in writing, any material revision in the shop drawings other than those specifically requested. |
| 4.3 | Procurement and Construction Work |
4.3.1 Control. The Contractor shall be solely responsible for and shall have control over all construction means, methods, techniques, sequences and procedures, and for coordinating all portions of the Work.
4.3.2 Inspection and Delivery of Materials, Components and Manufacturer’s Requirements. The Contractor shall perform a detailed inspection of all materials and Components located on or off the Job Site that comprise or will comprise a portion of the Work, and the Owner’s Representative may perform a detailed inspection of all materials and Components located on the Job Site that comprise or will comprise a portion of the Work, at intervals appropriate to the stage of construction or fabrication, as necessary to ensure that the Work is proceeding in accordance with this Agreement. On the basis of such inspections, the Contractor shall keep the Owner informed of the progress and quality of the Work and shall provide the Owner with reports of any material defects or deficiencies discovered during any inspection in which event Article 17 shall apply and Contractor shall, at the earliest practical opportunity cause such defects or deficiencies to be corrected. The Contractor shall expedite the delivery of all materials and Components and shall handle (including unloading the Components), store on-site and install all materials and Components in strict accordance with the manufacturer’s or vendors’ instructions and specifications. The Contractor acknowledges and agrees to bear all risks (including delay, schedule and performance risks) with respect to the Components. The Contractor shall be responsible for loading and transporting all Components to the Job Site as further described in Article 20. All Components incorporated into the Work will be new and will meet the requirements of this Agreement.
| - 22 - |
4.3.3 Access by the Owner and Others. The Contractor shall provide the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants access to the Work at all times during Working Days in accordance with the requirements of the Statement of Requirements; provided that the Owner and its respective employees, agents, representatives, designees and Owner’s Engineer or other consultants shall comply with reasonable security or safety restrictions imposed by the Contractor so as not to unduly interfere with the Work and the Owner shall not hold the Contractor liable for any such undue interference.
4.3.4 Clearing Job Site. The Contractor shall be responsible for all clearing, excavation, grading and similar work necessary to complete the Work.
4.3.5 Cutting, Coring, Excavation & Backfill. The Contractor shall be responsible for all cutting, fitting, coring, excavation and backfilling which is required to complete the Work or to make its parts fit together properly. It is the intent of this Agreement that all areas requiring cutting, fitting, coring, excavation and backfilling shall be restored to a completely finished condition which match and/or blend with its surroundings and pre-existing finishes such as asphalt, gravel, etc.
4.3.6 Cleaning Up. The Contractor shall, at all times during the term of this Agreement, keep the Job Site and surrounding streets, properties, sidewalks and other areas free from waste materials, rubbish, debris and other garbage resulting from the construction of the BESS, and shall employ adequate dust control measures. The Contractor shall properly and regularly dispose of unneeded materials used, generated or excavated in the performance of the Work. As soon as reasonably practicable following Substantial Performance and no later than Final Completion, the Contractor shall remove from the Job Site all tools, equipment, machinery, surplus materials, waste materials and rubbish, and shall clean all glass (inside and out), remove all material paint spots and other smears, stains or scuff marks, clean all plumbing and lighting fixtures, wash all concrete, tile and finished floors, and otherwise leave the Project and the Job Site in a neat and clean condition. All waste disposal and other clean-up shall be performed, at a minimum, in accordance with all applicable Laws. If the Contractor fails to clean the BESS and Job Site as provided herein, the Owner may do so upon five (5) days’ prior written Notice to the Contractor and the cost thereof shall be promptly reimbursed to the Owner by the Contractor on demand or may be set-off against any payments due to the Contractor. For clarity, all grading of property in or around the BESS shall be graded to the extent that minimizes any inconvenience to the Landlord.
4.3.7 Noise Controls. The Contractor shall make every effort to minimize the noise levels while construction of the Work is proceeding and shall comply with the specific requirements of the Statement of Requirements in this regard. The Contractor will be responsible for providing the BESS that complies with all noise Laws and Permits.
4.3.8 Records. The Contractor shall maintain in good order at the Job Site at least one copy (in hard copy and electronic formats as reasonably requested by the Owner) of the Design & Engineering Documents, the Detail Design Documents, drawings, specifications, product data, samples, shop drawings, Modifications and all other documents in connection with the Work being carried at the Job Site, marked currently to record changes made during construction. These documents shall be available at all times to the Owner and its representatives for their review and/or inspection. Prior to Final Completion, all of the preceding items which are applicable to the completed portion of the Work shall be delivered to the Owner, as well as a set of “as-built” drawings for each BESS (in hard copy and on computer disk) showing all changes made to the drawings during construction. The Contractor shall also provide to the Owner, prior to Final Completion, an “as-built” survey for each BESS at the Job Site, indicating the actual location of the improvements as constructed and as situated on the Job Site.
| - 23 - |
4.3.9 Purchasing Schedule. The Contractor shall prepare and deliver to the Owner a purchasing schedule and update at the Work progress meetings of the Owner and the Contractor described in Section 4.1.9 such purchasing schedule and the Major Component Procurement Plan. The purchasing schedule prepared by the Contractor under this Section 4.3.9 and the Major Component Procurement Plan shall identify each item to be purchased or procured, and shall with respect to each such item, describe (a) proposed date of purchase; (b) manufacturer and manufacturer’s location; (c) proposed shipping date; and (d) date delivery is due at the Job Site. The Major Component Procurement Plan shall cover the procurement of all Components to which the Technical Requirements described in the Statement of Requirements apply and shall include detailed provision for the quality testing and procurement by the Contractor of such Components, including but not limited to plans for pre-shipment quality testing of Components to be procured out of storage. The purchasing schedule and the Major Component Procurement Plan shall together provide for the supply of all Components and materials to be furnished by the Contractor and the Owner and incorporated into the Work by the Contractor.
4.3.10 The Contractor’s Responsibility for Proper Layout. The Contractor shall be strictly responsible for the proper layout, location, performance, and accuracy of the lines and levels required for the proper performance of the Work and for any loss or damage to the Owner resulting from the Contractor’s failure to properly perform the same if a problem arises. For greater clarity this includes the placement of the BESS as per Design & Engineering Documents.
| 4.4 | Coordination with Owner, Authorities and Subcontractors |
4.4.1 Notwithstanding Section 4.3.1, the Contractor acknowledges and agrees that the Job Site may be located on lands designated, in part, as agricultural lands used, in part, for farming purposes by the Landlord. The Contractor agrees to coordinate the Work with representatives of the Owner that will be assigned for this purpose to ensure that the Work and any farming operations at the Job Site are not disrupted. The Contractor acknowledges and agrees such coordination activities shall be included in the Work and may include periodic (weekly or more frequent) coordination meetings with the Job Site representative.
4.4.2 Subject to any other term in this Agreement, the Contractor shall have complete responsibility for coordination of the Work with all Authorities and any other Persons, as necessary, and the administration of any testing or taking of any other action necessary to demonstrate the Work’s compliance with all applicable permits and applicable Laws prior to and as at Substantial Performance.
4.4.3 The Contractor shall provide such reasonable assistance as may be requested by the Owner in dealing with any other contractors having access to the Job Site from time to time in relation to the Work.
4.4.4 The Contractor shall inform the Owner, and shall keep the Owner fully apprised, of any and all contact with any Authority, if applicable, in each of its reports issued to the Owner pursuant to Section 4.1.9.
| - 24 - |
4.4.5 The Contractor shall promptly provide the Owner with any correspondence the Contractor receives from any Authority and the Contractor shall provide any correspondence or submittals to the Owner for its review and approval prior to the Contractor delivering or issuing such to any Authority.
| 4.5 | Local Communities |
The Contractor shall use its Commercially Reasonable Efforts to cooperate and assist the Owner in its efforts to explore opportunities with, management of, or otherwise in obtaining involvement of, local communities in connection with the Work.
| 4.6 | Placement of Owner’s Personnel at Contractor’s Offices |
4.6.1 The Owner may require the placement of no greater than two (2) of the Owner’s personnel in the Contractor’s engineering phase of the Work at the Contractor’s offices to enable Owner to acquire knowledge about the Project design and engineering.
4.6.2 In addition to the requirements of Section 4.6.1, the Owner may require the placement of no greater than one (1) of the Owner’s personnel at the Job Site during the performance of any of the Work at the Job Site to enable the Owner to acquire knowledge about, among other things, the Project through the construction, start-up and commissioning of the BESS.
4.6.3 The Contractor shall be responsible for providing, at the Contractor’s sole cost and expense, any of the Owner’s personnel in the Contractor’s engineering and design offices with continuous access to office space, parking, basic office furniture, telephones and active telephone lines (including direct external lines, speakers for hands free operation and electronic voicemail), internet access, photocopiers, scanner and printers.
4.6.4 Notwithstanding any such attendance by the Owner’s personnel referred to in this Section 4.6 the Contractor shall retain sole responsibility for the Work.
4.6.5 The Contractor acknowledges that it shall not be provided with any specific space for any furnished facilities or any dedicated furnished facilities, at the Job Site and any space made available by the Owner shall be on an entirely discretionary basis from time to time as the Contractor may agree with the Owner.
| 4.7 | Entrance, Routing and Transportation to the Job Site |
The Owner shall provide all entrance(s) to the Job Site required for ingress and egress of all personnel, equipment, Components, materials and vehicles to and from the Job Site. The Contractor is responsible for the appropriateness of all routing and transport corridors for delivery of the Components, and any other materials or equipment to the Job Site and preparation of all transportation studies, and the Contractor shall be liable and shall indemnify the Owner from and against any and all Liabilities arising from the Contractor’s development, use or closure of routing and transport corridors, including any heavy-haul routes. Any transportation study, report or other information provided by the Owner prior to the effective date of this Contract in respect of such routing and transportation is provided as background information only and as an accommodation to the Contractor without limiting the Contractor’s obligations under this Contract, and shall not affect the obligations of the Contractor under this Section 4.7.
| - 25 - |
| 4.8 | Importing |
The Contractor shall be the importer of record with respect to all Components originating from a location outside of Canada which the Contractor accepts delivery of at a location outside of Canada.
ARTICLE 5
OWNER
| 5.1 | Rights, Duties & Obligations |
5.1.1 Owner’s Representative. The Owner shall designate in writing, from time to time, one or more individuals who shall act on behalf of the Owner in connection with the Projects, together with the scope of their authority. Among such designees, there shall be appointed a principal representative of the Owner (the “Owner’s Representative”), who shall be the Owner’s authorized representative and who shall receive and initiate all communications from and with the Contractor and be authorized to render binding decisions related to the Projects. Owner’s Representative shall not be authorised to enter into any Modifications on behalf of the Owner or any other amendment, variation, or waiver to any provision of this Agreement.
5.1.2 Owner Approvals. The Contractor acknowledges and agrees that any review, inspection, acceptance, comment or evaluation by the Owner of any plans, drawings, specifications, other documents, Components or other Work prepared by or on behalf of the Contractor shall be solely for the Owner’s determining for the Owner’s own satisfaction the suitability of the Projects generally for the purposes intended therefor by the Owner and may not be relied upon by the Contractor, Subcontractors, or any other third party as a substantive review or approval thereof. The Owner, in reviewing, inspecting, commenting on or evaluating any plans, drawings, specifications, other documents, Components or other Work, shall have no responsibility or Liabilities for the accuracy or completeness of such documents or Work, for any defects, deficiencies or inadequacies therein or for any failure of such documents or Work to comply with the requirements set forth in this Agreement; the responsibility for all of the foregoing matters being the sole Liability and obligation of the Contractor. In no event shall any review, inspection, comment, evaluation or approval by the Owner relieve the Contractor of any Liability, obligation or responsibility under this Agreement, it being understood that the Owner is at all times ultimately relying upon the Contractor’s skill, knowledge and professional training and experience.
5.1.3 Co-operation with the Contractor. Whenever the Owner’s co-operation is required by the Contractor in order to carry out the Contractor’s obligations hereunder, the Owner agrees that it shall act in good faith in so cooperating with the Contractor.
5.1.4 Rights to Access Project. The Owner has secured or shall secure all property rights required to permit the Contractor to access the Job Site as necessary for the performance of the Work.
5.1.5 Construction Means & Methods. The Owner shall have no control over or charge of, and shall not be responsible for, construction means, methods, techniques, sequences or procedures, or for safety precautions or programs, in connection with the Work, all of which are the sole responsibility of the Contractor. However, the Owner may consult with the Contractor on such matters and the Contractor will consider such matters in its reasonable judgment. The Contractor acknowledges and agrees with the Owner’s commitment to safety and acknowledges the Owner’s expectation of the compliance by the Contractor and its Subcontractors in relation to the same.
| - 26 - |
5.1.6 Inspection of Work
| (a) | The Contractor shall ensure that the Owner, and its respective employees, agents, advisors, representatives and designees shall be granted access to the Contractor’s Work, whether at the Job Site or off-site, at all times during the Working Days upon twenty-four (24) hours’ prior Notice so as to enable such parties to witness and inspect the Work (including, without limitation, any item of design, equipment, material, service or workmanship to be provided as part of the Work); provided that the Owner and its employees, agents, advisors representatives and designees shall comply with reasonable restrictions imposed by the Contractor so as not to unduly interfere with the Work. The Contractor shall make all arrangements necessary to permit such inspections at the Contractor’s Work place or at any location where any material, Components or piece of machinery is being manufactured or fabricated. The Owner and its employees, agents, advisors, representatives and designees will have the right to be present during all start- up, testing and commissioning, whether on or off the Job Site, and will, by way of example and not limitation, have timely access to all test procedures, quality control reports, and test reports and data, including all Components adjustment, installation and alignment data. The Contractor will provide safe and proper facilities for such access and inspection. Further, to allow the Owner and the Owner’s employees, agents, advisors, representatives and designees to be present, the Contractor will give the Owner ten (10) Working Days advance Notice of any system, Components or BESS check-out or testing, including any factory acceptance test of the batteries, power converters or transformers and with respect to any such factory acceptance test, the Contractor will cause the relevant Vendor to permit Owner and Owner’s employees, agents, advisors, representatives and designees to be present at such factory acceptance tests. The Contractor will permit the Owner and any Person authorised in writing by the Owner to inspect and review all field work including Component installation, start-up and commissioning. |
| (b) | Prior to covering or burying any Utility, the Contractor shall provide the Owner with at least ten (10) Working Days’ Notice and the Owner shall have an opportunity to inspect (the “Inspection Date”), such Utility. If any Utility has been covered prior to the Inspection Date, it shall be uncovered at the written request of the Owner for its observation and recovered at the Contractor’s sole cost and expense. If (i) a portion of the Work (other than such Utility) has been covered (which the Parties acknowledge and agree is not required to be observed prior to being covered) or (ii) the Owner elects not to inspect any Utility prior to burying or covering, the Owner may request in writing to see such Work and it shall be uncovered by the Contractor for inspection by the Owner. If the uncovered Work referred to in this Section 5.1.6(b) is found to be in accordance with this Agreement, (i) the costs of uncovering and recovering shall, by appropriate Change Order, be charged to and paid by the Owner and, in addition, (ii) the Contractor shall be entitled to an equitable adjustment to the Project Schedule and the Guaranteed Substantial Performance Date, as applicable. If the Work referred to in this Section 5.1.6(b) is found to be defective, the Contractor shall be responsible for the cost of uncovering, correcting and re-covering this Work, and no schedule adjustment in connection therewith shall be required. Nothing contained in this Section 5.1.6(b) shall alter the Contractor’s obligations to correct defective Work as set forth in Article 17. |
| - 27 - |
| (c) | The Owner may from time to time audit all safety, construction and other health and safety plans maintained by the Contractor in relation to the Work and the Job Site, including the Quality Plans, and the Health and Safety Plan and the Contractor shall promptly review and remedy any deficiencies reasonably identified by the Owner in the course of any such audit. |
| (d) | No inspection, audit or review of, or failure to inspect or review, the Work by any individual or entity referenced in this Section 5.1.6 shall relieve the Contractor of its obligation to properly execute and complete the Work. |
5.1.7 Owner’s Right to Carry Out the Work. If the Contractor defaults under this Agreement or neglects to carry out the Work in accordance with this Agreement (including, without limitation, any failure to immediately eliminate an unsafe or hazardous condition as required by Section 20.1.4) and fails within a five (5) Working Day period after receipt of written Notice from the Owner to correct such default or neglect or, if the default or neglect cannot be corrected in such five (5) day period, commence and continue correction of such default or neglect with diligence and promptness in accordance with a schedule to be agreed upon between the Owner and the Contractor, or fails within a five (5) Working Day period after receipt of written Notice from the Owner to eliminate (or diligently commence to eliminate) the cause of any stop work order issued, the Owner may, without prejudice to any other rights or remedies the Owner may have, and with or without terminating this Agreement, after good faith consultation with the Contractor, correct such deficiencies in a prudent and reasonably efficient manner, and deduct an amount equal to the expenditures reasonably incurred by the Owner in so doing from amounts due or to become due to the Contractor. If the payments then or thereafter due to the Contractor are not sufficient to cover the amount of the deduction, the Contractor shall pay the difference to the Owner on demand.
ARTICLE 6
PROJECT SCHEDULE
| 6.1 | Commencement |
The Contractor shall commence its obligations under this Agreement upon receipt of the notice to proceed pursuant to Section 2.1.
| 6.2 | Substantial Performance |
The Contractor acknowledges and agrees that achievement of Substantial Performance on or before the Guaranteed Substantial Performance Date to be of critical importance to the Owner.
| 6.3 | Project Schedule |
The Contractor has prepared the Project Schedule which is a detailed schedule for the Work for the Project. The Contractor shall update the Project Schedule on a monthly basis to reflect the actual progress to date (“Monthly Updated Schedule”); provided, however, that the Contractor may not modify the Guaranteed Substantial Performance Date or the Final Completion Date listed in Schedule 9 without a Change Order being executed pursuant to this Agreement, nor shall the Contractor change any dates that relate to the Owner’s obligations without obtaining the Owner’s prior written consent. If the Contractor changes the schedule logic or any durations with respect to any part of the Work, the Contractor shall provide the Owner with a written explanation of each such change along with such Monthly Updated Schedule. The Monthly Updated Schedule shall be in the same detail and form as required by the Project Schedule. The Contractor shall perform the Work in accordance with the Project Schedule as updated from time to time.
| - 28 - |
ARTICLE 7
LIQUIDATED DAMAGES
| 7.1 | Delay Liquidated Damages |
7.1.1 If Substantial Performance does not occur by or before the Guaranteed Substantial Performance Date, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner delay liquidated damages at the Daily Rate plus Sales Taxes for each day of such delay from and including the Guaranteed Substantial Performance Date until but not including the day on which the Contractor achieves Substantial Performance (the “Delay Liquidated Damages”). The Contractor shall have no obligation to pay Delay Liquidated Damages to the extent that such delay in achieving Substantial Performance is due to an Owner Caused Delay. Notwithstanding and in addition to the foregoing provisions of this Section 7.1, if Substantial Performance does not occur on or before May 1, 2025, the Owner shall be entitled to recover from the Contractor and the Contractor shall pay the Owner as a lump sum, liquidated damages equal to two percent (2%) of the Fixed Contract Price, in addition to any other Delay Liquidated Damages that may be payable by Contractor to Owner from time to time.
| 7.2 | Substantial Performance and Minimum Performance Criteria |
Notwithstanding anything to the contrary contained in this Agreement, the Contractor shall not be permitted to satisfy its obligation to achieve Substantial Performance by the payment of Liquidated Damages.
| 7.3 | Exclusivity of Liability |
7.3.1 Subject always to Section 5.1.7, Article 17 and Article 28, the payment of Liquidated Damages as provided in this Article 7 shall constitute the sole and exclusive Liability of the Contractor for Substantial Performance occurring after the Guaranteed Substantial Performance Date.
7.3.2 Maximum Overall Liquidated Damages. Notwithstanding anything herein to the contrary, the Contractor’s maximum liability for Liquidated Damages shall not exceed, under any circumstances, [REDACTED: Percentage amount] of the Fixed Contract Price.
| 7.4 | Invoicing and Payment of Liquidated Damages |
7.4.1 Subject always to any bona fide disputes relating to the payment of Liquidated Damages, if Liquidated Damages are payable from the Contractor to the Owner, the Owner shall submit monthly invoices as required to the Contractor specifying the Liquidated Damages to be paid by the Contractor. The Liquidated Damages specified in such invoice shall be due from the Contractor no later than thirty (30) days after the receipt of such invoice.
7.4.2 The Owner may set off against amounts due to the Contractor hereunder any Liquidated Damages owed by the Contractor hereunder.
| 7.5 | Liquidated Damages Not Penalty |
The Parties acknowledge and agree that because of the nature of the Project it is difficult or impossible to determine with precision of the amount of damages that would or might be incurred by the Owner as a result of Substantial Performance being achieved after the Guaranteed Substantial Performance Date. It is understood and agreed by the Parties that (i) the Owner shall be damaged by such matters, (ii) it would be difficult or impossible to fix the actual damages resulting therefrom, (iii) any sums which would be payable under this Article 7 are in the nature of liquidated damages and not penalties, and are fair and reasonable, and (iv) such payments represent a reasonable pre-estimate of fair compensation for the losses that may reasonably be anticipated from such delay. Notwithstanding the foregoing, in the event the Liquidated Damages are held to be unenforceable by any Authority, the Owner shall be permitted to make a claim and recover against the Contractor for the amount of any Liabilities arising from the relevant matter for which Liquidated Damages were payable.
| - 29 - |
ARTICLE 8
LIMITATION OF LIABILITY
| 8.1 | Consequential Damages |
Except as covered by Liquidated Damages and notwithstanding anything to the contrary contained in this Agreement, the Owner and the Contractor hereby waive all claims against the other party (and against its Affiliates, employees, directors, officers, members, contractors, subcontractors, consultants and agents) and neither Party shall be liable to the other for loss of anticipated revenues or profits, damages by reason of loss of opportunity or for any consequential, special, incidental, indirect or punitive damages, and regardless of whether any such claim arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory even if a Party was advised of the possibility of such loss or damage occurring. Provided always that any Liability of a Party to any third party for which indemnification or recovery is sought against the other Party hereunder shall not be considered a consequential, special, incidental or indirect loss solely because such third party claim included a claim for consequential, special, incidental or indirect loss.
| 8.2 | Overall Limitation |
Except for the exceptions set out in Section 8.3 and notwithstanding anything to the contrary contained in this Agreement, the aggregate Liability of the Contractor to the Owner or the Owner Indemnitees with respect to this Agreement, whether such Liability arises out of breach of contract, tort, product liability, indemnity, contribution, strict liability or other legal theory, shall not exceed an amount equal to [REDACTED: Confidential and commercially sensitive information regarding liability cap] “Maximum Liability Amount”).
| 8.3 | Exceptions to Caps on Liability |
Notwithstanding anything herein to the contrary, the Maximum Liability Amount shall not apply to and the Contractor’s Liability shall be:
8.3.1 unlimited with respect to its:
| (a) | fraud; or |
| (b) | wilful misconduct or gross negligence which results in death or personal injury; |
8.3.2 limited to [REDACTED: Dollar amount] with respect to claims relating to its gross negligence, wilful misconduct or pursuant to Section 26.1.4.
| - 30 - |
| 8.4 | Remedies Non-Exclusive |
Except as otherwise provided in Section 7.2, the remedies available to Contractor or Owner in connection with this Agreement, whether arising in contract or in tort are in addition to all other remedies provided by the laws of Ontario but excepting those remedies which have been expressly excluded in this Agreement.
| 8.5 | Limitations |
Nothing in this Agreement shall be construed to extend the limitation period applicable to the pursuit of any claim pursuant to this Agreement as set out in the Limitations Act (Ontario).
ARTICLE 9
CONTRACTOR’S COMPENSATION
| 9.1 | Fixed Contract Price |
In consideration of the Contractor’s performance of the Work pursuant to this Agreement, the Owner shall pay to the Contractor as compensation therefore, no more than the sum of twelve million one thousand three hundred eighty-two dollars ($12,008,516) (the “Fixed Contract Price”), subject to adjustment and final reconciliation pursuant to the terms of this Agreement and all applicable sales, use, purchase or similar taxes (collectively, the “Sales Taxes”). The breakdown of the Fixed Contract Price is attached hereto as Schedule 6.
The Parties expressly agree that Schedule 6 is based upon certain reasonable cost assumptions. On a monthly basis, Actual Costs shall be reconciled against the Fixed Contract Price.
| 9.2 | All Inclusive |
The Fixed Contract Price includes:
9.2.1 all Components, labour, services, import taxes and duties, supplies, Utilities supplied during construction (including water and electricity) and Intellectual Property Rights to be provided hereunder or required to perform the Work;
9.2.2 all federal, provincial, and local taxes arising out of the Contractor’s performance of the Work (except for those referred to in Section 9.3);
9.2.3 any duties including import duties and taxes, fees, licenses and royalties imposed with respect to any Contractor Permits, Components, other equipment, materials, labour, services, supplies or Utilities;
9.2.4 all transportation costs relating to any Components, other equipment and loading and offloading fees;
9.2.5 costs of necessary third party inspection and certification including by any Authorities;
9.2.6 everything contingently and indispensably necessary to construct and complete the Work, and shall include consideration of all geographical and other restrictions associated with performance of the Work;
| - 31 - |
9.2.7 Contractor’s entire profit for completing the Work in accordance with the requirements of the Agreement, as well as all costs, overhead, contingency, expenses and allowances in connection with performance of the Work, including:
| (a) | all project management, engineering specialist services, consumables (including all required fuel) and direct and indirect labour required to perform the Work in accordance with the Agreement; |
| (b) | all construction aids and consumables required for provision of the Work. This shall include, but not be limited to: |
| (i) | design development of purchase orders; |
| (ii) | procuring, expediting, receiving, handling, inspection and the like; and |
| (iii) | all costs, overheads and contributions to profit related to such items; |
| (c) | all costs associated with complying with health and safety requirements; |
| (d) | the total cost for all Subcontractor management and utilization; |
| (e) | any Contractor or Subcontractors’ yard modifications, upgrades to equipment, facilities and the like; |
| (f) | costs for royalties, duties, licence fees, know-how fees, usage of proprietary information and all similar items; |
| (g) | costs for research and development (including those related to the development of computer systems); |
| (h) | corporate and administrative services such as legal, advertising, recruiting, general procurement, corporate accounting, marketing, industrial relations, sales and their related office costs; |
| (i) | all payrolls, employment, travel, subsistence accommodation and like costs for Contractor and Subcontractor personnel directly or indirectly engaged in the performance of the Work. This shall include salaries, wages, payroll burdens, escalation, bonus programs, vacations, holidays, sick leave, overtime, employment premiums, redundancy provisions, leave allowances, qualification payments, fares and expenses, employment insurance, retirement funds, payments or benefits under national or local agreements, government taxes, social security contributions, safety and welfare programs, protective clothing, all overheads and profits; and |
9.2.8 Notwithstanding the above, the Parties acknowledge and agree that the costs for items (a) and (b) below are estimates only and the Fixed Contract Price will be adjusted up or down based on Actual Costs: [REDACTED: Confidential and commercially sensitive exclusions from Fixed Contract Price]
9.2.9 Notwithstanding Section 9.2.7(f), the Fixed Contract Price shall not include any tariffs or duties imposed after the date of this Agreement pursuant to the Customs Tariff (S.C. 1991, c.36) (“Unanticipated Tariff”). Notwithstanding the first sentence of this Section 9.2.9, any tariff or duty which prior to the date of this Agreement (i) has been introduced as a bill in the Parliament of Canada in a form similar as such statute takes when it has legal effect, or (ii) has been made public in a discussion or consultation paper, press release or announcement issued by the Government of Canada shall not constitute an Unanticipated Tariff.
| - 32 - |
| 9.3 | Taxes |
9.3.1 The Fixed Contract Price includes payment by the Contractor and its Subcontractors for Sales Taxes applicable to any portion of the Work (but excluding those applicable directly to the Fixed Contract Price as provided in Section 9.1), any and all fees (including licence, documentation and registration fees), taxes (including income, gross, receipt, sales, rental, use turnover, value added, property (tangible and intangible), excise and stamp taxes), licences, royalties, custom duties, value added taxes, fees, levies, imposts, duties, recording charges, charges, assessments, withholdings and other governmental charges of any nature whatsoever, whether federal, provincial, local, territorial or foreign, together with any and all assessments, penalties, fines, additions and interest thereon, (except for interests and penalties not paid or remitted by the Contractor at the specific written request of the Owner), payable or due, in relation to the Work, including any of the foregoing related to the import by the Contractor or its Subcontractors of any items into Canada, or other Work (collectively referred to as “Taxes”). The Fixed Contract Price shall not be increased with respect to any of the foregoing items or with respect to any withholdings in respect of any of the foregoing items that the Owner may be required to make. Notwithstanding any of the foregoing, the Contractor shall not be liable for, and the Contract Price shall not include any Taxes for which the Owner is responsible pursuant to Section 9.1. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of Sales Taxes will be paid on the Work. The Contractor shall indemnify and save the Owner harmless from and against any and all claims, costs, losses and damages (including interest and penalties) suffered or incurred by the Owner as a result of the Contractor’s non-compliance with any of its obligations in respect of Taxes.
9.3.2 The Parties acknowledge and agree that all purchases, sales, leases and uses of any property or services by the Contractor as part of the Work are not incurred as agent for the Owner.
9.3.3 The Contractor shall timely administer and pay all Taxes for which the Contractor is responsible, and shall timely furnish to the appropriate taxing authorities all required information and reports in connection with such Taxes. Upon receipt of an invoice submitted by the Contractor, the Owner shall pay, on the due date for the undisputed invoice determined in accordance with this Agreement, the amounts of HST payable pursuant to Section 9.1 to Contractor who shall remit the HST paid to the relevant Authority at the time required by Law. The amount of HST payable by the Owner shall be separately stated in all invoices to the Owner. The Contractor shall provide to the Owner all information reasonably requested by the Owner to confirm that the correct amount of HST shall be paid with respect to the Work. In the event that transactions involving the Owner may be exempt from some Taxes or HST under applicable Laws, at the direction of the Owner, the Contractor shall provide all necessary information to any Authority and complete all necessary forms to allow the Owner to secure such exemption. The Owner shall hold harmless and indemnify the Contractor with regard to the instructions the Owner provides for such transactions.
9.3.4 In the event that any amount becomes payable as a result of a breach, modification or termination of the Agreement, and if section 182 of the Excise Tax Act (Canada) applies to that payment, then the amount payable shall be increased by an amount equal to the HST percentage rate multiplied by the amount payable and the payor shall pay the increased amount.
| - 33 - |
ARTICLE 10
PROCEDURE FOR PAYMENTS
| 10.1 | Payments & Applications for Payment |
10.1.1 Application for Payment. No earlier than the fifth (5th) day of any month and no later than the tenth (10th) day of any month following a month in which the Contractor has achieved a milestone set out in Schedule 9, the Contractor shall submit to the Owner an application for payment detailing the milestone completed during the previous month, including (for information purposes only) a detailed schedule of the number of man-hours expended on the Work completed during the previous month together with the applicable executed Milestone Completion Certificate (each, an “Application for Payment”). Each Application for Payment shall properly represent the portion of the Work which has been achieved. All Applications for Payment shall be based on the relevant percentage of the Fixed Contract Price payable in respect of the relevant payment milestone satisfied in the preceding month, as set forth on the Schedule of Milestones attached as Schedule 9. Applications for Payment shall not be made more frequently than monthly.
10.1.2 Lien Holdback
| (a) | The Owner shall withhold from each payment with respect to the Fixed Contract Price due to the Contractor during the Project, the Lien Holdback Amount. The Owner may increase the Lien Holdback Amount by the amount of any holdback necessary or desirable as a result of registered Liens or claims for Liens, notice of which may have been received by the Owner. |
| (b) | Subject to the provisions of the Construction Act (Ontario) and the submission by Contractor of a certificate containing the following documents: |
| (i) | a written undertaking by Contractor to complete expeditiously any outstanding Work (including Punch List items) and to discharge all unfulfilled obligations under this Agreement; |
| (ii) | an executed statutory declaration in the form set out in Schedule 7; |
| (iii) | an invoice specifying the aggregate amount of the Lien Holdback Amounts held by the Owner, |
the aggregate of the Lien Holdback Amounts (other than the Lien Holdback Amount for finishing work as per section 22(2) of the Construction Act) is payable within (5) Business Days following the first date upon which both of the following conditions have been satisfied:
| (iv) | the Work has achieved Substantial Performance; and |
| (v) | forty (40) days have elapsed from the date that Contractor has published a notice of Substantial Performance of the Work in respect of which the applicable Lien Holdback Amounts were retained, as provided in the Construction Act (Ontario), |
| - 34 - |
provided that if, prior to the expiry of the period set forth in this Section 10.1.2(b)(v) Liens have been registered or the Owner has received written notice of any Liens in connection with the Work which have not been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario) by the date otherwise determined pursuant to this Section 10.1.2(b), the date of payment otherwise shall be extended until the date that such Liens have been satisfied and discharged, vacated or withdrawn as provided in the Construction Act (Ontario).
10.1.3 Supporting Documentation. Each Application for Payment shall be accompanied by the following, all in form and substance reasonably satisfactory to the Owner:
| (a) | an invoice and a duly executed and acknowledged statement showing all Subcontractors with whom the Contractor has entered into subcontracts, the amount of each such Subcontract, the amount requested for any Subcontractor in the Application for Payment and the amount to be paid to the Contractor and each Subcontractor from such payment(s); |
| (b) | duly executed statutory declaration in the form of Schedule 7 from the Contractor; and |
| (c) | such other information, instruments, documents or other materials (i) as may be required by the Laws or customs of the Province of Ontario in order to protect the Owner from construction or similar Liens or claims, or (ii) as the Owner may reasonably request. |
10.1.4 Title. The Contractor warrants that title to all Work and Components shall pass to the Owner, free and clear of all Liens, claims, charges, security interests and encumbrances whatsoever on the earlier of payment by the Owner therefor or when it is delivered to the Job Site. Notwithstanding such passing of title, the Components shall be at the risk of the Contractor until the earlier of the Substantial Performance Date or termination of the Agreement. The passing of title in any Components to the Owner shall in no way affect, limit, alter or reduce the Contractor’s duties and obligations or the Owner’s rights under the Agreement.
| 10.2 | Payment |
10.2.1 Issuance of Payment. Invoices for any amounts payable by the Owner pursuant to this Article 10 must be sent by the Contractor electronically to: The Owner shall only be required to make payments pursuant to electronic funds transfer. In order for Owner to make payment to Contractor via electronic funds transfer, Contractor must provide Owner with, in the case of the first payment only, (i) a void cheque, pre-printed deposit slip or bank confirmation letter and (ii) the email address where Contractor wishes to receive remittance information (together, “EFT Information”). EFT Information must be sent electronically to, [REDACTED: Email address]. Subject to Section 10.2.2 and any right of set-off or withholding, the Owner shall, within twenty eight (28) days after the receipt of the Contractor’s Application for Payment (and all supporting documentation), issue payment to the Contractor for such amount as the Owner determines is properly due, via electronic funds transfer. If the amount so determined by the Owner is less than the amount requested by the Contractor, the Owner shall notify the Contractor in writing within fourteen (14) days of receipt of the Contractor’s Application for Payment of the reasons for withholding payment in whole or in part as permitted in this Agreement.
| - 35 - |
10.2.2 Withholding Payments. The Owner may withhold, or cause to be withheld, any payment due to the Contractor in whole or in part if the Work corresponding to such payment is not properly completed or as may be reasonably necessary to protect the Owner from material loss because of (a) defective, deficient or nonconforming Work not remedied in accordance with this Agreement, (b) unresolved construction Liens filed by any Person (c) failure of the Contractor to make payments properly to Subcontractors or other Persons for labour, materials, Components or other Work without just cause, (d) damage to the Owner caused by the Contractor or Subcontractors, (e) the Contractor’s failure to carry out the Work in accordance with this Agreement following the Owner’s written Notice to the Contractor, (f) errors, discrepancies, inconsistencies or irregularities in any Application for Payment, (g) unauthorised deviations from the Project Requirements by the Contractor in the prosecution of the Work or otherwise prosecution of the Work in non-compliance with the Project Requirements. The Owner shall not be deemed in default by reason of withholding a payment in whole or in part while any of the above matters remains uncured to its satisfaction (acting reasonably), provided that the amount of such withholding is a good faith estimate of allowable damages hereunder that may be incurred by the Owner as a result thereof. When the Contractor believes that it has cured the reason for any such withholding, the Contractor shall resubmit an Application for Payment for the amount that was withheld and if the Owner agrees that the reason for withholding has been cured, payment for the withheld amount shall be made within thirty (30) days after Owner’s receipt of such Application for Payment.
10.2.3 Set-Off. The Owner shall have the right to deduct as a set-off from any Contractor’s invoice an amount reasonably sufficient to protect the Owner from any unfulfilled obligations of the Contractor under this Agreement, any defective Components or any other breaches of this Agreement by the Contractor. Notwithstanding the foregoing, no set-off shall be made unless and until the Owner has provided the Contractor with written Notice of the unfulfilled obligation and given the Contractor a reasonable opportunity of at least thirty (30) days to commence a cure of such obligation.
10.2.4 Punch List The Owner shall be permitted to withhold from any payment properly due and payable to Contractor hereunder two hundred percent (200%) of the value of the Punch List determined pursuant to Section 12.2.
| 10.3 | Payments |
10.3.1 Subcontractors. The Contractor shall promptly pay each Subcontractor, upon receipt of payment from the Owner, out of the amount paid to the Contractor on account of such Subcontractor’s portion of the Work, the amount to which said Subcontractor is entitled. The Contractor shall, by appropriate agreement with each Subcontractor, require each Subcontractor to make payments to in a similar manner. The Owner shall not have an obligation to pay or to see to the payment of money to a Subcontractor or Vendor.
10.3.2 No Acceptance. No payment made by the Owner under this Agreement will constitute a waiver of any claim or right the Owner may have at that time or thereafter, including claims regarding unsettled Liens, warranty rights and indemnification obligations of the Contractor. No Payment made by the Owner under this Agreement will be considered or deemed to represent that the Owner has inspected the Work, accepted or checked the quality or quantity of the Work or that the Owner knows or has ascertained how or for what purpose the Contractor has used sums previously paid, and will not be deemed or construed as an approval or acceptance of any Work, or to relieve the Contractor of any of the Contractor’s obligations under this Agreement, or as a waiver of any claim or right that the Owner may have under this Agreement. All payments will be subject to correction or adjustment in subsequent payments with a detailed explanation submitted by the Owner to the Contractor describing such correction or adjustment.
10.3.3 Dispute. In the event of a dispute between the Contractor and the Owner, the Owner shall continue to make payments hereunder of amounts not in dispute without resubmittal of the Application for Payment.
| - 36 - |
10.3.4 Interest. Payments due and unpaid hereunder, except payments legitimately withheld, shall bear interest from the date payment is due at the Prime Rate.
10.3.5 Payment Preconditions. A precondition to the Owner making any payment under this Agreement:
| (a) | is that all policies of insurance set out in Section 18.1 are in full force and effect and Owner shall have been provided with certificates of insurance in accordance with Section 18.2.1 which continue to be valid; |
| (b) | in respect of all or any part of the Components, is that such Components have been delivered to the Job Site or appropriately and effectively identified as property of the Owner, and the Contractor shall, at the request of the Owner, provide satisfactory evidence that this precondition has been met; and |
| (c) | is that each payment will be paid to a segregated account established and controlled by the Contractor for this Agreement and from which the Contractor shall make all payments for Work performed. |
| 10.4 | Final Completion & Final Payment |
10.4.1 Final Completion. Provided that the Owner has received a final Application for Payment from the Contractor requesting payment of the remainder of the unpaid Fixed Contract Price, the Owner shall, subject to this Section 10.4, issue final payment.
10.4.2 Conditions to Final Payment. The final Application for Payment shall be delivered by the Contractor to the Owner following issuance of the Certificate of Substantial Performance (excluding any Lien Holdback Amount which shall be paid in accordance with the Construction Act (Ontario)) and payment shall be made, or caused to be made, by the Owner to the Contractor within twenty-eight (28) days of receipt of such Application for Payment and receipt of compliance with the Workplace Safety and Insurance Act (Ontario) in accordance with Section 10.5.1.
10.4.3 Acceptance of Final Payment. Acceptance of final payment by the Contractor shall constitute a final and complete waiver of claims by the Contractor, except those previously made in writing and identified by the Contractor as unsettled at the time of the final payment.
10.4.4 Punch List. Upon the completion by the Contractor of all of the Punch List items with the exception of those waived by the Owner in writing, the Owner shall pay, or cause to be paid, to the Contractor the value retained by the Owner pursuant to Section 10.2.4 in respect of such Punch List within twenty-eight (28) days after the Owner’s receipt of a corresponding Application for Payment (and all supporting information) and upon the Owner’s agreement that all work relating to Punch List items is complete but subject always to the provisions of Sections 10.2 and 10.3. The Owner shall give the Contractor reasonable access to each BESS and the Job Sites during normal working hours so as to give the Contractor sufficient opportunity to complete the Punch List items.
10.4.5 Holdback. Any Lien Holdback Amount held back by the Owner with respect to payments of the Fixed Contract Price made after the Substantial Performance Date shall become due and payable and shall be released to the Contractor in accordance with the Construction Act (Ontario), provided that the Contractor has submitted to the Owner a sworn statement that all accounts to Subcontractors and any other indebtedness which may have been incurred by the Contractor up to and including Final Completion and for which the Owner might in any way be held responsible have been paid in full except Lien holdback monies properly retained.
| - 37 - |
| 10.5 | Workers’ Compensation |
10.5.1 Prior to (a) commencing the Work; (b) the Contractor’s application for release of any Lien Holdback Amount; and (c) the Contractor’s application for final payment, the Contractor shall provide evidence of compliance with the Workplace Safety and Insurance Act (Ontario) at the Job Site, including payments due thereunder.
10.5.2 At any time during the term of this Agreement, when requested by the Owner, the Contractor shall provide such evidence of compliance by the Contractor and Subcontractors with Workplace Safety and Insurance Act (Ontario).
ARTICLE 11
REPRESENTATIONS AND WARRANTIES
| 11.1 | The Contractor |
In addition to any other representations and warranties made herein, the Contractor hereby represents and warrants the following to the Owner, which representations and warranties shall survive the execution and delivery of this Agreement, any termination of this Agreement and the Final Completion of the Work:
| (a) | that the Contractor has carefully and thoroughly reviewed this Agreement (including, without limitation, the Technical Requirements) and that: (i) this Agreement does not contain any inconsistencies, discrepancies, errors or omissions; and (ii) this Agreement identifies (and permits the reasonable inference of) the scope which is necessary to complete the Work and the BESS within the Fixed Contract Price and by the Guaranteed Substantial Performance Date; |
| (b) | that the Contractor is able to furnish the personnel, tools, materials, supplies, Components, labour and design, engineering and construction services required to complete the Work, that it has the requisite technical, financial and legal ability to perform the Work, that it is familiar with and knowledgeable of all applicable Laws, and that it has and shall maintain the capability, expertise, competence and experience to perform the Work; |
| (c) | that the Contractor is a corporation duly organized, validly existing and in good standing under the Laws of Canada, and is duly qualified to do business in the Province of Ontario; |
| (d) | that the Contractor is authorized to do business in the Province of Ontario and properly licensed and approved by all Authorities having jurisdiction over the Contractor, the Work and/or the Project; |
| (e) | that the Contractor has visited the Job Sites, familiarized itself with the local conditions under which the Work is to be performed and correlated its observations with the requirements of this Agreement; |
| - 38 - |
| (f) | that the Contractor is capable of properly completing the Work and the BESS within the Fixed Contract Price, all in accordance with the terms and provisions of this Agreement; |
| (g) | that the Contractor has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (h) | that the Contractor’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (i) | that the Contractor has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Contractor’s authorization, execution, delivery and performance of the terms of this Agreement; |
| (j) | that there are no actions, suits, proceedings or investigations pending or, to the Contractor’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Contractor or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Contractor has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment; |
| (k) | that the Contractor is and will continue to be during the term of this agreement a registrant under the Excise Tax Act (Canada) with HST business number 846676377 RC0001; and |
| (l) | the Contractor is not and will not become during the term of this Agreement a non-resident of Canada for the purposes of the Income Tax Act (Canada). |
| 11.2 | The Owner |
The Owner hereby represents and warrants the following to the Contractor, which representations and warranties shall survive the execution and delivery of this Agreement, and any termination of this Agreement and the final completion of the Work:
| (a) | that the Owner is a corporation duly incorporated, validly existing and in good standing under the Laws of the Province of Ontario, and is duly qualified to do business in the Province of Ontario; |
| - 39 - |
| (b) | that the Owner has the power and authority to execute and deliver this Agreement and to perform its obligations thereunder and all such actions have been duly authorized by all necessary proceedings on its part; |
| (c) | that the Owner’s execution, delivery and performance of this Agreement will not conflict with (i) its governing documents, or (ii) any covenant, agreement, understanding, decree or order to which it is a party or by which it is bound or affected, which in case of this clause (ii), individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any material impairment of its ability to perform its obligations under this Agreement; |
| (d) | that the Owner has duly and validly executed and delivered this Agreement, which constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the rights of creditors generally or by general principles of equity, and that no authorization, approval, exemption or consent by any Authority is required in connection with the Owner’s authorization, execution, delivery and performance of the terms of this Agreement, which has not already been obtained or will be timely obtained; and |
| (e) | that there are no actions, suits, proceedings or investigations pending or, to the Owner’s knowledge, threatened against it at Law or in equity, before any court or before any Authority, which individually or in the aggregate could reasonably be expected to have a materially adverse effect on the business, properties or assets or the condition, financial or otherwise, of the Owner or could reasonably be expected to result in any impairment of its ability to perform its obligations under this Agreement, and that the Owner has no knowledge of any violation or default with respect to any order, writ, injunction or decree of any court or any Authority which could reasonably be expected to have such a materially adverse effect or result in such impairment. |
ARTICLE 12
TESTING AND SUBSTANTIAL PERFORMANCE
| 12.1 | Guarantee Performance Tests |
12.1.1 Site Acceptance Test Protocols. Contractor agrees to prepare a draft Site Acceptance Test in accordance with the Statement of Requirements and once Owner confirms that such draft is agreed, it shall constitute the Site Acceptance Test for the purposes of this Agreement. On or before the date which is twenty (20) Working Days prior to the date that the Contractor is expected to commence the Guaranteed Capacity Test and any other testing provided for in the Site Acceptance Test, the Contractor shall provide the Owner with a draft testing program and procedures in accordance with the Site Acceptance Test and the Statement of Requirements. Such testing program and procedures shall include a protocol established by Contractor which shall address how the Contractor shall conduct the Site Acceptance Test and the Guaranteed Capacity Test in particular. The Contractor shall provide the Owner with the final testing program and procedures before the Site Acceptance Test is commenced.
12.1.2 Testing. At such time as the Contractor believes that the BESS will be ready for the Site Acceptance Test, the Contractor shall notify the Owner of testing no later than ten (10) Working Days prior to the date of each Site Acceptance Test so that the Owner, its employees, agents, advisors, representatives and the Owner’s Engineer may observe and participate in the same.
| - 40 - |
12.1.3 Performance Testing. The Contractor shall complete all elements of the Site Acceptance Test as soon as is reasonably possible after the commencement of the first such test. The Contractor must demonstrate that the Guaranteed Capacity Test and Permit conditions have been met (at least to the extent the same are required to have been met to achieve Substantial Performance) simultaneously. The Site Acceptance Test shall be conducted (a) in the presence of the Owner’s Representative and, at the request of any Authority in the presence of such Authority, (b) utilizing the personnel, who shall act under the supervision and direction of the Contractor, and (c) in conformance with the Project Requirements. In the event that any test required by the Site Acceptance Test fails as a result of a defect in any Component, the Contractor shall promptly remedy the defect in the Component. No auxiliary, standby or temporary equipment or machinery may be used during the performance of the Site Acceptance Test unless otherwise approved in writing by the Owner. Each BESS will be operated in its normal mode of operation while the Site Acceptance Test is being conducted, which shall consist of (a) the operation of the BESS as a whole, (b) the concurrent operation of BESS systems, and (c) the operation of all BESS systems within the manufacturers’ specifications and without over-stressing or over-pressurizing any such systems. Within seven (7) days following the conduct of each element of the Site Acceptance Test, the Contractor shall submit to the Owner a preliminary report explaining and analyzing the tests.
| 12.2 | Substantial Performance |
When the Contractor believes that it has achieved Substantial Performance, the Contractor shall submit written notice (the “Contractor Substantial Performance Notice”) to the Owner so certifying such event (which notice shall be accompanied by a report as to the results of the Site Acceptance Test any other information deemed reasonably necessary by the Contractor and a proposed Punch List) and certifying as to the items required by the definition of Substantial Performance, such certification of the items required by the definition of Substantial Performance to be in the form attached hereto as Schedule 4. Immediately thereafter, the Owner shall conduct those investigations and inspections as it deems necessary or appropriate to determine if Substantial Performance has in fact been achieved. The Contractor shall furnish to the Owner any additional supporting information reasonably requested by the Owner. In the event that Owner determines that Substantial Performance has not been achieved, it shall within ten (10) Working Days of receipt of Contractor’s notice by the Owner state the reasons therefor and/or provide comments to the proposed Punch List. In the event that Owner determines that Substantial Performance has been achieved, it shall within fifteen (15) Working Days after the receipt of the Contractor’s notice by the Owner notify the Contractor that Substantial Performance has been achieved by providing a notice substantially in the form of the notice attached hereto as Schedule 15. In the event that the Owner provides written notice that Substantial Performance has been achieved (the “Owner Substantial Performance Notice”), the Contractor and the Owner shall execute a “Certificate of Substantial Performance” establishing and identifying the “Substantial Performance Date” as the date on which the Contractor delivered the final Contractor Substantial Performance Notice. In the event that the Owner provides written notice that Substantial Performance has not been achieved, the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions in the Work which so prevent Substantial Performance. Upon completion of any such corrective and/or remedial actions and upon not less than five (5) Working Days prior written Notice to the Owner, the Contractor shall re- perform the Site Acceptance Test as provided in Section 12.1.
| - 41 - |
| 12.3 | Possession |
Upon the Acceptance Date, the Owner shall take possession of, and shall assume care, custody and control over, the Project.
| 12.4 | Completion Plan |
If any BESS has not achieved Substantial Performance by the Guaranteed Substantial Performance Date or it is known to the Parties that Substantial Performance will not be achieved by the Guaranteed Substantial Performance Date, the Contractor shall, within three (3) days, submit for review and approval by the Owner a written completion plan (the “Completion Plan”) detailing steps the Contractor will take to complete all necessary Work to meet the requirements of Substantial Performance. The Owner shall provide written approval or rejection (with comments) to the Contractor within five (5) Working Days of receipt of the Completion Plan. If rejected, the Contractor shall then resubmit to the Owner within the next five (5) Working Days a revised Completion Plan addressing such comments as shall have been provided by the Owner. The Owner shall provide written comment and, within the next three (3) Working Days after receipt of the Owner’s written comment, the Contractor shall revise and resubmit the Completion Plan within these time limits until the Contractor has addressed all comments of the Owner, and the Contractor shall then promptly proceed with such Work as may be required under the Completion Plan. The preparation, review and revision of a Completion Plan and performance of Work as required by the Completion Plan shall not be deemed in any way to have relieved the Contractor of its obligation to achieve Substantial Performance expeditiously or be a basis for an increase in the Fixed Contract Price.
| 12.5 | Post Substantial Performance Remediation |
12.5.1 Remediation. In the event the result of any test required by the Site Acceptance Test results in the satisfaction of the Guaranteed Capacity Test and all requirements for Commercial Operation of the BESS but not all the components of the Site Acceptance Test and provided the Substantial Performance Date occurs in accordance with this Agreement or as otherwise agree by the Parties, notwithstanding the occurrence of the Substantial Performance Date, the Contractor shall with the Owner’s prior written consent promptly and diligently correct the defect, failure, deficiency or breach which has prevented satisfaction of the relevant portions of the Site Acceptance Test at the Contractor’s sole cost and expense which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of the BESS. The Contractor shall remedy any such defect, failure, deficiency or breach so as to minimise disruptions to the Landlord’s operations at the Job Site. The Contractor shall perform further Site Acceptance Tests and continue the remedial work referred to in this Section 12.5 until each element of the Site Acceptance Test is satisfied in its entirety.
12.5.2 Performance Testing. If the Contractor wishes to conduct further Site Acceptance Tests pursuant to Section 12.5.1, the Contractor shall so notify the Owner (which Notice shall include a detailed schedule for the performance of such tests). The Contractor and Owner each acting reasonably shall thereafter schedule such further Site Acceptance Tests and the Contractor acknowledges and agrees that it will make Commercially Reasonable Efforts to minimise revenue loss to the Owner. All such tests shall be conducted in the presence of the Owner’s Representative in conformance with the Project Requirements. No auxiliary, standby, temporary equipment or machinery may be used during the performance of any such Site Acceptance Test and each BESS will be operated in its normal mode of operation which shall consist of (a) operation of the BESS as a whole and (b) without over-stressing or over-pressuring the BESS systems.
| - 42 - |
ARTICLE 13
FINAL COMPLETION
| 13.1 | Establishing Final Completion |
When the Contractor believes that it has achieved Final Completion, the Contractor shall submit Notice to the Owner so certifying such event and the other items required by the definition of Final Completion, including supporting documentation as reasonably required by the Owner. Immediately thereafter, the Owner shall conduct those investigations and inspections as they deem necessary or appropriate to determine if Final Completion has in fact been achieved. Within ten (10) Working Days after the receipt of the Contractor’s Notice by the Owner, the Owner shall either (a) notify the Contractor that Final Completion has been achieved, or (b) notify the Contractor in writing that Final Completion has not been achieved and stating the reasons therefor. In the event that the Owner provides written Notice that Final Completion has been achieved, the Contractor and the Owner shall execute a “Certificate of Final Completion” establishing and identifying the Final Completion Date in the form attached hereto as Schedule 20, unless the Owner provides written Notice that Final Completion has not been achieved, in which case the Contractor shall, at its sole cost and expense, immediately correct and/or remedy the defects, deficiencies and other conditions which so prevent Final Completion. Upon completion of such corrective and/or remedial actions, the Contractor shall resubmit its Notice certifying that it believes Final Completion has been achieved (together with the other items required by the definition of Final Completion) and the foregoing procedures shall be repeated until Final Completion has in fact been achieved.
ARTICLE 14
SUBCONTRACTORS
| 14.1 | Subcontracting |
Except as otherwise provided below, the Contractor shall not delegate or subcontract all or any portion of the Work to be performed on the Job Site to any Subcontractor which is not listed in Schedule 16. If the Contractor wishes to use a Subcontractor not listed in Schedule 16, the Contractor shall notify the Owner of the Subcontractor and consider any comments the Owner may have in relation to such Person prior to engaging it. Contractor is and shall ensure that all subcontractors at the Job Site comply with the ITC labour requirements.
| 14.2 | The Contractor’s Responsibility |
The Contractor shall be liable for the acts, omissions, defaults or neglects of its Subcontractors, its or their agents, employees or consultants as fully as if they were the acts, omissions, defaults or neglects of the Contractor. The Contractor shall be solely responsible for the engagement, management and payment of Subcontractors in the performance of the Work. The Owner shall have no obligation to pay or see to the payment of any monies to any Subcontractor, except for those required pursuant to the Construction Act (Ontario) as permitted under this Agreement. Notwithstanding any subcontract, vendor agreement, purchase order or agreement with any Subcontractor:
| (a) | the Contractor shall remain fully liable to the Owner to perform all of the duties and obligations or liabilities of the Subcontractor thereunder; |
| - 43 - |
| (b) | nothing in any such subcontract, vendor agreement, purchase order or agreement shall in any way diminish or relieve the Contractor of its duties and obligations under this Agreement; |
| (c) | the Contractor shall be responsible for and shall ensure that the Subcontractors obtain and pay for all necessary permits, fees, licences and certificates of inspection and insurance in connection with the Work they are to perform; and |
| (d) | the Contractor shall ensure all Subcontractors comply with the Owner Policy in connection with performance of any work on the Job Site or otherwise relating to the Project. |
| 14.3 | Intentionally Left Blank |
| 14.4 | Contingent Assignment |
Each subcontract agreement to the extent applicable to the Work and for the applicable portion of the Work is hereby assigned by the Contractor to the Owner provided that:
14.4.1 the assignment is effective only after termination of this Agreement by the Owner or expiry of the Warranty Periods and only for those subcontract agreements which the Owner accepts by notifying the Subcontractor in writing;
14.4.2 [intentionally deleted]
14.4.3 upon such assignment becoming effective, all of the rights of the Contractor under the subcontract shall be assigned to the Owner and the Subcontractor shall perform its duties and obligations thereunder, provided that the Owner or its designee makes payment of any amounts due thereunder as and when due and payable with respect to the same, less such amounts as therefore paid by the Owner to the Contractor applicable to the subcontract.
14.4.4 The Contractor shall execute and deliver to the Owner any instruments reasonably required by the Owner to confirm and evidence any of the preceding contingent assignments. The Contractor shall also make available for the Owner’s inspection true and correct copies of the executed subcontracts during regular business hours. In the event that after using its Commercially Reasonable Efforts to give effect to the foregoing provisions of this Section 14.4 the Contractor is unable to contingently assign a subcontract to the Owner as provided in this Section 14.4:
14.4.5 each such subcontract (a “Non-Assigned Contract”) will be deemed not to have been contingently assigned by the Contractor to the Owner under this Agreement;
14.4.6 in event of the termination of this Agreement or expiry of the Warranty Periods, the Contractor shall upon Notice from the Owner, and to the extent applicable to the Work, hold the Non- Assigned Contract for the exclusive benefit of the Owner;
14.4.7 the Contractor shall, at the request and expense and under the direction of the Owner, acting reasonably, do all things or cause all things to be done that the Owner, acting reasonably, considers necessary or desirable to perform the obligations of the Contractor under the Non-Assigned Contracts in a manner that preserves the value of the rights, remedies and benefits under the Non-Assigned Contract and ensures that those rights, remedies and benefits will enure to the benefit of the Owner, and ensure that all services, amounts and other consideration receivable under the Non-Assigned Contracts will be received by the Owner;
| - 44 - |
14.4.8 the Contractor shall promptly pay over to the Owner all amounts collected by the Contractor under the Non-Assigned Contracts and the Owner shall pay any amounts due thereunder for the performance by the Subcontractor of its duties and obligations thereunder, as and when due and payable, less any such amounts paid by the Owner to the Contractor which are applicable to the Non-Assigned Contract;
14.4.9 the Contractor and the Owner shall make reasonable efforts and cooperate with each other in good faith to obtain any necessary consents under the Non-Assigned Contracts to assign the same to the Owner, where the Owner wishes to take assignment; and
14.4.10 if the Contractor obtains the necessary consent referred to in Section 14.4.9 in form satisfactory to the Owner, effective as of the date the Owner receives a copy of that consent from the Contractor, that Non-Assigned Contract will be deemed to have been assigned and transferred by the Contractor to the Owner and the Contractor and the Owner will be relieved of any further obligations under any agreement made between them in respect of that Non-Assigned Contract (including under these Sections 14.4.5 to 14.4.9).
ARTICLE 15
OWNERSHIP AND CONFIDENTIALITY
| 15.1 | Ownership |
15.1.1 Design Materials. The copies and other tangible embodiments of the Design & Engineering Documents, and any other drawings, specifications, designs, plans, “architectural work” and other documents, specifically prepared by or on behalf of the Owner, the Contractor or the Subcontractors in connection with the Project or the Work (collectively, the “Design Materials”) are and shall remain the property of the Owner. The Contractor shall use its Commercial Reasonable Efforts to ensure that all copies of the Design Materials are delivered or returned to the Owner or suitably accounted for upon Final Completion. The Contractor may retain one copy of the Design Materials for its records. Any use of such Design Materials by the Contractor on other projects shall be at the Contractor’s sole risk and liability. The Intellectual Property Rights, if any, relating to the Design Materials or the contents of or concepts embodied in the Design Materials shall remain with and belong to the Contractor or its Subcontractors as the case may be.
15.1.2 Licence. As Design Materials and any portion of the Work deemed subject to any form of Intellectual Property Rights, the Contractor hereby grants and shall cause to be granted and delivered to the Owner from Subcontractors, whichever is appropriate, a fully paid-up, non-exclusive, worldwide, irrevocable, transferable licence, for the term of the Intellectual Property Rights, for the Owner to use, amend, reproduce and have reproduced, and for the Owner to allow others to use, amend, reproduce and have reproduced, such Design Materials and any derivative thereof and the Work, subject to the restrictions set forth below:
| (a) | all Intellectual Property Rights referred to this Section 15.1.2 shall remain the property of the Contractor or the appropriate Subcontractor, whether or not the BESS is constructed; |
| - 45 - |
| (b) | in no event will the Owner require the Contractor or any subcontractor or sub-subcontractor to grant a license to, or produce any software source code; and |
| (c) | the Owner shall not, without the prior written consent of the Contractor, use the Design Materials, in whole or in part, for the construction of any other project or for any purpose except as set forth in the following sentence. The Owner may, however, at no cost to the Owner, use such Design Materials (i) for completion of the Project by others upon termination of this Agreement and (ii) for the construction, operation and maintenance of (and for additions, improvements, expansions, changes or alterations to) the BESS after its completion. |
15.1.3 Delivery. Upon Final Completion or the date of termination of this Agreement, the Contractor shall deliver to the Owner any Design Materials which have not been previously submitted to the Owner.
15.1.4 Title. In confirmation and furtherance of the terms and provisions of this Article 15, ownership and title to the Design Materials shall vest in the Owner immediately upon the creation in whole or in part of any Design Materials. In addition, the licence granted to the Owner pursuant to Section 15.1.2 shall be deemed to be granted immediately upon creation of any of the Intellectual Property Rights to which it pertains.
15.1.5 Moral Rights. The Contractor shall require each employee, consultant or designer to execute a waiver of moral rights in a form reasonably satisfactory to the Owner and with respect to the preparation by employees, consultants and other individuals engaged by the designers in preparation of the Design & Engineering Documents, the Detail Design Documents and the Work.
| 15.2 | Confidentiality |
15.2.1 Confidential Information. The Owner and the Contractor each agree to keep confidential the terms and conditions of this Agreement and upon receipt from the other Party any documentation or information (a) provided by such Party to the other Party, whether or not it is marked as “proprietary” or “confidential”; (b) which is supplied orally with a contemporaneous confidential designation; or (c) which is known by the receiving party to be confidential or proprietary information or documentation of the disclosing party (“Confidential Information”). The Parties shall have no obligation with respect to any such Confidential Information which (a) is or becomes publicly known through no act of the receiving party, (b) is approved for release by written authorization of the disclosing party; or (c) is disclosed by the receiving party pursuant to a legal or regulatory process.
| - 46 - |
15.2.2 Use of Confidential Information. The Owner and the Contractor shall not use or disclose Confidential Information for any purpose other than for the design, development, construction, financing, transfer or operation of the Project. Notwithstanding the foregoing, the Owner may use and disclose Confidential Information of the Contractor for the completion, repair, operation and maintenance of, and additions, improvements, expansions, changes or alterations to, the BESS, provided that the Owner makes any third party with which such Confidential Information is shared subject to a written confidentiality provision with terms similar to those set forth herein, unless the recipient is already bound by a professional obligation not to disclose such Confidential Information. The Owner shall co-operate with the Contractor in enforcing such confidentiality provisions. Each Party agrees to utilize the same standards and procedures with respect to Confidential Information received from the other Party which it applies to its own Confidential Information, but not less than reasonable care. Each Party shall limit access to received Confidential Information to those of its Affiliates and its and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who need to know about or participate in the design, development, construction, ownership financing, or operation of the Project and disclosure shall be limited to only Confidential Information necessary for performance under this Agreement. Each Party agrees to inform each of its Affiliates and it and their respective directors, officers, employees, lawyers, lenders, contractors, subcontractors, suppliers, agents, and consultants who receive Confidential Information of the secret and confidential nature thereof and of the obligations imposed by this Agreement, and shall disclose to the other Party the identities of any lenders, subcontractors, suppliers, agents, and consultants who will have access to or have received Confidential Information. Unless otherwise agreed by the Owner, no Confidential Information received from the Owner shall be disclosed by the Contractor or its Subcontractors to lenders, contractors, subcontractors, suppliers, agents, and consultants until and unless those individuals or entities have executed a mutually agreeable confidentiality agreement with the Owner. The Contractor agrees that any Confidential Information provided to the Owner may be disclosed by the Owner to any bona fide potential purchaser, investor, lender or operator of the BESS. Each Party shall be liable for unauthorized use or disclosure of received Confidential Information by any Person to which such Confidential Information is disclosed by it. Confidential Information shall not be reproduced without written agreement of the Parties. Notwithstanding the foregoing, Confidential Information may be disclosed by the Owner pursuant to a subpoena or other legal or regulatory process or proceeding to which the Owner is a party or pursuant to the order of an Authority.
| 15.3 | Survival |
The terms and provisions of Section 15.2 shall survive the termination or expiration of this Agreement for a period of two (2) years.
ARTICLE 16
CHANGES IN WORK
| 16.1 | Changes in the Work |
Changes in Work may be accomplished after execution of this Agreement and without invalidating this Agreement, by Change Order or Construction Change Directive. A Change Order shall be based upon agreement between the Owner and the Contractor; a Construction Change Directive may be issued by the Owner alone and may or may not be agreed to by the Contractor. Changes in Work shall be performed under applicable provisions of this Agreement, and the Contractor shall proceed promptly, unless otherwise provided in the Change Order or Construction Change Directive.
| - 47 - |
| 16.2 | Owner Initiated Changes |
The Owner may request changes in the Work within the general scope of this Agreement consisting of additions, deletions or other revisions. If the Owner so desires to change the Work, it shall promptly contact the Contractor to discuss the proposed changes to determine appropriate changes to the course of and impact on the Work. In addition, the Owner shall promptly submit a change request to the Contractor in writing in the form set out in Schedule 11. Within five (5) Working Days of its receipt of any such request, the Contractor shall submit a detailed proposal to the Owner in the form set out in Schedule 11 stating (i) the proposed increase, if any, in the Fixed Contract Price which would result from such a Change in Work, (ii) the effect, if any, upon the Guaranteed Substantial Performance Date by reason of such proposed Change in Work, and (iii) any other effect that the change would have on the provisions of this Agreement, together with supporting data and documentation, including any reasonably requested by the Owner in its request for the Change in Work. If the Contractor does submit a proposal within the preceding five (5) Working Day time period, the Owner shall, within three (3) Working Days following its receipt of such proposal, notify the Contractor as to whether the Owner agrees with such proposal and wishes to accept the Contractor’s proposal for the Change in Work (for purposes of this Section 16.2, the “Approval Date”). If the Owner agrees with such proposal and wishes to accept the same, the Owner and the Contractor promptly shall execute a Change Order pursuant to Section 16.3 below. In the event that the Owner disagrees with the Contractor’s proposal for the Change in Work, the Owner may either (i) notify the Contractor that the Owner has decided to withdraw its requested change, or (ii) issue a Construction Change Directive pursuant to Section 16.4 below (the “Directive Date”). Notwithstanding the time frame for formalizing any changes described above, the Parties agree to consult with one another throughout the process with respect to such changes.
| 16.3 | Change Orders |
In the event that the Owner agrees to accept the Contractor’s proposal in relation to the Owner’s request for a change in the Work, the Parties shall execute a “Change Order” in the form set out in Schedule11, which shall be a written instrument signed by the Owner and the Contractor, stating their agreement upon all of the following:
| (a) | the relevant Change in Work; |
| (b) | the amount of the adjustment in the Fixed Contract Price, if any; |
| (c) | the extent of the adjustment in the Project Schedule and the Guaranteed Substantial Performance Date, if any; and |
| (d) | all other effects the change has on the provisions of this Agreement. |
In addition to the circumstances described above, the Parties may enter into a Change Order in relation to a Force Majeure to the extent provided in Article 24 of this Agreement.
| 16.4 | Construction Change Directives |
In the event that the Owner disagrees with the Contractor’s proposal in relation to the Owner’s request for a Change in Work pursuant to Section 16.2, the Owner may issue a written order directing a Change in Work (a “Construction Change Directive”), whereupon the Owner and the Contractor shall also equitably adjust the Fixed Contract Price, the Guaranteed Substantial Performance Date, the Project Schedule as provided in this Section 16.4. To the extent any costs are actually incurred by the Contractor by virtue of and in accordance with the Change in Work required by a Construction Change Directive, the Fixed Contract Price will be adjusted in accordance with Section 16.5, and such extra costs, plus in the case of the costs identified in Section 16.5(b)(i) the Contractor’s profit and overhead thereon at a rate of five percent (5%), shall be invoiced by the Contractor monthly and paid by the Owner as required for payments hereunder. Unless otherwise stated in the Construction Change Directive, the Contractor shall begin the Work described in a Construction Change Directive promptly upon receipt of the same.
| 16.5 | Adjustment |
| (a) | The adjustment to the Fixed Contract Price resulting from the issuance of a Construction Change Directive shall be based on actual costs. |
| - 48 - |
| (b) | The Contractor shall keep and present, in such form as the Owner may prescribe, an itemized accounting of the “actual cost” together with appropriate supporting data, such as timesheets, invoices, time cards, payroll stubs, purchase orders, receipts and similar documentation. For the purposes of this Section 16.5, “actual cost” shall be defined and limited to the cost of the following: |
| (i) | costs of labour, including social security, old age and unemployment insurance, fringe benefits required by agreement or custom, and workers’ or workmen’s compensation insurance; |
| (ii) | costs of materials, supplies and Components, including cost of transportation, whether incorporated or consumed; |
| (iii) | reasonable rental costs of machinery and equipment to be used in relation to the Work identified in the Construction Change Directive, whether rented from the Contractor or others (including small tools); |
| (iv) | costs for subsistence, travel time and per diems, if necessary for the performance of the Work; |
| (v) | costs of premiums for all bonds and insurance and fees for Permits related to the Work; |
| (vi) | as to the Contractor, payments made to Subcontractors for Work performed or furnished by Subcontractors; and |
| (vii) | costs related to changes that are required to be made to Work impacted by the change set out in the Construction Change Directive. |
| 16.6 | Guaranteed Substantial Performance Date |
The Owner shall propose a basis for adjustment, if any, in the Guaranteed Substantial Performance Date in the Construction Change Directive it issues to the Contractor. If the Contractor does not agree with such proposed adjustment, then any such adjustment in the Project Schedule shall be determined in accordance with Article 27 of this Agreement.
| 16.7 | Adjustments Final |
When the adjustments in the Fixed Contract Price and the Project Schedule are determined as provided in this Article 16, such determination shall be effective immediately and shall be recorded by preparation and execution of an appropriate Change Order.
| 16.8 | Fixed Contract Price & Schedule |
Notwithstanding anything to the contrary contained in this Agreement, an increase in the Fixed Contract Price and the Guaranteed Substantial Performance Date may only be adjusted by Change Order or Construction Change Directive.
| - 49 - |
ARTICLE 17
CORRECTION OF WORK
| 17.1 | Correction of Work |
Prior to the date of Final Completion, the Contractor shall, at the earliest practical opportunity, correct Work (including any drawings, plans, specifications, items of construction or fabrication, or any other product constituting a part, system or component of the Work) (a) which the Owner, by providing written Notice to the Contractor, rejects as defective, deficient or failing to conform in all respects to this Agreement (whether arising from a design or construction defect, error, omission or deficiency), or (b) which is otherwise known by the Contractor or any Subcontractor to be defective or failing to conform to this Agreement. If other portions of the Work are adversely affected by or are damaged by such defective Work, the Contractor shall, at its sole cost and expense and at the earliest practical opportunity, correct, repair or replace such affected or damaged Work, as well as any other property damaged by such defective or nonconforming Work. All corrections to the Work shall be performed in accordance with this Agreement and the Project Requirements. The Contractor shall bear all costs of correcting such defective or nonconforming Work, including additional testing and inspections (including those necessary to demonstrate cure of the defective Work) and compensation for any design or engineering services and expenses made necessary thereby.
| 17.2 | Failure to Correct Work |
If the Contractor fails to correct defective or nonconforming Work, or any damaged Work or other property specified in Section 17.1 hereof, the Owner may correct it in accordance with Section 5.1.7.
ARTICLE 18
INSURANCE
[REDACTED: Confidential and commercially sensitive insurance provisions]
ARTICLE 19
[Intentionally left blank]
ARTICLE 20
PROTECTION OF PERSONS AND PROPERTY
| 20.1 | Safety |
20.1.1 Safety Programs. The Contractor shall be responsible for initiating, maintaining and supervising safety precautions and appropriate programs in connection with the performance of this Agreement, including, without limitation, appropriate precautions and programs for areas in and around the Job Site. Such precautions shall include the development of comprehensive environmental health and safety plan in accordance with the Statement of Requirements which shall relate specifically to the Project, the Work and the Job Site, which shall be developed and delivered to the Owner for approval by no later than delivery of the notice to proceed pursuant to Section 2.1 and the Contractor will comply with such environmental health and safety plan (the “Health and Safety Plan”). The Contractor shall have the highest regard for safety, emergency procedures and loss management at all times during the performance of the Work. Accordingly, the Contractor shall at all times be solely responsible for safety and loss management in the performance of the Work, including, but not limited to, protecting the Contractor, Separate Contractors, Subcontractors, visitors to the Job Site and the general public from injury or death and protecting the Job Site, the Owner’s property and the property of third parties from loss or damage. Without limiting the generality of the foregoing, the Contractor shall comply with all safety requirements specified in this Agreement.
| - 50 - |
20.1.2 Applicable Laws. The Contractor shall give Notices and comply with all applicable Laws bearing on the safety of persons or property or their protection from damage, injury or loss, including, without limitation, the Occupational Health and Safety Act (Ontario).
20.1.3 Constructor.
| (a) | The Contractor shall be the “constructor” at the Job Site and with respect to the Work for the purposes of the Occupational Health and Safety Act (Ontario) and shall nominate from among its personnel a contact person for issues relevant to such constructor role. As constructor Contractor shall do everything that is reasonably practicable to establish and maintain a system or process at the worksite that shall promote compliance with the applicable Occupational Health and Safety Act (Ontario) and its regulations. |
| (b) | The Contractor shall advise anyone performing the Work who may enter the Job Site, prior to their commencement of their portion of the Work as well as any Separate Contractors, that it is the constructor, that they shall comply with the requirements of the Occupational Health and Safety Act (Ontario) and cooperate with the Contractor’s directions with respect to the Occupational Health and Safety Act (Ontario) and directives that are safety related and that failure to do so could result in termination of their contracts. |
| (c) | The Owner may, at its sole and absolute discretion for reasons of health and safety, cause parts of, or all of, the Work or Project to be stopped, or Subcontractors or any construction aids to be removed or excluded from the Job Site. |
| (d) | The Contractor shall have complete and sole responsibility for all health and safety matters regarding the Work including compliance with all requirements pursuant to applicable Laws, familiarizing all relevant Persons with the provisions of the Occupational Health and Safety Act (Ontario) that apply to the Work and all potential or actual dangers to health and safety in the workplace and as otherwise set out in this Agreement. |
| (e) | The Contractor shall initiate, maintain and take complete responsibility for supervising health and safety precautions and programs necessary to comply with Laws and to prevent injury to Persons or damage to property on, about or adjacent to the Job Site and shall be responsible for submission of the required notice of project and registration form under the Occupational Health and Safety Act (Ontario). |
20.1.4 Elimination of Unsafe Conditions. Upon becoming aware of any unsafe or hazardous (or potentially unsafe or hazardous) condition in or around the Job Site, the Contractor shall immediately take any and all actions reasonably necessary to eliminate such condition and render the Job Site and surrounding areas safe. Notwithstanding the foregoing, responsibility for Hazardous Substances shall be as set forth in Article 25.
| - 51 - |
| 20.2 | Safety of Persons and Property |
20.2.1 Safety Precautions. The Contractor shall take all reasonable precautions for safety of, and shall provide all reasonable protection to prevent damage, injury or loss to:
| (a) | employees, Subcontractors, other Persons performing the Work, anyone in the vicinity of the Job Site (including, without limitation, members of the public or people in and around buildings and areas adjacent to the Job Site) and other Persons who may be affected thereby; |
| (b) | the Work, materials and Components to be incorporated therein, whether in storage on or off the Job Site by the Contractor or under the care, custody or control of the Contractor or any Subcontractor; and |
| (c) | other property at the Job Site and adjacent thereto, such as trees, shrubs, lawns, walks, pavements, roadways, parking lots, adjacent buildings, vehicles, structures, utility pipes, poles, conduits, wires, waterways, culverts, monuments and railroads. |
20.2.2 Safeguards. The Contractor shall erect and maintain, as required by existing conditions and the performance of this Agreement, all reasonable safeguards for safety and protection, including posting danger signs and other warnings against hazards, promulgating safety regulations, notifying members of the public, owners and people in and around buildings and areas adjacent to the Job Site and implementing safety precautions and measures (including, without limitation, fencing, overhead protection and similar measures) to ensure the safety of members of the public, owners and people in and around buildings and areas adjacent to the Job Site.
20.2.3 Intentionally Left Blank
20.2.4 Material Safety Data Sheets. If the Contractor or any Subcontractor intends to use or uses materials or substances in connection with the Work for which material safety data sheets are required pursuant to the Workplace Hazard Materials Information System, the Contractor shall submit copies of all such material safety data sheets to the Owner in advance of the use of such materials or substances. When possible, the Contractor shall submit material safety data sheets no less than thirty (30) days in advance of the use of such materials or substances and in no event shall any material safety data sheet be submitted to the Owner less than five (5) days prior to the use of such materials or substances.
20.2.5 Damage to Property. The Contractor shall promptly remedy any damage and loss to the Job Site and any other property (including, without limitation, the Project) to the extent caused in whole or in part by the Contractor, a Subcontractor or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable. The foregoing obligations of the Contractor are in addition to the Contractor’s indemnity obligations under Article 26.
20.2.6 Safety Personnel. The Contractor shall designate a responsible member of the Contractor’s organization the Job Site whose duty shall be the prevention of accidents.
20.2.7 Loading. The Contractor shall not load or permit any part of any construction aid or machinery to be loaded so as to endanger the safety of Persons or property.
20.2.8 Notices to the Owner. The Contractor shall promptly report in writing to the Owner all accidents arising out of or in connection with the Work which cause death, bodily injury or property damage of any severity, giving full details and statements of any witnesses. In addition, if death or serious bodily injuries or serious damages are caused, the accident shall be reported immediately by telephone to the Owner.
| - 52 - |
20.2.9 Emergencies. In an emergency affecting safety of Persons or property, the Contractor shall act, at the Contractor’s discretion, to prevent threatened damages, injury or loss. During the performance of the Work, the Contractor shall comply fully with the Agreement and the Owner’s safety and emergency instructions and guidelines.
20.2.10 Security. The Contractor shall take all precautions and measures as may be reasonably necessary to secure the Job Site at all hours and prevent trespassing, including evenings, holidays, work and non-work hours provided that the approval of Owner is obtained by the Contractor before taking any such precautions and measures. Such precautions may include (a) co-operating with existing security; (b) establishing and maintaining a worker identification system; (c) the provision of security guards and checking identification of all persons entering the Job Site; and (d) restriction of the Job Site to authorized personnel, equipment and materials.
20.2.11 Fencing. Subject to approval being granted by Owner, the Contractor shall provide and maintain a secure fence around the Job Site to prevent unauthorized access to the Project with required manway entrances and emergency exits.
20.2.12 Protection of Parties in Vicinity of Project. The Contractor acknowledges and understands that areas adjacent to and around the Job Site may be occupied by members of the public and other parties associated with adjacent businesses and operations while the Contractor performs the Work. The Contractor covenants and agrees that it shall at all times perform the Work, and cause all Subcontractors and representatives of the Contractor to perform the Work, so as to prevent interference with such parties, including, without limitation, the following types of interference: (a) fumes, odours, dust, debris, noise and safety hazards, (b) obstructions of access and obstructions of traffic flow to or from any building, roadway, entryway or parking lot in the vicinity of the Job Site, and (c) interruption in the availability and normal operation of water, sewer, electricity, gas, telephone, HVAC systems, computer systems and other utility services and systems relating to properties adjacent to and around the Job Site.
20.2.13 Intentionally Left Blank
20.2.14 Training.
| (a) | Prior to commencement of the Work, the Contractor shall submit to the Owner: |
| (i) | documentation of a valid Workplace Safety and Insurance Board clearance certificate; and |
| (ii) | a copy of the notice of Project filed with the Ministry of Labour. |
(b) without prejudice to the forgoing provisions of this Section 20.2.14, the Contractor hereby represents and warrants to the Owner that appropriate health and safety instruction and training have been provided or will be provided to the Contractor employees and Subcontractors and anyone for whom the Contractor is responsible, before the Work is commenced and agrees to provide to the Owner, if requested, proof of such instruction and training.
| - 53 - |
(c) The Contractor shall tour the appropriate area to familiarize itself with the Job Site prior to commencement of the Work.
(d) The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any claims, actions, proceedings, losses, damages, Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including legal fees on a solicitor and own client indemnity basis and expenses, based upon or arising out of or in connection with any safety infractions under the Occupational Health and Safety Act (Ontario), and regulations thereto, save and except to the extent such Liabilities arise from the negligent actions or inactions of the Owner, its agents officers, directors, employees, contractors, subcontractors or consultants or from any policy, plan or requirement instituted by the Owner with respect to health and safety.
20.2.15 General. The Contractor shall otherwise comply with the safety related requirements of the Statement of Requirements.
ARTICLE 21
[Intentionally left blank]
ARTICLE 22
TESTS AND INSPECTIONS
| 22.1 | Required Testing and Inspections |
In addition to the performance testing required in Article 12 hereof, the Contractor shall perform and/or obtain all tests and inspections necessary for the proper execution and completion of the Work, including, without limitation, all tests and inspections required by any applicable Laws and the Contractor shall provide the Owner with Notice at least five (5) Working Days prior to any such tests or inspections in each case so that the Owner and its designees may witness the same.
ARTICLE 23
WARRANTY
| 23.1 | Warranties |
23.1.1 Warranty. The Contractor warrants to the Owner that all design, engineering and other professional services, all construction services and all other Work, shall be performed in accordance with Good Engineering and Operating Practices and in a good and workmanlike manner, that all materials, supplies and Components furnished under this Agreement shall be of good quality and new, that the Work (including, without limitation, each item of Components incorporated therein) shall be of good and workmanlike quality and free from all faults, defects and deficiencies and shall be free from any encumbrances, Liens, security interests, or other defects in title upon conveyance of title to the Owner (other than those imposed by action of the Owner), and that the Work and the Components shall conform with the Project Requirements and designed and fit for the purpose of receiving, storing, dispatching and conditioning electrical power.
| - 54 - |
23.1.2 The Owner acknowledges and agrees that the obligations of the Contractor under this Article 23 may be impacted by the operation of the BESS and in this regard, agrees to provide access to the Contractor to a system user interface so that it may monitor the operation of the BESS by the Owner or its contractors. In the event that the Owner wilfully fails to provide such access to the Contractor within twenty (20) Working Days of Notice from the Contractor that such access has not been or is no longer provided to the Contractor, such failure shall not relieve the Contractor from its obligations under this Article 23, except to the extent and only to the extent to which such failure has increased the Liability of the Contractor under this Article 23.
23.1.3 The Contractor’s warranty excludes:
| (a) | remedy for damage or defect caused by negligence, improper operation or improper or insufficient maintenance by the Owner or normal wear and tear under normal usage after the Substantial Performance Date; |
| (b) | Components which are consumables that are consumed in operation or due to normal wear and tear; |
| (c) | the warranties and performance guarantees which are assigned to Owner in accordance with Section 23.1.10; |
| (d) | parts which inherently have a shorter normal useful life than the Warranty Periods and the Contractor has advised Owner of the duration of such useful life prior to the date hereof, except where any such parts are damaged or defective or subject to coverage under this Section 23.1.3 prior to the expiration of such useful life. |
23.1.4 Repair; Replacement; Correction. Any portion of the Work which has been repaired, replaced or otherwise corrected during the Initial Warranty Period set forth in Section 23.1.5 shall automatically be re-warranted by the Contractor in conformity with all warranty requirements set forth in this Article 23, and the Contractor shall have the same obligations in relation thereto as set forth in this Article 23, for a period (the “Extended Warranty Period”) the duration of which shall be the later of (a) the remainder of the original warranty period as set forth in Section 23.1.5 or (b) three hundred and sixty-five (365) days from the date of completion of such repair, replacement or correction; provided that in no event shall a warranty in this Section 23.1.4 extend beyond three (3) years after the Substantial Performance Date. Notwithstanding the foregoing, if a chronic failure of components (two or more failures of the same component) occurs during the Warranty Periods, the Contractor shall be responsible to determine the root cause of the chronic failure, and shall make the necessary repair or replacement of the Work to correct the root cause regardless of the expiry of the Warranty Periods.
| - 55 - |
23.1.5 Breach of Warranty. If, at any time prior to the expiration of [REDACTED: Time period] after the Substantial Performance Date (the “ Initial Warranty Period”) or any Extended Warranty Period set forth in Section 23.1.4, the Owner shall discover any defect, failure or breach of the Contractor’s warranties set out in this Agreement, the Contractor shall, upon written Notice from the Owner and at the Contractor’s sole cost and expense, immediately correct such defect, failure or breach (which corrective action shall include, without limitation, any necessary removal, disassembly, reinstallation, repair, replacement, reassembly, reconstruction, retesting and/or re-inspection of any part or portion of the Work and any other property damaged or affected by such failure, breach or corrective action). The Contractor shall remedy any such defect, failure or breach diligently and promptly so as to minimize revenue loss to the Owner and to avoid disruption to operations at the Job Site and from the BESS. In the event the Contractor has more than one method of performing corrective action necessary to remedy such defect, failure or breach, the Contractor shall select the method which is most likely to ensure that further corrective action is not required or, if that is not possible, that further corrective action is not required for the longest period of time. In the event that the Contractor fails to initiate and diligently pursue corrective action within five (5) days of the Contractor’s receipt of the Owner’s Notice (other than in the event of a Force Majeure or Owner Caused Delay), the Owner may undertake such corrective action at the Contractor’s expense; provided, however, if such failure or breach of the Contractor’s warranties materially affects the operation or use of any of the Work or the BESS or presents an imminent threat to the safety or health of any Person and the Owner knows of such breach or failure, the Owner may pursue corrective action without giving prior written Notice to the Contractor, and, in that event, the Contractor shall be liable to the Owner for all reasonable actual costs and expenses incurred by the Owner in connection with such corrective action and arising out of or relating to such corrective action and shall pay the Owner an amount equal to such costs and expenses. If correction or remedy, by either the Contractor or the Owner, of any such failure or breach requires or otherwise results in the shutdown of the Owner’s operations at the Job Site, the Warranty Periods and the warranty periods set forth in Section 23.1.4 shall be extended by a period of time at least equal to the period of time of such shutdown.
23.1.6 Primary Liability. Subject always to Section 23.1.3(c), the Contractor shall have primary liability with respect to its warranties set forth in this Agreement whether or not any defect, deficiency or other matter is also covered by a warranty of a Subcontractor or Vendor, and the Owner shall only be required to make claim and seek recourse from the Contractor for corrective action. In addition, the Contractor’s warranties expressed herein shall not be restricted in any manner by any warranty of a Subcontractor or Vendor, and the refusal of a Subcontractor or Vendor to correct defective, deficient or nonconforming Work shall not constitute Force Majeure nor excuse the Contractor from its liability as to its warranties provided herein.
23.1.7 Subcontractor Warranties. The Contractor shall, at its cost, obtain warranties for the benefit of the Contractor and the Owner from all Subcontractors and Vendors in relation to their respective portions of the Work. The Contractor shall in addition, at its cost, obtain warranties from all such individuals or entities which (a) are coterminous with the Contractor’s Warranty Periods, (b) warrant against defects and deficiencies in each such parties’ work and (c) are ultimately assignable to the Owner pursuant to an assignment conditional upon the earlier to occur of (i) the termination of this Agreement, or (ii) the expiration of the Warranty Periods if such warranty or warranties are still in effect at such time. Within ten (10) Working Days of receipt by the Contractor from the Owner of a Notice of a failure of any of the Work to satisfy any Subcontractor or Vendor covenant, guarantee or obligation required by this Agreement but excluding any of the foregoing referred to in Section 23.1.3(c), the Contractor shall be responsible for enforcing or performing any such covenant, guarantee or obligation, failing which, the Owner may, at its option and without derogating from the Contractor’s responsibilities, directly enforce any such covenant, guarantee or obligation against any Subcontractor or Vendor. The Contractor acknowledges and agrees that the Initial Warranty Period set forth in Section 23.1.5 above shall not serve to limit any warranties obtained from Subcontractors that may be of longer duration. Any warranty referred to in this Section 23.1.7 shall be assignable by the Owner to a third party on notice to the Contractor or the relevant Subcontractor.
23.1.8 Equipment Warranties. The Contractor shall obtain warranties and performance guarantees for the benefit of the Contractor and the Owner of no less than [REDACTED: Tim period] from the date of delivery to the Job Site for the BESS, 3 years from the date of delivery to the Job Site for the transformers, and 1 year from the date of delivery to the Job Site for the switchgear. For purposes of this Section 23.1.8, major equipment or Components shall mean each individual piece of equipment or Component which is obtained from a third party at a cost of [REDACTED: Dollar amount] or more. In the event the Owner requires the warranty coverage referred to in this Section 23.1.8 for a duration of more than the terms of the equipment warranties above, it shall be permitted to request such Change in Work pursuant to Section 16.2.
| - 56 - |
23.1.9 Records. The Contractor shall keep written records of any defect, failure or breach of any Work and all repairing, replacing or re-performing of same.
23.1.10 Assignment of Warranties. Upon Substantial Completion, Contractor shall assign all Component and subcontractor warranties, including all products and services warranties provided under this Agreement, to the Owner.
ARTICLE 24
FORCE MAJEURE AND OWNER CAUSED DELAY
| 24.1 | Force Majeure |
24.1.1 Definition. For the purposes of this Agreement, the term “Force Majeure” means any act, event, cause or condition that directly prevents a Party from performing its obligations (other than payment obligations) hereunder, that is beyond the affected Party’s reasonable control, and shall include:
| (a) | acts of God, including extreme wind, snow (≥ 100 cm/day), rain (≥ 30 cm/day ), temperatures ≤ -30º, ice, lightning or other storms, earthquakes, tornadoes, hurricanes, cyclones, landslides, drought, floods and washouts; |
| (b) | fires or explosions unless caused by the Contractor or its Subcontractors; |
| (c) | local, regional or national states of emergency; |
| (d) | strikes and other labour disputes (other than legal strikes or labour disputes by employees of such Party or a third party invoking Force Majeure, unless such strikes or other labour disputes are the result or part of a general industry strike or labour dispute); |
| (e) | civil disobedience or disturbances, war (whether declared or not), acts of sabotage, blockades, insurrections, terrorism, revolution, riots or epidemics; |
| (f) | subject to Section 24.1.4(c), an order, judgment, legislation, ruling or direction by Authorities restraining a Party, provided that the affected Party has not applied for or assisted in the application for and has used Commercially Reasonable Efforts to oppose said order, judgment, legislation, ruling or direction; |
| (g) | any inability to obtain, or to secure the renewal or amendment of after the exercise of all reasonable diligence, any Permit, certificate, impact assessment, license or approval of any Authority, required to perform or comply with any obligation under this Agreement, unless the revocation or modification of any such necessary permit, certificate, impact assessment, licence or approval was caused by the violation of the terms thereof or consented to by the Party invoking Force Majeure; |
| (h) | restraint, order or decree by an Authority to the extent such restraint, order or decree arises from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the affected Party, its Subcontractors or other Persons for whom they may respectively be liable, |
provided always that any such event shall have actually and directly prevented the affected Party from performing its obligations (other than payment obligations) hereunder and shall be beyond the affected Party’s reasonable control.
| - 57 - |
24.1.2 Resumption of Activities. Each Party shall resume its obligations as soon as the event of Force Majeure has terminated.
24.1.3 Performance Excused
| (a) | If a Party is unable, wholly or partially, to perform or comply with its obligations hereunder, then the Party so affected by Force Majeure shall be excused and relieved from performing or complying with such obligations, but not its other obligations hereunder not affected by Force Majeure, and shall not be liable for any Liabilities, damages, losses, payments, costs, expenses to, or incurred by, the other Party in respect of or relating to such Force Majeure and such Party’s failure to so perform or comply during the continuance and to the extent of the inability so caused from and after the invocation of Force Majeure. |
| (b) | A Party shall be deemed to have invoked Force Majeure with effect from the commencement of the event or circumstances constituting Force Majeure when that Party gives to the other Party prompt Notice, written or oral (but if oral, promptly confirmed in writing) of the effect of the Force Majeure and reasonably full particulars of the cause thereof, provided that such Notice shall be given within five (5) Working Days of the date that the Party invoking Force Majeure knows or ought to have known that the event of circumstances constituting Force Majeure could have an effect on the Project Schedule. For greater certainty, the reporting or discussion of a Force Majeure event provided in a periodic report from the Contractor to the Owner under this Agreement shall not constitute sufficient initial Notice of the occurrence of a Force Majeure event. The burden of proof as to whether a Force Majeure has occurred shall be on the Party invoking the Force Majeure and it shall respond to all requests of the other Party with respect to the Force Majeure in compliance with the terms of this Article 24. |
| (c) | The Party invoking Force Majeure shall use Commercially Reasonable Efforts to remedy and mitigate the effects of the Force Majeure and remove, so far as possible and with reasonable dispatch, the Force Majeure, but the decision as to whether to settle strikes, lockouts and other labour disturbances shall be wholly within the sole discretion of the Party involved. |
| (d) | The Party invoking Force Majeure shall provide reports to the other Party from time to time (and at least every ten (10) Working Days) with respect to the status of the Force Majeure, the steps taken by the affected Party to remedy the Force Majeure and the anticipated termination date of the Force Majeure. The Party invoking Force Majeure shall give prompt written Notice of the termination of the event of Force Majeure and agrees to resume performance of the obligations affected immediately upon such termination of the Force Majeure event. |
| - 58 - |
| (e) | Nothing in this Section 24.1.3 shall relieve a Party of its obligations to make payments of any amounts that were due and owing before the occurrence of the Force Majeure or that otherwise may become due and payable during any period of Force Majeure. In addition a Party shall not be relieved from any obligation not affected by the event of Force Majeure and shall continue to perform such obligations hereunder. |
| (f) | If, by reason of Force Majeure, the Substantial Performance Date is delayed by more than six (6) months after the original Guaranteed Substantial Performance Date, prior to any extension pursuant to Section 24.1.3(a), then notwithstanding anything in this Agreement to the contrary, the Owner may terminate this Agreement upon Notice to the Contractor and without any costs or payments of any kind to either Party and all security shall be returned forthwith. |
24.1.4 Certain Obligations Not Excused. A Party shall not be entitled to invoke Force Majeure under this Section 24.1, nor shall it be relieved of its obligations hereunder in any of the following circumstances:
| (a) | if and to the extent the Party seeking to invoke Force Majeure has caused the applicable event of Force Majeure by its fault, negligence or breach of this Agreement; |
| (b) | if and to the extent the Party seeking to invoke Force Majeure has failed to use Commercially Reasonable Efforts to avoid, prevent, mitigate or remedy the event of Force Majeure and remove, so far as possible and within a reasonable time period, the Force Majeure (except in the case of strikes, lockouts and other labour disturbances, the settlement of which shall be wholly within the sole discretion of the Party involved); |
| (c) | if and to the extent that the Party seeking to invoke Force Majeure because of arrest or restraint by an Authority, such arrest or restraint was the result of a breach by such Party of applicable Laws; |
| (d) | if the Force Majeure was caused by a lack of funds or other financial cause; |
| (e) | if the Party invoking Force Majeure fails to comply with the notice provisions in Sections 24.1.3(b) and 24.1.3(d); |
| (f) | if the Force Majeure arises as a result of labour shortages; |
| (g) | in the case of the Contractor, if the Force Majeure arises as a result of its design engineering, procurement or construction of the BESS or the lack of availability, failure or mechanical breakdown of any equipment required for the design or construction of the BESS; |
| (h) | in the case of the Contractor, with respect to its inability to procure any Component for any reason (the risk of which is assumed by Contractor) or the failure, mechanical breakdown or underperformance of any Component; |
| (i) | any acts or omissions of any third party, including any vendor, materialman, customer or supplier, unless such acts or omissions are themselves excused by reason of an independently identifiable event of Force Majeure; |
| - 59 - |
| (j) | changes in market conditions that affect the cost of supplies; or |
| (k) | weather events such as rain, heat or snow that a Party could reasonably anticipate as being likely in any given period of time at the Job Site. |
24.1.5 The Owner May Recommend the Contractor to Take Action. If, within a reasonable time after a Force Majeure occurrence that has caused the Contractor to suspend or delay performance of any part of the Work, the Owner or its representative has by Notice to the Contractor identified and recommended action to be undertaken by the Contractor at the expense of the Owner or otherwise to remove or relieve either the Force Majeure occurrence or its direct or indirect effects and the Contractor has failed to take such action, the Owner may, in its reasonable discretion and after written Notice to the Contractor, initiate such reasonable measures as will be designed to remove or relieve such Force Majeure occurrence or its direct or indirect effects and thereafter by Notice to the Contractor require the Contractor to resume full or partial performance of the Work. Such measures shall be undertaken at the Owner’s expense except to the extent that the Contractor’s failure to take such measures results in expense in addition to what the Owner would have incurred under this Section 24.1.5 had the Contractor taken such measures, which additional expense shall be for the Contractor’s account.
24.1.6 Change Order – The Contractor
| (a) | If an event of Force Majeure occurs that is covered by this Article 24 and the cumulative Force Majeure delays invoked by the Contractor are thirty (30) Days or more, the Contractor and the Owner shall execute a Change Order pursuant to Article 16 to address the following matters, if and to the extent applicable: |
| (i) | the Guaranteed Substantial Performance Date shall be extended by a period equal to the amount of time reasonably determined by mutual agreement of the Owner and the Contractor, to be necessary to allow for the actual delay the Contractor reasonably demonstrates has been caused to the proposed Substantial Performance Date in the Project Schedule, including the cumulative effect of a number of Force Majeure delays; and |
| (ii) | the Project Schedule shall be adjusted as appropriate as a result of the new Guaranteed Substantial Performance Date, but the Fixed Contract Price shall not be adjusted in such circumstances. |
24.1.7 Duty to Avoid. Each Party shall take all reasonable measures to anticipate and avoid Force Majeure events, wherever possible, and keep the other fully informed of all potential Force Majeure situations, particularly potential strikes and labour disturbances, to enable the Parties to consult and endeavour to take steps to mitigate their effect on the Work.
| 24.2 | Owner Caused Delays |
24.2.1 The occurrence of any of the following events, to the extent such events have not been caused by any act or omission of the Contractor or are beyond the Contractor’s reasonable control, shall constitute an “Owner Caused Delay”:
| (a) | delays resulting from the breach by the Owner of its obligations hereunder or the acts or omissions of the Owner or its Separate Contractors performing work to the extent such delays arise from circumstances beyond the reasonable control and not as the result of the fault, acts, omissions or negligence of the Contractor, its Subcontractors or other Persons for whom they may respectively be liable; |
| - 60 - |
| (b) | delays resulting from the late receipt of Owner Permits following any milestones for receipt of the same set out in the Project Schedule; or |
| (c) | the suspension of the Work in whole or in part by the Owner other than as a result of any act or omission of the Contractor in breach of this Agreement. |
24.2.2 In the event of an Owner Caused Delay that adversely impacts the cost or schedule for performing the Work, the Owner and the Contractor will use good faith efforts to agree on the extent to which the Project Schedule has been impacted or costs of performance have increased as a result of the Owner Caused Delay, and shall execute a Change Order adjusting the Project Schedule, the Guaranteed Substantial Performance Date, and/or the Fixed Contract Price as necessary to compensate the Contractor for such impact. To the extent that the Owner and the Contractor cannot reach agreement on the adjustments required to compensate for the impacts resulting from the Owner Caused Delay, the matter shall be resolved in accordance with the dispute resolution procedures contained in Article 27. The Contractor acknowledges and agrees that any adverse impacts on the cost or schedule for performing the Work can be affected by the Contractor and it will make all Commercially Reasonable Efforts to mitigate such adverse impacts.
ARTICLE 25
HAZARDOUS SUBSTANCES
| 25.1 | Hazardous Substances |
25.1.1 If, in the course of performance of the Work, the Contractor encounters on the Job Site any matter which it reasonably believes is a Hazardous Substance that may require response, removal, cleanup or other remedial action under applicable Environmental Laws and/or Job Site specific environmental requirements, the Contractor shall immediately suspend the Work in the area affected and report the condition to the Owner by telephone and in writing. In any such event, the obligations and duties of the parties hereto shall be as follows:
| (a) | if the Owner determines that such condition involves a Pre-Existing Hazardous Substance, then the Contractor shall have no obligation with respect to such condition and the Owner, at its sole discretion, shall respond in the manner which it deems appropriate; |
| (b) | the Owner determines that such condition involves a Pre-Existing Hazardous Substance, which was harmless or stored, contained or otherwise dealt with in accordance with Environmental Law, which has been dealt with in a manner by the Contractor or its Subcontractors or any Person for whom they are responsible in a manner which did not comply with Environmental Law, any response, removal, clean-up or other remedial action required by Environmental Laws shall be performed by the Contractor at its sole cost and expense. If the location of a Pre-Existing Hazardous Substance on the Job Site is not obvious from inspection, the provisions of this Section 25.1.1(b) shall only apply if the Owner has first notified the Contractor of the location of the Pre-Existing Hazardous Substance and the nature of the same. Except as to Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; |
| - 61 - |
| (c) | if the Owner determines that such condition involves a Hazardous Substance introduced to the Job Site after the date of this Agreement by the Contractor, its Subcontractors or any Person for whom they are responsible, then any response, removal, cleanup or other remedial action required by applicable Environmental Laws shall be performed by the Contractor at its sole cost and expense. Except as to the Contractor’s initial response to an emergency, any such remedial action(s) shall require the prior review and approval of the Owner; or |
| (d) | if the Owner determines that the condition does not involve a Pre-Existing Hazardous Substance that requires response, removal, cleanup or other remedial action under applicable Environmental Laws, the Contractor shall, promptly after receiving written Notice from the Owner authorizing the Contractor to recommence site activities in the subject area, resume the portion of the Work that had been suspended. |
25.1.2 The Parties acknowledge and agree that the Contractor shall not commence or continue any construction activities on any portion of the Job Site on, in or under which remedial actions are to be (or are being) performed until such remedial actions are to the point where construction activities will not interfere with such remedial actions, as evidenced by appropriate certifications from the applicable environmental engineer and/or remediation contractor and any required approvals of any applicable Authorities. The Contractor agrees to use good faith diligent efforts to continue the unaffected portions of the Work and to adjust and reschedule its activities at the Job Site so as to minimize, to the extent reasonably practicable, any adverse effect on the progress of the Work resulting from the performance of any remedial actions.
25.1.3 The Contractor shall not bring or store (and shall prohibit Subcontractors from bringing or storing) Hazardous Substances to or on the Job Site, and shall not utilize any construction materials containing radioactivity, asbestos, polychlorinated biphenyls or urea formaldehyde; provided, however, that the Contractor may use and store in reasonable quantities the following substances required to perform the Work, but only in accordance with applicable Environmental Laws: gasoline, diesel fuel, fuel oil, grease, lube oil, sealants, form oil, solvents, adhesives and other substances of a type and quantity consistent with normal and customary construction practices for construction of a project similar in nature and scope to the Project. Any other Hazardous Substances to be brought to, generated, released or stored on any Job Site shall require specific written authorization of the Owner. The Contractor shall comply, and shall cause its Subcontractors to comply, with all applicable Environmental Laws.
25.1.4 The Contractor shall be entitled to receive an equitable adjustment to the Project Schedule due to any impact on the Contractor’s schedule of performance due to Pre-Existing Hazardous Substances in accordance with Section 25.1.2.
25.1.5 The Contractor shall immediately upon receipt thereof provide the Owner with copies of all summons, citations, directives, information, inquiries or requests, notices of violation or deficiency, orders or decrees, claims, complaints, investigations, judgments, letters, reports (including any reports of releases required under applicable Environmental Laws), notices of environmental liens or response actions in progress, and other communications, written or oral, and responses thereto, to or from any Authority or any other entity or individual (including environmental reports commissioned by legal counsel but excluding other privileged communications between the a Party and its legal counsel), concerning:
| (a) | any Hazardous Substance contamination on, in or under any part of a Job Site; |
| - 62 - |
| (b) | any actual or alleged violation by the Contractor of, or responsibility of the Contractor under, any Environmental Laws in connection with its operations at a Job Site; or |
| (c) | any actual or alleged liability of the Contractor for its operations at a Job Site under any theory of tort, including without limitation, negligence, trespass, nuisance, strict liability, or ultra-hazardous activity, |
provided that in the event the communication in question includes information not required to be disclosed under this Section 25.1.5, the Contractor may transmit relevant portions of the communication rather than the entire communication.
ARTICLE 26
INDEMNIFICATION
| 26.1 | Contractor’s Indemnity |
26.1.1 The Contractor. To the fullest extent permitted by Law, the Contractor shall indemnify, defend and hold harmless the Owner and its respective assigns, officers, directors, employees, agents, Affiliates and representatives, and anyone else acting for or on behalf of the Owner (the “Owner Indemnitees”), from and against any and all third party claims, demands, suits, Liabilities (including, without limitation, as a result of claims or allegations of infringement, misappropriation, misuse or violation of any Intellectual Property Rights used by the Contractor in the performance of the Work including curative action under warranty), death, injuries (personal or bodily), property damage (including public property), and all expenses including, without limitation, court costs and legal fees on a solicitor and his own client indemnity basis incidental to any of the foregoing, to the extent caused by (i) the performance by the Contractor of its duties and obligations under this Agreement, (ii) the inaccuracy of any warranty or representation of the Contractor contained in this Agreement, (iii) any negligent act or omission to act by the Contractor, its Subcontractors or any Person directly or indirectly employed by them or anyone for whose acts they may be responsible, and/or (iv) any breach, default, violation or non-performance by the Contractor of any term, covenant, condition, duty or obligation provided in this Agreement provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.1. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.2 Indemnification for Violation of Law. The Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and his own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or whom they may be responsible of any Law or rule promulgated by an Authority including, without limitation, the failure to comply with the Occupational Health and Safety Act (Ontario) provided always in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any for the foregoing to the extent caused by any acts or omissions of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations under this Section 26.1.2. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
| - 63 - |
26.1.3 Indemnification for Violation of Taxing Authorities. The Contractor shall indemnify and hold harmless the Owner Indemnitees from and against all Liabilities (including civil, criminal and administrative Liabilities) and all expenses, including without limitation court costs and legal fees on a solicitor and own client indemnity basis, incidental to such Liabilities, based upon or arising out of any violation by the Contractor, its Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible of any order, rule or requirement of any taxing Authority, based on gross receipts or on income of the Contractor or in respect of any deductions, remittances or assessments in respect of any employees, as applicable, or that arise against the Owner for any sales taxes, including HST payable in connection with the Work, provided that the foregoing shall in no way release the Owner from paying HST in the manner set for in this Agreement and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees.
26.1.4 Environmental Indemnification. Subject to and other than with respect to the Owner’s obligations under Article 25, the Contractor shall indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with any non-compliance with Environmental Laws or any Hazardous Substance brought onto the Job Site in each case in connection with the construction or operation of the Project or the performance of the Work or during curative action under warranty by the Contractor, Subcontractors or any Person directly or indirectly employed by them and/or for whom they may be responsible including any negligent handling of Hazardous Substances on the Job Site and provided further that in each case that the Contractor shall not be required to indemnify, defend or hold harmless the Owner Indemnitees for any of the foregoing to the extent caused by any act or omission of the Owner Indemnitees. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them, this indemnification obligation shall not be limited in any way (except by Section 8.3.2) by any limitation on the amount or type of damages, compensation or benefits payable by or for the Contractor or any Subcontractor under workers’ or workmen’s compensation acts, disability benefit acts or other employee benefit acts.
26.1.5 Lien Indemnification. The Contractor agrees to indemnify, defend and hold harmless the Owner Indemnitees from and against any Liabilities (including civil, criminal and administrative Liabilities) and all expenses incidental thereto including court costs and legal fees on a solicitor and own client indemnity basis, based upon or arising out of or in connection with all Liens or Lien claims made, recorded, asserted or filed on the Work or any property on which it is being performed, on account of any labour performed or materials furnished by the Contractor, Subcontractors or any other Person in connection with the Work to the extent that the Owner has made payment to the Contractor therefor except to the extent such Liens are attributable to the willful misconduct of the Owner and exclusive of Liens by fault of the Owner. No amount of insurance maintained by the Contractor limits the Contractor’s indemnification obligations. In any and all claims, damages, losses or expenses incurred by any employee of the Contractor or anyone directly or indirectly employed by them this indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for Contractor or any Subcontractor under worker’s compensation acts, disability acts or other employment benefit acts.
| - 64 - |
26.1.6 Lien Removal.
| (a) | The Contractor will, at its own cost and expense, cause any and all Liens filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located, to be released, vacated or discharged no later than thirty (30) days after the earlier of the Owner having sent the Contractor written Notice of any claim of Lien and the Contractor having become aware of a claim for Lien except to the extent such Liens are attributable to the non-payment by the Owner of amounts due and payable hereunder or which are attributable to the willful misconduct of the Owner. If the Lien is merely vacated, the Contractor shall, if requested, undertake the Owner’s defence of any subsequent lawsuit commenced in respect of the lien at the Contractor’s sole expense. |
| (b) | If the Contractor shall fail to vacate or discharge promptly any proceedings or claim of Lien filed or made by a Subcontractor or any other Person against the Job Site or the BESS, any interest therein, or upon any materials, equipment or structures encompassed therein, or upon the premises upon which they are located within the period specified in Section 26.1.6(a), the Owner may exercise its rights under the Construction Act (Ontario) to have the claim of Lien vacated by making a payment into court or posting security and may offset the amount of any such payment and all costs and expenses incurred by the Owner in making such payment or posting such security, including administrative costs, legal fees and other expenses, against amounts due or to become due to the Contractor under the Agreement. |
| 26.2 | Limitation and Survival |
26.2.1 Notwithstanding anything else expressed or implied in this Agreement, the indemnification obligations in Article 26 will not apply and the Contractor shall have no further obligations under this Article 26 after two (2) years from the Substantial Performance Date.
26.2.2 This Section 26.2 shall survive the termination or expiration of this Agreement.
ARTICLE 27
DISPUTE RESOLUTION
| 27.1 | Negotiations |
Both during and after the performance of the Work under the Agreement, the Parties each shall, using their respective senior management, make bona fide efforts to resolve any disputes arising between them by amicable negotiations, and provide frank, candid and timely disclosure of all relevant facts, information and documents to facilitate those negotiations. If a dispute remains unresolved twenty-one (21) days after escalation to each Parties’ respective senior management, it may, if agreed by the Parties, be first submitted to non-binding mediation as contemplated in Section 27.2. If the Parties do not elect to pursue non-binding mediation, the dispute shall, at the request of either Party, be referred to arbitration in accordance with Section 27.3.
| - 65 - |
| 27.2 | Mediation |
27.2.1 To the extent any dispute is not resolved through negotiation by senior management, the Parties may pursue non-binding mediation to attempt to resolve all disputes arising out of or in connection with the Agreement, or in respect of any defined legal relationship arising out of or in connection with the Agreement, by structured negotiation with the assistance of a mediator, in accordance with the following provisions.
27.2.2 Unless the Parties otherwise agree, the mediator shall have the following qualifications:
| (a) | a legal background; |
| (b) | knowledge and experience in the type of matter that is the subject of the dispute; |
| (c) | be held in high regard by the Ontario community; |
| (d) | have no interest or perceived interest in the Parties or the subject matter of the dispute and have so confirmed in writing to the Parties; and |
| (e) | have experience as a mediator or facilitator. |
27.2.3 If the Parties are unable to agree on the appointment of a mediator within ten (10) Days after either Party has given Notice to the other Party requesting the appointment of a mediator, either Party may request the ADR Institute of Canada or its successor, if any, to appoint a mediator with the above qualifications in accordance with its appointment procedures. If ADR Institute of Canada does not exist and the Parties are not able to agree on a similar body to appoint the mediator, then the dispute shall be referred to arbitration under Section 27.3.
27.2.4 The mediation shall continue until the earlier of agreement between the Parties on the resolution of the dispute and one (1) calendar month after commencement of the mediation. The Parties may agree to extend the period of any particular mediation.
27.2.5 The mediation process is privileged and confidential. Neither Party may call the mediator to give evidence at any arbitration under Section 27.3.
27.2.6 The Parties shall bear the costs of the mediation equally and each Party shall bear its own costs.
| 27.3 | Arbitration |
27.3.1 All disputes arising out of or in connection with this Agreement, or in respect of any legal relationship associated with or derived from this Agreement not otherwise resolved in accordance with Sections 27.1 or 27.2 (“Dispute”), will be finally resolved by arbitration under the Arbitration Rules (the “Rules”) of the ADR Institute of Canada (the “Institute”), except as modified by this Section 27.3. The Seat of arbitration will be Toronto, Ontario. The language of the arbitration will be English.
27.3.2 A Party (the “Initiating Party”) wishing to submit the Dispute to arbitration shall select one (1) arbitrator, which arbitrator shall not be, or have been within the previous five (5) years, an employee, officer or director of the Initiating Party or of any Affiliate of the Initiating Party. The Initiating Party shall send a Notice of a Request to Arbitrate in the form prescribed by the Rules (the “Arbitration Notice”) to the other party setting out the name of its nominated arbitrator. The Initiating Party shall be responsible for notifying the Institute of the arbitration under its rules and for paying the administrative fee for the arbitration to the Institute.
| - 66 - |
27.3.3 The other Party (“Recipient”) shall have seven (7) days from receipt of the Arbitration Notice to nominate one (1) arbitrator and to notify the Initiating Party of the name of the arbitrator nominated by the Recipient. The arbitrator nominated by a Recipient shall not be, or have been within the previous five (5) years, an employee, officer or director of a Recipient or of any Affiliate of a Recipient.
27.3.4 Promptly upon their selection and in any event within fourteen (14) days of notification of the appointment of the Initiating Party’s arbitrator, the arbitrators then selected shall appoint a third arbitrator who shall act as chair of the arbitration.
27.3.5 If the Recipient fails to nominate an arbitrator, or the nominated arbitrators fail to agree upon the third arbitrator, then, pursuant to the Rules, any Party or its representative may request the Institute to promptly appoint the third Arbitrator and to notify the Party of such appointment.
27.3.6 Each arbitrator nominated pursuant to this Section 27.3 shall be qualified by education and experience to determine the matter in Dispute.
27.3.7 The Parties shall agree in advance as to the manner in which the arbitrators shall promptly hear witnesses and arguments, review documents and otherwise conduct the arbitration procedures. Failing such agreement within ten (10) days from the date of selection or appointment of the third arbitrator, the arbitrators shall use the Rules and promptly commence and expeditiously conduct the arbitration proceeds.
27.3.8 Nothing in this Section 27.3 shall prevent a Party from applying to a court of competent jurisdiction pending final disposition of the arbitration proceeding for such relief as may be necessary to assist the arbitration process, to ensure that the arbitration is carried out in accordance with the Rules or to prevent manifestly unfair or unequal treatment of any Parties to the arbitration.
27.3.9 In no event shall the arbitrators have the jurisdiction to amend or vary the terms of this Section 27.3 or of the Rules.
27.3.10 The arbitration award shall be given in writing, shall be final and binding on the Parties, not be subject to any appeal and shall deal with the question of costs of the arbitration and all other related matters.
27.3.11 Judgment upon the arbitration award may be entered in any court having jurisdiction, or, application may be made to such court for a judicial recognition of the arbitration award or an order of enforcement thereof, as the case may be.
27.3.12 Subject to Section 27.3.8, the Parties agree that the arbitration conducted pursuant to this Section 27.3 shall be the final and exclusive forum for the resolution of such a Dispute.
| 27.4 | Third Party Claims |
Any dispute between the Owner and the Contractor which also involves claims by or against third parties, or which requires the presence of third parties for full adjudication, and which is not subject to arbitration by all parties including any third party, shall be resolved by litigation in an appropriate court which has jurisdiction over all parties.
| - 67 - |
| 27.5 | Performance to Continue |
Performance of this Agreement shall continue during any negotiations, mediations or arbitration proceedings unless the Owner shall order suspension under Article 28, in which case adjustments shall be made as provided in Article 28, to the extent applicable.
| 27.6 | No Withholding of Undisputed Payments |
No undisputed payment due or payable by the Owner shall be withheld on account of a negotiation, mediation, litigation or arbitration under this Article 27.
ARTICLE 28
TERMINATION AND SUSPENSION
| 28.1 | Termination for Convenience |
The Owner may terminate this Agreement without cause upon not less than fifteen (15) days’ prior written Notice to the Contractor. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive the following: (a) payment for Work properly performed to the date of termination, (b) reimbursement for all reasonable cancellation charges incurred by the Contractor in relation to its Subcontractors, (c) reimbursement for mutually agreeable demobilization costs incurred by the Contractor, and (d) the termination charges equal to [REDACTED: Percentage amount] of the value of the Work remaining to be performed on the date of termination. For the avoidance of doubt, the performance of any portion of the Work by or on behalf of the Owner in accordance with the terms hereof shall not constitute a termination of this Agreement under this Section 28.1 in and of itself.
| 28.2 | Termination by the Owner for Cause |
28.2.1 The occurrence of any one or more of the following matters constitutes a default by the Contractor under this Agreement (a “Contractor Event of Default”):
| (a) | the Contractor becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Contractor makes a general assignment for the benefit of its creditors; |
| (c) | the Contractor shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of itself or of its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official or for all or any part of its property; |
| (d) | any case, proceeding or other action against the Contractor shall be commenced (i) seeking to have an order for relief entered against the Contractor as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for it or for all or any part of its property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within thirty (30) days after it is filed; |
| - 68 - |
| (e) | the breach of any material representation or warranty made by the Contractor herein that is not cured within thirty (30) days after Notice thereof from the Owner; |
| (f) | the Contractor attempts to assign, convey or transfer this Agreement or any interest, without the Owner’s prior written consent; |
| (g) | Intentionally Left Blank; |
| (h) | Intentionally Left Blank; |
| (i) | the Contractor fails to observe or perform any other material covenant, agreement, obligation, duty or provision of this Agreement, and such failure continues for thirty (30) days after Notice thereof from the Owner; |
| (j) | Intentionally Left Blank; |
| (k) | Substantial Performance has not occurred within sixty (60) days after the Guaranteed Substantial Performance Date; |
| (l) | failure of the Contractor to comply with its scheduling obligations under this Agreement, including those set forth in Article 6 which failure continues for ten (10) days after Notice thereof from the Owner; |
| (m) | the failure of the Contractor to comply with Law, which failure continues for ten (10) days after written Notice thereof from the Owner; or |
| (n) | the abandonment by the Contractor of the Job Site or the Work for a period of ten (10) days or more, other than in accordance with the terms of this Agreement which abandonment continues for five (5) days after Notice thereof from the Owner. |
28.2.2 Upon the occurrence of a Contractor Event of Default, the Owner may, without prejudice to any other right or remedy that the Owner may have under this Agreement, terminate the Agreement and/or the Contractor’s right to perform the Work upon not less than fifteen (15) days’ prior written Notice to the Contractor. In either such case, the Owner may, without prejudice to any other right or remedy, take possession of the Job Site and of all materials and Components and, subject to the rights of third parties, tools and machinery thereon owned by the Contractor, and may finish the Work by whatever method the Owner may deem reasonably prudent and efficient. If the unpaid balance of the Fixed Contract Price exceeds the cost of finishing the Work, then the Contractor shall be paid for all Work performed by the Contractor to the date of termination as to which there is no pending dispute (which amount shall in no event exceed the difference between the unpaid portion of the Fixed Contract Price and the Owner’s cost of completing the Work). However, if the cost of finishing the Work exceeds the unpaid balance of the Fixed Contract Price, the Contractor shall immediately pay the difference to the Owner. The cost to the Owner of completing the Work shall include the reasonable actual direct cost of any additional design, engineering, managerial and administrative services required thereby, legal fees on a substantial indemnity basis and expenses, and any other reasonable costs, expenses or damages the Owner may incur in order to complete the Work.
| - 69 - |
| 28.3 | Termination by the Contractor for Cause |
28.3.1 The occurrence of any one or more of the following matters shall constitute a default by the Owner under this Agreement (an “Owner Event of Default”):
| (a) | the Owner becomes insolvent or generally fails to pay, or admits in writing its inability or unwillingness to pay, its debts as they become due; |
| (b) | the Owner makes a general assignment for the benefit of its creditors; |
| (c) | the Owner shall commence or consent to any case, proceeding or other action (i) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or of the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debts, or (ii) seeking appointment of a receiver, trustee or similar official for the Owner or for all or any part of the Owner’s property; |
| (d) | any case, proceeding or other action against the Owner shall be commenced (i) seeking to have an order for relief entered against the Owner as debtor, (ii) seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of the Owner or the Owner’s debts under any Law relating to bankruptcy, insolvency, reorganization or relief of debtors, or (iii) seeking appointment of a receiver, trustee, or similar official for the Owner or for all or any part of the Owner’s property, and in the case of clauses (i), (ii) or (iii), such case, proceeding or other action is not discharged or denied within ninety (90) days after it is filed; or |
| (e) | the Owner fails to make any payment to the Contractor when due and not being disputed in good faith and such failure continues for sixty (60) days after the Owner’s receipt of written Notice thereof from the Contractor. |
28.3.2 Upon the occurrence of an Owner Event of Default, the Contractor shall provide Notice of default to owner, following which the Owner shall have fifteen (15) days to cure any such default. The Contractor may only terminate this Agreement in the event that the Owner fails to cure such default within such fifteen (15) day period or if such default cannot reasonably be cured within such period and the Owner fails to promptly commence, following receipt of such Notice and, thereafter diligently pursue, a cure. If this Agreement is so terminated, the Contractor, as its sole and exclusive remedy hereunder, shall be entitled to receive (a) payment for Work properly performed to the date of termination; (b) reimbursement for all cancellation charges incurred by the Contractor in relation to its Subcontractors and vendors; and (c) reimbursement for all demobilization costs incurred by the Contractor.
| 28.4 | Actions Upon Termination |
28.4.1 Upon termination of this Agreement or termination of the Contractor’s right to perform Work hereunder for any reason, the Contractor shall (a) cease operations as directed by the Owner; (b) take all actions necessary, or that the Owner may direct, for the protection and preservation of all Components, materials, parts, supplies and the Work and the Project (in whatever stage of completion); (c) cease entering into subcontracts and purchase orders; (d) take any actions necessary to effectuate the assignment of subcontracts to the Owner in accordance with Section 14.4 of this Agreement, if applicable; and deliver to the Owner all Design Materials, papers, documents, records, books of account and other documents and materials paid for, or otherwise owned, by the Owner; and in the event of an Owner Event of Default, the Owner shall compensate the Contractor for the costs thereof as expressed in Section 28.3.2 promptly following the termination of this Agreement and provision by the Contractor of an invoice and supporting documentation that reasonably substantiates such costs.
| - 70 - |
28.4.2 The Contractor’s obligations under this Agreement as to quality, correction and warranty of the Work pursuant to Articles 17 or 23, with respect to Work performed up to the time of termination of this Agreement shall continue in full force and effect after such termination for the longer of twenty-four (24) months from the effective date of termination or the expiry of the Warranty Periods (if applicable).
| 28.5 | Suspension of the Work |
The Owner may, without cause, order the Contractor to suspend the Work in whole or in part for such period of time as the Owner may determine. Any such suspension shall commence on or before the seventh (7th) day after the Contractor’s receipt of written Notice thereof from the Owner. The Contractor shall resume any suspended Work within five (5) days of the Owner’s written Notice directing the same. Should a suspension of the entire Work which is ordered by the Owner continue for ninety (90) or more consecutive days, either Party may thereafter terminate this Agreement by written Notice to the other Party and the rights and remedies of the Contractor shall be the same as those which are expressed in Section 28.1 hereof in the event of termination for convenience by the Owner.
ARTICLE 29
MISCELLANEOUS PROVISIONS
| 29.1 | Governing Law |
This Agreement will be construed, interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
| 29.2 | Meaning of Terms |
Words and abbreviations not defined in this Agreement which have well-known technical or design, engineering or construction industry meanings are used in this Agreement in accordance with such recognized meanings.
| 29.3 | Entire Agreement |
This Agreement represents the entire agreement between the Owner and the Contractor with respect to the subject matter hereof, and supersedes all prior understandings, agreements, representations (including misrepresentations, negligent or otherwise), negotiations, communications and discussions, written or oral, made by the Parties with respect thereto. There are no representations, warranties, terms, conditions, covenants or other understandings, express or implied, collateral, statutory or otherwise, between the Parties, except as expressly stated in this Agreement. The Parties have not relied and are not relying on any other information, discussion or understanding in entering into this Agreement. Except as provided in Article 16, this Agreement may not be amended, supplemented or otherwise modified in any respect except by written agreement signed by the Parties.
| - 71 - |
| 29.4 | Successors and Assigns |
This Agreement and any rights, interests or obligations hereunder shall not be assigned, conveyed, pledged, transferred or otherwise encumbered by a Party without the prior written consent of the other Party. Notwithstanding the foregoing, the Owner may without the Contractor’s consent, assign, transfer, sell, pledge, encumber or grant a security interest in, this Agreement or the accounts, revenues or proceeds hereof, to any Person providing any financing or financial arrangement in connection with the Project. The Contractor agrees to execute a consent to assignment with any Person providing financing in connection with the Project in a form reasonably provided by such Person and shall co-operate with any reasonable request of any such Person with respect to any such financing and the form of any such consent. The Owner may further assign its rights and obligations arising from this Agreement, in whole or in part or any rights (including warranty rights) arising from it to a potential purchaser of the Project , without the Contractors consent, subject always to provision of Notice of such assignment to the Contractor further to completion of the assignment.
| 29.5 | Third Parties |
Unless otherwise specified herein, this Agreement does not and is not intended to confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. Except for Indemnified Persons, no Person other than the Parties will be entitled to rely on the provisions of this Agreement in any action, suit, proceeding, hearing or other forum. The Parties reserve their right to vary or rescind, at any time and in any way whatsoever, the rights, if any, granted by or under this Agreement to any Person who is not a Party, without notice to or consent of that Person, including any Indemnified Person.
| 29.6 | Contractual Relationship |
Nothing contained in this Agreement shall be construed as creating a contractual relationship of any kind (i) between the Owner and a Subcontractor or Vendor (except as provided in Article 14 hereof), or (ii) between any Persons or entities other than the Owner and the Contractor. In confirmation and furtherance of the foregoing, no Subcontractor or Vendor or any other Person not a Party to this Agreement shall be deemed or construed as a third party beneficiary of this Agreement.
| 29.7 | Costs and Expenses |
Unless otherwise specified, each Party shall be responsible for all costs and expenses (including the fees and disbursements of legal counsel, bankers, investment bankers, accountants, brokers and other advisors) incurred by it in connection with this Agreement.
| 29.8 | Severability |
If any provision of this Agreement or its application to any Party or circumstance is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, it will be ineffective only to the extent of its illegality, invalidity or unenforceability without affecting the validity or the enforceability of the remaining provisions of this Agreement and without affecting its application to other parties or circumstances.
| 29.9 | Waiver of Rights |
Any waiver of any of the provisions of this Agreement will be binding only if it is in writing and signed by the Party to be bound by it, and only in the specific instance and for the specific purpose for which it has been given. The failure or delay of any Party in exercising any right under this Agreement will not operate as a waiver of that right. No single or partial exercise of any right will preclude any other or further exercise of that right or the exercise of any other right, and no waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar).
| - 72 - |
| 29.10 | Remedies Cumulative |
Unless otherwise specified, the rights and remedies of a Party under this Agreement are cumulative and in addition to and without prejudice to any other rights or remedies available to that Party at law, in equity or otherwise, and unless otherwise specified, no single or partial exercise by a Party of any right or remedy precludes or otherwise affects the exercise of any other right or remedy to which that Party may be entitled provided always the foregoing remedies are all subject to the limitation of liability set out in Section 8.2.
| 29.11 | Notices |
| (a) | Any notice, direction or other communication (in this Section 29.11, a “Notice”) regarding the matters contemplated by this Agreement must be in writing and delivered personally, sent by courier or by electronic mail) , as follows: |
If to either Owner:
570 Granville St., Suite 900
Vancouver, BC. V6C 3P1
Attention: Matthew Wayrynen
Email: [REDACTED: Email]
If to the Contractor:
505 Consumers Rd., Unit 803
North York, Ontario
M2J 4V8
Attention: Richard Lu
Email: [REDACTED: Email]
| (b) | A Notice is deemed to be delivered and received (i) if delivered personally, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (ii) if sent by same day courier, on the date of delivery if delivered prior to 5:00 p.m. (recipient’s time) on a Working Day and otherwise on the next Working Day; (iii) if sent by overnight courier, on the next Working Day; or (iv) if transmitted by facsimile, on the Working Day following the date of confirmation of transmission by the originating facsimile. |
| (c) | A Party may change its address for service from time to time by Notice given in accordance with the foregoing provisions. |
| 29.12 | Headings and Table of Contents |
The headings and captions used in this Agreement are inserted for reference and convenience only and the same shall not limit or construe the sections, articles or paragraphs to which they apply or otherwise affect the interpretation thereof. The headings contained herein and the Table of Contents are not part of this Agreement and are included solely for the convenience of the Parties.
| - 73 - |
| 29.13 | Time of Essence |
Time is of the essence of this Agreement.
| 29.14 | Interpretation |
In the event of any inconsistency or discrepancy between written words and specific numbers, the description of any such figures by written words shall govern.
| 29.15 | References |
In this Agreement, unless a clear, contrary intention appears: (a) the singular includes the plural and vice versa; (b) reference to any Person or entity includes such Person’s or entity’s successors and assigns but, in the case of a party to this Agreement, only if such successors and assigns are permitted by this Agreement, and reference to a Person or entity in a particular capacity excludes such Person or entity in any other capacity; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of this Agreement; (e) reference to any Law means such Law as amended, modified, codified or re-enacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (f) reference to any Section means such Section of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (g) “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, “from” means “from and including”, “to” means “to but excluding” and “through” means “through and including”.
| 29.16 | Incorporation by Reference |
The recitals set forth in this Agreement, as well as all Schedules attached hereto, are hereby incorporated into this Agreement by this reference and expressly made a part of this Agreement.
| 29.17 | Publicity |
Upon the reasonable request of the Owner, the Contractor shall cooperate and assist the Owner in connection with any public relations or publicity relating to the Project, including, without limitation, tours of the Project and the Job Site arranged by the Owner upon reasonable Notice and provided that any such public relations or publicity events do not interfere with the performance of the Work in the ordinary course. Neither Party shall issue any press or publicity release or otherwise release, distribute or disseminate any Confidential Information for publication concerning this Agreement or the participation of the other Party in the transactions contemplated hereby without the prior written consent of the other Party, which consent shall not be unreasonably withheld, or unless required by Law or stock exchange rule.
| - 74 - |
| 29.18 | Further Assurances |
The Contractor and the Owner agree to provide such information, execute and deliver any instruments and documents, and to take such other actions as may be necessary or reasonably requested by the other Party, which are not inconsistent with the provisions of this Agreement and which do not involve assumptions of obligations other than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of this Agreement.
| 29.19 | Number and Gender |
Where the context so requires, words importing the singular shall include the plural and vice versa, words importing the masculine shall include the feminine and neuter and all text in parentheses ( ) shall have the same effect as if parentheses were not used.
| 29.20 | Counterparts |
This Agreement may be executed in any number of counterparts (including counterparts by facsimile), each of which will be deemed to be an original and all of which, taken together, will be deemed to constitute one and the same instrument. Delivery by facsimile or by electronic transmission of an executed counterpart of this Agreement is as effective as delivery of an originally executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or by electronic transmission shall also deliver an originally executed counterpart of this Agreement, but the failure to deliver an originally executed copy does not affect the validity, enforceability or binding effect of this Agreement.
[Signing Page Follows]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first above written.
| 1000234763 ONTARIO INC. | ||
| By: | “Matthew Wayrynen” | |
| Name: | Matthew Wayrynen | |
| Title: | CEO | |
| SOLARBANK CORPORATION | ||
| By: | “Andrew van Doorn” | |
| Name: | Andrew van Doorn | |
| Title: | Chief Operating Officer | |
SCHEDULE 1
OWNER’S STATEMENT OF REQUIREMENTS
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 2
JOB SITE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 3
SITE ACCEPTANCE TEST
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 4
CONTRACTOR’S CERTIFICATE OF SUBSTANTIAL PERFORMANCE
This Certificate of Substantial Performance is provided in accordance with Section 12.2 of the Agreement dated [date] between [●] (the “Owner” and SolarBank Corporation (the “Contractor”. Capitalized terms used in this certificate and not otherwise defined in this certificate have the meaning specified in the Agreement.
In accordance with the Agreement, the Owner hereby certified that all of the following have been satisfied in accordance with the Agreement:
 | Contractor has completed the Commissioning services; and |
| Contractor and Owner have agreed on a Punch List as to all remaining work to be completed in connection with the BESS |
In accordance with the Agreement, the Parties hereby confirm and agree that the Substantial Completion Date shall be deemed to have occurred as of [date].
| Executed as of [date] | Accepted as of [date] | |||
| SolarBank Corporation | [●] | |||
| Per: | Per: | |||
| Name: | Name: | |||
| Title: | Title: | |||
SCHEDULE 5
MAJOR COMPONENT PROCUREMENT PLAN
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 6
FIXED CONTRACT PRICE
(as per Section 9.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 7
FORM OF STATUTORY DECLARATION
(see attached)
STATUTORY DECLARATION
| Canada | IN THE MATTER OF a contract entered with |
| Province of Ontario | _____________________________________________________, |
| (Owner) | |
| by (Name of Contractor) , (Contractor), on (date ) (the “Contract”) | |
| Project Name/Number: _______________________________ | |
| I, (Name) , | |
DO SOLEMNLY DECLARE:
1. that I am (Title or Position) , of (Name of Contractor) , the Contractor named in the above mentioned Contract, and as such have personal knowledge of the fact herein declared.
2. that all accounts for labour, sub-contracts, products, materials, services and construction machinery and equipment, which have been incurred directly by the Contractor in the performance of the Work as required by the Contract, and for which the Owner might in any way be held responsible, have been discharged, except for:
| (1) | holdback monies properly retained, |
| (2) | payments deferred by agreement between the Contractor and the Owner, |
| (3) | amounts withheld by reason of legitimate dispute which have been identified to the party or parties, from whom payment has been withheld and are listed below and, (identify payees and amounts payable to each) |
_______________________________________________________________________________________________
_______________________________________________________________________________________________
_______________________________________________________________________________________________
| (4) | payments that are yet to be made because they are subject to the Contractor’s verification processes. |
3. that all accounts for labour, material suppliers and sub-contracts have been informed of the name of the construction trade newspaper, as declared.
AND I MAKE THIS SOLEMN DECLARATION conscientiously believing it to be true and knowing that it is of the same force and effect as if made under oath and by virtue of the CANADA EVIDENCE ACT.
| Declared before me at the _________________________ | |
| Of _____________________________________________ | |
| in the __________________________________________ | |
| of ____________________this _____________________ |
day of ___________________________. 20 __
| (Deponent) | ||
| A Commissioner etc. |
INSTRUCTIONS
This declaration must be sworn before a commissioner for oaths, notary public or justice of the peace.
Statutory declaration to be submitted along with application for payment to the Owner.
SCHEDULE 8
CONTRACTOR’S PERSONNEL COMMITMENT
The following individual(s) will act on behalf of the Contractor in connection with the Project, together with their scope of authority. Such designations as of the date of this Agreement as set forth below. Such individuals may be replaced, from time to time, subject to the prior approval of the Owner.
Dennis Stainton
Construction and Operations Project Manager
[REDACTED: Email address]
SCHEDULE 9
SCHEDULE OF MILESTONES (AND MILESTONE COMPLETION CERTIFICATE)
[REDACTED: Confidential and commercially sensitive information]
MILESTONE COMPLETION CERTIFICATE
This Milestone Completion Certificate (the “Certificate”) is provided in accordance with the Contract by and between ___________________ (“Owner”) and SolarBank Corporation (“Contractor”) dated ___________________, 2023 (the “Agreement”).
Capitalized terms used in this Certificate and not otherwise defined herein have the meanings specified in the Agreement.
In accordance with Article _____________, the Contractor hereby certifies that, with respect to Milestone No. ___________________ all of the requirements to achieve [Insert Title of Milestone] Completion as defined in Article
with the exception of Owner’s acceptance hereof) have been achieved.
Attached hereto is the required documentation in support of above certification.
| Executed this ___ day of _____________________, 202_. | ||
| [Contractor]______________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
Acceptance
In accordance with Article ___________, Owner on this _______ day of ________, 201__, hereby indicates its acceptance of the achievement of Milestone No. Completion.
| [Owner]_________________ | ||
| By: | ||
| Name: | ||
| Title: | ||
SCHEDULE 10
PROJECT SCHEDULE
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 11
CHANGE ORDER AND CHANGE DIRECTIVE FORM
(as per Section 16.3)
See attached.
Change Order
Project: (Name and Address)
Contract Information:
Contract for:
Date:
Change Order Information
Change Order Number:
Date:
Owner: (Name and Address)
Contractor: (Name and Address)
_______________________________________________________________________________________________
The Contract I changed as follows:
(Insert a detailed description of the change and, if applicable, attach or reference specific exhibits. Also include agreed upon adjustments attributable to executed Construction Change Directives.)
| The original (Fixed Contract Price) was | $ | |||
| The net change by previously authorized Change Orders | $ | |||
| The (Fixed Contract Price) Prior to Change was | $ | |||
| The (Fixed Contract Price) will be (increased) (decreased) | ||||
| (unchanged) by this Change Order in the amount of | $ | |||
| The new (Fixed Contract Price), including this | ||||
| Change Order, will be | $ | |||
| The Completion Plan will be (increased)(decreased)(unchanged) by | $ | |||
| The new date of Substantial Completion will be | $ |
_______________________________________________________________________________________________
NOT VALID UNTIL SIGNED BY THE CONTARTCOR AND OWNER
| OWNER | CONTRACTOR | |
| SIGNATURE | SIGNATURE | |
| NAME AND POSITION | NAME AND POSITION | |
| DATE | DATE |
SCHEDULE 12
REPORT TO OWNER
| No. | Work Completed at Week of xx, 20 (Previous Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 | ||||||||||||||
| No. | Outstanding Work from Week of xx, 20 (Previous Week) |
Comments & Impact on Following Work |
Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| No. | Work planed at Week of xx, 20 (Current Week) | Comments | Start Date | Complete Date | Responsible Party | Stakeholder Involved | Stakeholder Activity (if Required) | |||||||
| 1 | ||||||||||||||
| 2 | ||||||||||||||
| 3 |
|
SCHEDULE 13
[Intentionally left blank]
SCHEDULE 14
FORM OF CONTRACTOR’S APPLICATION FOR PAYMENT
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 15
OWNER’S NOTICE OF SUBSTANTIAL PERFORMANCE
(see attached)
APPLICATION FOR SUBSTANTIAL PERFORMANCE
| To: | Date: | |||
| (Owner) | ||||
| Project: |
RE: Engineering, Procurement and Construction Agreement between Owner and SolarBank Corporation dated [date] (the “Contract”)
In accordance with the Contract requirements, I/We _________________________________ (Name of Contractor) hereby apply for:
☐ Certificate of Substantial Performance
☐ Certificate of Completion
| All work invoiced to date | $ | |||
| Payments made to date | -$ | |||
| Less holdback | -$ | |||
| Less Owner’s set-offs | -$ | |||
| Amount due | =$ |
I/We _______________________________________________________________________________ (Name of Contractor) hereby declare that the Certificate of Substantial Performance shall be published in: _______________________________________________(Name of the construction trade newspaper). The link for the construction trade newspaper is: __________________________.
I/We _______________________________________ (Name of Contractor) hereby release the Owner of all further claims related to the contract with the following exceptions:
| - | List outstanding issues | ||
I/We ____________________________________________________(Name of Contractor) hereby declare and submit with this Application a Statutory Declaration in the form provided that all liabilities incurred by the Contractor, and the Contractor’s Sub-Contractors, in carrying out the Contract have been discharged, except for the statutory holdbacks properly retained in accordance with the Construction Act.
| - | List outstanding liabilities: | ||
| Name: | Signature: | ||
| Position: | Date: |
SCHEUDLE 16
LIST OF APPROVED VENDORS AND SUBCONTRACTORS
(Section 14.1)
[REDACTED: Confidential and commercially sensitive information]
SCHEDULE 17
[intentionally left blank]
SCHEDULE 18
[intentionally left blank]
SCHEDULE 19
NOTICE TO PROCEED
(see attached)
PROJECT NOTICE TO PROCEED
| To: | SolarBank Corporation |
| Re: | Engineering, Procurement and Construction Agreement between Solarbank Corporation and [●] dated , 202_ (the “EPC Agreement”) |
Project:
Location:
In accordance with Section 2.1.1 of the EPC Agreement, the Contractor may proceed with the Work for the Project. Any Notice to Proceed provided by the Owner does not relieve the Contractor from any responsibility or obligation for the proper performance of the Work in conformity with the requirements of the Agreement. This Notice to Proceed imposes no liability upon the Owner and is not to be interpreted as an approval or acceptance of the Work by the Owner that the Work was completed or supplied in conformance with the Agreement.
| [Owner] | ||||
| Issued by: | Time & Date: | |||
| [name] | ||||
| SolarBank Corporation | ||||
| Received by: | Time & Date: | |||
| [name] |
SCHEDULE 20
CERTIFICATE OF FINAL COMPLETION
(see attached)
CERTIFICATE OF FINAL COMPLETION
Reference is made to that certain Engineering, Procurement & Construction Agreement dated as of ______________, 2023 by and between Owner and Contractor (the “Agreement”). Capitalized terms used, but not defined, herein shall have the meanings set forth in the Agreement.
| 1. | The undersigned Contractor does hereby certify and represent as follows to Owner: |
| (a) | Contractor has delivered to Owner a certificate verifying that the Project has achieved Commercial Operation; |
| (b) | Contractor has completed all Punch List items; |
| (c) | A Substantial Completion Certificate for the Work relating to the Project has been published pursuant to Section 31(1) of the Construction Act; |
| (d) | Contractor has delivered evidence of compliance with the Workplace Safety and Insurance Act (Ontario) in form and content satisfactory to Owner; |
| (e) | All Contractor personnel (including subcontractors) shall have left the Job Site; |
| (f) | Owner has received from Contractor all warranties, data, operation and maintenance and other manuals, spare parts lists, and such other items as required by required documentation for the Work in accordance with Section 4.8; |
| (g) | Pursuant to Section 10.1.2 of the Agreement, any Lien registered against the Owner or for which the Owner has received notice in connection with the Work has been satisfied, discharged, vacated or withdrawn in accordance with the Construction Act; |
| (h) | All waste and rubbish and all surplus materials and construction facilities other than those materials and facilities to which Owner holds title shall have been removed from the Job Site; |
| (i) | The Job Site shall have been restored to the same condition that such Job Site was received. |
Executed and delivered to Owner this ___________ day of ______________, 20__.
| CONTRACTOR: | ACCEPTED BY OWNER: | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: | |||
Exhibit 99.76
SolarBank Awarded $36 Million in EPC Contracts for Ontario Battery Energy System Storage Projects
| ● | Three projects in Ontario, each has a discharge capacity of 4.74 megawatts with 18.96 megawatt hours of storage |
| ● | SolarBank currently manages solar farms at two of the three locations that will now host a Battery Energy Storage System (BESS) |
This news release constitutes a “designated news release” for the purposes of the Company’s prospectus supplement dated June 29, 2023 to its short form base shelf prospectus dated May 2, 2023.
Toronto, Ontario, October 4, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that further to its press release of June 28, 2023, it has now entered into engineering, procurement, and construction (“EPC”) agreements dated October 3, 2023 for the construction of three separate BESS projects (the “Projects”) with a total contract value of approximately $36 million. The Projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario (the “Investors”). The battery energy storage market is forecast by Fortune Business Insights to grow at a 16.3% compound annual growth rate from 2022 to reach US$31.2 billion by 2029.1
Transmission and distribution-connected battery storage projects provide reliability benefits to existing electricity grids. In what is known as energy arbitrage, the storage systems will discharge their capacity during periods of peak demand and high prices and then re-charge from the grid when demand and prices are low. Utilities and system operators pay for these benefits to the grid via capacity payments.
The Projects were awarded as part of a procurement process with the Ontario Independent Electricity System Operator (“IESO”) known as “E-LT1”. Projects under the E-LT1 are expected to be operational no later than April 30, 2026 but the Company intends to have them completed for operation by the summer of 2025. Each Project is expected to operate under a long term contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The Projects will also earn revenue from the energy and ancillary markets in Ontario.
The Projects are in three different areas of Ontario. Each has a 4.74 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium-iron-phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
There are several risks associated with the Projects set forth in this news release. Firstly, there is no certainty the Projects will be completed on schedule or that they will operate in accordance with their design capacity. If the EPC agreements are terminated then SolarBank will not realize the full contract value. The development of any Project is subject to receipt of required permits and the continued availability of third-party financing arrangements for the Investors. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for battery storage systems, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
1 https://www.fortunebusinessinsights.com/industry-reports/battery-energy-storage-market-100489
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the battery storage projects mentioned in this press release; the megawatt capacity and type of future solar projects; the Company’s future involvement with respect to these projects; the total contract value of the EPC agreements; the completion timeline for the Projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: the Company’s bid is accepted; obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company’s bid is not accepted and the battery storage projects do not proceed; the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.77
Hydro-Québec Subsidiary (EVLO) Partners with SolarBank to Supply Battery Storage Systems for Recently Announced Ontario Projects
Toronto, Ontario, October 5, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that further to its press release of October 4, 2023, it has selected EVLO Energy Storage Inc. (“EVLO”) to supply EVLOFLEX battery energy storage systems (“BESS”) for three separate BESS projects in Ontario (the “Projects”). EVLO is a fully integrated battery energy storage system provider and wholly owned subsidiary of Hydro-Québec. EVLO will supply each of the Project sites with a 5 MW / 20MWh EVLOFLEX system.
The Projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third-party developer in Ontario (the “Investors”). The Projects are being constructed by SolarBank under engineering, procurement, and construction (“EPC”) agreements dated October 3, 2023 with a total contract value of approximately $36 million.
“We are pleased to move forward on constructing our first energy storage projects with EVLO, a leader in the Canadian battery storage industry,” said Dr. Richard Lu, Chief Executive Officer of SolarBank. “Safety and longevity were two of our primary considerations, and we are confident that the EVLOFLEX will deliver on both fronts.”
“It is an exciting time as the IESO progresses through its largest procurement of energy storage to date,” said Sonia St-Arnaud, President and CEO of EVLO. “Energy storage is critical for increasing reliability and resiliency while lowering greenhouse gas emissions, and we’re proud to support the reliability of the Ontario grid by supplying EVLOFLEX systems to SolarBank.”
SolarBank secured approval for the Projects from Ontario’s Independent Electricity System Operator (“IESO”) under the province’s Expedited Long-Term 1 (“E-LT1”) Reliability Procurement for battery storage. The Projects will increase grid reliability by participating in Ontario’s capacity markets, allowing them to strategically inject power into the grid during peak load hours to safely, sustainably, and cost-effectively manage energy demand. In addition to boosting grid reliability, participation in the IESO capacity market creates new revenue generation opportunities. The BESS for the three Projects are expected to be commissioned by summer 2025.
There are several risks associated with the Projects set forth in this news release. Firstly, there is no certainty the Projects will be completed on schedule or that they will operate in accordance with their design capacity. If the EPC agreements are terminated then SolarBank will not realize the full contract value. The development of any Project is subject to receipt of required permits and the continued availability of third-party financing arrangements for the Investors. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for battery storage systems, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About EVLO Energy Storage Inc.
EVLO Energy Storage Inc. (EVLO) is a fully integrated battery energy storage systems and solutions provider and subsidiary of Hydro-Québec – North America’s largest renewable energy producer. EVLO’s utility-scale systems, control software, and commissioning, monitoring and system management services deliver superior performance, safety and reliability. EVLO’s world-class solutions are backed by decades of R&D and its comprehensive services are led by a veteran team of industry experts passionate about partnering with customers to build a cleaner, more resilient energy future. To learn more: https://evloenergy.com/
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the battery storage projects mentioned in this press release; the megawatt capacity and type of future solar projects; the Company’s future involvement with respect to these projects; the total contract value of the EPC agreements; the completion timeline for the Projects; the details of the EVLOFLEX system; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: the Company’s bid is accepted; obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company’s bid is not accepted and the battery storage projects do not proceed; the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.78
Exhibit 99.79
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| October 3, 2023 | |
| 3. | News Release |
| A news release was disseminated on October 4, 2023 via Cision. | |
| 4. | Summary of Material Change |
| The Company has entered into engineering, procurement, and construction (“EPC”) agreements dated October 3, 2023 for the construction of three separate Battery Energy Storage System (“BESS”) Projects (the “Projects”) with a total contract value of approximately $36 million. The Projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario (the “Investors”). | |
| 5.1 | Full Description of Material Change |
The Company has entered into EPC agreements dated October 3, 2023 for the construction of three separate BESS Projects with a total contract value of approximately $36 million. The Projects are owned by the Investors through two different holding companies.
Transmission and distribution-connected battery storage projects provide reliability benefits to existing electricity grids. In what is known as energy arbitrage, the storage systems will discharge their capacity during periods of peak demand and high prices and then re-charge from the grid when demand and prices are low. Utilities and system operators pay for these benefits to the grid via capacity payments.
The Projects were awarded as part of a procurement process with the Ontario Independent Electricity System Operator (“IESO”) known as “E-LT1”. Projects under the E-LT1 are expected to be operational no later than April 30, 2026 but the Company intends to have them completed for operation by the summer of 2025. Each Project is expected to operate under a long term contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The Projects will also earn revenue from the energy and ancillary markets in Ontario.
The Projects are in three different areas of Ontario. Each has a 4.74 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium-iron-phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
There are several risks associated with the Projects set forth in this report. Firstly, there is no certainty the Projects will be completed on schedule or that they will operate in accordance with their design capacity. If the EPC agreements are terminated then SolarBank will not realize the full contract value. The development of any Project is subject to receipt of required permits and the continued availability of third-party financing arrangements for the Investors. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for battery storage systems, which could result in future projects no longer being economic. Please refer to “Forward-Looking Information” for additional discussion of the assumptions and risk factors associated with the statements in this report. |
| 2 |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. | |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is:
Sam Sun, Chief Financial Officer (416) 494-9559 sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| October 13, 2023 |
Forward-Looking Information
This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements pertaining to the Company’s expectations regarding industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the battery storage projects mentioned in this report; the megawatt capacity and type of future solar projects; the Company’s future involvement with respect to these projects; the total contract value of the EPC agreements; the completion timeline for the Projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: the Company’s bid is accepted; obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
| 3 |
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company’s bid is not accepted and the battery storage projects do not proceed; the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.80
Private & Confidential
| Dated | October 23, 2023 |
SOLARBANK CORPORATION
(as the “Purchaser”)
and
N. FINE INVESTMENTS LIMITED and LINDEN POWER INC.
(each a “Vendor” and together the “Vendors”)
and
OFIT GM INC.
(as the “Corporation”)
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT is made as of October 23, 2023,
BETWEEN:
SOLARBANK CORPORATION
a corporation formed under the laws of the Province of Ontario
(the “Purchaser”)
-and-
N. FINE INVESTMENTS LIMITED
a corporation formed under the laws of the Province of Ontario
(“N. Fine”)
-and-
LINDEN POWER INC.
a corporation formed under the laws of the Province of Ontario
(“Linden Power”)
(each of N. Fine and Linden Power may be referred to as a “Vendor” and together the “Vendors”);
-and-
OFIT GM INC.
a corporation formed under the laws of the Province of Ontario
(the “Corporation”).
RECITALS:
| (A) | N. Fine is the registered and beneficial owner of 499 issued and outstanding common shares in the capital of the Corporation (the “Fine Shares”) and Linden Power is the registered and beneficial owner of 499 issued and outstanding common shares in the capital of the Corporation (the “Linden Shares”) (together, the Fine Shares and the Linden Shares are referred to as the “Purchased Shares”). |
| (B) | N. Fine and Linden Power wish to sell the Purchased Shares and the Purchaser wishes to purchase such shares, on and subject to the terms and conditions set out in this Agreement. |
| (C) | The Corporation is entering into this Agreement to confirm its consent to the sale and purchase of the Purchased Shares. |
NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are acknowledged), the Parties agree as follows:
| 2 |
Article 1
Interpretation
| 1.1 | Definitions |
In this Agreement, in addition to the defined terms herein, the following words and expressions have the following meanings:
| (a) | Account Proceeds has the meaning given to such term in Section 2.2. |
| (b) | Affiliate means affiliates as defined in the Business Corporations Act (Ontario). |
| (c) | Acquisition Documents means this Agreement, the share transfer power in respect of the Purchased Shares, the Bring-down Certificate and officer’s certificate relating to the purchase of the Purchased Shares. |
| (d) | Agreement means this share purchase agreement and any exhibits attached to it or otherwise forming part of it, as the same may be amended, restated, replaced, supplemented or novated from time to time. |
| (e) | ASPE means the Canadian Accounting Standards for Private Enterprises, accounting principles generally accepted in Canada including those recommended or approved by the Charted Professional Accountants of Canada. |
| (f) | Assets means all property and assets of the Corporation of every nature and kind and wherever located including (a) any real property owned by the Corporation and the buildings, improvements and fixtures located thereon, (b) all machinery, equipment, furniture, accessories and supplies of all kinds, (c) all trucks, cars and other vehicles, (d) all inventories of the Corporation, (e) all accounts receivable of the Corporation of every nature and kind, whether current or not, (f) the leasehold interest of the Corporation in and to the Leased Properties and the buildings, improvements and fixtures located thereon, (g) all intellectual property rights of the Corporation, (h) all Authorizations issued to the Corporation, (i) the Leases and all other Contracts binding on or benefiting the Corporation, (j) the Books and Records, and (k) the Corporate Records. |
| (g) | Authorization means, with respect to any Person, any order, permit, approval, consent, waiver, licence or other authorization issued, granted, given or authorized by, or made applicable under the authority of, any Governmental Authority having jurisdiction over the Person. |
| (h) | Books and Records means all books of account, financial statements, tax records personnel records, historic documents relating to Employee Plans and Assets, sales and purchase records, cost and pricing information, customer and supplier lists and files, referral sources, research and development reports and records, production reports and records, equipment logs, operating guides and manuals, business reports, plans and projections and all other documents, files, correspondence and other information of the Corporation (whether in written, electronic or other form) other than the Corporate Records. |
| 3 |
| (i) | Bring-down Certificate means a certificate of each Vendor and the Purchaser deliverable on Closing, confirming that all of the representations and warranties of each Vendor and the Purchaser, as applicable, set out herein are true and complete as of the Closing Date. |
| (j) | Business Day means any day, other than a Saturday, Sunday or statutory or civic holiday in Toronto, Ontario. |
| (k) | Closing means the completion of the transaction of purchase and sale contemplated in this Agreement. |
| (l) | Closing Date means October 23, 2023, or such other earlier or later date as the Parties may agree in writing. |
| (m) | Consent means any consent, approval, waiver or other authorization required under a Contract. |
| (n) | Consideration Shares has the meaning given to such term in Section 2.2. |
| (o) | Contracts means all agreements, arrangements, understandings, commitments and undertakings (whether written, electronic or oral), to which a Person is a party or a beneficiary or pursuant to which any of its property or assets are or may be affected. |
| (p) | Corporate Records means the corporate records of the Corporation, including (a) all constating documents, articles and by-laws, (b) all minutes of meetings and resolutions of shareholders and directors, and (c) the share certificate books, securities register, register of transfers and register of directors. |
| (q) | Encumbrance means any and all claims, liens, security interests, mortgages, pledges, pre-emptive rights, charges, options, equity interests, encumbrances, proxies, voting agreements, voting trusts, leases, tenancies, easements or other interests of any nature or kind whatsoever, howsoever created. |
| (r) | Environment means the natural environment (including soil, land surface or subsurface strata, surface water, groundwater, sediment, ambient air (including all layers of the atmosphere), organic and inorganic matter and living organisms, including human health, and any other environmental medium or natural resource). |
| (s) | Environmental Laws means Laws aimed at or relating to, or imposing liability or standards of conduct for or relating to, development, operation, reclamation or restoration of properties; abatement of pollution; protection of the Environment; protection of wildlife, including endangered species; management, treatment, storage, disposal or control of, or exposure to, Hazardous Substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or Hazardous Substances; and all other Laws relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. |
| 4 |
| (t) | FIT Project means a project under the IESO’s Feed-in Tariff program owned or controlled by the Corporation, a list of which is found in Section 3.3(m). |
| (u) | FIT Rules means the rules of the IESO and any ancillary or related documents governing the FIT Projects including applicable FIT contracts and schedules relating to the FIT Projects owned by the Corporation. |
| (v) | Governmental Authority means any (a) multinational, federal, provincial, territorial, state, municipal, local or other governmental or public department, central bank, court, commission, board, arbitrator, tribunal, bureau or agency, domestic or foreign, (b) any subdivision or authority of any of the above, or (c) any quasi-governmental or private body exercising any regulatory, expropriation or tax authority under or for the account of any of the above, which shall include, but not be limited to, the IESO. |
| (w) | Hazardous Substances means any waste or other substance that is prohibited, listed, defined, designated or classified as dangerous, hazardous, radioactive, corrosive, explosive, infectious, carcinogenic, mutagenic or toxic or a pollutant or a contaminant under or pursuant to, or that could result in liability under, any applicable Environmental Laws including petroleum and all derivatives thereof or synthetic substitutes therefor, hydrogen sulphide, arsenic, cyanide, cadmium, lead, mercury, polychlorinated biphenyls (“PCBs”), PCB-containing equipment and material, mould, asbestos, asbestos-containing material, urea-formaldehyde, urea-formaldehyde- containing material and any other material or substance that may impair the Environment, the health of any individual, property or plant or animal life. |
| (x) | IESO means the Independent Electricity System Operator of Ontario and any successors or entities with which it is combined or amalgamated. |
| (y) | ITA means the Income Tax Act (Canada). |
| (z) | Laws means any and all (a) laws, constitutions, treaties, statutes, codes, ordinances, orders, decrees, rules, regulations and municipal by-laws, (b) judicial, arbitral, administrative, ministerial, departmental or regulatory judgments, orders, decisions, rulings or awards of any Governmental Authority, and (c) policies, guidelines and protocols. |
| (aa) | Leased Properties means the lands and premises leased by the Corporation. |
| (bb) | Leases means the leases entered into by the Corporation. |
| (cc) | Lien means (a) any mortgage, charge, pledge, hypothec, security interest, assignment, lien (statutory or otherwise), privilege, easement, servitude, pre-emptive right or right of first refusal, ownership or title retention agreement, restrictive covenant or conditional sale agreement, imperfections of title or encroachments relating to real property and (b) any other encumbrance of any nature or any arrangement or condition which, in substance, secures payment or performance of an obligation. |
| (dd) | Loss means any losses, damages, penalties, liabilities, costs, charges and expenses (including, without limitation, reasonable legal fees, accounting fees and expenses). |
| 5 |
| (ee) | Material Adverse Effect means an effect resulting from any change, event, occurrence or state of facts, either individually or in the aggregate, that: (i) is or would reasonably be expected to be, material and adverse to the business, condition (financial or otherwise), properties, assets (tangible or intangible), liabilities (whether absolute, accrued, conditional, contingent or otherwise), capitalization, operations, or results of operations of the Corporation; or (ii) would, or would reasonably be expected to, materially impair or delay the consummation of the transactions contemplated by this Agreement, except that: (A) any change, event, occurrence or state of facts relating to general economic conditions, or financial, credit, currency exchange, securities or commodities markets in general; or war, armed hostilities or acts of terrorism, will not result in a Material Adverse Effect unless it adversely affects the Corporation disproportionately, compared to other businesses of similar size operating in the same industry as the Corporation; and (B) any action taken (or not taken) by a Vendor, the Corporation that is required to be taken (or not taken) under this Agreement or that is consented to by the Purchaser in writing will not result in a Material Adverse Effect. |
| (ff) | Material Contract means a Contract to which the Corporation or a Subsidiary is a party or is bound that: involves or would result in the payment of money or money’s worth by or to the Corporation or a Subsidiary in an amount in excess of $20,000; has an unexpired term of more than one (1) year (including renewals); cannot be terminated by the Corporation without penalty upon less than 30 days’ notice; or the termination of which, or under which the loss of rights, would result in a Material Adverse Effect. |
| (gg) | Outside Date means December 31, 2023. |
| (hh) | Owned Properties means the lands and premises owned by the Corporation. |
| (ii) | Parties means the Vendor, the Purchaser, the Corporation and any other Person who may become a party to this Agreement. |
| (jj) | Permits means the authorizations, registrations, permits, certificates of approval, approvals, grants, licences, quotas, consents, commitments, rights or privileges issued or granted by any Governmental Authority to the Corporation. |
| (kk) | Person means a natural person, partnership, limited partnership, limited liability partnership, syndicate, sole proprietorship, corporation or company (with or without share capital), limited liability company, stock company, trust, unincorporated association, joint venture or other entity or Governmental Authority. |
| (ll) | Purchase Price has the meaning ascribed in Section 2.2. |
| (mm) | Tax or Taxes means any and all taxes, dues, duties, rates, imposts, fees, levies, other assessments, tariffs, charges or obligations of the same or similar nature, however denominated, imposed, assessed or collected by any Governmental Authority, including all income taxes, including any tax on or based on net income, gross income, income as specifically defined, earnings, gross receipts, capital gains, profits, business royalty or selected items of income, earnings or profits, and specifically including any federal, provincial, state, territorial, county, municipal, local or foreign taxes, state profit share taxes, windfall or excess profit taxes, capital taxes, royalty taxes, production taxes, payroll taxes, health taxes, employment taxes, withholding taxes, sales taxes, use taxes, goods and services taxes, custom duties, value added taxes, ad valoram taxes, excise taxes, alternative or add-on minimum taxes, franchise taxes, gross receipts taxes, licence taxes, occupation taxes, real and personal property taxes, stamp taxes, anti-dumping taxes, countervailing taxes, occupation taxes, environment taxes, transfer taxes, special COVID-19 tax relief (including, for greater certainty, any COVID-19 subsidy), and employment or unemployment insurance premiums, social insurance premiums and worker’s compensation premiums and pension (including Canada Pension Plan) payments, and other taxes, fees, imposts, assessments or charges of any kind whatsoever together with any interest, penalties, additional taxes, fines and other charges and additions that may become payable in respect thereof including any interest in respect of such interest, penalties and additional taxes, fines and other charges and additions, whether disputed or not, and any transferee or secondary liability in respect of any of the foregoing. |
| 6 |
| 1.2 | Gender and Number |
In this Agreement, unless the context requires, any reference to gender shall include both genders and words importing the singular number shall include the plural and vice-versa.
| 1.3 | Certain Phrases and Calculation of Time |
In this Agreement (i) the words “including” and “includes” mean “including (or includes) without limitation”; and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. If the last day of any such period is not a Business Day, such period will end on the next Business Day.
| 1.4 | Headings, etc. |
The division of this Agreement into articles and sections and the insertion of headings are for convenient reference only and shall not affect the construction or interpretation of this Agreement.
| 1.5 | References to the Schedules and Exhibits |
Any Schedules and exhibits attached hereto form an integral part of this Agreement.
| 1.6 | Currency |
Unless otherwise indicated, all references to dollar amounts in this Agreement are expressed in in Canadian currency.
| 1.7 | Accounting Terms |
All accounting terms not defined in this Agreement are to be interpreted in accordance with ASPE.
| 1.8 | Statutory References |
Unless otherwise specifically indicated in this Agreement, any reference in this Agreement to any Law shall be construed as a reference to such Law as amended or re-enacted from time to time or as a reference to any successor thereto.
| 1.9 | No Presumption |
| (a) | The Parties and their counsel have participated jointly in the negotiation and drafting of this Agreement and each of the Acquisition Documents. If an ambiguity or a question of intent or interpretation arises, this Agreement and each of the Acquisition Documents are to be construed as if drafted jointly by the Parties. No presumption or burden of proof should arise in favour of any Party by virtue of the authorship of any provision of this Agreement or any of the Acquisition Documents. |
| (b) | All Parties confirm that they have sought their own legal advice regarding the compliance of this Agreement and the Acquisition Documents with any applicable Laws and the FIT Rules and that they are not relying on any other Party or its counsel regarding the compliance of this Agreement and the Acquisition Documents with any Laws or the FIT Rules. |
| 7 |
Article
2
Purchase and Sale
| 2.1 | Purchase and Sale |
Subject to the terms and conditions of this Agreement, the Vendors agree to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the Vendors, all of the Purchased Shares for the Purchase Price payable as set out in Section 2.2.
| 2.2 | Purchase Price |
The purchase price for the Purchased Shares is the sum of $1,662,084.00 (the “Purchase Price”), payable on the Closing Date through the issuance of 215,855 common shares of the Purchaser at a rate of $7.70 per share (the “Consideration Shares”). In addition to the Consideration Shares, The Purchase shall pay the Vendors $232,262.75 in cash representing cash held by the Corporation in operating and reserve accounts (the “Account Proceeds”).
| 2.3 | Payment of Purchase Price |
| (a) | One hundred percent (100%) of the Purchase Price consisting of the Consideration Shares will be due and payable on the Closing Date as follows and shall be issued subject to Section 4.8 and shall be subject to restrictions in Section 4.7: |
| i. | 143,904 Consideration Shares issued to Fine; and |
| ii. | 71,951 Consideration Shares issued to Linden. |
Unless permitted under securities legislation, each of Fine and Linden acknowledge and agree that it shall not trade the Consideration Shares prior to the date that is four (4) months plus one day following issuance of the Consideration Shares. For certainty, such date is February 24, 2024.
| (b) | One hundred percent (100%) of the Account Proceeds shall be payable on the Closing Date, as follows: |
| i. | $154,841.83 payable to Fine; and |
| ii. | $77,420.92 payable to Linden. |
| 8 |
Article
3
Representations and Warranties
| 3.1 | Representations and Warranties of N. Fine |
N. Fine represents and warrants as follows and acknowledges that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | N. Fine is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No bankruptcy, insolvency or receivership proceedings have been instituted or are pending against N. Fine and N. Fine is able to satisfy its liabilities as they become due. |
| (c) | N. Fine has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | This Agreement constitutes a valid and binding obligation of N. Fine enforceable against it in accordance with its terms provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization and other similar laws generally affecting enforceability of creditors’ rights and that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. |
| (e) | The sale and transfer of the Fine Shares to the Purchaser will not result in a breach of any agreement or other right binding upon N. Fine. |
| (f) | N. Fine is the legal and beneficial owner of the Fine Shares and on the Closing Date the Purchaser shall acquire good and marketable title to the Fine Shares, free and clear of all Liens and claims of other persons. The Fine Shares are not subject to any options or rights of any person other than the Purchaser to acquire them and there are no restrictions on the transfer of the Fine Shares except those set forth in the Corporation’s Articles of Incorporation and in the Unanimous Shareholders Agreement. |
| (g) | N. Fine is not a party to, bound or affected by or subject to any mortgage, lease, agreement, legislation, court order or judgment or arbitration award which would be violated, contravened, breached by or under which any default would occur as a result of the execution and delivery of this Agreement or the consummation of any of the transactions contemplated under this Agreement. |
| (h) | N. Fine is not a non-resident of Canada within the meaning of the Income Tax Act (Canada). |
| (i) | There is no suit, action or proceeding in progress, pending or threatened against, involving or affecting the Fine Shares. |
| (j) | No Person acting on behalf of the Fine Shares is or will be entitled to any brokerage fee, commission, finder’s fee or financial advisory fee from any party in connection with the sale of the Fine Shares to the Purchaser. |
| (k) | None of the foregoing representations and warranties contains any untrue statement of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 9 |
| 3.2 | Representations and Warranties of Linden Power |
Linden represents and warrants as follows and acknowledges that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | Linden is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No bankruptcy, insolvency or receivership proceedings have been instituted or are pending against Linden and Linden is able to satisfy its liabilities as they become due. |
| (c) | Linden has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | This Agreement constitutes a valid and binding obligation of Linden enforceable against it in accordance with its terms provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization and other similar laws generally affecting enforceability of creditors’ rights and that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. |
| (e) | The sale and transfer of the Linden Shares to the Purchaser will not result in a breach of any agreement or other right binding upon Linden. |
| (f) | Linden is the legal and beneficial owner of the Linden Shares and on the Closing Date the Purchaser shall acquire good and marketable title to the Linden Shares, free and clear of all Liens and claims of other persons. The Fine Shares are not subject to any options or rights of any person other than the Purchaser to acquire them and there are no restrictions on the transfer of the Fine Shares except those set forth in the Corporation’s Articles of Incorporation and in the Unanimous Shareholders Agreement. |
| (g) | Linden is not a party to, bound or affected by or subject to any mortgage, lease, agreement, legislation, court order or judgment or arbitration award which would be violated, contravened, breached by or under which any default would occur as a result of the execution and delivery of this Agreement or the consummation of any of the transactions contemplated under this Agreement. |
| (h) | Linden is not a non-resident of Canada within the meaning of the Income Tax Act (Canada). |
| (i) | There is no suit, action or proceeding in progress, pending or threatened against, involving or affecting the Linden Shares. |
| 10 |
| (j) | No Person acting on behalf of the Linden Shares is or will be entitled to any brokerage fee, commission, finder’s fee or financial advisory fee from any party in connection with the sale of the Linden Shares to the Purchaser. |
| (k) | None of the foregoing representations and warranties contains any untrue statements of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 3.3 | Representations and Warranties of the Corporation |
Each Vendor, on its own behalf, jointly and severally, represents and warrants to the Purchaser as follows, and acknowledges and confirms that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | The Corporation is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No act or proceeding has been taken by or against the Corporation or any of its Subsidiaries in connection with the dissolution, liquidation, winding up, bankruptcy, reorganization, compromise or arrangement of the Corporation or for the appointment of a trustee, receiver, manager or other administrator of the Corporation s or any of its properties or assets nor, to the knowledge of the Corporation, is any such act or proceeding threatened. The Corporation has not sought protection under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or similar legislation. None of the Corporation nor any of its properties or assets is subject to any outstanding judgment, order, writ, injunction or decree that involves or may involve, or restricts or may restrict, the right or ability of the Corporation to conduct its business as it has been carried on prior to the date hereof, or that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or would reasonably be expected to prevent or significantly impede or materially delay the Closing. |
| (c) | The Corporation has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | The sale and transfer of the Purchased Shares from the Vendor to the Purchaser will not result in a breach of any agreement or other right binding upon the Corporation. |
| (e) | The Books and Records of the Corporation fairly and correctly set out and disclose in all material respects, in accordance with generally accepted accounting principles, the financial position of the Corporation as at the date of this Agreement and all material financial transactions of the Corporation relating to the business of the Corporation have been accurately recorded in such Books and Records. |
| 11 |
| (f) | The Corporation has filed all Tax returns, reports and other Tax filings required to be filed on or before the applicable filing deadline with the appropriate Governmental Authorities, and has paid, deducted, withheld or collected and remitted on a timely basis all material amounts to be paid, deducted, withheld or collected and remitted with respect to any Taxes, interest and penalties as required under all applicable Tax Laws. There are no Tax deficiencies that have been claimed, proposed, or asserted in writing against the Corporation hat have not been fully paid or finally settled, and there are no assessments, reassessments, actions, suits or proceedings in progress, pending or threatened, against the Corporation, and no waivers have been granted by the Corporation, in connection with any Taxes, interest or penalties. The terms and conditions made or imposed in respect of every material transaction (or series of transactions) between the Corporation and any Person that is (or was at the relevant time) not dealing at arm’s length with the Corporation for purposes of the ITA, do not differ from those that would have been made between persons dealing at arm’s length for purposes of the ITA. |
| (g) | The Corporation has not carried on any business other than the development of solar projects (the “Business”). |
| (h) | Any resolution or consent of the directors or shareholders of the Corporation required to authorize or approve the transfer of the Purchased Shares to the Purchaser has been obtained. |
| (i) | The Corporation has no receivables other than amounts as disclosed in the Financial Statements as of December 31, 2022. |
| (j) | The Corporate Records of the Corporation are complete and accurate and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable Laws and with the articles and by-laws of the Corporation. |
| (k) | The financial statements have or will be prepared in accordance with ASPE and are or will be complete and accurate. The final Financial Statements present fairly: the assets, liabilities (whether accrued, absolute, contingent or otherwise) and financial condition of the Corporation as at the respective dates of the financial statements; and the sales, earnings and results of the operations of the Corporation during the periods covered by the financial statements. |
| (l) | There are no agreements, options or other rights that exist pursuant to which any third party (other than Panasonic Eco-Solutions) has or had the right to provide any service, work, equipment or good to the Corporation in respect of the Corporation’s FIT Projects, including, without limitation, the right to receive compensation in respect of or relating to the Projects. The FIT Projects listed below are all of the solar photovoltaic projects of the Corporation. The FIT Projects are located at: |
| ● | 475 Garyray Dr.: FIT Contract #F-006148-SPV-310-528 | |
| ● | 10 Highbury Ave: FIT Contract #F-006192-SPV-310-528 | |
| ● | 3451 McNicholl Ave: FIT Contract #F-006195-SPV-310-528 |
| (m) | The Corporation’s bank account has a balance of at least $232,262.75. The Company has not granted or agreed to grant any Encumbrance whatsoever on the funds in the Company’s bank account to any third party. |
| 12 |
| (n) | The Corporation has no outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes due), whether accrued, absolute, contingent or otherwise, and are not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any Person, other than those incurred in the ordinary course of business and FIT Project financing having loan no. 210887000 with PNC Equipment Financing |
| (o) | The Corporation is not a party to, or bound or affected by, any agreement, commitment or document containing any covenant expressly limiting its ability to compete in any line of business, or limiting its ability to transfer or move any of its assets or operations, or any covenant which could reasonably be expected to have a Material Adverse Effect. |
| (p) | None of the execution and delivery of this Agreement by the Corporation or the performance of the Corporation’s obligations under this Agreement, will (except as disclosed in the Disclosure Letter): |
| a. | result in or constitute a breach of any term or provision of, or constitute a default under, its articles, charters or by-laws or other comparable organizational documents; any Permit to which the Corporation is a party or to which it, or any of its properties or assets, may be subject or by which it is bound; or any Laws, regulation, order, judgment or decree applicable to the Corporation or any of its properties or assets; |
| b. | result in or constitute a breach of any term or provision of, or constitute a default under, any agreement or other commitment to which the Corporation is a party or which affects the Purchased Shares; |
| c. | give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, Material Contract, license, franchise or Permit; |
| d. | constitute an event that would permit any party to any Material Contract to amend, cancel, terminate or sue for damages with respect to that Material Contract, or to accelerate the maturity of any indebtedness of the Corporation, or other obligation of the Corporation o under that Material Contract; |
| e. | give rise to any termination or acceleration of indebtedness, or cause any third party indebtedness to come due before its stated maturity or cause any available credit to cease to be available; |
| f. | result in the imposition of any Encumbrance upon any of the property or assets of the Corporation, or restrict, hinder, impair or limit the ability of the Corporation to conduct the Business; |
| g. | result in the creation or imposition of any Encumbrance on the Purchased Shares; |
| 13 |
| h. | result in any material payment (including retention, severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of the Corporation or a Subsidiary, or increase any benefit payable to such director, officer or employee by the Corporation or a Subsidiary, or result in the acceleration of the time of payment or vesting of any such benefits. |
| i. | contravene any applicable Law; or |
| j. | contravene any judgment, order, writ, injunction or decree of any Governmental Authority. |
| (q) | The Corporation does not have any subsidiaries. |
| (r) | The authorized share structure of the Corporation consists of: (i) an unlimited number of common shares, of which 1,000 common shares are issued and outstanding as fully paid and non-assessable shares; (ii) an unlimited number of special shares, of which 1,002 special shares are issued and outstanding as fully paid and non-assessable shares; (iii) an unlimited number of class A preference shares, of which nil class A preference shares are issued and outstanding; and (iv) an unlimited number of class B preference shares, of which nil class B preference shares are issued and outstanding. There are no outstanding bonds, debentures or other evidences of indebtedness of the Corporation having the right to vote with the holders of the outstanding shares of the Corporation on any matters. |
| (s) | No Person has any written or oral agreement or option or any right or privilege (whether by Law, pre-emptive, contractual or otherwise) capable of becoming an agreement or option, including securities, warrants or convertible obligations of any kind, for the purchase of any securities of the Corporation; or the purchase of any of the assets of the Corporation. |
| (t) | The Corporation owns, possesses and has good and marketable title to all of its undertakings, property and assets (whether owned or leased), including all the undertakings, property and assets reflected in the most recent balance sheet included in the Financial Statements, free and clear of all Encumbrances. Subject to the foregoing qualifications, the undertakings, property and assets of the Corporation, comprise all of the undertakings, property and assets necessary for the Corporation to carry on the Business as it is currently operated. All facilities, equipment, fixtures, vehicles and other tangible assets owned, leased or used by the Corporation are in good operating condition and repair, ordinary wear and tear excepted, and are reasonably fit and usable for the purposes for which they are being used. |
| (u) | The Corporation is not in default or breach of any Material Contract, and there exists no state of facts which, after notice or lapse of time or both, would constitute a default or breach under any Material Contract. No counterparty to any Material Contract is in default of any of its obligations under any Material Contract, the Corporation is entitled to all its benefits under each Material Contract, and neither the Corporation has not received any notice of termination of any Material Contract. |
| 14 |
| (v) | The business of the Corporation and Subsidiaries has been and is currently being conducted in compliance in all material respects with applicable Laws and neither the Corporation nor its Subsidiaries have received any notice of any alleged violation of any such Laws. The Corporation does not have any knowledge of any pending changes in any Law that would reasonably be expected to materially impact the business, operations, financial condition or prospects of the Corporation or any of its subsidiaries. Without limiting the generality of the foregoing, all issued and outstanding Purchased Shares have been issued in compliance with all applicable securities Laws. |
| (w) | All Permits material to the Business have been provided to the Purchaser. Those Permits are the only authorizations, registrations, permits, approvals, grants, licences, quotas, consents, commitments, rights or privileges required to enable the Corporation to carry on the Business as currently conducted and to enable the Corporation to own, lease and operate its assets in all material respects. All such Permits are valid, subsisting, in full force and effect and unamended, and the Corporation is not in default or breach of any Permit; no proceeding is pending or threatened to revoke or limit any Permit, and the completion of the transactions contemplated by this Agreement will not result in the revocation of any Permit or the breach of any term, provision, condition or limitation affecting the ongoing validity of any Permit. |
| (x) | The Corporation is not a party to any written or oral employment, service, pension, deferred profit sharing, benefit, bonus or other similar agreement or arrangement. |
| (y) | The insurance policies maintained by the Corporation insure all the property and assets of the Corporation against loss or damage by all insurable hazards of risk on a replacement cost basis, and provide the Corporation with product liability, professional liability, and errors and omissions coverage in amounts that are customary, and that would reasonably be considered adequate and prudent, for a company carrying on a business similar to the Business. All insurance policies are in full force and effect and the Corporation is not in default, whether as to the payment of premiums or otherwise, under any material term or condition of any of the insurance policies listed herein; and has not failed to give notice or present any claim under any of the insurance policies listed herein in a due and timely fashion. |
| (z) | There are no actions, suits, grievances or proceedings, whether judicial, arbitral or administrative, and whether or not purportedly on behalf of or against the Corporation, pending, commenced, or threatened. There is no outstanding judgment, decree, order, ruling or injunction in favour of, against or otherwise involving the Corporation or relating in any way to the transactions contemplated by this Agreement. |
| 15 |
| (aa) | The Corporation has carried on and are currently carrying on its operations in compliance with all applicable Environmental Laws and the Corporation properties and assets comply with all applicable Environmental Laws, in each case in all material respects. The Corporation has obtained from the relevant Governmental Authorities, and are in material compliance with, any Environmental Approvals required to conduct their previous and current businesses and such Environmental Approvals remain valid and in good standing on the date hereof. The Corporation is not subject to any contingent or other liability relating to (A) the restoration or rehabilitation of land, water or any other part of the environment, (B) closure, reclamation, remediation or other post operational requirements, or (C) non-compliance with Environmental Laws for the period the Corporation held the Corporation properties, and knows of no such contingent or other liability for a period prior to such ownership. The Corporation properties have not been used to generate, manufacture, refine, treat, recycle, transport, store, handle, dispose of, discharge, release, transfer, produce or process Hazardous Substances, except in material compliance with all Environmental Laws for the period the Corporation held the Corporation properties, and knows of no such contingent or other liability for a period prior to such ownership. The Corporation has not caused or permitted the Release of any Hazardous Substances at, in, on, under or from any Corporation properties, except in material compliance with all Environmental Laws. All Hazardous Substances handled, recycled, disposed of, discharged, released, treated or stored on or off site of the Corporation properties by the Corporation have been handled, recycled, disposed of, discharged, released, treated and stored in material compliance with all Environmental Laws. There are no Hazardous Substances at, in, on, under or migrating from any Corporation properties, except in material compliance with all Environmental Laws. The Corporation has not received from any person or Governmental Authority any notice, formal or informal, of any proceeding, action or other claim, liability or potential liability arising under any Environmental Law that is pending as of the date of this Agreement. There are no facts or circumstances that reasonably could be expected to give rise to any such notice, action or other claim, liability or potential liability. |
| (bb) | The Corporation and the Vendors have not retained any financial advisor, broker, agent, or finder, or entered into any agreement entitling any Person to any broker’s commission, finder’s fee, or similar payment, relating to this Agreement or the transactions contemplated by this Agreement. |
| (cc) | None of the foregoing representations and warranties contains any untrue statement of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 3.4 | Representations and Warranties of the Purchaser |
The Purchaser represents and warrants as follows to the Vendor and acknowledges and confirms that the Vendors are each relying on the representations and warranties in entering into this Agreement and selling the Purchased Shares to the Purchaser:
| (a) | The Purchaser is a corporation incorporated, organized and existing under the laws of the Province of Ontario and has the corporate power and authority to enter into and perform its obligations under this Agreement. |
| 16 |
| (b) | The execution, delivery and performance by the Purchaser of each of the obligations set out herein have been duly authorized by all necessary corporate action on the part of the Purchaser. |
| (c) | The Purchaser is not a “non-Canadian” within the meaning of the Investment Canada Act. |
| 3.5 | Survival of Representations and Warranties |
All representations, warranties, covenants and agreements contained in this Agreement on the part of each of the parties shall survive the Closing for a period of two years following Closing, except for the Vendor’s representations and warranties relating to Tax matters which shall survive for the period of time during which the Taxes to which such representations and warranties relate may be reassessed by the relevant taxation authority, unless a Vendor has been fraudulent in filing a return or supplying information to any taxation authority, in which case the survival of those representations and warranties relating to tax matters shall be unlimited. If no claim is made against a party prior to the expiry of the relevant period specified above with respect to any incorrectness in or breach of any representation or warranty made by such Party, such Party shall have no further liability under this Agreement with respect to such representation and warranty.
Article
4
Covenants of the Parties
| 4.1 | Conduct of Business Prior to Closing |
During the period from the date of this Agreement to the Closing Date, each Vendor shall do or cause the Corporation to do the following:
| (a) | The Corporation shall conduct the business in the ordinary course and shall not, without the prior written consent of the Purchaser, enter into any transaction which, if entered into before the date of this Agreement would cause any representations or warranties of the Vendors contained in this Agreement to be incorrect or constitute a breach of any covenant or agreement or the Vendor contained in this Agreement. Each Vendor shall use its best efforts to preserve intact the Corporation and the business and the relationships existing with the customers or suppliers of the Corporation. |
| (b) | The Corporation shall not, without the prior written consent of the Purchaser, (i) enter into, modify or terminate any Material Contract; (ii) amend the terms of any securities of the Corporation; or (iii) reorganize, amalgamate, or merge the Corporation with any other person. |
| (c) | The Corporation shall not take any action which would result in any Material Adverse Change in the Corporation or the business or sell, transfer or dispose of any of the assets of the Corporation other than in the ordinary course of business. |
| (d) | The Corporation shall comply with all applicable Laws, regulations, by-laws and other governmental requirements. |
| (e) | The Corporation shall not take any actions which may result in the Corporation incurring a liability. |
| 17 |
| 4.2 | Delivery of Books and Records |
At the time of Closing, the Vendor and the Corporation shall deliver to the Purchaser all Books and Records of the Corporation, and all relevant details, contracts, corporate, financial and tax records and files relating to the assets of the Corporation. The Purchaser agrees that it will preserve the documents, Books and Records so delivered to them for a period of six years from the Closing Date or for such other period as is required by any applicable law, and will permit the Vendor or its authorized representatives reasonable access to those Books and Records in connection with the affairs of the Vendor.
| 4.3 | Consents Required in Contracts |
The Purchaser shall have full responsibility to obtain, prior to the Closing Date, any consent, approval, waiver or other authorization required from the IESO. The Vendor shall cooperate in obtaining any consents required under any contract as a result of the sale of the Purchased Shares.
| 4.4 | Transfer of the Purchased Shares |
The Vendors shall take all necessary steps and corporate proceedings to permit good title to the Purchased Shares to be duly and validly transferred and assigned to the Purchaser on the Closing Date, free of all Liens.
| 4.5 | Exclusivity |
From the date of this Agreement until the earlier of the Closing and the date of termination of this Agreement, none of the Vendors or the Corporation will: (i) solicit, initiate, knowingly facilitate or encourage, or accept; (ii) enter into any agreement, arrangement or understanding; or (iii) participate in any discussions, conversations, negotiations or other communications regarding, any offer or proposal relating to any transaction (other than the purchase and sale transaction contemplated by this Agreement) involving the sale of any shares or other securities of the Corporation, the sale of the Business, the sale or transfer of any of the Corporation properties, or any other business combination involving the Corporation. If an offer or proposal relating to a transaction contemplated in this Section 4.5 is made to the Corporation or any Vendor, the recipient will provide prompt notice of the offer or proposal to the Purchaser.
| 4.6 | Escrow |
Each Vendor understands and acknowledges that the Consideration Shares issuable under this Agreement will be subject to certain resale restrictions under applicable Canadian securities Laws and each Vendor agrees to comply with such restrictions. Each Vendor also acknowledges that the certificates or direct registrations statements for the Consideration Shares issuable under this Agreement will bear the following legends required under Canadian Securities Laws:
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [date that is four months plus one day after the issuance date].”
| 4.7 | Share Sale Restrictions |
Following the expiry of the legends in Section 4.6, if any Vendor individually, or all Vendors in the aggregate, wishes to sell their Consideration Shares, such sale shall be restricted to an amount equal to 2% of the daily trading volume for the day of such sale. If any Vendor wishes to sell more that such amount in a single day, the written consent of the Purchaser (which may be provided by email) shall be required.
| 18 |
| 4.8 | Designated Broker |
In order to facilitate compliance with Section 4.7, the Vendors shall designate a single stockbroker (the “Designated Broker”) where all Consideration Shares issued to all the Vendors shall be deposited. The Designated Broker shall be Rod Clark at Research Capital Corporation unless consent is provided by the Purchaser for a change in Designated Broker. All Consideration Shares shall be retained with such Designated Broker until they are sold or transferred as permitted by Section 4.7. The Vendors shall cause the Designated Broker to issue monthly account statements to the Purchaser that provide the details of the Consideration Shares held by the Vendors.
Article 5
Indemnification
| 5.1 | Indemnification by Vendor |
| (a) | If the transactions contemplated by this Agreement are completed, each Vendor shall, jointly and severally, indemnify and hold the Purchaser, and the Corporation harmless against and in respect of any Loss which the Purchaser, or the Corporation may suffer or be required to pay pursuant to any claim that may be made or asserted against or affect the Purchaser, or the Corporation, arising out of or in connection with any misrepresentation or breach of any warranty, agreement, covenant or obligation of a Vendor or the Corporation contained in this Agreement or in any certificate or other document required to be delivered to the Purchaser by a Vendor or the Corporation, or any reassessment for Tax (and all interest and/or penalties relating thereto) in respect of which Tax returns have been filed before the Closing Date which result in the payment of Tax in excess of the amount accrued or reserved in the Corporation’s financial statements. |
| (b) | The obligation of the Vendor to indemnify the Purchaser and the Corporation as set forth in this subsection shall be subject to the limitation periods referred to in subsection 3.5 with regard to the survival of representations and warranties. |
| 5.2 | Indemnification by Purchaser |
If the transactions contemplated by this Agreement are completed, the Purchaser agrees to indemnify and hold each Vendor harmless against and in respect of any Loss which a Vendor may incur, suffer or be required to pay pursuant to any claim that may be made or asserted against or affect a Vendor arising out of or in connection with any misrepresentation or breach of any warranty, agreement, covenant or obligation of the Purchaser contained in this Agreement or in any certificate, or other document required to be delivered to the Vendors by the Purchaser. The obligation of a Vendor to indemnify the Purchaser as set forth in this subsection shall be subject to the limitation periods referred to in subsection 3.5 with regard to the survival of representations and warranties.
| 19 |
| 5.3 | Claims by Third Parties |
Promptly upon receipt by the Purchaser, the Corporation or a Vendor (such recipient being referred to as the “Indemnitee”) of notice of any claim by a third party (the “Notice”) in respect of which the Indemnitee proposes to demand indemnification from one or more other Parties to this Agreement (the “Indemnitor”), the Indemnitee shall forthwith give notice to that effect to the Indemnitor. The Indemnitor shall have the right, exercisable by giving notice to the Indemnitee not later than 20 Business Days after receipt of the Notice, to assume the control of the defence or settlement of the claim provided that the Indemnitor shall first deliver to the Indemnitee its written consent to be joined as a Party to any action or proceeding relating to such claim and the Indemnitor shall, at the Indemnitee’s request, furnish the Indemnitee with reasonable security against any costs or other liabilities to which it may be or become exposed by reason of such defence or settlement. Upon the assumption of control by the Indemnitor, the Indemnitor shall, at its expense, diligently proceed with the defence or settlement of the claim at the Indemnitor’s sole expense. The Indemnitee shall cooperate fully (subject to reimbursement by the Indemnitor for any costs incurred) in assisting the Indemnitor to conduct such defence. The final determination of any such claim will be binding and conclusive upon the parties. Should the Indemnitor fail to give Notice to the Indemnitee, the Indemnitee shall be entitled to make such settlement of the claim as in its sole discretion may appear advisable and such settlement or any other final determination of the claim shall be binding upon the Indemnitor.
| 5.4 | Indemnification Sole Remedy |
The provisions of this Article 5 shall constitute the sole remedy of a Vendor, the Purchaser and the Corporation against any other Party to this Agreement with respect to any and all breaches of any agreement, covenant, representation or warranty made by such Party in this Agreement.
| 5.5 | Rules Relating to Indemnification Obligations |
The following will apply to the indemnification obligations under this Article 5.
| (a) | The waiver of any condition relating to any representation, warranty or covenant will not affect the right to indemnification under this Article 5 based on that representation, warranty or covenant. |
| (b) | Before an Indemnitor is required to indemnify an Indemnitee for any Loss under an indemnity claim, the Indemnitee must first make all commercially reasonable efforts to seek recovery for that Loss under any applicable insurance policies held by the Indemnitee. The amount of any Loss under an indemnity claim will be net of any amounts actually recovered by the Indemnitee under insurance policies with respect to that Loss. |
| (c) | No Indemnitee is entitled to double recovery for any indemnity claim even though the indemnity claim may have resulted from the breach or incorrectness of more than one of the representations, warranties, covenants and obligations of the Indemnitor under this Agreement. |
| (d) | Any payment made by a Vendor as an Indemnitor pursuant to this Article 5 will constitute a dollar-for-dollar decrease of the Purchase Price and any payment made by the Purchaser as an Indemnitor pursuant to this Article 5 will constitute a dollar-for-dollar increase of the Purchase Price. |
| 20 |
Article 6
Conditions
| 6.1 | Purchaser’s Conditions |
The obligations of the Purchaser to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, on or before the Closing Date, each of the following conditions precedent (each of which is inserted for the sole benefit of the Purchaser and may be waived by it in whole or in part):
| (a) | Each of the representations of the representations and warranties of each Vendor shall be true and correct in all material respects and the Purchaser shall have received a certificate from the Vendor confirming the truth and correctness in all material respects of the representations and warranties of each Vendor. |
| (b) | Each Vendor shall have performed or complied with, in all material respects, all of its obligations, covenants and agreements under this Agreement. |
| (c) | On or before Closing Date all documents required to be delivered by a Vendor shall have been delivered in form reasonably satisfactory to the Purchaser and its solicitor and the Vendor shall have taken all actions and corporate proceedings required by the terms of this Agreement. |
| (d) | Without limiting the generality of Section 6.1(c), the Purchaser shall have received, on or before Closing, duly executed copies of the following: |
| (i) | A resolution of the director(s) of the Corporation approving this Agreement and the transaction contemplated by it; |
| (ii) | a certificate of the Vendor confirming that all conditions under this Agreement in favour of the Purchaser have been either fulfilled or waived; |
| (iii) | a certificate of status of the Corporation; |
| (iv) | share certificates representing the Purchased Shares; |
| (v) | confirmation, in form and substance acceptable to the Purchaser, that the Corporation and Vendors have received all required consents, approvals, waiver and authorizations required to permit the Closing; |
| (vi) | the resignation of Nick Ierfino and Richard Bower as a director and officer of the Corporation, as applicable; |
| (vii) | all Books and Records of the Corporation. |
| 21 |
| 6.2 | Vendor’s Conditions |
The obligation of the Vendor to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, on or before the Closing Date, each of the following conditions precedent (each of which is inserted for the sole benefit of the Vendor and may be waived by it in whole or in part):
| (a) | Each of the representations and warranties of the Purchaser shall be true and correct in all material respects and the Vendor shall have received a certificate from the Purchaser confirming the truth and correctness in all material respects of such representations and warranties. |
| (b) | The Purchaser shall have performed or complied with, in all respects, all of its obligations, covenants and agreements under this Agreement. |
| (c) | On or before Closing Date all documents required to be delivered by the Purchaser shall have been delivered in form reasonably satisfactory to the Vendor and its solicitor and the Purchaser shall have taken all actions required by the terms of this Agreement. |
| (d) | The Purchaser shall have delivered to the Vendor the Purchase Price in the form of a direct registration statement registered in the name of each Vendor and representing such Vendor’s share of the Consideration Shares. |
| (e) | The Vendor shall have received, on or before Closing, duly executed original copies of the following: |
| (i) | a copy of the approval of the transfer given in writing by the non-selling Shareholder, as stipulated in section 4.1(a) of the Unanimous Shareholders Agreement (“USA”) dated December 7, 2017, and a warranty that all requirements under section 4.2 of the USA have been complied with; and |
| (ii) | a certificate of the Purchaser confirming that all conditions under this Agreement in favour of the Vendor have been either fulfilled or waived. |
| 6.3 | Failure to Satisfy Conditions |
If any condition set forth in Section 6.1 or Section 6.2 is not satisfied on or before the Outside Date, the Party or Parties (the “First Party”) entitled to the benefit of such condition may terminate this Agreement by written notice to the other Party or Parties and in such event the First Party shall be released from all obligations under this Agreement. Unless such First Party can show that the condition or conditions which have not been satisfied and for which the First Party has terminated this Agreement are reasonably capable of being performed or caused to be performed by the other party or parties, then the other party or parties shall also be released from all obligations under this Agreement. The First Party shall be entitled to waive compliance with any such conditions in whole or in part if it sees fit to do so without prejudice to any of his rights of termination in the event of non-performance of any other condition in whole or in part.
| 22 |
Article
7
Termination
| 7.1 | Termination |
This Agreement may be terminated at any time on or prior to the Closing Date:
| (a) | in accordance with Section 6.3; or |
| (b) | by written agreement of the Parties. |
For added certainty, this Agreement may not be terminated by the Purchaser in the event that it is unable to receive any required Consents or Authorizations.
| 7.2 | Effect of Termination |
| (a) | If this Agreement is terminated pursuant to Section 7.1(b) all obligations of the Parties pursuant to this Agreement will terminate without further liability of any Party to the other Party. |
| (b) | If the Agreement is terminated by the Vendor pursuant to Section 7.1(a) the Vendor shall be entitled to remain as a full shareholder of the Corporation. |
| 7.3 | Waiver of Conditions of Closing |
If any of the conditions set forth in Section 6.1 have not been satisfied, the Purchaser may elect in writing to waive the condition and proceed with the completion of the transactions contemplated by this Agreement and, if any of the conditions set forth in Section 6.2 have not been satisfied, the Vendor may elect in writing to waive the condition and proceed with the completion of the transactions contemplated by this Agreement. Any such waiver and election by the Purchaser or the Vendor, as the case may be, will only serve as a waiver of that specific closing condition and the Party which has not been able to satisfy the waived condition will have no liability with respect to that specifically waived condition.
Article
8
Closing of Sale and Purchase
| 8.1 | Delivery of Closing Documents |
On the Closing Date:
| (a) | the Vendor shall complete the sale and transfer and the Purchaser shall complete the purchase of the Purchased Shares for the Purchase Price, with such purchase and the transfer of the Purchased Shares being effective on the Closing Date; |
| (b) | the Vendor shall take such actions as are reasonably required for the completion of the sale and purchase of the Purchased Shares including passing the appropriate authorizing resolutions and the issuance of a share certificate to the Purchaser for the Purchased Shares; and |
| (c) | The Purchaser shall pay and satisfy the Purchase Price as provided in Section 2.2. |
| 23 |
Article 9
General
| 9.1 | Assignment |
Neither this Agreement nor any rights or obligations hereunder shall be assignable by any Party to this Agreement without the prior written consent of the other Parties. Subject thereto, this Agreement shall enure to the benefit of and be binding upon each Party and their respective heirs, executors, administrators and permitted assigns.
| 9.1 | Severability |
If any provision of this Agreement is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect, without amendment.
| 9.2 | Further Assurances |
Each Party to this Agreement agrees that the Party will do all such acts and execute all such further documents, conveyances, deeds, assignments, transfers and the like, and will cause the doing of all such acts and will cause the execution of all such further documents as are within its power as other Party hereto may in writing from time to time reasonably request be done or executed, in order to consummate the transactions contemplated hereby or as may be necessary or desirable to effect the purpose of this Agreement or any document, agreement or instrument delivered pursuant hereto and to carry out their provisions or to better or more properly or fully evidence or give effect to the transactions contemplated hereby, whether before or after the Closing.
| 9.3 | Entire Agreement |
This Agreement constitutes the entire agreement between the Parties pertaining to the sale and purchase of the Purchased Shares and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties and there are no warranties, representations or other agreements between the parties in connection with such sale and purchase except as specifically set forth in this Agreement or any amendment agreed to in writing by the parties. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by each of the Parties.
| 9.4 | Notice |
Any notice required or permitted to be given under this Agreement to any party shall be sufficiently given if delivered personally or if sent by prepaid registered mail to such party:
In the case of a notice to the Vendors: 21 Roysun Rd., Unit 17, Woodbridge, ON L4L 8R3
|
In the case of a notice to the Purchaser: 505 Consumers Rd., Unit 803, North York, ON M2J 4V8
|
In the case of a notice to the Corporation: 21 Roysun Rd., Unit 17, Woodbridge, ON L4L 8R3
|
or at such other address as the Party to whom such writing is to be given shall have last notified to the Party giving the same in the manner provided in this section. Any notice personally delivered to the party to whom it is addressed as provided in this section shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day such notice shall be deemed to have been given and received on the Business Day next following such day. Any notice mailed to the address and in the manner provided for in this Section shall be deemed to have been given and received on the fifth Business Day next following the date of its mailing.
| 24 |
| 9.5 | Applicable Law |
This Agreement shall be governed by and construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated, in all respects, as an Ontario contract. Each of the Parties irrevocably and unconditionally submits and attorns to the exclusive jurisdiction of the courts of the Province of Ontario to determine all issues, whether at Law or in equity, arising from this Agreement.
| 9.6 | Time |
Time shall be of the essence for all purposes of this Agreement.
| 9.7 | Amendment and Waiver |
No amendment, discharge, restatement, supplement, termination or waiver of this Agreement or any Section of this Agreement is binding unless it is in writing and executed by the Party to be bound. No waiver of, failure to exercise or delay in exercising, any Section of this Agreement constitutes a waiver of any other Section (whether or not similar) nor does any waiver constitute a continuing waiver unless otherwise expressly provided.
| 9.8 | Assignment |
This Agreement shall enure to the benefit of, and be binding on, the Parties and their respective successors and permitted assigns. None of the Corporation nor the Vendors may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its respective rights or obligations under this Agreement without the prior written consent of the Purchaser. The Purchaser may assign or transfer all or any part of its rights or obligations under this Agreement without the prior written consent of any other Party.
| 9.9 | Costs and Expenses |
Except as otherwise specified in this Agreement, and without limiting the indemnification provisions in Article 5, all costs and expenses (including the fees and disbursements of accountants, financial advisors, legal counsel and other professional advisers) incurred in connection with the negotiation and settlement of this Agreement, and the completion of the transactions contemplated by this Agreement, are to be paid by the Party incurring those costs and expenses.
| 9.10 | Third Party Beneficiaries |
This Agreement is for the sole benefit of the Parties, and except as specifically provided for in Article 8 nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
| 9.11 | Remedies Cumulative |
The rights, remedies, powers and privileges herein provided to a Party are cumulative and in addition to and not exclusive of or in substitution for any rights, remedies, powers and privileges otherwise available to that Party.
| 9.12 | Counterparts |
This Agreement may be executed by the Parties in separate counterparts, and each of which may be delivered by e-mail or other functionally equivalent electronic means of transmission, and each of which when so executed and delivered shall be an original, and all such counterparts shall together constitute one and the same instrument.
[Remainder of page intentionally left blank.]
| 25 |
IN WITNESS WHEREOF the Parties have executed this Share Purchase Agreement.
| N. FINE INVESTMENTS LTD. | ||
| By: | “Nick Ierfino” | |
Nick Ierfino President | ||
| I have authority to bind the corporation. | ||
| linden power inc. | ||
| By: | “Richard Bower” | |
Richard Bower CEO | ||
| I have authority to bind the corporation. | ||
| OFIT GM INC. | ||
| By: | “Richard Bower” | |
Richard Bower President & CEO | ||
| By: | “Nick Ierfino” | |
Nick Ierfino Secretary | ||
| We have authority to bind the corporation. |
| SOLARBANK CORPORATION | ||
| By: | “Richard Lu” | |
Richard Lu President & CEO | ||
| I have authority to bind the corporation. | ||
(Signature Page for Share Purchase Agreement)
| 26 |
Exhibit 99.81
Private & Confidential
| Dated | October 23, 2023 |
SOLARBANK CORPORATION
(as the “Purchaser”)
and
N. FINE INVESTMENTS LIMITED and LINDEN POWER INC.
(each a “Vendor” and together the “Vendors”)
and
OFIT RT INC.
(as the “Corporation”)
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT is made as of October 23, 2023,
BETWEEN:
SOLARBANK CORPORATION
a corporation formed under the laws of the Province of Ontario
(the “Purchaser”)
-and-
N. FINE INVESTMENTS LIMITED
a corporation formed under the laws of the Province of Ontario
(“N. Fine”)
-and-
LINDEN POWER INC.
a corporation formed under the laws of the Province of Ontario
(“Linden Power”)
(each of N. Fine and Linden Power may be referred to as a “Vendor” and together the “Vendors”);
-and-
OFIT RT INC.
a corporation formed under the laws of the Province of Ontario
(the “Corporation”).
RECITALS:
| (A) | N. Fine is the registered and beneficial owner of 499 issued and outstanding common shares in the capital of the Corporation (the “Fine Shares”) and Linden Power is the registered and beneficial owner of 499 issued and outstanding common shares in the capital of the Corporation (the “Linden Shares”) (together, the Fine Shares and the Linden Shares are referred to as the “Purchased Shares”). |
| (B) | N. Fine and Linden Power wish to sell the Purchased Shares and the Purchaser wishes to purchase such shares, on and subject to the terms and conditions set out in this Agreement. |
| (C) | The Corporation is entering into this Agreement to confirm its consent to the sale and purchase of the Purchased Shares. |
NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are acknowledged), the Parties agree as follows:
| 2 |
Article 1
Interpretation
| 1.1 | Definitions |
In this Agreement, in addition to the defined terms herein, the following words and expressions have the following meanings:
| (a) | Account Proceeds has the meaning given to such term in Section 2.2. |
| (b) | Affiliate means affiliates as defined in the Business Corporations Act (Ontario). |
| (c) | Acquisition Documents means this Agreement, the share transfer power in respect of the Purchased Shares, the Bring-down Certificate and officer’s certificate relating to the purchase of the Purchased Shares. |
| (d) | Agreement means this share purchase agreement and any exhibits attached to it or otherwise forming part of it, as the same may be amended, restated, replaced, supplemented or novated from time to time. |
| (e) | ASPE means the Canadian Accounting Standards for Private Enterprises, accounting principles generally accepted in Canada including those recommended or approved by the Charted Professional Accountants of Canada. |
| (f) | Assets means all property and assets of the Corporation of every nature and kind and wherever located including (a) any real property owned by the Corporation and the buildings, improvements and fixtures located thereon, (b) all machinery, equipment, furniture, accessories and supplies of all kinds, (c) all trucks, cars and other vehicles, (d) all inventories of the Corporation, (e) all accounts receivable of the Corporation of every nature and kind, whether current or not, (f) the leasehold interest of the Corporation in and to the Leased Properties and the buildings, improvements and fixtures located thereon, (g) all intellectual property rights of the Corporation, (h) all Authorizations issued to the Corporation, (i) the Leases and all other Contracts binding on or benefiting the Corporation, (j) the Books and Records, and (k) the Corporate Records. |
| (g) | Authorization means, with respect to any Person, any order, permit, approval, consent, waiver, licence or other authorization issued, granted, given or authorized by, or made applicable under the authority of, any Governmental Authority having jurisdiction over the Person. |
| (h) | Books and Records means all books of account, financial statements, tax records personnel records, historic documents relating to Employee Plans and Assets, sales and purchase records, cost and pricing information, customer and supplier lists and files, referral sources, research and development reports and records, production reports and records, equipment logs, operating guides and manuals, business reports, plans and projections and all other documents, files, correspondence and other information of the Corporation (whether in written, electronic or other form) other than the Corporate Records. |
| 3 |
| (i) | Bring-down Certificate means a certificate of each Vendor and the Purchaser deliverable on Closing, confirming that all of the representations and warranties of each Vendor and the Purchaser, as applicable, set out herein are true and complete as of the Closing Date. |
| (j) | Business Day means any day, other than a Saturday, Sunday or statutory or civic holiday in Toronto, Ontario. |
| (k) | Closing means the completion of the transaction of purchase and sale contemplated in this Agreement. |
| (l) | Closing Date means October 23, 2023, or such other earlier or later date as the Parties may agree in writing. |
| (m) | Consent means any consent, approval, waiver or other authorization required under a Contract. |
| (n) | Consideration Shares has the meaning given to such term in Section 2.2. |
| (o) | Contracts means all agreements, arrangements, understandings, commitments and undertakings (whether written, electronic or oral), to which a Person is a party or a beneficiary or pursuant to which any of its property or assets are or may be affected. |
| (p) | Corporate Records means the corporate records of the Corporation, including (a) all constating documents, articles and by-laws, (b) all minutes of meetings and resolutions of shareholders and directors, and (c) the share certificate books, securities register, register of transfers and register of directors. |
| (q) | Encumbrance means any and all claims, liens, security interests, mortgages, pledges, pre-emptive rights, charges, options, equity interests, encumbrances, proxies, voting agreements, voting trusts, leases, tenancies, easements or other interests of any nature or kind whatsoever, howsoever created. |
| (r) | Environment means the natural environment (including soil, land surface or subsurface strata, surface water, groundwater, sediment, ambient air (including all layers of the atmosphere), organic and inorganic matter and living organisms, including human health, and any other environmental medium or natural resource). |
| (s) | Environmental Laws means Laws aimed at or relating to, or imposing liability or standards of conduct for or relating to, development, operation, reclamation or restoration of properties; abatement of pollution; protection of the Environment; protection of wildlife, including endangered species; management, treatment, storage, disposal or control of, or exposure to, Hazardous Substances; releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or Hazardous Substances; and all other Laws relating to the manufacturing, processing, distribution, use, treatment, storage, disposal, handling or transport of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. |
| 4 |
| (t) | FIT Project means a project under the IESO’s Feed-in Tariff program owned or controlled by the Corporation, a list of which is found in Section 3.3(m). |
| (u) | FIT Rules means the rules of the IESO and any ancillary or related documents governing the FIT Projects including applicable FIT contracts and schedules relating to the FIT Projects owned by the Corporation. |
| (v) | Governmental Authority means any (a) multinational, federal, provincial, territorial, state, municipal, local or other governmental or public department, central bank, court, commission, board, arbitrator, tribunal, bureau or agency, domestic or foreign, (b) any subdivision or authority of any of the above, or (c) any quasi-governmental or private body exercising any regulatory, expropriation or tax authority under or for the account of any of the above, which shall include, but not be limited to, the IESO. |
| (w) | Hazardous Substances means any waste or other substance that is prohibited, listed, defined, designated or classified as dangerous, hazardous, radioactive, corrosive, explosive, infectious, carcinogenic, mutagenic or toxic or a pollutant or a contaminant under or pursuant to, or that could result in liability under, any applicable Environmental Laws including petroleum and all derivatives thereof or synthetic substitutes therefor, hydrogen sulphide, arsenic, cyanide, cadmium, lead, mercury, polychlorinated biphenyls (“PCBs”), PCB-containing equipment and material, mould, asbestos, asbestos-containing material, urea-formaldehyde, urea-formaldehyde- containing material and any other material or substance that may impair the Environment, the health of any individual, property or plant or animal life. |
| (x) | IESO means the Independent Electricity System Operator of Ontario and any successors or entities with which it is combined or amalgamated. |
| (y) | ITA means the Income Tax Act (Canada). |
| (z) | Laws means any and all (a) laws, constitutions, treaties, statutes, codes, ordinances, orders, decrees, rules, regulations and municipal by-laws, (b) judicial, arbitral, administrative, ministerial, departmental or regulatory judgments, orders, decisions, rulings or awards of any Governmental Authority, and (c) policies, guidelines and protocols. |
| (aa) | Leased Properties means the lands and premises leased by the Corporation. |
| (bb) | Leases means the leases entered into by the Corporation. |
| (cc) | Lien means (a) any mortgage, charge, pledge, hypothec, security interest, assignment, lien (statutory or otherwise), privilege, easement, servitude, pre-emptive right or right of first refusal, ownership or title retention agreement, restrictive covenant or conditional sale agreement, imperfections of title or encroachments relating to real property and (b) any other encumbrance of any nature or any arrangement or condition which, in substance, secures payment or performance of an obligation. |
| (dd) | Loss means any losses, damages, penalties, liabilities, costs, charges and expenses (including, without limitation, reasonable legal fees, accounting fees and expenses). |
| 5 |
| (ee) | Material Adverse Effect means an effect resulting from any change, event, occurrence or state of facts, either individually or in the aggregate, that: (i) is or would reasonably be expected to be, material and adverse to the business, condition (financial or otherwise), properties, assets (tangible or intangible), liabilities (whether absolute, accrued, conditional, contingent or otherwise), capitalization, operations, or results of operations of the Corporation; or (ii) would, or would reasonably be expected to, materially impair or delay the consummation of the transactions contemplated by this Agreement, except that: (A) any change, event, occurrence or state of facts relating to general economic conditions, or financial, credit, currency exchange, securities or commodities markets in general; or war, armed hostilities or acts of terrorism, will not result in a Material Adverse Effect unless it adversely affects the Corporation disproportionately, compared to other businesses of similar size operating in the same industry as the Corporation; and (B) any action taken (or not taken) by a Vendor, the Corporation that is required to be taken (or not taken) under this Agreement or that is consented to by the Purchaser in writing will not result in a Material Adverse Effect. |
| (ff) | Material Contract means a Contract to which the Corporation or a Subsidiary is a party or is bound that: involves or would result in the payment of money or money’s worth by or to the Corporation or a Subsidiary in an amount in excess of $20,000; has an unexpired term of more than one (1) year (including renewals); cannot be terminated by the Corporation without penalty upon less than 30 days’ notice; or the termination of which, or under which the loss of rights, would result in a Material Adverse Effect. |
| (gg) | Outside Date means December 31, 2023. |
| (hh) | Owned Properties means the lands and premises owned by the Corporation. |
| (ii) | Parties means the Vendor, the Purchaser, the Corporation and any other Person who may become a party to this Agreement. |
| (jj) | Permits means the authorizations, registrations, permits, certificates of approval, approvals, grants, licences, quotas, consents, commitments, rights or privileges issued or granted by any Governmental Authority to the Corporation. |
| (kk) | Person means a natural person, partnership, limited partnership, limited liability partnership, syndicate, sole proprietorship, corporation or company (with or without share capital), limited liability company, stock company, trust, unincorporated association, joint venture or other entity or Governmental Authority. |
| (ll) | Purchase Price has the meaning ascribed in Section 2.2. |
| (mm) | Tax or Taxes means any and all taxes, dues, duties, rates, imposts, fees, levies, other assessments, tariffs, charges or obligations of the same or similar nature, however denominated, imposed, assessed or collected by any Governmental Authority, including all income taxes, including any tax on or based on net income, gross income, income as specifically defined, earnings, gross receipts, capital gains, profits, business royalty or selected items of income, earnings or profits, and specifically including any federal, provincial, state, territorial, county, municipal, local or foreign taxes, state profit share taxes, windfall or excess profit taxes, capital taxes, royalty taxes, production taxes, payroll taxes, health taxes, employment taxes, withholding taxes, sales taxes, use taxes, goods and services taxes, custom duties, value added taxes, ad valoram taxes, excise taxes, alternative or add-on minimum taxes, franchise taxes, gross receipts taxes, licence taxes, occupation taxes, real and personal property taxes, stamp taxes, anti-dumping taxes, countervailing taxes, occupation taxes, environment taxes, transfer taxes, special COVID-19 tax relief (including, for greater certainty, any COVID-19 subsidy), and employment or unemployment insurance premiums, social insurance premiums and worker’s compensation premiums and pension (including Canada Pension Plan) payments, and other taxes, fees, imposts, assessments or charges of any kind whatsoever together with any interest, penalties, additional taxes, fines and other charges and additions that may become payable in respect thereof including any interest in respect of such interest, penalties and additional taxes, fines and other charges and additions, whether disputed or not, and any transferee or secondary liability in respect of any of the foregoing. |
| 6 |
| 1.2 | Gender and Number |
In this Agreement, unless the context requires, any reference to gender shall include both genders and words importing the singular number shall include the plural and vice-versa.
| 1.3 | Certain Phrases and Calculation of Time |
In this Agreement (i) the words “including” and “includes” mean “including (or includes) without limitation”; and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”. If the last day of any such period is not a Business Day, such period will end on the next Business Day.
| 1.4 | Headings, etc. |
The division of this Agreement into articles and sections and the insertion of headings are for convenient reference only and shall not affect the construction or interpretation of this Agreement.
| 1.5 | References to the Schedules and Exhibits |
Any Schedules and exhibits attached hereto form an integral part of this Agreement.
| 1.6 | Currency |
Unless otherwise indicated, all references to dollar amounts in this Agreement are expressed in in Canadian currency.
| 1.7 | Accounting Terms |
All accounting terms not defined in this Agreement are to be interpreted in accordance with ASPE.
| 1.8 | Statutory References |
Unless otherwise specifically indicated in this Agreement, any reference in this Agreement to any Law shall be construed as a reference to such Law as amended or re-enacted from time to time or as a reference to any successor thereto.
| 1.9 | No Presumption |
| (a) | The Parties and their counsel have participated jointly in the negotiation and drafting of this Agreement and each of the Acquisition Documents. If an ambiguity or a question of intent or interpretation arises, this Agreement and each of the Acquisition Documents are to be construed as if drafted jointly by the Parties. No presumption or burden of proof should arise in favour of any Party by virtue of the authorship of any provision of this Agreement or any of the Acquisition Documents. |
| (b) | All Parties confirm that they have sought their own legal advice regarding the compliance of this Agreement and the Acquisition Documents with any applicable Laws and the FIT Rules and that they are not relying on any other Party or its counsel regarding the compliance of this Agreement and the Acquisition Documents with any Laws or the FIT Rules. |
| 7 |
Article
2
Purchase and Sale
| 2.1 | Purchase and Sale |
Subject to the terms and conditions of this Agreement, the Vendors agree to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the Vendors, all of the Purchased Shares for the Purchase Price payable as set out in Section 2.2.
| 2.2 | Purchase Price |
The purchase price for the Purchased Shares is the sum of $485,255.00 (the “Purchase Price”), payable on the Closing Date through the issuance of 63,020 common shares of the Purchaser at a rate of $7.70 per share (the “Consideration Shares”). In addition to the Consideration Shares, the Purchaser shall pay the Vendors $200,246.88 in cash representing cash held by the Corporation in operating and reserve accounts (the “Account Proceeds”).
| 2.3 | Payment of Purchase Price |
| (a) | One hundred percent (100%) of the Purchase Price consisting of the Consideration Shares will be due and payable on the Closing Date as follows and shall be issued subject to Section 4.8 and shall be subject to restrictions in Section 4.7: |
| i. | 42,013 Consideration Shares issued to Fine; and |
| ii. | 21,007 Consideration Shares issued to Linden. |
Unless permitted under securities legislation, each of Fine and Linden acknowledge and agree that it shall not trade the Consideration Shares prior to the date that is four (4) months plus one day following issuance of the Consideration Shares. For certainty, such date is February 24, 2024.
| (b) | One hundred percent (100%) of the Account Proceeds shall be payable on the Closing Date, as follows: |
| i. | $133,497.92 payable to Fine; and |
| ii. | $66,748.96 payable to Linden. |
| 8 |
Article
3
Representations and Warranties
| 3.1 | Representations and Warranties of N. Fine |
N. Fine represents and warrants as follows and acknowledges that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | N. Fine is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No bankruptcy, insolvency or receivership proceedings have been instituted or are pending against N. Fine and N. Fine is able to satisfy its liabilities as they become due. |
| (c) | N. Fine has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | This Agreement constitutes a valid and binding obligation of N. Fine enforceable against it in accordance with its terms provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization and other similar laws generally affecting enforceability of creditors’ rights and that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. |
| (e) | The sale and transfer of the Fine Shares to the Purchaser will not result in a breach of any agreement or other right binding upon N. Fine. |
| (f) | N. Fine is the legal and beneficial owner of the Fine Shares and on the Closing Date the Purchaser shall acquire good and marketable title to the Fine Shares, free and clear of all Liens and claims of other persons. The Fine Shares are not subject to any options or rights of any person other than the Purchaser to acquire them and there are no restrictions on the transfer of the Fine Shares except those set forth in the Corporation’s Articles of Incorporation and in the Unanimous Shareholders Agreement. |
| (g) | N. Fine is not a party to, bound or affected by or subject to any mortgage, lease, agreement, legislation, court order or judgment or arbitration award which would be violated, contravened, breached by or under which any default would occur as a result of the execution and delivery of this Agreement or the consummation of any of the transactions contemplated under this Agreement. |
| (h) | N. Fine is not a non-resident of Canada within the meaning of the Income Tax Act (Canada). |
| (i) | There is no suit, action or proceeding in progress, pending or threatened against, involving or affecting the Fine Shares. |
| (j) | No Person acting on behalf of the Fine Shares is or will be entitled to any brokerage fee, commission, finder’s fee or financial advisory fee from any party in connection with the sale of the Fine Shares to the Purchaser. |
| (k) | None of the foregoing representations and warranties contains any untrue statement of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 9 |
| 3.2 | Representations and Warranties of Linden Power |
Linden represents and warrants as follows and acknowledges that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | Linden is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No bankruptcy, insolvency or receivership proceedings have been instituted or are pending against Linden and Linden is able to satisfy its liabilities as they become due. |
| (c) | Linden has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | This Agreement constitutes a valid and binding obligation of Linden enforceable against it in accordance with its terms provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization and other similar laws generally affecting enforceability of creditors’ rights and that equitable remedies such as specific performance and injunction are in the discretion of the court from which they are sought. |
| (e) | The sale and transfer of the Linden Shares to the Purchaser will not result in a breach of any agreement or other right binding upon Linden. |
| (f) | Linden is the legal and beneficial owner of the Linden Shares and on the Closing Date the Purchaser shall acquire good and marketable title to the Linden Shares, free and clear of all Liens and claims of other persons. The Fine Shares are not subject to any options or rights of any person other than the Purchaser to acquire them and there are no restrictions on the transfer of the Fine Shares except those set forth in the Corporation’s Articles of Incorporation and in the Unanimous Shareholders Agreement. |
| (g) | Linden is not a party to, bound or affected by or subject to any mortgage, lease, agreement, legislation, court order or judgment or arbitration award which would be violated, contravened, breached by or under which any default would occur as a result of the execution and delivery of this Agreement or the consummation of any of the transactions contemplated under this Agreement. |
| (h) | Linden is not a non-resident of Canada within the meaning of the Income Tax Act (Canada). |
| (i) | There is no suit, action or proceeding in progress, pending or threatened against, involving or affecting the Linden Shares. |
| 10 |
| (j) | No Person acting on behalf of the Linden Shares is or will be entitled to any brokerage fee, commission, finder’s fee or financial advisory fee from any party in connection with the sale of the Linden Shares to the Purchaser. |
| (k) | None of the foregoing representations and warranties contains any untrue statements of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 3.3 | Representations and Warranties of the Corporation |
Each Vendor, on its own behalf, jointly and severally, represents and warrants to the Purchaser as follows, and acknowledges and confirms that the Purchaser is relying upon the representations and warranties in entering into this Agreement and purchasing the Purchased Shares from the Vendors:
| (a) | The Corporation is a corporation duly incorporated, organized and validly existing under the laws of the Province of Ontario. |
| (b) | No act or proceeding has been taken by or against the Corporation or any of its Subsidiaries in connection with the dissolution, liquidation, winding up, bankruptcy, reorganization, compromise or arrangement of the Corporation or for the appointment of a trustee, receiver, manager or other administrator of the Corporation s or any of its properties or assets nor, to the knowledge of the Corporation, is any such act or proceeding threatened. The Corporation has not sought protection under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or similar legislation. None of the Corporation nor any of its properties or assets is subject to any outstanding judgment, order, writ, injunction or decree that involves or may involve, or restricts or may restrict, the right or ability of the Corporation to conduct its business as it has been carried on prior to the date hereof, or that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or would reasonably be expected to prevent or significantly impede or materially delay the Closing. |
| (c) | The Corporation has all necessary corporate power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and the execution and delivery of this Agreement and the consummation of the transaction contemplated in this Agreement have been duly authorized by all necessary corporate action. |
| (d) | The sale and transfer of the Purchased Shares from the Vendor to the Purchaser will not result in a breach of any agreement or other right binding upon the Corporation. |
| (e) | The Books and Records of the Corporation fairly and correctly set out and disclose in all material respects, in accordance with generally accepted accounting principles, the financial position of the Corporation as at the date of this Agreement and all material financial transactions of the Corporation relating to the business of the Corporation have been accurately recorded in such Books and Records. |
| 11 |
| (f) | The Corporation has filed all Tax returns, reports and other Tax filings required to be filed on or before the applicable filing deadline with the appropriate Governmental Authorities, and has paid, deducted, withheld or collected and remitted on a timely basis all material amounts to be paid, deducted, withheld or collected and remitted with respect to any Taxes, interest and penalties as required under all applicable Tax Laws. There are no Tax deficiencies that have been claimed, proposed, or asserted in writing against the Corporation hat have not been fully paid or finally settled, and there are no assessments, reassessments, actions, suits or proceedings in progress, pending or threatened, against the Corporation, and no waivers have been granted by the Corporation, in connection with any Taxes, interest or penalties. The terms and conditions made or imposed in respect of every material transaction (or series of transactions) between the Corporation and any Person that is (or was at the relevant time) not dealing at arm’s length with the Corporation for purposes of the ITA, do not differ from those that would have been made between persons dealing at arm’s length for purposes of the ITA. |
| (g) | The Corporation has not carried on any business other than the development of solar projects (the “Business”). |
| (h) | Any resolution or consent of the directors or shareholders of the Corporation required to authorize or approve the transfer of the Purchased Shares to the Purchaser has been obtained. |
| (i) | The Corporation has no receivables other than amounts as disclosed in the Financial Statements as of December 31, 2022. |
| (j) | The Corporate Records of the Corporation are complete and accurate and all corporate proceedings and actions reflected therein have been conducted or taken in compliance with all applicable Laws and with the articles and by-laws of the Corporation. |
| (k) | The financial statements have or will be prepared in accordance with ASPE and are or will be complete and accurate. The final Financial Statements present fairly: the assets, liabilities (whether accrued, absolute, contingent or otherwise) and financial condition of the Corporation as at the respective dates of the financial statements; and the sales, earnings and results of the operations of the Corporation during the periods covered by the financial statements. |
| (l) | There are no agreements, options or other rights that exist pursuant to which any third party (other than Panasonic Eco-Solutions) has or had the right to provide any service, work, equipment or good to the Corporation in respect of the Corporation’s FIT Projects, including, without limitation, the right to receive compensation in respect of or relating to the Projects. The FIT Projects listed below are all of the solar photovoltaic projects of the Corporation. The FIT Projects are located at: |
| ● | 33 Nixon Rd.: FIT Contract #F-006088-SPV-310-528 | |
| ● | 66 Bullock Dr.: FIT Contract #F-006091-SPV-310-527 |
| (m) | The Corporation’s bank account has a balance of at least $200,246.88. The Company has not granted or agreed to grant any Encumbrance whatsoever on the funds in the Company’s bank account to any third party. |
| 12 |
| (n) | The Corporation has no outstanding indebtedness, liability or obligation (including liabilities or obligations to fund any operations or work or exploration program, to give any guarantees or for Taxes due), whether accrued, absolute, contingent or otherwise, and are not party to or bound by any suretyship, guarantee, indemnification or assumption agreement, or endorsement of, or any other similar commitment with respect to the obligations, liabilities or indebtedness of any Person, other than those incurred in the ordinary course of business and FIT Project financing having loan no. 210886000 with PNC Equipment Financing |
| (o) | The Corporation is not a party to, or bound or affected by, any agreement, commitment or document containing any covenant expressly limiting its ability to compete in any line of business, or limiting its ability to transfer or move any of its assets or operations, or any covenant which could reasonably be expected to have a Material Adverse Effect. |
| (p) | None of the execution and delivery of this Agreement by the Corporation or the performance of the Corporation’s obligations under this Agreement, will (except as disclosed in the Disclosure Letter): |
| a. | result in or constitute a breach of any term or provision of, or constitute a default under, its articles, charters or by-laws or other comparable organizational documents; any Permit to which the Corporation is a party or to which it, or any of its properties or assets, may be subject or by which it is bound; or any Laws, regulation, order, judgment or decree applicable to the Corporation or any of its properties or assets; |
| b. | result in or constitute a breach of any term or provision of, or constitute a default under, any agreement or other commitment to which the Corporation is a party or which affects the Purchased Shares; |
| c. | give rise to any rights of first refusal or trigger any change in control provisions, rights of first offer or first refusal or any similar provisions or any restrictions or limitation under any note, bond, mortgage, indenture, Material Contract, license, franchise or Permit; |
| d. | constitute an event that would permit any party to any Material Contract to amend, cancel, terminate or sue for damages with respect to that Material Contract, or to accelerate the maturity of any indebtedness of the Corporation, or other obligation of the Corporation o under that Material Contract; |
| e. | give rise to any termination or acceleration of indebtedness, or cause any third party indebtedness to come due before its stated maturity or cause any available credit to cease to be available; |
| f. | result in the imposition of any Encumbrance upon any of the property or assets of the Corporation, or restrict, hinder, impair or limit the ability of the Corporation to conduct the Business; |
| g. | result in the creation or imposition of any Encumbrance on the Purchased Shares; |
| 13 |
| h. | result in any material payment (including retention, severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of the Corporation or a Subsidiary, or increase any benefit payable to such director, officer or employee by the Corporation or a Subsidiary, or result in the acceleration of the time of payment or vesting of any such benefits. |
| i. | contravene any applicable Law; or |
| j. | contravene any judgment, order, writ, injunction or decree of any Governmental Authority. |
| (q) | The Corporation does not have any subsidiaries. |
| (r) | The authorized share structure of the Corporation consists of (i) an unlimited number of common shares, of which 1,000 common shares are issued and outstanding as fully paid and non-assessable shares; (ii) an unlimited number of special shares, of which 1,002 special shares are issued and outstanding as fully paid and non-assessable shares; (iii) an unlimited number of class A preference shares, of which nil class A preference shares are issued and outstanding; and (iv) an unlimited number of class B preference shares, of which nil class B preference shares are issued and outstanding.. There are no outstanding bonds, debentures or other evidences of indebtedness of the Corporation having the right to vote with the holders of the outstanding shares of the Corporation on any matters. |
| (s) | No Person has any written or oral agreement or option or any right or privilege (whether by Law, pre-emptive, contractual or otherwise) capable of becoming an agreement or option, including securities, warrants or convertible obligations of any kind, for the purchase of any securities of the Corporation; or the purchase of any of the assets of the Corporation. |
| (t) | The Corporation owns, possesses and has good and marketable title to all of its undertakings, property and assets (whether owned or leased), including all the undertakings, property and assets reflected in the most recent balance sheet included in the Financial Statements, free and clear of all Encumbrances. Subject to the foregoing qualifications, the undertakings, property and assets of the Corporation, comprise all of the undertakings, property and assets necessary for the Corporation to carry on the Business as it is currently operated. All facilities, equipment, fixtures, vehicles and other tangible assets owned, leased or used by the Corporation are in good operating condition and repair, ordinary wear and tear excepted, and are reasonably fit and usable for the purposes for which they are being used. |
| (u) | The Corporation is not in default or breach of any Material Contract, and there exists no state of facts which, after notice or lapse of time or both, would constitute a default or breach under any Material Contract. No counterparty to any Material Contract is in default of any of its obligations under any Material Contract, the Corporation is entitled to all its benefits under each Material Contract, and neither the Corporation has not received any notice of termination of any Material Contract. |
| 14 |
| (v) | The business of the Corporation and Subsidiaries has been and is currently being conducted in compliance in all material respects with applicable Laws and neither the Corporation nor its Subsidiaries have received any notice of any alleged violation of any such Laws. The Corporation does not have any knowledge of any pending changes in any Law that would reasonably be expected to materially impact the business, operations, financial condition or prospects of the Corporation or any of its subsidiaries. Without limiting the generality of the foregoing, all issued and outstanding Purchased Shares have been issued in compliance with all applicable securities Laws. |
| (w) | All Permits material to the Business have been provided to the Purchaser. Those Permits are the only authorizations, registrations, permits, approvals, grants, licences, quotas, consents, commitments, rights or privileges required to enable the Corporation to carry on the Business as currently conducted and to enable the Corporation to own, lease and operate its assets in all material respects. All such Permits are valid, subsisting, in full force and effect and unamended, and the Corporation is not in default or breach of any Permit; no proceeding is pending or threatened to revoke or limit any Permit, and the completion of the transactions contemplated by this Agreement will not result in the revocation of any Permit or the breach of any term, provision, condition or limitation affecting the ongoing validity of any Permit. |
| (x) | The Corporation is not a party to any written or oral employment, service, pension, deferred profit sharing, benefit, bonus or other similar agreement or arrangement. |
| (y) | The insurance policies maintained by the Corporation insure all the property and assets of the Corporation against loss or damage by all insurable hazards of risk on a replacement cost basis, and provide the Corporation with product liability, professional liability, and errors and omissions coverage in amounts that are customary, and that would reasonably be considered adequate and prudent, for a company carrying on a business similar to the Business. All insurance policies are in full force and effect and the Corporation is not in default, whether as to the payment of premiums or otherwise, under any material term or condition of any of the insurance policies listed herein; and has not failed to give notice or present any claim under any of the insurance policies listed herein in a due and timely fashion. |
| (z) | There are no actions, suits, grievances or proceedings, whether judicial, arbitral or administrative, and whether or not purportedly on behalf of or against the Corporation, pending, commenced, or threatened. There is no outstanding judgment, decree, order, ruling or injunction in favour of, against or otherwise involving the Corporation or relating in any way to the transactions contemplated by this Agreement. |
| 15 |
| (aa) | The Corporation has carried on and are currently carrying on its operations in compliance with all applicable Environmental Laws and the Corporation properties and assets comply with all applicable Environmental Laws, in each case in all material respects. The Corporation has obtained from the relevant Governmental Authorities, and are in material compliance with, any Environmental Approvals required to conduct their previous and current businesses and such Environmental Approvals remain valid and in good standing on the date hereof. The Corporation is not subject to any contingent or other liability relating to (A) the restoration or rehabilitation of land, water or any other part of the environment, (B) closure, reclamation, remediation or other post operational requirements, or (C) non-compliance with Environmental Laws for the period the Corporation held the Corporation properties, and knows of no such contingent or other liability for a period prior to such ownership. The Corporation properties have not been used to generate, manufacture, refine, treat, recycle, transport, store, handle, dispose of, discharge, release, transfer, produce or process Hazardous Substances, except in material compliance with all Environmental Laws for the period the Corporation held the Corporation properties, and knows of no such contingent or other liability for a period prior to such ownership. The Corporation has not caused or permitted the Release of any Hazardous Substances at, in, on, under or from any Corporation properties, except in material compliance with all Environmental Laws. All Hazardous Substances handled, recycled, disposed of, discharged, released, treated or stored on or off site of the Corporation properties by the Corporation have been handled, recycled, disposed of, discharged, released, treated and stored in material compliance with all Environmental Laws. There are no Hazardous Substances at, in, on, under or migrating from any Corporation properties, except in material compliance with all Environmental Laws. The Corporation has not received from any person or Governmental Authority any notice, formal or informal, of any proceeding, action or other claim, liability or potential liability arising under any Environmental Law that is pending as of the date of this Agreement. There are no facts or circumstances that reasonably could be expected to give rise to any such notice, action or other claim, liability or potential liability. |
| (bb) | The Corporation and the Vendors have not retained any financial advisor, broker, agent, or finder, or entered into any agreement entitling any Person to any broker’s commission, finder’s fee, or similar payment, relating to this Agreement or the transactions contemplated by this Agreement. |
| (cc) | None of the foregoing representations and warranties contains any untrue statement of material fact or omits to state any material fact necessary to make any such representation and warranty not misleading to the Purchaser. |
| 3.4 | Representations and Warranties of the Purchaser |
The Purchaser represents and warrants as follows to the Vendor and acknowledges and confirms that the Vendors are each relying on the representations and warranties in entering into this Agreement and selling the Purchased Shares to the Purchaser:
| (a) | The Purchaser is a corporation incorporated, organized and existing under the laws of the Province of Ontario and has the corporate power and authority to enter into and perform its obligations under this Agreement. |
| 16 |
| (b) | The execution, delivery and performance by the Purchaser of each of the obligations set out herein have been duly authorized by all necessary corporate action on the part of the Purchaser. |
| (c) | The Purchaser is not a “non-Canadian” within the meaning of the Investment Canada Act. |
| 3.5 | Survival of Representations and Warranties |
All representations, warranties, covenants and agreements contained in this Agreement on the part of each of the parties shall survive the Closing for a period of two years following Closing, except for the Vendor’s representations and warranties relating to Tax matters which shall survive for the period of time during which the Taxes to which such representations and warranties relate may be reassessed by the relevant taxation authority, unless a Vendor has been fraudulent in filing a return or supplying information to any taxation authority, in which case the survival of those representations and warranties relating to tax matters shall be unlimited. If no claim is made against a party prior to the expiry of the relevant period specified above with respect to any incorrectness in or breach of any representation or warranty made by such Party, such Party shall have no further liability under this Agreement with respect to such representation and warranty.
Article
4
Covenants of the Parties
| 4.1 | Conduct of Business Prior to Closing |
During the period from the date of this Agreement to the Closing Date, each Vendor shall do or cause the Corporation to do the following:
| (a) | The Corporation shall conduct the business in the ordinary course and shall not, without the prior written consent of the Purchaser, enter into any transaction which, if entered into before the date of this Agreement would cause any representations or warranties of the Vendors contained in this Agreement to be incorrect or constitute a breach of any covenant or agreement or the Vendor contained in this Agreement. Each Vendor shall use its best efforts to preserve intact the Corporation and the business and the relationships existing with the customers or suppliers of the Corporation. |
| (b) | The Corporation shall not, without the prior written consent of the Purchaser, (i) enter into, modify or terminate any Material Contract; (ii) amend the terms of any securities of the Corporation; or (iii) reorganize, amalgamate, or merge the Corporation with any other person. |
| (c) | The Corporation shall not take any action which would result in any Material Adverse Change in the Corporation or the business or sell, transfer or dispose of any of the assets of the Corporation other than in the ordinary course of business. |
| (d) | The Corporation shall comply with all applicable Laws, regulations, by-laws and other governmental requirements. |
| (e) | The Corporation shall not take any actions which may result in the Corporation incurring a liability. |
| 17 |
| 4.2 | Delivery of Books and Records |
At the time of Closing, the Vendor and the Corporation shall deliver to the Purchaser all Books and Records of the Corporation, and all relevant details, contracts, corporate, financial and tax records and files relating to the assets of the Corporation. The Purchaser agrees that it will preserve the documents, Books and Records so delivered to them for a period of six years from the Closing Date or for such other period as is required by any applicable law, and will permit the Vendor or its authorized representatives reasonable access to those Books and Records in connection with the affairs of the Vendor.
| 4.3 | Consents Required in Contracts |
The Purchaser shall have full responsibility to obtain, prior to the Closing Date, any consent, approval, waiver or other authorization required from the IESO. The Vendor shall cooperate in obtaining any consents required under any contract as a result of the sale of the Purchased Shares.
| 4.4 | Transfer of the Purchased Shares |
The Vendors shall take all necessary steps and corporate proceedings to permit good title to the Purchased Shares to be duly and validly transferred and assigned to the Purchaser on the Closing Date, free of all Liens.
| 4.5 | Exclusivity |
From the date of this Agreement until the earlier of the Closing and the date of termination of this Agreement, none of the Vendors or the Corporation will: (i) solicit, initiate, knowingly facilitate or encourage, or accept; (ii) enter into any agreement, arrangement or understanding; or (iii) participate in any discussions, conversations, negotiations or other communications regarding, any offer or proposal relating to any transaction (other than the purchase and sale transaction contemplated by this Agreement) involving the sale of any shares or other securities of the Corporation, the sale of the Business, the sale or transfer of any of the Corporation properties, or any other business combination involving the Corporation. If an offer or proposal relating to a transaction contemplated in this Section 4.5 is made to the Corporation or any Vendor, the recipient will provide prompt notice of the offer or proposal to the Purchaser.
| 4.6 | Escrow |
Each Vendor understands and acknowledges that the Consideration Shares issuable under this Agreement will be subject to certain resale restrictions under applicable Canadian securities Laws and each Vendor agrees to comply with such restrictions. Each Vendor also acknowledges that the certificates or direct registrations statements for the Consideration Shares issuable under this Agreement will bear the following legends required under Canadian Securities Laws:
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [date that is four months plus one day after the issuance date].”
| 4.7 | Share Sale Restrictions |
Following the expiry of the legends in Section 4.6, if any Vendor individually, or all Vendors in the aggregate, wishes to sell their Consideration Shares, such sale shall be restricted to an amount equal to 2% of the daily trading volume for the day of such sale. If any Vendor wishes to sell more that such amount in a single calendar day, the written consent of the Purchaser (which may be provided by email) shall be required.
| 18 |
| 4.8 | Designated Broker |
In order to facilitate compliance with Section 4.7, the Vendors shall designate a single stockbroker (the “Designated Broker”) where all Consideration Shares issued to all the Vendors shall be deposited. The Designated Broker shall be Rod Clark at Research Capital Corporation unless consent is provided by the Purchaser for a change in Designated Broker. All Consideration Shares shall be retained with such Designated Broker until they are sold or transferred as permitted by Section 4.7. The Vendors shall cause the Designated Broker to issue monthly account statements to the Purchaser that provide the details of the Consideration Shares held by the Vendors.
Article 5
Indemnification
| 5.1 | Indemnification by Vendor |
| (a) | If the transactions contemplated by this Agreement are completed, each Vendor shall, jointly and severally, indemnify and hold the Purchaser, and the Corporation harmless against and in respect of any Loss which the Purchaser, or the Corporation may suffer or be required to pay pursuant to any claim that may be made or asserted against or affect the Purchaser, or the Corporation, arising out of or in connection with any misrepresentation or breach of any warranty, agreement, covenant or obligation of a Vendor or the Corporation contained in this Agreement or in any certificate or other document required to be delivered to the Purchaser by a Vendor or the Corporation, or any reassessment for Tax (and all interest and/or penalties relating thereto) in respect of which Tax returns have been filed before the Closing Date which result in the payment of Tax in excess of the amount accrued or reserved in the Corporation’s financial statements. |
| (b) | The obligation of the Vendor to indemnify the Purchaser and the Corporation as set forth in this subsection shall be subject to the limitation periods referred to in subsection 3.5 with regard to the survival of representations and warranties. |
| 5.2 | Indemnification by Purchaser |
If the transactions contemplated by this Agreement are completed, the Purchaser agrees to indemnify and hold each Vendor harmless against and in respect of any Loss which a Vendor may incur, suffer or be required to pay pursuant to any claim that may be made or asserted against or affect a Vendor arising out of or in connection with any misrepresentation or breach of any warranty, agreement, covenant or obligation of the Purchaser contained in this Agreement or in any certificate, or other document required to be delivered to the Vendors by the Purchaser. The obligation of a Vendor to indemnify the Purchaser as set forth in this subsection shall be subject to the limitation periods referred to in subsection 3.5 with regard to the survival of representations and warranties.
| 19 |
| 5.3 | Claims by Third Parties |
Promptly upon receipt by the Purchaser, the Corporation or a Vendor (such recipient being referred to as the “Indemnitee”) of notice of any claim by a third party (the “Notice”) in respect of which the Indemnitee proposes to demand indemnification from one or more other Parties to this Agreement (the “Indemnitor”), the Indemnitee shall forthwith give notice to that effect to the Indemnitor. The Indemnitor shall have the right, exercisable by giving notice to the Indemnitee not later than 20 Business Days after receipt of the Notice, to assume the control of the defence or settlement of the claim provided that the Indemnitor shall first deliver to the Indemnitee its written consent to be joined as a Party to any action or proceeding relating to such claim and the Indemnitor shall, at the Indemnitee’s request, furnish the Indemnitee with reasonable security against any costs or other liabilities to which it may be or become exposed by reason of such defence or settlement. Upon the assumption of control by the Indemnitor, the Indemnitor shall, at its expense, diligently proceed with the defence or settlement of the claim at the Indemnitor’s sole expense. The Indemnitee shall cooperate fully (subject to reimbursement by the Indemnitor for any costs incurred) in assisting the Indemnitor to conduct such defence. The final determination of any such claim will be binding and conclusive upon the parties. Should the Indemnitor fail to give Notice to the Indemnitee, the Indemnitee shall be entitled to make such settlement of the claim as in its sole discretion may appear advisable and such settlement or any other final determination of the claim shall be binding upon the Indemnitor.
| 5.4 | Indemnification Sole Remedy |
The provisions of this Article 5 shall constitute the sole remedy of a Vendor, the Purchaser and the Corporation against any other Party to this Agreement with respect to any and all breaches of any agreement, covenant, representation or warranty made by such Party in this Agreement.
| 5.5 | Rules Relating to Indemnification Obligations |
The following will apply to the indemnification obligations under this Article 5.
| (a) | The waiver of any condition relating to any representation, warranty or covenant will not affect the right to indemnification under this Article 5 based on that representation, warranty or covenant. |
| (b) | Before an Indemnitor is required to indemnify an Indemnitee for any Loss under an indemnity claim, the Indemnitee must first make all commercially reasonable efforts to seek recovery for that Loss under any applicable insurance policies held by the Indemnitee. The amount of any Loss under an indemnity claim will be net of any amounts actually recovered by the Indemnitee under insurance policies with respect to that Loss. |
| (c) | No Indemnitee is entitled to double recovery for any indemnity claim even though the indemnity claim may have resulted from the breach or incorrectness of more than one of the representations, warranties, covenants and obligations of the Indemnitor under this Agreement. |
| (d) | Any payment made by a Vendor as an Indemnitor pursuant to this Article 5 will constitute a dollar-for-dollar decrease of the Purchase Price and any payment made by the Purchaser as an Indemnitor pursuant to this Article 5 will constitute a dollar-for-dollar increase of the Purchase Price. |
| 20 |
Article 6
Conditions
| 6.1 | Purchaser’s Conditions |
The obligations of the Purchaser to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, on or before the Closing Date, each of the following conditions precedent (each of which is inserted for the sole benefit of the Purchaser and may be waived by it in whole or in part):
| (a) | Each of the representations of the representations and warranties of each Vendor shall be true and correct in all material respects and the Purchaser shall have received a certificate from the Vendor confirming the truth and correctness in all material respects of the representations and warranties of each Vendor. |
| (b) | Each Vendor shall have performed or complied with, in all material respects, all of its obligations, covenants and agreements under this Agreement. |
| (c) | On or before Closing Date all documents required to be delivered by a Vendor shall have been delivered in form reasonably satisfactory to the Purchaser and its solicitor and the Vendor shall have taken all actions and corporate proceedings required by the terms of this Agreement. |
| (d) | Without limiting the generality of Section 6.1(c), the Purchaser shall have received, on or before Closing, duly executed copies of the following: |
| (i) | A resolution of the director(s) of the Corporation approving this Agreement and the transaction contemplated by it; |
| (ii) | a certificate of the Vendor confirming that all conditions under this Agreement in favour of the Purchaser have been either fulfilled or waived; |
| (iii) | a certificate of status of the Corporation; |
| (iv) | share certificates representing the Purchased Shares; |
| (v) | confirmation, in form and substance acceptable to the Purchaser, that the Corporation and Vendors have received all required consents, approvals, waiver and authorizations required to permit the Closing; |
| (vi) | the resignation of Nick Ierfino and Richard Bower as a director and officer of the Corporation, as applicable; |
| (vii) | all Books and Records of the Corporation. |
| 21 |
| 6.2 | Vendor’s Conditions |
The obligation of the Vendor to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, on or before the Closing Date, each of the following conditions precedent (each of which is inserted for the sole benefit of the Vendor and may be waived by it in whole or in part):
| (a) | Each of the representations and warranties of the Purchaser shall be true and correct in all material respect and the Vendor shall have received a certificate from the Purchaser confirming the truth and correctness in all material respects of such representations and warranties. |
| (b) | The Purchaser shall have performed or complied with, in all respects, all of its obligations, covenants and agreements under this Agreement. |
| (c) | On or before Closing Date all documents required to be delivered by the Purchaser shall have been delivered in form reasonably satisfactory to the Vendor and its solicitor and the Purchaser shall have taken all actions required by the terms of this Agreement. |
| (d) | The Purchaser shall have delivered to the Vendor the Purchase Price in the form of a direct registration statement registered in the name of each Vendor and representing such Vendor’s share of the Consideration Shares. |
| (e) | The Vendor shall have received, on or before Closing, duly executed original copies of the following: |
| (i) | a copy of the approval of the transfer given in writing by the non-selling Shareholder, as stipulated in section 4.1(a) of the Unanimous Shareholders Agreement (“USA”) dated December 7, 2017, and a warranty that all requirements under section 4.2 of the USA have been complied with; and |
| (ii) | a certificate of the Purchaser confirming that all conditions under this Agreement in favour of the Vendor have been either fulfilled or waived. |
| 6.3 | Failure to Satisfy Conditions |
If any condition set forth in Section 6.1 or Section 6.2 is not satisfied on or before the Outside Date, the Party or Parties (the “First Party”) entitled to the benefit of such condition may terminate this Agreement by written notice to the other Party or Parties and in such event the First Party shall be released from all obligations under this Agreement. Unless such First Party can show that the condition or conditions which have not been satisfied and for which the First Party has terminated this Agreement are reasonably capable of being performed or caused to be performed by the other party or parties, then the other party or parties shall also be released from all obligations under this Agreement. The First Party shall be entitled to waive compliance with any such conditions in whole or in part if it sees fit to do so without prejudice to any of his rights of termination in the event of non-performance of any other condition in whole or in part.]
| 22 |
Article
7
Termination
| 7.1 | Termination |
This Agreement may be terminated at any time on or prior to the Closing Date:
| (a) | in accordance with Section 6.3; or |
| (b) | by written agreement of the Parties. |
For added certainty, this Agreement may not be terminated by the Purchaser in the event that it is unable to receive any required Consents or Authorizations.
| 7.2 | Effect of Termination |
| (a) | If this Agreement is terminated pursuant to Section 7.1(b), all obligations of the Parties pursuant to this Agreement will terminate without further liability of any Party to the other Party. |
| (b) | If the Agreement is terminated by the Vendor pursuant to Section 7.1(a) the Vendor shall be entitled to remain as a full shareholder of the Corporation. |
| 7.3 | Waiver of Conditions of Closing |
If any of the conditions set forth in Section 6.1 have not been satisfied, the Purchaser may elect in writing to waive the condition and proceed with the completion of the transactions contemplated by this Agreement and, if any of the conditions set forth in Section 6.2 have not been satisfied, the Vendor may elect in writing to waive the condition and proceed with the completion of the transactions contemplated by this Agreement. Any such waiver and election by the Purchaser or the Vendor, as the case may be, will only serve as a waiver of that specific closing condition and the Party which has not been able to satisfy the waived condition will have no liability with respect to that specifically waived condition.
Article
8
Closing of Sale and Purchase
| 8.1 | Delivery of Closing Documents |
On the Closing Date:
| (a) | the Vendor shall complete the sale and transfer and the Purchaser shall complete the purchase of the Purchased Shares for the Purchase Price, with such purchase and the transfer of the Purchased Shares being effective on the Closing Date; |
| (b) | the Vendor shall take such actions as are reasonably required for the completion of the sale and purchase of the Purchased Shares including passing the appropriate authorizing resolutions and the issuance of a share certificate to the Purchaser for the Purchased Shares; and |
| (c) | The Purchaser shall pay and satisfy the Purchase Price as provided in Section 2.2. |
| 23 |
Article 9
General
| 9.1 | Assignment |
Neither this Agreement nor any rights or obligations hereunder shall be assignable by any Party to this Agreement without the prior written consent of the other Parties. Subject thereto, this Agreement shall enure to the benefit of and be binding upon each Party and their respective heirs, executors, administrators and permitted assigns.
| 9.1 | Severability |
If any provision of this Agreement is determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, that provision will be severed from this Agreement and the remaining provisions will continue in full force and effect, without amendment.
| 9.2 | Further Assurances |
Each Party to this Agreement agrees that the Party will do all such acts and execute all such further documents, conveyances, deeds, assignments, transfers and the like, and will cause the doing of all such acts and will cause the execution of all such further documents as are within its power as other Party hereto may in writing from time to time reasonably request be done or executed, in order to consummate the transactions contemplated hereby or as may be necessary or desirable to effect the purpose of this Agreement or any document, agreement or instrument delivered pursuant hereto and to carry out their provisions or to better or more properly or fully evidence or give effect to the transactions contemplated hereby, whether before or after the Closing.
| 9.3 | Entire Agreement |
This Agreement constitutes the entire agreement between the Parties pertaining to the sale and purchase of the Purchased Shares and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties and there are no warranties, representations or other agreements between the parties in connection with such sale and purchase except as specifically set forth in this Agreement or any amendment agreed to in writing by the parties. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by each of the Parties.
| 9.4 | Notice |
Any notice required or permitted to be given under this Agreement to any party shall be sufficiently given if delivered personally or if sent by prepaid registered mail to such party:
In the case of a notice to the Vendors: 21 Roysun Rd., Unit 17, Woodbridge, ON L4L 8R3
|
In the case of a notice to the Purchaser: 505 Consumers Rd., Unit 803, North York, ON M2J 4V8
|
In the case of a notice to the Corporation: 21 Roysun Rd., Unit 17, Woodbridge, ON L4L 8R3
|
or at such other address as the Party to whom such writing is to be given shall have last notified to the Party giving the same in the manner provided in this section. Any notice personally delivered to the party to whom it is addressed as provided in this section shall be deemed to have been given and received on the day it is so delivered at such address, provided that if such day is not a Business Day such notice shall be deemed to have been given and received on the Business Day next following such day. Any notice mailed to the address and in the manner provided for in this Section shall be deemed to have been given and received on the fifth Business Day next following the date of its mailing.
| 24 |
| 9.5 | Applicable Law |
This Agreement shall be governed by and construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated, in all respects, as an Ontario contract. Each of the Parties irrevocably and unconditionally submits and attorns to the exclusive jurisdiction of the courts of the Province of Ontario to determine all issues, whether at Law or in equity, arising from this Agreement.
| 9.6 | Time |
Time shall be of the essence for all purposes of this Agreement.
| 9.7 | Amendment and Waiver |
No amendment, discharge, restatement, supplement, termination or waiver of this Agreement or any Section of this Agreement is binding unless it is in writing and executed by the Party to be bound. No waiver of, failure to exercise or delay in exercising, any Section of this Agreement constitutes a waiver of any other Section (whether or not similar) nor does any waiver constitute a continuing waiver unless otherwise expressly provided.
| 9.8 | Assignment |
This Agreement shall enure to the benefit of, and be binding on, the Parties and their respective successors and permitted assigns. None of the Corporation nor the Vendors may assign or transfer, whether absolutely, by way of security or otherwise, all or any part of its respective rights or obligations under this Agreement without the prior written consent of the Purchaser. The Purchaser may assign or transfer all or any part of its rights or obligations under this Agreement without the prior written consent of any other Party.
| 9.9 | Costs and Expenses |
Except as otherwise specified in this Agreement, and without limiting the indemnification provisions in Article 5, all costs and expenses (including the fees and disbursements of accountants, financial advisors, legal counsel and other professional advisers) incurred in connection with the negotiation and settlement of this Agreement, and the completion of the transactions contemplated by this Agreement, are to be paid by the Party incurring those costs and expenses.
| 9.10 | Third Party Beneficiaries |
This Agreement is for the sole benefit of the Parties, and except as specifically provided for in Article 8 nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
| 9.11 | Remedies Cumulative |
The rights, remedies, powers and privileges herein provided to a Party are cumulative and in addition to and not exclusive of or in substitution for any rights, remedies, powers and privileges otherwise available to that Party.
| 9.12 | Counterparts |
This Agreement may be executed by the Parties in separate counterparts, and each of which may be delivered by e-mail or other functionally equivalent electronic means of transmission, and each of which when so executed and delivered shall be an original, and all such counterparts shall together constitute one and the same instrument.
[Remainder of page intentionally left blank.]
| 25 |
IN WITNESS WHEREOF the Parties have executed this Share Purchase Agreement.
| N. FINE INVESTMENTS LTD. | ||
| By: | “Nick Ierfino” | |
Nick Ierfino President | ||
| I have authority to bind the corporation. | ||
| linden power inc. | ||
| By: | “Richard Bower” | |
Richard Bower CEO | ||
| I have authority to bind the corporation. | ||
| OFIT RT INC. | ||
| By: | “Richard Bower” | |
Richard Bower President & CEO | ||
| By: | “Nick Ierfino” | |
Nick Ierfino Secretary | ||
| We have authority to bind the corporation. |
| SOLARBANK CORPORATION | ||
| By: | “Richard Lu” | |
Richard Lu President & CEO | ||
| I have authority to bind the corporation. | ||
(Signature Page for Share Purchase Agreement)
| 26 |
Exhibit 99.82
annual MANAGEMENT’S DISCUSSION AND ANALYSIS
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company for the year ended June 30, 2023 was prepared by management as of October 23, 2023 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended June 30, 2023. See “Risk Factors”. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Certain information included in the MD&A is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” for further details.
Business Profile
The Company is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc., and in 2016 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc. (“ASP”), to meet the demand for renewable energy in both countries. The company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement and construction (“EPC”), operation and maintenance (“O&M”), and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth via organic growth and M&A.
Selected Annual Information
Comparative information for annual periods from June 30, 2021, 2022 and 2023 has been presented in accordance with IFRS.
| Year ended June 30 | 2023 (Audited) ($) | 2022 (Audited) ($) | 2021 (Audited) ($) | |||||||||
| Revenue | 18,397,509 | 10,197,619 | 7,346,581 | |||||||||
| Revenue - EPC | 15,577,210 | 9,791,511 | 3,230,366 | |||||||||
| Revenue – development | 2,724,040 | 406,108 | 4,116,215 | |||||||||
| Revenue – O&M services | 96,259 | - | - | |||||||||
| Cost of goods sold | (13, 860,309 | ) | (8,231,476 | ) | (4,814,144 | ) | ||||||
| Net income (loss) | 2,241,986 | (188,393 | ) | (157,067 | ) | |||||||
| Net income (loss) per share | 0.11 | (0.01 | ) | (0.01 | ) | |||||||
| Total assets | 24,969,537 | 9,194,537 | 10,283,255 | |||||||||
| Long-term debt | 1,254,465 | 1,388,013 | 1,143,242 | |||||||||
| Dividends | - | - | - | |||||||||
The following discussion addresses the operating results and financial condition of the Company for the year ended June 30, 2023 compared with the year ended June 30, 2022. For a discussion of the operating results and financial condition of the Company for the year ended June 30, 2023 compared with the year ended June 30, 2021, please refer to the Company’s MD&A for the year ended June 30, 2022 which is included in the Company’s long form prospectus dated February 10, 2023 and filed on SEDAR+ at www.sedarplus.com. The MD&A should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended June 30, 2023.
Results of operations for the year ended June 30th, 2023 as compared to the year ended June 30th, 2022
Trend
In fiscal 2023, the Company continued to focus on scaling its business model by growing its pipeline and advancing its projects in EPC in the US and development in both US and Canada. It is expected that the Company’s revenue will keep growing in 2024 as four projects were at NTP stage and one project was in construction at end of FY23.
The net income for the year ended June 30, 2023 increased by $2,430,379 compared to the year ended June 30, 2022 with $2,241,986 net income recognized in 2023 as compared to a net loss of $188,393 recognized in 2022.
Key business highlights and projects updates in 2023
| ● | Existing projects |
| Name | Location | Size
(MW DC) |
Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached substantial completion in December 2022. The Company acquired 67% of the project in June 2023 | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. The Company acquired 67% of the project in June 2023 | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach
PTO (permission to operate) |
EPC project. It reached PTO in December 2022. | |||||
| Manlius | New York, USA | 5.7 | December 2023 | Reach
PTO (permission to operate) |
EPC project. It’s expected to reach PTO in December 2023 |
| ● | Projects under development |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred |
Sources of Funding | Current Status | ||||||||
| Geddes | New York, USA |
3.7 | September 2023 |
Completion of engineering and permitting, along with procurement deposit | 500,000 | 99,736 | IPO, working capital | Milestone reached in September 2023 and construction started in the same month. | ||||||||
| 261 Township |
Alberta, Canada |
4.2 | June 2024 |
Completion of engineering work and placement of orders for main project components | 800,000 | 31,428 | IPO, working capital | Structural assessment, noise study, and solar glare assessment are complete and interconnection has been filed with the utility. An Industrial Project Letter from Alberta Environment and Parks has been obtained for the project. A High Level Study has been received from Fortis Alberta for the project, and a Detailed Level Study is currently underway for Phase 1. Interconnection for Phase 2 will be filed with the utility pending the final results of Phase 1. The Alberta Utilities Commission (“AUC”) has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024, and that it will review policies and procedures for the development of renewable electricity generation. This pause will impact the Company’s receipt of interconnection approval for the project from the AUC until it is over, but in the interim the Company will advance its environmental and other studies, along with permits that are unrelated to the AUC. | ||||||||
| Richmond 2 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 | 10,642 | IPO, working capital | The four projects are under utility interconnection study. The design work will be after the completion of the interconnection study. |
| Name | Location | Size
(MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred |
Sources of Funding | Current Status | ||||||||
| Hardie | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 13,386 | IPO, working capital | |||||||||
| 206 Fuller Rd | New York, USA |
4.9 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | IPO, working capital | |||||||||
| 6882 Rice Road | New York, USA |
5.2 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | IPO, working capital | |||||||||
| SUNNY | New York, USA |
28.0 | June 2025 |
Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 | 33,232 | IPO, working capital | The Company submitted an interconnection request to New York Independent System Operator. The company signed a lease agreement with the landowner in 2022. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). | ||||||||
| Settling Basins - 1 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 | IPO, working capital | These three projects were sold to Honeywell International Inc. (“Honeywell”) in September 2023 and continued to be developed the Company under terms of an EPC contract. The three projects are under utility interconnection study and engineering study. The design work will be after the completion of the interconnection study. | ||||||||
| Settling Basins - 2 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 | IPO, working capital | |||||||||
| Settling Basins - 3 | New York, USA |
7.0 | December 2023 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 19,225 | IPO, working capital |
Revenue
Revenue for the year ended June 30, 2023 was $18,397,509 compared to $10,197,619 in the comparative period. The revenue increase was mainly the result of services provided with respect to the Manlius project in New York, USA.
The EPC service revenue for the year ended June 30, 2023 was $15,577,210 compared to $9,791,511 in the comparative period, increasing by $5,785,699, or 50%. The revenue increase was mainly due to significant progress in Manlius ($6.0M) and completion of Portland ($1.8M) and Richmond ($4.1M) projects in the year ended June 30, 2023 while the Company worked on fewer projects throughout the year ended June 30, 2022.
For the year ended June 30, 2023, the Company generated $2,724,040 in development revenue mainly from the sale of Manlius project for $2.7M. For the year ended June 30, 2022, the Company generated $406,108 in development revenue from the sales of two small-size projects developed by the Company.
For the year ended June 30, 2023, the Company generated $96,259 in service revenue. No such revenue was generated for the year ended June 30, 2022.
Expenses
| 2023 | 2022 | Change | Management Commentary | |||||||||||
| Cost of goods sold | (13,860,309 | ) | (8,231,476 | ) | (5,628,833 | ) | Consistent with increase in revenue | |||||||
| Operating expense: | ||||||||||||||
| Advertising and promotion | (282,908 | ) | (8,390 | ) | (274,518 | ) | Additional costs incurred in FY23 relating to investor marketing, including design of new company logo and website. | |||||||
| Depreciation | (49,209 | ) | (25,782 | ) | (23,427 | ) | Increase related to right-of-use (ROU) asset lease started on May 1, 2022, less amortization on ROU in the FY22 comparing to FY23 | |||||||
| Insurance | (130,259 | ) | (62,751 | ) | (67,508 | ) | Insurance was higher due to increased activity and higher director and officer insurance premiums following completion of the IPO | |||||||
| Office, rent and utilities | (348,864 | ) | (263,742 | ) | (85,122 | ) | Increase in FY23 due to accounting software migration to QuickBooks Online from QuickBooks Desktop. In FY23, both versions of the software are being used. In FY23, there were also IT equipment upgrades. | |||||||
| Listing fees | (101,505 | ) | - | (101,505 | ) | In FY23, Company incurred various IPO related fees, including prospectus and SEDAR filling fees ($44k), IPO listing and processing fees ($15k), and fees associated with a OTCQX application for trading in the United States ($20k). | ||||||||
| Professional fees | (1,248,895 | ) | (143,937 | ) | (1,104,958 | ) | Increase due to $160k audit fees all incurred in FY23, $237k consulting fees relating to PCDC claims, $545k consulting fees relating to preparation for IPO, and $260k legal fees accrual (relating to IPO, ATM, Self Prospectus, trademarks, etc.). | |||||||
| Salary and Wages | (1,876,338 | ) | (1,774,583 | ) | (101,755 | ) | $122k bonus paid in FY23 | |||||||
| Stock based compensation | (2,946,850 | ) | - | (2,946,850 | ) | Employee stock compensation of $810k, $344k for RSU, and $1.8M related to warrants granted for advisory services. | ||||||||
| Travel and events | (228,509 | ) | (47,504 | ) | (180,005 | ) | More travel and seminars activities in 2023 as there is no pandemic restriction. | |||||||
| Total operating expenses | (7,213,337 | ) | (2,326,689 | ) | (4,886,648 | ) | ||||||||
| Total Expenses | (21,073,646 | ) | (10,558,165 | ) | (10,515,481 | ) | ||||||||
Other Income (Expenses)
For the year ended June 30, 2023, the Company had other income of $6,590,347 compared to other income of $204,732 for the year ended June 30, 2022. Other income for the year ended June 30, 2023 consists mainly of Pre-Construction Development Costs recovered from the Ontario Independent Electricity System Operators (“IESO”) of $6,338,640, allowance for doubtful accounts recovery of $212,227, foreign exchange gain of $13,189, CESIR refund of $31,060, and government subsidies of $2,808, offset by other expense of $14,949. Other income for the year ended June 30, 2022 consisted mainly of Covid subsidy of $133,506, CESIR refund of $114,491, and foreign exchange loss of $9,212, offset by other expense of $34,053.
Net Income (Loss)
The net income for the year ended June 30, 2023 was $2,241,986 for an income per share of $0.11 based on 19,575,479 weighted average number of outstanding common shares versus loss of $188,393 for a loss per share of $0.01 based on 16,000,000 weighted average number of outstanding common shares for the comparative period.
Total Assets
Total assets for the year ended June 30, 2023 were $24,969,537 compared to $9,194,537 in the comparative period. The increase in assets was due to an increase in short-term investment, trade and other receivables, unbilled revenue, inventory, fixed assets and investment, which was partially offset by a decrease in contract fulfilment costs.
Total Liabilities
Total liabilities for the year ended June 30, 2023 were $8,338,341 compared to $4,753,922 in the comparative period. The increase in liabilities was due to an increase in trade and other payables, and unearned revenue.
Cash flow from operating activities
The Company has positive cash flow of $2,192,710 from operating activities during the year ended June 30, 2023, while the Company generated cash of $171,212 during the same period ended June 30, 2022. The Company generated cash of $6,014,389 from the operational activities and used $3,821,679 from the change of working capital during the year ended June 30, 2023, while the Company generated cash of $14,830 from the operational activities and generated $156,382 from the change of working capital for the same period ended June 30, 2022.
Cash flow from financing activities
The Company used cash of $117,133 in financing activities during the year ended June 30, 2023, while the Company used cash of $679,271 in financing activities during the same period ended June 30, 2022. The cash generated in financing activities for the year ended June 30, 2023 was mainly driven by the net proceeds of $1,250,000 received from debenture financing completed in October 2022 and net proceed from the issuance of common shares of $5,611,802, offset by the purchase of partnership units of $722,615, purchase of short-term GIC of $6,550,000, repayment of short-term loans of $320,275, and repayment of long-term loans of $111,111. In addition, the acquisition of US1 and VC1 resulted in cash generation from tax investors of $467,252 and non-controlling interest of $287,206. The cash used in financing activities for the year ended June 30, 2022 was mainly driven by the net proceeds received from long-term debts of $316,450, offset by the repayment of short-term loans of $982,642.
Cash flow from investing activities
The Company used cash of $950,713 in plant, property and equipment, and $1,122,465 in development assets during the year ended June 30, 2023, while the Company used $10,970 in plant, property and equipment during the same period ended June 30, 2022.
Acquisition
ASP has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects were reached PTO (permission to operation) in Dec 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects reached PTO.
On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.
On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo LLC (“Solar Alliance DevCo”), a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.
On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit or loss.
The Company also recognized $283,122 (USD $213,838) for 33% non-controlling interest in Solar Alliance DevCo.
Discussion of Operations and Outlook
Solar PV Technology
The Company is in the business of developing solar photovoltaic (“PV”) projects. PV devices generate electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors. Electrons in these materials are freed by solar energy and can be induced to travel through an electrical circuit, powering electrical devices or sending electricity to the grid.
Solar power is not dependent on burning fossil fuels or other products; instead, it uses electrons captured from the sun’s energy for electricity creation. Therefore, solar energy does not create greenhouse gases for energy production. Most modern solar cells are made from crystalline silicon semiconductor material. Silicon cells are more efficient at converting sunlight to electricity, but generally have higher manufacturing costs.
The cost of PV has dropped dramatically as the industry has scaled up manufacturing and incrementally improved the technology with new materials. Installation costs have come down too with more experienced and trained installers.
Using the PV technology the Company develops, builds, and operates behind-the-meter (BTM) solar power plants, electricity grid connected community solar gardens, and utility scale solar farms
BTM Solar Power Plants
The Company is a turn-key service provider to commercial and industrial customers for them to own BTM solar power plant on-site. The Company can also invest and own the BTM solar projects where local policies allow commercial aggregation and 3rd party ownership.
The most effective method to achieve Net-Zero carbon emissions from buildings is to build them all electric, with BTM solar power plants on-site to generate zero emission renewable solar power for the building’s self-use. The BTM solar power plants are reasonable in size (average 300 kWp) as rooftop, carport or ground mount systems. A BTM solar power plant can be net metered, through which the excess solar energy produced by the plant can be sent back to the grid in return for a credit or money from the local utility. BTM solar power plants have the following benefits:
| ● | Self-consumption of distributed generation, | |
| ● | Energy cost savings, | |
| ● | Control project operations and maintenance, | |
| ● | Visible commitment to sustainability, and | |
| ● | Resiliency (with battery storage). |
BTM solar power generation provides a readily available solution toward the goal of Net-Zero by 2050. There has been an increased interest in BTM solar power plants as an effective way to halt climate change. The Company is experienced in BTM solar and currently manages a number of BTM solar power plants. It is anticipated that the Company will be able to develop and build 2 MWp BTM solar power plants in 2024 in Canada and the USA.
On September 18, 2023 the Company and Honeywell entered into a Membership Interest Purchase Agreement (the “Honeywell MIPA”) and an EPC agreement (the “Honeywell EPC Agreement”) pursuant to which Honeywell acquired the SB-1, SB-2 and SB-3 projects and retained the Company for their construction, with a total transaction value of US$41 million. The Company also expects that it will retain an operations and maintenance contract for the SB projects following the completion of construction.
Community Solar Farms
Community solar refers to local solar PV facilities shared by multiple community subscribers who receive credit on their electricity bills for their share of the power produced. Community solar provides homeowners, renters, and businesses equal access to the economic and environmental benefits of solar energy generation regardless of the physical attributes or ownership of their home or business. Community solar expands access to solar for all, including in particular low-to-moderate income customers most impacted by a lack of access, all while building a stronger, distributed, and more resilient electric grid. Community solar power plants are usually less than seven (7) megawatts (MWdc) of electrical capacity, and it could power about 1,000 homes (the average American household uses approximately 10,000 kWh per year).
The Company works with 3rd party subscriber organizations in Boston and Chicago to manage its current 7,000 or so community solar subscribers. The Company brought 6 projects, total of 12.1 MWp, to COD in 2023.It is anticipated that the Company will deliver 30 MWp community solar farms with an additional more than 3,000 subscribers in year 2024.
On September 26, 2023 the Company announced that it has completed mechanical construction of the Community Solar Project in the Town of Manlius, Onondaga County, New York. The 5.9MW Project was constructed for Solar Advocate Development LLC under the terms of the Manlius EPC Agreement. All civil work is complete, along with the mechanical installation of racking and modules. The next step is completion of some final electrical work and acceptance testing. The project is expected to become operational during the fourth quarter of calendar year 2023.
On October 2, 2023 the Company announced that it has commenced major construction on the Geddes project that is being developed by the Company in Geddes, New York. Current activities include civil work and the commencement of the racking and module installation. Subject to receipt of financing, the Company intends to own and operate the Geddes project. The Geddes project which has a designed capacity of 3.7 megawatts MW DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. Based on its forecast project schedule, the Company anticipates that construction of the Geddes project will be completed in the 1st quarter of calendar 2024.
Utility Solar Farms
A utility-scale solar farm is one which generates solar power and feeds it into the grid, supplying a customer with renewable solar energy. A ‘utility-scale’ solar project is usually defined as such if it is 10 MW or bigger in capacity of energy production.
What distinguishes utility-scale solar from distributed generation is both project size and the fact that the electricity is sold to wholesale energy buyers, not end-use consumers. Virtually every utility-scale solar facility has a power purchase Agreement (PPA) with a corporation, an IPP or a utility, guaranteeing a market for its energy for a fixed term of time.
Utility-scale solar farm has become a growing source of electricity in the world. Many companies will need to partner with solutions providers such as the Company to help put them on a net-zero trajectory. The Company is actively advancing its utility scale solar farms pipeline of 200 MWp and anticipates to further developing a 28 MWp utility scale solar farm in 2024.
Battery Energy Storage Systems (BESS)
The Company is actively participating with a development partner in the Ontario IESO Competitive RFP Procurement of Battery Energy Storage Systems (BESS). On behalf of the customers, the Company won three BESS projects in 2023. On October 3, 2023, the Company entered into three EPC agreements for the construction of these three separate BESS projects (the “BESS Projects”) that were previously announced in June 2023, with a total contract value of approximately $36 million. The Projects are owned by SFF, two First Nations communities, and a third party developer in Ontario through holding companies. The BESS Projects are known as 903, OZ-1 and SFF 06 and are subject to the following agreements:
| (i) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234763 Ontario Inc. and the Company for 903 Project; |
| (ii) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234813 Ontario Inc. and the Company for OZ-1 Project; and |
| (iii) | Engineering, Procurement & Construction Agreement dated October 3, 2023 between 1000234763 Ontario Inc. and the Company for SFF 06 Project. |
The BESS Projects were awarded as part of a procurement process with the Ontario IESO known as “E-LT1”. Projects under the E-LT1 are expected to be operational no later than April 30, 2026, but the Company intends to have them completed for operation by the summer of 2025. Each BESS Project is expected to operate under a long term contract with guaranteed capacity payments from the IESO, provided all contract obligations are met. The Projects will also earn revenue from the energy and ancillary markets in Ontario. Each has a 4.74 MW discharge capacity with a four-hour duration using lithium-iron-phosphate technology. Lithium-iron-phosphate technology allows for the greatest number of charge/discharge cycles, making it the optimal selection for stationary energy storage systems.
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| 1. | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property that is being developed by the Company. The lawsuit was filed challenging the approval of the Manlius landfill. The Company is not named in the lawsuit; however, in cooperation with the town, the Company is vigorously defending this suit. On October 5, 2022 by decision of the State of New York Supreme Court, the lawsuit was dismissed. However, on October 19, 2022 an appeal was filed by the petitioners in the Appellate Division of the State of New York Supreme Court. The likelihood of success in these lawsuits cannot be reasonably predicted. |
| 2. | On June 29, 2018, the Progressive Conservative Party of Ontario was sworn in as the new provincial government. On July 13, 2018, the new government issued an Order in Council containing the Minister of Energy’s Directive to immediately take all steps necessary to wind down all Feed-In Tariff (FIT) 2, 3, 4 and 5 contracts where the Independent Electricity System Operator (IESO) had not issued Notice to Proceed (“NTP”). An NTP was issued for a contract when it was ready for construction. |
In response to the Minister of Energy’s Directive, the IESO issued termination notices to all pre-NTP FIT contract holders on July 16, 2018. However, the notice confirmed FIT Contract provisions for the cost recovery of Pre-Construction Development Costs (“PCDC”) in the event of contract termination. Pre-Construction Development Costs are defined as reasonable costs incurred in development of a project from contract award date to termination date. The total value of the PCDC claims submitted by the Company’s subsidiary, 2467264 Ontario Inc, is $6.3 million. IESO confirmed the full $6.3 million amount during the quarter ended March 31, 2023. As of March 31, 2023, $1.4 million have been recovered from IESO and the remaining $4.9 million was recorded as receivable.
| 3. | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| 4. | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| 5. | On October 10, 2023, the Company received a demand letter from US lawyers representing Dan Juhl claiming that the company is infringing Mr. Juhl’s trademark rights.Mr. Juhl holds a trademark registration for SOLARBANK in association with “Electric power generators, namely, reserve electric power generators for the renewable energy sector”. The Company is responding to the letter on several grounds, including that Mr. Juhl’s trademark is not distinctive in association with power storage products, that Mr. Juhl does not appear to be using the SOLARBANK trademark with products, and that confusion to trademark is unlikely because the Company’s business and services are very different from the products listed in Mr. Juhl’s application. The Company’s response will also indicate that it does not and has no intension of offering consumer products under the name “solar bank”. |
Summary of Quarterly Results
| Description | Q4 June 30, 2023 ($) | Q3 March 31, 2023 ($) | Q2 December 31, 2022 ($) | Q1 September 30, 2022 ($) | ||||||||||||
| Revenue | 9,245,267 | 706,856 | 2,964,934 | 5,480,452 | ||||||||||||
| Income (Loss) for the period | (1,076,836 | ) | 3,064,872 | 89,468 | 164,482 | |||||||||||
| Income (Loss) per share (basic and diluted) | (0.06) (basic) (0.03) (diluted) | 0.11 (basic) 0.09 (diluted) | 0.01 | 0.01 | ||||||||||||
| Description | Q4 June 30, 2022 ($) | Q3 March 31, 2022 ($) | Q2 December 31, 2021 ($) | Q1 September 30, 2021 ($) | ||||||||||||
| Revenue | 388,369 | 977,562 | 6,211,631 | 2,602,057 | ||||||||||||
| Income (Loss) for the period | (880,801 | ) | 235,346 | 399,331 | 57,731 | |||||||||||
| Income (Loss) per share (basic and diluted) | (0.06 | ) | 0.03 | 0.02 | 0.00 | |||||||||||
Historical quarterly results of operations and income per share data do not necessarily reflect any recurring expenditure patterns or predictable trends except for the fact that seasonally the Company’s third quarter typically has the smallest amount of revenue due to winter conditions that are less favorable for construction. The Company’s revenues fluctuate from quarter to quarter based on the timing of recognition of revenue which is dependent on the stage of the various solar power projects under development. Refer to “Results of Operations” for additional discussion.
Results of operations for the three months ended June 30, 2023
During the fourth quarter of 2023, the Company generated $9,245,267 in revenue mainly from the Manlius project in New York as a result of an EPC agreement being signed and construction started at end of FY23.
The Company reported a comprehensive loss from operations for the three months ended June 30, 2023 of $1,076,836 as compared to $880,801 for the three months ended June 30, 2022
Reviews of the major items during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 are as follows:
| 2023 | 2022 | Change | Management Commentary | |||||||||||
| Advertising and promotion | (196,576 | ) | (990 | ) | (195,586 | ) | Additional costs incurred in FY23 relating to investor marketing, including design of new company logo and website. | |||||||
| Salary and wages | (594,626 | ) | (458,764 | ) | (135,862 | ) | Additional personnel added in FY23 and increased bonus payments | |||||||
| Professional fees | (534,918 | ) | (72,699 | ) | (462,219 | ) | Increase due to audit fees all incurred in FY23, consulting fees relating to PCDC claims, and legal fees relating to Shelf Prospectus, ATM, trademarks etc. | |||||||
| Office, rent and utilities | (108,582 | ) | (119,573 | ) | 10,991 | Change due to timing of expenses incurred. | ||||||||
| Stock based compensation | (325,399 | ) | - | (325,399 | ) | Stock based compensation issued in FY23. | ||||||||
Liquidity
As at June 30, 2023, the Company had a cash balance of $749,427 (June 30, 2022 - $931,977) with working capital surplus of $14,962,023 (June 30, 2022 - $5,617,200).
| As at | June 30, 2023 $ | June 30, 2022 $ | ||||||
| Cash | 749,427 | 931,977 | ||||||
| Working capital | 14,962,023 | 5,617,200 | ||||||
| Total assets | 24,969,537 | 9,194,537 | ||||||
| Total liabilities | 8,338,341 | 4,753,922 | ||||||
| Shareholders’ equity | 16,631,196 | 4,440,615 | ||||||
The Company believes that with the proceeds of the IPO, along with its expected operating income and cash flows, it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations and debt financing. The Company will continue to identify financing opportunities, including equity issuances, in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
To assist with potential liquidity needs, the Company has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to $200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
In addition. The Company has entered into an equity distribution agreement (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) to establish an at-the-market equity program (the “ATM Program”). The Company may issue up to $15,000,000 of common shares of the Company (the “ATM Offered Shares”) from treasury under the ATM Program. The ATM Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The ATM Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the ATM Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of ATM Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
Capital Resources
Share Capital Transactions
In October 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.
Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs. The Series A vesting condition was satisfied on date of the closing of the IPO. As a result, 2,500,000 Series A warrants vested on March 1, 2023.
Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that the Company is not designated as a venture issuer.
Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.
On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. On March 1, 2023, the full liability portion of the Convertible Loan converted to 2,500,000 Common Shares. A continuity of the liability portion of the convertible debentures is as follows:
| Balance, June 30, 2022 | - | |||
| Initial recognition | $ | 1,136,364 | ||
| Accretion interest expenses | 47,348 | |||
| Conversion of Loan upon IPO | (1,183,712 | ) | ||
| Balance, June 30, 2023 | $ | - |
On March 1, 2023, the Company closed its initial public offering (the “IPO”) of common shares of the Company (“Common Shares”) raising aggregate gross proceeds of $6,037,500. The IPO consists of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Company paid $362,250 broker commission, $63,448 legal fees and issued 483,000 broker warrants to purchase common shares at $0.75 per share until March 1, 2026. The broker warrants were valued using the Black-Scholes model resulting in fair value of $242,575. As of June 30, 2023, the Company has used the net proceeds from the IPO as follows:
| Use of Proceeds | Initial Estimated Amount ($) | Actual Amount ($) | ||||||
| Completion of engineering and permitting, along with procurement deposit, for two projects located in New York, USA. | 1,000,000 | 4,464,898 | ||||||
| Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee for one project located in New York, USA. | 900,000 | 74,895 | ||||||
| Working capital for one project in Alberta, Canada that provides for the completion of engineering work and placement of orders for main project components. | 800,000 | 8,065 | ||||||
| Business development initiatives in the United States involving completion of documentation to advance six projects to the notice to proceed stage. | 1,600,000 | 99,006 | ||||||
| Salaries for new hires. | 418,250 | 71,386 | ||||||
| Total | 4,718,250 | 4,718,250 | ||||||
On November 4, 2022, the Company granted 500,000 Restricted Share Units (“RSUs”) to a consultant. Pursuant to the agreement, each unit is exercisable into one common share of the Company for a period of 60 days from the vesting date. 50% of the units, or 250,000 units, vested on the date of closing of the IPO, which was March 1, 2023, and the remaining 50% vests on the date that is 5-months after the date of closing of the IPO (on August 2, 2023). On March 8, 2023, 250,000 common shares were issued as a result of the vesting of 250,000 RSUs.
On March 13, 2023, the Company granted 15,000 RSUs to an employee. Pursuant to the agreement, each unit is exercisable into one common share of the Company for a period of 60 days from vesting date. 50% of the units, or 7,500 units, vest one year after the grant date (on March 12, 2024), and the remaining 50% vest two years after the grant date (on March 12, 2025).
On October 3, 2022, the Company granted an aggregated of 2,500,000 warrants as compensation to consultants in connection with the advisory services provided to assist the Company to successfully complete IPO. The warrants have been recorded at their estimated fair value of $1,792,594 during the year ended June 30, 2023. Each fully vested warrant may be exercised at $0.10 to acquire common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.59% | |
| ● | Expected life: 4.69 years; | |
| ● | Expected volatility: 126% based on historical five-year trends of industry peers; | |
| ● | Expected dividend yield: 0%; |
On March 1, 2023, the Company granted an aggregate of 483,000 warrants to a brokerage firm as commission for the completion of the IPO. The warrants have been recorded at their estimated fair value of $248,069 during the year ended June 30, 2023. Each fully vested warrant may be exercised at $0.75 to acquire a common share. The estimated fair value of the warrants was measured using the Black-Scholes valuation model. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.85% | |
| ● | Expected life: 3 years; | |
| ● | Expected volatility: 111% based on historical three-year trends of industry peers; | |
| ● | Expected dividend yield: 0%; |
On November 4, 2022, the Company granted an aggregate of 2,774,000 stock options to employees and directors at an exercise price of $0.75 per share, exercisable for a period of 5 years. The options vest over 24 months, 50% per 12 months from grant date. The estimated fair value of these options has been measured using the Black-Scholes valuation model. During the year ended June 30, 2023, compensation expense related to stock options was $809,628. The underlying weighted average assumption used in the estimation of fair value in the Black-Scholes valuation model are as follows:
| ● | Risk free rate: 3.80%; | |
| ● | Expected life: 4 years; | |
| ● | Expected volatility: 124% based on historical four-year trends of industry peers; | |
| ● | Expected dividend yield: 0%; |
As at June 30, 2023, no stock options were exercisable.
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| June 30, 2023 | June 30, 2022 | |||||||
| Long-term debt – non-current portion | $ | 759,259 | $ | 1,230,643 | ||||
| Shareholders’ equity | $ | 16,631,196 | $ | 4,440,615 | ||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
Changes to capital management from the prior year includes closing of Company’s initial public offering of common shares on March 1, 2023.
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. The table below sets out the Company’s common share and convertible securities as of June 30, 2023 and as of the date of this MD&A:
| Security Description | June 30, 2023 | Date of report | ||||||
| Common shares | 26,800,000 | 26,857,200 | ||||||
| Warrants | 7,983,000 | 7,928,000 | ||||||
| Stock options | 2,759,000 | 2,759,000 | ||||||
| Restricted share units | 265,000 | 265,000 | ||||||
| Fully diluted shares | 37,807,000 | 37,809,200 | ||||||
During the year ended June 30, 2023 the Company did not issue any Common Shares in at-the-market offerings.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
As at June 30, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of SIL.
As at June 30, 2023, included in trade and other receivable was $Nil (June 30, 2022 - $86,000) due from Renewable Sun Energy Co-Op (“RSE”). One of RSE’s director is also the controlling shareholder of the Company as at June 30, 2022. Subsequent to June 30, 2022, the controlling shareholder of the Company has ceased to be the director of RSE.
As at June 30, 2023, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the year ended June 30, 2023 and 2022 were as follows:
| June 30, 2023 | June 30, 2022 | |||||||
| Short-term employee benefits | $ | 1,533,393 | 998,511 | |||||
| Share-based compensation | 440,362 | |||||||
| Advisory warrants | 448,156 | |||||||
Short-term employee benefits include consulting fees and bonus.
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Significant accounting judgements and estimates
Despite the fact that the Company determined there are no critical accounting estimates, the most significant accounting judgements and estimates that the Company has made in the preparation of the consolidated financial statements includes:
Taxes:
The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.
Percentage of completion calculation:
The Company measures the stage of completion for EPC projects based on costs incurred to date compared to the total estimated costs for the project. The estimation of total estimated costs requires judgement and changes to these estimates may affect revenue, unbilled revenue, and deferred revenue.
Expected credit loss:
The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.
Warranties:
The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the year ended June 30, 2023, $Nil warranty provision was recorded (2022 - $Nil).
Contract fulfilment costs:
When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.
If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.
The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.
Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.
Convertible debenture:
The determination of the fair value of convertible debentures requires the input of highly subjective assumptions, including the expected discount rate. Changes in the input assumptions could materially affect the fair value estimate.
Stock-based compensation and warrant valuation:
The fair value of stock options issued and warrants granted are subjective to the limitation of the Black-Scholes option pricing model which incorporates market data, and which involved uncertainty and subjectivity in estimates used by management in the assumptions. The model requires assumptions relating to share price volatility, expected life of options and discount rate. Changes in these assumptions affect the fair value of the options and the amount of stock-based compensation to be recognized in operations over the vesting period.
Tax equity liabilities:
The Company makes estimates in the determination of expected future cash flows to calculate the effective interest rate (“EIR”) and amortization of tax equity liabilities. Tax equity investors generally require a specified allocation of the project’s cash distributions and tax attributes such as investment tax credit and taxable income or loss, including accelerated tax depreciation. Estimates are made when determining the amount and allocation of cash distributions and tax attributes to the tax equity investors, which may be influenced by a number of assumptions such as electricity production, selling prices, costs to operate and tax amounts.
Determining control or significant influence of special purpose entities:
The determination of whether the Company has control or significant influence over special purpose entities requires the Company to make assumptions and judgments in evaluating its specific control and influence characteristics. The Company exercises judgment in determining whether non-wholly owned special purpose entities are controlled by the Company, which involves the assessment of how the decisions of the special purpose entities are made, whether the rights of other partners are protective or substantive in nature, and the ability of the Company to influence the returns of the special purpose entity.
Acquisitions:
Management has had to apply judgment relating to acquisitions with respect to whether the acquisition was a business combination or an asset acquisition. Management applied a three-element process to determine whether a business or an asset was purchased, considering inputs, processes and outputs of each acquisition in order to reach a conclusion.
Changes in Accounting Policies
The following new and revised accounting standard, along with any consequential amendments were adopted by the Company for annual periods beginning on or after January 1, 2023.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.
IAS 1 – Presentation of Financial Statements
In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.
The Company does not expect the adoption of these new amendments to have a significant impact as the amendments only affect the note disclosure of the financial statements.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. The Company do not have Level 2 and Level 3 financial instrument.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| June 30, 2023 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,687,175 | 47 | % | ||||
| Customer B | $ | 5,924,196 | 32 | % | ||||
| June 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 8,925,034 | 88 | % | ||||
| June 30, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 8,584,998 | 76 | % | ||||
| Customer C | $ | 1,537,357 | 14 | % | ||||
| June 30, 2022 | Account Receivable | % of Account Receivable | ||||||
| Customer A | $ | 3,619,579 | 64 | % | ||||
| Customer B | $ | 1,596,777 | 28 | % | ||||
The outstanding accounts payable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few vendors who account for over 10% of total cost of goods sold as well as vendors who account for over 10% percentage of outstanding Accounts Payable.
| June 30, 2023 | Purchases | % of Total Purchases | ||||||
| Vendor A | $ | 2,698,889 | 19 | % | ||||
| June 30, 2022 | Purchases | % of Total Purchases | ||||||
| Vendor B | $ | 2,928,814 | 36 | % | ||||
| Vendor C | $ | 1,630,780 | 20 | % | ||||
| June 30, 2023 | Account Payable | % of Account Payable | ||||||
| Vendor A | $ | 549,996 | 12 | % | ||||
| June 30, 2022 | Account Payable | % of Account Payable | ||||||
| Vendor B | $ | 1,108,168 | 43 | % | ||||
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Commitment of loan for the next five years
Estimated principal repayments are as follows:
| 2024 | $ | 151,111 | ||
| 2025 | 111,111 | |||
| 2026 | 111,111 | |||
| 2027 | 111,111 | |||
| 2027 onwards | 425,926 | |||
| Total | $ | 910,370 |
Commitment of lease for the next five years
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of June 30, 2023 is as follows:
| 2024 | $ | 60,302 | ||
| 2025 | 64,183 | |||
| 2026 | 67,957 | |||
| 2027 | 11,431 | |||
| Total | $ | 203,873 |
Subsequent Events
Investment
On July 5, 2023, the Company acquired 42,500 limited partnership unites of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000.
At-the-Market Offering
The Company sold 1,000 shares on September 21, 2023 and 1,200 shares on September 22, 2023 through at-the-market offering at an average price of $10.0018 per share for gross proceeds of $22,003.96.
EPC Contract with Honeywell
On September 19, 2023 the Company and Honeywell entered into the Honeywell MIPA and the Honeywell EPC Agreement pursuant to which Honeywell acquired the SB-1, SB-2 and SB-3 projects and retained the Company for their construction, with a total transaction value of US$41 million. The Company also expects that it will retain an operations and maintenance contract for the SB projects following the completion of construction.
BESS Projects
On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate BESS Projects with a total contract value of approximately $36 million. The BESS Projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario. Refer to “Discussion of Operations and Outlook – Battery Energy Storage Systems (BESS)” for further details.
OFIT Acquisition
The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The shares of the Purchased Entities are being acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company will acquire 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company will also acquire 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The closing of the OFIT Transaction is subject to certain customary conditions including the receipt of consents from lenders to the Purchased Entities, landlords for the leases of the solar sites and shareholders of the Purchased Entities. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and will indirectly receive one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.
Risk Factors
Readers are cautioned that the risk factors discussed above in this MD&A are not exhaustive. Readers should also carefully consider the matters discussed under the heading, “Forward Looking Information”, in this MD&A and under the heading, “Risk Factors”, in the Company’s Annual Information Form for the year ended June 30, 2023 and filed on SEDAR+ at www.sedarplus.com.
Forward-Looking Statements
This MD&A contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this MD&A contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s expectations about its liquidity and sufficient of working capital for the next twelve months of operations; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this MD&A; the reduction of carbon emissions; the receipt of incentives for the projects; the expected value of EPC Contracts; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Approval
The Board of Directors of the Company has approved the disclosure contained in this MD&A.
Exhibit 99.83
SolarBank to Acquire 2.5 MW Solar Sites in Ontario
● Continued Growth of SolarBank’s Independent Power Producer Portfolio
● Projects have been in operation for seven years.
Toronto, Ontario, October 24, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of SolarBank (the “Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017.
“We are strategically acquiring solar power projects as an independent power producer to drive steady growth,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “Our focus on sustainability ensures a responsible approach to energy. With each project, we are contributing to a cleaner and more sustainable future, one step at a time.”
Pursuant to the terms of the SPAs, SolarBank will acquire 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company will also acquire 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The closing of the Transaction is subject to certain customary conditions including the receipt of consents from lenders to the Purchased Entities, landlords for the leases of the solar sites and shareholders of the Purchased Entities.
Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and will indirectly receive one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Transaction is exempt from the formal valuation requirements, the minority shareholder approval and information circular requirements of MI 61-101 pursuant to sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value of the consideration to be issued under the Transaction nor the consideration to be paid by the insiders will exceed 25% of the Company’s market capitalization. The Company will not file a material change report related to this Transaction more than 21 days before the expected closing of the Transaction as required by MI 61-101 since the Company wishes to close on an expedited basis for sound business reasons. The securities of the Company that will be acquired by the related party will be acquired pursuant to an exemption from the prospectus requirement in section 2.12 of National Instrument 45-106.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the closing of the transactions described in this news release; the satisfaction of closing conditions; the reduction of carbon emissions; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.84
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
SolarBank Corporation (the “Company” or “SolarBank”) 505 Consumers Road, Suite 803 Toronto, Ontario M2J 4V8 | |
| 2. | Date of Material Change |
| October 23, 2023 | |
| 3. | News Release |
| A news release was disseminated on October 24, 2023 via Cision. | |
| 4. | Summary of Material Change |
| The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of SolarBank (the “Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. | |
| 5.1 | Full Description of Material Change |
The Company has entered into the SPAs dated October 23, 2023 to acquire control of two corporations that hold the Projects for consideration of 278,875 Consideration Shares. The Purchased Entities have been operating the Projects since 2017.
Pursuant to the terms of the SPAs, SolarBank will acquire 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company will also acquire 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The closing of the Transaction is subject to certain customary conditions including the receipt of consents from lenders to the Purchased Entities, landlords for the leases of the solar sites and shareholders of the Purchased Entities.
Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and will indirectly receive one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Transaction is exempt from the formal valuation requirements, the minority shareholder approval and information circular requirements of MI 61-101 pursuant to sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value of the consideration to be issued under the Transaction nor the consideration to be paid by the insiders will exceed 25% of the Company’s market capitalization. The Company will not file a material change report related to this Transaction more than 21 days before the expected closing of the Transaction as required by MI 61-101 since the Company wishes to close on an expedited basis for sound business reasons. The securities of the Company that will be acquired by the related party will be acquired pursuant to an exemption from the prospectus requirement in section 2.12 of National Instrument 45-106. | |
| 5.2 | Disclosure for Restructuring Transactions |
| Not Applicable. |
| 2 |
| 6. | Reliance on Section 7.1(2) of National Instrument 51-102 |
| Not Applicable. | |
| 7. | Omitted Information |
| Not Applicable. | |
| 8. | Executive Officer |
The name and business number of the executive officer of the Company who is knowledgeable about the material change and this report is:
Sam Sun, Chief Financial Officer (416) 494-9559 sam.sun@solarbankcorp.com | |
| 9. | Date of Report |
| October 26, 2023 |
Forward-Looking Information
This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the closing of the transactions described in this report; the satisfaction of closing conditions; the reduction of carbon emissions; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
| 3 |
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.85
Exhibit 99.86
Exhibit 99.87
Exhibit 99.88
Exhibit 99.89
SolarBank Announces Fiscal Year End Results and Provides Fiscal 2024 Revenue Guidance
| ● | Revenue for the fiscal year of $18.4 million | |
| ● | Net income for the fiscal year of $2.2 million or $0.11 per share (undiluted) | |
| ● | Cash and short-term investments of $7.3 million | |
| ● | Revenue guidance of $45 million to $50 million for the fiscal year ended June 30, 2024 |
Toronto, Ontario, October 30, 2023 — SolarBank Corporation (CSE: SUNN) (OTCQX: SUUNF) (FSE: GY2) (“SolarBank” or the “Company”) today reported results for the fiscal year ended June 30, 2023. All financial figures are in Canadian dollars and in accordance with International Financial Reporting Standards (IFRS) as presented in the interim consolidated financial statements.
Fiscal Year Highlights (All Amounts are for the Twelve Month Period ended June 30, 2023)
| ● | Revenue of $18.4 million; | |
| ● | Cash flow from operating activities of $2.2 million; | |
| ● | Net income of $2.2 million; | |
| ● | Net income of $0.11 per share (undiluted); | |
| ● | Cash and short-term investments of $7.3 million; | |
| ● | Six projects have reached permission to operate (PTO); and | |
| ● | Mobilization underway and construction commenced on Manlius (5.7 MWdc) and Geddes (3.8 MWdc) projects in New York. |
“I am very excited with our year end results as SolarBank has doubled its revenues from the prior fiscal year and achieved profitability,” stated Dr. Richard Lu, Chief Executive Officer of SolarBank Corporation. “Subsequent to year end we have announced over $92 million(1) in new contracts and our revenue guidance for the fiscal year ended June 30, 2024 demonstrates an expected further doubling of SolarBank’s revenues.”
Summary of Annual Results (All Amounts are for the Twelve Month Period)
| Year Ended | June 30, 2023 | June 30, 2022 | ||||||
| Statement of Income and Comprehensive Income | ||||||||
| Total Revenue | $ | 18,397,509 | $ | 10,197,619 | ||||
| Cash flow from operating activities | $ | 2,241,986 | $ | (188,393 | ) | |||
| Net income | $ | 2,241,986 | $ | (188,393 | ) | |||
| Basic earnings per share | $ | 0.11 | $ | (0.01 | ) | |||
| Diluted earnings per share | $ | 0.06 | $ | (0.02 | ) | |||
The Company ended the 2023 fiscal year with $22.0 million in current assets, an increase of $13.1 million compared to year end June 30, 2022. The increase is mainly due to the increase in cash balances from financing activities and increased receivables and unbilled revenue.
Current liabilities increased from $3.4 million as of year ended June 30, 2022 to $7.0 million as of June 30, 2023, mainly due to an increase in trade and other payables, increase in unearned revenue, and increase in tax payable, offset by the repayment of a loan that was outstanding as of June 30, 2022.
For complete details please refer to the audited consolidated financial statements and associated Management Discussion and Analysis for the year ended June 30, 2023, available on SEDAR+ (www.sedarplus.com).
(1) In calculating the total contract value SolarBank has converted United States dollars to Canadian dollars at an exchange rate of 1.37.
2023 Year End Outlook
The Company is providing guidance of expected full year revenue in 2024 of between $45 million and $50 million. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2024 financial results for evaluating the performance of the Company’s business and is dated as of the date of this press release. This information may not be appropriate for other purposes. Information about the Company’s guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with “Forward-Looking Statements” in this press release and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause the Company’s actual future financial and operating results to differ from what it currently expects.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this press release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the megawatt capacity and type of future solar projects; the size of the Company’s development pipeline and future revenue guidance. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this press release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings. In addition, there are difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and government regulation that characterize the industries in which the Company operates.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.90
SolarBank Closes Acquisition of 2.5 MW Solar Sites in Ontario
● Continued Growth of SolarBank’s Independent Power Producer Portfolio
● Projects have been in operation for seven years
Toronto, Ontario, November 2, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has closed its previously announced acquisition of control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) were acquired pursuant to the terms of share purchase agreements (the “SPAs”) dated October 23, 2023. SolarBank has issued 278,875 common shares (the “Consideration Shares”) of SolarBank at a deemed value of $7.70 per share to the vendors (N. Fine Investments Limited and Linden Power Inc.) to complete the acquisition of the Purchased Entities (the “Transaction”). The Purchased Entities have been operating the Projects since 2017.
“I am very pleased to have completed the acquisition of these projects and our continued growth as an independent power producer,” said Dr. Richard Lu, CEO of SolarBank. “These are long life assets that have favorable feed in tariff rates until 2036 and these projects aren’t just power sources; they are beacons of sustainability, generating not only electricity but also long-term, recurring revenue that will empower us to continue driving positive change.”
Pursuant to the terms of the SPAs, SolarBank acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. All voting shares of the Purchased Entities are now owned by SolarBank.
Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and has indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Transaction is exempt from the formal valuation requirements, the minority shareholder approval and information circular requirements of MI 61-101 pursuant to sections 5.5(a) and 5.7(1)(a) of MI 61-101, as neither the fair market value of the consideration to be issued under the Transaction nor the consideration to be paid to the Dr. Lu will exceed 25% of the Company’s market capitalization. The Company will not file a material change report related to this Transaction more than 21 days before the expected closing of the Transaction as required by MI 61-101 since the Company needed to close on an expedited basis for sound business reasons. The securities of the Company that were acquired by the related party were acquired pursuant to an exemption from the prospectus requirement in section 2.12 of National Instrument 45-106.
The Company will pay a cash advisory fee equal to 5% of the value of the Transaction to an arm’s length third party.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the reduction of carbon emissions; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.91
Exhibit 99.92
505 Consumers Road, Suite 803
Toronto, Ontario, Canada M2J 4V8
Tel: 416.494.9559
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual General and Special Meeting (the “Meeting”) of the Shareholders of SolarBank Corporation (the “Company”) will be held at the offices of the Company located at 505 Consumers Road, Suite 803, Toronto, Ontario, Canada M2J 4V8, Canada, on Thursday, December 14, 2023, at 10:00 a.m. (Eastern Time) for the following purposes:
| 1. | To receive and consider the audited consolidated financial statements of the Company for the year ending June 30, 2023 and the report of the auditors thereon. |
| 2. | To consider and, if thought fit, to pass a special resolution approving an amendment to Articles of Incorporation of the Company to set a new minimum and maximum number of directors, as more particularly described in the Information Circular (defined below). |
| 3. | To set the number of directors of the Company at four. |
| 4. | To elect Dr. Richard Lu, Paul Pasalic, Olen Aasen and Paul Sparkes as directors of the Company on the basis set forth in the accompanying information circular of the Company dated November 7, 2023 (the “Information Circular”). |
| 5. | To appoint MSLL CPA LLP, Chartered Professional Accountants, as auditors of the Company for the ensuing year and to authorize the directors to fix the auditor’s remuneration. |
| 6. | To approve the Company’s Share Compensation Plan and all unallocated entitlements under the Share Compensation Plan. |
| 7. | To transact such other business as may properly come before the Meeting or any adjournment or adjournments thereof. |
If you hold your Shares in a brokerage account, you are a non-registered shareholder (“Beneficial Shareholder”). Beneficial Shareholders who hold their Shares through a bank, broker or other financial intermediary should carefully follow the instructions found on the form of Proxy or VIF provided to them by their intermediary, in order to cast their vote, or in order to notify the Company if they plan to attend the Meeting.
DATED at Toronto, Ontario, this 7th day of November, 2023.
| BY ORDER OF THE BOARD OF DIRECTORS | |
| “Dr. Richard Lu” | |
| Dr. Richard Lu | |
| Chief Executive Officer |
505
Consumers Road, Suite 803
Toronto, Ontario, Canada M2J 4V8
Tel: 416.494.9559
INFORMATION
CIRCULAR
As at November 7, 2023 unless otherwise noted
FOR THE ANNUAL GENERAL AND SPECIAL MEETING
OF THE SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 2023
SOLICITATION OF PROXIES
This information circular is furnished in connection with the solicitation of proxies by the management of SolarBank Corporation (the “Company”) for use at the Annual General and Special Meeting (the “Meeting”) of the Shareholders of the Company to be held at the time and place and for the purposes set forth in the Notice of Meeting and at any adjournment thereof.
PERSONS OR COMPANIES MAKING THE SOLICITATION
The enclosed Instrument of Proxy is solicited by management of the Company (“Management”). Solicitations will be made by mail and possibly supplemented by telephone or other personal contact to be made without special compensation by regular officers and employees of the Company. The Company does not reimburse Shareholders’ nominees or agents (including brokers holding shares on behalf of clients) for the cost incurred in obtaining from their principals, authorization to execute the Instrument of Proxy. No solicitation will be made by specifically engaged employees or soliciting agents. The cost of solicitation will be borne by the Company. None of the directors of the Company have advised that they intend to oppose any action intended to be taken by Management as set forth in this Information Circular.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the accompanying Instrument of Proxy are directors or officers of the Company and are nominees of Management. A Shareholder has the right to appoint a person to attend and act for him/her on his/her behalf at the Meeting other than the persons named in the enclosed Instrument of Proxy. To exercise this right, a Shareholder should strike out the names of the persons named in the Instrument of Proxy and insert the name of his/her nominee in the blank space provided, or complete another proper form of Instrument of Proxy. The completed Instrument of Proxy should be deposited with the Company’s Registrar and Transfer Agent, Endeavor Trust Corporation (the “Transfer Agent”), located at Suite 702 - 777 Hornby Street, Vancouver, BC, V6Z 1S4, or online: www.eProxy.ca, in either case at least 48 hours before the time of the Meeting or any adjournment thereof, excluding Saturdays, Sundays and holidays.
The Instrument of Proxy must be dated and be signed by the Shareholder or by his/her attorney in writing, or, if the Shareholder is a Company, it must either be under its common seal or signed by a duly authorized officer.
In addition to revocation in any other manner permitted by law, a Shareholder may revoke a Proxy either by (a) signing a Proxy bearing a later date and depositing it at the place and within the time aforesaid, or (b) signing and dating a written notice of revocation (in the same manner as the Instrument of Proxy is required to be executed as set out in the notes to the Instrument of Proxy) and either depositing it at the place and within the time aforesaid or with the Chair of the Meeting on the day of the Meeting or on the day of any adjournment thereof, or (c) registering with the Scrutineer at the Meeting as a Shareholder present in person, whereupon such Proxy shall be deemed to have been revoked.
| - 2 - |
NON-REGISTERED HOLDERS OF COMPANY’S SHARES
Only Shareholders whose names appear in the Company’s Shareholder’s Register (the “Registered Shareholders”) or duly appointed proxyholders are permitted to vote at the Meeting. Shareholders who do not hold their common shares (“Common Shares”) in their own name (“Beneficial Shareholders”) are advised that only proxies from Shareholders of record can be recognized and voted at the Meeting. Beneficial Shareholders who complete and return an Instrument of Proxy must indicate thereon the person (usually a brokerage house) who holds their Common Shares as registered Shareholder. Every intermediary (broker) has its own mailing procedure, and provides its own return instructions, which should be carefully followed. The form of proxy supplied to Beneficial Shareholders is similar to that provided to Registered Shareholders. However, its purpose is limited to instructing the registered Shareholder how to vote on behalf of the Beneficial Shareholder. Management of the Company does not intend to pay for intermediaries to forward to objecting beneficial owners under National Instrument 54-101 the proxy-related materials and Form 54-101F7 – Request for Voting Instructions Made by Intermediary, and in case of an objecting beneficial owner, the objecting beneficial owner will not receive the materials unless the objecting beneficial owner’s intermediary assumes the cost of delivery.
If Common Shares are listed in an account statement provided to a Shareholder by a broker, then in almost all cases those Common Shares will not be registered in such Shareholder’s name on the records of the Company. Such Common Shares will more likely be registered under the name of the Shareholder’s broker or agent of that broker. In Canada, the vast majority of such Common Shares are registered under the name of CDS & Co. (the registration for the Canadian Depository for Securities, which company acts as nominee for many Canadian brokerage firms). Common shares held by brokers or their nominees can only be voted (for or against resolutions) upon the instructions of the Beneficial Shareholder. Without specific instructions, brokers/nominees are prohibited from voting shares for their clients. The directors and officers of the Company do not know for whose benefit the Common Shares registered in the name of CDS & Co. are held.
In accordance with National Instrument 54-101 of the Canadian Securities Administrators, the Company has distributed copies of the Notice of Meeting, this Information Circular and the Instrument of Proxy to the clearing agencies and intermediaries for onward distribution. Applicable regulatory policy requires intermediaries/brokers to seek voting instructions from Beneficial Shareholders in advance of Shareholders’ meetings unless the Beneficial Shareholders have waived the right to receive meeting materials. Every intermediary/broker has its own mailing procedures and provides its own return instructions, which should be carefully followed by Beneficial Shareholders in order to ensure that their Common Shares are voted at the Meeting. Often the form of proxy supplied to a Beneficial Shareholder by its broker is identical to the Instrument of Proxy provided by the Company to the Registered Shareholders. However, its purpose is limited to instructing the Registered Shareholder how to vote on behalf of the Beneficial Shareholder. Should a Beneficial Shareholder receive such a form and wish to vote at the Meeting, the Beneficial Shareholder should strike out the Management proxyholder’s name in the form and insert the Beneficial Shareholder’s name in the blank provided. The majority of brokers now delegate the responsibility for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“Broadridge”). Broadridge typically applies a special sticker to the proxy forms, mails those forms to the Beneficial Shareholders and requests Beneficial Shareholders to return the proxy forms to Broadridge. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Common Shares to be represented at the Meeting. A Beneficial Shareholder receiving a proxy with a Broadridge sticker on it cannot use that proxy to vote Common Shares directly at the Meeting – the proxy must be returned to Broadridge well in advance of the Meeting in order to have the Common Shares voted. All references to Shareholders in this Information Circular and the accompanying Instrument of Proxy and Notice of Meeting are to Shareholders of record unless specifically stated otherwise.
| - 3 - |
VOTING OF SHARES AND EXERCISE OF DISCRETION OF PROXIES
On any poll, the persons named in the enclosed Instrument of Proxy will vote the shares in respect of which they are appointed and, where directions are given by the Shareholder in respect of voting for or against any resolution, will do so in accordance with such direction.
If no choice is specified on the proxy with respect to a matter to be acted upon, the proxy confers discretionary authority with respect to the matter upon the proxyholder named on the Instrument of Proxy. In the absence of any direction in the Instrument of Proxy, it is intended that the proxyholder named by Management in the Instrument of Proxy will vote the shares represented by the proxy in favour of the motions proposed to be made at the Meeting as stated under the headings in this Information Circular. The Instrument of Proxy enclosed, when properly signed, confers discretionary authority with respect to amendments or variations to any matters which may properly be brought before the Meeting.
At the time of printing of this Information Circular, the Management of the Company is not aware that any such amendments, variations or other matters are to be presented for action at the Meeting. However, if any other matters which are not now known to the Management should properly come before the Meeting, the Proxies hereby solicited will be exercised on such matters in accordance with the best judgement of the nominee.
FINANCIAL STATEMENTS
The audited financial statements of the Company for the year ended June 30, 2023 will be presented to the Shareholders at the Meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
At November 7, 2023 the Company had 27,136,075 Common Shares without par value issued and outstanding. All Common Shares in the capital of the Company are of the same class and each carries the right to one vote. The quorum for a meeting of Shareholders is shareholders present in person or represented by proxy holding at least five percent (5%) of the Common Shares entitled to vote at a meeting of shareholders (unless a greater number of shareholders and/or a greater number of shares are required to be represented by the Business Corporations Act (Ontario) (the “OBCA”) or the articles or any other by-law).
November 7, 2023 has been determined as the record date as of which Shareholders are entitled to receive notice of and attend and vote at the Meeting. Shareholders desiring to be represented by proxy at the Meeting must deposit their proxies at the place and within the time set forth in the notes to the Instrument of Proxy in order to entitle the person duly appointed by the proxy to attend and vote thereat.
To the knowledge of the directors and senior officers of the Company, as at November 7, 2023, no Shareholder beneficially owns or controls, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to the Common Shares of the Company.
NUMBER OF DIRECTORS AND ELECTION OF DIRECTORS
Approval of Article Amendment
At the Meeting, Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution (the “Amendment Resolution”) to approve an amendment (the “Amendment”) to the Company’s Articles of the Incorporation (“Articles”) to set a new minimum and maximum number of directors.
| - 4 - |
The Company is proposing an Amendment to the Articles to set the minimum number of directors at three and maximum number of directors at ten. The OBCA provides that any amendment to the Articles to increase or decrease the minimum or maximum number of directors of the Company requires the approval of the Company’s shareholders by a special resolution.
On November 7, 2023, the Board of Directors of the Company unanimously approved the Amendment to the Articles, determined that the Amendment is in the best interests of the Company and recommended that Shareholders vote in favour of the Amendment Resolution.
Amendment Resolution
At the Meeting, Shareholders will be asked to consider and, if deemed advisable, to approve the following Amendment Resolution in order to approve and ratify the Articles, as amended by the Amendment:
“RESOLVED, as a special resolution of the Shareholders of the Company, that:
| 1. | The amendment to the articles of incorporation (the “Articles”) of the Company to set the minimum number of directors at three and maximum number of directors at ten, be approved, ratified and confirmed. |
| 2. | Any one director or officer of the Company be and is hereby authorized to take all necessary steps and proceedings, and to execute and deliver and file any and all applications, declarations, documents and other instruments and do all such acts and things (whether under corporate seal of the Company or otherwise) that may be necessary or desirable to give effect to the provisions of these resolutions.” |
The Amendment Resolution must be passed, with or without variation, by at least 662/3 per cent of the votes cast by the holders of Common Shares, present in person or represented by proxy in respect of the Amendment Resolution at the Meeting. If the Amendment Resolution is not approved at the Meeting, the amended Articles will not be adopted by the Company.
Management recommends that Shareholders vote in favour of the Amendment Resolution. In the absence of contrary instruction, the persons named in the enclosed Instrument of Proxy intend to vote for the approval of the Amendment Resolution.
Election of Directors
The persons named in the enclosed Instrument of Proxy intend to vote in favour of the special resolution fixing the number of directors on the board of directors of the Company (the “Board of Directors”) at four (4). Each director of the Company is elected annually and holds office until the next Annual General Meeting unless that person ceases to be a director before then. Management of the Company proposes to nominate the persons herein listed for election as directors of the Company to serve until their successors are elected or appointed. In the absence of instructions to the contrary, the Common Shares represented by proxy will, on a poll, be voted for the nominees herein listed. MANAGEMENT OF THE COMPANY DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE AS A DIRECTOR. IN THE EVENT THAT PRIOR TO THE MEETING ANY VACANCIES OCCUR IN THE SLATE OF NOMINEES HEREIN LISTED, IT IS INTENDED THAT DISCRETIONARY AUTHORITY SHALL BE EXERCISED BY MANAGEMENT TO VOTE THE PROXY ON ANY POLL FOR THE ELECTION OF ANY PERSON OR PERSONS AS DIRECTOR UNLESS THE SHAREHOLDER HAS SPECIFIED OTHERWISE IN THE PROXY. UNLESS AUTHORITY TO DO SO IS WITHHELD, THE PERSONS NAMED IN THE ACCOMPANYING INSTRUMENT OF PROXY INTEND TO VOTE FOR THE ELECTION OF ALL OF THE NOMINEES.
| - 5 - |
The following table sets out the names of the persons to be nominated for election as directors, the positions and offices which they presently hold with the Company, their respective principal occupations or employment during the past five years if such nominee is not presently an elected director and the number of Common Shares of the Company which each beneficially owns, directly or indirectly, or over which control or direction is exercised as of the date of this Information Circular:
Name, Province or State and Country of Ordinary Residence of Nominee(4) and Present Positions with the Company |
Principal Occupation and, if not a Presently Elected Director, Occupation during the last Five Years(5) | Period from which Nominee has been a Director | Number of Common Shares Held(1)(2) | |||
| Dr.
Richard Lu Ontario, Canada Director, President & Chief Executive Officer |
President and Chief Executive Officer of the Company since 2014 | August 1, 2014 | 803,146(5) | |||
| Paul
Pasalic(3) London, UK Director |
Managing Director, Head of Legal (Europe) – Private Equity Transactions, with Hudson Advisors since 2019; Associate lawyer with Shearman & Sterling LLP from 2012 to 2019. | November 3, 2022 | 53,000 | |||
| Olen
Aasen(3) British Columbia, Canada Director |
Practicing corporate and securities lawyer since 2007. | November 3, 2022 | 150,000 | |||
| Paul
Sparkes(3) Ontario, Canada Director |
Corporate director and President of Otterbury Holdings Inc., a corporation advising growth entities in private and public markets. | November 3, 2022 | Nil |
| (1) | Common shares beneficially owned, directly and indirectly, or over which control or direction is exercised, at the date hereof, based upon the information furnished to the Company by individual directors and officers. Unless otherwise indicated, such Common Shares are held directly. These figures do not include Common Shares that may be acquired on the exercise of any share purchase warrants or stock options held by the respective directors or officers. |
| (2) | The directors, and nominees, as a group beneficially own, directly or indirectly, 1,006,146 Common Shares of the Company representing 3.7% of the total issued and outstanding Common Shares of the Company. |
| (3) | Current Member of the Audit Committee of the Company and the Special Committee of the Company. |
| (4) | The information as to country of residence and principal occupation, not being within the knowledge of the Company, has been furnished by the respective directors individually. |
| (5) | 773,200 Common Shares are held by 2384449 Ontario Inc., a corporation controlled by Dr. Richard Lu. |
Pursuant to the applicable securities legislation, the Company is required to have an audit committee. The general function of the audit committee is to review the overall audit plan and the Company’s system of internal controls, to review the results of the external audit, and to resolve any potential dispute with the Company’s auditors.
The audit committee of the Company currently consists of Paul Pasalic, Olen Aasen and Paul Sparkes. The members of the audit committee of the Company will be determined following the Meeting at the discretion of the Board of Directors and in accordance with applicable corporate and securities law. Aside from the audit committee, there is only one other standing committee of the Board of Directors which is the Special Committee that was established to review the OFIT Transaction discussed under “Interest of Informed Persons in Material Transactions”.
| - 6 - |
PENALTIES AND SANCTIONS
Except as disclosed below, no proposed director of the Company is, or within the 10 years prior to the date of this Information Circular, has been, a director, chief executive officer or chief financial officer of any company that while that person was acting in that capacity:
| (a) | was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or |
| (b) | was the subject of a cease trade order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 days, that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer, that resulted from an event that occurred while that person was acting in such capacity. |
No proposed director of the Company is, or within the 10 years prior to the date of this Information Circular, has been, a director or executive officer of any company that while that person was acting in that capacity or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No proposed director has individually, within the 10 years prior to this Information Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, officer or Shareholder.
No proposed director of the Company has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.
By Order of the Supreme Court of Newfoundland and Labrador (the “Court”) dated June 17, 2020, Deloitte Restructuring Inc. (“Deloitte”) was appointed as the receiver and manager (the “Receiver”) of all current and future assets, undertakings, and properties of the Kami Mine Limited Partnership, Kami General Partner Limited, and Alderon Iron Ore Corp. The receivership was initiated by a secured creditor of the Kami Mine Limited Partnership after its failure to refinance the secured debt due to the COVID-19 pandemic. Mr. Aasen was Corporate Secretary of Alderon Iron Ore Corp. and Secretary and a Director of Kami General Partner Limited until April 28, 2020.
On February 5, 2016, the British Columbia Securities Commission issued a cease trade order against Ziplocal Inc. for failure to file its annual audited financial statements and MD&A. The required documents were filed and the order was subsequently revoked on March 11, 2016. Mr. Paul Sparkes was a director of Ziplocal Inc. during this period.
APPOINTMENT AND REMUNERATION OF AUDITOR
MSLL CPA LLP, Chartered Accountants, of Vancouver, British Columbia were appointed on December 10, 2021, and are the current Auditors of the Company. The persons named in the enclosed Instrument of Proxy will vote for the appointment of MSLL CPA LLP, Chartered Accountants, of Vancouver, British Columbia, as Auditors of the Company, to hold office until the next Annual General Meeting of the Shareholders at remuneration to be fixed by the directors.
| - 7 - |
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
Approval and Ratification of Share Compensation Plan
At the Meeting, Shareholders will be asked to consider, and if thought advisable, approve the Company’s Share Compensation Plan (the “Plan”). The Company has no other incentive plans other than its Share Compensation Plan. The Plan is a 20% “rolling” plan pursuant to which the total number of Common Shares reserved and available for grant and issuance pursuant to the exercise of Company options (“Options”) and settlement of Company restricted share units (“RSUs”), each under the Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares from time to time. A detailed description of the Plan is set out in “Schedule “A” Form 51-102F6V – Statement of Executive Compensation – Stock Option Plan and Other Incentive Plans.”
The Plan is an evergreen plan which provides that if any option has been exercised, then the number of Common Shares into which such option or RSU was exercised shall become available to be issued upon the exercise of options subsequently granted under the Plan.
As at the date of this Information Circular, the Company has 2,759,000 options outstanding representing approximately 10.16% of the current number of issued and outstanding Common Shares and 265,000 RSUs representing approximately 0.98% of the current number of issued and outstanding Common Shares. Assuming the approval of the Plan, 2,403,215 Common Shares will be available to be granted under the Plan, representing approximately 8.86% of the current number of issued and outstanding Common Shares.
The rules of the Canadian Securities Exchange (“CSE”) require that, if a listed issuer has a security based compensation arrangement that does not have a fixed maximum aggregate number of securities issuable under such plan (an evergreen plan), the shareholders of the listed issuer must approve and re-affirm the unallocated options under the plan every three years. Shareholders will be asked to consider and, if thought advisable, pass an ordinary resolution approving the Plan and all unallocated options and RSUs under such plan (the “Plan Resolution”). The Plan Resolution requires the approval of a simple majority of the votes cast by Shareholders voting in person or by proxy at the Meeting.
If the Plan Resolution is passed, this approval will be effective until December 14, 2026. If approval is not obtained at the Meeting, options and RSUs which have not been allocated as of December 14, 2023 will not be available for grant. Previously allocated options and RSUs will be unaffected, but will not be available to be reallocated.
At the Meeting Shareholders will be asked to consider and approve the following Plan Resolution, with or without modification:
“RESOLVED, as an Ordinary Resolution, that:
| 1. | The Plan and all unallocated options and restricted share units issuable pursuant to the Plan be and are hereby approved and authorized until December 14, 2026, being the date that is three years from Shareholder approval of the Plan; |
| 2. | The Company be and is hereby authorized to grant stock options and restricted share units pursuant to and subject to the terms and conditions of the Plan entitling the option holders to purchase Common Shares of the Company; |
| 3. | The Company be and is hereby authorized to abandon or terminate all or any part of the adoption of the Plan, if the Board of Directors of the Company deems it appropriate and in the best interest of the Company to do so; and |
| 4. | Any one director or officer of the Company be and is hereby authorized and directed to do all such acts and things and to execute and deliver, under the corporate seal of the Company or otherwise, all such deeds, documents, instruments and assurances as in his or her opinion may be necessary or desirable to give effect to the foregoing resolutions.” |
| - 8 - |
The foregoing resolution must be approved by a simple majority of Shareholders.
The full text of the Plan will be available for review at the Meeting and may be obtained at the offices of the Company located at 505 Consumers Road, Suite 803, Toronto, Ontario, Canada M2J 4V8, or by contacting the Company by telephone at 416.494.9559, at any time before the Meeting.
Management recommends that Shareholders vote in favour of the resolution to approve the Plan. In the absence of contrary instruction, the persons named in the enclosed Instrument of Proxy intend to vote for the approval of the Plan Resolution at the Meeting.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as disclosed elsewhere in this Information Circular, none of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company’s last completed financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Other than as disclosed below and transactions carried out in the ordinary course of business of the Company or its subsidiary, none of the directors or executive officers of the Company, any shareholder directly or indirectly beneficially owning, or exercising control or direction over, more than 10% of the outstanding Common Shares, nor an associate or affiliate of any of the foregoing persons has had, during the most recently completed financial year of the Company or during the current financial year, any material interest, direct or indirect, in any transactions that materially affected or would materially affect the Company or its subsidiary.
In 2021, the Company entered into a term loan agreement with Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company (Address: 505 Consumers Road, Suite 803, Toronto, Ontario, Canada M2J 4V8), for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.
The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company at a deemed price of $7.70 per share for total consideration of $2,147,337.50 (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The acquisition of the Purchased Entities closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. (the “Vendors”) Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company (Address: 505 Consumers Road, Suite 803, Toronto, Ontario, Canada M2J 4V8), is a shareholder of the Vendors and as result indirectly received one-third of the Consideration Shares.
| - 9 - |
STATEMENT OF EXECUTIVE COMPENSATION
A copy of the Statement of Executive Compensation is attached as Schedule “A” to this Information Circular.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets out particulars of the compensation plans and individual compensation arrangements under which equity securities of the Company are authorized for issuance as of June 30, 2023.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plans approved by securityholders(1) | Nil | Nil | Nil | |||||||||
| Equity compensation plans not approved by securityholders | 3,024,000 | $ | 0.75 | 2,336,000 | ||||||||
| Total | 3,024,000 | $ | 0.75 | 2,336,000 | ||||||||
| (1) | As of June 30, 2023 the Company had a “rolling” share compensation plan that reserves 20% of the Company’s outstanding Common Shares from time to time for issuance as stock options or restricted share units. |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Other than routine indebtedness, no current or former director, executive officer or senior officer of the Company, employee or any proposed nominee for election as a director of the Company, or any associate or affiliate of any such director, executive officer or senior officer, employee or proposed nominee, is or has been indebted to the Company or any of its subsidiaries, or to any other entity that was provided a guarantee or similar arrangement by the Company or any of its subsidiaries in connection with the indebtedness, at any time since the beginning of the most recently completed financial year of the Company.
MANAGEMENT CONTRACTS
The management functions of the Company are not to any substantial degree performed by any person other than the executive officers and Directors of the Company. The Company has not entered into any contracts, agreements or arrangements with parties other than its Directors and executive officers for the provision of such management functions.
AUDIT COMMITTEE
For information regarding the Audit Committee, see the Company’s annual information form (the “AIF”) for the year ended June 30, 2023 under the heading, “Audit Committee”. The AIF is available under the Company’s profile at www.sedarplus.com.
| - 10 - |
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Canadian Securities Administrators have introduced in final form National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”) and National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”). The Company has reviewed its own corporate governance practices in light of the NP 58-201 guidelines. In certain cases, the Company’s practices comply with NP 58-201, however, the Board of Directors considers that some of the guidelines are not suitable for the Company at its current stage of development and therefore certain guidelines have not been adopted.
Set out below is a description of certain corporate governance practices of the Company, as required by NI 58-101. As the Company is a “venture issuer” it is disclosing its corporate governance practices in accordance with the disclosure items set out in Form 58-101F2.
Board of Directors
NP 58-201 recommends that boards of directors of reporting issuers be composed of a majority of independent directors. NI 52-110 sets out the standard for director independence. Under NI 52-110, a director is independent if he or she has no direct or indirect material relationship with the Company. A material relationship is a relationship which could, in the view of the Board of Directors, be reasonably expected to interfere with the exercise of a director’s independent judgment. During the last financial year, the Board of Directors was not composed of a majority of independent directors: Dr. Richard Lu, Paul Pasalic, Olen Aasen and Paul Sparkes. Dr. Richard Lu is the Chief Executive Officer of the Company and therefore not considered to be independent. Mr. Aasen receives a consulting fee from the issuer for the provision of legal services and therefore is not independent.
The proposed Board of Directors is Dr. Richard Lu, Paul Pasalic, Olen Aasen and Paul Sparkes. As discussed above, Mr. Pasalic and Mr. Sparkes are considered independent. The Board of Directors believes that management is effectively supervised by the non-management directors of the Company, on an informal basis, as the non-management directors are involved in reviewing the operations of the Company and have full access to management.
During the year ended June 30, 2023, the independent directors did not hold regularly scheduled meetings at which the non-independent directors and members of management are not in attendance. The Company does not currently have a Chair or Lead Director. To facilitate the Board operating independently of Management, the following processes are in place:
| ● | the Board can hold in-camera meetings with the non-management directors; |
| ● | at Board meetings, members of management, including the Chief Executive Officer, are not present for the discussion and determination of certain matters; and |
| ● | under the Company’s Articles any one director may call a Board meeting. |
Directorships
Currently, the following directors serve on the following boards of directors of other public companies:
| Director | Reporting Issuer Board Membership | |
| Dr. Richard Lu | None | |
| Paul Pasalic | None | |
| Olen Aasen | Draganfly Inc. The Good Flour Corp. | |
| Paul Sparkes | The
Good Flour Corp. Vortex Energy Corp. |
| - 11 - |
Orientation and Continuing Education
The Company provides an orientation program to new directors. This program consists of providing education regarding directors’ responsibilities, corporate governance issues, the audit committee charter, and recent and developing issues related to corporate governance and regulatory reporting. The Company also encourages senior management to participate in professional development programs and courses and supports Management’s commitment to training and developing employees. The Board of Directors provides comprehensive information regarding the Company to new directors and continuing education for directors on an ad hoc basis in respect of issues that are necessary for them to understand to meet their obligations as directors.
Ethical Business Conduct
The Board of Directors expects Management to operate the business of the Company in a manner that enhances shareholder value and is consistent with the highest level of integrity. Management is expected to execute the Company’s business plan and to meet performance goals and objectives. The Board of Directors has adopted a formal written Code of Business Conduct and Ethics (the “Code”) which is available on SEDAR+ at www.sedarplus.com.
The Board endeavors to ensure that directors, officers and employees exercise independent judgement in considering transactions and agreements in respect of which a director, officer or employee of the Company has a material interest, which include ensuring that directors, officers and employees are thoroughly familiar with the Code and, in particular, the rules concerning reporting conflicts of interest. In addition, in accordance with the Business Corporations Act (Ontario), if a director is a director or officer of, or has a material interest in, any person who is a party to a transaction or proposed transaction with the Company, that director is not entitled to vote on any directors’ resolutions in respect of such transaction, in most circumstances. The Board monitors conflicts of interest of both the Board of Directors and Management in accordance with the Code.
Nomination of Directors
The Company does not at this time have a specific committee responsible for the nomination of directors. The Board of Directors determines new nominees to the Board of Directors, although a formal process has not been adopted. The nominees are generally the result of recruitment efforts by the Board of Directors members, including both formal and informal discussions among Board of Directors members and the CEO. Proposed directors’ credentials are reviewed in advance of a Board of Directors meeting with one or more members of the Board of Directors prior to the proposed director’s nomination.
Compensation
During the financial year ended June 30, 2023, the Board of Directors did not have a compensation committee. The quantity and quality of the directors’ and executive officers’ compensation is reviewed and determined by the Board of Directors as a whole. Further details about the Company’s compensation practices are disclosed in the Company’s Statement of Executive Compensation for the year ended June 30, 2023 attached as Schedule “A” to this Information Circular.
| - 12 - |
Other Board Committees
The Company does not have any standing committees other than the Audit Committee and the Special Committee the Special Committee that was established to review the OFIT Transaction discussed under “Interest of Informed Persons in Material Transactions”.
Assessments
The Board of Directors does not, at present, have a formal process in place for assessing the effectiveness of the Board of Directors as a whole, its committees or individual directors, but will consider implementing one in the future should circumstances warrant.
OTHER MATTERS
It is not known if any other matters will come before the Meeting other than set forth above and in the Notice of Meeting, but if such should occur, the persons named in the accompanying Proxy intend to vote on any poll, on such matters in accordance with their best judgment, exercising discretionary authority with respect to amendments or variations of matters identified in the Notice of Meeting and other matters which may properly come before the Meeting or any adjournment thereof.
ADDITIONAL INFORMATION
Additional information regarding the Company is available on SEDAR+ at www.sedarplus.com. Shareholders can obtain copies of the Company’s financial statements and management discussion and analysis of financial results by sending a request in writing to the Company at 505 Consumers Road, Suite 803, Toronto, Ontario, Canada M2J 4V8. Financial information regarding the Company is provided in the Company’s audited comparative financial statements for the years ended June 30, 2023 and 2022 and in the accompanying management discussion and analysis, both of which are available on SEDAR+ at www.sedarplus.com.
DATED at Toronto, Ontario, this 7th day of November, 2023.
| “Dr. Richard Lu” | |
| Dr. Richard Lu | |
| Chief Executive Officer |
SCHEDULE
“A”
to the Information Circular as at November 7, 2023 of
SolarBank Corporation
SOLARBANK CORPORATION
(the “Company”)
FORM 51-102F6V
STATEMENT
OF EXECUTIVE COMPENSATION
(For the Year Ended June 30, 2023)
GENERAL
The following information is provided as required under Form 51-102F6V for Venture Issuers (the “Form”), as such term is defined in National Instrument 51-102.
For the purposes of this Form, a “Named Executive Officer”, or “NEO”, means each of the following individuals:
| (a) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief executive officer (“CEO”), including an individual performing functions similar to a CEO; |
| (b) | each individual who, in respect of the Company, during any part of the most recently completed financial year, served as chief financial officer (“CFO”), including an individual performing functions similar to a CFO; |
| (c) | in respect of the company and its subsidiaries, the most highly compensated executive officer other than the individuals identified in paragraphs (a) and (b) at the end of the most recently completed financial year whose total compensation was more than $150,000, as determined in accordance with subsection 1.3(5) of Form 51-102F6V, for that financial year; |
| (d) | each individual who would be a NEO under paragraph (c) but for the fact that the individual was not an executive officer of the Company, and was not acting in a similar capacity, at the end of that financial year. |
DIRECTOR AND NEO COMPENSATION
Director and NEO Compensation, Excluding Options and Compensation Securities
The following table of compensation, excluding options and compensation securities, provides a summary of the compensation paid by the Company to each NEO and director of the Company for the two most recently completed financial years ended June 30, 2023 and 2022. Options and compensation securities are disclosed under the heading “Stock Options and Other Compensation Securities and Instruments” of this Form.
| - 2 - |
| Table of Compensation, Excluding Compensation Securities | ||||||||||||||||||||||
| Name and position | Year (1) | Salary, consulting fee, retainer or commission ($)(2) | Bonus ($)(2) | Committee or meeting fees ($)(2) | Value of perquisites ($)(2) | Value of all other compensation ($)(2) | Total compensation ($)(2) | |||||||||||||||
| Dr. Richard Lu(3)
| 2023 | $ | 414,000 | $ | 206,830 | Nil | Nil | Nil | $ | 620,830 | ||||||||||||
| President, Chief Executive Officer and Director | 2022 | $ | 469,731 | $ | 100,000 | Nil | Nil | Nil | $ | 569,731 | ||||||||||||
| Sam Sun(4) | 2023 | $ | 115,378 | $ | 24,615 | Nil | Nil | Nil | $ | 139,993 | ||||||||||||
| Chief Financial Officer | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
| Andrew van Doorn(5) | 2023 | $ | 327,230 | Nil | Nil | Nil | Nil | $ | 327,230 | |||||||||||||
| Chief Operating Officer | 2022 | $ | 249,995 | Nil | Nil | Nil | Nil | $ | 249,995 | |||||||||||||
| Tracy Zheng(6) | 2023 | $ | 188,400 | $ | 120,000 | Nil | Nil | Nil | $ | 308,400 | ||||||||||||
| Chief Administrative Officer | 2022 | $ | 188,400 | Nil | Nil | Nil | Nil | $ | 188,400 | |||||||||||||
Paul Pasalic(7) | 2023 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
| Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
Olen Aasen(8) | 2023 | $ | 42,000 | Nil | Nil | Nil | Nil | $ | 42,000 | |||||||||||||
| Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
Paul Sparkes(7) | 2023 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
| Director | 2022 | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||||
NOTES:
| (1) | Financial years ended June 30. |
| (2) | All amounts shown were paid in Canadian currency, the reporting currency of the Company. |
| (3) | Effective September 1, 2022 Light Voltaic Corporation (“LVC”) entered into a consulting agreement (the “Consulting Agreement”) with the Company to provide the services of Dr. Lu to the Company to act as Chief Executive Officer. LVC is paid annual consulting fees of $469,731 for the services of Dr. Lu. LVC is also eligible to receive a bonus of $100,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. Dr. Lu receives no compensation for his services as a director. The Company may terminate Dr. Lu’s consulting agreement by providing six months prior written notice. In the event that within one year of a “Change of Control” the consulting agreement is terminated by Dr. Lu for “Good Reason” or by the Company, then Dr. Lu is entitled to a payment equal to two years of consulting fees. A “Change of Control” is defined a transaction that results in: (i) the sale of all or substantially all of the Company’s assets; or (ii) the Company having a new Control Person, where “Control Person” means: a person who holds sufficient number of the voting rights attached to all outstanding voting securities of the Corporation to affect materially the control of the Corporation; or a combination of persons, acting in concert by virtue of an agreement, arrangement, commitment or understanding, which holds in total a sufficient number of the voting rights attached to all outstanding voting securities of the Corporation to affect materially the control of the Corporation; or a person, or combination of persons, who holds more than 35% of the voting rights attached to all outstanding voting securities of the Company, unless there is evidence that that person or combination of persons does not hold a sufficient number of the voting rights to control the Company. “Good Reason” is defined as, without the consultant’s written consent, the occurrence of any of the following circumstances: (i) reduction by the Company in the consulting fee; (ii) the failure of the consultant to be appointed or re-appointed to the position of Chief Executive Officer of the Company; (iii) a material diminution in the consultant’s duties or the assignment to the Consultant of any duties inconsistent with his position and status as Chief Executive Officer of the Company; (iv) a change in the consultant’s reporting relationship such that the consultant no longer reports directly to the Board of Directors of the Company; or (v) a relocation of place of work more than 50 kilometers from the Company’s head office at the relevant time. |
| (4) | Effective June 10, 2022, Mr. Sun entered into an employment agreement with the Company with an effective start date of July 4, 2022. Mr. Sun is paid an annual salary of $120,000 for his services as CFO. Mr. Sun is also eligible to receive a bonus of $20,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation. The Company may terminate the employment agreement by providing the notice or pay in lieu of notice required under the Employment Standards Act, 2000 (Ontario) which as of June 30, 2023 was two weeks notice or pay in lieu of notice. |
| - 3 - |
| (5) | Effective October 25, 2022, Mr. van Doorn entered into an employment agreement with the Company. Mr. van Doorn is paid an annual salary of $350,000 for his services as COO. Mr. van Doorn is also eligible to receive a bonus of $90,000 for every 10 MW, DC (cumulative) solar projects achieving commercial operation and $20,000 for every 10 MW, DC (cumulative) solar projects achieving NTP. The Company may terminate the employment agreement by providing twelve month’s notice or pay in lieu of notice plus a continuation of employee group benefits for the notice period. |
| (6) | Effective February 1, 2021 Ms. Zheng, through her personal company, entered into a consulting agreement with the Company. Ms. Zheng is paid annual consulting fees of $188,400 (plus applicable taxes) for her services as Chief Administrative Officer. The Company may terminate Ms. Zheng’s consulting agreement by providing one month’s prior written notice. |
| (7) | Mr. Pasalic and Mr. Sparkes were appointed as directors of the Company on November 3, 2022 and receive no compensation for their services as directors of the Company. |
| (8) | Mr. Aasen was appointed as a director on November 3, 2023. Mr. Aasen entered into a consulting agreement dated March 1, 2023 pursuant to which Mr. Aasen receives annual base fees of $126,000 plus applicable taxes. The Company may terminate Mr. Aasen’s consulting agreement by providing 90 days prior written notice. In the event that within one year of a “Change of Control” the consulting agreement is terminated by Mr. Aasen or by the Company, then Mr. Aasen is entitled to a payment equal to twelve months of consulting fees. “Change of Control” means: (i) the consummation of a merger, amalgamation, plan of arrangement or other transaction or series of related transactions resulting in the combination of Company with or into another entity, where the shareholders of the Company immediately prior to such transaction or series of transactions, directly or indirectly, do not continue to hold a majority voting interest in the continuing or surviving entity immediately following such transaction or series of related transactions; (ii) a sale or transfer of all or substantially all of the Company’s assets (other than a sale or transfer to a wholly-owned subsidiary of the Company); or (iii) a sale or transfer of all or substantially all of the shares in the capital of the Company. Mr. Aasen currently serves on the Board of Directors of the Company but is not compensated for his services as a director. |
Stock Options and Other Compensation Securities and Instruments
The following table of compensation securities provides a summary of all compensation securities granted or issued by the Company to each NEO and director of the Company for the financial year ended June 30, 2023, for services provided or to be provided, directly or indirectly, to the Company or any of its subsidiaries:
| Compensation Securities | ||||||||||||||||||
| Name and position | Type of compensation security (2) (3) | Number of compensation securities, number of underlying securities, and percentage) of class (1)) | Date of issue or grant | Issue, conversation or exercise price ($) | Closing price of security or underlying security on date of grant ($)(4) | Closing price of security or underlying security at year end ($) | Expiry Date | |||||||||||
| Dr. Richard Lu(5) President, Chief Executive Officer and Director | Stock Options | 550,000 (550,000 Common Shares (2.05%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
| Sam Sun(5) Chief Financial Officer | Stock Options | 149,000 (149,000 Common Shares (0.56%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
| Andrew van Doorn(5) Chief Operating Officer | Stock Options | 300,000 (300,000 Common Shares (1.12%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
| Tracy Zheng(5) Chief Administrative Officer | Stock Options | 300,000 (300,000 Common Shares (1.12%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
Paul Pasalic(5) Director | Stock Options | 15,000 (150,000 Common Shares (0.56%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
Olen Aasen(5) Director | Stock Options | 200,000 (200,000 Common Shares (0.75%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
Paul Sparkes(5) Director | Stock Options | 150,000 (150,000 Common Shares (0.56%)) | Nov. 4, 2022 | $ | 0.75 | N/A | $ | 9.03 | Nov. 4, 2027 | |||||||||
NOTES:
| (1) | As at June 30, 2023, 26,800,000 Common Shares were issued and outstanding. The total amount of compensation securities and underlying securities held by each NEO and director as at June 30, 2023 are as set forth in the table above. |
| (2) | No compensation security held by a NEO or director has been repriced, cancelled and replaced, had its term extended, or otherwise been modified during financial year ended June 30, 2023. |
| (3) | There are no restrictions or conditions for converting, exercising or exchanging the compensation securities. |
| (4) | The Common Shares were not listed for trading on the date of grant. |
| (5) | The compensation securities vest over a period of two years, with the first one-half vesting one year from the date of grant and the second one-half vesting two years from the date of the grant. |
| - 4 - |
The following table provides a summary of each exercise of compensation securities by each NEO and director of the Company for the financial year ended June 30, 2023:
| Exercise of Compensation Securities | ||||||||||||||
| Name and position | Type of compensation security | Number of underlying securities exercised(1) | Exercise price per security ($) | Date of exercise | Closing price per security on date of exercise ($) | Difference between exercise price and closing price on date of exercise ($) | Total value on exercise date ($) | |||||||
| Dr. Richard Lu, President, Chief Executive Officer and Director | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Sam Sun Chief Financial Officer | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Andrew van Doorn Chief Operating Officer | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Tracy Zheng Chief Administrative Officer | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Paul Pasalic Director | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Olen Aasen Director | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
| Paul Sparkes Director | Stock Options | Nil | N/A | N/A | N/A | N/A | N/A | |||||||
NOTES:
| (1) | No compensation securities were exercised by any NEOs or directors of the Company during the financial year ended June 30, 2023. |
Stock Option Plan and Other Incentive Plans
The Board of Directors has adopted the Share Compensation Plan under which RSUs and Options may be granted to the Company’s directors, officers, employees and consultants. The Share Compensation Plan provides participants (each, a “Participant”), who may include participants who are citizens or residents of the United States (each, a “US Participant”), with the opportunity, through RSUs and Options, to acquire an ownership interest in the Company. The RSUs will rise and fall in value based on the value of the Common Shares. Unlike the Options, the RSUs will not require the payment of any monetary consideration to the Company. Instead, each RSU represents a right to receive one Common Share following the attainment of vesting criteria determined at the time of the award. See “Restricted Share Units – Vesting Provisions” below. The Options, on the other hand, are rights to acquire Common Shares upon payment of monetary consideration (i.e., the exercise price), subject also to vesting criteria determined at the time of the grant. See “Options – Vesting Provisions” below.
Purpose of the Share Compensation Plan
The stated purpose of the Share Compensation Plan is to advance the interests of the Company and its subsidiaries, and its shareholders by: (a) ensuring that the interests of Participants are aligned with the success of the Company and its subsidiaries; (b) encouraging stock ownership by such persons; and (c) providing compensation opportunities to attract, retain and motivate such persons.
| - 5 - |
The following people are eligible to participate in the Share Compensation Plan: any officer or employee of the Company or any officer or employee of any subsidiary of the Company and, solely for purposes of the grant of Options, any director of the Company or any director of any subsidiary of the Company, and any Consultant (defined under the Share Compensation Plan as an individual (other than an employee or a director of the Company) or a corporation that is not a U.S. Person that: (A) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to an offer or sale of securities of the Company in a capital raising transaction, or services that promote or maintain a market for the Company securities; (B) provides the services under a written contract between the Company or the affiliate and the individual or the Company, as the case may be; (C) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or an affiliate of the Company; and (D) has a relationship with the Company or an affiliate of the Company that enables the individual to be knowledgeable about the business and affairs of the Company).
Administration of the Share Compensation Plan
The Share Compensation Plan is administered by the Board or such other persons as may be designated by the Board (the “Administrators”) based on the recommendation of the Board or the compensation committee of the Board, if applicable. The Administrators determine the eligibility of persons to participate in the Share Compensation Plan, when RSUs and Options will be awarded or granted, the number of RSUs and Options to be awarded or granted, the vesting criteria for each award of RSUs and grant of Options and all other terms and conditions of each award and grant, in each case in accordance with applicable securities laws and the requirements of the CSE.
Restrictions on the Award of RSUs and Grant of Options
The awards of RSUs and grants of Options under the Share Compensation Plan is subject to a number of restrictions:
| (a) | the total number of Common Shares reserved and available for grant and issuance pursuant to the exercise of Options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares from time to time; and |
| (b) | the number of Common Shares issuable pursuant to the exercise of Options under the Share Compensation Plan within a 12 month period to all eligible persons retained to provide investor relations activities (together with those Common Shares that are issued pursuant to any other Share Compensation Arrangement) shall not, at any time, exceed 1% of the issued and outstanding Common Shares. |
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of the Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may in their sole discretion make such changes or adjustments, if any, as the Administrators consider fair or equitable to reflect such change or event including, without limitation, adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto, as determined by the Administrators.
Mechanics for RSUs
RSUs awarded to Participants under the Share Compensation Plan are credited to an account that is established on their behalf and maintained in accordance with the Share Compensation Plan. After the relevant date of vesting of any RSUs awarded under the Share Compensation Plan, a Participant shall be entitled to receive and the Company shall issue or pay (at its discretion): (i) a lump sum payment in cash equal to the number of vested RSUs recorded in the Participant’s account multiplied by the volume weighted average price of the Common Shares traded on the CSE for the five consecutive trading days prior to the payout date; (ii) the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s RSUs in the Participant’s account will be, duly issued as fully paid and non assessable shares and such Participant shall be registered on the books of the Company as the holder of the appropriate number of Common Shares; or (iii) any combination of thereof.
| - 6 - |
Vesting Provisions for RSUs
The Share Compensation Plan provides that: (i) at the time of the award of RSUs, the Administrators will determine the vesting criteria applicable to the awarded RSUs; (ii) vesting of RSUs may include criteria such as performance vesting; (iii) each RSU shall be subject to vesting in accordance with the terms set out in an agreement evidencing the award of the RSU attached as Exhibit A to the Share Compensation Plan (or in such form as the Administrators may approve from time to time) (each an “RSU Agreement”); and (iv) all vesting and issuances or payments in respect of a RSU shall be completed no later than December 15 of the third calendar year commencing after the award date for such RSU.
It is the current intention that RSUs may be awarded with both time based vesting provisions as a component of the Company’s annual incentive compensation program, and performance based vesting provisions as a component of the Company’s long term incentive compensation program.
Under the Share Compensation Plan, should the date of vesting of an RSU fall within a blackout period or within nine business days following the expiration of a blackout period, the date of vesting will be automatically extended to the tenth business day after the end of the blackout period.
Termination, Retirement and Other Cessation of Employment in connection with RSUs
A person participating in the Share Compensation Plan will cease to be eligible to participate in the following circumstances: (i) receipt of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause); (ii) retirement; and (iii) any cessation of employment or service for any reason whatsoever, including disability and death (an “Event of Termination”). In such circumstances, any vested RSUs will be issued (and with respect to each RSU of a US Participant, such RSU will be settled and shares issued as soon as practicable following the date of vesting of such RSU as set forth in the applicable RSU Agreement, but in all cases within 60 days following such date of vesting) and unless otherwise determined by the Administrators in their discretion, any unvested RSUs will be automatically forfeited and cancelled (and with respect to any RSU of a US Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to an RSU that is unvested at the time of an Event of Termination, such RSU shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting date of such RSU as set forth in the applicable RSU Agreement). Notwithstanding the above, if a person retires in accordance with the Company’s retirement policy at such time, the pro rata portion of any unvested performance based RSUs will not be forfeited or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable RSU Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, have been met on the applicable date. For greater certainty, if a person is terminated for just cause, all unvested RSUs will be forfeited and cancelled.
Mechanics for Options
Each Option granted pursuant to the Share Compensation Plan will entitle the holder thereof to the issuance of one Common Share upon achievement of the vesting criteria and payment of the applicable exercise price. Options granted under the Share Compensation Plan will be exercisable for Common Shares issued from treasury once the vesting criteria established by the Administrators at the time of the grant have been satisfied. However, the Company will continue to retain the flexibility through the amendment provisions in the Share Compensation Plan to satisfy its obligation to issue Common Shares by making a lump sum cash payment of equivalent value (i.e., pursuant to a cashless exercise), provided there is a full deduction of the number of underlying Common Shares from the Share Compensation Plan’s reserve.
| - 7 - |
Vesting Provisions for Options
The Share Compensation Plan provides that the Administrators may determine, in accordance with minimum vesting requirements of the CSE, the vesting criteria applicable to any Options, when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option agreement will disclose any vesting conditions prescribed by the Administrators.
Termination, Retirement and Other Cessation of Employment in connection with Options
A person participating in the Share Compensation Plan will cease to be eligible to participate where there is an Event of Termination. In such circumstances, unless otherwise determined by the Administrators in their discretion, any unvested Options will be automatically cancelled, terminated and not available for exercise and any vested Options may be exercised only before the earlier of: (i) the expiry of the Option; and (ii) six months after the date of the Event of Termination. If a person is terminated for just cause, all Options (whether or not then exercisable) will be automatically cancelled.
Other Terms
The Administrators will determine the exercise price and term/expiration date of each Option, provided that the exercise price in respect of that Option shall not be less than the Market Price on the date of grant. “Market Price” is defined in the Share Compensation Plan, as of any date, the price of the Common Shares determined as follows: (A) if the Common Shares are listed on any exchange, the Market Price will be the closing price of the Common Shares on such exchange for the last market trading day prior to the date of grant of the Option. Notwithstanding the foregoing, in the event that the Common Shares are listed on the CSE, for the purposes of establishing the exercise price of any Options, the Market Price shall not be lower than the greater of the closing market price of the Subordinate Voting Shares on the CSE on (i) the trading day prior to the date of grant of the Options, and (ii) the date of grant of the Options; or (B) in the absence of an established market for the Common Shares, the Market Price shall be determined in good faith by the Administrators.
No Option shall be exercisable after ten years from the date the Option is granted. Under the Share Compensation Plan, should the term of an Option expire on a date that falls within a blackout period or within nine business days following the expiration of a blackout period, such expiration date will be automatically extended to the tenth business day after the end of the blackout period.
Unless otherwise determined by the Board, in the event of a change of control, any surviving or acquiring corporation shall assume any Option outstanding under the Share Compensation Plan on substantially the same economic terms and conditions or substitute or replace similar options for those Options outstanding under the Share Compensation Plan on substantially the same economic terms and conditions.
Transferability
RSUs awarded and Options granted under the Share Compensation Plan or any rights of a Participant cannot be transferred, assigned, charged, pledged or hypothecated, or otherwise alienated, whether by operation of law or otherwise.
Reorganization and Change of Control Adjustments
In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of the Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may make such changes or adjustments, if any, as they consider fair or equitable, to reflect such change or event including adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto.
| - 8 - |
Amendment Provisions in the Share Compensation Plan
The Board may amend the Share Compensation Plan or any RSU or Option at any time without the consent of any Participant provided that such amendment shall: (i) not adversely alter or impair any RSU previously awarded or any Option previously granted, except as permitted by the adjustment provisions of the Share Compensation Plan and with respect to RSUs and Options of US Participants, such amendment will not result in the imposition of taxes under Section 409A of the U.S. Internal Revenue Code of 1986; (ii) be subject to any regulatory approvals including, where required, the approval of the CSE; and (iii) be subject to shareholder approval, where required, by the requirements of the CSE, provided that shareholder approval shall not be required for the following amendments:
| (a) | amendments of a “housekeeping nature”, including any amendment to the Share Compensation Plan or a RSU or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority, stock exchange or quotation system and any amendment to the Share Compensation Plan or a RSU or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein; |
| (b) | amendments that are necessary or desirable for RSUs or Options to qualify for favourable treatment under any applicable tax law; |
| (c) | amendments to the vesting provisions of any RSU or any Option (including any alteration, extension or acceleration thereof), providing such amendments do not adversely alter or impair such RSU or Option; |
| (d) | amendments to the termination provisions of any Option (e.g., relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date (as such date may be extended by virtue of a blackout period) providing such amendments do not adversely alter or impair such Option; |
| (e) | amendments to the Share Compensation Plan that would permit the Company to retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares for such persons, instead of issuing Common Shares from treasury upon the vesting of the RSUs; |
| (f) | amendments to the Share Compensation Plan that would permit the Company to make lump sum cash payments to Participants, instead of issuing Common Shares from treasury upon the vesting of the RSUs; and |
| (g) | the amendment of the cashless exercise feature set out in the Share Compensation Plan. |
For greater certainty, shareholder approval will be required in circumstances where an amendment to the Share Compensation Plan would: (i) increase the fixed maximum percentage of issued and outstanding Common Shares issuable under the Share Compensation Plan, other than by virtue of the adjustment provisions in the Share Compensation Plan, or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares; (ii) increase the limits referred to above under “Restrictions on the Award of RSUs and Grant of Options”; (iii) reduce the exercise price of any Option (including any cancellation of an option for the purpose of reissuance of a new option at a lower exercise price to the same person); (iv) extend the term of any Option beyond the original term (except if such period is being extend by virtue of a blackout period); or (v) amend the amendment provisions of the Share Compensation Plan.
| - 9 - |
Employment, Consulting and Management Agreements
The material terms of the employment, consulting and management agreements of the Company are described in the footnotes of the table under the heading “Director and NEO Compensation, Excluding Options and Compensation Securities” of this Form. Except as disclosed in that section, as of June 30, 2023, there were no provisions in any contract, agreement, plan or arrangement that provide for payments to a NEO or director at, following, or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control in the Company or a change in the NEO’s or director’s responsibilities, except for the minimum required payments under employment standards legislation.
Oversight and Description of Director and NEO Compensation
The purpose of this discussion is to provide information about the Company’s executive compensation objectives and processes and to discuss compensation decisions relating to its NEOs listed in the Summary Compensation Table set out above. In accordance with applicable securities legislation, the Company currently has four Named Executive Officers; being Richard Lu, Chief Executive Officer; Sam Sun, Chief Financial Officer; Andrew van Doorn, Chief Operating Officer and Tracy Zheng, Chief Administrative Officer.
The Board assumes responsibility for reviewing and monitoring the long-range compensation strategy for the senior management of the Company although the Compensation Committee guides it in this role. In determining executive compensation, the Board considers the Company’s financial circumstances at the time decisions are made regarding executive compensation, and also the anticipated financial situation of the Company in the mid and long-term.
Compensation Objectives and Principles
The compensation program for the senior management of the Company is designed to ensure that the level and form of compensation achieves certain objectives, including:
| (a) | attracting and retaining qualified executives; | |
| (b) | motivating the short and long-term performance of these executives; and | |
| (c) | better aligning their interests with those of the Company’s shareholders. |
In compensating its senior management, the Company has employed a combination of base salary, bonus compensation and equity participation through its Share Compensation Plan. The Company does not provide any retirement benefits for its directors or officers.
Elements of Compensation
Base Salary
In the Board’s view, paying base salaries which are reasonable in relation to the level of service expected while remaining competitive in the markets in which the Company operates is a first step to attracting and retaining qualified and effective executives. Competitive salary information on comparable companies within the Company’s industry is compiled from a variety of sources, including national and international publications.
| - 10 - |
Bonus Incentive Compensation
The Board will consider executive bonus compensation dependent upon the Company meeting its strategic objectives and milestones and sufficient cash resources being available for the granting of bonuses.
Equity Participation
The Company believes that encouraging its executives and employees to become shareholders is the best way of aligning their interests with those of its shareholders. Equity participation is accomplished through the Company’s Share Compensation Plan (as described herein). RSUs and Options may be granted to executives and employees taking into account a number of factors, including the amount and term of options previously granted, base salary and bonuses and competitive factors. The amounts and terms of RSUs and Options granted are determined by the Board.
Compensation Risks
The Board is keenly aware of the fact that compensation practices can have unintended risk consequences. The Board will continually review the Company’s compensation policies to identify any practice that might encourage an employee to expose the Company to unacceptable risk. At the present time the Board is satisfied that the current executive compensation program does not encourage the executives to expose the business to inappropriate risk. The Board takes a conservative approach to executive compensation rewarding individuals for the success of the Company once that success has been demonstrated and incenting them to continue that success through the grant of long-term incentive awards.
Hedging Policy
The Company has no policy on whether an NEO or director is permitted to purchase certain financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars or units of exchange funds which are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director.
Compensation Process
In establishing compensation for executive officers, the Board as a whole seeks to accomplish the following goals:
| ● | to recruit and subsequently retain highly qualified executive officers by offering competitive compensation and benefits; |
| ● | to motivate executives to achieve important corporate and personal performance objectives and reward them when such objectives are met; and |
| ● | to align the interests of executive officers with the long-term interests of shareholders through participation in the Company’s Share Compensation Plan. |
When considering the appropriate executive compensation to be paid to our officers, the Board have regard to a number of factors including: (i) recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and the Company’s shareholders; (iv) rewarding performance, both on an individual basis and with respect to operations generally; and (v) available financial resources.
RSU and Option-Based Awards
Long-term incentives in the form of RSUs and Options are intended to align the interests of our directors and executive officers with those of the Company’s Shareholders and to provide a long-term incentive to reward those individuals for their contribution to the generation of shareholder value, while reducing the burden of cash compensation that would otherwise be payable by the Company.
| - 11 - |
The Share Compensation Plan is administered by the Board. In determining the number of incentive RSUs or Options to be granted to the Named Executive Officers, the Board has regard to several considerations including previous grants of RSUs and Options and the overall number of outstanding RSUs and Options relative to the number of outstanding Common Shares, as well as the degree of effort, time, responsibility, ability, experience and level of commitment of the executive officer.
Director Compensation
During the fiscal year ended June 30, 2023, the Company had no formal director compensation program. No cash compensation was paid to the directors of the Company in their capacity as directors during the financial year ended June 30, 2023. During the year ended June 30, 2023, stock options were granted to directors as detailed in the table under the heading “Stock Options and Other Compensation Securities and Instruments” of this Form.
Pension
The Company does not have any form of pension plan that provides for payments or benefits to the NEO at, following, or in connection with retirement. The Company does not have any form of deferred compensation plan.
Changes Subsequent to Year-End
Except as otherwise disclosed herein, there have been no significant changes made to the Company’s compensation policies subsequent to the financial year ended June 30, 2023.
Exhibit 99.93
SolarBank Provides Update on Significant Progress Since IPO
| ● | $107 Million(1) in Awarded EPC Contracts | |
| ● | Honeywell as a major client with multiple projects completed or underway | |
| ● | Hydro-Québec Subsidiary (EVLO) Partners with SolarBank to supply Battery Energy Storage Systems (BESS) for Ontario IESO E-LT1 projects that SolarBank is constructing | |
| ● | Commenced operation as an Independent Power Producer | |
| ● | Enhanced its development pipeline of over one Gigawatt |
Toronto, Ontario, November 23, 2023 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to provide an update on its significant progress since the completion of its initial public offering on March 1, 2023.
Major Highlights
| ● | US$41 million transaction with Honeywell International Inc. (“Honeywell”) whereby Honeywell acquired the SB-1, SB-2 and SB-3 Community Solar Projects and agreed to enter into an engineering, procurement, and construction (“EPC”) Contract with SolarBank for their construction. SolarBank also expects that it will retain an operations and maintenance contract for the projects following the completion of construction. | |
| ● | $36 million in EPC contracts awarded to SolarBank for the construction of three separate BESS projects in Ontario Canada. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer. | |
| ● | US$11.35 million EPC contract awarded to SolarBank for the 5.9 MW, DC, Community Solar Project in the Town of Manlius, Onondaga County, New York. The project is owned by Solar Advocate Development LLC. | |
| ● | $6.3 million of Pre-Construction Development Costs received from the Ontario Independent Electricity System Operator (“IESO). |
Other Operational Highlights
| ● | March 2023: SolarBank reaches Commercial Operation on 389.7kW DC Solar Ground Mount System (US1) in Union Springs, NY. | |
| ● | March 2023: SolarBank reaches Commercial Operation on 297.9 kW DC Solar Ground Mount System (VC1) in Cazenovia, NY. | |
| ● | March 2023: SolarBank completes 3.5-Megawatt Community Solar Project in Portland, NY for Gosh Enterprises. |
| ● | March 2023: SolarBank’s 7-Megawatt Community Solar Project in Richmond, N.Y. achieves Commercial Operation, second recent project sold to Gosh Enterprises. | |
| ● | March 2023: SolarBank reaches commercial operation on New York Solar Project for Honeywell. The system has an installed capacity of 683.55 kWdc, and is expected to generate over 753,000 kWh of clean, renewable energy in its first year of operation. | |
| ● | May 2023: SolarBank Commences Trading on OTCQX Best Market. | |
| ● | May 2023: SolarBank announces that commercial operation reached on a 195 kW DC behind-the-meter system for Honeywell in Syracuse, NY. | |
| ● | June 2023: SolarBank partners with U.S.-based Rural Energy Development LLC (RED Renewables), a provider of solar energy solutions to the commercial agricultural market. The Co-Development Agreement provides for SolarBank to develop and construct solar energy projects introduced by RED Renewables. | |
| ● | June 2023: SolarBank added to ‘CSE 25’ Index as One of the 25 Largest Companies on the CSE. | |
| ● | June 2023: SolarBank acquires a 67% interest in the US1 Project and VC1 Project in NY, each has municipal power purchase agreement and commences operating as an Independent Power Producer. | |
| ● | June 2023: Ontario IESO awards 60 MWh of BESS contracts in response to proposals submitted by SolarBank on behalf of investors. | |
| ● | July 2023: SolarBank makes strategic investment in Canadian solar project developer and operator by acquiring from existing limited partners an aggregate of 42,500 limited partnership units of the Solar Flow-Through 2016-I Limited Partnership, further enhances its IPP business. | |
| ● | July 2023: SolarBank receives positive interconnection results on 7 MW ground mount site (Hardie) in Upstate New York. | |
| ● | July 2023: SolarBank awards a contract to Polar Racking, to supply its CORE fixed tilt ground mount solar mounting solution, and ballasted foundations to the Manlius and Geddes projects that are being developed by the Company. The Manlius project is being developed by the Company for Solar Advocate Development LLC and, subject to receipt of financing, the Company intends to own and operate the Geddes project. | |
| ● | August 2023: SolarBank has awarded a contract to Hewitt Young Electric, LLC to provide electrical subcontracting work for the Geddes project that is being developed by the Company. The Geddes project which has a designed capacity of 4.1 MW, DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. | |
| ● | September 2023: SolarBank executes a lease agreement on a proposed 7MW ground mount solar project site in Upstate New York and 16.817 MW ground mount solar project site in Alberta. | |
| ● | September 2023: SolarBank completes mechanical construction of US$11.35 million Community Solar Project in the Town of Manlius, Onondaga County, New York. The 6.2 MW, DC Project was constructed for Solar Advocate Development LLC under the terms of an EPC agreement. | |
| ● | September 2023: SolarBank commences major construction on the Geddes project that is being developed by the Company in Geddes, New York. This will be the largest project to date to be owned by SolarBank and once operational is expected to provide green energy for over 500 homes. Current activities include civil work and the commencement of the racking and module installation. Subject to receipt of financing, the Company intends to own and operate the Geddes project. |
| ● | October 2023: Hydro-Québec Subsidiary (EVLO) Partners with SolarBank to Supply Battery Storage Systems for recently announced Ontario IESO E-Lt1 projects. SolarBank has selected EVLO Energy Storage Inc. (“EVLO”) to supply EVLOFLEX battery energy storage systems for three separate BESS projects in Ontario. EVLO is a fully integrated battery energy storage system provider and wholly owned subsidiary of Hydro-Québec. EVLO will supply each of the Project sites with a 5 MW / 20MWh EVLOFLEX system. | |
| ● | November 2023: SolarBank expands its independent power producer portfolio with the acquisition of control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW. The projects have been in operations since 2017 and the projects have favorable feed in tariff rates until 2036. |
Management Commentary
Dr. Richard Lu, CEO of SolarBank commented: “I am incredibly proud of our team and the corporate-wide achievements over the seven months from the completion of the IPO. The Company has excelled in every area of its core business, including, site origination, interconnection, permitting, engineering, procurement, construction and operation & maintenance. With our footprint widening in Canada and the U.S., I anticipate our growth trends to continue and greatly look forward to delivering success for the balance of 2023 and beyond.”
There are several risks associated with the development of the projects detailed in this press release. The development of any project is subject to the continued availability of third-party financing arrangements for the project owners and the risks associated with the construction of a solar power project. There is no certainty the projects disclosed in this press release will be completed on schedule or that they will operate in accordance with their design capacity. If the EPC agreements are terminated then SolarBank will not realize the full contract value. As disclosed in the Company’s financial statements, the Manlius project is being challenged by neighboring residents to the site. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
(1) In calculating the total contract value SolarBank has converted United States dollars to Canadian dollars at an exchange rate of 1.37.
Investor Relations Contract
The Company also announces that it has entered into an agreement with Creative Direct Marketing Group, Inc. (“CDMG”) to provide public relations services in an effort to increase public awareness of the Company and its services and securities. Certain services to be provided by CDMG are anticipated to include ‘investor relations activities’ under the policies of the Canadian Securities Exchange and applicable securities laws.
The agreement is for a two year term commencing November 22, 2023 with the Company having the right to terminate upon 60 days written notice. The Company has budgeted up to US$2,500,000 for the marketing services of CDMG, which include facilitating the creation and distribution of marketing materials (including print, digital and video), landing pages, direct mail campaigns, on-line banner and native ads, and social media investor marketing.
CDMG is a Tennessee-based full-service, direct response advertising and digital marketing agency that has been operating for more than 40 years. No stock options are being granted to CDMG under the terms of its engagement. To the best of the Company’s knowledge, CDMG does not hold, directly or indirectly, any securities of the Company or have any right to acquire any such securities.
The contact information for CDMG is Creative Direct Marketing Group, Inc., 1313 4th Avenue North Nashville, TN 37208; Phone: 615-814-6633; Email: moppenheimer@cdmginc.com. CDMG and its principals are arm’s length to the Company.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the reduction of carbon emissions; the receipt of incentives for the projects; the expected value of EPC Contracts; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.94
Management’s Discussion and Analysis
For the Three Months End September 30, 2023
| Contact Information : | |
SolarBank Corporation (Formerly Abundant Solar Energy Inc.) | |
| 505 Consumers Road, Suite 803 | |
| Toronto, ON M2J 4V8 | |
| Contact Person: Mr. Sam Sun, CFO | |
| Email: info@solarbankcorp.com |
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of SolarBank Corporation. (“SUNN” or the “Company”) was prepared by management as of November 29, 2023 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the interim consolidated financial statements of the Company and notes thereto for the three months ended September 30th, 2023. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries. The company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement and construction (“EPC”), operation and maintenance (“O&M”), and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth via organic growth and M&A.
Development of the Business
USA
The Company is focused on its key market in New York, Maryland and California. In New York, the Company has 3 projects that reached Notice to Proceed (“NTP”) stage and construction started in November 2023. The Company also expects to reach Permission to Operate (“PTO”) in Q3 FY2024 for 2 projects in New York, including a 3.7 MW project to be owned by the Company. Around 20 projects are under utility interconnection studies. In addition, the Company is working on sites origination of potential community solar and utility scale solar projects.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs has been passed or is being proposed.
Canada
The Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects in October 2023 in Ontario. In addition 3 projects in Alberta and 3 projects in Nova Scotia are under utility interconnection studies and development work is ongoing.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Recent Developments
Since the commencement of the quarter ended September 30, 2023, the Company achieved the following business objectives:
| ● | July 2023: SolarBank makes strategic investment in Canadian solar project developer and operator by acquiring from existing limited partners an aggregate of 42,500 limited partnership units of the Solar Flow-Through 2016-I Limited Partnership, further enhances its IPP business. | |
| ● | July 2023: SolarBank receives positive interconnection results on 7 MW ground mount site (Hardie) in Upstate New York. | |
| ● | July 2023: SolarBank awards a contract to Polar Racking, to supply its CORE fixed tilt ground mount solar mounting solution, and ballasted foundations to the Manlius and Geddes projects that are being developed by the Company. The Manlius project is being developed by the Company for Solar Advocate Development LLC and, subject to receipt of financing, the Company intends to own and operate the Geddes project. | |
| ● | August 2023: SolarBank has awarded a contract to Hewitt Young Electric, LLC to provide electrical subcontracting work for the Geddes project that is being developed by the Company. The Geddes project which has a designed capacity of 4.1 MW, DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets. | |
| ● | September 2023: SolarBank executes a lease agreement on a proposed 7MW ground mount solar project site in Upstate New York and 16.817 MW ground mount solar project site in Alberta. | |
| ● | September 2023: SolarBank completes mechanical construction of US$11.35 million Community Solar Project in the Town of Manlius, Onondaga County, New York. The 6.2 MW, DC Project was constructed for Solar Advocate Development LLC under the terms of an EPC agreement. | |
| ● | September 2023: SolarBank commences major construction on the Geddes project that is being developed by the Company in Geddes, New York. This will be the largest project to date to be owned by SolarBank and once operational is expected to provide green energy for over 500 homes. Current activities include civil work and the commencement of the racking and module installation. Subject to receipt of financing, the Company intends to own and operate the Geddes project. | |
| ● | October 2023: Hydro-Québec Subsidiary (EVLO) Partners with SolarBank to Supply Battery Storage Systems for recently announced Ontario IESO E-Lt1 projects. SolarBank has selected EVLO Energy Storage Inc. (“EVLO”) to supply EVLOFLEX battery energy storage systems for three separate BESS projects in Ontario. EVLO is a fully integrated battery energy storage system provider and wholly owned subsidiary of Hydro-Québec. EVLO will supply each of the Project sites with a 5 MW / 20MWh EVLOFLEX system. | |
| ● | November 2023: SolarBank expands its independent power producer portfolio with the acquisition of control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW. The projects have been in operations since 2017 and the projects have favorable feed in tariff rates until 2036. |
Selected Quarterly Information
The following table shows selected financial information for the Company for the three months period ended September 30, 2023 and 2022 and should be read in conjunction with the Company’s consolidated financial statements as at September 30 and June 30, 2023, and related notes thereto for such periods.
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| For the three months ended September 30 | 2023 $ | 2022 $ | ||||||
| Revenue | 7,681,261 | 5,480,452 | ||||||
| Revenue – EPC | 5,613,015 | 5,465,542 | ||||||
| Revenue – development | 2,011,750 | - | ||||||
| Revenue – O&M | 56,496 | 14,910 | ||||||
| Cost of goods sold | (5,334,566 | ) | (4,917,533 | ) | ||||
| Net income | 2,038,968 | 225,957 | ||||||
| Earning per share | 0.08 | 0.01 | ||||||
September 30, 2023 $ | June 30, 2023 $ | |||||||
| Total assets | 30,176,457 | 24,969,537 | ||||||
| Total current liabilities | 9,725,926 | 7,083,876 | ||||||
| Total non-current liabilities | 1,201,113 | 1,254,465 | ||||||
The following discussion addresses the operating results and financial condition of the Company for the three months ended September 30th, 2023 compared with the three months ended September 30th, 2022.
Result of Operations
Three months ended September 30, 2023 compared to the three months ended September 30, 2022
Trend
In fiscal 2024, the Company continued to focus on scaling its business model by growing its pipeline and advancing its EPC projects in the US and continued development activities for projects in both US and Canada. It is expected that the Company’s revenue will keep growing in the fiscal 2024 as three projects (total of 21MW) in the US reached NTP and were sold to Honeywell International in this quarter. Total EPC contract value is US$41 million. The Company will act as EPC contractor. In addition, the Geddes Project (currently owned by the Company) and Manlius (owned by a third party) are expected to finish the construction and reach PTO in 2024.
The net income for the three months ended September 30, 2023 increased by $1,813,010 compared to the net income for the three month ended September 30, 2022 with $2,038,967 net income recognized during the first quarter of 2024 as compared to a net income of $225,957 for the first quarter of 2023.
Key business highlights and projects updates in FY2024
| ● | Existing projects |
| Name | Location | Size (MW DC) | Timeline | Milestone | Current Status | |||||
| Richmond | New York, USA | 7.0 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| Portland | New York, USA | 3.5 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached substantial completion in December 2022. The Company acquired 67% of the project in June 2023 | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. The Company acquired 67% of the project in June 2023 | |||||
| SCA | New York, USA | 0.7 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| Willis | New York, USA | 0.2 | December 2022 | Reach PTO (permission to operate) | EPC project. It reached PTO in December 2022. | |||||
| Manlius | New York, USA | 5.7 | Q3 FY2024 | Reach PTO (permission to operate) | EPC project. It”s expected to reach PTO in December 2023 | |||||
| Geddes | New York, USA | 3.7 | Q3 FY2024 | Reach PTO (permission to operate) | Construction started in September 2023. This is the largest project to date to be owned by the Company. | |||||
| Settling Basins - 1 | New York, USA | 7.0 | January 2025 | Reach PTO (permission to operate) | EPC project. Construction started in November 2023 | |||||
| Settling Basins - 2 | New York, USA | 7.0 | January 2025 | Reach PTO (permission to operate) | EPC project. Construction started in November 2023 | |||||
| Settling Basins - 3 | New York, USA | 7.0 | January 2025 | Reach PTO (permission to operate) | EPC project. Construction started in November 2023 | |||||
| BESS | Ontario, Cananda | Discharge: 4.74 Storage: 18.96 |
Summer 2025 | Reach PTO (permission to operate) | EPC project. EPC agreement entered Oct. 3, 2023 for the construction of 3 separate BESS projects |
| ● | Projects under development |
| Name | Location | Size (MWDC) | Timeline | Milestone | Expected Cost | Cost Incurred |
Sources of Funding | Current Status | ||||||||
| 261 Township | Alberta, Canada | 4.2 | June 2024 | Completion of engineering work and placement of orders for main project components | 800,000 | 31,428 | Equity financing, working capital | Structural assessment, noise study, and solar glare assessment are complete and interconnection has been filed with the utility. An Industrial Project Letter from Alberta Environment and Parks has been obtained for the project. A High Level Study has been received from Fortis Alberta for the project, and a Detailed Level Study is currently underway for Phase 1. Interconnection for Phase 2 will be filed with the utility pending the final results of Phase 1. The Alberta Utilities Commission (“AUC”) has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024, and that it will review policies and procedures for the development of renewable electricity generation. This pause will impact the Company’s receipt of interconnection approval for the project from the AUC until it is over, but in the interim the Company will advance its environmental and other studies, along with permits that are unrelated to the AUC. |
| Richmond 2 | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 | 10,642 | Equity financing, working capital | The four projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Hardie | New York, USA | 7.0 | December 2023 | Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 13,386 | Equity financing, working capital | |||||||||
| 206 Fuller Rd | New York, USA | 4.9 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | Equity financing, working capital | |||||||||
| 6882 Rice Road | New York, USA | 5.2 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | Equity financing, working capital | |||||||||
| SUNNY | New York, USA | 28.0 | June 2025 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 | 33,232 | Equity financing, working capital | The Company submitted an interconnection request to New York Independent System Operator. The company signed a lease agreement with the landowner in 2022. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). |
Revenue
Revenue for the three months ended September 30, 2023 was $7,681,261 compared to $5,480,452 in the comparative period.
The EPC service revenue for the year ended September 30, 2023 was $5,613,015 compared to $5,465,542 in the comparative period, increasing by $147,473, or 3%. The revenue for the period ended September 30, 2023 consists of significant progress in Manlius project ($5.3M). The Company worked on Portland ($1.2M), Richmond ($2.7M), US1 ($0.7M), VC1 ($0.4M) and SCA ($0.5M) for the period ended September 30, 2022.
For the period ended September 30, 2023, the Company generated $2,011,750 in development revenue mainly from the sale of Settling Basins projects to Honeywell. No development revenue earned for the comparative period ended September 30, 2022.
For the period ended September 30, 2023, the Company generated $56,496 in service revenue compared to $14,910 in the comparative period, increasing by $41,586. The revenue increase was mainly due to work done for electric vehicle charging ($42k) and electricity sold from IPP facilities ($15k).
Expenses
Expenses consist of expenditures related to cost of services provided and costs to develop new projects, as well as corporate business development and administrative expenses.
| Three months ended September 30, | ||||||||||||||
| 2023 | 2022 | Change | Management Commentary | |||||||||||
| Cost of goods sold | (5,334,566 | ) | (4,917,533 | ) | (417,033 | ) | Consistent with increase in revenue. | |||||||
| Operating expense: | ||||||||||||||
| Advertising and promotion | (503,809 | ) | - | (503,809 | ) | Additional costs incurred in FY24 relating to investor marketing. | ||||||||
| Consulting fees | (150,600 | ) | (173,469 | ) | 22,869 | Increase due to one additional consultant in FY23. | ||||||||
| Depreciation | (21,978 | ) | (9,746 | ) | (12,232 | ) | Increase related to depreciation of IPP facilities acquired in June 2023. | |||||||
| Insurance | (39,246 | ) | (23,786 | ) | (15,460 | ) | Insurance was higher due to increased activity and higher director and officer insurance premiums following completion of the IPO. | |||||||
| Office, rent and utilities | (84,244 | ) | (85,662 | ) | 1,418 | No significant changes. | ||||||||
| Professional fees | (300,591 | ) | (45,803 | ) | (254,788 | ) | Increase due to $85k audit fees, and $156k consulting fees relating to exploring investor markets. | |||||||
| Salary and Wages | (202,081 | ) | (66,903 | ) | (135,178 | ) | Three more employees in FY24 comparing to FY23. | |||||||
| Stock based compensation | (429,580 | ) | - | (429,580 | ) | Employee stock compensation of $319k, and $41.5k for RSU. | ||||||||
| Travel and events | (44,263 | ) | (20,883 | ) | (23,380 | ) | More travel and seminars activities in FY2024 to increase visibility of the Company in the market. | |||||||
| Total operating expenses | (1,776,392 | ) | (426,252 | ) | (1,350,140 | ) | ||||||||
| Total Expenses | (7,110,958 | ) | (5,343,785 | ) | (1,767,173 | ) | ||||||||
Other Income (Expense)
For the three months ended September 30, 2023, the Company had other income of $1,371,837 compared to other income of $122,072 for the three months ended September 30, 2022. Other income for the three months ended September 30, 2023 consists mainly of bad debt recovery of $1,195,012, foreign exchange gain of $148,969, and other income of $27,856. Other income for the three months ended September 30, 2022 consists mainly of foreign exchange gain of $127,459 and other expense of $5,386.
Net Income
The net income for the three months ended September 30, 2023 was $2,038,968 for earning per share of $0.08 based on 26,806,183 outstanding shares versus $225,957 for an income per share of $0.01 based on 16,000,000 outstanding shares for the comparative period.
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company. |
| (2) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (3) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| (4) | The Company has $5,291,826 in accounts receivable outstanding from the Solar Flow Through group of companies for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. During the three months ended September 30, 2023, a total of $2,652,500 was collected and $1,195,012 recognized as other income. The remaining amounts are expected to be collected during the 2024 fiscal year. |
Summary of Quarterly Results
| Description | Q1 September 30, 2023 ($) | Q4 June 30, 2023 ($) | Q3 March 31, 2023 ($) | Q2 December 31, 2022 ($) | ||||||||||||
| Revenue | 7,681,261 | 9,245,267 | 706,856 | 2,964,934 | ||||||||||||
| Income (Loss) for the period | 2,038,968 | (1,076,836 | ) | 3,064,872 | 89,468 | |||||||||||
| Earning (Loss) per share (basic and diluted) | 0.08 (basic) 0.05 (diluted) | (0.06) (basic)
| 0.11 (basic) 0.09 (diluted) | 0.01 | ||||||||||||
| Description | Q1 September 30, 2022 ($) | Q4 June 30, 2022 ($) | Q3 March 31, 2022 ($) | Q2 December 31, 2021 ($) | ||||||||||||
| Revenue | 5,480,452 | 388,369 | 977,562 | 6,211,631 | ||||||||||||
| Income (Loss) for the period | 225,957 | (880,801 | ) | 235,346 | 399,331 | |||||||||||
| Income (Loss) per share (basic and diluted) | 0.01 | (0.06 | ) | 0.03 | 0.02 |
Historical quarterly results of operations and income per share data do not necessarily reflect any recurring expenditure patterns or predictable trends except for the fact that seasonally the Company’s third quarter typically has the smallest amount of revenue due to winter conditions that are less favorable for construction. The Company’s revenues fluctuate from quarter to quarter based on the timing of recognition of revenue which is dependent on the stage of the various solar power projects under development. Refer to “Results of Operations” for additional discussion.
Liquidity and Capital Resources
As at September 30, 2023, the Company had a cash balance of $621,151 (June 30, 2023 - $749,427) with working capital (current assets less current liabilities) surplus of $11,355,856 (June 30, 2023 - $14,962,023).
The following table summarizes the Company’s liquidity position:
| As at | September
30, 2023 | June 30, 2023 | ||||||
| Cash | 621,151 | 749,427 | ||||||
| Working capital | 11,355,826 | 14,962,023 | ||||||
| Total assets | 30,176,457 | 24,969,537 | ||||||
| Total liabilities | 10,927,039 | 8,338,341 | ||||||
| Shareholders’ equity | 19,249,418 | 16,631,196 | ||||||
The Company believes that with its expected operating income and cash flows, it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations, debt financing and equity financing. The Company will continue to identify financing opportunities, including equity issuances, in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
To assist with potential liquidity needs, the Company has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to $200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
In addition. The Company has entered into an equity distribution agreement (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) to establish an at-the-market equity program (the “ATM Program”). The Company may issue up to $15,000,000 of common shares of the Company (the “ATM Offered Shares”) from treasury under the ATM Program. The ATM Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The ATM Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the ATM Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of ATM Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| For three months ended | September 30, 2023 | September 30, 2022 | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 554,157 | 2,589,661 | ||||||
| Investing activities | (710,008 | ) | - | |||||
| Financing activities | 20,647 | 198,969 | ||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | (128,276 | ) | 2,932,483 | |||||
Cash flow from operating activities
The Company has positive cash flow of $554,157 from operating activities during the three months ended September 30, 2023, while the Company generated $2,589,661 cash during the same period ended September 30, 2022. The Company generated cash of $2,470,491 from the operational activities and used $1,916,334 for the change of working capital during the three months ended September 30, 2023, while the Company generated cash of $267,043 from the operating activities and generate $2,322,618 due to the change of working capital for the same period ended September 30, 2022.
Cash flow from financing activities
The Company generated cash of $20,647 from financing activities during the three months ended September 30, 2023, while the Company generated $198,969 cash during the same period ended September 30, 2022. The cash generated in financing activities for the three months ended September 30, 2023 was driven by issuance of common shares of $21,659 and proceeds from broker warrants exercised of $41,250. Offset by repayment of lease obligation of $14,484 and long-term loans of $27,778. The cash generated in financing activities for the three months ended September 30, 2022 was resulted of proceeds from convertible loan of $825,000, offset by the repayment of short-term loans of $583,765.
Cash flow from investing activities
The Company used cash of $710,008 in investing activities during the three months ended September 30, 2023, while the Company did not have investing activities during the same period ended September 30, 2022. The cash used for the three months ended September 20, 2023 includes acquisition of development asset of $3,675,008 and purchase of partnership units of $2,465,000, offset by redemption of GIC of $5,430,000.
Capital Transactions
During the three-months ended September 30, 2023, the Company issued the following shares:
| i. | On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share. | |
| ii. | On September 21, 2023, the Company sold 1,000 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $10,000. | |
| iii. | On September 22, 2023, the Company sold 1,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $12,004. |
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. The table below sets out the Company’s outstanding common share and convertible securities as of September 30, 2023 and as of the date of this MD&A:
| Security Description | September 30, 2023 | Date of report | ||||||
| Common shares | 26,857,200 | 27,136,075 | ||||||
| Warrants | 7,928,000 | 7,928,000 | ||||||
| Stock options | 2,759,000 | 2,759,000 | ||||||
| Restricted share units | 265,000 | 265,000 | ||||||
The following table reflects the details of warrants issued and outstanding as of the date of this MD&A:
The following table reflects the details of options issued and outstanding as of the date of this MD&A:
| Date granted | Expiry | Exercise price (CAD) | Outstanding options | |||||||||
| 04-Nov-2022 | 04-Nov-2027 | $ | 0.75 | 2,759,000 | ||||||||
The following table reflects the details of RSUs issued and outstanding as of the date of this MD&A:
| Date granted | Vesting Date | Outstanding RSUs | ||||
| 4-Nov-2022 | 02-Aug-20 | 250,000 | ||||
| 13-Mar-2023 | 12-Mar-2024 | 7,500 | ||||
| 13-Mar-2023 | 12-Mar-2025 | 7,500 | ||||
| 265,000 | ||||||
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| September 30, 2023 | June 30, 2023 | |||||||
| Long-term debt -non-current portion | $ | 731,482 | 759,259 | |||||
| Shareholder Equity | $ | 19,249,418 | 16,631,196 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, issuance of equity, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
No changes to capital management from the prior year.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three months ended September 30, 2023 and 2022 were as follows:
| Three Month Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 299,599 | $ | 235,982 | ||||
| Share-based compensation | 180,546 | - | ||||||
Short-term employee benefits include consulting fees and salaries made to key management.
Transactions with related parties, are described above, were for services rendered to the Company in the normal course of operations, and were measured based on the consideration established and agreed to by the related parties. Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Critical Accounting Estimates and Policies
The preparation of the consolidated financial statements in accordance with IFRS as issued by IASB requires management to make estimates and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent management’s estimates that are uncertain and any changes in these estimates could materially impact the Company’s consolidated financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The Company’s critical accounting policies and estimates are described in Note 3 of the audited consolidated financial statements for the year ended June 30, 2023.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended September 30, 2023.
The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Three months ended September 30, 2023 | Revenue | % of Total Revenue | ||||||
| Customer D | $ | 5,318,304 | 69 | % | ||||
| Customer E | $ | 2,011,750 | 27 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer D | $ | 3,427,942 | 86 | % |
| Three months ended September 30, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 3,883,451 | 71 | % | ||||
| Account Receivable | % of Account Receivable | |||||||
| Customer B | $ | 1,448,145 | 57 | % | ||||
| Customer C | $ | 900,089 | 36 | % |
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Subsequent Events
| (a) | On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects (the “BESS Projects”) with a total contract value of approximately $36 million. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario. | |
| (b) | The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction. |
Risk Factors
Readers are cautioned that the risk factors discussed above in this MD&A are not exhaustive. Readers should also carefully consider the matters discussed under the heading, “Forward Looking Information”, in this MD&A and under the heading, “Risk Factors”, in the Company’s Annual Information Form for the year ended June 30, 2023 and filed on SEDAR+ at www.sedarplus.com.
Forward-Looking Statements
This MD&A contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this MD&A contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s expectations about its liquidity and sufficient of working capital for the next twelve months of operations; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this MD&A; the reduction of carbon emissions; the receipt of incentives for the projects; the expected value of EPC Contracts; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Approval
The Board of Directors of the Company has approved the disclosure contained in this MD&A.
Exhibit 99.95
Exhibit 99.96
Exhibit 99.97
SolarBank Announces First Quarter Results
| ● | Revenue for the three month period of $7.7 million | |
| ● | Net income for the three month period of $2 million or $0.08 per share (undiluted) | |
| ● | Reaffirmed revenue guidance of $45 million to $50 million for the full fiscal year ended June 30, 2024 |
Toronto, Ontario, November 30, 2023 — SolarBank Corporation (CSE: SUNN) (OTCQX: SUUNF) (FSE: GY2) (“SolarBank” or the “Company”) today reported first quarter 2024 interim financial results. All financial figures are in Canadian dollars and in accordance with International Financial Reporting Standards (IFRS) as presented in the interim consolidated financial statements.
First Quarter Highlights (All Amounts are for the Three Month Period)
| ● | Revenue of $7.7 million: | |
| ● | Net income of $2.0 million; | |
| ● | Net income of $0.08 per share (undiluted); | |
| ● | US$41 million transaction with Honeywell International Inc. (“Honeywell”) whereby Honeywell acquired the SB-1, SB-2 and SB-3 Community Solar Projects and agreed to enter into an engineering, procurement, and construction (“EPC”) Contract with SolarBank for their construction. | |
| ● | $36 million in EPC contracts awarded to SolarBank for the construction of three separate BESS projects in Ontario Canada. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer. |
“This has been another significant quarter for the Company as it has concluded several major contracts to support its continuing growth,” stated Dr. Richard Lu, Chief Executive Officer of SolarBank Corporation. “Revenues have increased by 40% as compared to the first quarter of 2023 and net income increased by 800%.”
Summary of Quarterly Results (All Amounts are for the Three Month Period)
| Quarter Ended | September 30, 2023 | September 30, 2022 | ||||||
| Statement of Income and Comprehensive Income | ||||||||
| Total Revenue | $ | 7,681,261 | $ | 5,480,452 | ||||
| Cash flow from operating activities | $ | 554,157 | $ | 2,589,661 | ||||
| Net income | $ | 2,038,968 | $ | 225,957 | ||||
| Basic earnings per share | $ | 0.08 | $ | 0.01 | ||||
| Diluted earnings per share | $ | 0.05 | $ | 0.01 | ||||
The Company ended the first quarter of 2024 with $21.0 million in current assets, an decrease of $1.0 million compared to year end June 30, 2023. The decrease is mainly due to the decrease in short-term investment offset by an increase in unbilled revenue and prepaid expenses and deposits.
Current liabilities increased from $7.0 million as of year ended June 30, 2023 to $9.7 million in the current quarter, mainly due to an increase in trade and other payables and unearned revenue.
For complete details please refer to the unaudited condensed interim consolidated financial statements and associated Management Discussion and Analysis for the three months ended September 30, 2023, available on SEDAR+ (www.sedarplus.com).
2024 Year End Outlook
The Company is reaffirming its guidance of expected full year revenue in fiscal 2024 of between $45 million and $50 million. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2024 financial results for evaluating the performance of the Company’s business and is dated as of the date of this press release. This information may not be appropriate for other purposes. Information about the Company’s guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with “Forward-Looking Statements” in this press release and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause the Company’s actual future financial and operating results to differ from what it currently expects.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this press release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the megawatt capacity and type of future solar projects; the size of the Company’s development pipeline and future revenue guidance. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this press release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings. In addition, there are difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and government regulation that characterize the industries in which the Company operates.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.98
SolarBank Acquires 100% Interest
in Two Solar Projects in New York
● US1 Project has an installed capacity of 389.7kW DC
● VC1 Project has an installed capacity of 297.9kW DC
● Both projects have power purchase agreement (“PPA”) extending to Year 2047 to sell electricity to municipality via remote net metering
Toronto, Ontario, December 5, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has acquired a 100% interest in the US1 Project and VC1 Project, each located in New York (the “Projects”). The Company previously held a 67% interest in the Projects and has now acquired the remaining 33% from the minority partner.
The first project is the US1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Union Springs, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 389.7kW DC and is expected to generate an estimated 578,000 kWh of clean, renewable energy in its first year of operation.
The second project is the VC1 Project which is a ground-mount solar power project located at a municipally-owned utility campus in the Village of Cazenovia, N.Y. Per the PPA with the municipality, the system will sell electricity to the municipality via remote net metering. The system has an installed capacity of 297.9kW DC and is expected to generate an estimated 387,000 kWh of clean, renewable energy in its first year of operation.
“SolarBank is steadily increasing the size of its portfolio of owned and operated solar power projects,” said Dr. Richard Lu, Chief Executive Officer at SolarBank. “These two projects will generate nearly 1 MW of clean, renewable energy in their first year and with the recently completed OFIT acquisition, the Company’s IPP portfolio is now over 3.5 MW.”
The acquisition of the remaining 33% interest in the Projects was completed through a cash purchase price of US$70,000.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of the Projects may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and expected power generation of solar projects; the acquisition of additional solar projects; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.99
Exhibit 99.100
Blackstone
Backed ISN Provides Certification
for Industrial Safety to SolarBank Subsidiary
| ● | ISNetworld® Certification is required by government agencies, large corporation and suppliers, providing access to new potential customers for SolarBank | |
| ● | ISN, backed by Blackstone, provides products and services for more than 75,000 contractors and suppliers around the world |
Toronto, Ontario, December 27, 2023 — SolarBank Corporation (CSE: SUNN; OTCQX: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that its wholly-owned United States subsidiary, Abundant Solar Power Inc. (“ASP”), has received ISNetworld® certification for industrial safety compliance from ISN, a global leader in contractor and supplier information management.
ISNetworld® is an online supplier management platform that helps companies manage supplier information, streamline the prequalification process, promote transparency and improve workplace safety. It includes a database for companies to discover contractors that already have proved compliance with safety requirements in industries, such as: Manufacturing, Mining, Utilities, Energy, Chemical and Pharmaceutical.
“ISNetworld certification means that ASP has an exemplary safety record, sound safety practices and necessary insurances for work in any customer environment,” said Dr. Richard Lu, President & CEO of SolarBank. “This certification opens to the door to an even larger base of customers as many government entities and major corporations require this certification. This is yet another example of SolarBank’s continued growth and I am very pleased with the achievement of the entire team.”
ASP has received ISNetworld® certification for:
| · | Consultant | |
| · | Engineering | |
| · | General Contractor | |
| · | Inspection | |
| · | Instrumentation & Electrical | |
| · | Other: Solar engineering, procurement and construction |
ISNetworld® certification involves:
| · | Collection and review of various Health, Safety, Environment and Quality (HSEQ) documents and information, such as written programs, work hours, incidents and injuries. | |
| · | Collection and review of insurance and other procurement-related documents such as supplier certificates and Workers’ Compensation. | |
| · | Tracking and completion of employee-level training, competencies and qualifications required to perform specified jobs. | |
| · | Tracking and completion of audits and evaluation reports based on Hiring Client requirements. |
ISN provides a world-class platform of data-driven products and services that help manage risk and strengthen relationships for over 750 Hiring Clients and more than 75,000 active contractors and suppliers around the world.
Over the past 20 years, ISN has become the global leader in contractor and supplier management services and created a network for industry thought leaders. With a team of more than 600 employees around the world, ISN supports customers in more than 85 countries from 13 global offices. In 2020, Blackstone announced a significant minority investment in ISN to help fuel ISN’s continued growth through product innovation and expansion into new markets and geographies. To learn more about ISN and ISNetworld®, visit https://www.isnetworld.com/en/contractor-management-solution.
Investor Relations Contract
The Company also announces that it has entered into an agreement with Think Ink Marketing Data & Email Services LLC (“Think Ink”) to provide public relations services in an effort to increase public awareness of the Company and its services and securities. Certain services to be provided by Think Ink are anticipated to include ‘investor relations activities’ under the policies of the Canadian Securities Exchange and applicable securities laws.
The agreement is for a 12 month term commencing December 27, 2023 with either party having the right to terminate upon 30 days written notice. The Company has budgeted up to US$350,000 for the marketing services of Think Ink, which include facilitating the creation and distribution of marketing materials, on-line banner and native ads, and social media investor marketing.
Think Ink is a California-based marketing firm established in 1991 that provides its customers with a complete range of marketing services that includes data appending, e-mail marketing and pay-per-click on-line banner/native ads and social media investor marketing. Think Ink helps its clients to reach a large network of potential investors. No stock options are being granted to Think Inc. under the terms of its engagement.
The contact information for Think Ink is Think Ink Marketing Data & Email Services LLC, 3308 W. Warner Ave., Santa Ana, California 92704; Phone: 888-808-2161; Email: info@thinkinkmarketing.com. Think Ink and its principals are arm’s length to the Company.
ABOUT SOLARBANK CORPORATION
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@abundantsolarenergy.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the megawatt capacity and expected power generation of solar projects; the acquisition of additional solar projects; the benefits of the ISN certification and potential future customers, and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.101
SolarBank 3.7 MW Geddes Project Completes Mechanical Construction –
Largest Project to Date to be Owned by SolarBank
| ● | 500 homes expected to be provided green energy once operational |
Toronto, Ontario, January 11, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has completed mechanical construction on the 3.7 MW DC Geddes project (the “Project”) that is being developed by the Company in Geddes, New York. The next step is completion of final electrical work and acceptance testing. The Project is expected to become operational during the second quarter of 2024. Subject to receipt of financing, the Company intends to own and operate the Geddes project.
The Project which has a designed capacity of 3.7 megawatts (MW) DC is repurposing a closed landfill, addressing two critical challenges: the need for clean energy and the transformation of contaminated sites into valuable assets.
Dr. Richard Lu, CEO of SolarBank commented: “This is yet another major milestone in SolarBank’s growing independent power producer portfolio. I am excited for this project to begin operating and turn what was a closed landfill into a solar project that will generate clean renewable energy for years to come.”
There are several risks associated with the development of the project disclosed in this press release. The development of any project is subject to the availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the Company’s ownership of the Geddes project; the timeline for completion of construction of the Geddes Project; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.102
SolarBank
Executes Lease on 14 MW
Ground Mount Sites in Greenville, New York
| ● | Expected to operate as a community solar site, selling credits to subscribers. | |
| ● | 1,600 homes are expected to receive green energy once the system is operational | |
| ● | Eligible to participate in the NYSUN program to receive NYSERDA incentives. |
Toronto, Ontario, January 18, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that it has executed a lease agreement on a site in Greenville, New York. SolarBank intends to develop two 7 MW DC (14 MW DC total) ground-mount solar power projects on the site (the “Projects”). The Projects are expected to be eligible for incentives under the New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program.
The Company has submitted its initial interconnection request for the Projects and is awaiting the results of that process. Following receipt of interconnection approval, the Company will work to complete the permitting process and secure the necessary financing for the construction of the Projects.
Once completed, each of the Projects will be operated as a community solar project. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
There are several risks associated with the development of the Projects. The development of any project is subject to receipt of interconnection approval, required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the reduction of carbon emissions; the receipt permits and financing to be able to construct the Project; and the receipt of incentives for the Projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.103
SolarBank
Executes Lease on 3 MW
Ground Mount Site in Nassau, New York
| ● | Expected to operate as a community solar site, selling credits to subscribers. | |
| ● | 350 homes are expected to receive green energy once the system is operational. | |
| ● | Eligible to participate in the NYSUN program to receive NYSERDA incentives. |
Toronto, Ontario, January 22, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that it has executed a lease agreement on a 15 acre site in Nassau, New York. SolarBank intends to develop a 3 MW DC ground-mount solar power project on the site (the “Project”). The Project is expected to be eligible for incentives under the New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program.
The Company has submitted its initial interconnection request for the Project and is awaiting the results of that process. Following receipt of interconnection approval, the Company will work to complete the permitting process and secure the necessary financing for the construction of the Project.
Once completed, the Project will be operated as a community solar project. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
There are several risks associated with the development of the Project. The development of any project is subject to receipt of interconnection approval, required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the reduction of carbon emissions; the receipt permits and financing to be able to construct the Project; and the receipt of incentives for the Project. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.104
SolarBank’s
5.728 MW, DC, Community Solar Project Begins Power Production in the
Town of Manlius, Onondaga County, New York
● SolarBank constructed the Project under a US$11.35 million
EPC Agreement for Solar Advocate Development LLC
● 1,150 homes expected to be powered in first year of operation
● The system will produce approximately 7 million kilowatt hours of electricity equivalent to
reducing more than 2,500 metric tons of carbon dioxide (CO2) emissions
Toronto, Ontario, January 25, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that the Manlius, New York community solar project (the “Project”) that has been developed and constructed for Solar Advocate Development LLC (the “Owner”) has reached permission to operate stage (PTO) on January 24, 2024. National Grid has confirmed that the Project has been formally accepted, successfully commissioned and it is authorized to produce power. National Grid is one of the largest investor-owned energy companies in the US — serving more than 20 million people throughout New York and Massachusetts.
The Project repurposed Manlius landfill with a community solar ground mount sizing at 4.35MW AC/5.728 MW DC. It is estimated to produce 175 million kWh of clean electricity over the 25 years of the community solar program, enough to power around 1,150 homes and reduce an estimated 116,700 tones of CO2 equivalent emissions.
SolarBank provided turn-key development for this project. It originated the site in Manlius, New York and has completed an interconnection agreement with the utility company, and obtained permits from the local authority having jurisdiction. The Company carried out all engineering, construction and procurement work for the Project under the terms of an engineering, procurement, and construction (“EPC”) agreement. The EPC agreement has a total value of approximately US$11.35 million.
Incentives for the Project have been secured from New York State Energy Research and Development Authority (“NYSERDA”). NYSERDA also provides additional incentives to utilize these types of land, whether any hazard is real or perceived, because investment increases local tax bases, facilitates job growth, and improves and protects the environment, amongst other reasons.
There are several risks associated with the development of the Project. As disclosed in the Company’s financial statements, the project is being challenged by neighboring residents to the site. The commercial operation of any project is subject to the risks associated with the operation of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power project mentioned in this press release; the expected value of the EPC Agreement; the reduction of carbon emissions; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.105
SolarBank Receives Conditional Approval to List on Cboe Canada
Toronto, Ontario, January 31, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has received conditional approval to list its common shares (the “Shares”) on the Cboe Canada stock exchange.
Upon listing the Shares on Cboe Canada, the Company plans to delist the Shares from the Canadian Securities Exchange (the “CSE”). The transition to Cboe Canada does not require the Company to recapitalize or undertake any corporate restructuring. The Shares will continue trading in Canada on Cboe Canada under the same symbol “SUNN”. Trading of the Company’s securities is not expected to be disrupted in any way and current shareholders do not need to take any action.
Final approval of the listing of the Shares on Cboe Canada is subject to the Company fulfilling customary conditions prescribed by Cboe Canada, and the delisting from the CSE is subject to the approval of the CSE. A further news release outlining the transition will be announced once the Company receives final approval from Cboe Canada.
Launched in 2015 as the NEO Exchange, and acquired by Cboe Global Markets in 2022, Cboe Canada is the third most active marketplace in Canada, consistently representing close to 15% of all volume traded in Canadian-listed securities. Cboe Canada offers a marketplace that is home to over 260 unique public listings, including public companies, Exchange Traded Funds (ETFs), Canadian Depositary Receipts™ (CDRs), Special Purpose Acquisition Companies (SPACs), and Closed-End Funds (CEFs). Cboe Canada-listed securities market data is available to all investors in real-time. Cboe’s equities markets are among the most liquid in the world. In North America, Cboe’s U.S. and Canadian equities trading venues handle over $67 billion combined in average daily notional value (ADNV).
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; final approval of listing on Cboe Canada; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.106
SolarBank
Executes Lease on 19 MW
Ground Mount Sites in Upstate New York
| ● | Expected to operate as community solar sites, selling credits to subscribers. | |
| ● | 2,260 homes are expected to receive green energy once the systems are operational. | |
| ● | Eligible to participate in the NYSUN program to receive NYSERDA incentives. |
Toronto, Ontario, February 8, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) announces that it has executed lease agreements on two closed landfill sites located in Skaneateles, New York and Lewiston, New York. The Company intends to develop three ground-mount community solar projects across the two sites with a capacity of 19.3 MW DC (the “Projects”). The Company’s subsidiary was the successful proponent in an RFP from the private owner of the sites. The Projects are expected to be eligible for incentives under the New York State Energy Research and Development Authority (“NYSERDA”) NY-Sun Program.
The Company is in process of submitting its initial interconnection request for the Projects. Following receipt of interconnection approval, the Company will work to complete the permitting process and secure the necessary financing for the construction of the Projects.
Once completed, each of the Projects will be operated as a community solar project. Community solar is a group of solar panels with access to the local electricity grid. Once the panels are turned on and generating electricity, clean energy from the site feeds into the local power grid. Depending on the size and number of panels the project has, dozens or even hundreds of renters and homeowners can save money from the electricity that is generated by the project. By subscribing to a project, a homeowner earns credits on their electric bill every month from their portion of the solar that’s generated by the project, accessing the benefits of solar without installing panels on their home.
There are several risks associated with the development of the Projects. The development of any project is subject to receipt of interconnection approval, required permits, the continued availability of third-party financing arrangements for the Company and the risks associated with the construction of a solar power project. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this press release; the reduction of carbon emissions; the receipt permits and financing to be able to construct the Projects; and the receipt of incentives for the Projects. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in Company’s Annual Information Form for its most recently completed financial year, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.107
SolarBank Receives Final Approval to List on Cboe Canada
Toronto, Ontario, February 13, 2024 — SolarBank Corporation (CSE: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that the Cboe Canada stock exchange (“Cboe Canada”) has granted final approval of the Company’s listing application and that the common shares of the Company (the “Shares”) will be listed and available for trading on Cboe Canada at the start of trading on February 14, 2024. The Company’s existing trading symbol “SUNN” will remain unchanged as a result of the listing. The Shares will be delisted from the Canadian Securities Exchange at the close of market on February 13, 2024.
“It has been less than a year since SolarBank initially completed its IPO and during this period the company has undergone substantial growth. Today’s migration of our listing to the senior Cboe Canada exchange is yet another significant milestone,” explained Dr. Richard Lu, President and CEO of SolarBank. “Cboe’s global platform and investor reach were major considerations in our decision to uplist on Cboe Canada. There are big things ahead in 2024 and beyond as SolarBank continues to execute on its over 1 GWp pipeline of solar energy and battery storage projects.”
Launched in 2015 as the NEO Exchange, and acquired by Cboe Global Markets in 2022, Cboe Canada is the third most active marketplace in Canada, consistently representing close to 15% of all volume traded in Canadian-listed securities. Cboe Canada offers a marketplace that is home to over 260 unique public listings, including public companies, Exchange Traded Funds (ETFs), Canadian Depositary Receipts™ (CDRs), Special Purpose Acquisition Companies (SPACs), and Closed-End Funds (CEFs). Cboe Canada-listed securities market data is available to all investors in real-time. Cboe’s equities markets are among the most liquid in the world. In North America, Cboe’s U.S. and Canadian equities trading venues handle over $67 billion combined in average daily notional value (ADNV).
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form for the most recently completed financial year, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.108
CHANGE OF STATUS REPORT
(Section 11.2 of National Instrument 51-102)
| TO: | Ontario Securities Commission |
| Alberta Securities Commission | |
| British Columbia Securities Commission | |
| Financial and Consumer Affairs Authority of Saskatchewan | |
| Manitoba Securities Commission | |
| New Brunswick Financial and Consumer Services Commission | |
| Nova Scotia Securities Commission | |
| Prince Edward Island Office of the Superintendent of Securities | |
| Office of the Superintendent of Securities, Service Newfoundland and Labrador |
| RE: | SolarBank Corporation (the “Corporation”) |
Effective February 13, 2024, the Corporation’s common shares ceased trading on the Canadian Securities Exchange, and effective February 14, 2024, the Corporation’s common shares became listed on the Cboe Canada Exchange. As a result, the Corporation ceased to be a “venture issuer” as defined under National Instrument 51-102 on February 14, 2024.
SOLARBANK CORPORATION
| Per: | “Olen Aasen” (signed) | |
| Name: | Olen Aasen | |
| Title: | Director |
Exhibit 99.109
| SOLARBANK CORPORATION | ||
| (Formerly Abundant Solar Energy Inc.) | ||
| Condensed Interim Consolidated Financial Statements | ||
| (Expressed in Canadian Dollars) | ||
| (Unaudited) | ||
| For the three and six months ended December 31,2023 and 2022 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
(Unaudited)
| Notes | December 31, 2023 | June 30, 2023 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 24,914,920 | $ | 749,427 | ||||||
| Short-term investment | 3 | 220,000 | 6,550,000 | |||||||
| Trade and other receivables | 4 | 3,493,337 | 3,837,207 | |||||||
| Unbilled revenue | 3,125,019 | 7,405,866 | ||||||||
| Prepaid expenses and deposits | 5 | 4,686,482 | 3,054,678 | |||||||
| Inventory | 7 | 1,045,254 | 448,721 | |||||||
| 37,485,012 | 22,045,899 | |||||||||
| Non-current assets | ||||||||||
| Property, plant and equipment | 6 | 2,283,215 | 950,133 | |||||||
| Right-of-use assets | 11 | 895,041 | 144,487 | |||||||
| Development asset | 8 | 6,595,639 | 1,106,503 | |||||||
| Goodwill | 16 | 5,689,227 | - | |||||||
| Investment | 18 | 3,187,515 | 722,515 | |||||||
| 18,650,637 | 2,923,638 | |||||||||
| Total assets | $ | 56,135,649 | $ | 24,969,537 | ||||||
| Liabilities and Shareholder’s equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 9 | $ | 11,747,280 | $ | 4,713,497 | |||||
| Unearned revenue | 10 | 16,286,018 | 1,150,612 | |||||||
| Current portion of long-term debt | 12 | 345,785 | 151,111 | |||||||
| Loan payables | 42,816 | - | ||||||||
| Tax payable | - | 929,944 | ||||||||
| Current portion of lease liability | 11 | 112,258 | 44,961 | |||||||
| Current portion of tax equity | 13 | 79,758 | 93,751 | |||||||
| Non-current liabilities: | 28,613,915 | 7,083,876 | ||||||||
| Long-term debt | 12 | 2,811,979 | 759,259 | |||||||
| Lease liability | 11 | 823,992 | 128,350 | |||||||
| Tax equity | 13 | 327,487 | 366,856 | |||||||
| 3,963,458 | 1,254,465 | |||||||||
| Total liabilities | $ | 32,577,373 | $ | 8,338,341 | ||||||
| Shareholders’ equity: | ||||||||||
| Share capital | 15 | 8,984,448 | 6,855,075 | |||||||
| Contributed surplus | 3,652,023 | 3,001,924 | ||||||||
| Accumulated other comprehensive income | (218,547 | ) | (116,759 | ) | ||||||
| Retained earnings | 8,734,132 | 6,652,551 | ||||||||
| Equity attributable to shareholders of the company | 21,152,056 | 16,392,791 | ||||||||
| Non-controlling interest | 17 | 2,406,220 | 238,405 | |||||||
| Total equity | 23,558,276 | 16,631,196 | ||||||||
| Total liabilities and shareholders’ equity | $ | 56,135,649 | $ | 24,969,537 | ||||||
Approved and authorized for issuance on behalf of the Board of Directors on February 21, 2024 by:
| “Richard Lu” | “Sam Sun” | |
| Richard Lu, CEO, and Director | Sam Sun, CFO |
See accompanying notes to these condensed interim consolidated financial statements.
| 2 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Expressed in Canadian dollars)
(Unaudited)
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||||
| Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Revenue from EPC services | $ | 18,429,025 | $ | 2,932,635 | $ | 24,042,040 | $ | 8,398,177 | ||||||||||
| Revenue from development fees | 67,668 | - | 2,079,418 | - | ||||||||||||||
| Revenue from other services | 147,112 | 32,299 | 203,608 | 47,209 | ||||||||||||||
| 18,643,805 | 2,964,934 | 26,325,066 | 8,445,386 | |||||||||||||||
| Cost of goods sold | (16,109,886 | ) | (1,926,479 | ) | (21,444,452 | ) | (6,844,012 | ) | ||||||||||
| Gross profit | 2,533,919 | 1,038,455 | 4,880,614 | 1,601,374 | ||||||||||||||
| Operating expense: | ||||||||||||||||||
| Advertising and promotion | (974,893 | ) | (38,613 | ) | (1,478,702 | ) | (38,613 | ) | ||||||||||
| Consulting fees | (150,600 | ) | (153,960 | ) | (301,200 | ) | (327,429 | ) | ||||||||||
| Depreciation | (49,320 | ) | (13,593 | ) | (71,298 | ) | (23,339 | ) | ||||||||||
| Insurance | (88,012 | ) | (34,002 | ) | (127,258 | ) | (57,788 | ) | ||||||||||
| Office, rent and utilities | (172,991 | ) | (63,467 | ) | (257,235 | ) | (149,129 | ) | ||||||||||
| Professional fees | (782,240 | ) | (145,246 | ) | (1,082,831 | ) | (191,049 | ) | ||||||||||
| Salary and Wages | (275,335 | ) | (349,062 | ) | (477,416 | ) | (415,965 | ) | ||||||||||
| Stock based compensation | (220,519 | ) | - | (650,099 | ) | - | ||||||||||||
| Travel and accommodation | (126,971 | ) | (92,019 | ) | (171,234 | ) | (112,902 | ) | ||||||||||
| Total operating expenses | (2,840,881 | ) | (889,962 | ) | (4,617,273 | ) | (1,316,214 | ) | ||||||||||
| Other income (loss) | ||||||||||||||||||
| Interest income | 75,567 | 34,363 | 158,736 | 34,363 | ||||||||||||||
| Interest expense | (126,212 | ) | (44,006 | ) | (150,293 | ) | (76,788 | ) | ||||||||||
| Other income (expense) | 4,16 | 363,853 | (12,308 | ) | 1,735,690 | 109,764 | ||||||||||||
| Net income before taxes | $ | 6,246 | $ | 126,542 | $ | 2,007,474 | $ | 352,499 | ||||||||||
| Income tax refund (expense) | (21,753 | ) | - | 15,987 | - | |||||||||||||
| Net income (loss) | $ | (15,507 | ) | $ | 126,542 | $ | 2,023,461 | $ | 352,499 | |||||||||
| Current translation adjustments, net of tax of $nil | (188,554 | ) | (37,074 | ) | (101,788 | ) | (98,549 | ) | ||||||||||
| Net income (loss) and comprehensive income (loss) | $ | (204,061 | ) | $ | 89,468 | $ | 1,921,673 | $ | 253,950 | |||||||||
| Net income attributable to: | ||||||||||||||||||
| Shareholders of the company | 39,872 | 126,542 | 2,074,491 | 352,499 | ||||||||||||||
| Non-controlling interest | (55,379 | ) | - | (51,030 | ) | - | ||||||||||||
| Net Income (loss) | $ | (15,507 | ) | $ | 126,542 | $ | 2,023,461 | $ | 352,499 | |||||||||
| Total income (loss) and comprehensive income (loss) attributable to: | ||||||||||||||||||
| Shareholders of the company | (153,031 | ) | 89,468 | 1,927,703 | 253,950 | |||||||||||||
| Non-controlling interest | (51,030 | ) | - | (51,030 | ) | - | ||||||||||||
| Total income (loss) and comprehensive income (loss) | $ | (204,061 | ) | $ | 89,468 | $ | 1,921,673 | $ | 253,950 | |||||||||
| Earning (loss) per share | ||||||||||||||||||
| Basic | (0.00 | ) | 0.01 | 0.08 | 0.02 | |||||||||||||
| Diluted | (0.00 | ) | 0.01 | 0.05 | 0.02 | |||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||||
| Basic | 27,039,075 | 16,000,000 | 26,922,629 | 16,000,000 | ||||||||||||||
| Diluted | 37,466,187 | 16,000,000 | 37,448,058 | 16,000,000 | ||||||||||||||
See accompanying notes to these condensed interim consolidated financial statements
| 3 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in Canadian Dollars)
(Unaudited)
| Note | No. of Shares | Share Capital | Share Option Reserve | Retained Earnings | Accumulated
OCI | Total Shareholders’ Equity | Non-Controlling Interest | Total Equity | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | 16,000,000 | $ | 1,000 | $ | - | $ | 4,410,565 | $ | 73,767 | $ | 4,485,332 | $ | (44,717 | ) | $ | 4,440,615 | ||||||||||||||||||
| Net income for the period | - | - | 352,499 | - | 352,499 | - | 352,499 | |||||||||||||||||||||||||||
| Convertible debentures – equity component | 113,636 | 113,636 | 113,636 | |||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | (98,549 | ) | (98,549 | ) | - | (98,549 | ) | ||||||||||||||||||||||||
| Balance at December 31,2022 | 16,000,000 | $ | 1,000 | $ | 113,636 | $ | 4,763,064 | $ | (24,782 | ) | $ | 4,852,918 | $ | (44,717 | ) | $ | 4,808,201 | |||||||||||||||||
| Balance at June 30, 2023 | 26,800,000 | $ | 6,855,075 | $ | 3,001,924 | $ | 6,652,551 | $ | (116,759 | ) | $ | 16,392,791 | $ | 238,405 | $ | 16,631,196 | ||||||||||||||||||
| Net income for the period | - | - | - | 2,074,491 | - | 2,074,491 | (51,030 | ) | 2,023,461 | |||||||||||||||||||||||||
| Common shares issued, net of costs | 2,200 | 21,659 | - | - | - | 21,659 | - | 21,659 | ||||||||||||||||||||||||||
| Warrant exercised | 15(c) | 55,000 | 41,250 | - | - | - | 41,250 | - | 41,250 | |||||||||||||||||||||||||
| RSU granted | 15(e) | - | - | 48,181 | - | - | 48,181 | - | 48,181 | |||||||||||||||||||||||||
| Share-based compensation | 15(d) | - | - | 601,918 | - | - | 601,918 | - | 601,918 | |||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | (101,788 | ) | (101,788 | ) | 8,172 | (93,616 | ) | |||||||||||||||||||||||
| OFIT GM and OFIT RT acquisition | 16 | 278,875 | 2,066,464 | - | - | - | 2,066,464 | 2,508,989 | 4,575,453 | |||||||||||||||||||||||||
| Acquisition of NCI of Solar alliance DevCo | 16 | - | - | - | 7,090 | - | 7,090 | (298,316 | ) | (291,226 | ) | |||||||||||||||||||||||
| Balance at September 30,2023 | 27,136,075 | $ | 8,984,448 | $ | 3,652,023 | $ | 8,734,132 | $ | (218,547 | ) | $ | 21,152,056 | $ | 2,406,220 | $ | 23,558,276 | ||||||||||||||||||
See accompanying notes to condensed interim consolidated financial statements
| 4 |
SOLARBANK CORPORATION
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Unaudited
| Six months ended December 31, | ||||||||
| In Canadian Dollars | 2023 | 2022 | ||||||
| Operating activities: | ||||||||
| Net income (loss) | $ | 2,023,461 | $ | 352,499 | ||||
| Items not involving cash: | ||||||||
| Depreciation | 71,298 | 23,339 | ||||||
| Interest accretion on convertible debentures | - | 28,409 | ||||||
| Interest expenses | 80,472 | 17,243 | ||||||
| Changes in ITC Distribution | (69,821 | ) | - | |||||
| Gain from acquisition of NCI | (195,893 | ) | - | |||||
| Share-based compensation | 601,918 | - | ||||||
| Warrants and RSU vested | 48,181 | - | ||||||
| 2,559,616 | 421,490 | |||||||
| Changes in non-cash working capital balances: | ||||||||
| Trade and other receivable | 3,867,066 | (3,452,992 | ) | |||||
| Contract fulfilment costs | 3,011 | 3,660,468 | ||||||
| Inventory | (605,118 | ) | (348,735 | ) | ||||
| Prepaids | (1,652,808 | ) | (111,511 | ) | ||||
| Trade and other payables | 7,049,299 | (183,549 | ) | |||||
| Advance from customer | 15,560,451 | - | ||||||
| Income tax payable | 12,826 | 18,363 | ||||||
| Changes in due to related parties | (49,761 | ) | 750,053 | |||||
| Cash provided by operating activities | 26,744,582 | 753,587 | ||||||
| Investing activities: | ||||||||
| Acquisition of property, plant and equipment | (42,908 | ) | - | |||||
| Acquisition of development asset | (5,596,634 | ) | - | |||||
| Redemption of GIC | 6,330,000 | - | ||||||
| Net cash acquired from acquisition | 11,155 | - | ||||||
| Acquisition of NCI | (95,333 | ) | ||||||
| Investment in partnership units | (2,465,000 | ) | - | |||||
| Cash used in investing activities | (1,858,720 | ) | - | |||||
| Financing activities: | ||||||||
| Net proceeds from convertible loan | - | 1,250,000 | ||||||
| Proceeds from issuance of common shares, net transaction costs | 21,659 | - | ||||||
| Net proceeds from broker warrants exercised | 41,250 | - | ||||||
| Repayment of lease obligation | (52,050 | ) | (8,991 | ) | ||||
| Repayment of short-term loans | - | (595,712 | ) | |||||
| Repayment of long-term debts | (203,223 | ) | (388,666 | ) | ||||
| Cash provided by (used in) financing activities | (192,364 | ) | 256,631 | |||||
| Effect of changes in exchange rates on cash | (528,005 | ) | (53,138 | ) | ||||
| Increase (decrease) in cash | 24,165,493 | 957,080 | ||||||
| Cash and cash equivalents, beginning | 749,427 | 931,977 | ||||||
| Cash and cash equivalents, ending | 24,914,920 | 1,889,057 | ||||||
| Supplementary of cash flow provided by operating activities: | ||||||||
| Interest received | 158,736 | - | ||||||
| Interest paid | 69,028 | 19,319 | ||||||
| Income tax paid | 928,627 | - | ||||||
See accompanying notes to condensed interim consolidated financial statements.
| 5 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 1. | Nature of operations: |
SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.
The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.
On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
| 2. | Material accounting policy information |
| (a) | Statement of compliance and basis of preparation: |
These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2023.
These condensed interim consolidated financial statements were prepared on a going concern basis.
The board approved these condensed interim consolidated financial statements of directors for issue on February 21, 2024.
| (b) | Basis of consolidation: |
These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
Balance, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
| 6 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
Details of the Company’s significant subsidiaries which are consolidated are as follows:
| 2. | Material accounting policy information (continued) |
| Name | Method of accounting | Ownership interest | ||||
| Abundant Solar Power Inc. | Consolidation | 100 | % | |||
| Abundant Construction Inc. | Consolidation | 100 | % | |||
| Abundant Energy Solutions Ltd. | Consolidation | 100 | % | |||
| 2467264 Ontario Inc. | Consolidation | 49.9 | % | |||
| OFIT GM Inc. | Consolidation | 49.9 | % | |||
| OFIT RT Inc. | Consolidation | 49.9 | % | |||
| Solar Alliance Energy DevCo LLC(1) | Consolidation | 100 | % | |||
| Solar Alliance TE HoldCo 1, LLC(1) | Consolidation | 100 | % | |||
| Solar Alliance VC1 LLC(1) | Consolidation | 100 | % | |||
| Abundant Solar Power (US1) LLC(1) | Consolidation | 100 | % | |||
| Abundant Solar Power (New York) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Maryland) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (RP) LLC | Consolidation | 100 | % | |||
| SUNN 1011 LLC | Consolidation | 100 | % | |||
| SUNN 1012 LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (CNY) LLC | Consolidation | 100 | % | |||
| SUNN 1016 LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (TZ1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (M1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (J1) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Steuben) LLC | Consolidation | 100 | % | |||
| ABUNDANT SOLAR POWER (USNY- MARKHAM HOLLOW RD-001) LLC | Consolidation | 100 | % | |||
| SUNN 1015 LLC | Consolidation | 100 | % | |||
| SUNN 1002 LLC | Consolidation | 100 | % | |||
| SUNN 1003 LLC | Consolidation | 100 | % | |||
| ABUNDANT SOLAR POWER (USNY-Richmond-002) LLC | Consolidation | 100 | % | |||
| ABUNDANT SOLAR POWER (USNY-Richmond-003) LLC | Consolidation | 100 | % | |||
| SUNN 1006 LLC | Consolidation | 100 | % | |||
| SUNN 1007 LLC | Consolidation | 100 | % | |||
| SUNN 1008 LLC | Consolidation | 100 | % | |||
| SUNN 1009 LLC | Consolidation | 100 | % | |||
| SUNN 1010 LLC | Consolidation | 100 | % | |||
| SUNN (203 Fuller Rd) LLC | Consolidation | 100 | % | |||
| SUNN 1001 LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (USNY-6882 Rice Road-001) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (LCP) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (SB13W) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (SB13N) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Dutch Hill 2) LLC | Consolidation | 100 | % | |||
| Abundant Solar Power (Dutch Hill 3) LLC | Consolidation | 100 | % | |||
| SUNN 1004 LLC | Consolidation | 100 | % | |||
| (1) | The Company acquired the remaining shares from the non-controlling interest shareholders during the three months ended December 31, 2023 and owns 100% interest of these subsidiaries. |
| 7 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 2. | Material accounting policy information (continued) |
| (c) | New standards and amendments adopted by the Company: |
The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended June 30, 2023, except for the adoption of new standards effective as of July 1, 2023. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
The amendments below apply for the first time effective July 1, 2023, but do not have an impact on the condensed interim consolidated financial statements of the Company.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.
IAS 1 – Presentation of Financial Statements
In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.
| 8 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 3. | Short-term investments |
Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase.
As at December 31, 2023, the Company has one GIC in short-term investment of $220,000. The GIC has one year term and with interest rate of 4.95%.
As at June 30, 2023, the Company has two GICs in short-term investment totaling $6,550,000. The GIC of $2,980,000 has one year term and with interest rate of 4.7%. The GIC of $3,570,000 has one year term and with interest rate of 4.95%.
| 4. | Trade and other receivables |
| December 31, 2023 | June 30, 2023 | |||||||
| Accounts receivable, net | $ | 3,304,767 | $ | 1,978,834 | ||||
| Receivable from Solar Flow-Through (1) | - | 1,537,357 | ||||||
| Other receivable | 188,571 | 321,016 | ||||||
| $ | 3,493,337 | $ | 3,837,207 | |||||
| (1) | In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. The aged receivable of $1,457,489 from SFT as at June 30, 2023 was collected during the six months ended December 31, 2023. Additional $1,462,752 was collected and recorded in other income as accounts receivable recovery for the six months ended December 31, 2023. The Company owns partnership units in SFT, see Note 18. |
| 5. | Prepaid expenses and deposits |
| December 31, 2023 | June 30, 2023 | |||||||
| Interconnection deposits(1) | $ | - | $ | 469,725 | ||||
| Construction in progress deposit(2) | 4,240,359 | 1,623,209 | ||||||
| Security deposits | 12,352 | 12,352 | ||||||
| Prepaid insurance | 277,850 | 74,373 | ||||||
| Prepaid marketing expenses(3) | 28,109 | 782,101 | ||||||
| Other prepaids and deposits | 127,812 | 92,918 | ||||||
| $ | 4,686,482 | $ | 3,054,678 | |||||
| (1) | Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation. | |
| (2) | Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Geddes and Settling Basins, located in New York, USA. | |
| (3) | The Company hired investor relations and marketing consultant companies to increase the Company’s visibility in the market and to explore over-seas markets. The balance is related to the payment made to these marketing consultant companies. |
| 9 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 6. | Property, Plant and Equipment |
| Computer equipment | Furniture and equipment | Vehicle | IPP facilities | Total | ||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance, June 30, 2022 | $ | 59,984 | 83,706 | - | - | $ | 143,690 | |||||||||||||
| Additions | - | - | - | - | - | |||||||||||||||
| Balance, December 31, 2022 | $ | 59,984 | 83,706 | - | - | $ | 143,690 | |||||||||||||
| Accumulated amortization: | ||||||||||||||||||||
| Balance, June 30, 2022 | $ | 49,973 | 68,603 | - | - | $ | 118,576 | |||||||||||||
| Amortization | 2,838 | 1,489 | - | - | 4,327 | |||||||||||||||
| Balance, December 31, 2022 | $ | 52,811 | 70,092 | - | - | $ | 122,903 | |||||||||||||
| Net Book Value, December 31, 2022 | $ | 7,173 | 13,614 | - | - | $ | 20,787 | |||||||||||||
| Cost: | ||||||||||||||||||||
| Balance, June 30, 2023 | $ | 19,256 | 50,253 | - | 937,194 | $ | 1,006,703 | |||||||||||||
| Additions | - | 7,300 | 35,608 | 1,324,499 | 1,367,407 | |||||||||||||||
| Balance, December 31, 2023 | $ | 19,256 | 57,553 | 35,608 | 2,261,693 | $ | 2,374,110 | |||||||||||||
| Accumulated amortization: | ||||||||||||||||||||
| Balance, June 30, 2023 | $ | 13,876 | 42,694 | - | - | $ | 56,570 | |||||||||||||
| Amortization | 1,320 | 786 | 885 | 30,752 | 33,743 | |||||||||||||||
| Foreign currency impact | - | - | - | 582 | 581 | |||||||||||||||
| Balance, December 31, 2023 | $ | 15,196 | 43,480 | 885 | 31,334 | $ | 90,895 | |||||||||||||
| Net Book Value, December 31, 2023 | $ | 4,060 | 14,073 | 34,723 | 2,230,359 | $ | 2,283,215 | |||||||||||||
| 10 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 7. | Inventory |
As of December 31, 2023 and 2022, the Company’s inventory is comprised of development costs for the solar projects.
| Balance, June 30, 2022 | 195,920 | |||
| Additions: development costs | 428,191 | |||
| Minus: development costs expensed to cost of goods sold | - | |||
| FX Impact | 11,168 | |||
| Balance, December 31, 2022 | $ | 635,279 |
| Balance, June 30, 2023 | 448,721 | |||
| Additions: development costs | 775,122 | |||
| Minus: development costs expensed to cost of goods sold | (170,155 | ) | ||
| FX Impact | (8,434 | ) | ||
| Balance, December 31, 2023 | $ | 1,045,254 |
| 8. | Development asset |
Development projects are depreciated over the useful lives of the resulting assets once they become operational. The balance in development assets include costs incurred on self-owned projects. Detail of costs as at December 31, 2023 are as follows:
| Interconnection and permitting | $ | 1,080,093 | ||
| Modules | 2,019,964 | |||
| Inverter | 175,033 | |||
| Racking | 847,690 | |||
| Datalogger | 23,613 | |||
| Engineering | 77,604 | |||
| Installation | 2,255,663 | |||
| Balance of system | 110.424 | |||
| Construction | 5,555 | |||
| $ | 6,595,639 |
| 11 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 9. | Trade and other payables |
| December 31, 2023 | June 30, 2023 | |||||||
| Accounts payable and accrued liabilities | $ | 9,214,373 | $ | 1,542,849 | ||||
| Due to related party | - | 63,754 | ||||||
| Other payable (1) | 2,532,907 | 3,106,894 | ||||||
| $ | 11,747,280 | $ | 4,713,497 | |||||
| (1) | Balance includes $2,168,122 NYSERDA grants to be paid to various projects. |
| 10. | Unearned revenue |
As of December 31, 2023, the Company’s unearned revenue mostly consists of payments received for EPC projects not started yet.
| Balance, June 30, 2023 | $ | 1,150,612 | ||
| Additional payments received | 15,135,406 | |||
| Recognized to revenue | - | |||
| Balance, December 31, 2023 | $ | 16,286,018 |
| 11. | Right of use assets and lease liabilities |
The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. On December 1, 2023, the Company leased additional office space, which increased monthly rent to $5,091. The right of use (“ROU”) and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.
On November 1, 2023, the Company acquired shares of OFIT GM Inc. (“OFIT GM”) and OFIT RT Inc. (“OFIT RT”) (see Note 16). The OFIT companies leased five properties where independent power producer (“IPP”) facilities are located. The leases commenced during the period from August 28, 2017 to October 6, 2017, each with a 20 year lease term. Two leases are paid on a monthly basis and three leases are paid on a quarterly basis. The monthly lease payments are in the range of $502 to $2,456 and quarterly lease payments are in the range of $1,250 to $8,125. The right of use asset and lease liabilities were treated as new assets and liabilities starting from acquisition date of November 1, 2023 in accordance to IFRS 3. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 12.5%.
| 12 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 11. | Right of use assets and lease liabilities (continued) |
The continuity of the right-of-use as of December 31, 2023 is as follows:
| Right-of- use assets | Office | IPP Facilities | Total | |||||||||
| Cost: | ||||||||||||
| Balance, June 30, 2023 | $ | 197,719 | - | 197,719 | ||||||||
| Addition | 116,168 | 671,941 | 788,109 | |||||||||
| Balance, December 31, 2023 | $ | 313,887 | 671,941 | 985,828 | ||||||||
| Accumulated amortization: | ||||||||||||
| Balance, June 30, 2023 | $ | 53,232 | - | 53,232 | ||||||||
| Amortization: | 26,334 | 11,221 | 37,555 | |||||||||
| Balance, December 31, 2023 | $ | 79,566 | 11,221 | 90,787 | ||||||||
| Net Book Value, December 31, 2023 | $ | 234,321 | 660,720 | 895,041 | ||||||||
The continuity of the lease liabilities as of December 31, 2023 is as follows:
| Lease liabilities | Office | IPP Facilities | Total | |||||||||
| Balance, June 30, 2023 | $ | 173,311 | - | 173,311 | ||||||||
| New obligations | 116,168 | 671,941 | 788,109 | |||||||||
| Payments: | (30,560 | ) | (21,490 | ) | (52,050 | ) | ||||||
| Interest accretion: | 9,203 | 17,677 | 26,880 | |||||||||
| Balance, December 31, 2023 | $ | 268,122 | 668,128 | 936,250 | ||||||||
| Current | 83,746 | 28,512 | 112,258 | |||||||||
| Long term | 184,376 | 639,616 | 823,992 | |||||||||
| Net Book Value, December 31, 2023 | $ | 268,122 | 668,128 | 936,250 | ||||||||
The maturity analysis of the Company’s contractual undiscounted lease liabilities as of December 31, 2023 is as follows:
| 2024 | $ | 102,667 | ||
| 2025 | 218,013 | |||
| 2026 | 226,104 | |||
| 2027 | 124,389 | |||
| 2027 onward | 956,545 | |||
| Total | $ | 1,627,717 |
| 13 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 12. | Long-term debt |
| December 31, 2023 | June 30, 2023 | |||||||
| Highly Affected Sectors Credit Availability Program (1) | $ | 814,815 | $ | 870,370 | ||||
| Canadian Emergency Business Account (2) | 40,000 | 40,000 | ||||||
| Long-term loans(3) | 2,302,949 | - | ||||||
| Total | 3,157,764 | 910,370 | ||||||
| Less: current portion | 345,785 | 151,111 | ||||||
| Long-term portion | $ | 2,811,979 | $ | 759,259 | ||||
| (1) | In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual interest rate from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months and six month ended December 31, 2023, the interest recorded and paid was $8,397 and $17,077 (3-month and 6-month period ended December 31, 2022 - $9,803 and $19,325). | |
| (2) | The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by January 18, 2024. If $40,000 is repaid in full on or before January 18, 2024 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum. | |
| The Company repaid the loan on January 8, 2024. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met. | ||
| (3) | The Company obtained these loans as a result of acquisition of OFIT GM and OFIT RT. The loans were originally obtained on December 19, 2017 for a total principal amount of $4,248,495 and used interest rate swap agreements to fix the annual interest rate at 4.75%. The loans are guaranteed by Panasonic Corporation North America and collateralized by the solar projects, including related contracts such as FIT contract, EPC contract, site leases and similar contracts. The carrying value of solar projects was $6.45 million upon entering the loan agreements and the carrying value of solar projects as at December 31, 2023 was $1.31 million. The loans will mature on December 19, 2035 with interest payable quarterly commencing on March 19, 2018 and principal payments payable semi-annually commencing on June 19, 2018. The fair value of the loans recorded at acquisition date of November 1, 2023 were determined by using a discount rate of 12.5%. During the period from the acquisition date to December 31, 2023, the interest recorded and paid was $81,297 and interest accretion on fair value of the loans was $33,339. |
Estimated principal repayments are as follows:
| 2024 | $ | 653,543 | ||
| 2025 | 634,714 | |||
| 2026 | 628,086 | |||
| 2027 | 427,157 | |||
| 2027 onwards | 3,810,152 | |||
| Total | $ | 6,153,653 |
| 14 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 13. | Tax equity |
On June 20, 2023, the Company acquired 67% membership interest in an entity which owns and operates certain solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the capital cost of the solar facilities. Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the effective interest rate (“EIR”) method. Amortized cost is affected by the allocation of ITCs, taxable income, and accelerated tax depreciation. Financing expenses represent the interest accretion using the EIR. The EIR of the tax equity was determined to be 9%, the loan value was $549,061 (USD 414,699), with a maturity date (representing the expected flip point as estimated) of 2028 and the percentage of ownership between 99%, reflecting the allocation of taxable income or loss prior to the flip date.
Tax equity investors in US solar projects generally require sponsor guarantees as a condition to their investment. To support the tax equity investments, the Company executed guarantees indemnifying the tax equity investors against certain breaches of project level representations, warranties and covenants and other events. The Company believe these indemnifications cover matters which are substantially under its control and are very unlikely to occur.
| 14. | Financial instruments |
The Company as part of its operations carries financial instruments consisting of cash, short term investment, trade receivables, accounts payable and accruals, loan payable, lease liabilities, tax equity and long-term debt.
| (a) | Fair value: |
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices. Iin active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. | |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended December 31, 2023.
The carrying amounts of trade and other receivables, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities, tax equity liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
| (b) | Financial risk management: |
| (i) | Credit risk and economic dependence: |
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
| 15 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 14. | Financial instruments (continued) |
| (ii) | Concentration risk and economic dependence: |
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Six months
ended December 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer B | $ | 5,024,401 | 19 | % | ||||
| Customer C | $ | 2,507,976 | 10 | % | ||||
| Customer D | $ | 6,550,519 | 25 | % | ||||
| Customer E | $ | 11,659,809 | 44 | % | ||||
| Six months
ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,783,272 | 68 | % | ||||
| Three months
ended December 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer B | $ | 5,081,531 | 27 | % | ||||
| Customer C | $ | 2,531,928 | 14 | % | ||||
| Customer E | $ | 9,648,059 | 52 | % | ||||
| Three months
ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 1,851,848 | 62 | % | ||||
| December 31, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer D | $ | 2,545,465 | 73 | % | ||||
| Customer E | $ | 565,412 | 16 | % | ||||
| June 30, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer D | $ | 1,179,132 | 31 | % | ||||
| Customer F | $ | 1,537,357 | 40 | % | ||||
| 16 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 14. | Financial instruments (continued) |
| (iii) | Liquidity risk: |
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
| (iv) | Interest rate risk: |
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
| 15. | Share Capital |
| (a) | Authorized |
Unlimited number of common shares with no par value.
| (b) | Issued and outstanding share capital |
At December 31, 2023, the Company had 27,136,075 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity.
During the six-months ended December 31, 2023, the Company issued the following shares:
| i. | On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share. | |
| ii. | In September, 2023, the Company sold a total of 2,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $22,000. | |
| iii. | The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of OFIT GM and OFIT RT for consideration of 278,875 common shares of the Company that were issued on November 1, 2023. See Note 16 for more detail. |
| (c) | Warrants |
The following table reflects the warrants issued and outstanding as of December 31, 2023:
| 17 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 15. | Share Capital (continued) |
| (d) | Stock Options |
The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.
Details of the stock option outstanding as at December 31, 2023 are as follows:
| Date issued | Expiry | Exercise price (CAD) | Balance at July 1, 2023 | Granted | Balance at December 31, 2023 | |||||||||||||
| 10-Feb-2023 | 04-Nov-2027 | $ | 0.75 | 2,759,000 | - | 2,759,000 | ||||||||||||
| 04-Dec-2023 | 04-Dec-2028 | $ | 6.60 | - | 82,500 | 82,500 | ||||||||||||
| 2,759,000 | 82,500 | 2,841,500 | ||||||||||||||||
| Weighted average exercise price | $ | 0.92 | ||||||||||||||||
| Weighted average remaining contractual life | 3.88 years | |||||||||||||||||
As at December 31, 2023, no stock options were exercisable.
| (e) | Restricted Stock Units |
Details of the Restricted Stock Units (RSU) outstanding as at September 30, 2023 are as follows:
| Date granted | Vesting Date | Granted | Distributed | Forfeited | Balance at December 31, 2023 | |||||||||||||
| 4-Nov-2022 | 02-Aug-2023 | 250,000 | - | - | 250,000 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2024 | 7,500 | - | - | 7,500 | |||||||||||||
| 13-Mar-2023 | 12-Mar-2025 | 7,500 | - | - | 7,500 | |||||||||||||
| 265,000 | - | - | 265,000 | |||||||||||||||
The weight average grant date price per share is $0.86.
| 18 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Acquisitions |
Solar Alliance DevCo LLC
Abundant Solar Power (“ASP”) has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects reached PTO (permission to operation) in December 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects were reached PTO.
On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.
On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo, a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.
The provisional allocation of the purchase consideration to the total fair value of net assets acquired is as follows:
| Fair value of net assets acquired | $ | |||
| Accounts receivable | 407,210 | |||
| Capital assets | 937,194 | |||
| Accounts payable | (25,851 | ) | ||
| Tax equity liability | (460,607 | ) | ||
| Identifiable net assets acquired | 857,946 | |||
| Non-controlling interest | (283,122 | ) | ||
| Purchase consideration transferred | 574,824 |
On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit and loss in the fiscal year ended June 30, 2023.
On December 4, 2023, ASP acquired the remaining 33% of Solar Alliance DevCo for $95,333 (USD $70,000). The 33% non-controlling interest was originally valued at $283,122 (USD $213,838) on acquisition date. Accordingly, a gain of $195,893 (USD $143,838) is recognized as other income in the statement of income (loss) and comprehensive income (loss) for the six months period ended December 31, 2023.
| 19 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Acquisitions (continued) |
OFIT GM Inc. and OFIT RT Inc.
The Company entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of $432,510 cash and 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM and OFIT RT (the “Purchased Entities”) have been operating the Projects since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. The shares owned by the Town of Kapuskasing have no voting right, hence, the Company controls and consolidate the Purchased Entities.
The acquisition of the Purchased Entities is considered a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair value at the acquisition date.
Due to the timing of the acquisition and the ongoing collection of data necessary to value the acquired assets and liabilities, the identified assets acquired and liabilities assumed have been determined provisionally and purchase price allocation has not yet been finalized. Changes in the assumptions used in the valuation of these assets may affect the fair value resulting in a reallocation of purchase price to or from the amount recognized for goodwill. Any changes in these amounts will also result in a change in the relevant deferred tax liabilities recognized on the intangibles. The Company expects to finalize its purchase price allocation by the fourth quarter of fiscal 2024.
The President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.
| 20 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 16. | Acquisitions (continued) |
The preliminary fair value of consideration transferred from the acquisition of OFIT GM and OFIT RT Inc. consists of the following:
| Fair value of net assets (liabilities) acquired | $ | $ | $ | |||||||||
| OFIT GM | OFIT RT | Net | ||||||||||
| Cash | 242,885 | 200,780 | 443,665 | |||||||||
| Accounts receivable | 6,454 | 26,611 | 33,065 | |||||||||
| Prepaid | 11,210 | 5,297 | 16,507 | |||||||||
| Capital assets | 951,749 | 372,750 | 1,324,499 | |||||||||
| Current liabilities | (29,716 | ) | (52,006 | ) | (81,721 | ) | ||||||
| Long-term loans | (1,759,062 | ) | (658,217 | ) | (2,417,279 | ) | ||||||
| Identifiable net liabilities assumed at fair value | (576,480 | ) | (104,785 | ) | (681,265 | ) | ||||||
| Goodwill arising on acquisition | 4,247,318 | 1,441,909 | 5,689,227 | |||||||||
| Non-controlling interest at fair value | (1,839,090 | ) | (669,899 | ) | (2,508,989 | ) | ||||||
| Purchase consideration transferred | 1,831,748 | 667,225 | 2,498,973 | |||||||||
| Consideration paid in cash | 232,263 | 200,247 | 432,510 | |||||||||
| Consideration paid in common shares | 1,599,486 | 466,978 | 2,066,464 | |||||||||
| Total consideration | 1,831,748 | 667,225 | 2,498,973 | |||||||||
| 17. | Non-Controlling Interest |
The following items affects non-controlling interest for the year ended December 31, 2023:
Solar Alliance DevCo LLC
On June 20, 2023, the Company (through ASP) acquired a 67% membership interest in two solar facilities. The remaining 33% membership was acquired on December 4, 2023. For the period of July 1 to December 4, 33% of net income or $7,023 was allocated to non-controlling interest.
OFIT GM and OFIT RT
On November 1, 2023, the Company acquired 49.9% interest in OFIT GM and OFIT RT. For the period of November 2 to December 31, 2023, net loss of $46,195 in OFIT GM and $11,858 in OFIT RT were allocated to non-controlling interest.
| 21 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 18. | Investment |
On June 1, 2023, the Company acquired 200 limited partnership units of Solar Flow-Through 2012-I Limited Partnership from former partner unitholders for an aggregate purchase price of $4,200, and 31,230 limited partnership units of Solar Flow-Through 2013-I Limited Partnership for an aggregate purchase price of $718,290. On July 5, 2023, the Company acquired 42,500 limited partnership units of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000.
The Company does not have significant influence over Solar Flow-Through Limited Partnerships subsequent to the purchase of units. No fair value adjustment is required as at December 31, 2023.
| 19. | Related Party Transactions |
Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
Compensation of key management personnel
The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended December 31, 2023 and 2022 were as follows:
| Three Month Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 303,029 | $ | 504,357 | ||||
| Share-based compensation | 105,938 | - | ||||||
| Six Month Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 610,628 | $ | 740,339 | ||||
| Share-based compensation | 286,484 | - | ||||||
Short-term employee benefits include consulting fees and salaries made to key management personnel.
Related parties transactions
The OFIT transaction is considered a related party transaction due to the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. See note 16.
| 22 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 20. | Capital Management |
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| December 31, 2023 | June 30, 2023 | |||||||
| Long-term debt -non-current portion (note 12) | $ | 2,811,979 | 759,259 | |||||
| Shareholders’ equity | $ | 23,558,276 | 16,631,196 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
There has not been any significant change in capital management from the prior year.
| 21. | Segment reporting |
The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.
The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three and six months ended and as at December 31, 2023 and 2022 are as follows:
| Revenue from external customers | ||||||||||||||||
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Canada | $ | 7,743,618 | 508,351 | $ | 8,079,929 | 523,261 | ||||||||||
| United States | 10,900,187 | 2,456,583 | 18,245,137 | 7,922,125 | ||||||||||||
| $ | 18,643,805 | 2,964,934 | $ | 26,325,066 | 8,445,386 | |||||||||||
| 23 |
SOLARBANK CORPORATION
Notes to Condensed Interim Consolidate Financial Statements
For the period ended December 31, 2023, and 2022
(Expressed in Canadian Dollars)
(Unaudited)
| 21. | Segment reporting (continued) |
| Non-current assets | ||||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Canada | $ | 10,259,314 | 879,941 | |||||
| United States | 8,391,323 | 2,043,697 | ||||||
| $ | 18,650,637 | 2,923,638 | ||||||
| Total assets | Total liabilities | |||||||||||||||
| December 31, 2023 | June 30, 2023 | December 31, 2023 | June 30, 2023 | |||||||||||||
| Canada | $ | 19,310,094 | 11,219,868 | $ | 4,981,132 | 2,603,271 | ||||||||||
| United States | 36,825,555 | 13,739,128 | 27,596,241 | 5,724,529 | ||||||||||||
| $ | 56,135,649 | 24,958,996 | $ | 32,577,373 | 8,327,800 | |||||||||||
| 22. | Provisions and contingent liabilities |
In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company.
| 24 |
Exhibit 99.110
Management’s Discussion and Analysis
For the Three and Six Months End December 31, 2023
| Contact Information : | |
SolarBank Corporation | |
| (Formerly Abundant Solar Energy Inc.) | |
| 505 Consumers Road, Suite 803 | |
| Toronto, ON M2J 4V8 | |
| Contact Person: Mr. Sam Sun, CFO | |
| Email: info@solarbankcorp.com |
The following Management Discussion and Analysis (“MD&A”) of the financial condition and results of operations of SolarBank Corporation. (“SUNN” or the “Company”) was prepared by management as of February 21, 2024 and was reviewed and approved by the Board of Directors. The following discussion of performance, financial condition and future prospects should be read in conjunction with the interim consolidated financial statements of the Company and notes thereto for the three months ended September 30th, 2023. The information provided herein supplements but does not form part of the financial statements. All amounts are stated in Canadian dollars unless otherwise indicated.
Overview
Business Profile
SolarBank Corporation is incorporated in Ontario, Canada with its registered and head office at 505 Consumers Road, Suite 803, Toronto, Ontario, M2J 4V8. The Company was originally founded in Canada in 2013 as Abundant Solar Energy Inc, and in 2017 established a 100% owned U.S. subsidiary, Abundant Solar Power Inc., to meet the demand for renewable energy in both countries. The company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.
The Company is a growing renewable energy sector Company that specializes in delivering solar and other renewable energy power plants in Canada and the United States of America. Throughout its years in business, the Company has worked to provide safe, reliable and low-cost solar power plants that would generate solar renewable electricity to: (a) address the growing requirements to reduce carbon emissions in the form of Solar Renewable Energy Credits (“SREC”); and (b) provide a cost competitive alternative to conventional electricity generation to further decarbonize the electricity grid.
As an established independent renewable and clean energy project developer and asset operator, the Company is engaged in the site origination, development, engineering, procurement and construction (“EPC”), operation and maintenance (“O&M”), and asset management of a solar power plants, whether electricity grid interconnected or behind-the-meter (“BTM”) solar photovoltaic power plants on roofs of commercial and/or industrial buildings, or ground-mount solar farms, community-scale or utility-scale in size. The solar power plants could be net metered or virtual net metered to supply renewable energy to a specific commercial and industrial customer, or supply the green energy to community solar subscribers, or sell the renewable power or SREC to utilities in order to meet their Renewable Procurement Standard (“RPS”) compliance requirement or large corporations in meeting their carbon emission reduction limits or Net-Zero targets, such as NZ2050 or NZ2035.
The Company is shifting its business model from a “develop to sell” strategy to the ownership of renewable projects as an Independent Power Producer. The Company will accelerate its portfolio growth via organic growth and M&A.
Development of the Business
USA
The Company is focused on its key markets in New York, Maryland and California. In New York, the Company has 3 projects that reached Notice to Proceed (“NTP”) stage and construction started in November 2023. The Company reached Permission to Operate (“PTO”) for 1 project in New York in January 2024. The Company also expects to reach PTO for a 3.7 MW project by the end of FY2024; this project is to be owned by the Company subject to receipt of financing. Around 20 projects are under utility interconnection studies. In addition, the Company is working on sites origination of potential community solar and utility scale solar projects.
Community solar needs state-level polices in order to thrive. The Company is monitoring certain potential markets such as Illinois, Pennsylvania, Michigan, Ohio and Virginia where legislation for community solar programs has been passed or is being proposed.
Canada
The Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects in October 2023 in Ontario. In addition, 3 projects in Alberta and 3 projects in Nova Scotia are under utility interconnection studies and development work is ongoing.
The Company, in addition to its on-going business in Canada to provide operation and maintenance services of solar projects, is developing solutions to assist the real estate sector to achieve net zero greenhouse gas emissions.
Acquisitions
The Company acquired control of two corporations, OFIT GM Inc. (“OFIT GM” and OFIT RT Inc. (“OFIT RT, and together with OFIT GM, the “Purchased Entities”) as a result of Share Purchase Agreements entered into on October 23, 2023 (the “SPAs”). The Purchased Entities hold solar projects located in Ontario with a combined capacity of 2.5 MW and have been operating since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. and 49.9% ownership of OFIT GM Inc.
The Company also acquired 100% interest in the US1 Project and VC1 Project on December 5, 2023, both located in New York (the “Projects)”. The Company previously held a 67% interest in the Projects and has now acquired the remaining 33% from the minority interest shareholder. The Projects have a combined installed capacity of 687.6 kW DC.
Recent Developments
Since the commencement of the quarter ended December 31, 2023, the Company achieved the following business objectives:
| ● | October 2023: Hydro-Québec Subsidiary (EVLO) Partners with SolarBank to Supply Battery Storage Systems for recently announced Ontario IESO E-Lt1 projects. SolarBank has selected EVLO Energy Storage Inc. (“EVLO”) to supply EVLOFLEX battery energy storage systems for three separate BESS projects in Ontario. EVLO is a fully integrated battery energy storage system provider and wholly owned subsidiary of Hydro-Québec. EVLO will supply each of the Project sites with a 5 MW / 20MWh EVLOFLEX system. | |
| ● | January 2024: The 3.7 MW Geddes project completed mechanical construction. This is the largest project to date to be owned by the Company (subject to financing). The next step is completion of final electrical work and acceptance testing. The Project is expected to become operational during the second quarter of 2024. | |
| ● | January 2024: The Company executed a lease agreement on a site in Greenville, New York. The Company intends to develop two 7 MW DC ground-mount solar power projects on the site. The Company also executed a lease agreement on a 3 MW DC ground mount site in Nasau, New York. | |
| ● | January 2024: The Manlius, New York community solar project has reached permission to operate stage (PTO) on January 24, 2024. National Grid has confirmed that the Manlius Project has been formally accepted, successfully commissioned and it is authorized to produce power. | |
| ● | February 2024: The Company executed lease agreements on two closed landfill sites located in Skaneateles, New York and Lewiston, New York. The Company intends to develop three ground-mount solar power projects on the sites with a capacity of 19.3 MW DC. | |
| ● | February 2024: The Company received approval to list its common shares (the “Shares”) on the Cboe Canada stock exchange with trading commencing on February 14, 2024. The Shares were concurrently delisted from the Canadian Securities Exchange. |
Selected Quarterly Information
The following table shows selected financial information for the Company for the three and six months period ended December 31, 2023 and 2022 and should be read in conjunction with the Company’s consolidated financial statements as at December 31 and June 30, 2023, and related notes thereto for such periods.
The condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and are expressed in Canadian dollars.
| For the three months ended December 31 | 2023 $ | 2022 $ | ||||||
| Revenue | 18,643,805 | 2,964,934 | ||||||
| Revenue – EPC | 18,429,025 | 2,932,635 | ||||||
| Revenue – development | 67,668 | - | ||||||
| Revenue – O&M | 24,490 | 32,299 | ||||||
| Revenue – IPP production | 122,622 | - | ||||||
| Cost of goods sold | (16,109,886 | ) | (1,926,479 | ) | ||||
| Net income (loss) | (15,507 | ) | 126,542 | |||||
| Earning (loss) per share | (0.00 | ) | 0.01 | |||||
| For the six months ended December 31 | 2023 $ | 2022 $ | ||||||
| Revenue | 26,325,066 | 8,445,386 | ||||||
| Revenue – EPC | 24,042,040 | 8,398,177 | ||||||
| Revenue – development | 2,079,418 | - | ||||||
| Revenue – O&M | 66,090 | 47,209 | ||||||
| Revenue – IPP production | 137,518 | - | ||||||
| Cost of goods sold | (21,444,452 | ) | (6,844,012 | ) | ||||
| Net income | 2,023,461 | 352,499 | ||||||
| Earning per share | 0.08 | 0.01 | ||||||
December 31, 2023 $ | June 30, 2023 $ | |||||||
| Total assets | 56,135,649 | 24,969,537 | ||||||
| Total current liabilities | 28,613,915 | 7,083,876 | ||||||
| Total non-current liabilities | 3,963,458 | 1,254,465 | ||||||
The following discussion addresses the operating results and financial condition of the Company for the three and six months ended December 31st, 2023 compared with the three and six months ended December 31st, 2022.
Result of Operations
Three and six months ended December 31, 2023 compared to the three and six months ended December 31, 2022
Trend
In fiscal 2024, the Company continued to focus on scaling its business model by growing its pipeline and advancing its EPC projects in the US and continued development activities for projects in both US and Canada. It is expected that the Company’s revenue will keep growing in the fiscal 2024 as three projects (total of 21MW) in the US sold to Honeywell International started construction this quarter. Total EPC contract value is US$41 million. The Company acts as EPC contractor. In addition, the Geddes Project (currently owned by the Company) are expected to finish the construction and reach PTO in 2024.
The net income for the three months ended December 31, 2023 decreased by $142,050 compared to the net income for the three month ended December 31, 2022 with $15,508 net loss recognized during the second quarter of 2024 as compared to a net income of $126,542 for the second quarter of 2023.
The net income for the six months ended December 31, 2023 increased by $1,670,960 compared to the net income for the six month ended December 31, 2022 with $2,023,459 net income recognized during the period as compared to a net income of $352,499 for the same period in fiscal 2023.
Key business highlights and projects updates in FY2024
| ● | Existing projects |
| Name | Location | Size (MW DC) |
Timeline | Milestone | Current Status | |||||
| US1 | New York, USA | 0.4 | December 2022 | Reach PTO (permission to operate) |
EPC project. It reached substantial completion in December 2022. The Company acquired 100% of the project in December 2023 | |||||
| VC1 | New York, USA | 0.3 | December 2022 | Reach PTO (permission to operate) |
EPC project. It reached PTO in December 2022. The Company acquired 100% of the project in December 2023 | |||||
| Manlius | New York, USA | 5.7 | Q3 FY2024 | Reach PTO (permission to operate) |
EPC project. It reached PTO in January 2024 | |||||
| Geddes | New York, USA |
3.7 | Q4 FY2024 | Reach PTO (permission to operate) |
Construction started in September 2023. This is the largest project to date to be owned by the Company (subject to financing). | |||||
| Settling Basins - 1 | New York, USA |
7.0 | January 2025 | Reach PTO (permission to operate) |
EPC project. Construction started in November 2023 | |||||
| Settling Basins - 2 | New York, USA |
7.0 | January 2025 | Reach PTO (permission to operate) |
EPC project. Construction started in November 2023 | |||||
| Settling Basins - 3 | New York, USA |
7.0 | January 2025 | Reach PTO (permission to operate) |
EPC project. Construction started in November 2023 | |||||
| BESS | Ontario, Cananda | Discharge: 4.74 Storage: 18.96 |
July 2025 | Reach PTO (permission to operate) |
EPC project. EPC agreement entered Oct. 3, 2023 for the construction of 3 separate BESS projects |
| ● | Projects under development |
| Name | Location | Size (MWDC) |
Timeline | Milestone | Expected Cost | Cost Incurred |
Sources of Funding | Current Status | ||||||||
261 Township |
Alberta, Canada |
4.2 | June 2024 |
Completion of engineering work and placement of orders for main project components | 800,000 | 31,428 | Equity financing, working capital | Detailed Level Study was received from Fortis Alberta in December 2023 for Phase 1. Notice to Proceed was signed by client in January 2023, which allows the Company to proceed with detailed engineering and procurement. Interconnection for Phase 2 will be filed with the utility pending the final results of Phase 1. The Alberta Utilities Commission (“AUC”) has announced a pause on approvals of new renewable electricity generation projects over one megawatt until Feb. 29, 2024,. This pause will impact the Company’s receipt of interconnection approval for the project from the AUC until it is over. | ||||||||
| Richmond 2 | New York, USA |
7.0 | December 2025 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 400,000 | 10,642 | Equity financing, working capital | The four projects are under utility interconnection study. The design work will be after the completion of the interconnection study. | ||||||||
| Hardie | New York, USA |
7.0 | December 2024 |
Completion of design and submission of zoning and interconnection documents to regulatory agencies | 300,000 | 13,386 | Equity financing, working capital | |||||||||
| 206 Fuller Rd | New York, USA |
4.9 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | Equity financing, working capital | |||||||||
| 6882 Rice Road | New York, USA |
5.2 | March 2024 | Completion of interconnection studies, engineering and permitting, along with interconnection deposit | 800,000 | 10,750 | Equity financing, working capital | |||||||||
| SUNNY | New York, USA |
28.0 | June 2025 |
Completion of interconnection studies, engineering and permitting, along with interconnection deposit, and procurement bid application fee | 900,000 | 33,232 | Equity financing, working capital | The Company submitted an interconnection request to New York Independent System Operator. The company signed a lease agreement with the landowner in 2022. It has also qualified to submit a Proposal under NYSERDA’s RESRFP22-1 for Renewable Energy Credits (RECs). |
Revenue
The Company’s revenue is mainly from EPC services, Development fees and O&M services.
| Three Months Ended December 31 | Six Months Ended December 31 | |||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
| EPC services | 18,429,025 | 2,932,635 | 15,496,390 | 24,042,040 | 8,398,177 | 15,643,863 | ||||||||||||||||||
| Development fees | 67,668 | - | 67,668 | 2,079,418 | - | 2,079,418 | ||||||||||||||||||
| O&M services | 24,490 | 32,299 | (7,809 | ) | 66,090 | 47,209 | 18,881 | |||||||||||||||||
| IPP Production | 122,622 | - | 122,622 | 137,518 | - | 137,518 | ||||||||||||||||||
| Total Revenue | 18,643,804 | 2,964,934 | 15,678,870 | 26,325,065 | 8,445,386 | 17,879,679 | ||||||||||||||||||
The following table shows the significant changes in revenue from 2022
| Three months | Six months | Explanation | ||||||||
| EPC services | 15,496,390 | 15,643,863 | Increase due to $7M earned from BESS projects and $10M from Settling Basins projects in Q2 FY24. In FY23 Q2, $1.4M earned from Richmond and Portland projects. | |||||||
| Development fees | 67,668 | 2,079,418 | In FY24, $68k earned from BESS development work in Q2 and $2M earned from Settling Basins in Q1. No project has been sold at NTP in FY2023. | |||||||
| O&M services | (7,809 | ) | 18,881 | No significant changes | ||||||
| IPP Production | 122,622 | 137,518 | IPP production from US1 & VC1 acquired June 2023 and OFIT GM & OFIT RT acquired November 2023 | |||||||
| Total | 15,678,870 | 17,879,679 | ||||||||
Expenses
Expenses consist of expenditures related to cost of services provided and costs to develop new projects, as well as corporate business development and administrative expenses.
| Expenses | Three Months Ended December 31 | Six Months Ended December 31 | ||||||||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
| Cost of goods sold | (16,109,885 | ) | (1,926,479 | ) | (14,183,406 | ) | (21,444,452 | ) | (6,844,012 | ) | (14,600,440 | ) | ||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Advertising and promotion | (974,893 | ) | (38,613 | ) | (936,280 | ) | (1,478,702 | ) | (38,613 | ) | (1,440,089 | ) | ||||||||||||
| Consulting fees | (150,600 | ) | (153,960 | ) | 3,360 | (301,200 | ) | (327,429 | ) | 26,229 | ||||||||||||||
| Depreciation | (49,320 | ) | (13,593 | ) | (35,727 | ) | (71,298 | ) | (23,339 | ) | (47,959 | ) | ||||||||||||
| Insurance | (88,012 | ) | (34,002 | ) | (54,010 | ) | (127,258 | ) | (57,788 | ) | (69,470 | ) | ||||||||||||
| Office, rent and utilities | (172,991 | ) | (63,467 | ) | (109,524 | ) | (257,235 | ) | (149,129 | ) | (108,106 | ) | ||||||||||||
| Professional fees | (782,240 | ) | (145,246 | ) | (636,994 | ) | (1,082,831 | ) | (191,049 | ) | (891,782 | ) | ||||||||||||
| Salary and Wages | (275,335 | ) | (349,062 | ) | 73,727 | (477,416 | ) | (415,965 | ) | (61,451 | ) | |||||||||||||
| Stock based compensation | (220,519 | ) | - | (220,519 | ) | (650,099 | ) | - | (650,099 | ) | ||||||||||||||
| Travel and events | (126,971 | ) | (92,019 | ) | (34,952 | ) | (171,234 | ) | (112,902 | ) | (58,332 | ) | ||||||||||||
| Total operating expenses | (2,840,881 | ) | (889,962 | ) | (1,950,919 | ) | (4,617,273 | ) | (1,316,214 | ) | (3,301,059 | ) | ||||||||||||
| Total Expenses | (18,950,766 | ) | (2,816,441 | ) | (16,134,325 | ) | (26,061,725 | ) | (8,160,226 | ) | (17,901,499 | ) | ||||||||||||
The following table shows the significant changes in expenses from 2022:
| Three months | Six months | Management Commentary | ||||||||
| Cost of goods sold | (14,183,406 | ) | (14,600,440 | ) | Consistent with increase in revenue. | |||||
| Operating expense: | ||||||||||
| Advertising and promotion | (936,280 | ) | (1,440,089 | ) | Additional costs incurred in FY24 relating to marketing expenditure to build the awareness of the Company | |||||
| Consulting fees | 3,360 | 26,229 | No significant changes | |||||||
| Depreciation | (35,727 | ) | (47,959 | ) | Increase related to depreciation of IPP facilities acquired in June and October 2023. | |||||
| Insurance | (54,010 | ) | (69,470 | ) | Insurance was higher due to increased activity and higher director and officer insurance premiums following completion of the IPO. Increase also affected by higher revenue and new companies acquired. | |||||
| Office, rent and utilities | (109,524 | ) | (108,106 | ) | Increase in rent and maintenance costs due to new IPP facilities acquired. | |||||
| Professional fees | (636,994 | ) | (891,782 | ) | Increase due to audit fees, consulting fees relating to exploring investor markets, due diligence work on acquisitions, tax preparations, and fees for new hires. | |||||
| Salary and Wages | 73,727 | (61,451 | ) | Increase in salary due to 2 new employees hired in Dec. 2023. Decrease for the three months period due to performance bonus paid at end of Dec. 2022 for $280k. | ||||||
| Stock based compensation | (220,519 | ) | (650,099 | ) | Employee stock compensation started March 2023. | |||||
| Travel and events | (34,952 | ) | (58,332 | ) | More travel and seminars activities in FY2024 to grow the company’s pipeline | |||||
| Total operating expenses | (1,950,919 | ) | (3,301,059 | ) | ||||||
| Total Expenses | (16,134,325 | ) | (17,901,499 | ) | ||||||
Other Income (Expense)
For the three months ended December 31, 2023, the Company had other income of $363,853 compared to other expenses of $12,308 for the three months ended December 31, 2022. Other income for the three months ended December 31, 2023 consists mainly of bad debt recovery of $267,740, gain from acquisition of non-controlling interest of Solar Alliance Energy DevCo of $195,893, foreign exchange loss of $111,865 and other income of $12,084. Other loss for the three months ended December 31, 2022 consists mainly of a foreign exchange loss of $9,827 and other expenses of $2,481.
For the six months ended December 31, 2023, the Company had other income of $1,735,690 compared to other income of $109,764 for the six months ended December 31, 2022. Other income for the six months ended December 31, 2023 consists mainly of bad debt recovery of $1,462,752, gain from acquisition of non-controlling interest of $195,893, foreign exchange gain of $30,317 and other gain of $46,728. Other income for the six months ended December 31, 2022 consists mainly of foreign exchange gain of $114,820, offsetting by other expenses of $5,056.
Net Income
The net loss for the three months ended December 31, 2023 was $15,508 for loss per share of $0.00 based on 27,039,075 outstanding shares versus $126,542 for an income per share of $0.01 based on 16,000,000 outstanding shares for the comparative period.
The net income for the six months ended December 31, 2023 was $2,023,459 for earning per share of $0.08 based on 26,922,629 outstanding shares versus $352,499 for an income per share of $0.02 based on 16,000,000 outstanding shares for the comparative period.
Legal Matters and Contingent Assets
The Company is subject to the following legal matters and contingencies:
| (1) | In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company. |
| (2) | On December 2, 2020, a Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and seven independent solar project developers (collectively the “Plaintiffs”) against the Ontario Ministry of Energy, Northern Development and Mines (“MOE”), the IESO, and John Doe (collectively the “Defendants”). Plaintiffs seek damages from the Defendants in the amount of $240 million in lost profits, $17.8 million in development costs, and $50 million in punitive damages for misfeasance of public office, breach of contract, inducing the breach of contract, breach of the duty of good faith and fair dealing, and conspiracy resulting in the wrongful termination of 111 FIT Contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 8.3% to the legal claim. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions. No amounts are recognized in these consolidated special purpose financial statements with respect to this claim. |
| (3) | On January 29, 2021, a second Statement of Claim was filed by the Company’s subsidiary, 2467264 Ontario Inc, and fourteen independent solar project developer (collectively the “Plaintiffs”) against the MOE, the IESO, and Greg Rickford, as Minister of the MOE (collectively the “Defendants”). The Plaintiffs seek damages from the Defendants in the amount of $260 million in lost profits, $26.9 million in development costs, and $50 million in punitive damages for breach of contract and breach of duty of good faith and fair dealing resulting in the wrongful termination of 133 FIT contracts. 2467264 Ontario Inc. will receive its proportionate entitlement of any net legal award based on its economic entitlement of 0.7% to the legal claim. This second Statement of Claim is separate and in addition to the first Statement of Claim filed. This lawsuit was previously subject to a leave requirement under s. 17 of the Crown Liability and Proceedings Act, 2019. However, a recent decision of the Ontario Superior Court of Justice has deemed s. 17 of no force and effect (see Poorkid Investments v. HMTQ 2022 ONSC 883). Accordingly, the lawsuit will continue to move forward through the normal course. We expect statements of defence to be served following the determination of some preliminary motions, including a motion to consolidate the two actions into a single action. No amounts are recognized in these combined special purpose financial statements with respect to this claim. |
| (4) | The Company has $5,291,826 in accounts receivable outstanding from the Solar Flow Through group of companies for development services performed for their solar contracts from December 2017 to July 2018. The Government of Ontario cancelled said solar contracts in July 2018 ceasing all development work. During the six months ended December 31, 2023, a total of $2,920,240 was collected and $1,462,752 recognized as other income. The remaining amounts are expected to be collected during the 2024 fiscal year. |
Summary of Quarterly Results
| Description | Q2 December 31, 2023 ($) | Q1 September 30, 2023 ($) | Q4 June 30, 2023 ($) | Q3 March 31, 2023 ($) | ||||||||||||
| Revenue | 18,643,804 | 7,681,261 | 9,245,267 | 706,856 | ||||||||||||
| Income (Loss) for the period | (15,508 | ) | 2,038,968 | (1,076,836 | ) | 3,064,872 | ||||||||||
| Earning (Loss) per
share (basic and diluted) | (0.00) (basic)
| 0.08 (basic) 0.05 (diluted) | (0.06) (basic)
| 0.11 (basic) 0.09 (diluted) | ||||||||||||
| Description | Q2 December 31, 2022 ($) | Q1 September 30, 2022 ($) | Q4 June 30, 2022 ($) | Q3 March 31, 2022 ($) | ||||||||||||
| Revenue | 2,964,934 | 5,480,452 | 388,369 | 977,562 | ||||||||||||
| Income (Loss) for the period | 89,468 | 225,957 | (880,801 | ) | 235,346 | |||||||||||
| Income (Loss) per
share (basic and diluted) | 0.01 | 0.01 | (0.06 | ) | 0.03 | |||||||||||
Historical quarterly results of operations and income per share data do not necessarily reflect any recurring expenditure patterns or predictable trends except for the fact that seasonally the Company’s third quarter typically has the smallest amount of revenue due to winter conditions that are less favorable for construction. The Company’s revenues fluctuate from quarter to quarter based on the timing of recognition of revenue which is dependent on the stage of the various solar power projects under development. Refer to “Results of Operations” for additional discussion.
Liquidity and Capital Resources
As at December 31, 2023, the Company had a cash balance of $24,914,920 (June 30, 2023 - $749,427) with working capital (current assets less current liabilities) surplus of $8,871,097 (June 30, 2023 - $14,962,023).
The following table summarizes the Company’s liquidity position:
| As at | December
31, 2023 $ | June
30, 2023 $ | ||||||
| Cash | 24,914,920 | 749,427 | ||||||
| Working capital | 8,871,097 | 14,962,023 | ||||||
| Total assets | 56,135,649 | 24,969,537 | ||||||
| Total liabilities | 32,577,373 | 8,338,341 | ||||||
| Shareholders’ equity | 23,558,276 | 16,631,196 | ||||||
The Company believes that with its expected operating income and cash flows, it has sufficient working capital to continue its operations for the next twelve months. To date, the Company’s operations have been financed from cash flows from operations, debt financing and equity financing. The Company will continue to identify financing opportunities, including equity issuances, in order to provide additional financial flexibility and execute on the Company’s growth plans. While the Company has been successful raising the necessary funds in the past, there can be no assurance it can do so in the future.
To assist with potential liquidity needs, the Company has filed a final short form base shelf prospectus (the “Shelf Prospectus”) with the securities regulatory authorities in each of the provinces of Canada. The Shelf Prospectus will enable the Company to make offerings of up to $200 million of common shares, warrants, subscription receipts, units and share purchase contracts or a combination thereof of the Company from time to time, separately or together, in amounts, at prices and on terms to be determined based on market conditions at the time of the offering and as set out in an accompanying prospectus supplement, during the 25-month period that the Shelf Prospectus remains valid.
The nature, size and timing of any such financings (if any) will depend, in part, on the Company’s assessment of its requirements for funding and general market conditions. Unless otherwise specified in the prospectus supplement relating to a particular offering of securities, the net proceeds from any sale of any securities will be used for to advance the Company’s business objectives and for general corporate purposes, including funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions. The specific terms of any future offering will be established in a prospectus supplement to the Shelf Prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities.
In addition. The Company has entered into an equity distribution agreement (the “Distribution Agreement”) with Research Capital Corporation (the “Agent”) to establish an at-the-market equity program (the “ATM Program”). The Company may issue up to $15,000,000 of common shares of the Company (the “ATM Offered Shares”) from treasury under the ATM Program. The ATM Offered Shares will be issued by the Company to the public from time to time, through the Agent, at the Company’s discretion. The ATM Offered Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. Since the ATM Offered Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The Company intends to use the net proceeds from any sales of ATM Offered Shares under the ATM Program, if any, to advance the Company’s business objectives and for general corporate purposes, including, without limitation, funding ongoing operations or working capital requirements, repaying indebtedness outstanding from time to time, discretionary capital programs and potential future acquisitions.
The Company’s cash is held in highly liquid accounts. No amounts have been or are invested in asset-backed commercial paper.
The chart below highlights the Company’s cash flows:
| For six months ended | December
31, 2023 $ | December
31, 2022 $ | ||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | 26,744,582 | 753,587 | ||||||
| Investing activities | (1,858,720 | ) | - | |||||
| Financing activities | (192,364 | ) | 256,631 | |||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 24,165,493 | 957,080 | ||||||
Cash flow from operating activities
The Company has positive cash flow of $26,744,582 from operating activities during the six months ended December 31, 2023, while the Company generated $753,587 cash during the same period ended December 31, 2022. The Company generated cash of $2,559,616 from the operational activities and generate $24,184,966 for the change of working capital during the six months ended December 31, 2023, while the Company generated cash of $421,490 from the operating activities and generated $332,097 due to the change of working capital for the same period ended December 31, 2022.
Cash flow from financing activities
The Company used cash of $192,364 from financing activities during the six months ended December 31, 2023, while the Company generated $256,631 cash during the same period ended December 31, 2022. The cash usage in financing activities for the six months ended December 31, 2023 was driven by repayment of long-term debt of $203,223 and payment of lease obligation of $52,050. This was offset by cash generation from issuance of common shares for net proceeds of $21,659 and proceeds from broker warrants exercised of $41,250. The cash generated in financing activities for the six months ended December 31, 2022 was the result of net proceeds of $1,250,000 received from debenture financing completed in October 2022 and the increase of due to related party by $623,579, offset by the repayment of short-term loans of $595,712, long-term loans of $388,666.
Cash flow from investing activities
The Company used cash of $1,858,720 in investing activities during the six months ended December 31, 2023, while the Company did not have investing activities during the same period ended December 31, 2022. The cash used for the six months ended December 31, 2023 includes acquisition of property, plant and equipment of $42,908, acquisition of development asset of $5,596,634, purchase of partnership units of $2,465,000, and purchase of non-controlling interest of $95,333, offset by net cash of $11,155 received from acquisition and redemption of GIC of $6,330,000.
Capital Transactions
During the six months ended December 31, 2023, the Company issued the following shares:
| i. | On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share. | |
| ii. | On September 21, 2023, the Company sold 1,000 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $10,000. | |
| iii. | On September 22, 2023, the Company sold 1,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $12,004. | |
| iv. | The Company has entered into the SPAs dated October 23, 2023 to acquire control of OFIT GM and OFIT RT for consideration of 278,875 common shares of the Company that were issued November 1, 2023. |
Capital Structure
The Corporation is authorized to issue an unlimited number of common shares. The table below sets out the Company’s outstanding common share and convertible securities as of December 31, 2023 and as of the date of this MD&A:
| Security Description | December 31, 2023 | Date of report | ||||||
| Common shares | 27,136,075 | 27,136,075 | ||||||
| Warrants | 7,928,000 | 7,928,000 | ||||||
| Stock options | 2,841,500 | 2,766,500 | ||||||
| Restricted share units | 265,000 | 265,000 | ||||||
The following table reflects the details of warrants issued and outstanding as of the date of this MD&A:
The following table reflects the details of options issued and outstanding as of the date of this MD&A:
| Date granted | Expiry | Exercise price (CAD) | Outstanding options | |||||||
| 10-Feb-2023 | 04-Nov-2027 | $ | 0.75 | 2,759,000 | ||||||
| 04-Dec-2023 | 04-Dec-2028 | $ | 6.60 | 7,500 | ||||||
| 2,766,500 | ||||||||||
| Weighted average exercise price | $ | 0.77 | ||||||||
The following table reflects the details of RSUs issued and outstanding as of the date of this MD&A:
| Date granted | Vesting Date | Outstanding RSUs | ||||
| 4-Nov-2022 | 02-Aug-20 | 250,000 | ||||
| 13-Mar-2023 | 12-Mar-2024 | 7,500 | ||||
| 13-Mar-2023 | 12-Mar-2025 | 7,500 | ||||
| 265,000 | ||||||
Capital Management
The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:
| December 31, 2023 | June 30, 2023 | |||||||
| Long-term debt -non-current portion | $ | 2,811,979 | 759,259 | |||||
| Shareholder Equity | $ | 23,558,276 | 16,631,196 | |||||
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, issuance of equity, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.
No changes to capital management from the prior year.
Off-Balance Sheet Arrangements
The Company is not a party to any off-balance sheet arrangements or transactions.
Transactions Between Related Parties
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and corporate officers, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Administrative Officer.
The remuneration of directors and other members of key management personnel, for the three and six months ended December 31, 2023 and 2022 were as follows:
| Three Month Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 303,029 | $ | 504,357 | ||||
| Share-based compensation | 150,938 | - | ||||||
| Six Month Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Short-term employee benefits | $ | 610,628 | $ | 740,339 | ||||
| Share-based compensation | 286,484 | - | ||||||
Short-term employee benefits include consulting fees and salaries made to key management.
Transactions with related parties, are described above, were for services rendered to the Company in the normal course of operations, and were measured based on the consideration established and agreed to by the related parties. Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.
The Company acquired control of OFIT GM and OFIT RT on November 1, 2023. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.
Critical Accounting Estimates and Policies
The preparation of the consolidated financial statements in accordance with IFRS as issued by IASB requires management to make estimates and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent management’s estimates that are uncertain and any changes in these estimates could materially impact the Company’s consolidated financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The Company’s critical accounting policies and estimates are described in Note 3 of the audited consolidated financial statements for the year ended June 30, 2023.
Financial Instruments and Other Instruments (Management of Financial Risks)
Fair value
The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable for the asset or liability. |
| ● | Level 3: Inputs for the asset or liability that are not based on observable market data. |
Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended December 31, 2023.
The carrying amounts of trade and other receivables, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities, tax equity liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.
Credit risk
Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.
The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.
Concentration risk and economic dependence
The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.
| Six months ended December 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer B | $ | 5,024,401 | 19 | % | ||||
| Customer C | $ | 2,507,976 | 10 | % | ||||
| Customer D | $ | 6,550,519 | 25 | % | ||||
| Customer E | $ | 11,659,809 | 44 | % | ||||
| Six months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 5,783,272 | 68 | % | ||||
| Three months ended December 31, 2023 | Revenue | % of Total Revenue | ||||||
| Customer B | $ | 5,081,531 | 27 | % | ||||
| Customer C | $ | 2,531,928 | 14 | % | ||||
| Customer E | $ | 9,648,059 | 52 | % | ||||
| Three months ended December 31, 2022 | Revenue | % of Total Revenue | ||||||
| Customer A | $ | 1,851,848 | 62 | % | ||||
| December 31, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer D | $ | 2,545,465 | 73 | % | ||||
| Customer E | $ | 565,412 | 16 | % | ||||
| June 30, 2023 | Account Receivable | % of Account Receivable | ||||||
| Customer D | $ | 1,179,132 | 31 | % | ||||
| Customer F | $ | 1,537,357 | 40 | % | ||||
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.
Subsequent Events
Not significant subsequent events to note.
Risk Factors
Readers are cautioned that the risk factors discussed above in this MD&A are not exhaustive. Readers should also carefully consider the matters discussed under the heading, “Forward Looking Information”, in this MD&A and under the heading, “Risk Factors”, in the Company’s Annual Information Form for the year ended June 30, 2023 and filed on SEDAR+ at www.sedarplus.com.
Forward-Looking Statements
This MD&A contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this MD&A contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s expectations about its liquidity and sufficient of working capital for the next twelve months of operations; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this MD&A; the reduction of carbon emissions; the receipt of incentives for the projects; the expected value of EPC Contracts; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon. These statements speak only as of the date of this MD&A.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this MD&A, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this MD&A are expressly qualified in their entirety by this cautionary statement.
Approval
The Board of Directors of the Company has approved the disclosure contained in this MD&A.
Exhibit 99.111
Exhibit 99. 112
Exhibit 99.113
SolarBank Announces Second Quarter Results
| ● | Revenue for the six month period of $26.3 million | |
| ● | Net income for the six month period of $2 million or $0.08 per share (undiluted) | |
| ● | Reaffirmed revenue guidance of $45 million to $50 million for the full fiscal year ended June 30, 2024 |
Toronto, Ontario, February 22, 2024 — SolarBank Corporation (Cboe CA: SUNN) (OTCQX: SUUNF) (FSE: GY2) (“SolarBank” or the “Company”) reports second quarter 2024 interim financial results. All financial figures are in Canadian dollars and in accordance with International Financial Reporting Standards (IFRS) as presented in the interim consolidated financial statements.
Fiscal Year to Date Highlights (All Amounts are for the Six Month Period)
| ● | Revenue of $26.3 million: | |
| ● | Net income of $2.0 million; | |
| ● | Net income of $0.08 per share (undiluted); | |
| ● | US$41 million transaction with Honeywell International Inc. (“Honeywell”) whereby Honeywell acquired the SB-1, SB-2 and SB-3 Community Solar Projects and agreed to enter into an engineering, procurement, and construction (“EPC”) Contract with SolarBank for their construction. | |
| ● | $36 million in EPC contracts awarded to SolarBank for the construction of three separate BESS projects in Ontario Canada. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer. | |
| ● | Growth of independent power producer portfolio with the acquisition of control of two corporations, OFIT GM Inc. and OFIT RT Inc. that hold solar projects located in Ontario with a combined capacity of 2.5 MW. | |
| ● | Senior listing on Cboe Canada stock exchange. |
Summary of Quarterly Results (All Amounts are for the Six Month Period)
| Quarter Ended | December 31, 2023 | December 31, 2022 | ||||||
| Statement of Income and Comprehensive Income | ||||||||
| Total Revenue | $ | 26,325,066 | $ | 8,445,386 | ||||
| Cash flow from operating activities | $ | 26,744,582 | $ | 753,587 | ||||
| Net income | $ | 2,023,461 | $ | 352,499 | ||||
| Basic earnings per share | $ | 0.08 | $ | 0.02 | ||||
| Diluted earnings per share | $ | 0.05 | $ | 0.02 | ||||
The Company ended the second quarter of 2024 with $37.5 million in current assets, an increase of $15.5 million compared to year end June 30, 2023. The increase is mainly due to an increase in cash balances offset by the decrease in short-term investment.
Current liabilities increased from $7.0 million as of year ended June 30, 2023 to $28.6 million in the current quarter, mainly due to an increase in trade and other payables and unearned revenue.
For complete details please refer to the unaudited condensed interim consolidated financial statements and associated Management Discussion and Analysis for the six months ended December 31, 2023, available on SEDAR+ (www.sedarplus.com).
2024 Year End Outlook
The Company is reaffirming its guidance of expected full year revenue in fiscal 2024 of between $45 million and $50 million. The purpose of the financial outlook is to assist investors, shareholders, and others in understanding certain financial metrics relating to expected 2024 financial results for evaluating the performance of the Company’s business and is dated as of the date of this press release. This information may not be appropriate for other purposes. Information about the Company’s guidance, including the various assumptions underlying it, is forward-looking and should be read in conjunction with “Forward-Looking Statements” in this press release and the related disclosure and information about various economic, competitive, and regulatory assumptions, factors, and risks that may cause the Company’s actual future financial and operating results to differ from what it currently expects.
The Company notes that the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements for the Company and its customers and the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power, which could cause demand for the Company’s services to decline. Further the forecasted MW capacity of a solar project may not be reached. Please refer to “Forward-Looking Statements” for additional discussion of the assumptions and risk factors associated with the statements in this press release.
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clean energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this press release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; the expected energy production from the solar power project mentioned in this press release; the megawatt capacity and type of future solar projects; the size of the Company’s development pipeline and future revenue guidance. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this press release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the final long form prospectus of the Company dated February 10, 2023, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings. In addition, there are difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and government regulation that characterize the industries in which the Company operates.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.114
| SOLARBANK CORPORATION | Clawback Policy |
SOLARBANK CORPORATION
Clawback Policy
February 26, 2024
| SOLARBANK CORPORATION | Clawback Policy |
Clawback Policy
| 1. | Introduction |
The Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) believes that it is in the best interests of the Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability and that reinforces the Company’s pay-for-performance compensation philosophy. The Board has therefore adopted this policy which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws (the “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”) and Nasdaq Listing Rule 5608 (the “Clawback Listing Standards”).
| 2. | Administration |
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation, Corporate Governance and Nominating Committee or any successor or other committee of the Board responsible for executive compensation matters (the “Compensation Committee”), in which case references herein to the Board shall be deemed to be references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected individuals.
| 3. | Covered Executives |
This Policy applies to the Company’s current and former executive officers1, as determined by the Board in accordance with the definition in Section 10D of the Exchange Act and the Clawback Listing Standards, and such other senior executives who may from time to time be deemed subject to the Policy by the Board (“Covered Executives”).
| 4. | Recoupment; Accounting Restatement |
In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, the Board will require reimbursement or forfeiture of any excess Incentive Compensation received by any Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.
1 NTD: “Executive officers” isn’t defined but the SEC and NASDAQ treat it broadly to include the president, principal financial officer, principal accounting officer/controller, any VP in charge of a business unit, division or function, any other officer who performs a policy-making function, and any other person who performs similar policy-making functions (which may include executive officers of a subsidiary).
| - 1 - |
| SOLARBANK CORPORATION | Clawback Policy |
| 5. | Incentive Compensation |
For purposes of this Policy, “Incentive Compensation” means any of the following, provided that, such compensation is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure:
| ● | Annual bonuses and other short- and long-term cash incentives. |
| ● | Stock options. |
| ● | Stock appreciation rights. |
| ● | Restricted stock. |
| ● | Restricted stock units. |
| ● | Performance shares. |
| ● | Performance units. |
Financial reporting measures include:
| ● | Company stock price. |
| ● | Total shareholder return. |
| ● | Revenues. |
| ● | Net income. |
| ● | Earnings before interest, taxes, depreciation, and amortization (EBITDA). |
| ● | Funds from operations. |
| ● | Liquidity measures such as working capital or operating cash flow. |
| ● | Return measures such as return on invested capital or return on assets. |
| ● | Earnings measures such as earnings per share. |
| 6. | Excess Incentive Compensation: Amount Subject to Recovery |
The amount to be recovered will be the excess of the Incentive Compensation paid to the Covered Executive based on the erroneous data over the Incentive Compensation that would have been paid to the Covered Executive had it been based on the restated results, as determined by the Board, without regard to any taxes paid by the Covered Executive in respect of the Incentive Compensation paid based on the erroneous data.
If the Board cannot determine the amount of excess Incentive Compensation received by the Covered Executive directly from the information in the accounting restatement, then it will make its determination based on a reasonable estimate of the effect of the accounting restatement.
| - 2 - |
| SOLARBANK CORPORATION | Clawback Policy |
| 7. | Method of Recoupment |
The Board will determine, in its sole discretion, the method for recouping Incentive Compensation hereunder which may include, without limitation:
| (a) | requiring reimbursement of cash Incentive Compensation previously paid; |
| (b) | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards; |
| (c) | offsetting the recouped amount from any compensation otherwise owed by the Company to the Covered Executive; |
| (d) | cancelling outstanding vested or unvested equity awards; and/or |
| (e) | taking any other remedial and recovery action permitted by law, as determined by the Board. |
| 8. | No Indemnification |
The Company shall not indemnify any Covered Executives against the loss of any incorrectly awarded Incentive Compensation.
| 9. | Interpretation |
The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act, any applicable rules or standards adopted by the Securities and Exchange Commission, and the Clawback Listing Standards.
| 10. | Effective Date |
This Policy shall be effective as of the date it is adopted by the Board (the “Effective Date”) and shall apply to Incentive Compensation that is received by Covered Executives on or after the Effective Date, even if such Incentive Compensation was approved, awarded, or granted to Covered Executives prior to the Effective Date.
| 11. | Amendment; Termination |
The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect final regulations adopted by the Securities and Exchange Commission under Section 10D of the Exchange Act and to comply with the Clawback Listing Standards and any other rules or standards adopted by a national securities exchange on which the Company’s securities are listed. The Board may terminate this Policy at any time.
| - 3 - |
| SOLARBANK CORPORATION | Clawback Policy |
| 12. | Other Recoupment Rights |
Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
| 13. | Relationship to Other Plans and Agreements |
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement, or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require a Covered Executive to agree to abide by the terms of this Policy. In the event of any inconsistency between the terms of the Policy and the terms of any employment agreement, equity award agreement, or similar agreement under which Incentive Compensation has been granted, awarded, earned or paid to a Covered Executive, whether or not deferred, the terms of the Policy shall govern.
| 14. | Acknowledgment |
Each Covered Executive shall sign an acknowledgment form in which such Covered Executive acknowledges having read and understood the terms of this Policy and agree to be bound by this Policy.
| 15. | Impracticability |
The Board shall recover any excess Incentive Compensation in accordance with this Policy unless such recovery would be impracticable, as determined by the Board in accordance with Rule 10D-1 of the Exchange Act and the listing standards of the national securities exchange on which the Company’s securities are listed.
| 16. | Successors |
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
Approved by the Board February 26, 2024.
| - 4 - |
Exhibit 99.115
Form 52-109F1R
Certification of refiled annual filings
This certificate is being filed on the same date that SolarBank Corporation (the “issuer”) has refiled its Annual Information Form.
I, Sam Sun, Chief Financial Officer of SolarBank Corporation, certify the following:
| 1. | Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of the issuer for the financial year ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. |
Date: February 26, 2024
“Sam Sun”
_____________________________
Sam Sun
Chief Financial Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:
| (i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Exhibit 99.116
Form 52-109F1R
Certification of refiled annual filings
This certificate is being filed on the same date that SolarBank Corporation (the “issuer”) has refiled its Annual Information Form.
I, Dr. Richard Lu, Chief Executive Officer of SolarBank Corporation, certify the following:
| 1. | Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the “annual filings”) of the issuer for the financial year ended June 30, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the annual filings. |
Date: February 26, 2024
“Dr. Richard Lu”
_____________________________
Dr. Richard Lu
Chief Executive Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of:
| (i) | controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
| (ii) | a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Exhibit 99.117
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
SOLARBANK CORPORATION
AUDIT COMMITTEE CHARTER
Adopted: November 4, 2022
Revised: February 26, 2024
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
AUDIT COMMITTEE CHARTER
| 1. | PURPOSE |
The main purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) is to assist the Board in fulfilling its oversight responsibility with respect to the quality and integrity of the Company’s published financial information, including the audit of the Company’s financial statements, internal controls, audit processes and financial reporting and other matters as deemed necessary by the Committee or directed by the Board, including the oversight of:
| (a) | the integrity of the Company’s financial statements and other financial information provided by the Company to securities regulators, governmental bodies and the public to ensure that the Company’s financial disclosures are complete, accurate, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations by the International Financial Reporting Interpretations Committee (“IFRIC”), and fairly present the financial position and risks of the Company; |
| (b) | assessing the independence, qualifications and performance of the Company’s independent auditor (the ”Auditor”), appointing and replacing the Auditor, overseeing the audit and non- audit services provided by the Auditor, and approving the compensation of the Auditor; |
| (c) | Senior Management (as defined below) responsibility for assessing and reporting on the effectiveness of internal controls; |
| (d) | financial matters and management of financial risks; |
| (e) | the prevention and detection of fraudulent activities; and |
| (f) | investigation of complaints and submissions regarding accounting or auditing matters and unethical or illegal behavior. |
The Committee provides an avenue for communication between the Auditor, the Company’s executive officers and other senior managers (“Senior Management”) and the Board, and has the authority to communicate directly with the Auditor. The Committee shall have a clear understanding with the Auditor that they must maintain an open and transparent relationship with the Committee. The Auditor is ultimately accountable to the Committee and the Board, as representatives of the Company’s shareholders.
| 2. | COMPOSITION |
The Committee shall be comprised of at least three directors. Each Committee member shall:
| (a) | satisfy the laws governing the Company; |
| (b) | be “independent” in accordance with Sections 1.4 and 1.5 of National Instrument 52-110 Audit Committees (“NI 52-110”) (subject to the exceptions set forth in Part 3 and Part 6 of NI 52-110, as applicable), which sections are reproduced in Appendix A of this charter, and must also meet the independence requirements of Rule 10A-3 of the United States Securities Exchange Act of 1934, as amended, and Nasdaq Listing Rule 5605(a)(2), which is reproduced in Appendix B of this charter; |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (c) | not have participated in the preparation of the Company’s or any of its subsidiaries’ financial statements at any time during the past three years (other than oversight responsibility as a member of the Committee or the Board); and |
| (d) | be “financially literate” in accordance with the definition set out in Section 1.6 of NI 52-110, which definition is reproduced in Appendix A of this charter, and must otherwise, in the business judgment of the Board, be able to read and understand fundamental financial statements, including balance sheets, income statements, and cash flow statements. |
For purposes of subparagraph (c) above, the position of non-executive Chair of the Board is considered to be an executive officer of the Company.
The Committee shall include at least one member who is an “audit committee financial expert” as required by the rules and regulations of the U.S. Securities and Exchange Commission and other applicable laws, regulations and listing standards from time to time. Additionally, the Committee must include at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. A director who qualifies as an audit committee financial expert is presumed to qualify as a financially sophisticated audit committee member.
Committee members and the chair of the Committee (the “Committee Chair”) shall be appointed annually by the Board at the first Board meeting that is held after every annual general meeting of the Company’s shareholders. The Board may remove a Committee member at any time in its sole discretion by a resolution of the Board.
If a Committee member simultaneously serves on the audit committees of more than three public companies, the Committee shall seek the Board’s determination as to whether such simultaneous service would impair the ability of such member to effectively serve on the Committee and ensure that such determination is disclosed.
| 3. | MEETINGS |
The Committee shall meet at least once per financial quarter and as many additional times as the Committee deems necessary to carry out its duties effectively.
The Committee shall meet:
| (a) | within 60 days following the end of each of the first three financial quarters to review and discuss the unaudited financial results for the preceding quarter and the related management’s discussion and analysis (“MD&A”); and |
| (b) | within 120 days following the end of the Company’s fiscal year end to review and discuss the audited financial results for the year and related MD&A. |
As part of its job to foster open communication, the Committee shall meet at least once each financial quarter with Senior Management and the Auditor in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.
| 2 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
A majority of the members of the Committee shall constitute a quorum for any Committee meeting. No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present or by unanimous written consent of the Committee members.
The Committee Chair shall preside at each Committee meeting. In the event the Committee Chair is unable to attend or chair a Committee meeting, the Committee will appoint a chair for that meeting from the other Committee members.
The Corporate Secretary of the Company, or such individual as appointed by the Committee, shall act as secretary for a Committee meeting (the “Committee Secretary”) and, upon receiving a request to convene a Committee meeting from any Committee member, shall arrange for such meeting to be held.
The Committee Chair, in consultation with the other Committee members, shall set the agenda of items to be addressed at each Committee meeting. The Committee Secretary shall ensure that the agenda and any supporting materials for each upcoming Committee meeting are circulated to each Committee member in advance of such meeting.
The Committee may invite such officers, directors and employees of the Company, the Auditor, and other advisors as it may see fit from time to time to attend at one or more Committee meetings and assist in the discussion and consideration of any matter. For purposes of performing their duties, members of the Committee shall, upon request, have immediate and full access to all corporate information and shall be permitted to discuss such information and any other matters relating to the duties and responsibilities of the Committee with officers, directors and employees of the Company, with the Auditor, and with other advisors subject to appropriate confidentiality agreements being in place.
Unless otherwise provided herein or as directed by the Board, proceedings of the Committee shall be conducted in accordance with the rules applicable to meetings of the Board.
| 4. | DUTIES AND RESPONSIBILITIES |
Subject to the powers and duties of the Board and the Articles of the Company, in order to carry out its oversight responsibilities, the Committee shall:
| 4.1 | Financial Reporting Process |
| (a) | Review with Senior Management and the Auditor any items of concern, any proposed changes in the selection or application of accounting principles and policies and the reasons for the change, any identified risks and uncertainties, and any issues requiring the judgement of Senior Management, to the extent that the foregoing may be material to financial reporting. |
| (b) | Consider any matter required to be communicated to the Committee by the Auditor under generally accepted auditing standards, applicable law and listing standards, if applicable, including the Auditor’s report to the Committee (and the response of Senior Management thereto) on: |
| 3 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (i) | accounting policies and practices used by the Company; |
| (ii) | alternative accounting treatments of financial information that have been discussed with Senior Management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the Auditor; and |
| (iii) | any other material written communications between the Auditor and Senior Management. |
| (c) | Discuss with the Auditor their views about the quality, not just the acceptability, of accounting principles and policies used by the Company, including estimates and judgements made by Senior Management and their selection of accounting principles. |
| (d) | Discuss with Senior Management and the Auditor: |
| (i) | any accounting adjustments that were noted or proposed (immaterial or otherwise) by the Auditor but were not reflected in the financial statements; |
| (ii) | any material correcting adjustments that were identified by the Auditor in accordance with generally accepted accounting principles (“GAAP”) or applicable law; |
| (iii) | any communication reflecting a difference of opinion between the audit team and the Auditor’s national office on material auditing or accounting issues raised by the engagement; and |
| (iv) | any “management” or “internal control” letter issued, or proposed to be issued, by the Auditor to the Company. |
| (e) | Discuss with Senior Management and the Auditor any significant financial reporting issues considered during the fiscal period and the method of resolution, and resolve disagreements between Senior Management and the Auditor regarding financial reporting. |
| (f) | Review with Senior Management and the Auditor: |
| (i) | any off-balance sheet financing mechanisms being used by the Company and their effect on the Company’s financial statements; and |
| (ii) | the effect of regulatory and accounting initiatives on the Company’s financial statements, including the potential impact of proposed initiatives. |
| (g) | Review with Senior Management and the Auditor and legal counsel, if necessary, any litigation, claim or other contingency, including tax assessments, that could have a material effect on the financial position or operating results of the Company, and the manner in which these matters have been disclosed or reflected in the financial statements. |
| (h) | Review with the Auditor any audit problems or difficulties experienced by the Auditor in performing the audit, including any restrictions or limitations imposed by Senior Management, and the response of Senior Management, and resolve any disagreements between Senior Management and the Auditor regarding these matters. |
| 4 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (i) | Review the results of the Auditor’s work, including findings and recommendations, Senior Management’s response, and any resulting changes in accounting practices or policies and the impact such changes may have on the financial statements. |
| (j) | Review and discuss with Senior Management the audited annual financial statements and related MD&A and make recommendations to the Board with respect to approval thereof before their release to the public. |
| (k) | Review and discuss with Senior Management and the Auditor all interim unaudited financial statements and related interim MD&A. |
| (l) | Approve interim unaudited financial statements and related interim MD&A prior to their filing and dissemination. |
| (m) | In connection with Sections 4.1 and 5.1 of National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), obtain confirmation from the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) (and considering the Auditor’s comments, if any, thereon) to their knowledge: |
| (i) | that the audited financial statements, together with any financial information included in the annual MD&A and annual information form, fairly present in all material respects the Company’s financial condition, financial performance and cash flows; and |
| (ii) | that the interim financial statements, together with any financial information included in the interim MD&A, fairly present in all material respects the Company’s financial condition, financial performance and cash flows. |
| (n) | Review news releases to be issued in connection with the audited annual financial statements and related MD&A and the interim unaudited financial statements and related interim MD&A, before being disseminated to the public, if the Company is required to do so under applicable securities laws, paying particular attention to any use of “pro-forma” or “adjusted” non-GAAP, information. |
| (o) | Review any news release containing earnings guidance or financial information based upon the Company’s financial statements prior to the release of such statements, if the Company is required to disseminate such news releases under applicable securities laws. |
| (p) | Review the appointment of the CFO and have the CFO report to the Committee on the qualifications of new key financial personnel involved in the financial reporting process. |
| 4.2 | Internal Controls |
| (a) | Consider and review with Senior Management and the Auditor the adequacy and effectiveness of internal controls over accounting and financial reporting within the Company and any proposed significant changes in them. |
| (b) | Consider and discuss any Auditor’s comments on the Company’s internal controls, together with Senior Management responses thereto. |
| 5 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (c) | Discuss, as appropriate, with Senior Management and the Auditor any major issues as to the adequacy of the Company’s internal controls and any special audit steps in light of material internal control deficiencies. |
| (d) | Review annually the disclosure controls and procedures. |
| (e) | Receive confirmation from the CEO and the CFO of the effectiveness of disclosure controls and procedures, and whether there are any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information or any fraud, whether or not material, that involves Senior Management or other employees who have a significant role in the Company’s internal control over financial reporting. In addition, receive confirmation from the CEO and the CFO that they are prepared to sign the annual and quarterly certificates required by Sections 4.1 and 5.1 of NI 52-109, as amended from time to time. |
| 4.3 | The Auditor |
Qualifications and Selection
| (a) | Subject to the requirements of applicable law, be solely responsible to select, retain, compensate, oversee, evaluate and, where appropriate, replace the Auditor. The Committee shall be entitled to adequate funding from the Company for the purpose of compensating the Auditor for authorized services. |
| (b) | Instruct the Auditor that: |
| (i) | they are ultimately accountable to the Board and the Committee, as representatives of shareholders; and |
| (ii) | they must report directly to the Committee. |
| (c) | Ensure that the Auditor have direct and open communication with the Committee and that the Auditor meet with the Committee once each financial quarter without the presence of Senior Management to discuss any matters that the Committee or the Auditor believe should be discussed privately. |
| (d) | Evaluate the Auditor’s qualifications, performance, and independence. As part of that evaluation: |
| (i) | at least annually, request and review a formal report by the Auditor describing: the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; |
| (ii) | annually review and confirm with Senior Management and the Auditor the independence of the Auditor, including all relationships between the Auditor and the Company, including the amount of fees received by the Auditors for the audit services, the extent of non-audit services and fees therefor, the extent to which the compensation of the audit partners of the Auditor is based upon selling non-audit services, the timing and process for implementing the rotation of the lead audit partner, reviewing partner and other partners providing audit services for the Company, and whether there should be a regular rotation of the audit firm itself; and |
| (iii) | annually review and evaluate senior members of the audit team of the Auditor, including their expertise and qualifications. In making this evaluation, the Committee should consider the opinions of Senior Management. |
Conclusions on the independence of the Auditor should be reported by the Committee to the Board.
| 6 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (e) | Approve and review, and verify compliance with, the Company’s policies for hiring of employees and former employees of the Auditor and former auditors. Such policies shall include, at minimum, a one-year hiring “cooling off” period. |
Other Matters
| (a) | Meet with the Auditor to review and approve the annual audit plan of the Company’s financial statements prior to the annual audit being undertaken by the Auditor, including reviewing the year-to-year co-ordination of the audit plan and the planning, staffing and extent of the scope of the annual audit. This review should include an explanation from the Auditor of the factors considered by the Auditor in determining their audit scope, including major risk factors. The Auditor shall report to the Committee all significant changes to the approved audit plan. |
| (b) | Review and pre-approve all audit and non-audit services and engagement fees and terms in accordance with applicable law, including those provided to the Company’s subsidiaries by the Auditor or any other person in its capacity as independent auditor of such subsidiary. Between scheduled Committee meetings, the Committee Chair, on behalf of the Committee, is authorized to pre-approve any audit or non-audit services and engagement fees and terms up to $50,000. At the next Committee meeting, the Committee Chair shall report to the Committee any such pre-approval given. |
| (c) | Establish and adopt procedures for such matters. |
| 4.4 | Compliance |
| (a) | Monitor compliance by the Company with all payments and remittances required to be made in accordance with applicable law, where the failure to make such payments could render the Company’s directors personally liable. |
| (b) | Receive regular updates from Senior Management regarding compliance with laws and regulations and the process in place to monitor such compliance, excluding, however, legal compliance matters subject to the oversight of the Corporate Governance and Nominating Committee of the Board, if any. Review the findings of any examination by regulatory authorities and any observations by the Auditor relating to such matters. |
| (c) | Establish and oversee the procedures in the Company’s Whistleblower Policy to address: |
| (i) | the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting or auditing matters or unethical or illegal behaviour; and |
| (ii) | confidential, anonymous submissions by employees of concerns regarding questionable accounting and auditing matters or unethical or illegal behaviour. |
| (d) | Ensure that political and charitable donations conform with policies and budgets approved by the Board. |
| (e) | Monitor management of hedging, debt and credit, make recommendations to the Board respecting policies for management of such risks, and review the Company’s compliance therewith. |
| (f) | Approve the review and approval process for the expenses submitted for reimbursement by the CEO. |
| (g) | Oversee Senior Management’s mitigation of material risks within the Committee’s mandate and as otherwise assigned to it by the Board. |
| 7 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| 4.5 | Financial Oversight |
| (a) | Assist the Board in its consideration and ongoing oversight of matters pertaining to: |
| (i) | capital structure and funding including finance and cash flow planning; |
| (ii) | capital management planning and initiatives; |
| (iii) | property and corporate acquisitions and divestitures including proposals which may have a material impact on the Company’s capital position; |
| (iv) | the Company’s annual budget; |
| (v) | the Company’s insurance program; |
| (vi) | directors’ and officers’ liability insurance and indemnity agreements; and |
| (vii) | matters the Board may refer to the Committee from time to time in connection with the Company’s capital position. |
| 4.6 | Other |
| (a) | Perform such other duties as may be assigned to the Committee by the Board. |
| (b) | Annually review and assess the adequacy of its charter and recommend any proposed changes to the Corporate Governance and Nominating Committee. |
| (c) | Review its own performance annually, and provide the results of such evaluation to the Board for its review. |
| 5. | AUTHORITY |
In discharging its oversight role, the Committee is empowered to investigate any matter relating to the Company’s accounting, auditing, internal control or financial reporting practices brought to its attention with full access to the Company’s books, records, facilities and personnel.
The Committee shall have the authority, in its sole discretion, to retain and obtain the advice and assistance of independent outside counsel and such other advisors as it deems necessary to fulfill its duties and responsibilities under this charter. The Committee shall set the compensation, and oversee the work, of any outside counsel and other advisors.
The Committee shall receive appropriate funding from the Company, as determined by the Committee in its capacity as a committee of the Board, and without independent approval of the Board or senior management, for the payment of compensation to the Company’s independent accountants, any other accounting firm engaged to perform services for the Company, any outside counsel and any other advisors to the Committee.
| 6. | ACCOUNTABILITY |
The Committee Chair shall make periodic reports to the Board, as requested by the Board, on matters that are within the Committee’s area of responsibility.
The Committee shall maintain minutes of its meetings with the Company’s Corporate Secretary and shall provide an oral report to the Board at the next Board meeting that is held after a Committee meeting.
| 8 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
Appendix A
Definitions from National Instrument 52-110 Audit Committees
Section 1.4 Meaning of Independence
| (1) | An audit committee member is independent if he or she has no direct or indirect material relationship with the issuer. |
| (2) | For the purposes of subsection (1), a “material relationship” is a relationship which could, in the view of the issuer’s board of directors, be reasonably expected to interfere with the exercise of a member’s independent judgement. |
| (3) | Despite subsection (2), the following individuals are considered to have a material relationship with an issuer: |
| (a) | an individual who is, or has been within the last three years, an employee or executive officer of the issuer; |
| (b) | an individual whose immediate family member is, or has been within the last three years, an executive officer of the issuer; |
| (c) | an individual who: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, |
| (ii) | is an employee of that firm, or |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (d) | an individual whose spouse, minor child or stepchild, or child or stepchild who shares a home with the individual: |
| (i) | is a partner of a firm that is the issuer’s internal or external auditor, |
| (ii) | is an employee of that firm and participates in its audit, assurance or tax compliance (but not tax planning) practice, or |
| (iii) | was within the last three years a partner or employee of that firm and personally worked on the issuer’s audit within that time; |
| (e) | an individual who, or whose immediate family member, is or has been within the last three years, an executive officer of an entity if any of the issuer’s current executive officers serves or served at that same time on the entity’s compensation committee; and |
| (f) | an individual who received, or whose immediate family member who is employed as an executive officer of the issuer received, more than $75,000 in direct compensation from the issuer during any 12 month period within the last three years. |
| (4) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because |
| (a) | he or she had a relationship identified in subsection (3) if that relationship ended before March 30, 2004; or |
| (b) | he or she had a relationship identified in subsection (3) by virtue of subsection (8) if that relationship ended before June 30, 2005. |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
| (5) | For the purposes of clauses (3)(c) and (3)(d), a partner does not include a fixed income partner whose interest in the firm that is the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with that firm if the compensation is not contingent in any way on continued service. |
| (6) | For the purposes of clause (3)(f), direct compensation does not include: |
| (a) | remuneration for acting as a member of the board of directors or of any board committee of the issuer, and |
| (b) | the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
| (7) | Despite subsection (3), an individual will not be considered to have a material relationship with the issuer solely because the individual or his or her immediate family member |
| (a) | has previously acted as an interim chief executive officer of the issuer, or |
| (b) | acts, or has previously acted, as a chair or vice-chair of the board of directors or of any board committee of the issuer on a part-time basis. |
| (8) | For the purpose of Section 1.4, an issuer includes a subsidiary entity of the issuer and a parent of the issuer. |
Section 1.5 Additional Independence Requirements
| (1) | Despite any determination made under Section 1.4, an individual who |
| (a) | accepts, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or any subsidiary entity of the issuer, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; or |
| (b) | is an affiliated entity of the issuer or any of its subsidiary entities, is considered to have a material relationship with the issuer. |
| (2) | For the purposes of subsection (1), the indirect acceptance by an individual of any consulting, advisory or other compensatory fee includes acceptance of a fee by |
| (a) | an individual’s spouse, minor child or stepchild, or a child or stepchild who shares the individual’s home; or |
| (b) | an entity in which such individual is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the issuer or any subsidiary entity of the issuer. |
| (3) | For the purposes of subsection (1), compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer if the compensation is not contingent in any way on continued service. |
Section 1.6 Meaning of Financial Literacy
For the purposes of this Instrument, an individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.
| 2 |
| SOLARBANK CORPORATION | AUDIT COMMITTEE CHARTER |
Appendix B
Nasdaq Listing Rule 5605(a)(2)
(2) “Independent Director” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. For purposes of this rule, “Family Member” means a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. The following persons shall not be considered independent:
| (A) | a director who is, or at any time during the past three years was, employed by the Company; |
| (B) | a director who accepted or who has a Family Member who accepted any compensation from the Company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following: |
| (i) | compensation for board or board committee service; |
| (ii) | compensation paid to a Family Member who is an employee (other than an Executive Officer) of the Company; or |
| (iii) | benefits under a tax-qualified retirement plan, or non-discretionary compensation. |
Provided, however, that in addition to the requirements contained in this paragraph (B), audit committee members are also subject to additional, more stringent requirements under Rule 5605(c)(2).
| (C) | a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the Company as an Executive Officer; |
| (D) | a director who is, or has a Family Member who is, a partner in, or a controlling Shareholder or an Executive Officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: |
| (i) | payments arising solely from investments in the Company’s securities; or | |
| (ii) | payments under non-discretionary charitable contribution matching programs. |
| (E) | a director of the Company who is, or has a Family Member who is, employed as an Executive Officer of another entity where at any time during the past three years any of the Executive Officers of the Company serve on the compensation committee of such other entity; or |
| (F) | a director who is, or has a Family Member who is, a current partner of the Company’s outside auditor, or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years. |
| (G) | in the case of an investment company, in lieu of paragraphs (A)-(F), a director who is an “interested person” of the Company as defined in Section 2(a)(19) of the Investment Company Act of 1940, other than in his or her capacity as a member of the board of directors or any board committee. |
Note:
Pursuant to Rule 5605(a)(1), “‘Executive Officer’ means those officers covered in Rule 16a-1(f) under the [Securities Exchange Act of 1934].” Under that Rule 16a-1(f), an “officer” means “an issuer’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the issuer. Officers of the issuer’s parent(s) or subsidiaries shall be deemed officers of the issuer if they perform such policy-making functions for the issuer.”
Exhibit 99.118
SOLARBANK CORPORATION
COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE CHARTER
January 30, 2024
Revised: February 26, 2024
SOLARBANK CORPORATION
COMPENSATION, CORPORATE GOVERNANCE AND NOMINATING COMMITTEE CHARTER
| 1. | Purposes |
The purposes of the Compensation, Corporate Governance and Nominating Committee (the “Committee”) of the Board of Directors (the “Board”) of SolarBank Corporation (the “Company”) are:
| (i) | to assist the Board in monitoring, reviewing and approving compensation policies and practices of the Company and administering the Company’s share compensation plans; |
| (ii) | identify and recommend to the Board individuals qualified to be nominated for election to the Board; |
| (iii) | recommend to the Board the members and Chair for each Board committee; and |
| (iv) | develop and recommend corporate governance principles for the Board of the Company. |
| 2. | Committee Responsibilities with Respect to Compensation |
The Committee’s responsibilities with respect to compensation shall be:
| a) | reviewing and making recommendations to the Board with respect to the overall compensation strategy and policies for directors, officers and employees of the Company, including executive officer and management compensation criteria, corporate and personal goals and objectives (see Schedule “A”); |
| b) | reviewing and making recommendations to the Board with respect to the corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluating the performance of the Chief Executive Officer in light of those goals and objectives, and recommending to the Board the compensation level of the Chief Executive Officer based on this evaluation; |
| c) | reviewing and making recommendations to the Board with respect to the compensation of the Chairman of the Board; |
| d) | reviewing and making recommendations to the Board with respect to the annual compensation of all other executive officers and directors of the Company; |
| e) | reviewing and making recommendations to the Board, as appropriate, in connection with the Company’s succession planning with respect to the Chief Executive Officer and other senior executive officers; |
| f) | administering the Company’s Share Compensation Plan, and any other Stock Option Plan, Restricted Share Unit Plan or Deferred Share Unit Plan that may be in effect from time to time, in accordance with the terms of such plans; |
| g) | making recommendations to the Board with respect to the Company’s incentive compensation and equity-based plans that are subject to Board approval; |
| h) | reviewing and approving the annual public disclosure in the information circular relating to executive compensation of the Company; and |
| i) | reviewing the results of the annual CEO evaluation prior to submission to the Nominating and Corporate Governance Committee and the Board. |
| 3. | Committee Responsibilities with Respect to Corporate Governance |
The Committee’s responsibilities with respect to corporate governance shall be:
| a) | Reviewing the Company’s corporate governance policies and procedures on a periodic basis and making recommendations to the Board respecting amendments to the following Corporation policies, as applicable: |
| i) | Disclosure Policy; |
| ii) | Code of Business Conduct and Ethics; |
| iii) | Whistleblower Policy; and |
| iv) | Insider Trading Policy and any other policy dealing with trading in the Company’s securities; and |
| v) | Such other policies as may be enacted by the Board. |
| b) | Reviewing disclosure in the Company’s public disclosure documents relating to corporate governance practices and recommending any necessary changes; |
| c) | Proposing agenda items and content for submission to the Board related to corporate governance issues and providing periodic updates to the Board on recent developments in corporate governance; and |
| d) | Developing and implementing an adequate process for the formal assessment of the performance and effectiveness of the Board, its Committees and the Board and Committee chairs. |
| 4. | Committee Responsibilities with Respect to Corporate Governance |
The Committee’s responsibilities with respect to nomination and succession shall be:
| a) | In advance of each annual shareholder meeting, consider the size and composition of the Board (including tenure length) with a view to determining the impact of the number of directors, the effectiveness of the Board and recommend to the Board, if necessary, a reduction or increase in the size of the Board; |
| b) | Determine the skills and qualifications necessary for individual directors and determine the expertise and skill set required of the Board as a whole in light of the Company’s business and stage of development; |
| c) | Consider the diversity of the board composition, including whether targets have been adopted for women, visible minorities, Aboriginal people and people with disabilities on the board or in executive officer positions; |
| -3- |
| d) | Consider the competencies and skills that each new nominee will bring to the boardroom whether or not each new nominee can devote sufficient time and resources to his or her duties as a director; |
| e) | Based on the determinations made under sections (a), (b), (c) and (d), recommend to the Board nominees to fill vacancies on the Board and management nominees to be recommended for election as directors at annual shareholder meetings; |
| f) | Seek out candidates to fill Board positions and assist the Company in attracting qualified individuals to act as Board members based on the determinations made in sections (a), (b), (c) and (d); |
| g) | Assess the independence of all Board members taking into account the rules and regulations of any securities regulatory authorities and/or stock exchanges that may be applicable to the Company; and |
| h) | Establish an orientation and education program for new members of the Board and provide opportunities for continuing education of all directors to ensure their knowledge and understanding of the Company’s business remains current. |
| 5. | Other Committee Responsibilities |
The Board and Committees of the Board
The Committee is responsible for identifying and making recommendations to the Board as to the structure of the Board and the committees of the Board to be constituted from time to time and the structure of those committees. The committees of the Board will at all times, in addition to the Committee, include an Audit Committee and a Compensation Committee. The Committee will review the Board Mandate and the Charter of each committee of the Board and make recommendations to the Board with respect thereto in order to ensure that all aspects of corporate governance of the Company and its management and the performance of the Company’s obligations to its shareholders, employees and members of the public are being effectively reviewed.
Assessment of the Board and its Committees
The Committee is responsible for arranging for annual surveys of the directors to be conducted with respect to their views on the effectiveness of the Board, its committees and the directors. In conjunction therewith, the Committee will assess the effectiveness of the Board, as well as the effectiveness and contribution of each of the Board’s committees and will report to the Board thereon. Such assessment will take into account the responsibilities of the Board and each committee, the position descriptions applicable to the chair of the Board and the chairs of each committee and the annual survey of directors, as well as the competencies and skills that each individual director is expected to bring to the Board and its committees, attendance at Board and committee meetings and overall contributions made to the Board and its committees.
Position Descriptions
The Committee is responsible for reviewing and making recommendations to the Board regarding the position descriptions for the chair of the Board, and each chair of a committee of the Board.
| -4- |
Principal Occupation Changes and Other Directorships
The Committee is responsible for reviewing the continued appropriateness of Board membership upon a director changing his or her principal occupation or ceasing to be an officer of the Company and making recommendations to the Board thereon. The Committee is also responsible for reviewing a director’s acceptance of additional positions as a corporate director with for-profit corporations at arm’s length to the Company and making recommendations to the Board thereon.
Orientation and Continuing Education
The Committee is responsible for reviewing and making recommendations to the Board regarding orientation and education programs to be undertaken for all new members of the Board and continuing education programs to be made available to members of the Board.
Insurance and Indemnification of Directors
The Committee is responsible for assessing the directors’ and officers’ insurance policy and making recommendations relating to its renewal or amendment or the replacement of the insurer. Subject to applicable law and the articles and by-laws of the Company, the Committee is also responsible for administering all policies and practices of the Company with respect to the indemnification of directors and officers by the Company and for approving all payments made pursuant thereto.
Miscellaneous Matters
The Committee is responsible for monitoring and making recommendations with respect to the following matters:
| a) | shareholder and investor issues including the adoption of shareholders rights plans and related matters; |
| b) | policies regarding management serving on outside boards; |
| c) | retirement policy for directors based upon age, health or other considerations; |
| d) | the minimum equity investment in the Company in the form of common shares to be maintained by non-management Board members and the time period over which such investment may be made; |
| e) | the Company’s charitable and political donation policies; |
| f) | the Company’s Code of Business Conduct and Ethics and compliance therewith, including the granting of any waivers from the application of the Code; |
| g) | the Company’s Insider Trading Policy and compliance therewith, including reviewing systems for ensuring that all directors and officers of the Company who are required to file insider reports pursuant to the Policy do so; |
| h) | the Company’s Corporate Disclosure Policy, if any, and compliance therewith; and |
| i) | the retainer, subject to the Committee’s approval and at the expense of the Company, of outside advisors for individual members of the Board in appropriate circumstances and the procedures relating thereto. |
| -5- |
| 6. | Responsibilities of the Committee Chair |
The fundamental responsibility of the Committee Chair is to be responsible for the management and effective performance of the Committee and provide leadership to the Committee in fulfilling its mandate and any other matters delegated to it by the Board. To that end, the Committee Chair’s responsibilities shall include:
| a) | working with the Chairman of the Board (and the Lead Independent Director, if applicable), the Chief Executive Officer and the Corporate Secretary to establish the frequency of Committee meetings and the agendas for meetings; |
| b) | providing leadership to the Committee and presiding over Committee meetings; |
| c) | ensuring that the Committee is properly organized and effectively discharges its duties; |
| d) | facilitating the flow of information to and from the Committee and fostering an environment in which Committee members may ask questions and express their viewpoints; |
| e) | reporting to the Board with respect to the significant activities of the Committee and any recommendations of the Committee; |
| f) | leading the Committee in reviewing and assessing the adequacy of its mandate and evaluating its effectiveness in fulfilling its mandate; and |
| g) | taking such other steps as are reasonably required to ensure that the Committee carries out its mandate. |
| 7. | Powers of the Committee |
The Committee:
| a) | shall have the authority to retain and obtain advice and assistance from a compensation consultant, outside legal or other adviser in its sole discretion; |
| b) | shall assess the independence of any compensation consultant, legal counsel or other adviser that provides advice to the Committee (other than in-house legal counsel), pursuant to the rules and regulations of any securities regulatory authorities and/or stock exchanges that may be applicable to the Company (provided, however, that the Committee is not required (i) to retain a compensation consultant, legal counsel or other adviser that is independent, or (ii) to implement or act consistently with the advice or recommendations of the compensation consultant, legal counsel or other adviser, and may exercise its own judgment in fulfillment of the duties of the Committee); |
| c) | shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other adviser retained by the Committee; |
| d) | shall receive appropriate funding from the Company, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other adviser retained by the Committee; and |
| e) | may delegate any part of its authority or responsibilities to individual members and subcommittees. |
| -6- |
| 8. | Qualifications, Appointment and Removal |
| a) | The Committee shall consist of at least two members each of whom shall be appointed by the Board annually and as vacancies arise. If an appointment of the members of the Committee is not made as prescribed, the incumbent members shall continue as such until their successors are appointed. |
| b) | Any member of the Committee may be removed or replaced at any time by the Board and shall cease to be a member on ceasing to be a Director. |
| c) | All of the members of the Committee shall be directors whom the Board has determined are independent, taking into account the rules and regulations of any securities regulatory authorities and/or stock exchanges that may be applicable to the Company, and each member of the Committee must be an “Independent Director” as such term is defined in the Nasdaq Listing Rule 5605(a)(2) and otherwise in accordance with Nasdaq Listing Rule 5605(d)(2). |
| d) | The Chairman of the Committee shall be appointed from time to time by the Committee members, taking into account the rules and regulations of any securities regulatory authorities and/or stock exchanges that may be applicable to the Company. |
The foregoing requirements are subject to any exemptions, exceptions, cure periods or phase-in accommodations that may be available to the Company under applicable securities laws and stock exchange rules.
| 9. | Conduct and Frequency of Meetings |
| a) | The time and place of the meetings of the Committee, the calling of meetings and the procedure in all things at such meetings shall be determined by the Chair of the Committee. |
| b) | A majority of the Committee will constitute a quorum. No business may be transacted by the Committee except at a meeting of its members at which a quorum of the Committee is present in person or by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. |
| c) | The Committee shall meet at least once per year. |
| d) | The Committee may invite such directors, officers and employees of the Company and advisors as it sees fit from time to time to attend meetings of the Committee and assist thereat in the discussion and consideration of matters relating to the Committee. During each meeting of the Committee, the Committee will meet with only Committee members present in person or by other permitted means. |
| e) | The Chief Executive Officer shall not be present during voting or deliberations on his or her compensation. |
| 10. | Reporting |
| a) | The Committee shall report to the Board through the Chair of the Committee following each meeting on the major discussions, recommendations and decisions made by the Committee. |
| b) | The Committee, through the Chair of the Committee, shall report annually to the Board on the Committee’s responsibilities and how it has discharged them. |
Adopted by the Board on January 30, 2024, and revised on February 26, 2024.
| -7- |
Schedule “A”
| Key Elements of Management Compensation | Detailed Criteria | |
| Base Salary | Level of responsibility, experience, and expertise. | |
| Demonstrated leadership, time commitment, personal commitment and attitude. | ||
| Review public disclosure available for comparable companies and, at the discretion of the Committee, the results of a report prepared by an independent consultant to assist in determining the competitiveness of base salary, bonuses, benefits and stock options paid to each of the executive officers of the Company. | ||
| Assessment of whether base salary compensation is within the range of compensation demonstrated by industry peers. | ||
| Bonus Plan | Assessment of operating and financial performance of the Company as compared to annual goals and objectives. | |
| Assessment of the efforts and results of eligible participants as compared to stated goals and objectives. | ||
| Application of the relative weighting of corporate and personal objectives as applicable to each eligible participant. | ||
| Assessment of adherence to corporate policies. | ||
| Options/RSUs | Review of total option/RSU grants outstanding and individual awards during preceding fiscal year. | |
| Review of public disclosure available for comparable companies including review of independent consultant’s report, if applicable, to determine the competitiveness of option awards. | ||
| Assessment of awards relative to positions, performance, and what is considered competitive in the industry. |
| -8- |
Exhibit 99.119
SolarBank Appoints Renewable Energy Executive to Board of Directors
Toronto, Ontario, February 27, 2024 — SolarBank Corporation (Cboe CA: SUNN; OTC: SUUNF; FSE: GY2) (“SolarBank” or the “Company”) is pleased to announce that it has appointed Chelsea L. Nickles to its Board of Directors as an independent director.
Ms. Nickles is a renewable energy professional with more than 20 years of experience contributing to a net zero world. For nearly the past decade, Ms. Nickles has been focusing on developing offshore wind projects in multiple jurisdictions with Ørsted, the global leader in offshore wind. Ms. Nickels currently holds the title of Director with Ørsted and also serves as a director for several offshore wind companies where she helps to steer their success. Prior to joining Ørsted, Ms. Nickles worked as a lawyer in the Projects, Energy, Natural Resources and Infrastructure group with Allen & Overy LLP in London, England. Ms. Nickles holds a Bachelors of Arts (honours) from Acadia University and obtained a juris doctor from the University of Calgary in 2009.
Dr. Richard Lu, President & CEO of SolarBank commented: “I am very pleased that Chelsea has agreed to join the Board as our third independent director. Her experience in renewable energy, and international background, are key skill sets that will assist SolarBank as it continues to grow its business. Access to wind project expertise and her being located overseas open up new opportunities for SolarBank to explore.”
About SolarBank Corporation
SolarBank Corporation is an independent renewable and clean energy project developer and owner focusing on distributed and community solar projects in Canada and the USA. The Company develops solar projects that sell electricity to utilities, commercial, industrial, municipal and residential off-takers. The Company maximizes returns via a diverse portfolio of projects across multiple leading solar markets including projects with utilities, host off-takers, community solar, and virtual net metering projects. The Company has a potential development pipeline of over one gigawatt and has developed renewable and clear energy projects with a combined capacity of over 70 megawatts built. To learn more about SolarBank, please visit www.solarbankcorp.com.
For further information, please contact:
SolarBank Corporation
Tracy Zheng
Email: tracy.zheng@solarbankcorp.com
Phone: 416.494.9559
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, ”projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this news release contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies; and the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release.
Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. In making the forward looking statements included in this news release, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form for the most recently completed financial year, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the future impact of COVID-19 on the Company is unknown at this time; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them, or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.
Exhibit 99.120
| MSLL CPA LLP | ||
| 2110 - 1177 West Hastings Street | Tel: 604 688 5671 | |
| Vancouver, B.C. Canada | Fax: 604 688 8479 | |
| V6E 2K3 | msllcpa.com |
Consent of Independent Auditors
We consent to the reference to our Firm under the caption “Interest of Experts” in the Revised Annual Information Form of Solarbank Corporation (the “Corporation”) included as Exhibit 99.57 in the Registration Statement on Form 40-F of the Corporation for the registration of its common shares (the “Form 40-F”) and to the inclusion of the Independent Auditors’ Report prepared by us, dated October 23, 2023, with respect to the consolidated financial statements of the Corporation as at June 30, 2023 and 2022 (included in Exhibit 99.56 to the Form 40-F).
/s/ MSLL CPA LLP
Vancouver, British Columbia
February 27, 2024
Exhibit 99.121
Exhibit 99.122
