|
British Columbia
|
| |
3711
|
| |
N/A
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
William Rosenstadt, Esq.
Tim Dockery, Esq. Ortoli Rosenstadt LLP 501 Madison Avenue, 14 th Floor New York, New York, U.S.A., 10022 Telephone: (302) 738-6680 |
| |
Richard I. Anslow, Esq.
Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, New York 10105 Telephone: (212) 370-1300 |
|
CALCULATION OF REGISTRATION FEE
|
| ||||||||||||||||||
Title of each class of securities to be registered
|
| |
Proposed maximum
aggregate offering price (1) |
| |
Amount of
registration fee |
| | | ||||||||||
Units, each unit consisting of one common share, no par value, and one warrant to purchase one common share
(3)(4)
|
| | | $ | 28,750,000 | | | | | $ | 3,580 | | | | | ||||
Common shares included in the units
(4)
|
| | | | — (5) | | | | | | — (5) | | | | | ||||
Warrants included in the units
(4)
|
| | | | — (5) | | | | | | — (5) | | | | | ||||
Common shares underlying the warrants included in the units (at an exercise price of 125% of the price of the units)
(4)
|
| | | $ | 35,937,500 | | | | | $ | 4,475 | | | | | ||||
Warrants to be issued to the underwriters
|
| | | | — (5) | | | | | | — (5) | | | | | ||||
Common shares underlying warrants to be issued to the Underwriters
(4)(6)
|
| | | $ | 898,438 | | | | | $ | 112 | | | | | ||||
| | | | $ | 65,585,938 | | | | | $ | 8,167 (2) | | | | | ||||
|
| | |
Per Unit
|
| |
Total
(1)
|
|
Public offering price
(2)
|
| |
US$
|
| |
US$
|
|
Underwriters fees and commissions
(2)(3)
|
| |
US$
|
| |
US$
|
|
Proceeds to us, before expenses
(4)
|
| |
US$
|
| |
US$
|
|
| The Benchmark Company | | | | | |
ThinkEquity
|
|
| | | | | | |
A division of Fordham Financial Management, Inc.
|
|
| | |
Page
|
||
| | | | 1 | |
| | | | 9 | |
| | | | 23 | |
| | | | 25 | |
| | | | 25 | |
CAPITALIZATION | | | | | 26 |
DILUTION | | | | | 27 |
| | | | 28 | |
| | | | 29 | |
| | | | 30 | |
| | | | 44 | |
| | | | 45 | |
| | | | 50 | |
| | | | 62 | |
| | | | 71 | |
| | | | 85 | |
| | | | 87 | |
| | | | 91 | |
| | | | 92 | |
| | | | 92 | |
| | | | 93 | |
| | | | 97 | |
| | | | 98 | |
UNDERWRITING | | | | | 106 |
| | | | 111 | |
EXPERTS | | | | | 112 |
| | | | 112 | |
| | | | 112 | |
| | | | 112 | |
| | | | F-1 |
| | |
Year ended
December 31, 2017 |
| |
Year ended
December 31, 2016 |
| |
Period ended
December 31, 2015 |
| |
For the
three months ended March 31, |
| ||||||||||||||||||
| | |
2018
|
| |
2017
|
| ||||||||||||||||||||||||
Revenue
|
| | | $ | 109,173 | | | | | | — | | | | | | — | | | | | $ | 166,133 | | | | | $ | — | | |
Gross Profit
|
| | | $ | 45,223 | | | | | | — | | | | | | — | | | | | $ | 63,465 | | | | | $ | — | | |
Net and Comprehensive Loss
|
| | | $ | 11,366,372 | | | | | $ | 8,973,347 | | | | | $ | 995,833 | | | | | $ | 2,403,974 | | | | | $ | 2,189,569 | | |
Loss per Share – Basic and Fully Diluted
|
| | | $ | (0.35 ) | | | | | $ | (0.27 ) | | | | | $ | (0.04 ) | | | | | $ | (0.10 ) | | | | | $ | (0.10 ) | | |
| | |
December 31, 2017
|
| |
December 31, 2016
|
| |
December 31, 2015
|
| |
For the
three months ended March 31, 2018 |
| ||||||||||||
Cash
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | | | | $ | 106,357 | | | | | $ | 5,861,327 | | |
Current Assets
|
| | | $ | 10,007,684 | | | | | $ | 4,437,152 | | | | | $ | 197,309 | | | | | $ | 7,266,465 | | |
Total Assets
|
| | | $ | 12,661,381 | | | | | $ | 4,787,766 | | | | | $ | 213,118 | | | | | $ | 11,152,939 | | |
Current Liabilities
|
| | | $ | 3,354,675 | | | | | $ | 881,176 | | | | | $ | 346,416 | | | | | $ | 2,143,318 | | |
Total Liabilities
|
| | | $ | 7,010,365 | | | | | $ | 881,176 | | | | | $ | 346,416 | | | | | $ | 5,309,948 | | |
Total Equity (Deficiency)
|
| | | $ | 5,651,016 | | | | | $ | 3,906,590 | | | | | $ | (133,298 ) | | | | | $ | 5,842,991 | | |
|
Gross proceeds
|
| | | US$ | 25,000,000 | | |
|
Underwriting discounts and commissions (up to 7.0% of gross proceeds)
|
| | | US$ | 1,750,000 | | |
|
Underwriting non-accountable expenses (0.85% of gross proceeds)
|
| | | US$ | 212,500 | | |
|
Miscellaneous underwriting fees expenses
|
| | | US$ | 150,000 | | |
|
Other offering expenses
(1)
|
| | | US$ | 230,000 | | |
|
Net proceeds
|
| | | US$ | 22,657,500 | | |
Description of Use
|
| |
Estimated Amount of
Net Proceeds |
| |||
Manufacturing Plant & Equipment
|
| | | US$ | 2,404,730 | | |
Production Molds
|
| | | US$ | 4,144,364 | | |
Inventory
|
| | | US$ | 4,026,524 | | |
Research & Development
|
| | | US$ | 7,286,091 | | |
Sales & Marketing
|
| | | US$ | 2,804,985 | | |
Unallocated Working Capital
|
| | | US$ | 1,990,806 | | |
Total
|
| | | US$ | 22,657,500 | | |
| | |
As of March 31, 2018
|
| |||||||||
| | |
Actual (unaudited)
|
| |
Pro forma
(1)
|
| ||||||
Assets: | | | | | | | | | | | | | |
Current assets
|
| | | $ | 7,266,465 | | | | | $ | 35,578,965 | | |
Restricted cash
|
| | | | 107,903 | | | | | | 107,903 | | |
Goodwill and other intangible assets
|
| | | $ | 1,260,014 | | | | | | 1,260,014 | | |
Plant and equipment
|
| | | $ | 2,518,557 | | | | | | 2,518,557 | | |
Total Assets
|
| | | $ | 11,152,939 | | | | | $ | 39,465,439 | | |
Liabilities: | | | | | | | | | | | | | |
Current Liabilities
|
| | | $ | 2,143,318 | | | | | | 2,143,318 | | |
Derivative Liabilities
|
| | | $ | 3,166,630 | | | | | | 3,166,630 | | |
Total Liabilities
|
| | | $ | 5,309,948 | | | | | | 5,309,948 | | |
Shareholder’s Equity: | | | | | | | | | | | | | |
Share Capital
|
| | | $ | 25,293,271 | | | | | | 53,605,771 | | |
Share-based payment reserve
|
| | | $ | 4,289,246 | | | | | $ | 4,289,246 | | |
Deficit
|
| | | $ | (23,739,526 ) | | | | | | (23,739,526 ) | | |
Total equity
|
| | | $ | 5,842,991 | | | | | $ | 34,117,991 | | |
Total Liabilities and Equity
|
| | | $ | 11,152,939 | | | | | $ | 39,465,439 | | |
| | |
Offering
Without Over- Allotment (1) |
| |
Offering With
Over- Allotment (1) |
| ||||||
Offering price per unit (US$)
|
| | | US$ | 6.38 | | | | | US$ | 6.38 | | |
Offering Price ($)
|
| | | $ | 7.99 | | | | | $ | 7.99 | | |
Net tangible book value per common share before the offering
|
| | | $ | 0.19 | | | | | $ | 0.19 | | |
Increase per common share attributable to payments by new investors
|
| | | $ | 0.97 | | | | | $ | 1.10 | | |
Pro forma net tangible book value per common share after the offering
|
| | | $ | 1.16 | | | | | $ | 1.28 | | |
Dilution per common share to new investors
|
| | | $ | 6.83 | | | | | $ | 6.70 | | |
| | |
Period End
|
| |
Period
Average Rate |
| |
High Rate
|
| |
Low Rate
|
| ||||||||||||
Year Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2016
|
| | | $ | 1.3426 | | | | | $ | 1.3243 | | | | | $ | 1.4592 | | | | | $ | 1.2544 | | |
December 31, 2017
|
| | | $ | 1,2517 | | | | | $ | 1.2963 | | | | | $ | 1.3745 | | | | | $ | 1.2131 | | |
Last Six Months
|
| | | | | | | | | | | | | | | | | | | | | | | | |
January 2018
|
| | | $ | 1.2293 | | | | | $ | 1.2429 | | | | | $ | 1.2534 | | | | | $ | 1.2293 | | |
February 2018
|
| | | $ | 1.2806 | | | | | $ | 1.2588 | | | | | $ | 1.2806 | | | | | $ | 1.2280 | | |
March 2018
|
| | | $ | 1.2891 | | | | | $ | 1.2933 | | | | | $ | 1.3096 | | | | | $ | 1.2822 | | |
April 2018
|
| | | $ | 1.2848 | | | | | $ | 1.2732 | | | | | $ | 1.2918 | | | | | $ | 1.2581 | | |
May 2018
|
| | | $ | 1.2970 | | | | | $ | 1.2866 | | | | | $ | 1.3027 | | | | | $ | 1.2761 | | |
June 2018
|
| | | | 1.3140 | | | | | | 1.3266 | | | | | | 1.3319 | | | | | | 1.2907 | | |
|
|
| |
|
|
|
|
| |
|
| | | |
| | |
Level 1 Charging
|
| |
Level 2 Charging
|
|
Electric and Power Specifications
|
| |
120 Volt, 20 Amp circuit
1.4 kW |
| |
208 – 240 Volt, 40 Amp circuit*
6.2 – 7.6 kW** |
|
Time to Fully Charge an EV with a 100-mile Battery
|
| | 17 – 25 hours | | | 4 – 5 hours | |
Drivers Served per Station per Day
|
| | 1 | | | 3 – 4 or more | |
PHEV and BEV Sales January – December, 2016 US by State
|
| ||||||||||||||||||||||||||||||||||||
State
|
| |
EV Sales #
|
| |
EV Sales
% of US |
| |
Sales %
W/O Calif. |
| |
EVs % of
State Sales |
| |
% of New US
Car Regist. |
| |
Relative to
Actual Sales |
| ||||||||||||||||||
California
|
| | | | 73,854 | | | | | | 50.7 % | | | | | | N/A | | | | | | 3.66 % | | | | | | 12 % | | | | | | 422.79 % | | |
Oregon
|
| | | | 3,486 | | | | | | 2.4 % | | | | | | 4.9 % | | | | | | 1.93 % | | | | | | 1.1 % | | | | | | 217.70 % | | |
Washington
|
| | | | 5,363 | | | | | | 3.7 % | | | | | | 7.5 % | | | | | | 1.81 % | | | | | | 1.70 % | | | | | | 216.71 % | | |
Hawaii
|
| | | | 1,224 | | | | | | 0.8 % | | | | | | 1.7 % | | | | | | 1.39 % | | | | | | 0.50 % | | | | | | 168.17 % | | |
Vermont
|
| | | | 514 | | | | | | 0.4 % | | | | | | 0.7 % | | | | | | 1.32 % | | | | | | 0.20 % | | | | | | 176.55 % | | |
District of Columbia
|
| | | | 405 | | | | | | 0.3 % | | | | | | 0.6 % | | | | | | 1.05 % | | | | | | N/A | | | | | | N/A | | |
Colorado
|
| | | | 2,711 | | | | | | 1.9 % | | | | | | 3.8 % | | | | | | 1.00 % | | | | | | 1.60 % | | | | | | 116.40 % | | |
Connecticut
|
| | | | 1,511 | | | | | | 1.0 % | | | | | | 2.1 % | | | | | | 0.85 % | | | | | | 1.00 % | | | | | | 103.80 % | | |
Massachusetts
|
| | | | 2,905 | | | | | | 2.0 % | | | | | | 4.1 % | | | | | | 0.80 % | | | | | | 2.10 % | | | | | | 95.03 % | | |
New Jersey
|
| | | | 3,980 | | | | | | 2.7 % | | | | | | 5.5 % | | | | | | 0.67 % | | | | | | 3.50 % | | | | | | 78.12 % | | |
New York
|
| | | | 6,043 | | | | | | 4.2 % | | | | | | 8.4 % | | | | | | 0.58 % | | | | | | 6.00 % | | | | | | 69.19 % | | |
Florida
|
| | | | 6,255 | | | | | | 4.3 % | | | | | | 8.7 % | | | | | | 0.47 % | | | | | | 7.80 % | | | | | | 55.09 % | | |
Georgia
|
| | | | 2,435 | | | | | | 1.7 % | | | | | | 3.4 % | | | | | | 0.47 % | | | | | | 3.00 % | | | | | | 55.76 % | | |
Illinois
|
| | | | 2,688 | | | | | | 1.8 % | | | | | | 3.7 % | | | | | | 0.41 % | | | | | | 3.90 % | | | | | | 47.35 % | | |
Michigan
|
| | | | 2,482 | | | | | | 1.7 % | | | | | | 3.5 % | | | | | | 0.41 % | | | | | | 3.70 % | | | | | | 46.08 % | | |
Texas
|
| | | | 4,510 | | | | | | 3.1 % | | | | | | 6.3 % | | | | | | 0.29 % | | | | | | 8.90 % | | | | | | 34.81 % | | |
All Other States
|
| | | | 25,204 | | | | | | 17.3 % | | | | | | 35.1 % | | | | | | | | | | | | | | | | | | | | |
All States
|
| | | | 145,570 | | | | | | 100.0 % | | | | | | 71,716 | | | | | | | | | | | | | | | | | | | | |
|
| | | |
|
| |
|
| |
|
| |
|
| |
|
|
| | | |
ElectraMeccanica
SOLO |
| |
Smart Electric
|
| | Tesla Model 3 | | | Chevrolet Volt | | | Nissan Leaf | |
| Price | | | US$15,888 | | | US$28,750 | | | Up to US$56,500 | | | US$33,220+ | | | US$29,990 | |
| Electric only miles | | | Up to 100 miles | | |
Up to 76 miles
|
| | Up to 310 miles | | |
Up to 53 miles
|
| |
Up to 150 miles
|
|
| Price per Mile | | | US$155/mile | | | US$378/mile | | | US$182/mile | | | US$627/mile | | | US$199/mile | |
| Top Speed | | | 85/mph | | | 83/mph | | | 130/mph | | | 100/mph | | | 93/mph | |
| Full charge Time | | | 3 hours on a 240 volt outlet | | | 6 hours on a 240 volt outlet | | | 13.85 hours on a 240 volt outlet | | | 4.5 hours on a 240 volt outlet | | | 4 hours on a 7kW charging point | |
| Vehicle Class | | | Micro | | | Sub-compact | | | Compact | | | Compact | | | Compact | |
Activity
|
| |
Number of
Full-Time Employees |
| |||
Engineering/R&D
|
| | | | 36 | | |
Sales & Marketing
|
| | | | 4 | | |
General & Administration
|
| | | | 5 | | |
Executives
|
| | | | 6 | | |
| | |
Year ended
December 31, 2017 |
| |
Year ended
December 31, 2016 |
| |
Period ended
December 31, 2015 |
| |
For the three
months ended March 31, |
| | | | | ||||||||||||||||||||||||||
|
2018
|
| |
2017
|
| | | | | ||||||||||||||||||||||||||||||||||
Revenue
|
| | | $ | 109,173 | | | | | | — | | | | | | — | | | | | $ | 166,133 | | | | | $ | — | | | | | | | ||||||||
Gross Profit
|
| | | $ | 45,223 | | | | | | — | | | | | | — | | | | | $ | 63,465 | | | | | $ | — | | | | | | | ||||||||
Net and Comprehensive Loss
|
| | | $ | 11,366,372 | | | | | $ | 8,973,347 | | | | | $ | 995,833 | | | | | $ | 2,403,974 | | | | | $ | 2,189,569 | | | | | | | ||||||||
Loss per Share – Basic and Fully Diluted
|
| | | $ | (0.70 ) | | | | | $ | (0.54 ) | | | | | $ | (0.44 ) | | | | | $ | (0.10 ) | | | | | $ | (0.10 ) | | | | | | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |
For the three
months ended March 31, 2018 |
| ||||||||||||
Cash
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | | | | $ | 106,357 | | | | | $ | 5,861,327 | | |
Current Assets
|
| | | $ | 10,007,684 | | | | | $ | 4,437,152 | | | | | $ | 197,309 | | | | | $ | 7,266,465 | | |
Total Assets
|
| | | $ | 12,661,381 | | | | | $ | 4,787,766 | | | | | $ | 213,118 | | | | | $ | 11,152,939 | | |
Current Liabilities
|
| | | $ | 3,354,675 | | | | | $ | 881,176 | | | | | $ | 346,416 | | | | | $ | 2,143,318 | | |
Total Liabilities
|
| | | $ | 7,010,365 | | | | | $ | 881,176 | | | | | $ | 346,416 | | | | | $ | 5,309,948 | | |
Total Equity (Deficiency)
|
| | | $ | 5,651,016 | | | | | $ | 3,906,590 | | | | | $ | (133,298 ) | | | | | $ | 5,842,991 | | |
| | |
Year Ended December 31, 2017
|
| |||||||||||||||||||||
| | |
Intermeccanica
|
| |
Electrameccanica
|
| |
Adjustments
|
| |
Total
|
| ||||||||||||
Revenue
(1)
|
| | | $ | 1,179,595 | | | | | $ | — | | | | | $ | (501,461 ) | | | | | $ | 678,134 | | |
Cost of revenue
(2)
|
| | | | 758,948 | | | | | | — | | | | | | (385,971 ) | | | | | | 372,977 | | |
Gross profit
|
| | | | 420,647 | | | | | | — | | | | | | (115,490 ) | | | | | | 305,157 | | |
Operating expenses
(3)
|
| | | | (404,521 ) | | | | | | (9,401,693 ) | | | | | | (115,462 ) | | | | | | (9,690,752 ) | | |
Income/(Loss) before other items
|
| | | | 16,126 | | | | | | (9,401,693 ) | | | | | | (28 ) | | | | | | (9,385,595 ) | | |
Other items
(5)
|
| | | | 11,806 | | | | | | (536,440 ) | | | | | | (1,342,794 ) | | | | | | (1,867,428 ) | | |
Net and comprehensive loss
|
| | | $ | 27,932 | | | | | $ | (9,938,133 ) | | | | | $ | (1,342,766 ) | | | | | $ | (11,253,023 ) | | |
|
Securities
|
| |
Outstanding
|
|
Voting equity securities issued and outstanding
|
| | 25,265,725 common shares | |
Preferred shares | | | None | |
Securities convertible or exercisable into voting equity securities — stock options | | | Vested Stock options to acquire up to 2,703,945 common shares | |
Securities convertible or exercisable into voting equity securities — warrants | | | Warrants to acquire up to 12,686,856 common shares | |
Contractual Obligations
|
| |
Total
|
| |
Payments due by period
|
| |
More than
5 years |
| |||||||||||||||||||||
|
Less than 1 year
|
| |
2 – 3 years
|
| |
4 – 5 years
|
| |||||||||||||||||||||||
Operating Lease Obligations
|
| | | $ | 535,699 (1) | | | | | $ | 232,130 | | | | | $ | 303,569 | | | | | | Nil | | | | | | Nil | | |
Other Long-Term Liabilities Reflected on the
Registrant’s Balance Sheet under IFRS |
| | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | |
Total
|
| | | $ | 535,699 | | | | | $ | 232,130 | | | | | $ | 303,569 | | | | | | Nil | | | | | | Nil | | |
Issuance of Shares
|
| |
Number of
Shares Issued |
| |
Cash Proceeds
|
| ||||||
Private placements
|
| | | | 1,910,250 | | | | | $ | 10,842,021 | | |
Finder’s fee
|
| | | | 107,005 | | | | | $ | Nil | | |
Shares issued on conversion of convertible loan
|
| | | | 810,057 | | | | | $ | 2,992,810 | | |
Shares issued for services
|
| | | | 75,000 | | | | | $ | Nil | | |
Share issued costs
|
| | | | Nil | | | | | $ | (1,456,442 ) | | |
Issuance of Shares
|
| |
Number of
Shares Issued |
| |
Cash Proceeds
|
| ||||||
Private Placements
|
| | | | 757,138 | | | | | $ | 3,534,397 | | |
Finder’s Fee
|
| | | | 2,286 | | | | | $ | Nil | | |
Shares issued for exercise of stock options
|
| | | | 6,198 | | | | | $ | 12,395 | | |
Share issued costs
|
| | | | Nil | | | | | $ | (337,787 ) | | |
Date of Grant
|
| |
Number of
Options |
| |
Price Per
Option |
| |
Expiry Date
|
| ||||||
June 11, 2015
|
| | | | 22,500,000 | | | | | $ | 0.30 | | | | June 11, 2022 | |
August 13, 2015
|
| | | | 1,331,250 | | | | | $ | 0.30 | | | | August 13, 2022 | |
December 9, 2015
|
| | | | 4,200,000 | | | | | $ | 0.80 | | | |
December 9, 2022
|
|
March 7, 2016
|
| | | | 12,500 | | | | | $ | 0.80 | | | | March 7, 2023 | |
June 21, 2016
|
| | | | 25,000 | | | | | $ | 2.00 | | | | June 21, 2023 | |
February 17, 2017
|
| | | | 480,000 | | | | | $ | 2.00 | | | |
February 17, 2023
|
|
August 8, 2017
|
| | | | 50,000 | | | | | $ | 2.00 | | | | August 8, 2023 | |
January 5, 2018
|
| | | | 347,500 | | | | US$9.60 | | | January 6, 2025 | |
Vehicle Type
|
| |
Production
Three Months Ended |
| |
Customer Deliveries
Three Months Ended |
| ||||||||||||||||||
| | |
March 31, 2018
|
| |
March 31, 2017
|
| |
March 31, 2018
|
| |
March 31, 2017
|
| ||||||||||||
Roadster/Speedster
|
| | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | |
SOLO
|
| | | | 6 | | | | | | 2 | | | | | | Nil | | | | | | 1 | | |
| | |
Fiscal year
ended December 31, 2017 |
| |
Fiscal year
ended December 31, 2016 |
| |
Period
ended December 31, 2015 |
| |
Three months
ended March 31, 2018 |
| ||||||||||||
Labor
|
| | | $ | -1,971,946 | | | | | $ | 1,715,562 | | | | | $ | 382,047 | | | | | $ | 685,568 | | |
Materials
|
| | | | 2,763,355 | | | | | | 1,266,730 | | | | | | 117,537 | | | | | $ | 880,174 | | |
Government grants
|
| | | | (304,914 ) | | | | | | (203,997 ) | | | | | | (12,775 ) | | | | | $ | (5,565 ) | | |
Total
|
| | | $ | 4,430,387 | | | | | $ | 2,778,295 | | | | | $ | 486,809 | | | | | $ | 1,560,177 | | |
At December 31, 2017
|
| |
Within
one year |
| |
Between one
and five years |
| |
More than
five years |
| |||||||||
Bank loan
|
| | | $ | 123,637 | | | | | $ | — | | | | | $ | — | | |
Trade payables
|
| | | | 474,334 | | | | | | — | | | | | | — | | |
Customer deposits
|
| | | | 447,071 | | | | | | — | | | | | | — | | |
Shareholder loan
|
| | | | 10,383 | | | | | | — | | | | | | — | | |
Promissory note
|
| | | | 1,500,000 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 2,555,425 | | | | | $ | — | | | | | $ | — | | |
At December 31, 2016
|
| |
Within
one year |
| |
Between one and
five years |
| |
More than
five years |
| |||||||||
Trade payables
|
| | | $ | 150,305 | | | | | $ | — | | | | | $ | — | | |
Customer deposits
|
| | | | 169,500 | | | | | | — | | | | | | — | | |
Convertible loan
|
| | | | 243,676 | | | | | | — | | | | | | — | | |
Total
|
| | | $ | 563,481 | | | | | $ | — | | | | | $ | — | | |
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Cash and cash equivalents
|
| | | $ | 5,596,635 | | | | | $ | 98,762 | | |
Trade payables
|
| | | $ | (138,794 | | | | | $ | (4,804 ) | | |
Total
|
| | | $ | 5,457,841 | | | | | $ | 93,958 | | |
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Loans and receivables: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | |
Other receivables
|
| | | $ | 243,639 | | | | | $ | 271,284 | | |
Total
|
| | | $ | 8,854,635 | | | | | $ | 4,187,567 | | |
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Non-derivative financial liabilities: | | | | | | | | | | | | | |
Bank loan | | | | | | | | | | | | | |
Trade payable
|
| | | $ | 123,637 | | | | | $ | 150,305 | | |
Customer deposits
|
| | | $ | 447,071 | | | | | $ | 169,500 | | |
Shareholder loan
|
| | | $ | 10,383 | | | | | | — | | |
Convertible loan
|
| | | | nil | | | | | $ | 243,676 | | |
Promissory note
|
| | | $ | 1,500,000 | | | | | | | | |
Derivative financial liabilities | | | | | | | | | | | | | |
Warrant derivative liabilities
|
| | | $ | 3,655,686 | | | | | | | | |
| | | | $ | 6,271,111 | | | | | $ | 563,481 | | |
Name, Province/State and Country of Residence
|
| |
Age
|
| |
Position
|
| |
Director/Officer Since
|
|
Jerry Kroll (1) , British Columbia, Canada | | |
57
|
| | CEO and Chairman | | |
February 16, 2015
|
|
Henry Reisner
(3)
, British Columbia, Canada
|
| |
53
|
| |
President, Chief Operating Officer and director
|
| |
February 16, 2015
|
|
Kulwant Sandher
(2)
, British Columbia, Canada
|
| |
56
|
| |
Chief Financial Officer and Secretary
|
| | June 15, 2016 | |
Iain Ball
, British Columbia, Canada
|
| |
65
|
| | Vice-President, Finance | | |
February 16, 2015
|
|
Ed Theobald
, British Columbia, Canada
|
| |
65
|
| | General Manager | | |
February 16, 2015
|
|
Shaun Greffard
(4)
, British Columbia, Canada
|
| |
43
|
| | Director | | | August 8, 2016 | |
Luisa Ingargiola (4) , Florida, USA | | |
50
|
| | Director | | | March 16, 2018 | |
Steven Sanders (4) , New York, USA | | |
72
|
| | Director | | | March 16, 2018 | |
Robert Tarzwell
(3)
, British Columbia, Canada
|
| |
47
|
| | Director | | | August 8, 2016 | |
Mark West
, British Columbia, Canada
|
| |
50
|
| |
Vice-President, Sales & Dealerships
|
| |
November 1, 2016
|
|
Isaac Moss
, British Columbia, Canada
|
| |
65
|
| |
Senior Vice-President, Operations
|
| | May 15, 2018 | |
Name
|
| |
State/province of residence
|
| |
Position
|
|
Myron Trenne | | | Michigan, USA | | | Advisory Board member | |
Mike Volker | | | British Columbia, Canada | | | Advisory Board member | |
Named Executive Officer
and Principal Position |
| |
Year
|
| |
Salary
($) |
| |
Share-
based awards ($) |
| |
Option-
based awards ($) (1) |
| |
Annual
Incentive Plan ($) |
| |
Long-
term Incentive Plan ($) |
| |
Pension
Value ($) |
| |
All
Other Compensation ($) |
| |
Total
Compensation ($) |
| ||||||||||||||||||||||||
Jerry Kroll
(2)
President and Chief Executive Officer |
| |
2017
|
| | | | 60,000 | | | | | | Nil | | | | | | 358,694 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 418,694 | | |
|
2016
|
| | | | 30,000 | | | | | | Nil | | | | | | 887,605 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 917,605 | | | ||
Kulwant Sandher
(3)
Chief Financial Officer and Secretary |
| |
2017
|
| | | | 65,000 | | | | | | Nil | | | | | | 86,394 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 151,394 | | |
|
2016
|
| | | | 31,000 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 31,000 | | | ||
Iain Ball
(4)
Vice-President, Finance |
| |
2017
|
| | | | 60,000 | | | | | | Nil | | | | | | 37,883 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 97,883 | | |
|
2016
|
| | | | 52,500 | | | | | | Nil | | | | | | 87,958 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 140,458 | | | ||
Henry Reisner
(5)
Chief Operating Officer |
| |
2017
|
| | | | 60,000 | | | | | | Nil | | | | | | 70,405 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 130,405 | | |
|
2016
|
| | | | 53,000 | | | | | | Nil | | | | | | 168,494 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 221,494 | | | ||
Ed Theobald
(6)
General Manager |
| |
2017
|
| | | | 60,000 | | | | | | Nil | | | | | | 37,883 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 97,883 | | |
|
2016
|
| | | | 45,000 | | | | | | Nil | | | | | | 87,958 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 132,958 | | | ||
Mark West
(7)
Vice-President, Sales & Dealerships |
| |
2017
|
| | | | 144,000 | | | | | | Nil | | | | | | 70,563 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 16,167 | | | | | | 230,730 | | |
|
2016
|
| | | | 16,000 | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | Nil | | | | | | 16,000 | | |
Plan Category
|
| |
Number of securities to be
issued upon exercise of outstanding options, warrants and rights (a) |
| |
Weighted-average
exercise price of outstanding options, warrants and rights ($) (b) |
| |
Number of
securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
| |||||||||
Equity compensation plans approved by securityholders
|
| | | | 28,598,750 | | | | | $ | 0.40 | | | | | | 1,401,250 | | |
Equity compensation plans not approved by securityholders
|
| | | | 28,598,750 | | | | | | | | | | | | 1,401,250 | | |
Total
|
| | | | 28,598,750 | | | | | $ | 0.40 | | | | | | 1,401,250 | | |
| | |
Option-based Awards
|
| ||||||||||||
Named Executive Officer or Director
|
| |
Number of
securities underlying unexercised options (#) |
| |
Option exercise
price (US$) |
| |
Option
expiration date |
| ||||||
Jerry Kroll
President, Chief Executive Officer and a director (1) |
| | | | 22,500,000 | | | | | $ | 0.30 | | | |
June 11, 2022
|
|
| | | 2,500,000 | | | | | $ | 0.80 | | | |
Dec. 9, 2022
|
| ||
| | | 5,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
| ||
Kulwant Sandher
Chief Financial Officer and Secretary |
| | | | 125,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
|
Iain Ball
Vice-President, Finance |
| | | | 250,000 | | | | | $ | 0.30 | | | |
Aug. 13, 2022
|
|
| | | 375,000 | | | | | $ | 0.80 | | | |
Dec. 9, 2022
|
| ||
| | | 5,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
| ||
Henry Reisner
Chief Operating Officer (1) |
| | | | 625,000 | | | | | $ | 0.30 | | | |
Aug. 13, 2022
|
|
| | | 625,000 | | | | | $ | 0.80 | | | |
Dec. 9, 2022
|
| ||
| | | 5,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
| ||
Ed Theobald
General Manager |
| | | | 250,000 | | | | | $ | 0.30 | | | |
Aug. 13, 2022
|
|
| | | 375,000 | | | | | $ | 0.80 | | | |
Dec. 9, 2022
|
| ||
| | | 5,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
| ||
Mark West
Vice-President, Sales & Dealerships |
| | | | 112,500 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
|
Shaun Greffard
Director |
| | | | 25,000 | | | | | $ | 0.30 | | | |
Aug. 13, 2022
|
|
| | | 12,500 | | | | | $ | 0.80 | | | |
Dec. 9, 2022
|
| ||
| | | 125,000 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
| ||
Robert Tarzwell
Director |
| | | | 12,500 | | | | | $ | 0.30 | | | |
Aug. 13, 2022
|
|
| | | 2,500 | | | | | $ | 2.00 | | | |
Feb. 17, 2024
|
|
Named Executive Officer and Director
|
| |
Option-based
Awards – Value Vested During the Year ($) (1) |
| |
Non-Equity Incentive
Plan Compensation – Value Vested During the Year ($) |
| ||||||
Jerry Kroll
President and Chief Executive Officer
(2)
|
| | | $ | 80,139,063 | | | | | | Nil | | |
Kulwant Sandher
Chief Financial Officer and Secretary
|
| | | $ | 523,699 | | | | | | Nil | | |
Iain Ball
Vice-President, Finance
|
| | | $ | 1,964,414 | | | | | | Nil | | |
Henry Reisner
Chief Operating Officer
(2)
|
| | | $ | 3,944,453 | | | | | | Nil | | |
Ed Theobald
General Manager
|
| | | $ | 1,964,414 | | | | | | Nil | | |
Mark West
Vice-President, Sales & Dealerships
|
| | | $ | 366,589 | | | | | | Nil | | |
Shaun Greffard
, Director
|
| | | $ | 40,226 | | | | | | Nil | | |
Robert Tarzwell
, Director
|
| | | $ | 119,115 | | | | | | Nil | | |
Name
|
| |
Common Shares
Beneficially Owned (1) |
| |
Percentage of
Common Shares Beneficially Owned (2) |
| ||||||
Directors and Executive Officers: | | | | | | | | | | | | | |
Jerry Kroll,
CEO and Chairman
|
| | | | 10,542,559 (3) | | | | | | 42.0 % | | |
Iain Ball,
Vice-President, Finance
|
| | | | 75,147 (4) | | | | | | * | | |
Henry Reisner,
President, COO and a Director
|
| | | | 3,112,255 (5) | | | | | | 12.5 % | | |
Kulwant Sandher, CFO
|
| | | | 70,312 (6) | | | | | | * | | |
Ed Theobald,
General Manager
|
| | | | 294,167 (7) | | | | | | 1.2 % | | |
Shaun Greffard,
Director
|
| | | | 79,333 (8) | | | | | | * | | |
Robert Tarzwell,
Director
|
| | | | 385,910 (9) | | | | | | 1.5 % | | |
Mark West,
Vice-President, Sales & Dealerships
|
| | | | 69,407 (10) | | | | | | * | | |
Steven Sanders,
Director
|
| | | | 56,250 (11) | | | | | | * | | |
Luisa Ingargiola,
Director
|
| | | | 56,250 (12) | | | | | | * | | |
Isaac Moss,
Senior Vice President, Operations
|
| | | | 93,750 (13) | | | | | | * | | |
Directors and Executive Officers as a Group (Eleven Persons)
|
| | | | 14,835,610 (14) | | | | | | 53.5 % | | |
Other 5% or more Shareholders: | | | | | | | | | | | | | |
Megan Martin
|
| | | | 2,700,000 (15) | | | | | | 9.9 % | | |
Yuan Sheng Zhang
|
| | | | 2,700,000 (16) | | | | | | 9.9 % | | |
Shang Wen Yang
|
| | | | 2,000,000 (17) | | | | | | 7.7 % | | |
Unison International Holdings Ltd.
|
| | | | 3,200,000 (18) | | | | | | 11.9 % | | |
Zongshen (Canada) Environtech Ltd.
|
| | | | 2,800,000 (19) | | | | | | 10.6 % | | |
| | |
High Bid
|
| |
Low Bid
|
| ||||||
Quarter ended | | | | | | | | | | | | | |
December 31, 2017
|
| | | US$ | 15.00 | | | | | US$ | 10.00 | | |
March 31, 2018
|
| | | US$ | 10.70 | | | | | US$ | 9.00 | | |
Month ended | | | | | | | | | | | | | |
January 31, 2018
|
| | | US$ | 10.70 | | | | | US$ | 9.48 | | |
February 28, 2018
|
| | | US$ | 10.00 | | | | | US$ | 9.12 | | |
March 31, 2018
|
| | | US$ | 10.00 | | | | | US$ | 9.00 | | |
April 30, 2018
|
| | | US$ | 9.88 | | | | | US$ | 8.40 | | |
May 31, 2018
|
| | | US$ | 9.00 | | | | | US$ | 6.18 | | |
June 30, 2018
|
| | | US$ | 8.20 | | | | | US$ | 4.25 | | |
Name of Underwriter
|
| |
Number of Units
|
| |||
The Benchmark Company, LLC
|
| | | | | | |
ThinkEquity, a division of Fordham Financial Management, Inc.
|
| | | | | | |
Cuttone & Co., LLC
|
| | | | | | |
Total
|
| | | | | | |
|
| | |
Per Unit
|
| |
Total Without
Over-Allotment Option |
| |
Total With Full
Over-Allotment Option |
| |||||||||
Public offering price
|
| | | US$ | | | | | | US$ | 25,000,000 | | | | | US$ | 28,750,000 | | |
Underwriting discount
(1)
|
| | | US$ | | | | | | US$ | 1,750,000 | | | | | US$ | 2,012,500 | | |
Non-accountable expense allowance
(2)
|
| | | US$ | | | | | | US$ | 212,500 | | | | | US$ | 244,375 | | |
Proceeds, before expenses, to us
|
| | | US$ | | | | | | US$ | 23,037,500 | | | | | US$ | 26,493,125 | | |
|
Securities and Exchange Commission Registration Fee
|
| | | US$ | 4,936 | | |
|
Nasdaq Capital Market Listing Fee
|
| | | US$ | 50,000 | | |
|
FINRA
|
| | | US$ | 4,250 | | |
|
Legal Fees and Expenses
|
| | | US$ | 150,000 | | |
|
Accounting Fees and Expenses
|
| | | US$ | 20,000 | | |
|
Printing and Engraving Expenses
|
| | | US$ | 5,000 | | |
|
Miscellaneous Expenses
|
| | | US$ | 5,000 | | |
|
Total Expenses
|
| | | US$ | 239,186 | | |
| ELECTRAMECCANICA VEHICLES CORP. | | | | | | | |
|
Annual Financial Statements for the Year Ended December 31, 2017
|
| | | | | | |
| | | | | F-2 | | | |
| | | | | F-3 | | | |
| | | | | F-4 | | | |
| | | | | F-5 | | | |
| | | | | F-6 | | | |
| | | | | F-7 | | | |
|
Interim Financial Statements for the Three-Month Period Ended March 31, 2018
|
| | | | | | |
| | | | | F-29 | | | |
| | | | | F-30 | | | |
| | | | | F-31 | | | |
| | | | | F-32 | | | |
| | | | | F-33 | | | |
| INTERMECCANICA INTERNATIONAL INC. | | | | | | | |
|
Annual Financial Statements for the Year Ended March 31, 2017
|
| | | | | | |
| | | | | F-52 | | | |
| | | | | F-53 | | | |
| | | | | F-54 | | | |
| | | | | F-55 | | | |
| | | | | F-56 | | | |
| | | | | F-57 | | | |
|
Interim Financial Statements for the Six-Month Period September 30, 2017
|
| | | | | | |
| | | | | F-69 | | | |
| | | | | F-70 | | | |
| | | | | F-71 | | | |
| | | | | F-72 | | | |
| | | | | F-73 | | |
| | |
Note
|
| |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| |
4
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | |
Receivables
|
| |
5
|
| | | | 243,639 | | | | | | 271,284 | | |
Prepaid expenses
|
| | | | | | | 920,146 | | | | | | 249,585 | | |
Inventory
|
| | | | | | | 232,903 | | | | | | — | | |
| | | | | | | | 10,007,684 | | | | | | 4,437,152 | | |
Non-current assets | | | | | | | | | | | | | | | | |
Plant and equipment
|
| |
6
|
| | | | 1,393,683 | | | | | | 225,269 | | |
Investment
|
| |
7
|
| | | | — | | | | | | 100,000 | | |
Trademark and patents
|
| | | | | | | — | | | | | | 23,175 | | |
Goodwill and other intangible assets
|
| |
7
|
| | | | 1,260,014 | | | | | | 2,170 | | |
TOTAL ASSETS
|
| | | | | | $ | 12,661,381 | | | | | $ | 4,787,766 | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Bank overdraft and demand loan
|
| |
9
|
| | | $ | 123,637 | | | | | $ | — | | |
Trade payables and accrued liabilities
|
| |
8
|
| | | | 1,123,790 | | | | | | 468,000 | | |
Customer deposits
|
| | | | | | | 447,071 | | | | | | 169,500 | | |
Convertible loan
|
| |
11
|
| | | | — | | | | | | 243,676 | | |
Shareholder loan
|
| | | | | | | 10,383 | | | | | | — | | |
Promissory note
|
| |
7
|
| | | | 1,500,000 | | | | | | — | | |
Deferred income tax
|
| |
7
|
| | | | 149,794 | | | | | | — | | |
| | | | | | | | 3,354,675 | | | | | | 881,176 | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Derivative liability
(1)
|
| |
12
|
| | | | 3,655,690 | | | | | | — | | |
TOTAL LIABILITIES
|
| | | | | | | 7,010,365 | | | | | | 881,176 | | |
EQUITY | | | | | | | | | | | | | | | | |
Share capital
|
| |
13
|
| | | | 22,718,282 | | | | | | 11,383,996 | | |
Common share subscription
|
| | | | | | | 750,000 | | | | | | 101,500 | | |
Share-based payment reserve
|
| |
14
|
| | | | 3,518,286 | | | | | | 2,351,144 | | |
Equity component reserve
|
| |
14
|
| | | | — | | | | | | 39,130 | | |
Deficit
|
| | | | | | | (21,335,552 ) | | | | | | (9,969,180 ) | | |
TOTAL EQUITY
|
| | | | | | | 5,651,016 | | | | | | 3,906,590 | | |
TOTAL LIABILITIES AND EQUITY
|
| | | | | | $ | 12,661,381 | | | | | $ | 4,787,766 | | |
|
|
/s/ Jerry Kroll
Director
|
| |
/s/ Robert Tarzwell
Director
|
|
| | |
Note
|
| |
Year ended
December 31, 2017 |
| |
Year ended
December 31, 2016 |
| |
Period from
inception February 16, 2015 to December 31, 2015 |
| |||||||||
Revenue
|
| | | | | | $ | 109,173 | | | | | $ | — | | | | | $ | — | | |
Cost of revenue
|
| | | | | | | 63,950 | | | | | | — | | | | | | — | | |
Gross profit
|
| | | | | | | 45,223 | | | | | | — | | | | | | — | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | |
Amortization
|
| |
6
|
| | | | 124,134 | | | | | | 22,567 | | | | | | 629 | | |
General and administrative expenses
|
| |
15
|
| | | | 2,373,251 | | | | | | 1,205,835 | | | | | | 132,962 | | |
Research and development expenses
|
| |
16
|
| | | | 4,430,386 | | | | | | 2,778,295 | | | | | | 486,809 | | |
Sales and marketing expenses
|
| |
17
|
| | | | 631,381 | | | | | | 209,455 | | | | | | 19,691 | | |
Stock-based compensation expense
|
| |
13
|
| | | | 889,511 | | | | | | 1,461,189 | | | | | | 354,015 | | |
Share-based payment expense
|
| |
13
|
| | | | 1,085,716 | | | | | | 3,264,681 | | | | | | — | | |
| | | | | | | | (9,534,379 ) | | | | | | (8,942,022 ) | | | | | | (994,106 ) | | |
Loss before other items
|
| | | | | | | (9,489,156 ) | | | | | | (8,942,022 ) | | | | | | (994,014 ) | | |
Other items | | | | | | | | | | | | | | | | | | | | | | |
Accretion interest expense
|
| |
11
|
| | | | 69,562 | | | | | | 25,908 | | | | | | — | | |
Changes in fair value of warrant derivative
|
| |
12
|
| | | | 186,269 | | | | | | — | | | | | | — | | |
Finder’s fee on convertible loan
|
| |
11
|
| | | | 258,542 | | | | | | — | | | | | | — | | |
Impairment of goodwill
|
| |
7
|
| | | | 1,342,794 | | | | | | — | | | | | | — | | |
Foreign exchange loss
|
| | | | | | | 20,048 | | | | | | 5,417 | | | | | | 1,727 | | |
Net and comprehensive loss
|
| | | | | | $ | (11,366,372 ) | | | | | $ | (8,973,347 ) | | | | | $ | (995,833 ) | | |
Loss per share – basic and fully diluted
|
| | | | | | $ | (0.35 ) | | | | | $ | (0.27 ) | | | | | $ | (0.04 ) | | |
Weighted average number of shares outstanding – basic and fully diluted
|
| |
13
|
| | | | 43,636,629 | | | | | | 32,684,868 | | | | | | 25,769,510 | | |
|
| | |
Note
|
| |
Share capital
|
| |
Share
subscription |
| |
Share
Issue cost |
| |
Share-based
payment reserve |
| |
Equity
component reserve |
| |
Deficit
|
| |
Total
|
| |||||||||||||||||||||||||||
| | |
Number of
shares |
| |
Amount
|
| |||||||||||||||||||||||||||||||||||||||||||||
Balance at inception on February 16, 2015
|
| | | | | | | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Shares issued for cash – seed capital
|
| |
13
|
| | | | 25,350,000 | | | | | | 5,070 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,070 | | |
Shares issued for cash – private placements
|
| |
13
|
| | | | 1,433,625 | | | | | | 453,450 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 453,450 | | |
Share subscription
|
| |
13
|
| | | | — | | | | | | — | | | | | | 50,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 50,000 | | |
Stock-based compensation
|
| |
13
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 354,015 | | | | | | — | | | | | | — | | | | | | 354,015 | | |
Comprehensive loss for the period
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (995,833 ) | | | | | | (995,833 ) | | |
Balance at December 31, 2015
|
| | | | | | | 26,783,625 | | | | | | 458,520 | | | | | | 50,000 | | | | | | — | | | | | | 354,015 | | | | | | — | | | | | | (995,833 ) | | | | | | (133,298 ) | | |
Shares issued for cash
|
| |
13
|
| | | | 13,575,200 | | | | | | 8,375,519 | | | | | | — | | | | | | (1,604,486 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,771,033 | | |
Share issued for finders fees
|
| |
13
|
| | | | 1,273,512 | | | | | | 823,512 | | | | | | — | | | | | | — | | | | | | 519,088 | | | | | | — | | | | | | — | | | | | | 1,342,600 | | |
Shares issued for convertible debt
issue cost |
| |
11,13
|
| | | | 26,250 | | | | | | 26,250 | | | | | | — | | | | | | — | | | | | | 16,852 | | | | | | — | | | | | | — | | | | | | 43,102 | | |
Share issued to settle debt
|
| |
13
|
| | | | 125,000 | | | | | | 50,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 50,000 | | |
Share-based payment
|
| |
13
|
| | | | — | | | | | | 3,264,681 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,264,681 | | |
Stock-based compensation
|
| |
13
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,461,189 | | | | | | — | | | | | | — | | | | | | 1,416,189 | | |
Share subscription
|
| |
13
|
| | | | — | | | | | | — | | | | | | 51,500 | | | | | | (10,000 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 41,500 | | |
Equity component of convertible
loan |
| |
11
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 39,130 | | | | | | — | | | | | | 39,130 | | |
Net and comprehensive loss for the year
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (8,973,347 ) | | | | | | (8,973,347 ) | | |
Balance at December 31, 2016
|
| | | | | | | 41,783,587 | | | | | | 12,998,482 | | | | | | 101,500 | | | | | | (1,614,486 ) | | | | | | 2,351,144 | | | | | | 39,130 | | | | | | (9,969,180 ) | | | | | | 3,906,590 | | |
Shares issued for cash
|
| |
13
|
| | | | 3,820,499 | | | | | | 12,022,308 | | | | | | (101,500 ) | | | | | | (1,381,442 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,539,366 | | |
Adjustment for warrant derivative
liability |
| | | | | | | | | | | | | (2,410,255 ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2,410,255 ) | | |
Issuance of convertible debt
|
| |
11
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 130,439 | | | | | | | | | | | | 130,439 | | |
Shares issued for finders fees
|
| |
13
|
| | | | 214,009 | | | | | | 709,521 | | | | | | — | | | | | | — | | | | | | 3,223 | | | | | | — | | | | | | — | | | | | | 712,744 | | |
Shares issued upon conversion of
convertible debt |
| |
11,13
|
| | | | 1,620,114 | | | | | | 1,657,845 | | | | | | — | | | | | | — | | | | | | — | | | | | | (169,569 ) | | | | | | — | | | | | | 1,488,276 | | |
Shares and warrants issued to services
|
| |
13
|
| | | | 150,000 | | | | | | 811,308 | | | | | | — | | | | | | — | | | | | | 274,408 | | | | | | — | | | | | | — | | | | | | 1,085,716 | | |
Stock-based compensation
|
| |
13
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 889,511 | | | | | | — | | | | | | — | | | | | | 889,511 | | |
Share subscription
|
| |
13
|
| | | | — | | | | | | — | | | | | | 750,000 | | | | | | (75,000 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 675,000 | | |
Net and comprehensive loss for the year
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (11,366,372 ) | | | | | | (11,366,372 ) | | |
Balance at December 31, 2017
|
| | | | | | | 47,588,209 | | | | | $ | 25,789,209 | | | | | $ | 750,000 | | | | | $ | (3,070,928 ) | | | | | $ | 3,518,286 | | | | | $ | — | | | | | $ | (21,335,552 ) | | | | | $ | 5,651,015 | | |
|
| | |
Year ended
December 31, 2017 |
| |
Year ended
December 31, 2016 |
| |
Period from inception
February 16, 2015 to December 31, 2015 |
| |||||||||
Operating activities | | | | | | | | | | | | | | | | | | | |
Loss for the year
|
| | | $ | (11,366,372 ) | | | | | $ | (8,973,347 ) | | | | | $ | (995,833 ) | | |
Adjustments for: | | | | | | | | | | | | | | | | | | | |
Amortization
|
| | | | 124,134 | | | | | | 22,567 | | | | | | 629 | | |
Stock-based compensation expense
|
| | | | 889,511 | | | | | | 1,461,189 | | | | | | 354,015 | | |
Shares issued for services
|
| | | | 1,085,716 | | | | | | 3,264,681 | | | | | | — | | |
Interest accretion expense
|
| | | | 69,562 | | | | | | 25,908 | | | | | | — | | |
Finder’s fee on convertible loan
|
| | | | 258,542 | | | | | | — | | | | | | — | | |
Impairment of goodwill
|
| | | | 1,342,794 | | | | | | — | | | | | | — | | |
Impairment of trademark and patents
|
| | | | 19,174 | | | | | | — | | | | | | — | | |
Change in fair value of warrant derivative
|
| | | | 186,269 | | | | | | — | | | | | | — | | |
Changes in non-cash working capital items: | | | | | | | | | | | | | | | | | | | |
Receivables
|
| | | | 93,210 | | | | | | (242,645 ) | | | | | | (28,639 ) | | |
Prepaid expenses
|
| | | | (657,713 ) | | | | | | (202,238 ) | | | | | | (47,347 ) | | |
Inventory
|
| | | | (44,092 ) | | | | | | 14,966 | | | | | | (14,967 ) | | |
Trades payable and accrued liabilities
|
| | | | 568,850 | | | | | | 325,090 | | | | | | 132,910 | | |
Customer deposits
|
| | | | 110,335 | | | | | | 140,994 | | | | | | 28,506 | | |
Net cash flows used in operating activities
|
| | | | (7,320,080 ) | | | | | | (4,162,835 ) | | | | | | (570,725 ) | | |
Investing activities | | | | | | | | | | | | | | | | | | | |
Expenditures on plant and equipment
|
| | | | (1,264,265 ) | | | | | | (232,027 ) | | | | | | (16,438 ) | | |
Purchase of Intermeccanica
|
| | | | (900,000 ) | | | | | | (100,000 ) | | | | | | — | | |
Cash received on business combination
|
| | | | 59,449 | | | | | | — | | | | | | — | | |
Expenditures on trademarks and patents
|
| | | | — | | | | | | (25,345 ) | | | | | | — | | |
Net cash flows used in investing activities
|
| | | | (2,104,816 ) | | | | | | (357,372 ) | | | | | | (16,438 ) | | |
Financing activities | | | | | | | | | | | | | | | | | | | |
Proceeds from bank loan
|
| | | | 123,637 | | | | | | — | | | | | | — | | |
Proceeds from convertible loans
|
| | | | 2,441,225 | | | | | | 300,000 | | | | | | — | | |
Repayment of shareholder loans
|
| | | | (33,155 ) | | | | | | (135,000 ) | | | | | | 185,000 | | |
Proceeds from share subscription
|
| | | | 750,000 | | | | | | 101,500 | | | | | | 50,000 | | |
Proceeds on issuance of common shares – net of issue costs
|
| | | | 10,837,902 | | | | | | 8,063,633 | | | | | | 458,520 | | |
Net cash flows from financing activities
|
| | | | 14,119,609 | | | | | | 8,330,133 | | | | | | 693,520 | | |
Increase in cash and cash equivalents
|
| | | | 4,694,713 | | | | | | 3,809,926 | | | | | | 106,357 | | |
Cash and cash equivalents, beginning
|
| | | | 3,916,283 | | | | | | 106,357 | | | | | | — | | |
Cash and cash equivalents, ending
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | | | | $ | 106,357 | | |
Non-cash financing and investing transactions: | | | | | | | | | | | | | | | | | | | |
Issuance of promissory note for acquisition of Intermeccanica
|
| | | $ | 1,500,000 | | | | | $ | — | | | | | $ | — | | |
|
Class of plant and equipment
|
| |
Amortization rate
|
|
Office furniture and equipment
|
| |
20%
|
|
Shop equipment
|
| |
20%
|
|
Computer equipment
|
| |
33%
|
|
Computer software
|
| |
50%
|
|
Vehicles
|
| |
33%
|
|
Leasehold improvement
|
| |
over term of lease
|
|
Tooling
|
| |
20%
|
|
Production molds
|
| |
per unit produced
|
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Cash
|
| | | $ | 6,715,996 | | | | | $ | 666,293 | | |
Cash equivalent
|
| | | | 1,895,000 | | | | | | 3,249,990 | | |
| | | | $ | 8,610,996 | | | | | $ | 3,916,283 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Trade receivable
|
| | | $ | 154,698 | | | | | $ | — | | |
GST receivable
|
| | | | 84,566 | | | | | | 155,498 | | |
IRAP contribution receivable
|
| | | | — | | | | | | 108,535 | | |
GIC interest receivable
|
| | | | 4,375 | | | | | | 6,000 | | |
Other
|
| | | | — | | | | | | 1,251 | | |
| | | | $ | 243,639 | | | | | $ | 271,284 | | |
|
| | |
Furniture
and equipment |
| |
Computer
hardware and software |
| |
Vehicles
|
| |
Leasehold
Improvements |
| |
Production
molds deposit |
| |
Total
|
| ||||||||||||||||||
Cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2015
|
| | | $ | 16,438 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 16,438 | | |
Additions
|
| | | | 27,771 | | | | | | 18,897 | | | | | | 173,213 | | | | | | 12,146 | | | | | | — | | | | | | 232,027 | | |
At December 31, 2016
|
| | | | 44,209 | | | | | | 18,897 | | | | | | 173,213 | | | | | | 12,146 | | | | | | — | | | | | | 248,465 | | |
Additions
|
| | | | 246,634 | | | | | | 54,757 | | | | | | 216,837 | | | | | | 89,055 | | | | | | 914,060 | | | | | | 1,521,343 | | |
December 31, 2017
|
| | | | 290,843 | | | | | | 73,654 | | | | | | 390,050 | | | | | | 101,201 | | | | | | 914,060 | | | | | | 1,769,808 | | |
Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2015
|
| | | | 629 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 629 | | |
Charge for the year
|
| | | | 6,483 | | | | | | 2,514 | | | | | | 11,666 | | | | | | 1,904 | | | | | | — | | | | | | 22,567 | | |
At December 31, 2016
|
| | | | 7,112 | | | | | | 2,514 | | | | | | 11,666 | | | | | | 1,904 | | | | | | — | | | | | | 23,196 | | |
Charge for the year
|
| | | | 181,495 | | | | | | 24,633 | | | | | | 74,098 | | | | | | 72,703 | | | | | | — | | | | | | 352,929 | | |
At December 31, 2017
|
| | | | 188,607 | | | | | | 27,147 | | | | | | 85,764 | | | | | | 74,607 | | | | | | — | | | | | | 376,125 | | |
Net book value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2016
|
| | | $ | 37,097 | | | | | $ | 16,383 | | | | | $ | 161,547 | | | | | $ | 10,242 | | | | | $ | — | | | | | $ | 225,269 | | |
At December 31, 2017
|
| | | $ | 102,237 | | | | | $ | 46,507 | | | | | $ | 304,286 | | | | | $ | 26,594 | | | | | $ | 914,060 | | | | | $ | 1,393,683 | | |
|
| Fair value of purchase consideration at October 18, 2017 | | | | | | | |
|
Cash
|
| | | $ | 1,000,000 | | |
|
Promissory note
|
| | | | 1,500,000 | | |
|
Total consideration
|
| | | $ | 2,500,000 | | |
| Fair value amounts of identifiable assets acquired and liabilities assumed | | | | | | | |
|
Cash
|
| | | $ | 59,449 | | |
|
Receivables
|
| | | | 65,565 | | |
|
Prepaid expenses
|
| | | | 12,848 | | |
|
Inventory
|
| | | | 188,811 | | |
|
Plant and equipment
|
| | | | 24,282 | | |
| Intangible assets: | | | | | | | |
|
Customer relationships
|
| | | | 87,000 | | |
|
Contracted backlog
|
| | | | 23,000 | | |
|
Non-compete covenants
|
| | | | 25,000 | | |
|
Trade name
|
| | | | 423,000 | | |
|
Trades payable and accrued liabilities
|
| | | | (91,025 ) | | |
|
Customer deposits
|
| | | | (167,236 ) | | |
|
Shareholder loans
|
| | | | (43,538 ) | | |
|
Deferred income tax
|
| | | | (149,794 ) | | |
|
Total net identifiable assets
|
| | | | 457,362 | | |
|
Goodwill and other intangible assets
|
| | | | 2,042,638 | | |
|
Total
|
| | | $ | 2,500,000 | | |
|
| | |
Identifiable intangibles
on acquisition |
| |
Goodwill on
acquisition |
| |
Domain
name |
| |
Total
|
| ||||||||||||
December 31, 2015 and 2016
|
| | | $ | — | | | | | $ | — | | | | | $ | 2,170 | | | | | $ | 2,170 | | |
Acquired in year
|
| | | | 558,000 | | | | | | 2,042,638 | | | | | | — | | | | | | 2,600,638 | | |
Impairment
|
| | | | — | | | | | | (1,342,794 ) | | | | | | — | | | | | | (1,342,794 ) | | |
December 31, 2017
|
| | | $ | 558,000 | | | | | $ | 699,844 | | | | | $ | 2,170 | | | | | $ | 1,260,014 | | |
|
Pro-forma information
|
| |
2017
|
| |||
Revenue
|
| | | $ | 947,600 | | |
Gross Profit
|
| | | | 347,375 | | |
Net and comprehensive loss
|
| | | | (8,848,308 ) | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Trade payables
|
| | | $ | 457,520 | | | | | $ | 70,401 | | |
Wages payables
|
| | | | 62,110 | | | | | | — | | |
Due to related parties (Note 18)
|
| | | | 16,814 | | | | | | 79,904 | | |
Accrued liabilities
|
| | | | 587,346 | | | | | | 317,695 | | |
| | | | $ | 1,123,790 | | | | | $ | 468,000 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Payable not later than one year
|
| | | $ | 310,034 | | | | | $ | 221,071 | | |
Payable later than one year and not later than five years
|
| | | | 507,036 | | | | | | 601,542 | | |
Payable later than five years
|
| | | | — | | | | | | — | | |
| | | | $ | 817,070 | | | | | $ | 882,613 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Net loss
|
| | | $ | (11,366,371 ) | | | | | $ | (8,973,347 ) | | | | | $ | (995,833 ) | | |
Statutory tax rate
|
| | | | 26 % | | | | | | 26 % | | | | | | 26 % | | |
Expected income tax recovery at the statutory tax rate
|
| | | | (2,955,257 ) | | | | | | (2,333,070 ) | | | | | | (134,437 ) | | |
Stock-based compensation
|
| | | | 231,273 | | | | | | 1,228,726 | | | | | | 47,792 | | |
Share issue cost and other
|
| | | | 488,227 | | | | | | (231,643 ) | | | | | | — | | |
Effect of change in tax rate
|
| | | | (149,561 ) | | | | | | — | | | | | | — | | |
SR&ED effects
|
| | | | 183,351 | | | | | | — | | | | | | — | | |
Temporary differences not recognized
|
| | | | 2,385,319 | | | | | | 1,335,987 | | | | | | 86,645 | | |
Income tax recovery
|
| | | $ | — | | | | | $ | — | | | | | $ | — | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Non-capital loss carry-forwards
|
| | | $ | 11,436,565 | | | | | $ | 5,019,398 | | | | | $ | 641,189 | | |
Property, plant and equipment
|
| | | | 141,271 | | | | | | 23,197 | | | | | | — | | |
Share issue costs
|
| | | | 1,983,154 | | | | | | 737,637 | | | | | | — | | |
SR&ED
|
| | | | 1,397,672 | | | | | | — | | | | | | — | | |
Other
|
| | | | (558,000 ) | | | | | | — | | | | | | — | | |
| | | | | 14,400,662 | | | | | | 5,780,231 | | | | | | 641,189 | | |
Deferred tax assets not recognized
|
| | | | (14,955,454 ) | | | | | | (5,780,231 ) | | | | | | (641,189 ) | | |
Deferred tax liability
|
| | | | (554,794 ) | | | | | | — | | | | | | — | | |
Deferred tax liability (tax effected at 27%)
|
| | | $ | (149,794 ) | | | | | $ | — | | | | | $ | — | | |
|
Unsecured Convertible Loan issued September 7, 2016
|
| |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Balance, beginning
|
| | | $ | 243,676 | | | | | | — | | |
Proceeds from issue of convertible loan
|
| | | | — | | | | | $ | 300,000 | | |
Amount allocated to equity on issue of convertible loan
|
| | | | — | | | | | | (39,130 ) | | |
Convertible loan issue costs
|
| | | | — | | | | | | (43,102 ) | | |
Interest accretion expense
|
| | | | 47,763 | | | | | | 25,908 | | |
Conversion to common shares (Note 13)
|
| | | | (291,439 ) | | | | | | — | | |
Balance, ending
|
| | | $ | — | | | | | $ | 243,676 | | |
|
Unsecured Convertible Loan issued July 31, 2017
|
| |
December 31,
2017 |
| |||
Proceeds from issue of convertible loan
|
| | | $ | 1,000,034 | | |
Amount allocated to equity on issue of convertible loan
|
| | | | (130,439 ) | | |
Debt issue costs
|
| | | | (86,958 ) | | |
Interest accretion expense
|
| | | | 21,799 | | |
finder’s fee accretion
|
| | | | 14,533 | | |
Conversion to common shares (Note 13)
|
| | | | (818,969 ) | | |
| | | | $ | — | | |
|
Unsecured Convertible Loan issued October 17, 2017
|
| |
December 31,
2017 |
| |||
Proceeds from issue of convertible loan (USD $1,152,289)
|
| | | $ | 1,441,191 | | |
Amount allocated to fair value of conversion feature
|
| | | | (708,319 ) | | |
Amount allocated to fair value of warrants
|
| | | | (732,772 ) | | |
Conversion to common shares (Note 13)
|
| | | | (100 ) | | |
| | | | $ | — | | |
|
| | |
December 31
2017 |
| |||
Balance, beginning
|
| | | $ | — | | |
Warrants issued
|
| | | | 3,469,421 | | |
Changes in fair value of derivative liabilities
|
| | | | 186,269 | | |
Balance, ending
|
| | | $ | 3,655,690 | | |
|
| | |
At Issue
|
| |
December 31
2017 |
| ||||||
Fair value of related warrants outstanding
|
| | | $ | 3,469,421 | | | | | $ | 3,655,690 | | |
Risk-free interest rate
|
| | | | 1.52 % | | | | | | 1.66 % | | |
Expected term (in years)
|
| | | | 3.04 | | | | | | 2.44 | | |
Expected share price volatility
|
| | | | 60 % | | | | | | 60 % | | |
|
| | |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||||||||||||||
| | |
Number of
options |
| |
Weighted
average exercise price |
| |
Number of
options |
| |
Weighted
average exercise price |
| ||||||||||||
Options outstanding, beginning
|
| | | | 56,175,000 | | | | | $ | 0.19 | | | | | | 56,150,000 | | | | | $ | 0.19 | | |
Options granted
|
| | | | 1,120,000 | | | | | | 1.00 | | | | | | 100,000 | | | | | | 0.85 | | |
Options exercised
|
| | | | (12,500 ) | | | | | | 0.15 | | | | | | — | | | | | | — | | |
Options expired and forfeited
|
| | | | (85,000 ) | | | | | | 1.00 | | | | | | (75,000 ) | | | | | | 0.40 | | |
Options outstanding, ending
|
| | | | 57,197,500 | | | | | $ | 0.20 | | | | | | 56,175,000 | | | | | $ | 0.19 | | |
|
Exercise price
|
| |
Weighted average
contractual life |
| |
Number of options
outstanding |
| |
Number
of options exercisable |
| ||||||
$0.15
|
| |
4.45 years
|
| | | | 45,000,000 | | | | | | 29,062,500 | | |
$0.15
|
| |
4.62 years
|
| | | | 2,662,500 | | | | | | 1,616,146 | | |
$0.40
|
| |
4.94 years
|
| | | | 8,400,000 | | | | | | 4,375,000 | | |
$0.40
|
| |
5.18 years
|
| | | | 25,000 | | | | | | 11,458 | | |
$1.00
|
| |
5.47 years
|
| | | | 50,000 | | | | | | 19,792 | | |
$1.00
|
| |
6.13 years
|
| | | | 960,000 | | | | | | 159,375 | | |
$1.00
|
| |
6.61 years
|
| | | | 100,000 | | | | | | — | | |
| | |
4.57 years
|
| | | | 57,197,500 | | | | | | 35,244,271 | | |
|
| | |
Year ended December 31, 2017
|
|
Expected life of options
|
| |
5 years
|
|
Annualized volatility
|
| |
60%
|
|
Risk-free interest rate
|
| |
1.02% – 1.43%
|
|
Dividend rate
|
| |
0%
|
|
|
| | |
December 31, 2017
|
| |
December 31, 2016
|
| ||||||||||||||||||
| | |
Number of
warrants |
| |
Weighted average
exercise price |
| |
Number of
warrants |
| |
Weighted average
exercise price |
| ||||||||||||
Warrants outstanding, beginning
|
| | | | 18,533,587 | | | | | $ | 1.64 | | | | | | 1,933,625 | | | | | $ | 0.66 | | |
Warrants issued
|
| | | | 5,185,129 | | | | | | 4.91 | | | | | | 16,599,962 | | | | | | 1.75 | | |
Warrants exercised
|
| | | | (5,000 ) | | | | | | 2.00 | | | | | | — | | | | | | — | | |
Warrants outstanding, ending
|
| | | | 23,713,716 | | | | | $ | 2.35 | | | | | | 18,533,587 | | | | | $ | 1.64 | | |
|
Exercise price
|
| |
Weighted average
contractual life |
| |
Number of warrants
outstanding |
| |||
$0.40 CAD – $2.00 CAD
|
| |
3.35 years
|
| | | | 21,723,121 | | |
$1.00 USD – $12.00 USD
|
| |
0.26 years
|
| | | | 2,000,595 | | |
|
| | |
Year ended December 31, 2017
|
|
Expected life of warrants
|
| |
2 years
|
|
Annualized volatility
|
| |
60%
|
|
Risk-free interest rate
|
| |
1.52%
|
|
Dividend rate
|
| |
0%
|
|
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Rent
|
| | | $ | 269,716 | | | | | $ | 141,957 | | | | | $ | 17,936 | | |
Office expenses
|
| | | | 345,986 | | | | | | 113,158 | | | | | | 18,013 | | |
Legal and professional
|
| | | | 912,347 | | | | | | 643,725 | | | | | | 78,660 | | |
Consulting fees
|
| | | | 405,176 | | | | | | 186,437 | | | | | | 11,985 | | |
Investor relations
|
| | | | 113,256 | | | | | | — | | | | | | — | | |
Salaries
|
| | | | 326,770 | | | | | | 120,558 | | | | | | 6,276 | | |
| | | | $ | 2,373,251 | | | | | $ | 1,205,835 | | | | | $ | 132,870 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Labour
|
| | | $ | 1,971,946 | | | | | $ | 1,715,562 | | | | | $ | 382,047 | | |
Materials
|
| | | | 2,763,355 | | | | | | 1,266,730 | | | | | | 117,537 | | |
Government grants
|
| | | | (304,914 ) | | | | | | (203,997 ) | | | | | | (12,775 ) | | |
| | | | $ | 4,430,387 | | | | | $ | 2,778,295 | | | | | $ | 486,809 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Consulting
|
| | | $ | 143,275 | | | | | $ | 35,847 | | | | | $ | — | | |
Marketing
|
| | | | 182,723 | | | | | | 93,345 | | | | | | 19,691 | | |
Salaries
|
| | | | 305,383 | | | | | | 80,263 | | | | | | — | | |
| | | | $ | 631,381 | | | | | $ | 209,455 | | | | | $ | 19,691 | | |
|
| | |
Year ended Dec 31, 2017
|
| |
Year ended December 31, 2016
|
| ||||||||||||||||||
| | |
Electric Vehicles
|
| |
Custom Built
Vehicles |
| |
Electric Vehicles
|
| |
Custom Built
Vehicles |
| ||||||||||||
Revenue
|
| | | $ | — | | | | | $ | 109,173 | | | | | $ | — | | | | | $ | — | | |
Gross profit
|
| | | | — | | | | | | 45,223 | | | | | | — | | | | | | — | | |
Operating expenses
|
| | | | 9,473,794 | | | | | | 60,585 | | | | | | 8,942,022 | | | | | | — | | |
Other items
|
| | | | 1,879,208 | | | | | | (1,992 ) | | | | | | 31,325 | | | | | | — | | |
Net and comprehensive loss
|
| | | | 11,353,002 | | | | | | 13,370 | | | | | | 8,973,347 | | | | | | — | | |
Inventory
|
| | | | — | | | | | | 232,903 | | | | | | — | | | | | | — | | |
Plant and equipment
|
| | | $ | 1,370,350 | | | | | $ | 23,333 | | | | | $ | 225,269 | | | | | $ | — | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Shareholder loan
|
| | | $ | 10,383 | | | | | $ | — | | |
Due to related parties (Note 7)
|
| | | | 16,814 | | | | | | 79,904 | | |
| | | | $ | 27,197 | | | | | $ | 79,904 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| |
December 31,
2015 |
| |||||||||
Consulting fees
|
| | | $ | 185,000 | | | | | $ | 136,500 | | | | | $ | — | | |
Salary
|
| | | | 280,167 | | | | | | 45,000 | | | | | | — | | |
Deferred salary for CEO
|
| | | | — | | | | | | 30,000 | | | | | | — | | |
Stock-based compensation
|
| | | | 659,228 | | | | | | 1,238,013 | | | | | | 338,883 | | |
| | | | $ | 1,124,395 | | | | | $ | 1,449,513 | | | | | $ | 338,883 | | |
|
At December 31, 2017
|
| |
Within one year
|
| |
Between one
and five years |
| |
More than
five years |
| |||||||||
Bank loan
|
| | | $ | 123,637 | | | | | $ | — | | | | | $ | — | | |
Trade payables
|
| | | | 474,334 | | | | | | — | | | | | | — | | |
Customer deposits
|
| | | | 447,071 | | | | | | — | | | | | | — | | |
Convertible loan
|
| | | | — | | | | | | — | | | | | | — | | |
Shareholder loan
|
| | | | 10,383 | | | | | | | | | | | | | | |
Promissory note
|
| | | | 1,500,000 | | | | | | — | | | | | | — | | |
| | | | $ | 2,555,425 | | | | | $ | — | | | | | $ | — | | |
|
At December 31, 2016
|
| |
Within one year
|
| |
Between one
and five years |
| |
More than
five years |
| |||||||||
Trade payables
|
| | | $ | 150,305 | | | | | $ | — | | | | | $ | — | | |
Customer deposits
|
| | | | 169,500 | | | | | | — | | | | | | — | | |
Shareholder loan
|
| | | | 243,676 | | | | | | — | | | | | | — | | |
| | | | $ | 563,481 | | | | | $ | — | | | | | $ | — | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Cash and cash equivalents
|
| | | $ | 5,596,635 | | | | | $ | 98,762 | | |
Trade payables
|
| | | | (138,794 ) | | | | | | (4,804 ) | | |
| | | | $ | 5,457,841 | | | | | $ | 93,958 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Loans and receivables: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 8,610,996 | | | | | $ | 3,916,283 | | |
Other receivables
|
| | | | 243,639 | | | | | | 271,284 | | |
| | | | $ | 8,854,635 | | | | | $ | 4,187,567 | | |
|
| | |
December 31,
2017 |
| |
December 31,
2016 |
| ||||||
Non-derivative financial liabilities: | | | | | | | | | | | | | |
Bank loan
|
| | | $ | 123,637 | | | | | $ | — | | |
Trade payable
|
| | | | 474,334 | | | | | | 150,305 | | |
Customer deposits
|
| | | | 447,071 | | | | | | 169,500 | | |
Convertible loan
|
| | | | — | | | | | | 243,676 | | |
Shareholder loan
|
| | | | 10,383 | | | | | | — | | |
Promissory note
|
| | | | 1,500,000 | | | | | | — | | |
Derivative financial liabilities: | | | | | | | | | | | | | |
Warrant derivative liability
|
| | | | 3,655,686 | | | | | | — | | |
| | | | $ | 6,2711,111 | | | | | $ | 563,481 | | |
|
| | |
Note
|
| |
March 31, 2018
(Unaudited) |
| |
December 31, 2017
|
| ||||||
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| |
4
|
| | | $ | 5,861,327 | | | | | $ | 8,610,996 | | |
Receivables
|
| |
5
|
| | | | 340,171 | | | | | | 243,639 | | |
Prepaid expenses
|
| | | | | | | 806,874 | | | | | | 920,146 | | |
Inventory
|
| | | | | | | 258,093 | | | | | | 232,903 | | |
| | | | | | | | 7,266,465 | | | | | | 10,007,684 | | |
Non-current assets | | | | | | | | | | | | | | | | |
Restricted cash
|
| | | | | | | 107,903 | | | | | | — | | |
Plant and equipment
|
| |
6
|
| | | | 2,518,557 | | | | | | 1,393,683 | | |
Goodwill and other intangible assets
|
| |
7
|
| | | | 1,260,014 | | | | | | 1,260,014 | | |
TOTAL ASSETS
|
| | | | | | $ | 11,152,939 | | | | | $ | 12,661,381 | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Bank overdraft and demand loan
|
| |
9
|
| | | $ | — | | | | | $ | 123,637 | | |
Trade payables and accrued liabilities
|
| |
8
|
| | | | 1,576,336 | | | | | | 1,123,790 | | |
Customer deposits
|
| | | | | | | 407,844 | | | | | | 447,071 | | |
Shareholder loan
|
| |
17
|
| | | | 9,344 | | | | | | 10,383 | | |
Promissory note
|
| |
7
|
| | | | — | | | | | | 1,500,000 | | |
Deferred income tax
|
| | | | | | | 149,794 | | | | | | 149,794 | | |
| | | | | | | | 2,143,318 | | | | | | 3,354,675 | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Derivative liability
(1)
|
| |
10
|
| | | | 3,166,630 | | | | | | 3,655,690 | | |
TOTAL LIABILITIES
|
| | | | | | | 5,309,948 | | | | | | 7,010,365 | | |
EQUITY | | | | | | | | | | | | | | | | |
Share capital
|
| |
11
|
| | | | 25,293,271 | | | | | | 22,718,282 | | |
Common share subscription
|
| | | | | | | — | | | | | | 750,000 | | |
Share-based payment reserve
|
| |
12
|
| | | | 4,289,246 | | | | | | 3,518,286 | | |
Deficit
|
| | | | | | | (23,739,526 ) | | | | | | (21,335,552 ) | | |
TOTAL EQUITY
|
| | | | | | | 5,842,991 | | | | | | 5,651,016 | | |
TOTAL LIABILITIES AND EQUITY
|
| | | | | | $ | 11,152,939 | | | | | $ | 12,661,381 | | |
|
| “Luisa Ingargiola” | | | “Steven Sanders” | |
| Director | | | Director | |
| | | | | |
3 months ended
|
| |||||||||
| | |
Note
|
| |
March 31,
2018 |
| |
March 31,
2017 |
| ||||||
Revenue
|
| | | | | | $ | 166,133 | | | | | $ | — | | |
Cost of revenue
|
| | | | | | | 102,668 | | | | | | — | | |
Gross profit
|
| | | | | | | 63,465 | | | | | | — | | |
Operating expenses | | | | | | | | | | | | | | | | |
Amortization
|
| |
6
|
| | | | 51,029 | | | | | | 24,910 | | |
General and administrative expenses
|
| |
13
|
| | | | 975,217 | | | | | | 482,809 | | |
Research and development expenses
|
| |
14
|
| | | | 1,560,177 | | | | | | 1,283,729 | | |
Sales and marketing expenses
|
| |
15
|
| | | | 279,630 | | | | | | 124,266 | | |
Stock-based compensation expense
|
| |
11
|
| | | | 790,234 | | | | | | 247,656 | | |
| | | | | | | | (3,656,287 ) | | | | | | (2,163,370 ) | | |
Loss before other items
|
| | | | | | | (3,592,822 ) | | | | | | (2,163,370 ) | | |
Other items | | | | | | | | | | | | | | | | |
Accretion interest expense
|
| | | | | | | — | | | | | | 20,277 | | |
Changes in fair value of warrant derivative
|
| |
10
|
| | | | (1,166,027 ) | | | | | | — | | |
Foreign exchange loss/(gain)
|
| | | | | | | (22,821 ) | | | | | | 5,922 | | |
Net and comprehensive loss
|
| | | | | | $ | (2,403,974 ) | | | | | $ | (2,189,569 ) | | |
Loss per share – basic and fully diluted
|
| | | | | | $ | (0.10 ) | | | | | $ | (0.10 ) | | |
Weighted average number of shares outstanding – basic and fully diluted
|
| |
11
|
| | | | 24,468,974 | | | | | | 20,987,233 | | |
|
| | |
Note
|
| |
Share capital
|
| |
Share
subscription |
| |
Share
issue cost |
| |
Share-based
payment reserve |
| |
Equity
component reserve |
| |
Deficit
|
| |
Total
|
| |||||||||||||||||||||||||||
| | |
Number of
shares |
| |
Amount
|
| |||||||||||||||||||||||||||||||||||||||||||||
Balance at Dec 31, 2016
|
| | | | | | | 20,891,794 | | | | | $ | 12,998,482 | | | | | $ | 101,500 | | | | | $ | (1,614,486 ) | | | | | $ | 2,351,144 | | | | | $ | 39,130 | | | | | $ | (9,969,180 ) | | | | | $ | 3,906,590 | | |
Shares issued for cash
|
| | | | | | | 264,000 | | | | | | 528,000 | | | | | | (100,000 ) | | | | | | (55,266 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 372,734 | | |
Share issued for finders fees
|
| | | | | | | 2,500 | | | | | | 5,000 | | | | | | — | | | | | | — | | | | | | 3,223 | | | | | | — | | | | | | — | | | | | | 8,223 | | |
Stock-based compensation
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 247,656 | | | | | | — | | | | | | — | | | | | | 247,656 | | |
Net and comprehensive loss for the period
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,189,569 ) | | | | | | (2,189,569 ) | | |
Balance at March 31, 2017
|
| | | | | | | 21,158,294 | | | | | $ | 13,531,482 | | | | | $ | 1,500 | | | | | $ | (1,669,752 ) | | | | | $ | 2,602,023 | | | | | $ | 39,130 | | | | | $ | (12,158,749 ) | | | | | $ | 2,345,634 | | |
Balance at December 31, 2017
|
| | | | | | | 23,794,106 | | | | | $ | 25,789,209 | | | | | $ | 750,000 | | | | | $ | (3,070,927 ) | | | | | $ | 3,518,286 | | | | | $ | — | | | | | $ | (21,335,552 ) | | | | | $ | 5,651,016 | | |
Shares issued for cash
|
| |
11
|
| | | | 757,138 | | | | | | 3,534,397 | | | | | | (750,000 ) | | | | | | (337,787 ) | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,446,610 | | |
Shares issued on exercise of options
|
| |
11
|
| | | | 6,198 | | | | | | 31,669 | | | | | | | | | | | | | | | | | | (19,274 ) | | | | | | | | | | | | | | | | | | 12,395 | | |
Adjustment for warrant derivative
liability |
| |
10
|
| | | | | | | | | | (676,967 ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (676,967 ) | | |
Shares issued for finders fees
|
| |
11
|
| | | | 2,286 | | | | | | 23,678 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,678 | | |
Stock-based compensation
|
| |
11
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 790,234 | | | | | | — | | | | | | — | | | | | | 790,234 | | |
Net and comprehensive loss for the period
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (2,403,974 ) | | | | | | (2,403,974 ) | | |
Balance at March 31, 2018
|
| | | | | | | 24,559,728 | | | | | $ | 28,701,986 | | | | | $ | — | | | | | $ | (3,408,715 ) | | | | | $ | 4,289,246 | | | | | $ | — | | | | | $ | (23,739,526 ) | | | | | $ | 5,842,991 | | |
|
| | |
3 months ended
|
| |||||||||
| | |
March 31,
2018 |
| |
March 31,
2017 |
| ||||||
Operating activities | | | | | | | | | | | | | |
Loss for the year
|
| | | $ | (2,403,974 ) | | | | | $ | (2,189,569 ) | | |
Adjustments for: | | | | | | | | | | | | | |
Amortization
|
| | | | 51,029 | | | | | | 24,910 | | |
Stock-based compensation expense
|
| | | | 790,234 | | | | | | 247,656 | | |
Non-cash services
|
| | | | 23,678 | | | | | | — | | |
Interest accretion expense
|
| | | | — | | | | | | 20,277 | | |
Change in fair value of warrant derivative
|
| | | | (1,166,027 ) | | | | | | — | | |
Changes in non-cash working capital items: | | | | | | | | | | | | | |
Receivables
|
| | | | (96,532 ) | | | | | | (74,088 ) | | |
Prepaid expenses
|
| | | | 113,272 | | | | | | 34,477 | | |
Inventory
|
| | | | (25,190 ) | | | | | | (3,475 ) | | |
Trades payable and accrued liabilities
|
| | | | 452,546 | | | | | | 62,415 | | |
Customer deposits
|
| | | | (39,227 ) | | | | | | 23,250 | | |
Net cash flows used in operating activities
|
| | | | (2,300,191 ) | | | | | | (1,854,147 ) | | |
Investing activities | | | | | | | | | | | | | |
Restricted cash
|
| | | | (107,903 ) | | | | | | — | | |
Expenditures on plant and equipment
|
| | | | (1,175,903 ) | | | | | | (127,196 ) | | |
Purchase of Intermeccanica
|
| | | | — | | | | | | (100,000 ) | | |
Expenditures on trademarks and patents
|
| | | | — | | | | | | (14,063 ) | | |
Net cash flows used in investing activities
|
| | | | (1,283,806 ) | | | | | | (241,259 ) | | |
Financing activities | | | | | | | | | | | | | |
Repayment of bank loan
|
| | | | (123,637 ) | | | | | | — | | |
Repayment of shareholder loan
|
| | | | (1,040 ) | | | | | | — | | |
Repayment of promissory note
|
| | | | (1,500,000 ) | | | | | | — | | |
Proceeds on issuance of common shares – net of issue costs
|
| | | | 2,459,005 | | | | | | 380,957 | | |
Net cash flows from financing activities
|
| | | | 834,328 | | | | | | 380,957 | | |
Decrease in cash and cash equivalents
|
| | | | (2,749,669 ) | | | | | | (1,714,449 ) | | |
Cash and cash equivalents, beginning
|
| | | | 8,610,996 | | | | | | 3,916,283 | | |
Cash and cash equivalents, ending
|
| | | $ | 5,861,327 | | | | | $ | 2,201,834 | | |
|
Financial assets/liabilities
|
| |
Original classification IAS 39
|
| |
New classification IFRS 9
|
|
Bank loan | | | Amortized cost | | | Amortized cost | |
Cash and cash equivalents | | | Amortized cost | | | Amortized cost | |
Accounts receivables | | | Amortized cost | | | Amortized cost | |
Accounts payable and accrued liabilities | | | Amortized cost | | | Amortized cost | |
Loans | | | Amortized cost | | | Amortized cost | |
Warrant derivative liability | | | FVTPL | | | FVTPL | |
Class of plant and equipment
|
| |
Amortization rate
|
| |||
Office furniture and equipment
|
| | | | 20 % | | |
Shop equipment
|
| | | | 20 % | | |
Computer equipment
|
| | | | 33 % | | |
Computer software
|
| | | | 50 % | | |
Vehicles
|
| | | | 33 % | | |
Leasehold improvement
|
| |
over term of lease
|
| |||
Tooling
|
| | | | 20 % | | |
Production molds
|
| |
per unit produced
|
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Cash
|
| | | $ | 3,966,327 | | | | | $ | 6,715,996 | | |
Cash equivalent
|
| | | | 1,895,000 | | | | | | 1,895,000 | | |
| | | | $ | 5,861,327 | | | | | $ | 8,610,996 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Trade receivable
|
| | | $ | 144,093 | | | | | $ | 154,698 | | |
GST receivable
|
| | | | 182,989 | | | | | | 84,566 | | |
IRAP contribution receivable
|
| | | | 5,565 | | | | | | — | | |
GIC interest receivable
|
| | | | 7,524 | | | | | | 4,375 | | |
| | | | $ | 340,171 | | | | | $ | 243,639 | | |
|
| | |
Furniture
and equipment |
| |
Computer
hardware and software |
| |
Vehicles
|
| |
Leasehold
Improvements |
| |
Production
molds deposit |
| |
Total
|
| ||||||||||||||||||
Cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2016
|
| | | $ | 44,209 | | | | | $ | 18,897 | | | | | $ | 173,213 | | | | | $ | 12,146 | | | | | $ | — | | | | | $ | 248,465 | | |
Additions
|
| | | | 246,634 | | | | | | 54,757 | | | | | | 216,837 | | | | | | 89,055 | | | | | | 914,060 | | | | | | 1,521,343 | | |
December 31, 2017
|
| | | | 290,843 | | | | | | 73,654 | | | | | | 390,050 | | | | | | 101,201 | | | | | | 914,060 | | | | | | 1,769,808 | | |
Additions
|
| | | | 51,263 | | | | | | 10,150 | | | | | | (2,000 ) | | | | | | — | | | | | | 1,116,490 | | | | | | 1,175,903 | | |
March 31, 2018
|
| | | | 342,106 | | | | | | 83,804 | | | | | | 388,050 | | | | | | 101,201 | | | | | | 2,030,550 | | | | | | 2,945,711 | | |
Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2016
|
| | | | 7,112 | | | | | | 2,514 | | | | | | 11,666 | | | | | | 1,904 | | | | | | — | | | | | | 23,196 | | |
Charge for the year
|
| | | | 181,495 | | | | | | 24,633 | | | | | | 74,098 | | | | | | 72,703 | | | | | | — | | | | | | 352,929 | | |
At December 31, 2017
|
| | | | 188,607 | | | | | | 27,147 | | | | | | 85,764 | | | | | | 74,607 | | | | | | — | | | | | | 376,125 | | |
Charge for the period
|
| | | | 8,108 | | | | | | 7,661 | | | | | | 32,373 | | | | | | 2,887 | | | | | | — | | | | | | 51,029 | | |
At March 31, 2018
|
| | | | 196,715 | | | | | | 34,808 | | | | | | 118,137 | | | | | | 77,494 | | | | | | — | | | | | | 427,154 | | |
Net book value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At December 31, 2017
|
| | | $ | 102,237 | | | | | $ | 46,507 | | | | | $ | 304,286 | | | | | $ | 26,594 | | | | | $ | 914,060 | | | | | $ | 1,393,683 | | |
At March 31, 2018
|
| | | $ | 145,391 | | | | | $ | 48,996 | | | | | $ | 269,913 | | | | | $ | 23,707 | | | | | $ | 2,030,550 | | | | | $ | 2,518,557 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Domain name
|
| | | $ | 2,170 | | | | | $ | 2,170 | | |
Identifiable intangibles on acquisition of Intermeccanica
|
| | | | 558,000 | | | | | | 558,000 | | |
Goodwill and other intangibles on acquisition of Intermeccanica
|
| | | | 699,844 | | | | | | 699,844 | | |
| | | | $ | 1,260,014 | | | | | $ | 1,260,014 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Trade payables
|
| | | $ | 671,925 | | | | | $ | 457,520 | | |
Wages payables
|
| | | | 23,663 | | | | | | 62,110 | | |
Due to related parties (Note 17)
|
| | | | 60,855 | | | | | | 16,814 | | |
Accrued liabilities
|
| | | | 819,893 | | | | | | 587,346 | | |
| | | | $ | 1,576,336 | | | | | $ | 1,123,790 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Payable not later than one year
|
| | | $ | 232,130 | | | | | $ | 310,034 | | |
Payable later than one year and not later than five years
|
| | | | 303,569 | | | | | | 507,036 | | |
Payable later than five years
|
| | | | — | | | | | | — | | |
| | | | $ | 535,699 | | | | | $ | 817,070 | | |
|
| | |
March 31
2018 |
| |||
Balance, beginning
|
| | | $ | 3,655,690 | | |
Warrants issued
|
| | | | 676,967 | | |
Changes in fair value of derivative liabilities
|
| | | | (1,166,027 ) | | |
Balance, ending
|
| | | $ | 3,166,630 | | |
|
| | |
At Issue
|
| |
March 31
2018 |
| ||||||
Fair value of related warrants outstanding
|
| | | $ | 676,967 | | | | | $ | 3,166,630 | | |
Risk-free interest rate
|
| | | | 1.96 % | | | | | | 1.94 % | | |
Expected term (in years)
|
| | | | 3 | | | | | | 2.30 | | |
Expected share price volatility
|
| | | | 60 % | | | | | | 60 % | | |
|
| | |
March 31, 2018
|
| ||||||
| | |
Number of
options |
| |
Weighted average
exercise price |
| |||
Options outstanding, beginning
|
| | | | 28,598,750 | | | |
$0.40
|
|
Options granted
|
| | | | 352,500 | | | |
USD 9.60
|
|
Options exercised
|
| | | | (6,198 ) | | | |
2.00
|
|
Options expired and forfeited
|
| | | | (21,302 ) | | | |
4.32
|
|
Options outstanding, ending
|
| | | | 28,923,750 | | | |
$0.54
|
|
|
Exercise price
|
| |
Weighted average
contractual life |
| |
Number of
options outstanding |
| |
Number of options
exercisable |
| ||||||
$0.30
|
| |
4.20 years
|
| | | | 22,500,000 | | | | | | 15,937,500 | | |
$0.30
|
| |
4.37 years
|
| | | | 1,331,250 | | | | | | 887,500 | | |
$0.80
|
| |
4.70 years
|
| | | | 4,200,000 | | | | | | 2,450,000 | | |
$0.80
|
| |
4.94 years
|
| | | | 12,500 | | | | | | 6,510 | | |
$2.00
|
| |
5.23 years
|
| | | | 12,500 | | | | | | 5,729 | | |
$2.00
|
| |
5.89 years
|
| | | | 470,000 | | | | | | 157,500 | | |
$2.00
|
| |
6.36 years
|
| | | | 50,000 | | | | | | — | | |
USD $9.60
|
| |
6.77 years
|
| | | | 347,500 | | | | | | 31,250 | | |
| | |
4.36 years
|
| | | | 28,923,750 | | | | | | 19,475,989 | | |
|
| | |
Period ended
March 31, 2018 |
| |||
Expected life of options
|
| |
5 years
|
| |||
Annualized volatility
|
| | | | 60 % | | |
Risk-free interest rate
|
| | | | 1.91 % | | |
Dividend rate
|
| | | | 0 % | | |
| | |
March 31, 2018
|
| |||||||||
| | |
Number of
warrants |
| |
Weighted average
exercise price |
| ||||||
Warrants outstanding, beginning
|
| | | | 11,856,858 | | | | | $ | 4.70 | | |
Warrants issued
|
| | | | 200,000 | | | | | | 20.92 | | |
Warrants outstanding, ending
|
| | | | 12,056,858 | | | | | $ | 5.00 | | |
|
Exercise price
|
| |
Weighted average
contractual life |
| |
Number of warrants
outstanding |
| |||
$0.80 CAD – $4.00 CAD
|
| |
3.42 years
|
| | | | 10,856,561 | | |
$2.00 USD – $24.00 USD
|
| |
2.85 years
|
| | | | 1,200,298 | | |
|
| | |
3 months ended
|
| |||||||||
| | |
March 31,
2018 |
| |
March 31,
2017 |
| ||||||
Rent
|
| | | $ | 87,122 | | | | | $ | 58,285 | | |
Office expenses
|
| | | | 236,949 | | | | | | 32,050 | | |
Legal and professional
|
| | | | 264,969 | | | | | | 176,852 | | |
Consulting fees
|
| | | | 143,265 | | | | | | 93,344 | | |
Investor relations
|
| | | | 90,058 | | | | | | 22,223 | | |
Salaries
|
| | | | 152,854 | | | | | | 100,055 | | |
| | | | $ | 975,217 | | | | | $ | 482,809 | | |
|
| | |
3 months ended
|
| |||||||||
| | |
March 31,
2018 |
| |
March 31,
2017 |
| ||||||
Labour
|
| | | $ | 685,568 | | | | | $ | 449,423 | | |
Materials
|
| | | | 880,174 | | | | | | 937,840 | | |
Government grants
|
| | | | (5,565 ) | | | | | | (103,534 ) | | |
| | | | $ | 1,560,177 | | | | | $ | 1,283,729 | | |
|
| | |
3 months ended March 31, 2018
|
| |
3 months ended March 31, 2017
|
| ||||||||||||||||||
| | |
Electric
Vehicles |
| |
Custom Built
Vehicles |
| |
Electric
Vehicles |
| |
Custom Built
Vehicles |
| ||||||||||||
Revenue
|
| | | $ | — | | | | | $ | 166,133 | | | | | $ | — | | | | | $ | — | | |
Gross profit
|
| | | | — | | | | | | 63,465 | | | | | | — | | | | | | — | | |
Operating expenses
|
| | | | 3,584,411 | | | | | | 71,876 | | | | | | 2,163,370 | | | | | | — | | |
Other items
|
| | | | (1,196,739 ) | | | | | | 7,891 | | | | | | 26,199 | | | | | | — | | |
Net and comprehensive loss
|
| | | | 2,387,672 | | | | | | 16,302 | | | | | | 2,189,569 | | | | | | — | | |
|
| | |
March 31, 2018
|
| |
December 31, 2017
|
| ||||||||||||||||||
| | |
Electric
Vehicles |
| |
Custom Built
Vehicles |
| |
Electric
Vehicles |
| |
Custom Built
Vehicles |
| ||||||||||||
Inventory
|
| | | $ | — | | | | | $ | 258,093 | | | | | $ | — | | | | | $ | 232,903 | | |
Plant and equipment
|
| | | | 2,496,859 | | | | | | 21,698 | | | | | | 1,370,350 | | | | | | 23,333 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Shareholder loan
|
| | | $ | 9,344 | | | | | $ | 10,383 | | |
Due to related parties (Note 8)
|
| | | | 60,855 | | | | | | 16,814 | | |
| | | | $ | 70,199 | | | | | $ | 27,197 | | |
|
| | |
3 months ended
|
| |||||||||
| | |
March 31,
2018 |
| |
March 31,
2017 |
| ||||||
Consulting fees
|
| | | $ | 60,000 | | | | | $ | 45,000 | | |
Salary
|
| | | | 88,000 | | | | | | 51,000 | | |
Deferred salary for CEO
|
| | | | — | | | | | | 15,000 | | |
Stock-based compensation
|
| | | | 121,562 | | | | | | 202,637 | | |
| | | | $ | 269,562 | | | | | $ | 313,637 | | |
|
At March 31, 2018
|
| |
Within one year
|
| |
Between one
and five years |
| |
More than
five years |
| |||||||||
Trade payables
|
| | | $ | 732,780 | | | | | $ | — | | | | | $ | — | | |
Customer deposits
|
| | | | 407,844 | | | | | | — | | | | | | — | | |
Shareholder loan
|
| | | | 9,344 | | | | | | — | | | | | | — | | |
Promissory note
|
| | | | — | | | | | | — | | | | | | — | | |
| | | | $ | 1,149,968 | | | | | $ | — | | | | | $ | — | | |
|
At December 31, 2017
|
| |
Within one year
|
| |
Between one
and five years |
| |
More than
five years |
| |||||||||
Bank loan
|
| | | $ | 123,637 | | | | | $ | — | | | | | $ | — | | |
Trade payables
|
| | | | 474,334 | | | | | | — | | | | | | — | | |
Customer deposits
|
| | | | 447,071 | | | | | | — | | | | | | — | | |
Shareholder loan
|
| | | | 10,383 | | | | | | — | | | | | | — | | |
Promissory note
|
| | | | 1,500,000 | | | | | | — | | | | | | — | | |
| | | | $ | 2,555,425 | | | | | $ | — | | | | | $ | — | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Cash and cash equivalents
|
| | | $ | 3,569,225 | | | | | $ | 5,596,635 | | |
Trade receivables
|
| | | | 3,607 | | | | | | — | | |
Trade payables
|
| | | | (326,470 ) | | | | | | (138,794 ) | | |
| | | | $ | 3,246,362 | | | | | $ | 5,457,841 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Loans and receivables:
|
| | | ||||||||||
Cash and cash equivalents
|
| | | $ | 5,861,327 | | | | | $ | 8,610,996 | | |
Receivables
|
| | | | 340,170 | | | | | | 243,639 | | |
| | | | $ | 6,201,497 | | | | | $ | 8,854,635 | | |
|
| | |
March 31,
2018 |
| |
December 31,
2017 |
| ||||||
Non-derivative financial liabilities: | | | | ||||||||||
Bank loan
|
| | | $ | — | | | | | $ | 123,637 | | |
Trade payable
|
| | | | 732,780 | | | | | | 474,334 | | |
Customer deposits
|
| | | | 407,844 | | | | | | 447,071 | | |
Shareholder loan
|
| | | | 9,344 | | | | | | 10,383 | | |
Promissory note
|
| | | | — | | | | | | 1,500,000 | | |
Derivative financial liabilities: | | | | | | | | | | | | | |
Warrant derivative liability
|
| | | | 3,166,630 | | | | | | 3,655,686 | | |
| | | | $ | 4,316,598 | | | | | $ | 6,2711,111 | | |
|
| | |
Note
|
| |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash
|
| | | | | | $ | 72,846 | | | | | $ | 19,986 | | |
Receivables
|
| | | | | | | 210,677 | | | | | | 115,133 | | |
Inventory
|
| |
4
|
| | | | 193,836 | | | | | | 155,424 | | |
Taxes recoverable
|
| |
5
|
| | | | 8,216 | | | | | | 8,216 | | |
Prepaid expenses and deposits
|
| | | | | | | 16,952 | | | | | | 16,606 | | |
| | | | | | | | 502,527 | | | | | | 315,365 | | |
Non-current assets | | | | | | | | | | | | | | | | |
Plant and equipment
|
| |
6
|
| | | | 38,394 | | | | | | 51,853 | | |
TOTAL ASSETS
|
| | | | | | $ | 540,921 | | | | | $ | 367,218 | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Bank indebtedness
|
| |
7
|
| | | $ | — | | | | | $ | 159,637 | | |
Trade payables and accrued liabilities
|
| |
8
|
| | | | 80,103 | | | | | | 84,241 | | |
Customer deposits
|
| | | | | | | 189,853 | | | | | | 122,584 | | |
Income taxes payable
|
| | | | | | | 17,251 | | | | | | — | | |
Shareholder loans
|
| |
14
|
| | | | 167,512 | | | | | | 83,324 | | |
Current portion of long-term debt
|
| |
9
|
| | | | 4,153 | | | | | | 4,153 | | |
| | | | | | | | 458,872 | | | | | | 453,939 | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Long-term debt
|
| |
9
|
| | | | 9,344 | | | | | | 13,498 | | |
TOTAL LIABILITIES
|
| | | | | | | 468,216 | | | | | | 467,437 | | |
EQUITY | | | | | | | | | | | | | | | | |
Share capital
|
| |
13
|
| | | | 100 | | | | | | 100 | | |
Retained earnings (deficit)
|
| | | | | | | 72,605 | | | | | | (100,319 ) | | |
TOTAL EQUITY (DEFICIT)
|
| | | | | | | 72,705 | | | | | | (100,219 ) | | |
TOTAL LIABILITIES AND EQUITY
|
| | | | | | $ | 540,921 | | | | | $ | 367,218 | | |
|
| “Jerry Kroll”________ | | | “Henry Reisner”______ | |
| Director | | | Director | |
| | | | | |
Year ended
|
| |||||||||
| | |
Note
|
| |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Revenue
|
| |
11, 14
|
| | | $ | 1,262,657 | | | | | $ | 1,001,549 | | |
Cost of sales
|
| | | | | | | 700,000 | | | | | | 681,399 | | |
Gross profit
|
| | | | | | | 562,657 | | | | | | 320,150 | | |
Operating expenses | | | | | | | | | | | | | | | | |
Advertising and promotion
|
| | | | | | | 20,038 | | | | | | 24,747 | | |
Amortization of equipment
|
| |
6
|
| | | | 13,459 | | | | | | 10,925 | | |
Bad debts
|
| | | | | | | 1,511 | | | | | | 1,262 | | |
Bank charges & interest
|
| | | | | | | 9,998 | | | | | | 12,526 | | |
Computer expenses
|
| | | | | | | 1,044 | | | | | | 1,363 | | |
Insurance
|
| | | | | | | 15,394 | | | | | | 13,522 | | |
Office expenses
|
| | | | | | | 5,655 | | | | | | 4,156 | | |
Professional fees
|
| | | | | | | 8,059 | | | | | | 8,799 | | |
Rent, property taxes and licenses
|
| | | | | | | 77,727 | | | | | | 76,384 | | |
Research and development expenses
|
| | | | | | | — | | | | | | 38,585 | | |
Salaries and benefits
|
| | | | | | | 145,976 | | | | | | 127,687 | | |
Shop supplies
|
| | | | | | | 27,752 | | | | | | 21,678 | | |
Telephone and utilities
|
| | | | | | | 24,015 | | | | | | 23,252 | | |
Travel
|
| | | | | | | 21,855 | | | | | | 11,924 | | |
| | | | | | | | 372,482 | | | | | | 376,810 | | |
Income (loss) before tax
|
| | | | | | | 190,175 | | | | | | (56,660 ) | | |
Provision (recovery) for income tax
|
| |
12
|
| | | | 17,251 | | | | | | (1,500 ) | | |
Net and comprehensive income (loss)
|
| | | | | | $ | 172,924 | | | | | $ | (55,160 ) | | |
Income (loss) per share
|
| | | | | | $ | 190 | | | | | $ | (61 ) | | |
|
| | | | | |
Common shares
|
| |
Preferred shares
|
| |
Retained
Earnings (Deficit) |
| |
Total
|
| ||||||||||||||||||||||||
| | |
Note
|
| |
Number
|
| |
Amount
|
| |
Number
|
| |
Amount
|
| ||||||||||||||||||||||||
Balance at March 31, 2015
|
| |
13
|
| | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | (45,159 ) | | | | | $ | (45,059 ) | | |
Comprehensive loss for the year
|
| | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (55,160 ) | | | | | | (56,160 ) | | |
Balance at March 31, 2016
|
| |
13
|
| | | | 910 | | | | | | 9 | | | | | | 9,100 | | | | | | 91 | | | | | | (100,319 ) | | | | | | (100,219 ) | | |
Comprehensive income for the year
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 172,924 | | | | | | 172,923 | | |
Balance at March 31, 2017
|
| |
13
|
| | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | 72,605 | | | | | $ | 72,705 | | |
|
| | |
Year ended
|
| ||||||
| | |
March 31,
2017 |
| |
March 31,
2016 |
| |||
Operating activities | | | | | | | | | | |
Income (loss) for the year
|
| |
$172,924
|
| | | $ | (55,160 ) | | |
Adjustments for: | | | | | | | | | | |
Amortization
|
| |
13,459
|
| | | | 10,925 | | |
Changes in non-cash working capital items: | | | | | | | | | | |
Receivables
|
| |
(95,544)
|
| | | | (30,328 ) | | |
Inventory
|
| |
(38,412
|
| | | | 244,199 | | |
Prepaid expenses and deposits
|
| |
(346)
|
| | | | 5,459 | | |
Trades payable and accrued liabilities
|
| |
(4,138)
|
| | | | (64,348 ) | | |
Customer deposits
|
| |
67,269
|
| | | | (89,738 ) | | |
Income taxes payable
|
| |
17,251
|
| | | | — | | |
Net cash flows from operating activities
|
| |
132,463
|
| | | | 21,009 | | |
Investing activities | | | | | | | | | | |
Expenditures on plant and equipment
|
| |
—
|
| | | | (24,280 ) | | |
Net cash flows used in investing activities
|
| |
—
|
| | | | (24,280 ) | | |
Financing activities | | | | | | | | | | |
Payment of bank indebtedness
|
| |
(159,637)
|
| | | | (13,963 ) | | |
Proceeds from (repayment of) loan
|
| |
(4,154)
|
| | | | 17,651 | | |
Proceeds from (repayment of) shareholder loans
|
| |
84,188
|
| | | | (10,925 ) | | |
Net cash flows used in financing activities
|
| |
(79,603)
|
| | | | (7,237 ) | | |
Increase (decrease) in cash
|
| |
52,860
|
| | | | (10,508 ) | | |
Cash, beginning
|
| |
19,986
|
| | | | 30,494 | | |
Cash, ending
|
| |
$72,846
|
| | | $ | 19,986 | | |
|
Class of plant and equipment
|
| |
Amortization
rate |
| |||
Computers
|
| | | | 55 % | | |
Vehicles
|
| | | | 30 % | | |
Office equipment
|
| | | | 20 % | | |
Shop equipment
|
| | | | 20 % | | |
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Parts
|
| | | | 193,836 | | | | | | 155,424 | | |
| | | | $ | 193,836 | | | | | $ | 155,424 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Investment tax credit receivable
|
| | | $ | 6,716 | | | | | $ | 6,716 | | |
Tax receivable
|
| | | | 1,500 | | | | | | 1,500 | | |
| | | | $ | 8,216 | | | | | $ | 8,216 | | |
|
| | |
Equipment
|
| |
Computers
|
| |
Tooling
|
| |
Vehicles
|
| |
Leasehold
Improvement |
| |
Total
|
| ||||||||||||||||||
Cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2015
|
| | | $ | 104,571 | | | | | $ | 4,766 | | | | | $ | 67,806 | | | | | $ | 51,075 | | | | | $ | 62,701 | | | | | $ | 290,919 | | |
Additions
|
| | | | — | | | | | | — | | | | | | 3,515 | | | | | | 20,765 | | | | | | — | | | | | | 24,280 | | |
At March 31, 2016
|
| | | | 104,571 | | | | | | 4,766 | | | | | | 71,321 | | | | | | 71,840 | | | | | | 62,701 | | | | | | 315,199 | | |
Additions
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
At March 31, 2017
|
| | | | 104,571 | | | | | | 4,766 | | | | | | 71,321 | | | | | | 71,840 | | | | | | 62,701 | | | | | | 315,199 | | |
Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2015
|
| | | | 91,136 | | | | | | 3,097 | | | | | | 59,576 | | | | | | 35,911 | | | | | | 62,701 | | | | | | 252,421 | | |
Charge for the year
|
| | | | 1,344 | | | | | | 918 | | | | | | 999 | | | | | | 7,664 | | | | | | — | | | | | | 10,925 | | |
At March 31, 2016
|
| | | | 92,480 | | | | | | 4,015 | | | | | | 60,575 | | | | | | 43,575 | | | | | | 62,701 | | | | | | 263,346 | | |
Charge for the year
|
| | | | 2,149 | | | | | | 413 | | | | | | 1,950 | | | | | | 8,947 | | | | | | — | | | | | | 13,459 | | |
At March 31, 2017
|
| | | | 94,629 | | | | | | 4,428 | | | | | | 62,525 | | | | | | 52,522 | | | | | | 62,701 | | | | | | 276,805 | | |
Net book value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2016
|
| | | $ | 12,091 | | | | | $ | 751 | | | | | $ | 10,747 | | | | | $ | 28,265 | | | | | $ | — | | | | | $ | 51,853 | | |
At March 31, 2017
|
| | | $ | 9,942 | | | | | $ | 338 | | | | | $ | 8,796 | | | | | $ | 19,318 | | | | | $ | — | | | | | $ | 38,394 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Line of credit
|
| | | $ | — | | | | | $ | 159,637 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
|||||
Trade payables
|
| | | $ | 23,717 | | | | | $ | 34,154 |
Wages and salaries payable
|
| | | | 35,387 | | | | | | 25,978 |
Sales taxes payable
|
| | | | 8,466 | | | | | | 4,909 |
Accrued liabilities
|
| | | | 12,533 | | | | | | 19,200 |
| | | | $ | 80,103 | | | | | $ | 84,241 |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
|||||
Loan
|
| | | $ | 13,497 | | | | | $ | 18,101 |
Current portion of loan
|
| | | | (4,153 ) | | | | | | (4,153 ) |
| | | | $ | 9,344 | | | | | $ | 13,948 |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Payable not later than one year
|
| | | $ | 294,548 | | | | | $ | 220,696 | | |
Payable later than one year and not later than five years
|
| | | | 601,293 | | | | | | 595,194 | | |
Payable later than five years
|
| | | | 126,340 | | | | | | 426,986 | | |
| | | | $ | 1,022,181 | | | | | $ | 1,242,876 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Aggregate amount of costs incurred
|
| | | $ | 160,183 | | | | | $ | 140,315 | | |
Aggregate amount of profits recognized
|
| | | | 68,650 | | | | | | 60,135 | | |
Amounts billed in excess of work performed
|
| | | | 192,958 | | | | | | 213,557 | | |
Revenue recognized in excess of amounts billed
|
| | | | 228,834 | | | | | | 200,449 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Net income (loss) before taxes
|
| | | $ | 190,175 | | | | | $ | (56,660 ) | | |
Statutory tax rate
|
| | | | 13 % | | | | | | 13 % | | |
Expected income tax liability (recovery) at the statutory tax rate
|
| | | | 24,723 | | | | | | (7,366 ) | | |
Non-deductible items and other
|
| | | | 4,642 | | | | | | 2,317 | | |
Temporary differences not recognized
|
| | | | (12,114 ) | | | | | | 3,549 | | |
Income tax expense
|
| | | $ | 17,251 | | | | | $ | (1,500 ) | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
|||||
Non-capital loss carry-forwards
|
| | | $ | — | | | | | $ | 10,696 |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
|||||
Shareholder loans
|
| | | $ | 167,512 | | | | | $ | 83,824 |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Cash
|
| | | $ | 34,578 | | | | | $ | 2,213 | | |
Trade receivables
|
| | | | 1,856 | | | | | | 46,000 | | |
Trade payables
|
| | | | (10,803 ) | | | | | | (14,320 ) | | |
| | | | $ | 25,631 | | | | | $ | 33,893 | | |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
|||||
Loans and receivables: | | | | | | | | | | | |
Cash
|
| | | $ | 72,846 | | | | | $ | 19,986 |
Trade receivables
|
| | | | 210,677 | | | | | | 61,568 |
Taxes recoverable
|
| | | | 8,216 | | | | | | 8,216 |
| | | | $ | 291,739 | | | | | $ | 89,770 |
|
| | |
March 31,
2017 |
| |
March 31,
2016 |
| ||||||
Non-derivative financial liabilities: | | | | | | | | | | | | | |
Bank indebtedness
|
| | | $ | — | | | | | $ | 159,637 | | |
Trade payable and accrued liabilities
|
| | | | 80,103 | | | | | | 84,241 | | |
Customer deposits
|
| | | | 189,853 | | | | | | 122,584 | | |
Long-term debt
|
| | | | 13,497 | | | | | | 17,651 | | |
Shareholder loans
|
| | | | 167,512 | | | | | | 83,324 | | |
| | | | $ | 450,965 | | | | | $ | 467,437 | | |
|
| | |
Note
|
| |
September 30,
2017 (unaudited) |
| |
March 31,
2017 |
| ||||||
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash
|
| | | | | | $ | 152,104 | | | | | $ | 72,846 | | |
Receivables
|
| | | | | | | 110,593 | | | | | | 210,677 | | |
Inventory
|
| |
4
|
| | | | 190,981 | | | | | | 193,836 | | |
Taxes recoverable
|
| |
5
|
| | | | — | | | | | | 8,216 | | |
Prepaid expenses and deposits
|
| | | | | | | 12,848 | | | | | | 16,952 | | |
| | | | | | | | 466,526 | | | | | | 502,527 | | |
Non-current assets | | | | | | | | | | | | | | | | |
Plant and equipment
|
| |
6
|
| | | | 41,046 | | | | | | 38,394 | | |
TOTAL ASSETS
|
| | | | | | $ | 507,572 | | | | | $ | 540,921 | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Bank indebtedness
|
| |
7
|
| | | $ | — | | | | | $ | — | | |
Trade payables and accrued liabilities
|
| |
8
|
| | | | 60,149 | | | | | | 80,103 | | |
Customer deposits
|
| | | | | | | 210,520 | | | | | | 189,853 | | |
Income taxes payable
|
| | | | | | | 17,251 | | | | | | 17,251 | | |
Shareholder loans
|
| |
13
|
| | | | 150,280 | | | | | | 167,512 | | |
Current portion of long-term debt
|
| |
9
|
| | | | 4,153 | | | | | | 4,153 | | |
| | | | | | | | 442,353 | | | | | | 458,872 | | |
Non-Current liabilities | | | | | | | | | | | | | | | | |
Long-term debt
|
| |
9
|
| | | | 7,268 | | | | | | 9,344 | | |
TOTAL LIABILITIES
|
| | | | | | | 449,621 | | | | | | 468,216 | | |
EQUITY | | | | | | | | | | | | | | | | |
Share capital
|
| |
12
|
| | | | 100 | | | | | | 100 | | |
Retained earnings
|
| | | | | | | 57,851 | | | | | | 72,605 | | |
TOTAL EQUITY
|
| | | | | | | 57,951 | | | | | | 72,705 | | |
TOTAL LIABILITIES AND EQUITY
|
| | | | | | $ | 507,572 | | | | | $ | 540,921 | | |
|
| | | | | |
Three months ended
|
| |
Six months ended
|
| ||||||||||||||||||
| | |
Note
|
| |
September 30,
2017 |
| |
September 30,
2016 |
| |
September 30,
2017 |
| |
September 30,
2016 |
| ||||||||||||
Revenue
|
| |
11, 13
|
| | | $ | 249,784 | | | | | $ | 265,690 | | | | | $ | 529,736 | | | | | $ | 582,279 | | |
Cost of sales
|
| | | | | | | 190,883 | | | | | | 180,578 | | | | | | 381,071 | | | | | | 377,025 | | |
Gross profit
|
| | | | | | | 58,901 | | | | | | 85,112 | | | | | | 148,665 | | | | | | 205,254 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advertising and promotion
|
| | | | | | | 519 | | | | | | 11,926 | | | | | | 1,060 | | | | | | 12,205 | | |
Amortization of equipment
|
| | | | | | | 4,481 | | | | | | 3,365 | | | | | | 7,067 | | | | | | 6,729 | | |
Bank charges & interest
|
| | | | | | | 884 | | | | | | 2,930 | | | | | | 1,784 | | | | | | 5,614 | | |
Computer expenses
|
| | | | | | | 32 | | | | | | 32 | | | | | | 65 | | | | | | 65 | | |
Insurance
|
| | | | | | | 4,010 | | | | | | 3,862 | | | | | | 8,055 | | | | | | 7,602 | | |
Office expenses
|
| | | | | | | 1,787 | | | | | | 1,054 | | | | | | 3,118 | | | | | | 2,014 | | |
Professional fees
|
| | | | | | | 3,538 | | | | | | 5,024 | | | | | | 5,727 | | | | | | 8,160 | | |
Rent, property taxes and licenses
|
| | | | | | | 18,399 | | | | | | 17,926 | | | | | | 36,500 | | | | | | 35,284 | | |
Research and development
|
| | | | | | | — | | | | | | — | | | | | | 1,500 | | | | | | — | | |
Salaries and benefits
|
| | | | | | | 28,905 | | | | | | 28,130 | | | | | | 55,099 | | | | | | 55,260 | | |
Shop supplies
|
| | | | | | | 8,374 | | | | | | 6,622 | | | | | | 20,695 | | | | | | 13,699 | | |
Telephone and utilities
|
| | | | | | | 5,487 | | | | | | 4,946 | | | | | | 12,966 | | | | | | 10,863 | | |
Travel
|
| | | | | | | 6,289 | | | | | | 5,430 | | | | | | 9,783 | | | | | | 8,747 | | |
| | | | | | | | 82,705 | | | | | | 91,247 | | | | | | 163,419 | | | | | | 166,244 | | |
Net and comprehensive income (loss)
|
| | | | | | $ | (23,804 ) | | | | | $ | (6,135 ) | | | | | $ | (14,754 ) | | | | | $ | 39,012 | | |
Income (loss) per share
|
| | | | | | $ | (26 ) | | | | | $ | (7 ) | | | | | $ | (16 ) | | | | | $ | 43 | | |
|
| | | | | | | | |
Common shares
|
| |
Preferred shares
|
| |
Retained
Earnings (Deficit) |
| |
Total
|
| ||||||||||||||||||||||||
| | |
Note
|
| |
Number
|
| |
Amount
|
| |
Number
|
| |
Amount
|
| |||||||||||||||||||||||||||
Balance at March 31, 2016
|
| | | | 12 | | | | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | (100,319 ) | | | | | $ | (100,219 ) | | |
Comprehensive income for the period
|
| | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (14,754 ) | | | | | | (14,754 ) | | |
Balance at September 30, 2016
|
| | | | 12 | | | | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | (115,073 ) | | | | | $ | (114,973 ) | | |
Balance at March 31, 2017
|
| | | | | | | | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | 72,605 | | | | | $ | 72,705 | | |
Comprehensive loss for the period
|
| | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (14,754 ) | | | | | | (14,754 ) | | |
Balance at September 30, 2017
|
| | | | 12 | | | | | | 910 | | | | | $ | 9 | | | | | | 9,100 | | | | | $ | 91 | | | | | $ | 57,851 | | | | | $ | 57,951 | | |
|
| | |
Three months ended
|
| |
Six months ended
|
| ||||||||||||||||||
| | |
September 30,
2017 |
| |
September 30,
2016 |
| |
September 30,
2017 |
| |
September 30,
2016 |
| ||||||||||||
Operating activities | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) for the period
|
| | | $ | (23,804 ) | | | | | $ | (6,135 ) | | | | | $ | (14,754 ) | | | | | $ | 39,012 | | |
Adjustments for: | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization
|
| | | | 4,481 | | | | | | 3,365 | | | | | | 7,067 | | | | | | 6,729 | | |
Changes in non-cash working capital items: | | | | | | | | | | | | | | | | | | | | | | | | | |
Receivables
|
| | | | (48,348 ) | | | | | | (8,168 ) | | | | | | 100,084 | | | | | | 64,161 | | |
Inventory
|
| | | | 244,721 | | | | | | 10,314 | | | | | | 2,855 | | | | | | (186,165 ) | | |
Taxes recoverable
|
| | | | — | | | | | | — | | | | | | 8,216 | | | | | | 6,716 | | |
Prepaid expenses and deposits
|
| | | | 2,400 | | | | | | 2,820 | | | | | | 4,104 | | | | | | 3,815 | | |
Trades payable and accrued liabilities
|
| | | | (35,353 ) | | | | | | 15,145 | | | | | | (19,954 ) | | | | | | 22,436 | | |
Customer deposits
|
| | | | (225,455 ) | | | | | | 25,256 | | | | | | 20,667 | | | | | | 148,426 | | |
Net cash flows from (used in) operating activities
|
| | | | (81,358 ) | | | | | | 42,597 | | | | | | 108,285 | | | | | | 105,130 | | |
Investing activities | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenditures on plant and equipment
|
| | | | (4,542 ) | | | | | | (500 ) | | | | | | (9,719 ) | | | | | | (24,452 ) | | |
Net cash flows used in investing activities
|
| | | | (4,542 ) | | | | | | (500 ) | | | | | | (9,719 ) | | | | | | (24,452 ) | | |
Financing activities | | | | | | | | | | | | | | | | | | | | | | | | | |
Payment of bank indebtedness
|
| | | | — | | | | | | (22,108 ) | | | | | | | | | | | | (5,072 ) | | |
Payment of loan
|
| | | | (1,038 ) | | | | | | (1,038 ) | | | | | | (2,076 ) | | | | | | (2,077 ) | | |
Payment of shareholder loans
|
| | | | (8,668 ) | | | | | | (5,557 ) | | | | | | (17,232 ) | | | | | | (13,127 ) | | |
Net cash flows used in financing activities
|
| | | | (9,706 ) | | | | | | (28,703 ) | | | | | | (19,308 ) | | | | | | (20,276 ) | | |
Increase (decrease) in cash
|
| | | | (95,606 ) | | | | | | 13,394 | | | | | | 79,258 | | | | | | 60,402 | | |
Cash, beginning
|
| | | | 247,710 | | | | | | 66,994 | | | | | | 72,846 | | | | | | 19,986 | | |
Cash, ending
|
| | | $ | 152,104 | | | | | $ | 80,388 | | | | | $ | 152,104 | | | | | $ | 80,388 | | |
|
Class of plant and equipment
|
| |
Amortization
rate |
| |||
Computers
|
| | | | 55 % | | |
Vehicles
|
| | | | 30 % | | |
Office equipment
|
| | | | 20 % | | |
Shop equipment
|
| | | | 20 % | | |
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Parts
|
| | | $ | 190,981 | | | | | $ | 193,836 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Investment tax credit receivable
|
| | | $ | — | | | | | $ | 6,716 | | |
Tax receivable
|
| | | | — | | | | | | 1,500 | | |
| | | | $ | — | | | | | $ | 8,216 | | |
|
| | |
Equipment
|
| |
Computers
|
| |
Tooling
|
| |
Vehicles
|
| |
Leasehold
Improvement |
| |
Total
|
| ||||||||||||||||||
Cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2016
|
| | | $ | 104,571 | | | | | $ | 4,766 | | | | | $ | 71,321 | | | | | $ | 71,840 | | | | | $ | 62,701 | | | | | $ | 315,199 | | |
Additions
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
At March 31, 2017
|
| | | | 104,571 | | | | | | 4,766 | | | | | | 71,321 | | | | | | 71,840 | | | | | | 62,701 | | | | | | 315,199 | | |
Additions
|
| | | | — | | | | | | 760 | | | | | | — | | | | | | — | | | | | | 8,959 | | | | | | 9,719 | | |
At Sept 30, 2017
|
| | | | 104,571 | | | | | | 5,526 | | | | | | 71,321 | | | | | | 71,840 | | | | | | 71,660 | | | | | | 324,918 | | |
Amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2016
|
| | | | 92,480 | | | | | | 4,015 | | | | | | 60,575 | | | | | | 43,575 | | | | | | 62,701 | | | | | | 263,346 | | |
Charge for the year
|
| | | | 2,149 | | | | | | 413 | | | | | | 1,950 | | | | | | 8,947 | | | | | | — | | | | | | 13,459 | | |
At March 31, 2017
|
| | | | 94,629 | | | | | | 4,428 | | | | | | 62,525 | | | | | | 52,522 | | | | | | 62,701 | | | | | | 276,805 | | |
Charge for the period
|
| | | | 969 | | | | | | 408 | | | | | | 862 | | | | | | 2,961 | | | | | | 1,867 | | | | | | 7,067 | | |
At Sept 30, 2017
|
| | | | 95,598 | | | | | | 4,836 | | | | | | 63,387 | | | | | | 55,483 | | | | | | 64,568 | | | | | | 283,872 | | |
Net book value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At March 31, 2017
|
| | | $ | 9,942 | | | | | $ | 338 | | | | | $ | 8,796 | | | | | $ | 19,318 | | | | | $ | — | | | | | $ | 38,394 | | |
At Sept 30, 2017
|
| | | $ | 8,973 | | | | | $ | 690 | | | | | $ | 7,934 | | | | | $ | 16,357 | | | | | $ | 7,092 | | | | | $ | 41,046 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
|||||
Trade payables
|
| | | $ | 8,506 | | | | | $ | 23,717 |
Wages and salaries payable
|
| | | | 32,964 | | | | | | 35,387 |
Sales taxes payable
|
| | | | 6,479 | | | | | | 8,466 |
Accrued liabilities
|
| | | | 12,200 | | | | | | 12,533 |
| | | | $ | 60,149 | | | | | $ | 80,103 |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
|||||
Loan
|
| | | $ | 11,421 | | | | | $ | 13,497 |
Current portion of loan
|
| | | | (4,153 ) | | | | | | (4,153 ) |
Long-term portion of loan
|
| | | $ | 7,268 | | | | | $ | 9,344 |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Payable not later than one year
|
| | | $ | 300,646 | | | | | $ | 294,548 | | |
Payable later than one year and not later than five years
|
| | | | 577,309 | | | | | | 601,293 | | |
Payable later than five years
|
| | | | — | | | | | | 126,340 | | |
| | | | $ | 877,955 | | | | | $ | 1,022,181 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Aggregate amount of costs incurred
|
| | | $ | 180,815 | | | | | $ | 160,183 | | |
Aggregate amount of profits recognized
|
| | | | 77,493 | | | | | | 68,650 | | |
Amounts billed in excess of work performed
|
| | | | 210,521 | | | | | | 64,883 | | |
Revenue recognized in excess of amounts billed
|
| | | | 71,482 | | | | | | 100,759 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Shareholder loans
|
| | | $ | 150,280 | | | | | $ | 167,512 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Cash
|
| | | $ | 58,567 | | | | | $ | 34,578 | | |
Trade receivables
|
| | | | 1,456 | | | | | | 1,856 | | |
Trade payables
|
| | | | (1,415 ) | | | | | | (10,803 ) | | |
| | | | $ | 58,608 | | | | | $ | 25,631 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Loans and receivables: | | | | | | | | | | | | | |
Cash
|
| | | $ | 152,104 | | | | | $ | 72,846 | | |
Trade receivables
|
| | | | 110,593 | | | | | | 210,677 | | |
Taxes recoverable
|
| | | | — | | | | | | 8,216 | | |
| | | | $ | 262,697 | | | | | $ | 291,739 | | |
|
| | |
September 30,
2017 |
| |
March 31,
2017 |
| ||||||
Non-derivative financial liabilities: | | | | | | | | | | | | | |
Bank indebtedness
|
| | | $ | — | | | | | $ | — | | |
Trade payable and accrued liabilities
|
| | | | 60,149 | | | | | | 80,103 | | |
Customer deposits
|
| | | | 210,520 | | | | | | 189,853 | | |
Long-term debt
|
| | | | 11,421 | | | | | | 13,497 | | |
Shareholder loans
|
| | | | 150,280 | | | | | | 167,512 | | |
| | | | $ | 432,370 | | | | | $ | 450,965 | | |
|
| | | | | | | | |
Year Ended December 31, 2017
|
| |||||||||||||||||||||
| | |
Note
|
| |
IMI
|
| |
EMV
|
| |
Adjustments
|
| |
Total
|
| |||||||||||||||
Revenue
|
| | | | 1 | | | | | $ | 1,179,595 | | | | | $ | — | | | | | $ | (501,461 ) | | | | | $ | 678,134 | | |
Cost of revenue
|
| | | | 2 | | | | | | 758,948 | | | | | | — | | | | | | (385,971 ) | | | | | | 372,977 | | |
Gross profit
|
| | | | | | | | | | 420,647 | | | | | | — | | | | | | (115,490 ) | | | | | | 305,157 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization
|
| | | | | | | | | | 26,142 | | | | | | 122,468 | | | | | | | | | | | | 148,610 | | |
General and administrative expenses
|
| | | | 3 | | | | | | 373,947 | | | | | | 2,314,714 | | | | | | (95,941 ) | | | | | | 2,592,720 | | |
Research and development expenses
|
| | | | 4 | | | | | | — | | | | | | 4,358,285 | | | | | | (19,521 ) | | | | | | 4,338,764 | | |
Sales and marketing expenses
|
| | | | | | | | | | 4,432 | | | | | | 630,999 | | | | | | | | | | | | 635,431 | | |
Stock-based compensation expense
|
| | | | | | | | | | — | | | | | | 889,511 | | | | | | | | | | | | 889,511 | | |
Share-based payment expense
|
| | | | | | | | | | — | | | | | | 1,085,716 | | | | | | | | | | | | 1,085,716 | | |
| | | | | | | | | | | (404,521 ) | | | | | | (9,401,693 ) | | | | | | (115,462 ) | | | | | | (9,690,752 ) | | |
Income/(Loss) before other items
|
| | | | | | | | | | 16,126 | | | | | | (9,401,693 ) | | | | | | (28 ) | | | | | | (9,385,595 ) | | |
Other items | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accretion interest expense
|
| | | | | | | | | | — | | | | | | 69,561 | | | | | | | | | | | | 69,561 | | |
Changes in fair value of warrant derivative
|
| | | | | | | | | | — | | | | | | 186,269 | | | | | | | | | | | | 186,269 | | |
Finder’s fee on convertible loan
|
| | | | | | | | | | — | | | | | | 258,542 | | | | | | | | | | | | 258,542 | | |
Impairment of goodwill
|
| | | | 5 | | | | | | — | | | | | | — | | | | | | 1,342,794 | | | | | | 1,342,794 | | |
Foreign exchange (gain)/loss
|
| | | | | | | | | | (11,806 ) | | | | | | 22,068 | | | | | | | | | | | | 10,262 | | |
Net and comprehensive loss
|
| | | | | | | | | $ | 27,932 | | | | | $ | (9,938,133 ) | | | | | $ | (1,342,766 ) | | | | | $ | (11,253,023 ) | | |
| The Benchmark Company | | | | | |
ThinkEquity
|
|
| | | | | | |
A division of Fordham Financial Management, Inc.
|
|
|
Signature
|
| |
Title
|
| |
Date
|
|
|
/s/ Jerry Kroll
Jerry Kroll
|
| |
Chief Executive Officer
(Principal Executive Officer) and Chairman |
| |
July 23, 2018
|
|
|
/s/ Kulwant Sandher
Kulwant Sandher
|
| |
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting Officer) |
| |
July 23, 2018
|
|
|
/s/ Shaun Greffard
Shaun Greffard
|
| |
Director
|
| |
July 23, 2018
|
|
|
/s/ Robert Tarzwell
Robert Tarzwell
|
| |
Director
|
| |
July 23, 2018
|
|
|
/s/ Henry Reisner
Henry Reisner
|
| |
Director
|
| |
July 23, 2018
|
|
|
/s/ Luisa Ingargiola
Luisa Ingargiola
|
| |
Director
|
| |
July 23, 2018
|
|
|
/s/ Steven Sanders
Steven Sanders
|
| |
Director
|
| |
July 23, 2018
|
|
Exhibit 1.1
UNDERWRITING AGREEMENT
, 2018
The Benchmark Company, LLC
150 East 58 th St., 17 th Floor
New York, NY 10155
As Representative of the several Underwriters named on Schedule 1 attached hereto
Ladies and Gentlemen:
The undersigned, Electrameccanica Vehicles Corp., a corporation formed under the laws of British Columbia (the “ Company ”), hereby confirms its agreement (this “ Agreement ”) with The Benchmark Company, LLC (hereinafter the “ Representative ”) and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “ Underwriters ” or, individually, an “ Underwriter ”) as follows:
1. Purchase and Sale of Securities .
(a) Firm Securities .
(i) Nature and Purchase of Firm Securities .
(A) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters an aggregate of units (each, a “Firm Unit”), each unit consisting of one common share, no par value per share (the “ Common Shares ”) and one warrant to purchase one Common Share at an exercise price of $ per share (125% of the public offering price per unit in the Offering) (each, a “ Warrant ” and collectively, the “ Warrants ”). The Common Shares referred to in this Section 1(a)(i)(A) are hereinafter referred to as the “ Firm Shares ” and the Warrants referred to in this Section 1(a)(i)(A) are hereinafter referred to as the “ Firm Warrants ,” and together with the Firm Shares, the “ Firm Securities .” No Firm Units will be issued or certificated, and the Firm Shares and the Firm Warrants will be separated immediately upon issuance.
(B) The Underwriters, severally and not jointly, agree to purchase from the Company (i) the number of Firm Units set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price equal to 93% of the per Firm Unit offering price set forth on the cover page of the Prospectus (as defined in Section 2(a)(i)(B) hereof) (the “Public Offering Price per Firm Unit”), which shall be allocated as $ per Firm Share and $ per Firm Warrant, and (ii) the number of Firm Units set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price equal to 94.5% of the Public Offering Price per Firm Unit from the sale of the Firm Units to investors introduced by the Company to the Underwriters (the “ Company Investors ”), which shall be allocated as $ per Firm Share and $ per Firm Warrant.
(ii) Firm Securities Payment and Delivery .
(A) Delivery and payment for the Firm Securities shall be made no later than 2:00 p.m., Eastern time, on the second (2 nd ) Business Day following the effective date (the “ Effective Date ”) of the Registration Statement (as defined in Section 2(a)(i)(A) below) (or the third (3 rd ) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, 11th Floor, New York, NY 10105 (“ Representative Counsel ”), or at such other place (or by electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Securities is called the “ Closing Date .”
(B) Payment for the Firm Securities shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Representative) representing the Firm Securities (or through the facilities of the Depository Trust Company (“ DTC ”) or via a DWAC transfer), for the account of the Underwriters. The Firm Securities shall be registered in such name or names and in such authorized denominations as the Representative may request in writing prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Securities except upon tender of payment by the Representative for all of the Firm Securities or via delivery versus payment for the Firm Securities. The term “ Business Day ” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
(iii) Over-allotment Option .
(A) Option Securities . For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares and Firm Warrants, the Company hereby grants to the Underwriters an option (the " Over-allotment Option ") to purchase, in the aggregate, up to additional Common Shares, representing fifteen percent (15%) of the Firm Shares sold in the offering (the “Option Shares”) and/or Warrants to purchase as additional Common Shares, representing 15% of the Firm Warrants sold in the Offering (the “Option Warrants”). The Over-allotment Option is, at the Underwriters’ sole discretion, for Option Shares and Option Warrants together, solely Option Shares, solely Option Warrants, or any combination thereof (each, an “ Option Security ” and collectively, the “ Option Securities ”). The Firm Securities and the Option Securities are collectively referred to as the “ Securities .” The Securities and the Underlying Common Shares (as defined below), are collectively referred to as the " Public Securities ." The Public Securities shall be issued directly by the Company and shall have the rights and privileges described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The Firm Warrants and the Option Warrants, if any, shall be issued pursuant to, and shall have the rights and privileges set forth in, a warrant agreement, dated on or before the Closing Date, between the Company and Computershare Investor Services Inc., as warrant agent (the “ Warrant Agreement ”). The offering and sale of the Public Securities is herein referred to as the " Offering ."
(B) Exercise of Option . The Over-allotment Option granted pursuant to Section 1(a)(iii)(A) hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) for any number of the Option Securities within 45 days after the Effective Date. The purchase price to be paid per Option Share shall be equal to the applicable price paid per Firm Share, and the purchase price to be paid per Option Warrant shall be equal to the applicable price paid per Firm Warrant. The Underwriters shall not be under any obligation to purchase any of the Option Securities prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or email or facsimile or other electronic transmission setting forth the number of Option Securities to be purchased and the date and time for delivery of and payment for the Option Securities (the " Option Closing Date "), which shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Securities does not occur on the Closing Date, an Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Securities subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Securities specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Securities then being purchased as set forth in Schedule 1 opposite the name of such Underwriter, subject to such adjustments as the Representative, in its sole discretion, shall determine.
(C) Payment and Delivery . Payment for the Option Securities shall be made on an Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to the Underwriters of certificates (in form and substance satisfactory to the Representative) representing the applicable number of Option Securities (or through the facilities of DTC or DWAC transfer) for the account of the Underwriters. The applicable number of Option Securities shall be registered in such name or names and in such authorized denominations as the Representative may request in writing prior to the applicable Option Closing Date. The Company shall not be obligated to sell or deliver Option Securities except upon tender of payment by the Representative for the applicable Option Securities. An Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time and date are simultaneous with the Closing Date, the term “ Closing Date ” shall refer to the time and date of delivery of the Firm Securities and the applicable Option Securities.
2 |
(iv) Representative’s Warrant .
(A) Warrant Amount; Term . The Company hereby agrees to issue to the Representative (and/or its designees) on the Closing Date or Option Closing Date, as applicable, a five-year warrant (the “ Representative’s Warrant ”) for the purchase of a number of the Common Shares equal to 2.5% of the number of the Firm Shares and Option Shares issued on such Closing Date or Option Closing Date (or 1.5% of the number of the Firm Shares and Option Shares issued on such Closing Date or Option Closing Date to the Company’s Investors), pursuant to a warrant agreement in the form attached hereto as Exhibit A (the “ Representative’s Warrant Agreement ”), at an initial exercise price of $ per share, which is equal to 125% of the Public Offering Price per Firm Unit. The Representative’s Warrant and the Underlying Common Shares are hereinafter referred to together as the “ Representative’s Securities .” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant and the underlying securities during the one hundred eighty (180) day period after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; or as otherwise expressly permitted by Rule 5110(g), and only if any such transferee agrees to the foregoing lock-up restrictions.
(B) Delivery . Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date or Option Closing Date, as applicable, and shall be issued in the name or names and in such authorized denominations as the Representative may request.
2. Representations and Warranties of the Company . The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below) and as of the Closing Date and as of each Option Closing Date, if any, as follows (unless otherwise indicated, all references to the Company in this Section 2 shall refer to the Company and its subsidiaries:
(a) Filing of Registration Statement .
(i) Pursuant to the Securities Act .
(A) The Company has filed with the U.S. Securities and Exchange Commission (the “ Commission ”) a registration statement, and an amendment or amendments thereto, on Form F-1 (File No. 333-222814), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “ Securities Act ”), which registration statement and amendment or amendments have been prepared by the Company in conformity in all material respects with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “ Securities Act Regulations ”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus (as defined below) included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein by reference and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “ Rule 430A Information ”)), is referred to herein as the “ Registration Statement .” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “ Registration Statement ” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
(B) Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “ Preliminary Prospectus .” The Preliminary Prospectus that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “ Pricing Prospectus .” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “ Prospectus .” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
3 |
(C) “ Applicable Time ” means 4:30 p.m., Eastern time, on the date of this Agreement.
(D) “ Issuer Free Writing Prospectus ” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“ Rule 433 ”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
(E) “ Issuer General Use Free Writing Prospectus ” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “ bona fide electronic road show,” as defined in Rule 433 (the “ Bona Fide Electronic Road Show ”), as evidenced by its being specified in Schedule 2 hereto.
(F) “ Issuer Limited Use Free Writing Prospectus ” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
(G) “ Pricing Disclosure Package ” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, and the Pricing Prospectus, all considered together.
(ii) Pursuant to the Exchange Act . The Company has filed with the Commission a Form 8-A providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), of the Common Shares and the Warrants, which registration statement complies in all material respects with the Exchange Act. The registration of the Common Shares and the Warrants under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares and the Warrants under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
(b) Stock Exchange Listing . The Common Shares and Warrants have been approved for listing on The NASDAQ Capital Market (the “ Exchange ”), subject to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting either the Common Shares or Warrants from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating either such listing.
(c) No Stop Orders, etc . Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
(d) Disclosures in Registration Statement .
(i) Compliance with Securities Act and 10b-5 Representation .
(A) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
4 |
(B) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. To the Company’s knowledge, no post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.
(C) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the disclosure contained in the subsections “Commissions and Discounts,” “Over-allotment Option,” “Underwriters’ Warrant,” and “Stabilizing Transactions and Penalty Bids” included in the “Underwriting” section of the Prospectus (the “ Underwriters’ Information ”); and
(D) None of the Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto (including any prospectus wrapper), as of their respective issue dates, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state 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 this representation and warranty shall not apply to the Underwriters’ Information.
(ii) Disclosure of Agreements . The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or business (each, a “ Governmental Entity ”), including, without limitation, those relating to environmental laws and regulations, that would reasonably be expected to constitute a Material Adverse Change.
5 |
(iii) Prior Securities Transactions . Since inception, no securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
(iv) Regulations . The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign laws, rules and regulations relating to the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
(v) No Other Distribution of Offering Materials . The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the Offering other than any Preliminary Prospectus, the Prospectus and other materials, if any, permitted under the Securities Act and consistent with Section 3(b) below.
(e) Changes After Dates in Registration Statement .
(i) No Material Adverse Change . Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect (as defined below) and no material adverse change in the financial position or results of operations of the Company, nor to the Company’s knowledge, any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “ Material Adverse Change ”); (ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Public Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day (as defined below) prior to the date that this representation is made.
“ Material Adverse Effect ” means (i) a material adverse effect on the legality, validity or enforceability of this Agreement, the Warrant Agreement or the Representative’s Warrant Agreement, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement, the Warrant Agreement or the Representative’s Warrant Agreement. “Trading Day” means a day on which the Exchange is open for trading.
(ii) Recent Securities Transactions, etc . Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities (other than (x) grants under any share compensation plan and (y) shares issued upon exercise or conversion of options, warrants or convertible securities described in the Registration Statement, the Pricing Disclosure Package and the Prospectus) or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
6 |
(f) Independent Accountants . To the knowledge of the Company, Dale Matheson Carr-Hilton Labonte LLP (the “ Auditor ”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. Except as may otherwise be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
(g) Financial Statements, etc . The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing; and such financial statements have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by IFRS); and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company (other than (i) grants under any share compensation plan and (ii) common shares issued upon exercise or conversion of option, warrants or convertible securities described in the Registration Statement, the Pricing Disclosure Package and the Prospectus), (d) there has not been any Material Adverse Change in the Company’s long-term or short-term debt, and (e) the Company has not altered its method of accounting.
(h) Authorized Capital; Options, etc . The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted share capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time, on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued Common Shares of the Company or any security convertible or exercisable into Common Shares of the Company, or any contracts or commitments to issue or sell Common Shares or any such options, warrants, rights or convertible securities (“ Common Share Equivalent ”). No individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind (a “ Person ”) has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement, the Warrant Agreement or the Representative’s Warrant Agreement. The issuance and sale of the Public Securities will not obligate the Company to issue Common Shares or other securities to any Person (other than the Underwriters) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no shareholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s shareholders.
7 |
(i) Valid Issuance of Securities, etc.
(i) Outstanding Securities . All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable and have been issued in compliance with all federal and state securities laws; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized number of Common Shares, Company preferred shares and other securities of the Company to be outstanding upon consummation of the offering of the Firm Securities and Option Securities conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding Common Shares were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such shares, exempt from such registration requirements. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, accurately and fairly present, in all material respects, the information required to be shown with respect to such plans, arrangements, options and rights.
(ii) Securities Sold Pursuant to this Agreement . The Firm Securities, the Option Securities and the Representative’s Warrants have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable, free and clear of all liens imposed by the Company; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken; the Common Shares issuable upon exercise of the Warrants and Representative’s Warrants (the “ Underlying Common Shares ”) have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with such Warrants, the Warrant Agreement and Representative’s Warrants or exercised on a cashless basis as set forth in such Representative’s Warrants, as the case may be, such Underlying Common Shares will be validly issued, fully paid and non-assessable; and the Public Securities and Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(j) Registration Rights of Third Parties . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company (except for any such rights that have been waived).
(k) Validity and Binding Effect of Agreements . This Agreement, the Warrant Agreement and the Representative’s Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(l) No Conflicts, etc . The execution, delivery and performance by the Company of this Agreement, the Warrant Agreement and the Representative’s Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Articles (as the same may be amended or restated from time to time, the “ Charter ”) or the by-laws of the Company (as the same may be amended or restated from time to time, the “ Bylaws ”) or other similar governing document; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof, except in the cases of clauses (i) and (iii) for such breaches, conflicts or violations which would not reasonably be expected to have a Material Adverse Change.
8 |
(m) Regulatory . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change: (i) the Company has not received notice from any Governmental Entity alleging or asserting noncompliance with any Applicable Regulations (as defined in clause (ii) below) or Authorizations (as defined in clause (iii) below); (ii) the Company is and has been in material compliance with federal, state or foreign statutes, laws, ordinances, rules and regulations applicable to the Company (collectively, “ Applicable Regulations ”); (iii) the Company possesses all licenses, certificates, approvals, clearances, consents, authorizations, qualifications, registrations, permits, and supplements or amendments thereto required by any such Applicable Regulations and/or to carry on its businesses as now conducted (“ Authorizations ”) and such Authorizations are valid and in full force and effect and the Company is not in violation of any term of any such Authorizations; (iv) the Company has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any product, operation or activity is in violation of any Applicable Regulations or Authorizations or has any knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding, nor, to the Company’s knowledge, has there been any material noncompliance with or violation of any Applicable Regulations by the Company that could reasonably be expected to require the issuance of any such communication or result in an investigation, corrective action, or enforcement action by any Governmental Entity; and (v) the Company has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations or has any knowledge that any such Governmental Entity has threatened or is considering such action. Neither the Company nor, to the Company's knowledge, any of its directors, officers, employees or agents has been convicted of any crime under any Applicable Regulations.
(n) No Defaults; Violations . No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not (i) in violation of any term or provision of its Charter or Bylaws, or (ii) in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity applicable to the Company.
(o) Corporate Power; Licenses; Consents .
(i) Conduct of Business . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(ii) Transactions Contemplated Herein . The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained and no further action is required by the Company, the Company’s Board of Directors (the “ Board ”) or its shareholders in connection herewith or therewith. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement, the Warrant Agreement and the Representative’s Warrant and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”).
9 |
(p) D&O Questionnaires . To the Company’s knowledge, all information contained in the questionnaires (the “ Questionnaires ”) completed by each of the Company’s directors, officers and 5% shareholders immediately prior to the Offering (the “ Insiders ”) as supplemented by all information concerning the Company’s directors, officers and principal shareholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate and incorrect.
(q) Litigation; Governmental Proceedings . There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which is required to be disclosed, in each case which individually or in the aggregate, is reasonably expected to result in a Material Adverse Change, or which adversely affects or challenges the legality, validity or enforceability of this Agreement, the Warrant Agreement the Representative’s Warrant Agreement or the Public Securities.
(r) Good Standing . The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of British Columbia as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change.
(s) Insurance . The Company carries or is entitled to the benefits of insurance, with reputable insurers, and in such amounts and covering such risks which the Company believes are reasonably adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change.
(t) Transactions Affecting Disclosure to FINRA .
(i) Finder’s Fees . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee or commission by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its shareholders that may affect the Underwriters’ compensation, as determined by FINRA.
(ii) Payments Within 180 Days . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (A) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (B) any FINRA member; or (C) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the 180-day period immediately preceding the original filing of the Registration Statement, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
(iii) Use of Proceeds . None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
(iv) FINRA Affiliation . There is no (A) officer or director of the Company, (B) beneficial owner of 5% or more of any class of the Company's securities or (C) beneficial owner of the Company's unregistered equity securities which were acquired during the 180-day period immediately preceding the original filing of the Registration Statement that, in each case and to the best of the Company’s knowledge, is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
10 |
(v) Information . All information provided by the Company in its FINRA Questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
(u) Foreign Corrupt Practices Act . None of the Company and its subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its subsidiaries or any other person acting on behalf of the Company and its subsidiaries, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(v) Compliance with OFAC . None of the Company and its subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its subsidiaries or any other person acting on behalf of the Company and its subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
(w) Money Laundering Laws . The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “ Money Laundering Laws ”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(x) Officers’ Certificate . Any certificate signed by any duly authorized officer of the Company and delivered to the Representative or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
(y) Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers, directors and 5% or more shareholders (collectively, the “ Lock-Up Parties ”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B ( the “ Lock-Up Agreement ”), prior to the execution of this Agreement.
(z) Subsidiaries . Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has no direct or indirect subsidiaries or variable interest entities and does not hold any equity interests in any other entity. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each subsidiary free and clear of any Lien, and all of the issued and outstanding shares of capital stock of each subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. All direct and indirect subsidiaries of the Company are duly organized and in good standing under the laws of the place of organization or incorporation, and each subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Effect and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
11 |
(aa) Related Party Transactions . There are no business relationships or related party transactions involving the Company or any of its subsidiaries or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
(bb) Board of Directors . The Board is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Directors and Executive Officers.” The qualifications of the persons serving as Board members and the overall composition of the Board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “ Sarbanes-Oxley Act ”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board qualify as “independent,” as defined under the listing rules of the Exchange.
(cc) Sarbanes-Oxley Compliance .
(i) Disclosure Controls . The Company has developed and currently maintains disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations applicable to it, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
(ii) Compliance . The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
(dd) Accounting Controls . The Company maintains systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, its principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses, if any, in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud, if any, known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company.
(ee) No Investment Company Status . The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
12 |
(ff) No Labor Disputes . No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent. To the knowledge of the Company, no executive officer of the Company is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(gg) Intellectual Property Rights . To the Company’s knowledge, the Company has, or can acquire on reasonable terms, ownership of and/or license to, or otherwise has the right to use, all inventions, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), patents and patent rights trademarks, service marks and trade names, copyrights, (collectively “ Intellectual Property ”) material to carrying on its businesses as described in the Pricing Prospectus. With the exception of: (i) correspondence from governmental offices regarding pending trademark applications; (ii) an opposition filed by Trek Bicycle Corp. in the European Union with respect to ELECTRA MECCANICA TOFINO and (iii) an opposition filed by Trek Bicycle Corporation in Canada with respect to ELECTRA MECCANICA SOLO, with both (ii) and (iii) having been withdrawn based on a settlement agreement between the Company and Trek Bicycle Corporation and to the Company’s knowledge, the Company has not received any correspondence relating to any Intellectual Property, including notice of: (A) infringement or misappropriation of, or conflict with, any Intellectual Property of a third party; (B) asserted rights of others with respect to any Intellectual Property of the Company; or (C) assertions that any Intellectual Property of the Company is invalid or otherwise inadequate to protect the interest of the Company, that in each case (if the subject of any unfavorable decision, ruling or finding), individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Change. There are no third parties who have been able to establish any material rights to any Intellectual Property, except for the retained rights of the owners or licensors of any Intellectual Property that is licensed to the Company. With the exception of: (i) correspondence from governmental offices regarding pending trademark applications; (ii) an opposition filed by Trek Bicycle Corp. in the European Union with respect to ELECTRA MECCANICA TOFINO and (iii) an opposition filed by Trek Bicycle Corporation in Canada with respect to ELECTRA MECCANICA SOLO, with both (ii) and (iii) having been withdrawn based on a settlement agreement between the Company and Trek Bicycle Corporation and to the Company’s knowledge, there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others: (A) challenging the validity, enforceability or scope of any Intellectual Property of the Company or (B) challenging the Company’s rights in or to any Intellectual Property or (C) that the Company materially infringes, misappropriates or otherwise violates or conflicts with any Intellectual Property or other proprietary rights of others. The Company has complied in all material respects with the terms of each agreement described in the Registration Statement, Pricing Disclosure Package or Prospectus pursuant to which any Intellectual Property is licensed to the Company, and all such agreements related to products currently made or sold by the Company, or to product candidates currently under development, are in full force and effect.
(hh) Taxes . Each of the Company and its subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, each of the Company and its subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such subsidiary. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its subsidiaries. The term “ taxes ” mean all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “ returns ” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
(ii) ERISA Compliance . The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ ERISA ”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ ERISA Affiliate ” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “ Code ”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” that is subject to ERISA and that is established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” that is subject to ERISA and that is established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
13 |
(jj) Compliance with Laws . The Company: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company (“ Applicable Laws ”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or notice from any other governmental authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“ Authorizations ”); (C) possesses all material Authorizations and such Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any governmental authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such governmental authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) has not received notice that any governmental authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such governmental authority is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of Federal, State, local and all foreign regulation on the Company’s business as currently contemplated are correct in all material respects.
(kk) Application of Takeover Protections . The Company and the Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Charter (or similar charter documents) (excluding, for purposes of this representation, the “blank check” preferred shares that are authorized by the Company’s Charter) or the laws of its jurisdiction of incorporation that is or could become applicable as a result of the Underwriters and the Company fulfilling their obligations or exercising their rights under this Agreement, the Warrant Agreement or the Representative’s Warrant Agreement.
(ll) Solvency . Based on the consolidated financial condition of the Company as of the Closing Date, and as of each Option Closing Date, if any, after giving effect to the receipt by the Company of the proceeds from the sale of the Public Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The Registration Statement, Pricing Disclosure Package and the Prospectus sets forth as of the date hereof all outstanding secured and unsecured Indebtedness (as defined below) of the Company or for which the Company has commitments.
14 |
“ Indebtedness ” means (i) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (ii) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (iii) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with IFRS.
(mm) Real Property . Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
(nn) Contracts Affecting Capital . There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s or any of its subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.
(oo) Loans to Directors or Officers . There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or any of its subsidiaries to or for the benefit of any of the officers or directors of the Company, any of its subsidiaries or any of their respective family members.
(pp) Employee Benefit Laws . The Company is not in violation of or has not received notice of any violation with respect to any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wages and hours law, nor any state law precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which could reasonably be expected to have a Material Adverse Change.
(qq) Ineligible Issuer . At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(rr) Industry Data . The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
15 |
(ss) Electronic Road Show . The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering.
(tt) Margin Securities . The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Common Shares or Warrants to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
(uu) Environmental Laws . The Company and its subsidiaries are in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses (“ Environmental Laws ”), except where the failure to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any of its subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company or any of its subsidiaries is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Change; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Change. In the ordinary course of business, the Company and its subsidiaries conduct periodic reviews of the effect of Environmental Laws on their business and assets, in the course of which they identify and evaluate associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or governmental permits issued thereunder, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such reviews, the Company and its subsidiaries have reasonably concluded that such associated costs and liabilities would not have, singularly or in the aggregate, a Material Adverse Change.
(vv) Forward-Looking Statements . No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(ww) Export and Import Laws . The Company and, to the Company's knowledge, each of its affiliates, and any director, officer, agent or employee of, or other person associated with or acting on behalf of the Company, has acted at all times in compliance with applicable Export and Import Laws (as defined below) and there are no claims, complaints, charges, investigations or proceedings pending or expected or, to the knowledge of the Company, threatened between the Company or any of its subsidiaries and any governmental authority under any Export or Import Laws. The term “ Export and Import Laws ” means the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Act of 1979, as amended, the Export Administration Regulations, and all other laws and regulations of the United States government regulating the provision of services to non-U.S. parties or the export and import of articles or information from and to the United States of America, and all similar laws and regulations of any foreign government regulating the provision of services to parties not of the foreign country or the export and import of articles and information from and to the foreign country to parties not of the foreign country.
(xx) Integration . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.
16 |
(yy) Confidentiality and Non-Competition . To the Company’s knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company or be expected to result in a Material Adverse Change.
(zz) Minute Books . The minute books of the Company have been made available to the Underwriters and counsel for the Underwriters, and such books (i) contain a complete summary of all meetings and actions of the Board (including each Board committee) and shareholders of the Company (or analogous governing bodies and interest holders, as applicable), and each of its subsidiaries since the time of its respective incorporation or organization through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in such minutes. There are no material transactions, agreements, dispositions or other actions of the Company that are not properly approved and/or accurately and fairly recorded in the minute books of the Company, as applicable.
(aaa) Stabilization . Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
(bbb) Smaller Reporting Company . As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
3. Covenants of the Company . The Company covenants and agrees as follows:
(a) Amendments to Registration Statement . The Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
(b) Federal Securities Laws .
(i) Compliance . The Company shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or, to the Company’s knowledge, threatening, of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
17 |
(ii) Continued Compliance . The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement, the Warrant Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“ Rule 172 ”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an 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 not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or Representative Counsel shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or Representative Counsel shall reasonably object.
(iii) Exchange Act Registration . For a period of three (3) years after the date of this Agreement, the Company shall use its best efforts to maintain the registration of the Common Shares and Warrants under the Exchange Act. During this time period, the Company shall not deregister the Common Shares or Warrants under the Exchange Act without the prior written consent of the Representative.
(iv) Free Writing Prospectuses . The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each Issuer General Use Free Writing Prospectus and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed and approved in writing by the Representative. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(c) Delivery to the Underwriters of Registration Statements . The Company has delivered or made available or shall deliver or make available to the Representative and Representative Counsel, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
18 |
(d) Delivery to the Underwriters of Prospectuses . The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Public Securities other than the Prospectus, the Registration Statement, and copies of the documents incorporated by reference therein.
(e) Effectiveness and Events Requiring Notice to the Representative . The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus through and including the expiration date of the Warrants (or the date all Warrants have been exercised or duly called, if earlier), and shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or to the Company’s knowledge, the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or to the Company’s knowledge, the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3(e) that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall make every reasonable effort to obtain promptly the lifting of such order.
(f) Listing . The Company shall use its best efforts to maintain the listing of the Common Shares and Warrants on the Exchange for three (3) years after the date of this Agreement.
(g) Review of Financial Statements . For a period of one (1) year after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s interim financial statements for each of the three fiscal quarters that are not its fiscal year end immediately preceding the announcement of any quarterly financial information.
(h) Financial Public Relations Firm . Within thirty (30) days following the Closing Date, the Company shall retain a financial public relations firm that is reasonably acceptable to the Representative and the Company (which shall include the firm of KCSA Strategic Communications), which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the Closing Date.
19 |
(i) Research Independence . In addition, the Company acknowledges that each Underwriter’s research analysts and research departments, if any, are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriter’s research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the offering that differ from the views of its investment bankers. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Underwriter with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriter’s investment banking divisions. The Company acknowledges that the Representative is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short position in debt or equity securities of the Company.
(j) Reports to the Representative; Transfer Agent and Warrant Agent .
(i) Periodic Reports, etc . For a period of three (3) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish or make available to the Representative: (i) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company and (ii) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system or otherwise filed with the Commission or made publicly available shall be deemed to have been delivered to the Representative pursuant to this Section 3(j)(i).
(ii) Transfer Agent . The Company shall maintain a transfer agent, warrant agent and registrar for the Common Shares and Warrants that is acceptable to the Representative (it being understood that Computershare Investor Services Inc. is acceptable to the Representative).
(k) Payment of Expenses .
(i) General Expenses Related to the Offering . The Company hereby agrees to pay on each of the Closing Date and each Option Closing Date, if any, to the extent not previously paid, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Public Securities to be sold in the Offering with the Commission; (b) all Public Offering Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of the Common Shares on the Exchange; (d) all fees, expenses and disbursements, if any, relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of “blue sky” counsel); (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (f) the costs of all mailing and printing of the Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (g) the costs of preparing, printing and delivering certificates representing the Public Securities; (h) fees and expenses of the transfer and warrant agent for the Common Shares and Warrants; (i) share transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (j) the fees and expenses of the Company’s accountants; (k) the fees and expenses of the Company’s legal counsel and other agents and representatives; and (l) the due diligence fees and expenses of the Underwriter (including, without limitation, domestic and foreign legal counsel, background checks, travel expenses and other diligence expenses). The Representative’s maximum aggregate expense reimbursement allowance will be $150,000. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or an Option Closing Date, if any, the expenses set forth herein (as limited by this Section 3(k)(i)) to be paid by the Company to the Underwriters, provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8(c) hereof.
(ii) Non-accountable Expenses . The Company further agrees that, in addition to the expenses payable pursuant to Section 3(k)(i) clauses (d) and (l), (i) on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (0.85%) of the gross proceeds received by the Company from the sale of the Firm Units.
20 |
(l) Application of Net Proceeds . The Company shall apply the net proceeds from the offering of the Firm Units and the Option Securities received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(m) Rule 158 . The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its security holders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, Rule 158(a) under Section 11(a) of the Securities Act.
(n) Stabilization . Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
(o) Internal Controls . The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with IFRS and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(p) Accountants . The Company shall retain an independent registered public accounting firm reasonably acceptable to the Representative (it being understood that the Auditor is an independent registered public accounting firm that is reasonably acceptable to the Representative), and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement.
(q) FINRA . The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company's securities or (iii) any beneficial owner of the Company's unregistered equity securities which were acquired during the 180 days immediately preceding the original filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
(r) Board Composition and Board Designations . The Company shall ensure that: (i) the qualifications of the persons serving as Board members and the overall composition of the Board comply with the Sarbanes-Oxley Act and the rules promulgated thereunder and with the listing requirements of the Exchange and (ii) if applicable, at least one member of the Board qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act and the rules promulgated thereunder.
(s) Securities Laws Disclosure; Pre-Closing Publicity . At the request of the Representative, by 9:00 a.m. (New York City time) on the date following the date hereof, the Company shall issue a press release disclosing the material terms of the Offering. Except as set forth in the immediately preceding sentence, prior to the Closing Date and any Option Closing Date, the Company shall not issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Representative is notified), without the prior written consent of the Representative, which consent shall not be unreasonably withheld, unless in the judgment of the Company and its counsel, and after notification to the Representative, such press release or communication is required by law.
21 |
(t) No Fiduciary Duties . The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement. Notwithstanding anything in this Agreement to the contrary, the Company acknowledges that the Underwriters may have financial interests in the success of the Offering that are not limited to the difference between the price to the public and the purchase price paid to the Company by the Underwriters for the Shares and the Underwriters have no obligation to disclose, or account to the Company for, any of such additional financial interests. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of fiduciary duty.
(u) Company Lock-Up Agreements . The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of one hundred eighty (180) days after the date of this Agreement (the “ Lock-Up Period ”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company (other than pursuant to a registration statement on Form S-8 for employee benefit plans); or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii) or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise. The restrictions contained in this section shall not apply to (i) the Public Securities and the Representative’s Warrants to be sold hereunder; (ii) the issuance by the Company of Common Shares upon the exercise of an outstanding stock option or warrant or the conversion of a security outstanding on the date hereof and disclosed in the Registration Statement and the Pricing Disclosure Package, (iii) the grant by the Company of stock options or other stock-based awards, or the issuance of shares of capital stock of the Company under any equity compensation plan of the Company disclosed in the Pricing Prospectus, (iv) the issuance of securities in connection with mergers, acquisitions, joint ventures, licensing arrangements or any other similar non-capital raising transactions or (v) financings with Industry Related Persons (which shall mean automotive and vehicle manufacturers, manufacturers and designers of automotive and vehicle components (including batteries)), as long as such financing is done above the five day average closing price of the Company’s common stock immediately prior to the financing.
(v) Blue Sky Qualifications . The Company shall use its best efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
(w) Reporting Requirements . The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
(x) Sarbanes-Oxley . The Company shall at all times comply with all applicable provisions of the Sarbanes-Oxley Act in effect from time to time.
(y) IRS Forms . The Company shall deliver to each Underwriter (or its agent), prior to or at the Closing Date, a properly completed and executed Internal Revenue Service (“ IRS ”) Form W-9 or an IRS Form W-8, as appropriate, together with all required attachments to such form.
22 |
4. Conditions of Underwriters’ Obligations . The obligations of the Underwriters to purchase and pay for the Firm Units and the Option Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and each Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
(a) Regulatory Matters .
(i) Effectiveness of Registration Statement; Rule 430A Information . The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by the Representative, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto shall have been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus shall have been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
(ii) FINRA Clearance . On or before the date of this Agreement, the Representative shall have received correspondence from FINRA that it will raise no objection as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
(iii) Stock Market Clearance . On the Closing Date, the Firm Securities shall have been approved for listing on the Exchange, subject only to official notice of issuance. On each Option Closing Date (if any), the Option Securities shall have been approved for listing on the Exchange, subject only to official notice of issuance, if needed.
(b) Company Counsel Matters .
(i) Closing Date Opinion of U.S. Counsel . On the Closing Date and on each Option Closing Date (if any), the Representative shall have received the favorable opinion of Ortoli Rosenstadt LLP, counsel to the Company, dated the Closing Date or Option Closing Date, as applicable, and addressed to the Representative, substantially in form and substance reasonably satisfactory to the Representative and Representative Counsel.
(ii) Closing Date Opinion of Canadian Counsel for the Company . On the Closing Date and on each Option Closing Date (if any), the Representative shall have received the opinion of McMillan LLP, Canadian counsel for the Company, dated the Closing Date or Option Closing Date, as applicable, addressed to the Representative, substantially in form and substance reasonably satisfactory to the Representative.
(iii) Closing Date Opinion of IP Counsel for the Company . On the Closing Date and on each Option Closing Date (if any), the Representative shall have received the opinion of Clark Wilson LLP, intellectual property counsel for the Company, dated the Closing Date or Option Closing Date, as applicable, addressed to the Representative, substantially in form and substance reasonably satisfactory to the Representative.
(c) Comfort Letters .
(i) Comfort Letter . At the time this Agreement is executed the Representative shall have received a cold comfort letter from the Auditor containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to the Representative and to the Auditor, dated as of the date of this Agreement.
23 |
(ii) Bring-down Comfort Letter . At the Closing Date and on each Option Closing Date (if any), the Representative shall have received from the auditor a letter, dated as of the Closing Date or Option Closing Date, as applicable, to the effect that such Auditor reaffirms the statements made in the letter furnished pursuant to Section 4(c)(i), except that with respect to the initial comfort letter the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date.
(d) Officers’ Certificates .
(i) Officers’ Certificate . The Company shall have furnished to the Representative a certificate, dated the Closing Date or Option Closing Date, as applicable, of its President and Chief Executive Officer, and its Chief Financial Officer stating that (A) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date or Option Closing Date, as applicable, did 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 Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date or Option Closing Date, as applicable, the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date or Option Closing Date, as applicable, did 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) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (C) as of the Closing Date or Option Closing Date, as applicable, the representations and warranties of the Company in this Agreement are true and correct in all material respects (except for those representations and warranties qualified as to materiality, which shall be true and correct in all respects and except for those representations and warranties which refer to facts existing at a specific date, which shall be true and correct as of such date) and the Company 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 any Option Closing Date (if such date is other than the Closing Date), and (D) there has not been, subsequent to the date of the most recent audited financial statements included in the Pricing Disclosure Package, any Material Adverse Change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
(ii) Secretary’s Certificate . At each of the Closing Date and any Option Closing Date, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date and Option Closing Date (if such date is other than the Closing Date), certifying: (A) that each of the Charter, Bylaws and similar governing documents is true and complete, has not been modified and is in full force and effect; (B) that the resolutions of the Board relating to the Offering are in full force and effect and have not been modified; (C) the good standing and foreign qualification of the Company; and (D) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
(e) No Material Changes . Prior to and on each of the Closing Date and each Option Closing Date: (i) there shall have been no Material Adverse Change or development involving a prospective Material Adverse Change in the condition or the business activities, financial or otherwise, of the Company or any subsidiary of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding would reasonably be expected to result in a Material Adverse Change, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall 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 light of the circumstances under which they were made, not misleading.
24 |
(f) No Material Misstatement or Omission . The Underwriters shall not have discovered and disclosed to the Company on or prior to the Closing Date and any Option Closing Date that the Registration Statement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Representative Counsel, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any amendment or supplement thereto contains an untrue statement of fact which, in the opinion of such counsel, is material or omits to state any fact which, in the opinion of such counsel, is material and is necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.
(g) Corporate Proceedings . All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Warrant Agreement, the Representative’s Warrant Agreement, the Public Securities, the Registration Statement, the Pricing Disclosure Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all other legal matters relating to this Agreement, the Warrant Agreement, the Representative’s Warrant Agreement and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all material respects to Representative Counsel, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
(h) Delivery of Agreements .
(i) Lock-Up Agreements . On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
(ii) Warrant Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative an executed copy of the Warrant Agreement.
(iii) Representative’s Warrant Agreement . On the Closing Date, the Company shall have delivered to the Representative an executed copy of the Representative’s Warrant Agreement.
(i) Additional Documents . At the Closing Date and on each Option Closing Date (if any), Representative Counsel shall have been furnished with such documents and opinions as they may require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Firm Securities, the Options Shares (as applicable) and the Representative’s Warrant as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.
5. Indemnification.
(a) Indemnification of the Underwriters . The Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each person controlling such Underwriter (within the meaning of Section 15 of the Securities Act), and the directors, officers, employees, members, partners, shareholders, agents, representatives and counsel of each Underwriter, its affiliates and each such controlling person (each Underwriter, and each such entity or person hereafter is referred to as an “ Indemnified Person ”) from and against any losses, claims, damages, judgments, assessments, costs and other liabilities (collectively, the “ Liabilities ”), and shall reimburse each Indemnified Person for all fees and expenses (including the reasonable fees and expenses of counsel for the Indemnified Persons, except as otherwise expressly provided in this Agreement) (collectively, the “ Expenses ”) and agrees to advance payment of such Expenses as they are incurred by an Indemnified Person in investigating, preparing, pursuing or defending any actions, whether or not any Indemnified Person is a party thereto, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus or in any Issuer Free Writing Prospectus (as from time to time each may be amended and supplemented); (ii) 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 “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representative’s Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a 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, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. The Company also agrees to reimburse each Indemnified Person for all Expenses as they are incurred in connection with such Indemnified Person's enforcement of his or its rights under this Agreement.
25 |
(b) Procedure . Upon receipt by an Indemnified Person of actual notice of an action against such Indemnified Person with respect to which indemnity may reasonably be expected to be sought under this Agreement, such Indemnified Person shall promptly notify the Company in writing; provided that failure by any Indemnified Person so to notify the Company shall not relieve the Company from any obligation or liability which the Company may have on account of this Section 5 or otherwise to such Indemnified Person, except to the extent the Company is materially prejudiced as a proximate result of such failure. The Company shall have the right to assume the defense of any such action (including the employment of counsel designated by the Company and reasonably satisfactory to the Representative). Any Indemnified Person shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company has failed promptly to assume the defense and employ counsel reasonably satisfactory to the Representative for the benefit of the Underwriters and the other Indemnified Persons or (ii) such Indemnified Person shall have been advised that in the opinion of counsel that there is an actual or potential conflict of interest that prevents (or makes it imprudent for) the counsel engaged by the Company for the purpose of representing the Indemnified Person, to represent both such Indemnified Person and any other person represented or proposed to be represented by such counsel. The Company shall not be liable for the fees and expenses of more than one separate counsel (together with local counsel), representing all Indemnified Persons who are parties to such action), which counsel (together with any local counsel) for the Indemnified Persons shall be selected by the Representative. The Company shall not be liable for any settlement of any action effected without its written consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior written consent of the Underwriters, settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action in respect of which advancement, reimbursement, indemnification or contribution may be sought hereunder (whether or not such Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination (i) includes an unconditional release of each Indemnified Person, from all Liabilities arising out of such action for which indemnification or contribution may be sought hereunder and (ii) 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 Person. The advancement, reimbursement, indemnification and contribution obligations of the Company required hereby shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as every Liability and Expense is incurred and is due and payable, and in such amounts as fully satisfy each and every Liability and Expense as it is incurred (and in no event later than 30 days following the date of any invoice therefore).
(c) Indemnification of the Company . Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all Liabilities, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5(b). The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus.
26 |
(d) Contribution . If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5(a) or 5(c) in respect of any Liabilities and Expenses referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such Liabilities and Expenses, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and each of the Underwriters, on the other hand, from the Offering, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the matters as to which such Liabilities or Expenses relate, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total proceeds from the Offering purchased under this Agreement (before deducting expenses) received by the Company bear to the total underwriting discount and commissions actually received by the Underwriters in connection with the Offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, on the one hand, and the Underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Underwriters, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company through the Representative by or on behalf of any Underwriter for use in any Preliminary Prospectus, any Registration Statement or the Prospectus, or in any amendment or supplement thereto, consists solely of the Underwriters’ Information. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (d). Notwithstanding the above, no person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from a party who was not guilty of fraudulent misrepresentation.
(e) Limitation . The Company also agrees that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with advice or services rendered or to be rendered by any Indemnified Person pursuant to this Agreement, the transactions contemplated thereby or any Indemnified Person's actions or inactions in connection with any such advice, services or transactions, except to the extent that a court of competent jurisdiction has made a finding that Liabilities (and related Expenses) of the Company have resulted primarily from such Indemnified Person's gross negligence or willful misconduct in connection with any such advice, actions, inactions or services.
(f) Survival . The advancement, reimbursement, indemnity and contribution obligations set forth in this Section 5 shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Person's services under or in connection with, this Agreement.
6. Default by an Underwriter.
(a) Default Not Exceeding 10% of Firm Units . If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Units , and if the number of the Firm Units with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Units that all Underwriters have agreed to purchase hereunder, then such Firm Units to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
27 |
(b) Default Exceeding 10% of Firm Units . In the event that the default addressed in Section 6(a) relates to more than 10% of the Firm Units , the Representative may in its discretion arrange for itself or for another party or parties to purchase such Firm Units to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the Firm Units , the Representative does not arrange for the purchase of such Firm Units , then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties satisfactory to the Representative to purchase said Firm Units on such terms. In the event that neither the Representative nor the Company arrange for the purchase of the Firm Units to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by the Representative or the Company without liability on the part of the Company (except as provided in Sections 3(k) and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
(c) Postponement of Closing Date . In the event that the Firm Units to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of Representative Counsel may thereby be made necessary. The term “ Underwriter ” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Public Securities.
7. Additional Covenants.
(a) Prohibition on Press Releases and Public Announcements . Except as set forth in the first sentence of Section 3(t) above, the Company shall not issue press releases or engage in any other publicity, without the Representative’s prior written consent (such consent not to be unreasonably withheld), for a period ending at 5:00 p.m., Eastern time, on the first (1 st ) Business Day following the forty-fifth (45 th ) day after the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.
(b) Right of First Refusal . Provided that the Firm Securities are sold in accordance with the terms of this Agreement, the Representative shall have a right of first refusal (the “ Right of First Refusal ”), for a period of eighteen (18) months from the commencement of sales of the offering, to act as sole and exclusive investment banker, sole and exclusive book-runner, sole and exclusive financial advisor, sole and exclusive underwriter and/or sole and exclusive placement agent, at the Representative’s sole and exclusive discretion, for each and every future public and private equity and debt offering, including all equity linked financings (each, a “ Subject Transaction ”), during such eighteen (18) month period, of the Company, or any successor to or subsidiary of the Company, on terms and conditions customary to the Representative for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction for which the Representative has exercised its Right of First Refusal without the express written consent of the Representative. The Representative shall have the sole right to determine whether or not any other broker dealer shall have the right to participate in a Subject Transaction and the economic terms of any such participation. For the avoidance of any doubt, such Right of First Refusal does not extend to mergers, acquisitions, joint ventures, licensing arrangements or any other similar non-capital raising transactions that may or may not involve a broker or similar finder.
The Company shall notify the Representative of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by registered mail or overnight courier service addressed to the Representative. If the Representative fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the mailing of such written notice, then the Representative shall have no further claim or right with respect to the Subject Transaction. The Representative may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by the Representative shall not adversely affect the Representative’s Right of First Refusal with respect to any other Subject Transaction during the eighteen (18) month period agreed to above.
8. Effective Date of this Agreement and Termination Thereof.
(a) Effective Date . This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.
28 |
(b) Termination . The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in Representative’s opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the NASDAQ Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in Representative’s opinion, make it inadvisable to proceed with the delivery of the Firm Securities; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of such a Material Adverse Change in the conditions of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities. Either party shall have the right to terminate this Agreement if the Closing Date does not occur within twenty (20) Business Days of the date of this Agreement. Section 5 of this Agreement shall survive any termination of this Agreement.
(c) Expenses . Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters pursuant to Section 6(b) above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters (less any amounts previously advanced to the Representative); provided, however, that this in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).
(d) Indemnification . Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
(e) Representations, Warranties, Agreements to Survive . All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.
9. Miscellaneous.
(a) Notices . All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), or personally delivered and shall be deemed given when so delivered or if mailed, two (2) days after such mailing.
If to the Representative:
The Benchmark Company, LLC
150 East 58 th St., 17 th Floor
New York, NY 10155
Attention: Michael Jacobs
29 |
with copies to:
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, Floor 11
New York, NY 10105
Attention: Richard Anslow
If to the Company:
Electrameccanica Vehicles Corp.
102 East 1st Avenue
Vancouver, British Columbia, Canada, V5T 1A4
Attention: Jerry Kroll
with copies to:
Ortoli Rosenstadt LLP
501 Madison Avenue, 14 th Floor
New York, NY 10022
Attention: William Rosenstadt
(b) Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
(c) Amendment . This Agreement may only be amended by a written instrument executed by each of the parties hereto.
(d) Entire Agreement . This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and the Representative, dated November 27, 2017, shall remain in full force and effect.
(e) Binding Effect . This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, each Indemnified Person referred to in Section 5, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
(f) Governing Law; Consent to Jurisdiction; Trial by Jury . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each party hereto hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon a party hereto may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9(a) hereof. Such mailing shall be deemed personal service and shall be legal and binding upon such party in any action, proceeding or claim. Each party hereto agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. Each of the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its shareholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
30 |
(g) Execution in Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by email/pdf transmission shall constitute valid and sufficient delivery thereof.
(h) Waiver, etc . The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
[ Signature Page Follows ]
31 |
If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below.
Very truly yours, | ||
Electrameccanica Vehicles Corp. | ||
By: | ||
Name: | ||
Title: |
Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto: | ||
THE BENCHMARK COMPANY, LLC | ||
By: | ||
Name: | ||
Title: |
[Signature Page]
Electrameccanica Vehicles Corp. – Underwriting Agreement
32 |
SCHEDULE 1
Underwriter |
Total Number of Firm
Units to be Purchased at 93% of the Public Offering Price per Firm Unit |
Total Number of Firm
Units to be Purchased at 94.5% of the Public Offering Price per Firm Unit |
Number of Option
Units to be Purchased at 93% of the Public Offering Price per Firm Unit if the Over- Allotment Option is Fully Exercised |
Number of Option
Units to be Purchased at 94.5% of the Public Offering Price per Firm Unit if the Over- Allotment Option is Fully Exercised |
||||||||||||
The Benchmark Company, LLC | ||||||||||||||||
ThinkEquity, a division of Fordham Financial Management, Inc. | ||||||||||||||||
Cuttone & Co., LLC | ||||||||||||||||
Total |
33 |
SCHEDULE 2
Issuer General Use Free Writing Prospectuses
None.
34 |
SCHEDULE 3
List of Lock-Up Parties
[TO COME]
35 |
EXHIBIT A
Form of Representative’s Warrant Agreement
[TO COME]
36 |
EXHIBIT B
Form of Lock-Up Agreement
[TO COME]
37 |
Exhibit 4.5
Form of Underwriter’s Warrant
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT OR ANY COMMON SHARES FOR WHICH IT IS EXERCISED EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT OR ANY COMMON SHARES FOR WHICH IT IS EXERCISED FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) THE BENCHMARK COMPANY LLC OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF THE BENCHMARK COMPANY LLC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [●], 2018. VOID AFTER 5:00 P.M., EASTERN TIME, [●], 2023.
COMMON SHARE PURCHASE WARRANT
For the Purchase of [●] Common Shares
of
ELECTRAMECCANICA VEHICLES CORP.
1. Purchase Warrant . THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of or its assigns (“ Holder ”), as registered owner of this Purchase Warrant, to Electrameccanica Vehicles Corp., a British Columbia corporation (the “ Company ”), Holder is entitled, at any time or from time to time from [●], 2018 (the “ Commencement Date ”), and at or before 5:00 p.m., Eastern time, [●], 2023 (the ” Expiration Date ”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [●] 1 common shares (the “ Shares ”) of the Company, no par value per share, subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant except as otherwise provided herein or with the Holder’s consent. This Purchase Warrant is initially exercisable at $[●] 2 per Share; provided , however , that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “ Exercise Price ” shall mean the initial exercise price or the adjusted exercise price, depending on the context. This Purchase Warrant is being issued pursuant to that certain Underwriting Agreement, dated [●], 2018 (the “ Agreement ”), between the Company and, on behalf of the Underwriters named on Schedule 1 thereto, The Benchmark Company, LLC (“ Benchmark ”). The Company’s offering contemplated by the Agreement is referred to herein as the “ Offering .”
1 Number of shares equal to 1.5% of the common shares included in the units sold to investors introduced to the underwriters by the Company and 2.5% of the common shares included in the units sold to all other investors in the offering.
2 Equal to 125% of the price of a unit sold in the offering.
1 |
2. Exercise .
2.1 Exercise Form . In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2 Cashless Exercise . In lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company will issue to Holder Shares in accordance with the following formula:
Y*(A-B) | |||
X | = | A |
Where, | |||
X | = | The number of Shares to be issued to Holder; | |
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | |
A | = | The fair market value of one Share; and | |
B | = | The Exercise Price. |
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i) | if the Company’s common shares are traded on a national securities exchange, the fair value shall be deemed to be the closing price on such exchange on the trading day immediately preceding the date on which Holder elects to exercise this Purchase Warrant, which shall be set forth in the applicable notice of exercise; |
(ii) | if the Company’s common shares are traded on any tier of the OTC Markets or any successor over-the-counter market, the fair value shall be deemed to be the closing bid price on the over-the-counter market on the trading day immediately preceding the date on which Holder elects to exercise this Purchase Warrant, which shall be set forth in the applicable notice of exercise; or |
(iii) | if there is no active trading market, the fair value shall be the fair market value as determined in good faith by the Company’s Board of Directors. |
2.3 Legend . Each certificate for the Shares purchased under this Purchase Warrant shall bear a legend as follows unless such Shares have been registered under the Securities Act of 1933, as amended (the “ Act ”):
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “ Act ”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law which, in the opinion of counsel to the Company, is available.”
2 |
3. Transfer .
3.1 General Restrictions . The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant or any Shares for a period of one hundred eighty (180) days following the commencement of sales in the public offering referenced in the Underwriting Agreement (defined below) (the commencement of sales in the public offering is referred to as the “ Effective Date ”) to anyone other than: (i) Benchmark or an underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Benchmark or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). After 180 days after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) business days upon receipt of the completed assignment form and payment of all transfer taxes, if any, transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Act . The Shares evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Ellenoff Grossman & Schole LLP shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of the Shares has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “ Commission ”) and compliance with applicable state securities law has been established. The Company acknowledges that this Purchase Warrant and the Shares have been registered pursuant to the Registration Statement (as defined in the Underwriting Agreement).
4. Registration Rights .
4.1 Grant of Rights . For so long as the Shares cannot be freely traded pursuant to an exemption from registration under the Securities Act, the Holder shall have the right to include the Shares underlying the Purchase Warrants (collectively, the “ Registrable Securities ”) as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of common shares which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities. In addition, if, at any time prior to the Expiration Date, a registration statement under the Act covering the Registrable Securities is not effective, the Company, upon written demand (the “ Demand Notice ”) of the Holder(s) of at least 51% of the Warrant (measured by the number of shares underlying the Warrants) (“ Majority Holders ”), agrees to use its commercially reasonable efforts to register (the “ Demand Registration ”) under the Act, all or any portion of the Registrable Securities requested by the Majority Holders in the Demand Notice. Upon its receipt of the Demand Notice, the Company will use its commercially reasonable efforts to file a registration statement under the Act covering the Registrable Securities within thirty days after receipt of the Demand Notice and use its commercially reasonable efforts to have such registration statement declared effective as soon as possible thereafter. The Demand Notice shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will notify all holders of the Warrants and shares underlying the Warrants of the demand within ten days from the date of the receipt of the Demand Notice. Each holder of Warrants or shares underlying the Warrants who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “ Demanding Holder ”) shall so notify the Company within fifteen days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration. The Company shall not be obligated to effect more than one (1) Demand Registration under this Section 4.1 and such “demand” registration rights shall terminate on the fifth anniversary of the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(iv).
3 |
4.2 Terms . The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to this Section 4 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than ten (10) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company during the term of this Purchase Warrant. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this section; provided, however, that such “piggy-back” registration rights shall terminate on the fifth anniversary of the Effective Date in accordance with FINRA Rule 5110(f)(2)(G)(v).
4.3 Exercise of Purchase Warrants . Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
4.4 Documents Delivered to Holders . The Company shall deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times, during normal business hours, as any such Holder shall reasonably request.
4 |
4.5 Underwriting Agreement . If the Company shall enter into an underwriting agreement, pursuant to which Registrable Securities of a Holder are being registered, such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
4.6 Documents to be Delivered by Holder(s) . Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
4.7 Damages . Should the Company fail to comply with the provisions of this Section 4, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to seek specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
5. New Purchase Warrants to be Issued .
5.1 Partial Exercise or Transfer . Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
5.2 Lost Certificate . Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
6. Adjustments .
6.1 Adjustments to Exercise Price and Number of Securities . The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a share dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.
5 |
6.1.2 Aggregation of Shares . If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.
6.1.3 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
6.1.4 Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
6.2 Substitute Purchase Warrant . In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.
6 |
6.3 Elimination of Fractional Interests . The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
7. Reservation and Listing . The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on a national securities exchange or quoted on any tier of the OTC Markets or any successor trading market on which the Shares issued to the public in the Offering may then be listed and/or quoted.
8. Certain Notice Requirements .
8.1 Holder’s Right to Receive Notice . Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least ten (10) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other shareholders of the Company in connection with the events described in Section 8.2 below at the same time and in the same manner that such notice is given to the shareholders.
8.2 Events Requiring Notice . The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price . The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“ Price Notice ”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
7 |
8.4 Transmittal of Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via e-mail attachment at the email address set forth below at or prior to 5:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via e-mail attachment at the e-mail address as set forth below on a day that is not a business day or later than 5:30 p.m. (New York City time) on any business day, (c) the second (2nd) business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.
If to the Holder:
The Benchmark Company, LLC
150 East 58th St, 17th Floor
New York, NY 10155
If to the Company:
Electrameccanica Vehicles Corp.
102 East 1 st Avenue
Vancouver, British Columbia, Canada, V5T 1A4
9. Miscellaneous .
9.1 Amendments . The Company and the Holder may from time to time supplement or amend this Purchase Warrant. All modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
9.2 Headings . The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
9.3. Entire Agreement . This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.4 Binding Effect . This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
8 |
9.5 Governing Law; Submission to Jurisdiction; Trial by Jury . This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the courts of the United States District Court for the Southern District of New York located in the County of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
9.6 Waiver, etc . The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7 Exchange Agreement . As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and Benchmark enter into an agreement (“ Exchange Agreement ”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.
[ Signature Page Follows ]
9 |
IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the [●] day of [●], 2018.
Electrameccanica Vehicles Corp. | ||
By: | ||
Name: | ||
Title: |
10 |
[ Form to be used to exercise Purchase Warrant ]
Date: __________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for ______ common shares, no par value per share (the “ Shares ”), of Electrameccanica Vehicles Corp., a British Columbia corporation (the “ Company ”), and hereby makes payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
or
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
Y*(A-B) | |||
X | = | A |
Where, | |||
X | = | The number of Shares to be issued to Holder; | |
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | |
A | = | The fair market value of one Share which is equal to $_____; and | |
B | = | The Exercise Price which is equal to $______ per share |
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.
Signature |
Signature Guaranteed |
11 |
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: | ||
(Print in Block Letters) | ||
Address: | ||
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
12 |
[ Form to be used to assign Purchase Warrant ]
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto __________________________ the right to purchase common shares, no par value per share, of Electrameccanica Vehicles Corp., a British Columbia corporation (the “ Company ”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
Dated: __________, 20__
Signature |
Signature Guaranteed |
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
13 |
Exhibit 5.1
Our File No. | 1007463-254429 |
Date | July 23, 2018 |
Electrameccanica Vehicles Corp.
102 East 1
st
Avenue
Vancouver, British Columbia
Canada V5T 1A4
Dear Sirs:
Re: Electrameccanica Vehicles Corp. - Registration Statement on Form F-1
We have acted as special legal counsel to Electrameccanica Vehicles Corp., a British Columbia corporation (the “ Company ”), in connection with the Company’s Registration Statement on Form F-1 filed on February 1, 2018 (as amended and supplemented from time to time, the “ Registration Statement ”) with the Securities and Exchange Commission (the “ Commission ”) including a related prospectus filed with the Registration Statement (the “ Prospectus ”), covering the offering (the “ Offering ”) for sale to The Benchmark Company, LLC, ThinkEquity, a division of Fordham Financial Management Inc. and Cuttone & Co., LLC (together the “ Underwriters ”) of an aggregate of up to US$25,000,000 of units, plus an additional US$3,750,000 of units pursuant to an over-allotment option granted to the Underwriters (each, a “ Unit ”) at an offering price to be determined by the Company and the Underwriters (the “ Offering Price ”), and the public offering of such securities by the Underwriters.
Each Unit consists of (i) one common share without par value in the capital of the Company (each a “ Share ”) and (ii) one common share purchase warrant (each, a “ Warrant ”). The Units will not be issued or certificated, and, although the Shares and Warrants will be purchased together in the Offering, the Shares and Warrants will be issued separately. Each Warrant entitles the holder to purchase one common share without par value in the capital of the Company (each a “ Warrant Share ”) at an exercise price per Warrant Share equal to 125% of the final Offering Price of the Units sold in the Offering for a period of five years following its date of issue.
Pursuant to the underwriting agreement to be entered into among the Company and the Underwriters, the Company agrees to issue to the Underwriters, as partial compensation for their services, common share purchase warrants (each, an “ Underwriter Warrant ”) in an amount equal to 1.5% of the Shares sold in the Offering and 1.5% of the Shares underlying the Warrants sold in the Offering to investors introduced to the Underwriters by the Company and 4% of the Shares sold in the Offering and 4% of the Shares underlying Warrants sold in the Offering to all other investors in the Offering. Each Underwriter Warrant will entitle the holder to purchase one Share (each, an “ Underwriter Warrant Share ”) commencing six months after the effective date of the Registration Statement (the “ Effective Date ”) at a price per Underwriter Warrant Share equal to 125% of the final Offering Price of the Units sold in the Offering and expiring five years following its date of issue.
|
July 23, 2018 Page 2 |
In connection with this opinion, we have reviewed and relied upon the Registration Statement and Prospectus, the Company’s Notice of Articles, the Company’s Articles, records of the Company’s corporate proceedings in connection with the offering, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. With respect to the foregoing documents, we have assumed: (i) the authenticity of all records, documents, and instruments submitted to us as originals; (ii) the genuineness of all signatures on all agreements, instruments and other documents submitted to us; (iii) the legal capacity and authority of all persons or entities (other than the Company) executing all agreements, instruments or other documents submitted to us; (iv) the authenticity and the conformity to the originals of all records, documents, and instruments submitted to us as copies; (v) that the statements contained in the certificates and comparable documents of public officials, officers and representatives of the Company and other persons on which we have relied for purposes of this opinion are true and correct; and (vi) the due authorization, execution and delivery of all agreements, instruments and other documents by all parties thereto (other than the due authorization, execution and delivery of each such agreement, instrument and document by the Company). We have also obtained from officers of the Company certificates as to certain factual matters and, insofar as this opinion is based on matters of fact, we have relied on such certificates without independent investigation.
Our opinion is limited to law of the Province of British Columbia, including all applicable provisions of the British Columbia Business Corporations Act (the “ BC Business Corporations Act ”). We have not considered, and have not expressed any opinion with regard to, or as to the effect of, any other law, rule, or regulation, state or federal, applicable to the Company. In particular, we express no opinion as to United States federal securities laws.
Based upon the foregoing and in reliance thereon, and subject to the qualifications and limitations set forth herein, we are of the opinion that:
1. | the Units have been duly authorized by all necessary corporate action by the Company; |
2. | the Shares have been duly authorized and, when the Shares are issued and sold in the manner and under the terms described in the Registration Statement, will be validly issued, fully paid and non-assessable; |
3. | The Warrants have been duly authorized and, when issued and sold in accordance with and in the manner described in the Registration Statement, will constitute a valid and binding agreement of the Company enforceable against the Company in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, winding-up, moratorium, liquidation, fraudulent conveyance, or other similar law affecting creditors’ rights, and subject to general principles of equity and to limitations on availability of equitable relief, including specific performance; |
|
July 23, 2018 Page 3 |
4. | The Underwriter Warrants have been duly authorized and, when issued and sold in accordance with and in the manner described in the Registration Statement, will constitute a valid and binding agreement of the Company enforceable against the Company in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, arrangement, winding-up, moratorium, liquidation, fraudulent conveyance, or other similar law affecting creditors’ rights, and subject to general principles of equity and to limitations on availability of equitable relief, including specific performance; |
5. | The Warrant Shares have been duly authorized and, when issued and paid for upon exercise of the Warrants as contemplated by the Warrants, will be validly issued, fully paid and non-assessable; and |
6. | The Underwriter Warrant Shares have been duly authorized and, when issued and paid for upon exercise of the Underwriter Warrants as contemplated by the Underwriter Warrants, will be validly issued, fully paid and non-assessable. |
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our firm’s name in the section of the Registration Statement and the Prospectus included therein entitled “Legal Matters”. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the “ Securities Act ”), or the rules and regulations of the Commission.
This opinion is furnished in accordance with the requirements of Item 8.a. of Form F-1 and Item 601(b)(5)(i) of Regulation S-K in connection with the filing of the Registration Statement and the related Prospectus, and is not to be used, circulated, quoted or otherwise relied upon for any other purpose. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. We disclaim any obligation to advise you of facts, circumstances, events or developments that hereafter may be brought to our attention and that may alter, affect or modify the opinion expressed herein after the effective date of the Registration Statement.
Yours truly,
/s/ McMillan LLP
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 (as amended) of our report dated April 2, 2018 relating to the consolidated financial statements of Electrameccanica Vehicles Corp. for the years ended December 31, 2017, 2016 and the period from inception on February 16, 2015 to December 31, 2015, and to the reference to our firm under the caption "Experts" in the related Prospectus of Electrameccanica Vehicles Corp.
|
Dale Matheson Carr-Hilton LaBonte LLP |
Chartered Professional Accountants |
Vancouver, Canada
July 23, 2018
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form F-1 (as amended) of our report dated June 7, 2018 relating to the financial statements of Intermeccanica International Inc. as at March 31, 2017 and 2016 and for the years then ended, and to the reference to our firm under the caption "Experts" in the related Prospectus of Electrameccanica Vehicles Corp.
|
Dale Matheson Carr-Hilton LaBonte LLP |
Chartered Professional Accountants |
Vancouver, Canada
July 23, 2018