Vision Marine Technologies Inc F-1, filed Jul 9, 2020
Vision Marine Technologies Inc. (VMAR)
As filed with the U.S. Securities and Exchange Commission on July 9, 2020.
Registration No. 333-________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
VISION MARINE TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
| Québec | 3730 | N/A |
| (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer |
| incorporation or organization) | Classification Code Number) | Identification Number) |
730 Boulevard du Curé-Boivin
Boisbriand, Québec J7G 2A7, Canada
Telephone: 450-951-7009
(Address of principal executive offices, including zip code, and telephone number, including area code)
Corporation Service Company
251 Little Falls Drive, Wilmington, DE 19808
Telephone: +1 302 636 5401
(Name, address, including zip code, and telephone number, including area code, of agent of service)
Copies to:
| William
Rosenstadt, Esq. Tim Dockery, Esq. Ortoli Rosenstadt LLP 501 Madison Avenue, 14th Floor New York, New York 10022 Telephone: (302) 738-6680 |
Rob Condon, Esq. Dentons US LLP 1221 Avenue of the Americas |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company x
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨
CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered(2) | Proposed maximum aggregate offering price(1) |
Amount of registration fee |
||||||
| Common shares | US$ | 17,250,000 | US$ | 2,239 | ||||
| Warrants to be issued to the underwriter | - | (3) | - | (3) | ||||
| Common shares underlying warrants to be issued to the underwriter (4) | US$ | 1,185,938 | US$ | 154 | ||||
| US$ | 18,435,938 | US$ | 2,393 | |||||
| (1) | Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act. Assumes that the underwriter exercises its over-allotment option. | |
| (2) | Pursuant to Rule 416 under the Securities Act, there are also being registered such indeterminate number of additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions. | |
| (3) | No registration fee required pursuant to Rule 457(g). | |
| (4) | We have agreed to issue to the underwriters warrants to purchase common shares representing up to 5.5% of the common shares issued in the offering. The representative’s warrants are exercisable at a per share exercise price equal to 125% of the public offering price per share of the common stock offered hereby. As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the representative’s warrants is US$1,185,938, which is equal to 125% of US$948,750 (5.5% of US$17,250,000). |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine
The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED JULY [--], 2020 |
[●] Common Shares
Vision Marine Technologies Inc.
This is a firm commitment initial public offering of common shares of Vision Marine Technologies Inc. (d/b/a Canadian Electric Boat Company). Prior to this offering, there has been no public market for our common shares. We anticipate that the initial public offering price of our shares will be between US$ and US$ .
We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “VMAR”.
We are an “emerging growth company” under the federal securities laws and have elected to comply with certain reduced public company reporting requirements.
Investing in our common shares involves a high degree of risk. You should carefully consider the matters described under the caption “Risk Factors” beginning on page 1.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per
Common Share | Total | |||||||||
| Public offering price | US$ | US$ | ||||||||
| Underwriter discounts and commissions(1) | US$ | US$ | ||||||||
| Proceeds to us, before expenses(2) | US$ | US$ | ||||||||
| (1) | The underwriter will receive compensation in addition to the discounts and commissions. The registration statement, of which this prospectus is a part, also registers for sale warrants to purchase common shares to be issued to the representative of the underwriters (based on the assumed offering price of US$ per share, the midpoint of the range set forth on the cover page of this prospectus). We have agreed to issue the warrants to the underwriter as a portion of the underwriting compensation payable to the underwriter in connection with this offering. See “Underwriting” for a description of compensation payable to the underwriter. |
| (2) | The total estimated expenses related to this offering are set forth in the section entitled “Expenses Relating to this Offering.” |
We have granted a 45-day option to the underwriter to purchase up to additional common shares to cover over-allotments, if any.
The underwriter expects to deliver the common shares on or about , 2020.
| ThinkEquity |
| a division of Fordham Financial Management, Inc. |
The date of this prospectus is , 2020
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by or on our behalf. Neither we, nor the underwriter, have authorized any other person to provide you with different or additional information. Neither we, nor the underwriter, take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The underwriter is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates.
Except as otherwise set forth in this prospectus, neither we nor the underwriter have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.
Unless the context otherwise requires, in this prospectus, the term(s) “we”, “us”, “our”, “Company”, “our company”, “our business” and “Canadian Electric Boat Company” refer to Vision Marine Technologies Inc.
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The following summary highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus. You should read carefully the entire document, including our historical financial statements and related notes, to understand our business, the common shares and the other considerations that are important to your investment decision. You should pay special attention to the “Risk Factors” section beginning on page 1.
All references to “$” or “dollars”, are expressed in Canadian dollars unless otherwise indicated.
Our Company
We are in the business of designing and manufacturing electric outboard powertrain systems and our related technology. We believe that our electric outboard powertrain systems are significantly more efficient and powerful than those currently being offered in the market today. In particular, we have recorded powertrain efficiencies of more than 94%, well above the 54% efficiency that we recorded for our principal competitor’s product. Increases in powertrain efficiency allows for more power and range, both of which are highly desirable characteristics for consumers in the marketplace. Although our primary focus is on electric outboard powertrain technology, we will continue to design, manufacture and sell our high-performance, fully-electric boats to commercial and retail customers. According to Research and Markets, the global electric boat market will reach US$12.32 billion in 2027 up significantly from US$4.5 billion in 2018.
We have developed our first fully-electric outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. Our technologies used in this powertrain system are designed to improve the efficiency of the outboard powertrain and, as a result, increase range and performance. We believe our approach in marketing and selling our powertrain technology to boat designers and manufacturers will enable us to leverage their distribution and servicing systems with minimal capital outlay. We expect our core intellectual property contained within our outboard electric powertrain systems to form the foundation for our future growth and for such systems to represent the majority of our revenue shortly following this initial public offering of our common shares. We do not currently have any patents or pending patent applications on the technology related to our electric outboard powertrain systems, but we intend to file patent applications shortly after this offering.
We continue to manufacture hand-crafted, highly durable, low maintenance, environmentally-friendly electric recreational powerboats. In our last two fiscal years, we manufactured 46 and 21 powerboats, respectively, and we expect to manufacture approximately 150 powerboats in the twelve months following the closing of this offering. We sell powerboats to retail customers and operators of rental fleets of powerboats through which we seek to build brand awareness. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats. We conduct our transactions directly to customers through our website or through a network of marinas, distributors and show rooms. Our boats are a solution to bans and restrictions on the use of gasoline- and diesel-powered boats on local waterways, lakes and rivers that cities and regions have imposed to improve air quality and protect water habitats.
Our Electric Outboard Powertrain Systems
A powertrain system is a vehicle’s infrastructure that converts energy into movement. In an electric boat, that infrastructure starts at the battery pack, continues with an inverter, goes to the motor and ends with the propeller. Electric powertrains have less moving parts than powertrains for boats with an internal combustion engine and, as a result, tend to break less and require less complex servicing.
The efficiency of a powertrain system determines the range of a boat on a single battery charge and the speed at which the boat operates. We find existing electric powertrain systems unsatisfactory because of their insufficient yields and limited power range. In 2015, we decided to research technology to take advantage of this vacuum and develop an in-house system, relying on existing third-party components where possible. Our electric powertrain is designed to have 180 hp (horsepower) and 236 Lb. ft at 94% load. Furthermore, the electric powertrain system will be liquid cooled as compared to air cooled.
We intend to produce our electric powertrain at our current facilities in Quebec. We believe that we can produce up to 300 electric powertrains per year in addition to producing 150 boats in our current facilities in the year following the initial public offering. If customer demand is sufficiently high for our electric powertrains and we foresee demand for more than 300 units in a year, we will require additional manufacturing space. Although we believe that we will be able to find comparable space at a similar price on relatively short notice, including space adjacent to our current facility that is owned by our current landlord and our CEO, such space may not be available when needed.
The production of our electric powertrain will consist of assembling components from third parties, including battery packs, inverters and high-efficiency motors. We intend to use advanced batteries in our battery packs but do not envision depending on a limited number of suppliers, as we will be able to use a wide range of batteries. We will source the inverters from UQM (Danfoss Editron) and motors from UQM (Danfoss Editron) and Dana TM4.
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We have developed our first fully-electric outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. We set out below the current specifications of this outboard electric powertrain.
| Maximum power | 180 HP, 135 Kw |  |
 |
| Max torque | 250 ft.lb, 340 Nm | ||
| Continuous power | 90 kW | ||
| Voltage | 650 V | ||
| Efficiency | 94% at 8,000 rpm | ||
| Weight | 413 Lbs., 188 kg | ||
| Lithium Battery | 60 - 420 kW | ||
| Shaft Length | S – XL | ||
| Cooling | Water | ||
| Control | Can bus |
As we develop our electric powertrain systems, we envisage a 300-horsepower version of our electric outboard engine to be released within the next 18 months.
Our Powerboats
We manufacture four models of electric powerboats and are preparing to launch a fifth model. Each model is available in different standard variations or may be customized according to a purchaser’s specifications. For each of our boats, our consumers are able to customize certain aspects including color (for the hull, striping, interior and deck), radio and covers and other storage options. In addition, there are customizations that are just available for some boat models, including propulsion and batteries. Our boats are:
 |
Phoenix 290: | Our latest model that we recently unveiled and which we are planning to begin production of in 2021. It is a 29-foot powerboat capable of accommodating up to 12 people, comes equipped with two Torqeedo Deep Blue engines. |
 |
Bruce 22: | Our current flagship boat. It is capable of reaching speeds of up to approximately 41 miles per hour (66 kph). We offer three variations of the Bruce 22 with starting prices between $69,995 and $289,995. Purchasers may customize the Bruce 22 by choosing among various options including type of propulsion, inserts, other options and batteries. In our 2019 fiscal year, we sold 5 Bruce 22s. |
 |
Volt 180: | A powerful boat that can reach speeds of up to approximately 30 miles per hour (48 kph). In our 2019 fiscal year, we sold 14 Volt 180s. |
 |
Fantail 217: | A boat designed with a view towards relaxation rather than speed. The Fantail 217 starts at $38,995, seats up to ten people and has a maximum speed of approximately 10 miles per hour (6 kph). In our 2019 fiscal year, we sold 23 Fantail 217s |
 |
Quietude 156: | A boat with an eye towards tranquility over speed or power. The Quietude 156 starts at $22,995, seats four passengers and reaches a top speed approximately 5 miles per hour (8 kph). In our 2019 fiscal year, we sold 4 Quietude 156s. |
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Sales
Although we have yet to commercialize our electric powertrains, we have received non-binding letters of intent (“LOIs”) from original equipment manufacturers (“OEMs”) for the purchase of such powertrains. Under the LOIs, OEMs have indicated their interest in purchasing 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for the year ended August 31, 2024. Such LOIs are non-binding and may never result in any actual sales. The projected sales price for our first electric outboard powertrain system is $100,000.
We currently generate over 90% of our revenue from the sale of our electric power boats. In our 2019 fiscal year, we sold 46 of our electric powerboats for revenue of $2,664,000, and in our 2018 fiscal year we sold 21 of our electric powerboats for revenue of $1,036,000. During the six months ended February 29, 2020, we generated $353,148 from the sale of electric powerboats. Our sales are to retail customers and operators of rental fleets of powerboats through which we seek to build brand awareness. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats.
Industry Overview
In North America, 75 million people go boating every year, according to the U.S. Coast Guard, with approximately 12 million recreational vessels registered with the U.S. Coast Guard in 2018. Within the boating market, there is an outboard motor market and an electric boat market. Our products fall into each of those categories, and if produced, our electric powertrains will be used in boats in both those markets.
Outboard Motor Market
An outboard motor is a propulsion system for boats, consisting of a self-contained unit that includes engine, gearbox and propeller or jet drive, designed to be affixed to the outside of the boat. As well as providing propulsion, outboards provide steering control, as they are designed to pivot over their mountings and thus control the direction of thrust. Outboard motors tend to be found on smaller watercraft as it is more efficient for larger boats to have an inboard system. Although outboard engines powered by fossil fuels have traditionally dominated this market and continue to do so, electric outboard motors are a relatively new phenomenon that have been growing in step with the growth in the electric boat market. We have developed our first fully-electric outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. Our technologies used in this powertrain system are designed to improve the efficiency of the outboard powertrain and, as a result, increase range and performance.
According to the National Marine Manufacturing Association (“NMMA”), sales of outboard engines in the United States (which includes outboard motors) increased to a thirteen-year high of 280,300 units representing sales market of US$2.9 billion. Consumer demand for higher-performance engines continued to trend upward in 2019, with double digit gains in sales for engines with 200 and greater horsepower. Engines with between 200 and 300 horsepower accounted for 16.3% of all sales of outboard engines, and those with over 300 horsepower accounted for 10%. Overall, the average horsepower of all outboard engines sold in 2019 reached a record-high of 127.6 hp, up 6.9% from the prior year’s average of 119.4 horsepower and up 46% from the average ten years prior of 87 horsepower.
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Electric Boat Market
Although electric boats have been available for over 100 years, interest in them was minimal until the 1990s when the first studies were conducted in the United States following the suspicion that motorboats contaminate aquatic environments significantly through loss of gasoline and lubrication oil. According to Andre Mele, recreational boats pollute as much as cars and trucks in the United States. In the early 2000’s, 8 million speedboats in the United States released 15 times more pollutants annually into the environment than the oil spill produced by the oil tanker Exxon Valdez in 1989. The sinking of this tanker in Alaska had released 11 million U.S. gallons of hydrocarbons into the environment. After conversion, this means that each boat releases an average of 78 L of hydrocarbons into aquatic environments each year. If that average is still current, we estimate that in 2019 oil losses in the environment via motorboats equaled 150,000 tons of hydrocarbon scaly leaks in Canada (based on 2 million vessels), 750,000 tons of hydrocarbon scaly leaks in the United States (based on 10 million vessels) and 450,000 tons of hydrocarbon scaly leaks in Europe (based on 6 million vessels).
This explains why some lakes and bodies of water have recently banned motorboats. The total elimination of gasoline immediately eliminates a very large source of marine pollution, with immediate results: possibility of beaches, swimming, and reduction of BOD (biochemical oxygen demand) and DCO (direct chemical oxidation) of ambient water. Specifically, hydrocarbons, similar to the dirt that clings to the walls of a bathtub, contaminate the shores and banks of lakes, rivers and bodies of water, where the development of many living organisms takes place. The ecosystem is then modified with the scarcity or disappearance of certain species.
In an effort to tackle air pollution, cities around the world are beginning to ban all gasoline - and diesel-powered boats from the center of the city. One of the first cities to implement this change is Amsterdam, Netherlands. This movement to electrically powered boats has been implemented in Venice, where the city has restricted the movement of gasoline - and diesel-powered boats, while exempting electrically powered boats.
Research and Markets predicts that the growth in the electric boat market will be caused by:
| ● | advancement in battery technology that offers longer run-time and higher speed; |
| ● | decreasing battery prices; |
| ● | problems inherent to internal combustion engine boats, including a high pollution rate and the comparatively high fuel prices; and |
| ● | other noteworthy advantages offered by electric boats, such as noiseless and smokeless use and less vibration and less engine maintenance than boats that use internal combustion engines. |
The electric boat market is segmented into two categories, hybrid and pure electric boats. In 2018, hybrid electric boats represented approximately 70% of the electric boat market. The NMMA anticipates that the market shares of the pure electric boat segment will meaningfully increase during the period from 2019 to 2027 owing to advancements in battery technology.
Competitive Advantages & Operational Strengths
We intend to sell our electric powertrains to OEMs for use in their boats. We are currently aware of one company (Torqeedo) that produces electric powertrains for OEMs, and as a result we believe that there is room for competition in this market. We believe the primary competitive factors in our market include but are not limited to:
| ● | technological innovation; |  | |
| ● | product quality and safety; | ||
| ● | service options; | ||
| ● | product performance; | ||
| ● | environmental friendliness; | ||
| ● | design and styling; and | ||
| ● | brand perception. | ||
Most of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Most of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition, many of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.
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We believe that our experience, production capability, product offering and management give us the ability to successfully operate in the recreational electric powerboat market in a way that our competitors cannot. In particular, we believe that we have a number of competitive advantages, including:
| · | technological innovation: we have demonstrated our capacity to develop our own products through research and development; |
| · | product performance: the efficiency of our powertrain systems provides the boats they are in greater speed and range; |
| · | certification: our boats are certified by the U.S. Coast Guard and the Canadian Coast Guard in Canada and meet the American Boat & Yacht Council (“ABYC”) safety standards and the European Union’s imported manufactured products standards; |
| · | product price: we believe that our products are competitively priced across all models and with all customizations. We have not priced our first powertrain system yet but intend to do so in a way that is competitive for its performance; and |
| · | management expertise: our founders have extensive experience in offshore power boating and are aware of what is required by customers in regard to power and efficiency of outboard electric powertrain systems. |
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Strategy
As a designer, manufacturer, and marketer of premium electric boats and electric powertrain systems, we strive to design new and innovative products that appeal to a broad customer base. Since fiscal 2014, we have successfully launched a number of new products and features with best-in-class quality leading to increased sales and significant margin expansion. Furthermore, our unique product development process enables us to offer products with innovative offerings that we believe will be difficult for our competitors to match without significant additional capital investments, most notably our outboard electric powertrain system.
We are developing innovative electric outboard powertrain systems designed to enable us to capture market share, as the outboard powertrain industry moves to electric powertrain outboard motors to comply with local green initiatives. The NMMA estimates that total retail orders of outboard engines was US$2.9 billion in 2018, and Global Market Insights estimates that sales of outboard engines will reach US$17 billion by 2025.
We sell our electric boats to retail customers as well as to boat clubs and boat rental operations. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats. We plan to further expand our sales by offering our products via third party dealerships and by attending more tradeshows. As we launch our innovative electric outboard powertrain systems, we will directly market to OEMs of boats, thereby leveraging their support and distribution systems. We will market our electric powertrains to the OEMs by attending trade shows, inviting the OEMs to test the electric outboard powertrains on a prototype boat, introducing the electric powertrain using social media avenues and advertising the electric powertrain systems in trade journals.
We will continue to implement a number of initiatives to reduce our cost base and to improve the efficiency of our manufacturing process. Additionally, we have fostered a culture of operational improvement within our workforce, which will lead to further operational efficiencies. Finally, we intend to invest in further research and development to ensure that we develop innovative electric powertrain systems thus expanding the number of OEMs that will use our products.
We intend to increase our international sales and expand our network of international distributors and dealers.
General
We were incorporated in August 2012 under the laws of Québec, Canada, and have an August 31, fiscal year end. As of July 7, 2020, we had 16,829,500 common shares outstanding. We had net comprehensive income of $233,066 in our fiscal year ended August 31, 2019 and a net comprehensive loss of $477,797 in our six months ended February 29, 2020.
Our principal executive, registered and records offices are located at 730 Boulevard du Curé-Boivin, Boisbriand, Québec J7G 2A7, Canada. Our telephone number is (450) 951-7009. Our website address is www.electricboats.ca. Information on our website does not constitute part of this prospectus.
As of July 7, 2020, our executive officers and directors beneficially owned 75.5% of our common shares, which includes shares that our executive officers and directors have the right to acquire within the next 60 days pursuant to warrants and stock options which have vested.
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Offering Summary
| Common Shares Offered: | (excluding the underwriter’s over-allotment option). | |
| Assumed Public Offering Price: | US$ per common share, the midpoint of the price range on the cover page of this prospectus. | |
| Over-allotment | We have granted the underwriter a 45-day option (commencing from the date of this prospectus) to purchase up to an additional common shares at the public offering price to cover over-allotments, if any. | |
| Shares Outstanding After the Offering: | common shares will be outstanding immediately after the offering (or if the underwriter exercises its over-allotment option in full). | |
| Use of Proceeds: | We intend to use the net proceeds from this offering for the sale and marketing and the production of our new powertrain, the build-up of inventory for order fulfilment and for general working capital. |
| Market for our Common Shares: | This is currently no market for our common shares. We intend to list our common shares on the Nasdaq Capital Market under the symbol “VMAR”. Our application could be rejected by Nasdaq, and this offering will not be consummated until we have received Nasdaq’s approval for our application. | |
| Risk Factors: | See “Risk Factors” for a discussion of the factors you should consider before deciding to invest in our securities. |
Shares outstanding after the offering is based on 16,829,500 common shares outstanding as of July 7, 2020 and excludes:
| · | 1,940,000 shares issuable upon the exercise of outstanding options; and | |
| · | [ ] shares issuable upon exercise of the warrants issued to the underwriter. |
Summary Financial Data
The summary financial information set forth below has been derived from our audited financial statements for the fiscal years ended August 31, 2019 and 2018 and from our unaudited financial statements for the three and six months ended February 29, 2020 and February 28, 2020. You should read the following summary financial data together with our historical financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.
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Statement of Comprehensive Income (Loss)
Year ended August 31, | Six months ended | |||||||||||||||
| 2019 | 2018 | February 29,
2020 | February 28,
2019 | |||||||||||||
| Revenue | $ | 2,869,377 | $ | 1,271,566 | $ | 436,193 | $ | 1,271,552 | ||||||||
| Gross profit | $ | 1,285,364 | $ | 501,727 | $ | 233,560 | $ | 589,844 | ||||||||
| Net and comprehensive income (loss) | $ | 233,066 | $ | (185,848 | ) | $ | (477,797 | ) | $ | 54,647 | ||||||
| Basic and diluted income (loss) per share (1) | $ | 0.02 | $ | (0.01 | ) | $ | (0.03 | ) | $ | - | ||||||
(1) Revised to reflect a 1:23,084.86 share exchange effected on January 22, 2020.
Statements of Financial Position
Year ended August 31, | Six months ended February 29, 2020 | |||||||||||||||
| 2019 | 2018 | Actual | As Adjusted | |||||||||||||
| Current Assets | $ | 1,366,769 | $ | 1,578,282 | $ | 1,855,030 | $ | |||||||||
| Total Assets | $ | 1,914,562 | $ | 1,993,194 | $ | 3,043,903 | $ | |||||||||
| Current Liabilities | $ | 1,459,534 | $ | 1,890,278 | $ | 1,731,886 | $ | |||||||||
| Total Liabilities | $ | 2,046,864 | $ | 2,395,987 | $ | 3,478,927 | $ | |||||||||
| Total Deficiency | $ | (132,302 | ) | $ | (402,793 | ) | $ | (435,024 | ) | $ | ||||||
Our financial position data as of February 29, 2020 is presented on:
| • | an actual basis; and |
| • | an as adjusted basis, giving effect to the sale and issuance of common shares by us in this offering, based upon the assumed initial public offering price of US$ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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An investment in our common shares carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our historical financial statements and related notes included elsewhere in this prospectus, before you decide to purchase the common shares. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our common shares. Refer to “Special Note Regarding Forward-Looking Statements”.
We may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.
Risks Related to our Business and Industry
There is limited public information on our operating history.
Our limited public operating history makes evaluating our business and prospects difficult. Although we were formed in 2012, we did not provide public reports on the results of operations until we first filed a draft of the registration statement of which this prospectus forms a part. We only have two years of audited financial statements. Your investment decision will not be made with the same data as would be available as if we had a longer history of public reporting.
We currently have minimally positive net income, and if we are unable to maintain and grow our net income in the future our ability to grow our business as planned will be adversely affected.
We have made significant up-front investments in research and development, sales and marketing, and general and administrative expenses to rapidly develop and expand our business. We had net income of $233,066 in our 2019 fiscal year as compared to a net loss of $185,848 in our 2018 fiscal year and incurred a comprehensive net loss of $477,797 in our six months ended February 29, 2020 as compared to comprehensive net income of $54,647 for the corresponding period in 2019. Net income may fail to grow or even decline in certain circumstances, many of which are beyond our control. Even after the use of the proceeds from this offering, our revenues might not significantly exceed our expenses or could be less than our expenses.. It may take us longer to increase our net income to do so than we anticipate, if at all, or we may only do so at a much lower rate than we anticipate. Failure to increase our net income would mean that we would have to curtail our planned growth in operations or resort to financings to fund such growth.
A substantial amount of our revenues in our 2019 and 2018 fiscal years were derived or sourced from related-party transactions.
Our Chief Executive Officer is an affiliate of EB Rental Ltd., an entity that rents electric boats at the Lido Marina Village in Newport, California. We respectively sold $455,531 and $372,719 of boats, parts, services and other items to EB Rental Ltd. in our 2019 and 2018 fiscal years and have generated income from them in the six months ended February 29, 2020 of $66,077 from the sale of parts and maintenance. Although we believe that these sales were on an arms’-length terms, such sales may not have occurred were it not for the relation among these parties. Had such sales not occurred, our results of operations for those fiscal years would have been different, and we may not have achieved net comprehensive income in our 2019 fiscal year.
Our plan of operations entails promoting a product candidate that we may never launch or which may not be commercially accepted if launched.
We have concentrated the majority of our research and development efforts on developing electric powertrain systems that we intend to sell to OEMs of boats following our initial public offering. We expect the electric powertrain systems to represent the majority of our revenue in the accounting periods shortly following the initial public offering. We have built prototypes of our electronic powertrain but have not shared this prototype with potential OEMs or the performance specifications of our powertrain with them. We do not know if OEMs will find our product candidate to be an attractive component in their boats or if they will find the price of our electric powertrains to be acceptable. We do not currently have any customers for our electric powertrains. Although we have received LOIs from OEMs for 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for the year ended August 31, 2024, such LOIs are non-binding and may never result in any actual sales. Even if we do develop such relationships, we might not be able to maintain them or grow them as anticipated. If we are not successful in commercializing our product candidate or if sales of our electric powertrain are less than we estimate, our business may not grow as expected, if at all, and we may fail.
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To carry out our proposed business plan to build up inventory for order fulfilment, increase brand awareness and develop a new powertrain for our engines, we will require a significant amount of capital.
If the funds from this offering and revenue from our business are not sufficient to cover our cash requirements, we will need to raise additional funds through the sale of our equity securities, in either private placements or additional registered offerings, and through shareholder loans. If we are unsuccessful in raising enough funds through such capital-raising efforts, we may review other financing possibilities such as bank loans. Financing might not be available to us or, if available, only on terms that are not acceptable to us.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our current corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
Terms of subsequent financings may adversely impact your investment.
We may have to engage in common equity, debt, or preferred stock financing in the future. Your rights and the value of your investment in our securities could be reduced. Interest on debt securities could increase costs and negatively impacts operating results. Preferred stock could be issued in series from time to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock could be more advantageous to those investors than to the holders of common shares. In addition, if we need to raise more equity capital from the sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment. Common shares which we sell could be sold into any market which develops, which could adversely affect the market price.
Our future growth depends upon consumers’ willingness to purchase electric powerboats.
Our growth highly depends upon the adoption by consumers of, and we are subject to an elevated risk of any reduced demand for, electric powerboats. Without such growth, sales of our electric powertrain, if any, and our electric boats may not grow at the rate that we anticipate, if such sales grow at all. If the market for electric powerboats does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be negatively impacted. Despite the long history of electric powerboats, the market for them is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new electric powerboat announcements and changing consumer demands and behaviors. Powerboats with conventional gas-powered motors may be deemed preferable to electric powerboats as they tend to be more powerful, have a longer range and/or cost less. Other factors that may influence the adoption of electric powerboats include:
| ● | the decline of an electric powerboats range resulting from deterioration over time in the battery’s ability to hold a charge; | |
| ● | concerns about electric grid capacity and reliability, which could derail our efforts to promote electric powerboats as a practical solution to powerboats which require gasoline; | |
| ● | improvements in the fuel economy of the internal combustion engine; | |
| ● | the availability of service for electric powerboats; | |
| ● | the environmental consciousness of consumers; | |
| ● | volatility in the cost of oil and gasoline; | |
| ● | consumers’ perceptions about convenience and cost to charge an electric powerboat; | |
| ● | the availability of tax and other governmental incentives to manufacture electric powerboats; and | |
| ● | perceptions about and the actual cost of alternative fuel. |
The influence of any of the factors described above may cause current or potential customers not to purchase our electric powerboat, which would materially adversely affect our business, operating results, financial condition and prospects.
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Our future growth depends upon consumers’ preference for outboard motors over inboard motors.
We envision the majority of our growth deriving from the sale of one of our product candidates, an electric powertrain for an outboard motor. If consumer preferences led to a decline in outboard motors, the OEMs we intend to sell to may produce less boats, and we may not be able to sell as many electric powertrains as we anticipate, if we sell any at all. We may not be able to adapt the technology behind this powertrain for inboard motors or may only be able to do so in a way that is not cost effective.
We rely on a limited number of suppliers for key components of our finished products.
Although we manufacture all of our powerboats, we do so by assembling the component parts that we acquire from third-party suppliers rather than by producing any of those component parts ourselves. We materially depend on some of those third-party suppliers for certain components that we obtain from a limited number of suppliers, namely
| ● | hulls: we purchase all of our hulls from Aqualux and Abitibi & Co., |
| ● | motors: for our electric powertrains, we intend to purchase motors from UQM Technologies and Dana TM4 and for our boats, we purchase approximately 20% of our motors from Torqeedo, 30% from Min-Kota, 35% from E-Tech and 10% from E-Propulsion; |
| ● | powertrains: we purchase approximately 5% of our powertrains from Piktronik, an Austrian-Slovenian company specialized in the research, development and production of components for electric vehicles and electric powerboats (which provides the powertrain used in our Bruce 22); and |
| ● | battery packs: we purchase our lithium-ion batteries (approximately 15% of all batteries we purchase) from BMW and/or Relion Batteries who in turn rely upon Samsung cells, and we purchase our lead batteries (approximately 85% of all batteries we purchase) from Thermo Fisher Scientific Inc. |
As we purchase our components and parts through purchase orders and informal arrangements rather than long-term purchase agreements, we have not contractually secured a supply chain for these components and parts. If there were delays in our supplies from these third-parties, if they significantly increased the cost of these components or if they ceased offering us these components, we would have to find new suppliers, which might not be possible on a timely basis, or cease production of the products in which the components are included.
The range of electric powerboats on a single charge declines over time which may negatively influence potential customers’ decisions whether to purchase our boats or boats containing our electric powertrains.
The range of electric powerboats on a single charge declines principally as a function of usage, time and charging patterns. For example, a customer’s use of their powerboat as well as the frequency with which they charge the battery can result in additional deterioration of the battery’s ability to hold a charge. During the lifetime of the lead acid batteries in powerboats, 500 to 1000 recharge cycles are possible, and our lithium battery pack will retain approximately 85% of its ability to hold its initial charge after approximately 3,000 charge cycles and 8 years, which will result in a decrease to the boat’s initial range. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions whether to purchase an electric boat, which may harm our ability to market and sell our boats. Likewise, if such reasoning deters potential customers from purchasing boats made by OEMs that use our electric powertrains, they may order fewer electric powertrains from us, if they ever order any at all.
Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for our electric powerboats.
Significant developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. For example, fuel which is abundant and relatively inexpensive in North America, such as compressed natural gas, may emerge as consumers’ preferred alternative to petroleum-based propulsion. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced electric powerboats, which could result in the loss of competitiveness of our boats, decreased revenue and a loss of market share to competitors.
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If we are unable to keep up with advances in electric powerboat technology, we may suffer a decline in our competitive position.
We may be unable to keep up with changes in electric powerboats technology, particularly developments with powertrains. As a result, we may suffer a decline in our competitive position. Any failure to keep up with advances in electric powerboat technology would result in a decline in our competitive position which would materially and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not be sufficient to adapt to changes in electric powerboat technology. As technologies change, we plan to upgrade or adapt our electric powertrain candidate. We would additionally upgrade our boats and introduce new models to take advantage of these changes. However, our technology and boats may not compete effectively with alternative technology or powerboats if we are not able to source and integrate the latest technology. For example, we do not manufacture either or lead or lithium battery cells which makes us depend upon suppliers of battery cell technology for our battery packs.
Demand in the powerboat industry is highly volatile.
Volatility of demand in the powerboat industry, especially for recreational powerboats and electric powerboats, may materially and adversely affect our business, prospects, operating results and financial condition. The markets in which we will be competing have been subject to considerable volatility in demand in recent periods. Demand for recreational powerboat and electric powerboat sales depends to a large extent on general, economic and social conditions in a given market. Historically, sales of recreational powerboats decrease during economic downturns. We have fewer financial resources than more established powerboat manufacturers to withstand adverse changes in the market and disruptions in demand.
Unfavorable weather conditions may have a material adverse effect on our business, financial condition, and results of operations, especially during the peak boating season.
Adverse weather conditions in any year in any particular geographic region may adversely affect sales in that region, especially during the peak boating season. Sales of our products are generally stronger just before and during spring and summer, which represent the peak boating months in most of our markets, and favorable weather during these months generally has a positive effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall, reduced rainfall levels, or drought conditions during these periods may close area boating locations or render boating dangerous or inconvenient, thereby generally reducing consumer demand for our products. Our annual results would be materially and adversely affected if our net sales were to fall below expected seasonal levels during these periods. We may also experience more pronounced seasonal fluctuation in net sales in the future as we continue to expand our businesses. Additionally, to the extent that unfavorable weather conditions are exacerbated by global climate change or otherwise, our sales may be affected to a greater degree than we have previously experienced.
We intend to increasingly use our network of independent dealers, and we will face increasing competition for dealers and have little control over their activities.
Currently, most of our sales are directly placed with us online, but approximately 35% of our sales in our 2019 fiscal year were derived from our network of independent dealers. We have agreements with the dealers in our network that typically provide for terms of between 1 and 3 years. While we will continue to market direct sales through our website, we seek to increase revenues and diversify our sales points by expanding our network of independent dealers. We envision an increase in the number of dealers supporting our products and the quality of their marketing and servicing efforts as being essential to our ability to increase sales. We may not be successful in our effort to grow our network of independent dealers.
Competition for dealers among recreational powerboat manufacturers continues to increase based on the quality, price, value and availability of the manufacturers' products, the manufacturers' attention to customer service and the marketing support that the manufacturer provides to the dealers. We will face intense competition from other recreational powerboat manufacturers in attracting and retaining dealers, and we might not be able to attract or retain relationships with qualified and successful dealers. We might not be able to maintain or improve our relationship with our dealers or our market share position. In addition, independent dealers in the recreational powerboat industry have experienced significant consolidation in recent years, which could inhibit our ability to retain them or result in the loss of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a competitor. If we do not establish a significant network of dealers, our future sales could fail to meet our projected financial condition and results of operations and cause to alter our business plan.
We envision that our success will depend, in part, upon the financial health of our dealers and their continued access to financing.
We seek to increase revenues and diversify our sales points by expanding our network of independent dealers. The financial health of our current and any future dealers is critical to our success. Our business, financial condition and results of operations may be adversely affected if the financial health of dealers that sell our products suffers. Their financial health may suffer for a variety of reasons, including a downturn in general economic conditions, rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations and personal financial issues.
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In addition, dealers require adequate liquidity to finance operations, including purchases of our products. Dealers are subject to numerous risks and uncertainties that could unfavorably affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis on reasonable terms. These sources of financing are vital to our ability to sell products through our distribution network. Access to floor plan financing generally facilitates dealers’ ability to purchase powerboats from us, and their financed purchases reduce our working capital requirements. If floor plan financing were not available to our dealers, our sales and our working capital levels could be adversely affected. The availability and terms of financing offered by dealers’ floor plan financing providers will continue to be influenced by:
| • | their ability to access certain capital markets and to fund their operations in a cost-effective manner; |
| • | the performance of their overall credit portfolios; |
| • | their willingness to accept the risks associated with lending to dealers; and |
| • | the overall creditworthiness of those dealers. |
Changes to trade policy, tariffs, and import/export regulations may have a material adverse effect on our business, financial condition, and results of operations.
Although we manufacture our products in Canada, in our last fiscal year approximately 90% of our sales occurred in the United States, a percentage that could increase as our operations expand. Changes in laws and policies governing foreign trade could adversely affect our business. As a result of recent policy changes, there may be greater restrictions and economic disincentives on international trade. We will particularly be affected by the Agreement Between the United States of America, the United Mexican States, and Canada (commonly known as USMCA), if ratified by all participants, the effects of which are not certain. Such changes have the potential to adversely impact the global and local economies, our industry and global demand for our products and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
Interest rates and energy prices affect marine products’ sales
Although our products are not frequently financed by our dealers and retail powerboat consumers, we envision this becoming more common as we expand our operations and grow our network of distributors. This may not occur if interest rates meaningfully rise because higher rates increase the borrowing costs and, accordingly, the cost of doing business for dealers and the cost of powerboat purchases for consumers. Energy costs can represent a large portion of the costs to manufacture our products and increase their ultimate sales price. Therefore, higher interest rates and fuel costs can adversely affect consumers’ decisions relating to recreational powerboating purchases.
We have a large fixed cost base that will affect our profitability if our sales decrease.
The fixed cost levels of operating a recreational powerboat manufacturer can put pressure on profit margins when sales and production decline. Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we decide to reduce our rate of production, gross or net margins could be negatively affected. Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.
We depend on certain key personnel, and our success will depend on our continued ability to retain and attract such qualified personnel.
Our success depends on the efforts, abilities and continued service of Alexandre Mongeon, our Chief Executive Officer, Patrick Bobby, our Chief Operating Officer, and Kulwant Sandher, our Chief Financial Officer. A number of these key employees and consultants have significant experience in the recreational boating and manufacturing industry. A loss of service from any one of these individuals may adversely affect our operations, and we may have difficulty or may not be able to locate and hire a suitable replacement. We have not obtained any “key person” insurance on certain key personnel.
We are subject to numerous environmental and health and safety laws and any breach of such laws may have a material adverse effect on our business and operating results.
We are subject to numerous environmental and health and safety laws, including statutes, regulations, bylaws and other legal requirements. These laws relate to the generation, use, handling, storage, transportation and disposal of regulated substances, including hazardous substances (such as batteries), dangerous goods and waste, emissions or discharges into soil, water and air, including noise and odors (which could result in remediation obligations), and occupational health and safety matters, including indoor air quality. These regulations also apply to any contamination that our powerboats cause in the lakes and rivers in which they operate. These legal requirements vary by location and can arise under federal, provincial, state or municipal laws. Any breach of such laws and/or requirements would have a material adverse effect on our company and its operating results.
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Our powerboats are subject to mandated safety standards and failure to meet those standards would have a material adverse effect on our business and operating results.
Given the inherent dangers involved with powerboats, all powerboats sold must comply with federal, state and provincial safety standards. Additionally, most powerboats sold in the United States meet the safety standards set by the ABYC, a non-profit, member organization that develops voluntary safety standards for the design, construction, maintenance, and repair of recreational powerboats and the NMMA. Our powerboats have been certified by the United States Coast Guard, the Canadian Coast Guard, meet the ABYC safety standards and have received CE marking indicating their conformity with health, safety, and environmental protection standards within the European Economic Area. Loss of any of these certifications or failure to obtain them for future products could have a material adverse effect on our business and operating results.
If we are unable to meet the service requirements of our customers, our business will be materially and adversely affected.
We do not offer warranties or provide service for our boats and do not intend to offer warranties on our powertrains systems. Instead, the purchasers of our boats and of our powertrains may rely upon the warranties and services of the manufacturers of the components used in our boats. As all such warranties are provided by third-party suppliers, the quality and timeliness of such service is outside of our control. Additionally, the terms of such warranties, including the length of time of coverage, and servicing terms, including locations and labor cost, are not uniform. If our purchasers and potential purchasers believe that warranties and servicing capabilities provided by our third-party suppliers are unable to successfully address their service requirements, the reputation of our brand will suffer and business and prospects could be materially and adversely affected.
We may not succeed in establishing, maintaining and strengthening the Vision Marine Technologies Inc. brand, which would materially and adversely affect customer acceptance of our boats and components and our business, revenues and prospects.
Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Vision Marine Technologies brand and the brands of our powerboat models. Any failure to develop, maintain and strengthen these brands may materially and adversely affect our ability to sell our products. If we are not able to establish, maintain and strengthen our brands, we may lose the opportunity to build our customer base. We expect that our ability to develop, maintain and strengthen the Vision Marine Technologies brand will also depend heavily on the success of our marketing efforts. We intend to use proceeds from this offering for marketing of our products, but we might be successful in such expanded marketing. To further promote our brand, we may be required to change our marketing practices, which could result in substantially increased advertising expenses, including the need to use traditional media such as television, radio and print. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain strong brands, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Increases in costs, disruption of supply or shortage of raw materials, in particular lithium-ion cells, could harm our business.
Although we do not materially use raw materials in the production of our electronic powerboats, we purchase the necessary parts and components for our boats from third-party suppliers that do. Were those third-party suppliers to experience increases in the cost or a sustained interruption in the supply or shortage of raw materials, the corresponding parts and components could become more costly or less available (if still available at all). We are particularly exposed to this risk as have not contractually secured long-term supply commitments at fixed prices with our third-party suppliers. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-ion cells. These risks include:
| ● | the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to meet demand; | |
| ● | disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and | |
| ● | an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells. |
Our business depends on the continued supply of battery cells for our boats. We do not currently have any agreements for the supply of batteries and depend upon the open market for their procurement. Any disruption in the supply of battery cells from our supplier could temporarily disrupt the planned production of our boats until such time as a different supplier is fully qualified. Moreover, battery cell manufacturers may choose to refuse to supply electric boat manufacturers to the extent they determine that the boats are not sufficiently safe. Furthermore, current fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials would increase our operating costs and could reduce our margins if we cannot recoup the increased costs through increased electric boat prices. We might not be able to recoup increasing costs of raw materials by increasing boat prices. We publish the price for the base model of our powerboats. However, any attempts to increase the published prices in response to increased raw material costs could be viewed negatively by our potential customers, result in cancellations of orders and could materially adversely affect our brand, image, business, prospects and operating results.
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If our suppliers sell us parts or components containing conflict minerals, we may be required at significant expense to find suppliers that do not use conflict minerals.
In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requiring the Securities and Exchange Commission (“SEC”) to issue rules specifically relating to the use of “Conflict Minerals” within manufactured products. Conflict Minerals are currently defined by U.S. Law as tin, tantalum, tungsten and gold (also known as “3TG”) and related derivatives. Within a year of becoming a public company, the SEC rules require any SEC registrant whose commercial products contain any 3TG (“3TG Product”) to determine whether the 3TG in the 3TG Product originated from the Democratic Republic of the Congo (“DRC”) or adjoining countries (collectively, the “DRC Region”) and, if so, whether the 3TG is “conflict free”. “3TG Conflict Free” means that the supply chain is transparent and the 3TG in 3TG Products does not directly or indirectly benefit armed groups responsible for serious human rights abuses in the DRC Region. By enacting this provision, Congress intends to further the humanitarian goal of ending the extremely violent conflict in the DRC Region, which has been partially financed by the exploitation and trade of 3TG originating in the DRC Region.
We will need to expend time and money on determining whether our products contain conflict minerals. If our suppliers use conflict minerals in the production of the parts and components that we purchase from them, we may need to find alternative suppliers. If possible, this may only be possible at significant expense or with material delays in production.
Our software to control our electric powertrain systems contains “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
We use software to control our electric powertrain systems that relies upon “open source” licenses and intend to use such software in the future. Although we do not believe that the open source code we have used imposes any limitations on the use of the software that we have developed, the terms of many open source licenses have not been interpreted by United States or other courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions including requirements that we make available source code for modifications or derivative works we create based upon the open source software or license such modifications or derivative works. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. We cannot be sure that all open source is submitted for approval prior to use in our solutions. In addition, many of the risks associated with usage of open source cannot be eliminated, and could, if not properly addressed, negatively affect the performance of our electric powertrains and our business.
We rely on network and information systems and other technologies for our business activities and certain events, such as computer hackings, viruses or other destructive or disruptive software or activities may disrupt our operations, which could have a material adverse effect on our business, financial condition and results of operations.
Network and information systems and other technologies are important to our business activities and operations. Network and information systems-related events, such as computer hackings, cyber threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns or malicious or other activities could result in a disruption of our services and operations or improper disclosure of personal data or confidential information, which could damage our reputation and require us to expend resources to remedy any such breaches. Moreover, the amount and scope of insurance we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches could have a material adverse effect on our business and results of operations. The risk of these systems-related events and security breaches occurring has intensified, in part because we maintain certain information necessary to conduct our businesses in digital form stored on cloud servers. While we develop and maintain systems seeking to prevent systems-related events and security breaches from occurring, the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite these efforts, there can be no assurance that disruptions and security breaches will not occur in the future. Moreover, we may provide certain confidential, proprietary and personal information to third parties in connection with our businesses, and while we obtain assurances that these third parties will protect this information, there is a risk that this information may be compromised. The occurrence of any of such network or information systems-related events or security breaches could have a material adverse effect on our business, financial condition and results of operations.
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If the governmental grants and tax credits that we receive were no longer available, our net income would be materially reduced.
We receive governmental benefits in connection with our operations. In connection with the production of our powerboats and our research into green technology, we have been able to receive tax credits and grants provided by the Quebec provincial government and the Canadian federal government. In our 2019 and 2018 fiscal years, we received scientific research and development tax credits of $163,743 and $248,750, grants of $379,601 and $274,409, respectively, under an energy and greenhouse gas emission reduction innovation support program (known as Technoclimat). We intend to continue applying for such grants and receiving such tax credits. Without such grants and tax credits, our net income in each of the past two fiscal years would have been a net loss. If they were no longer available, our business, prospects, financial condition and operating results could be adversely affected.
The unavailability, reduction or elimination of government could have a material adverse effect on our business, financial condition, operating results and prospects.
Although we are unaware of substantial governmental economic incentives, such as tax credits and rebates, that customers may receive in connection with the purchase of our products, there are certain governmental regulations whose repeal could affect the desirability of our powerboats. In particular, local and regional restrictions of internal combustion engines on certain waterways, make electric boats an attractive alternative for use in such lakes and rivers. Any reduction, elimination or discriminatory application of such rules because of policy changes or other reasons may result in the diminished competitiveness of electric boats generally. This could materially and adversely affect the growth of our market and our business, prospects, financial condition and operating results.
If we fail to manage future growth effectively, we may not be able to market or sell our powerboats or powertrains successfully.
Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our operations in the near future. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this expansion include:
| ● | training new personnel; | |
| ● | forecasting production and revenue; | |
| ● | expanding our marketing efforts, including the marketing of a new powertrain that we use; | |
| ● | controlling expenses and investments in anticipation of expanded operations; | |
| ● | establishing or expanding design, manufacturing, sales and service facilities; | |
| ● | implementing and enhancing administrative infrastructure, systems and processes; and | |
| ● | addressing new markets. |
We intend to continue to hire a number of additional personnel, including design and manufacturing personnel and service technicians for our electric boats and powertrains. Competition for individuals with experience designing, manufacturing and servicing electric boats is intense, and we may not be able to attract, assimilate, train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business and prospects.
Our business may be adversely affected by labor and union activities.
None of our employees are currently represented by a labor union, it is common in Québec for employees of manufacturers of a certain size to belong to a union. Although we do not believe that we are currently of a size where our employees will unionize, were they to do so now or in the future, we would be at risk for higher employee costs and increased risk of work stoppages. We also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs within our business, that of our key suppliers or our network of distributors, it could materially reduce the manufacture and sale of our boats and have a material adverse effect on our business, prospects, operating results or financial condition.
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Our ability to meet our manufacturing workforce needs is crucial to our results of operations and future sales and profitability.
We rely on the existence of an available hourly workforce to manufacture our products. We cannot assure you that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all. For instance, the demand for skilled employees has increased recently with the low unemployment rates in the regions where we have manufacturing facilities. Also, although none of our employees are currently covered by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions in the future. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees. Significant increases in manufacturing workforce costs could materially adversely affect our business, financial condition or results of operations.
We compete with a variety of other activities for consumers’ scarce leisure time.
Our powerboats are used for recreational and sport purposes, and demand for our powerboats may be adversely affected by competition from other activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern or taste. Similarly, an overall decrease in consumer leisure time may reduce consumers’ willingness to purchase and enjoy our products.
Product liability, warranty, personal injury, property damage and recall claims may materially affect our financial condition and damage our reputation.
We are engaged in a business that exposes us to claims for product liability and warranty claims in the event our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in property damage, personal injury or death. Our products involve kinetic energy, produce physical motion and are to be used on the water, factors which increase the likelihood of injury or death. Our products contain Lithium-ion batteries, which have been known to catch fire or vent smoke and flame, and chemicals which are known to be, or could later be proved to be, toxic carcinogenic. Any judgment or settlement for personal injury or wrongful death claims could be more than our assets and, even if not justified, could prove expensive to contest.
We do not provide warranties for our powerboats but instead rely upon the warranties provided by the third-party manufacturers from whom we purchase the components for our powerboats. Although we maintain product and general liability insurance of the types and in the amounts that we believe are customary for the industry, we are not fully insured against all such potential claims. We may experience legal claims in excess of our insurance coverage or claims that are not covered by insurance, either of which could adversely affect our business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against us could have a material adverse effect on our financial condition and harm our reputation. In addition, if any of our products or components in our products are, or are alleged to be, defective, we may be required to participate in a recall of that product or component if the defect or alleged defect relates to safety. Any such recall and other claims could be costly to us and require substantial management attention.
Our intellectual property is not protected through patents or formal copyright registration. As a result, we do not have the full benefit of patent or copyright laws to prevent others from replicating our products, product candidates and brands.
We have not yet protected our intellectual property rights through patents or formal copyright registration, and we do not currently have any patent applications pending. As we intend to transition into the production of electric powertrains to OEMs, we envision our intellectual property and its security becoming more vital to our future. Until we protect our intellectual property through patent, trademarks and registered copyrights, we may not be able to protect our intellectual property and trade secrets or prevent others from independently developing substantially equivalent proprietary information and techniques or from otherwise gaining access to our intellectual property or trade secrets. In such an instance, our competitors could produce products that are nearly identical to ours resulting in us selling less products or generating less revenue from our sales.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets, know-how and technology, which are not protected by patents, to protect the intellectual property behind our electric powertrain and for the construction of our boats. We do not yet use confidentiality agreements with our collaborators, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors to protect our proprietary technology and processes. We intend to use such agreements in the future, but these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
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Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from interfering with our commercialization of our products.
Although we currently do not have any patents or pending patent application, we intend to file patent applications in the future in connection with our electric outboard powertrain systems. The registration and enforcement of patents involves complex legal and factual questions and the breadth and effectiveness of patented claims is uncertain. We cannot be certain that we will be first to file patent applications on this or other inventions, nor can we be certain that such patent applications will result in issued patents or that any of our issued patents will afford sufficient protection against someone creating competing products, or as a defensive portfolio against a competitor who claims that we are infringing its patents. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications, if any, will result in issued patents in those foreign jurisdictions or that such patents can be effectively enforced, even if they relate to patents issued in the U.S.
We do not have trademarks for our products and trade names.
Although we use our logo as a trademark and have applied for its registration at the Canadian Intellectual Property Office, we do not have other trademarks for any of our brand names and logos in the United States or elsewhere. Any trademark applications that we file with a relevant governmental authority for brand names/logos might not be approved. Failure to obtain such approval could limit our ability to use the brand names/logos in those territories or lead our products be confused with, and/or tarnished by, competing products. Even if appropriate applications were made and approved, third parties may oppose or otherwise challenge such applications or registrations.
We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.
The status of the protection of our intellectual property is unsettled as we do not have any patents, trademarks or registered copyrights and have not applied for the same. Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our powerboats and electric powertrains or use third-party components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from third parties that allege our products or components thereof are covered by their patents or trademarks or other intellectual property rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights. If we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
| ● | cease making, using, selling or offering to sell processes, goods or services that incorporate or use the third-party intellectual property; | |
| ● | pay substantial damages; |
| ● | seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; | |
| ● | redesign our boats or other goods or services to avoid infringing the third-party intellectual property; | |
| ● | establish and maintain alternative branding for our products and services; or | |
| ● | find-third providers of any part or service that is the subject of the intellectual property claim. |
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under the laws of the Province of Québec, a substantial portion of our assets are in Canada and all of our directors and executive officers reside outside the United States
We are constituted under the laws of the Business Corporations Act (Québec) (the “Business Corporation Act”) and our executive offices are located outside of the United States in Boisbriand, Québec. All of our officers, and directors,as well as our auditor reside outside the United States. In addition, a substantial portion of their assets and our assets are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. Federal or state securities laws. Furthermore, there is substantial doubt as to the enforceability in Canada against us or against any of our directors, officers and the expert named in this prospectus who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities based solely upon the civil liability provisions of the U.S. federal securities laws. In addition, shareholders in Québec corporations may not have standing to initiate a shareholder derivative action in U.S. federal courts.
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As a result, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
Global economic conditions could materially adversely impact demand for our products and services.
Our operations and performance depend significantly on economic conditions. Global financial conditions continue to be subject to volatility arising from international geopolitical developments and global economic phenomenon, as well as general financial market turbulence, including a significant recent market reaction to the novel coronavirus (COVID-19), resulting in a significant reduction in many major market indices. Uncertainty about global economic conditions could result in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition. Access to public financing and credit can be negatively affected by the effect of these events on Canadian, U.S. and global credit markets. The health of the global financing and credit markets may affect our ability to obtain equity or debt financing in the future and the terms at which financing or credit is available to us. These instances of volatility and market turmoil could adversely affect our operations and the trading price of our common shares.
Our business may be materially affected by the COVID-19 Outbreak
The outbreak of the novel coronavirus (COVID-19) may cause disruptions to our business and operational plans. These disruptions may include disruptions resulting from (i) shortages of employees, (ii) unavailability of contractors and subcontractors, (iii) interruption of supplies from third parties upon which we rely, (iv) restrictions that governments impose to address the COVID-19 outbreak, and (v) restrictions that we and our contractors and subcontractors impose to ensure the safety of employees and others. Further, it is presently not possible to predict the extent or durations of these disruptions. These disruptions may have a material adverse effect on our business, financial condition and results of operations. Such adverse effect could be rapid and unexpected. These disruptions may severely affect our ability to carry out our business plans for 2020 and 2021.
Fluctuations in currency exchange rates may significantly impact our results of operations.
Our operations are conducted in Canada, but approximately 90% of our sales occur in the United States. As a result, we are exposed to an exchange rate risk between the U.S. and Canadian dollars. The exchange rates between these currencies in recent years have fluctuated significantly and may continue to do so in the future. An appreciation of the Canadian dollar against the U.S. dollar could increase the relative cost of our products outside of Canada, which could lead to decreased sales. Conversely, to the extent that we are required to pay for goods or services in U.S. dollars, the depreciation of the Canadian dollar against the U.S. dollar would increase the cost of such goods and services.
We do not hedge our currency exposure and, therefore, we incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the Canadian dollar. Given the volatility of exchange rates, we might not be able to effectively manage our currency transaction risks, and volatility in currency exchange rates might have a material adverse effect on our business, financial condition or results of operations.
Risks Related to Our Common Shares and this Offering
Our executive officers and directors beneficially will own approximately [ ]% of our common shares after completion of the proposed offering.
If we sell [ ] common shares in this offering (excluding any shares that may be sold as a result of the underwriter’s over-allotment option), our executive officers and directors will beneficially own, in the aggregate, [ ]% of our common shares, which includes shares that our executive officers and directors have the right to acquire pursuant to stock options which have vested or will vest within the next 60 days. As a result, they will be able to exercise a significant level of control over all matters requiring shareholder approval, including the election of directors, amendments to our Articles of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholders.
In addition, Nasdaq provides a “controlled company”, a company of which more than 50% of the voting power for the election of its directors is held by a single person, entity or group, with exemptions from certain corporate governance requirements, including the requirement that a majority of its board of directors consist of independent directors. While we will not be a "controlled company" after the offering pursuant to Nasdaq rules, two of our directors will each beneficially own approximately [--]% of our common shares through a commonly controlled entity. Any future concentration of voting power among these directors or other persons could result in our becoming a "controlled company". If we become a "controlled company," we may elect to rely on certain exemptions from Nasdaq’s corporate governance rules. In such case, you may not have the same protection afforded to shareholders of companies that are subject to those corporate governance requirements.
The continued sale of our equity securities will dilute the ownership percentage of our existing shareholders and may decrease the market price for our common shares.
Our Articles of Incorporation, as amended by our Articles of Amendment, authorize the issuance of an unlimited number of common shares, also referred to in our Articles of Amendment as Common Shares, which are issuable in four series, of which an unlimited number are designated as Voting Common Shares – Series Founder, an unlimited number are designated as Voting Common Shares – Series Investor 1, an unlimited number are designated as Voting Common Shares – Series Investor 2 and an unlimited number are designated as Non-Voting Common Shares. All of our currently issued and outstanding common shares are Voting Common Shares – Series Founder, Voting Common Shares – Series Investor 1 and Voting Common Shares – Series Investor 2, and there is no difference in the rights and obligations of the holders of shares of those classes. The common shares being offered hereby are technically common shares – Series Investor 2. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future. The issuance of any such common shares may result in a reduction of the book value or market price, if one exists at the time, of the outstanding common shares. If we do issue any additional common shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. As a result of such dilution, if you acquire common shares, your proportionate ownership interest and voting power could be decreased. Further, any such issuances could result in a change of control or a reduction in the market price for our common shares.
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The market price of our common shares may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
Currently, there is no public market for our common shares. Although we will not close this offering unless our application to list our common shares on the Nasdaq Capital Market is approved, such listing might not result in significant volume, a per common share market price in excess of the per common share price in this offering or per common share price stability. The value of your investment could decline due to the impact of any of the following factors upon the market price of our common shares:
| ● | sales or potential sales of substantial amounts of our common shares; |
| ● | announcements about us or about our competitors; |
| ● | litigation and other developments relating to our patents or other proprietary rights or those of our competitors; |
| ● | conditions in the marine product industry; |
| ● | governmental regulation and legislation; |
| ● | variations in our anticipated or actual operating results; |
| ● | change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; |
| ● | change in general economic trends; and |
| ● | investor perception of our industry or our prospects. |
Many of these factors are beyond our control. The stock markets in general, and the market for marine product companies in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broad or active public trading market for our common shares may not develop or be sustained.
We do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.
We have never paid any cash or stock dividends, and we do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of any dividends. Because we do not intend to declare dividends, any gain on your investment will need to result from an appreciation in the price of our common shares. There will therefore be fewer ways in which you are able to make a gain on your investment.
FINRA sales practice requirements may limit your ability to buy and sell our common shares, which could depress the price of our shares.
FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares and, thereby, depress their market prices.
Volatility in our common shares price may subject us to securities litigation.
The market for our common shares may have, when compared to seasoned issuers, significant price volatility, and we expect that our share price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
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We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could harm our business.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
We are a foreign private issuer within the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:
| · | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company; |
| · | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies; |
| · | we are not required to provide the same level of disclosure on certain issues, such as executive compensation; |
| · | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; |
| · | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and |
| · | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction. |
Our shareholders may not have access to certain information they may deem important and are accustomed to receiving from U.S. reporting companies.
As an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure may make our common shares less attractive to investors.
For as long as we remain an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors find our common shares less attractive as a result, there may be a less active trading market for such securities and their market prices may be more volatile.
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We incur significant costs as a result of being a public company, which costs will grow after we cease to qualify as an “emerging growth company.”
We incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the end of the fiscal year in which the fifth anniversary of this offering occurs, (b) in which we have total annual gross revenue of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common shares that is held by non-affiliates exceeds US$700 million as of the prior February 28th, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an emerging growth company, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
If we are, or were to become, a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes, U.S. investors in our common shares would be subject to certain adverse U.S. federal income tax consequences.
In general, a non-U.S. corporation will be a PFIC for any taxable year if (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. We do not expect to be a PFIC for our current taxable year or in the foreseeable future. However, there can be no assurance that we will not be considered a PFIC for any taxable year. If we were a PFIC for any taxable year during which a U.S. investor held common shares, such investor would be subject to certain adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, an additional interest charge on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. If we are characterized as a PFIC, a U.S. investor may be able to make a “mark-to-market” election with respect to our common shares that would alleviate some of the adverse consequences of PFIC status. Although U.S. tax rules also permit a U.S. investor to make a “qualified electing fund” election with respect to the shares of a non-U.S. corporation that is a PFIC if the non-U.S. corporation provides certain information to its investors, we do not currently intend to provide the information that would be necessary for a U.S. investor to make a valid “qualified electing fund” election with respect to our common shares.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute “forward-looking statements”. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. These statements appear in a number of different places in this prospectus and, in some cases, can be identified by words such as “anticipates”, “estimates”, “projects”, “expects”, “contemplates”, “intends”, “believes”, “plans”, “may”, “will”, or their negatives or other comparable words, although not all forward-looking statements contain these identifying words. Forward-looking statements in this prospectus may include, but are not limited to, statements and/or information related to: strategy, future operations, projected production capacity, projected sales or rentals, projected costs, expectations regarding demand and acceptance of our products, availability of material components, trends in the market in which we operate, plans and objectives of management.
We believe that we have based our forward-looking statements on reasonable assumptions, estimates, analysis and opinions made in light of our experience and our perception of trends, current conditions and expected developments, as well as other factors that we believe to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. Although management believes that the assumption and expectations reflected in such forward-looking statements are reasonable, we may have made misjudgments in preparing such forward-looking statements. Assumptions have been made regarding, among other things: our expected production capacity; labor costs and material costs, no material variations in the current regulatory environment and our ability to obtain financing as and when required and on reasonable terms. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used.
The forward-looking statements, including the statements contained in the sections entitled Risk Factors, Description of Business and Management’s Discussion and Analysis of Financial Conditions and Results of Operations and elsewhere in this prospectus, are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by such forward-looking statements.
Although management has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Forward-looking statements might not prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking statements or we may have mad misjudgments in the course of preparing the forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. We wish to advise you that these cautionary remarks expressly qualify, in their entirety, all forward-looking statements attributable to our company or persons acting on our company’s behalf. We do not undertake to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such statements, except as, and to the extent required by, applicable securities laws. You should carefully review the cautionary statements and risk factors contained in this prospectus and other documents that we may file from time to time with the securities regulators.
IMPLICATIONS OF BEING A FOREIGN PRIVATE ISSUER
We are considered a foreign private issuer. In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are U.S. citizens or residents, (2) more than 50% of our assets are located in the United States or (3) our business is administered principally in the United States.
We have taken advantage of certain reduced reporting and other requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.
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IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
The U.S. Congress passed the JOBS Act, which provides for certain exemptions from various reporting requirements applicable to reporting companies under the Exchange Act, that qualify as “emerging growth companies.” We are an “emerging growth company” and we will continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of US$1.07 billion (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Exchange Act Rule 12b–2. Therefore, we expect to continue to be an emerging growth company for the foreseeable future.
An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
| • | the ability to include only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations disclosure in this prospectus; | |
| • | an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and | |
| • | Exemption from mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the registrant (auditor discussion and analysis). |
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than US$1.07 billion in annual revenue, have more than US$700 million in market value of our common shares held by non-affiliates or issue more than US$1 billion of non-convertible debt over a three-year period.
Assuming the sale of US$[ ] of common shares in this offering at a price of US$[ ] per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us and assuming no exercise of the underwriter’s over-allotment option, we expect to receive net proceeds of approximately US$[----------] from this offering. If the underwriter exercises its over-allotment option in full, our net proceeds will be approximately US$[ ].
A US$1.00 increase or decrease in the assumed public offering price of US$[ ] per share would increase or decrease the net proceeds from this offering by approximately US$[ ], assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. Similarly, each increase or decrease of 100,000 shares offered would increase or decrease our net proceeds by approximately $[ ], assuming the assumed public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds of this offering (assuming no exercise of the over-allotment option) as follows, and we have ordered the specific uses of proceeds in order of priority.
| Description of Use | Estimated
Amount of Net Proceeds | |||
| Sales & Marketing | US$ | [---------] | ||
| Build Up Inventory for Order Fulfilment | US$ | [---------] | ||
| Research & Development | US$ | [---------] | ||
| Unallocated Working Capital | US$ | [---------] | ||
| Development of Rental Sales | US$ | [---------] | ||
| Total | US$ | [---------] | ||
Pending our use of the net proceeds from this offering, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.
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To date, we have not paid any dividends on our outstanding common shares. The future payment of dividends will depend upon our financial requirements to fund further growth, our financial condition and other factors which our Board of Directors may consider in the circumstances. We do not contemplate paying any dividends in the immediate or foreseeable futures.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth our capitalization as of February 29, 2020:
| • | on an actual basis, |
| • | on an as adjusted basis to reflect the application of net proceeds of $[----------] (excluding proceeds from the exercise of the over-allotment option, if any) after deducting the estimated offering expenses. |
You should read this table in conjunction with our historical financial statements and related notes appearing elsewhere in this prospectus and “Use of Proceeds.”
| As of February 29, 2020 | ||||||||
| Actual (unaudited) | As adjusted(1) | |||||||
| Assets: | ||||||||
| Current assets | $ | 1,855,030 | $ | |||||
| Property and equipment | $ | 483,136 | ||||||
| Right-of-use assets | $ | 705,737 | ||||||
| Total Assets | $ | 3,043,903 | $ | |||||
| Liabilities: | ||||||||
| Current liabilities | $ | 1,731,886 | ||||||
| Non-current liabilities | $ | 1,747,041 | ||||||
| Total Liabilities | $ | 3,478,927 | ||||||
| Shareholders’ Equity (Deficiency): | ||||||||
| Capital stock | $ | 213,100 | ||||||
| Retained earnings (deficit) | $ | (648,124 | ) | $ | ||||
| Total equity (deficit) | $ | (435,024 | ) | $ | ||||
| Total Liabilities and Shareholder’s Equity (Deficit) | $ | 3,043,903 | $ | |||||
| (1) | Converted into Canadian dollars as set out in “Currency and Exchange Rates”. |
A US$1.00 increase or decrease in the assumed public offering price per common share would increase or decrease the amount of current assets by approximately $ million and total shareholders’ equity by approximately $ million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of common shares we are offering. An increase (decrease) of 100,000 common shares offered by us, would increase (decrease) the amount of current assets by approximately $ million and total shareholders’ equity by approximately $ million after deducting estimated underwriting discounts and commissions and any estimated offering expenses payable by us.
If you invest in our common shares, your interest in our common shares will be diluted to the extent of the difference between the offering price per common share and the as adjusted net tangible book value per common share after the offering. Dilution results from the fact that the per common share offering price is substantially in excess of the book value per common share attributable to the existing shareholders for our presently outstanding common shares. Our net tangible book value attributable to shareholders at February 29, 2020 was $(435,024) or approximately $(0.0308) per common share. Net tangible book value per common share as of February 29, 2020 represents the amount of total assets less intangible assets and total liabilities, divided by the number of common shares outstanding.
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Our as adjusted net tangible book value of our common shares as of February 29, 2020 gives effect to the sale of common shares at the assumed public offering price of US$[----] (or $[----] converted as using the exchange rate as set out in “Currency and Exchange Rates”) per common share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses. We will issue [------------] common shares upon completion of the offering (and [--------] common shares if the over-allotment option is exercised in full). Our as adjusted net tangible book value as of February 29, 2020, which gives effect to receipt of the net proceeds from the offering and the issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after [---------], 2020, will be approximately $[------------] or $[----] per common share (or $[---------------] or $[----] per common share if the over-allotment option is exercised in full). This would result in dilution to investors in this offering of approximately $[----] per common share (or $[----] per common share if the over-allotment option is exercised in full) or approximately [--]% (or [--]% if the over-allotment option is exercised in full) from the assumed offering price of US$[----] per common share ($[----]). Net tangible book value per common share would increase to the benefit of present shareholders by $[----] per share attributable to the purchase of the common shares by investors in this offering (or $[----] if the over-allotment option is exercised in full).
The following table sets forth the estimated net tangible book value per common share after the offering and the dilution to persons purchasing common shares based on the foregoing offering assumptions.
| Offering Without Over- Allotment (1) |
Offering
With Over- Allotment (1) |
|||||||
| Assumed offering price per common share (US$) | US$ | [----] | US$ | [----] | ||||
| Net tangible book value per common share before the offering | $ | [----] | $ | [----] | ||||
| Increase per common share attributable to payments by new investors | $ | [----] | $ | [----] | ||||
| As adjusted net tangible book value per common share after the offering | $ | [----] | $ | [----] | ||||
| Dilution per common share to new investors | $ | [----] | $ | [----] | ||||
| (1) | U.S. dollar amounts converted into $ as set out in “Currency and Exchange Rates”. |
A US$1.00 increase or decrease in the assumed public offering price per common share would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $[----] per share (or $[----] per share if the over-allotment is exercised in full), and increase or decrease the dilution per share to new investors by approximately $[----] per share (or $[----] per share if the over-allotment is exercised in full), assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discount and estimated offering expenses payable by us. We may also increase or decrease the number of common shares we are offering. An increase (decrease) of 100,000 common shares offered by us, would increase or decrease the as adjusted net tangible book value per share after this offering by approximately $[----] per share (or $[----] per share if the over-allotment is exercised in full), and increase or decrease the dilution per share to new investors by approximately $[----] per share (or $[----] per share if the over-allotment is exercised in full).
If any common shares are issued upon exercise of outstanding options, you may experience further dilution.
All dollar amounts in this prospectus are expressed in Canadian dollars unless otherwise indicated. Our accounts are maintained in Canadian dollars, and our financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All reference to “U.S. dollars”, “USD”, or to “US$” are to United States dollars.
The following table sets forth, for each period indicated, the high and low exchange rate for U.S. dollars expressed in Canadian dollars, and the average exchange rate for the periods indicated. Averages for year-end periods are calculated by using the exchange rates on the last day of each full month during the relevant period. These rates are based on the noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.
| Period End | Period Average Rate |
High Rate | Low Rate | |||||||||||||
| Year Ended | ||||||||||||||||
| August 31, 2019 | $ | 1.3290 | $ | 1.3260 | $ | 1.3644 | $ | 1.2799 | ||||||||
| August 31, 2018 | $ | 1.3072 | $ | 1.2812 | $ | 1.3319 | $ | 1.2131 | ||||||||
| Month Ended | ||||||||||||||||
| January 31, 2020 | $ | 1.3220 | $ | 1.3089 | $ | 1.3220 | $ | 1.2998 | ||||||||
| February 29, 2020 | $ | 1.3411 | $ | 1.3286 | $ | 1.3411 | $ | 1.3217 | ||||||||
| March 31, 2020 | $ | 1.4123 | $ | 1.3960 | $ | 1.4529 | $ | 1.3334 | ||||||||
| April 30, 2020 | $ | 1.4048 | $ | 1.3911 | $ | 1.4222 | $ | 1.3903 | ||||||||
| May 31, 2020 | $ | 1.4021 | $ | 1.3972 | $ | 1.4143 | $ | 1.3879 | ||||||||
| June 30, 2020 | $ | 1.3614 | $ | 1.3552 | $ | 1.3695 | $ | 1.3379 | ||||||||
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Certain conversions from U.S. dollars into Canadian dollars have been made for your convenience at US$1.00 = $1.2962, the noon-buying price on December 31, 2019.
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History and Development of the Company
We were incorporated on August 29, 2012, under the laws of the province of Quebec, Canada, and our principal activity is the design, development and manufacturing of electric outboard powertrain systems and electric boats. We do not currently have any subsidiaries.
Corporate Headquarters
Our principal executive offices are located at 730 Boulevard du Curé-Boivin, Boisbriand, Québec J7G 2A7, Canada. Our phone number is 450-951-7009. Our website address is https://electricboats.ca. The information contained on, or that can be accessed through, our website is not part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
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General
We are in the business of designing and manufacturing electric outboard powertrain systems and our related technology. We believe that our electric outboard powertrain systems are significantly more efficient and powerful than those currently being offered in the market today. In particular, we have recorded powertrain efficiencies of more than 94%, well above the 54% efficiency that we recorded for our principal competitor’s product. Increases in powertrain efficiency allows for more power and range, both of which are highly desirable characteristics for consumers in the marketplace. Although our primary focus is on electric outboard powertrain technology, we will continue to design, manufacture and sell our high-performance, fully-electric boats to commercial and retail customers. According to Research and Markets, the global electric boat market will reach US$12.32 billion in 2027 up significantly from US$4.5 billion in 2018.
We have developed our first fully-electric outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. Our technologies used in this powertrain system are designed to improve the efficiency of the outboard powertrain and, as a result, increase range and performance. We believe our approach in marketing and selling our powertrain technology to boat designers and manufacturers will enable us to leverage their distribution and servicing systems with minimal capital outlay. We expect our core intellectual property contained within our outboard electric powertrain systems to form the foundation for our future growth and for such systems to represent the majority of our revenue shortly following this initial public offering of our common shares.
We continue to manufacture hand-crafted, highly durable, low maintenance, environmentally-friendly electric recreational powerboats. In our last two fiscal years, we manufactured 46 and 21 powerboats, respectively, and we expect to manufacture approximately 150 powerboats in the twelve months following the closing of this offering. We sell powerboats to retail customers and operators of rental fleets of powerboats through which we seek to build brand awareness. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats. We conduct our transactions directly to customers through our website or through a network of marinas, distributors and show rooms.
In an effort to improve air quality and protect local water habitats, cities and local municipalities are beginning to ban or restrict the use of gasoline- and diesel-powered boats from local waterways, lakes and rivers. For example, Teal Lake in Michigan, USA, bans the standard use of powerboat motors fueled by gasoline or diesel. This trend is beginning to take hold in other parts of the United States, including Washington state, which has provided clear examples of the harm that gasoline products cause on local waterways, and New Hampshire, where the Department of Safety has published restrictions on the use of gasoline and diesel-powered boats across its state.
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Our Electric Outboard Powertrain Systems
A powertrain system is a vehicle’s infrastructure that converts energy into movement. In an electric boat, that infrastructure starts at the battery pack, continues with an inverter, goes to the motor and ends with the propeller. Electric powertrains have less moving parts than powertrains for boats with an internal combustion engine and, as a result, tend to break less and require less complex servicing.
The efficiency of a powertrain system determines the range of a boat on a single battery charge and the speed at which the boat operates. We find existing electric powertrain systems unsatisfactory because of their insufficient yields and limited power range. In 2015, we decided to research technology to take advantage of this vacuum and develop an in-house system, relying on existing third-party components where possible. We noted the need for innovation in the following areas:
| ● | optimizing the electric motor to improve efficiency and range by customizing the power to the motor from different battery suppliers; |
| ● | developing optimization software that reads and calibrates the controller to suit the current use of the outboard electric powertrain system; |
| ● | using appropriate components, including the battery; |
| ● | customizing gears and propellers to a boat's specifications. We have recorded the efficiency of our principal competitor’s electric powertrain system as 54%, meaning that only 54% of the power leaving the battery pack reached the propeller. Our proprietary union and direct transmission system allow our prototype powertrains to have an efficiency of 94% which provides a competitive advantage over current electric outboard motors. We have also chosen a propeller design which when combined with the efficiencies obtained using our proprietary union and transmission system, provides optimal results; and |
| ● | developing an innovative controller, in particular, one that: |
| o | improves control over thermal overheating and thus protects the electric powertrain system; |
| o | incorporates a dual electrical and mechanical cooling system allowing for a better performance of the electric powertrain system; |
| o | detects possible operating problems (for example cavitation); and |
| o | reduces jolts and noise. |
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Our electric powertrain is designed to have 180 hp (horsepower) and 236 Lb. ft at 94% load. Furthermore, the electric powertrain system will be liquid cooled as compared to air cooled.
We intend to produce our electric powertrain at our current facilities in Quebec. We believe that we can produce up to 300 electric powertrains per year in addition to producing 150 boats in our current facilities in the year following the initial public offering. If customer demand is sufficiently high for our electric powertrains and we foresee demand for more than 300 units in a year, we will require additional manufacturing space. Although we believe that we will be able to find comparable space at a similar price on relatively short notice, including space adjacent to our current facility that is owned by our current landlord and our CEO, such space may not be available when needed.
The production of our electric powertrain will consist of assembling components from third parties, including battery packs, inverters and high-efficiency motors. We intend to use advanced batteries in our battery packs but do not envision depending on a limited number of suppliers as we will be able to use a wide range of batteries. Consequently, we have not entered into long-term contracts for the supply of batteries. We will source the inverters from UQM (Danfoss Editron) and motors from UQM (Danfoss Editron) and Dana TM4.
Our electric powertrains will be controlled by control software developed in house. We have used open-source software code to develop our own battery management system software that will be tailored to regulate the power from the battery pack to the electric motor and its related systems.
We have received governmental support in connection with our development of electric powertrain. In our 2019 and 2018 fiscal years, we respectively received scientific research and development tax credits of $163,743 and $248,750, grants of $379,601 and $274,409 under an energy and greenhouse gas emission reduction innovation support program (known as Technoclimat).
Specifications of our first outboard electric powertrain:
We have developed our first fully-electric outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly between the transmission and the electric motor design and extensive control software. We set out below the current specifications of this outboard electric powertrain.
| Maximum power | 180 HP, 135 kW |  |
 |
| Max torque | 250 ft.lb, 340 Nm | ||
| Continuous power | 90 kW | ||
| Voltage | 650 V | ||
| Efficiency | 94% | ||
| Weight | 413 Lbs., 188 kg | ||
| Lithium Battery | 60 - 420 kW | ||
| Shaft Length | S – XL | ||
| Cooling | Water | ||
| Control | Can bus |
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As we develop our electric powertrain systems, we envisage a 300-horsepower version of our electric outboard engine to be released within the next 18 months.
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Our Powerboats
We manufacture four models of electric powerboats and are preparing to launch a fifth model. Each model is available in different standard variations or may be customized according to a purchaser’s specifications. The following table sets out the specifications of our different models, although the specifications of any specific powerboat within that line would depend on the variation purchased or the customizations requested.
| Phoenix 290* | Bruce 22 | Volt 180 | Fantail 217 | Quietude 156 | |
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 |
 |
 |
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| Price Range | $175,000 - $325,000 | $68,995 - $289,995 | $34,995 –$190,000 | $38,995 – $90,000 | $22,995 – $38,000 |
| Maximum speed | 51.5 km/h (32 mph) | 65.9 km/h (41 mph) | 48 km/h (30 mph) | 9.66 km/h (6 mph) | 8.05 km/h (5 mph) |
| Cruising speed | 32.2 km/h (20 mph) | Up to 32 km/h (20 mph) | Up to 24 km/h (15 mph) | 8.05 km/h (5 mph) | 6 – 13 km/h (4-8 mph) |
| Capacity | 10 passengers | 5-8 passengers | 11 Canada, 14 US | 8-10 passengers | 4 passengers |
| Dry Weight | 1996 Kg (4400 pounds) | 1088 Kg (2400 pounds) | 720 kg (1600 pounds) | 775 kg (1705 lbs.) | 800lbs |
| Hull Material | Fiberglass | Fiberglass | Fiberglass (Infusion Sandwich) | Fiberglass | Fiberglass |
| Overall Length | 8.3 m (29 feet) | 6.7 m (22′) | 5.4 m (17’9”) | 6.6 m (21’7”) | 4.7 m (15’6”) |
| Overall Width | 2.6 meters (8’5”) | 2.08 m (6’6”) | 2.13 m (7’) | 2.03 m (6’8”) | 1.5 m (4’11”) |
| Draft | 0.45 m (18”) | 0.30 m (12”) | 0.43 m (20”) | 0.18 m (8”) | |
| Homologation | USA, Canada, EU | USA, Canada, EU | USA, Canada, EU | USA, Canada, EU | USA, Canada, EU |
| Woodwork | Mahogany, Teak | Synthetic | Synthetic | Synthetic | |
| Propulsion | Twin Deep Blue 80 HP | Minn Kota, Torqeedo or Piktronic | Minn-Kota or Torqeedo | Minn-Kota, E-Tech engine, E-Tech Propulsion, Torqeedo salt-water engine | Minn-Kota |
| Battery Type | Lithium ion/80 kW BMW i3 | Lithium ion | Lead Acid, Lithium Relion or Lithium BMW | Lead Acid, Lithium Relion or Lithium BMW | Lead Acid |
* Proposed specifications based on prototypes
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For each of our boats, our consumers are able to customize certain aspects including color (for the hull, striping, interior and deck), radio and covers and other storage options. In addition, there are customizations that are just available for some boat models, including propulsion and batteries.
Phoenix 290
 |
We have been developing the Phoenix 290 as the next in our line of boats. The Phoenix 290, a 29-foot powerboat capable of accommodating up to 12 people, comes equipped with two Torqeedo Deep Blue engines. We unveiled the Phoenix 290 at the Miami boat show in February 2020. We anticipate that we will begin production of the Phoenix 290 in 2021. |
Bruce 22
 |
Reaching speeds of up to approximately 41 miles per hour (66 kph), the Bruce 22 is our flagship boat. We offer three variations of the Bruce 22: a Hatchback Classic (a 100 kWh five-seater starting at $279,995), an Open Utility (a 100 kWh eight-seater starting at $289,995) and the Bruce22 T (a 4 kWh eight-seater starting at $68,995). In addition to the customizations that are available for each of our boats, purchasers may customize the Bruce 22 by choosing among various options including type of propulsion (Piktronic, Torqeedo or Min-Kota), inserts (mahogany, permatek and fiber glass) and other options (including ski pole, underwater light and a swim platform). In our 2019 fiscal year, we sold 5 Bruce 22s. |
Volt 180
|
Reaching speeds of up to approximately 30 miles per hour (48 kph), the Volt 180 is a powerful boat that can be used for various watersports. In addition to the customizations that are available for each of our boats, purchasers may customize the Volt 180 by choosing among various options including the power of the motor (available in 2, 3, 6, 10 and 60 kilowatts), accessories (including racing seats, fish rod holder, depth finder and anchor) and other options (including bumper, types of canopies and a premium sound system). In our 2019 fiscal year, we sold 14 Volt 180s. |
Fantail 217
 |
We designed the Fantail 217 with a view towards relaxation rather than speed. The Fantail 217 starts at $38,995, seats up to ten people and has a maximum speed of approximately 10 miles per hour (6 kph). In addition to the customizations that are available for each of our boats, purchasers may customize the Fantail 217 by choosing among various options including the type of motor (Torqeedo Salt Water, E-Tech, Min-Kota or E-Propulsion), type of battery (lead acid, lithium relion, lithium BMW 48-5000), number of batteries (up to eight), type of canopy (aluminum, stainless steel or fiberglass) and other options (including night navigation light, a double horn and bottom paint). In our 2019 fiscal year, we sold 23 Fantail 217s. |
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Quietude 156
 |
As the name suggests, we designed the Quietude 156 with an eye towards tranquility over speed or power. The Quietude 156 starts at $22,995, seats four passengers and reaches a top speed approximately 5 miles per hour (8 kph). The Quietude 156 comes with a Min-Kota 36V motor and three lead acid batteries, but purchasers may still customize other aspects of the Quietude 156 by choosing among various options including the type of table to be used, the type of canopy and electronics that can be included (such as a bluetooth marine radio and a depth meter). In our 2019 fiscal year, we sold 4 Quietude 156s. |
Sales
We currently generate over 90% of our revenue from the sale of our electric power boats. In our 2019 fiscal year, we sold 46 of our electric powerboats for revenue of $2,664,000, and in our 2018 fiscal year we sold 21 of our electric powerboats for revenue of $1,036,000. In the six months ended February 29, 2020, we generated $353,000 from the sale of electric powerboats. Our sales are to retail customers and operators of rental fleets of powerboats.
Although we have yet to commercialize our electric powertrains, we have received non-binding letters of intent from OEMs for the purchase of such powertrains. Under the LOIs, OEMs have indicated their interest in purchasing 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for the year ended August 31, 2024. Such LOIs are non-binding and may never result in any actual sales. The projected sales price for our first electric outboard powertrain system is $100,000.
Sales of New Powerboats to Retail Purchasers
We sell our powerboats to retail purchasers. In our 2019 and 2018 fiscal years, we sold 15 and 5 powerboats to retail customers, respectively, which was approximately 33% and 24% of all sales.
Sales of Fleets of New Powerboats
We sell our powerboats to persons operating fleets of rental boats. In our 2019 and 2018 fiscal years, we sold 31 and 16 powerboats to rental fleet operators, respectively, which was approximately 67% and 76% of all of our sales. These sales were to related parties. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats.
Suppliers
We purchase all of our product parts and components from third-party suppliers. Some of these parts and components are manufactured to our specifications (such as hulls and motors) while others are bought “off the shelf” (such as batteries and canopies). We do not maintain long-term contracts with preferred suppliers, but instead rely on informal arrangements and off-the-shelf purchases. We have not experienced any material shortages in any of our product parts, or components. Temporary shortages, when they do occur, usually involve manufacturers of these products adjusting model mix, introducing new product lines, or limiting production in response to an industry-wide reduction in boat demand.
Electric Powertrains
The most significant parts and components we intend to use in manufacturing our electric powertrains are:
| • | engines – we intend to rely on two suppliers of engines, UQM (Danfoss Editron) and Dana TM4; |
| • | lithium-ion batteries – we intend to use duplicate suppliers as multiple producers make lithium-ion batteries we can use in our product candidate at a price and quality that we are looking for; |
| • | inverter –we intend to source our inverters from UQM. |
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Power Boats
The most significant parts and components used in manufacturing our boats are:
| • | engines – we use three suppliers of engines, Torqeedo (for the Bruce 22, the Fantail 217 and the Volt 180), Min Kota (for the Bruce 22, the Fantail 217, the Volt 180 and the Quietude 156) and E-Tech Propulsion (for the Fantail 217); |
| • | lithium-ion batteries – we source duplicate suppliers for our lithium-ion batteries, including Relion and BMW, and believe that we could source batteries at a similar price from the market were these suppliers unable to meet our demand; |
| • | hulls – we have two suppliers of the hulls that we use in our boats, but we believe that we could source hulls of a similar quality and at a similar price without significant delay to our production schedule were these suppliers unable to meet our demands. |
As we do not produce any of the parts of components of our electric powertrains or electric powerboats, we do not materially use, or intend to use, any raw materials in their production. The manufacturers of the parts and components that we use, however, do use raw materials, including resins, fiberglass, hydrocarbon feedstocks, steel and various minerals, especially in the production of the engines and batteries that we use. We do not control how these third parties source the raw materials that they use, and we may suffer production delays if such third parties do not have access to all of the raw materials that they need or source conflict minerals in violation of applicable regulations.
Patents and Licenses
We do not currently have any patents or any patent applications pending, and we do not rely on any licenses from third parties at this time.
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we intend to rely on a combination of patent and design applications, trade secrets, including know-how, employee and third-party non-disclosure agreements, copyright laws, trademarks and other contractual rights to establish and protect our proprietary rights in our technology. We intend to continue to file patent applications with respect to components of a powertrain that we are developing. We do not know whether any of our patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Even if granted, these pending patent applications might not provide us with adequate protection.
Trademarks
We use our logo as a trademark and have applied for its registration at the Canadian Intellectual Property Office. We have operated under the trade name “CANADIAN ELECTRIC BOAT COMPANY” and are transitioning to operating under the name “VISION MARINE TECHNOLOGIES”, but neither these nor any of the names of the models of our boats are currently registered trademarks.
This prospectus contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
Industry Overview
In North America, 75 million people go boating every year, according to the U.S. Coast Guard, with 12 million recreational vessels registered with the U.S. Coast Guard in 2018. Within the boating market, there is an outboard motor market and an electric boat market. Our products fall into each of those categories, and if produced, our electric powertrains will be used in boats in both those markets.
Outboard Motor Market
An outboard motor is a propulsion system for boats, consisting of a self-contained unit that includes engine, gearbox and propeller or jet drive, designed to be affixed to the outside of the boat. As well as providing propulsion, outboards provide steering control, as they are designed to pivot over their mountings and thus control the direction of thrust. Outboard motors tend to be found on smaller watercraft as it is more efficient for larger boats to have an inboard system. Although outboard engines powered by fossil fuels have traditionally dominated this market and continue to do so, electric outboard motors are a relatively new phenomenon that have been growing in step with the growth in the electric boat market.
According to the NMMA, sales of outboard engines in the United States (which includes outboard motors) increased to a thirteen-year high of 280,300 units representing sales market of US$2.9 billion. Consumer demand for higher-performance engines continued to trend upward in 2019, with double digit gains in sales for engines with 200 and greater horsepower. Engines with between 200 and 300 horsepower accounted for 16.3% of all sales of outboard engines, and those with over 300 horsepower accounted for 10%. Overall, the average horsepower of all outboard engines sold in 2019 reached a record-high of 127.6 hp, up 6.9% from the prior year’s average of 119.4 horsepower and up 46% from the average ten years prior of 87 horsepower.
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Although many recreational boats can be powered by outboard or inboard motors, many consumers prefer outboard motors. Among the reasons for their preference are that, unlike inboard motors, outboard motors can be easily removed for storage or repairs, they provide more room in the boat as they are attached to the transom outside of the boat, they tend to have a shallower draft and they can be more easily replaced in the event the motor no longer works or a desire to upgrade to a higher horsepower.
There are many manufacturers of outboard motors. Some of these manufacturers are subsidiaries of massive global conglomerates, like Yamaha, Bombardier and Suzuki, that have more resources and experience in the market than we do. Others are relatively new startups, like us, that may be more nimble and adaptive to changes in the outboard motor market than we will be. We deem our biggest competitor in the electric outboard motor market to be Torqeedo.
Electric Boat Market
Although electric boats have been available for over 100 years, interest in them was minimal until the 1990s when the first studies were conducted in the United States following the suspicion that motorboats contaminate aquatic environments significantly through loss of gasoline and lubrication oil. According to Andre Mele, recreational boats pollute as much as cars and trucks in the United States. In the early 2000’s, 8 million speedboats in the United States released 15 times more pollutants annually into the environment than the oil spill produced by the oil tanker Exxon Valdez in 1989. The sinking of this tanker in Alaska had released 11 million U.S. gallons of hydrocarbons into the environment. After conversion, this means that each boat releases an average of 78 L of hydrocarbons into aquatic environments each year. If that average is still current, we estimate that in 2019 oil losses in the environment via motorboats equaled 150,000 tons of hydrocarbon scaly leaks in Canada (based on 2 million vessels), 750,000 tons of hydrocarbon scaly leaks in the United States (based on 10 million vessels) and 450,000 tons of hydrocarbon scaly leaks in Europe (based on 6 million vessels).
This explains why some lakes and bodies of water have recently banned motorboats. The total elimination of gasoline immediately eliminates a very large source of marine pollution, with immediate results: possibility of beaches, swimming and reduction of BOD (biochemical oxygen demand) and DCO (direct chemical oxidation) of ambient water. Specifically, hydrocarbons, similar to the dirt that clings to the walls of a bathtub, contaminate the shores and banks of lakes, rivers and bodies of water, where the development of many living organisms takes place. The ecosystem is then modified with the scarcity or disappearance of certain species.
In an effort to tackle air pollution, cities around the world are beginning to ban all gasoline - and diesel-powered boats from the center of the city. One of the first cities to implement this change is Amsterdam, Netherlands. This movement to electrically powered boats has been implemented in Venice, where the city has restricted the movement of gasoline - and diesel-powered boats, while exempting electrically powered boats.
Interest in electric boats has also been driven by decreases in their cost largely as a result of a decrease in the price of the batteries used to power them. The average price per kilowatt hour of a lithium-ion battery fell from approximately US$1,200 in 2010 to below US$200 in 2018.
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The electric boat market is competitive in nature with much of that competition of late focusing on launching new E-boats that have longer range and higher speed than currently available boats. The global electric boat market in 2018 was worth approximately US$4.5 billion, according to Research and Markets which expects that market to reach US$12.32 billion by 2027, a cumulative annual growth rate of 11.9%. Research and Markets predicts that the growth in the electric boat market will be caused by:
| ● | advancement in battery technology that offers longer run-time and higher speed; |
| ● | decreasing battery prices; |
| ● | problems inherent to internal combustion engine boats, including a high pollution rate and the comparatively high fuel prices; and |
| ● | other noteworthy advantages offered by electric boats, such as noiseless and smokeless use and less vibration and less engine maintenance than boats that use internal combustion engines. |
The electric boat market is segmented into two categories, hybrid and pure electric boats. In 2018, hybrid electric boats represented approximately 70% of the electric boat market. The NMMA anticipates that the market shares of the pure electric boat segment will meaningfully increase during the period from 2019 to 2027 owing to advancements in battery technology. On the basis of passenger capacity, electric boats with a capacity of less than 10 passengers captured the highest share of the global electric boat market in 2018. Additionally, the same segment is the fastest-growing segment pertaining to high demand for small boats for recreational purposes from the rich class of the U.S., Canada, and Western European countries.
Government Support
Although the recreational powerboat industry does not generally receive much direct governmental support, we have received tax credits from, and grants provided by, the Quebec provincial government and the Canadian federal government primarily in connection with our development and promotion of green technology. In our 2019 and 2018 fiscal years, we respectively received scientific research and development tax credits of $163,743 and $248,750, grants of $379,601 and $274,409 under an energy and greenhouse gas emission reduction innovation support program (known as Technoclimat). We intend to continue applying for such grants and receiving such tax credits. Although we do not consider the receipt of such credits and grants as essential to our operations, if they were no longer available, our business, prospects, financial condition and operating results could be adversely affected.
Competitive Advantages & Operational Strengths
We face competition from manufacturers of:
| (i) | electric powertrain systems that sell to OEMs, |
| (ii) | traditional fossil fuel-powered recreational powerboats in general and |
| (iii) | electric recreational powerboats in particular. |
We intend to sell our electric powertrains to OEMs for use in their boats. We are currently aware of one company (Torqeedo) that produces electric powertrains for OEMs, and as a result we believe that there is a viable and meaningful market opportunity in this market for us. Although, we believe that our electric powertrain systems are more efficient and powerful than current offerings on the market, our competitors, including Torqeedo, may have greater resources than we do and OEMs may find their designs or price to be more attractive than ours. Even if we produce electric powertrains and sell them to OEMs, other competitors may enter the field or the OEMs may decide to produce their own powertrains and cease purchasing ours.
The recreational powerboat industry is highly competitive for consumers and dealers. Competition affects our ability to succeed in the markets we currently serve and new markets that we may enter in the future. Some potential purchasers of powerboats may not have a preference as to whether they will purchase electric power boats or fossil fuel powered ones. To that end, we compete with several large manufacturers, such as Brunswick Corporation, MasterCraft Boat Holdings, Inc. and Correct Craft, that produce fossil fuel powerboats and have greater financial, marketing and other resources than we do. To the extent that OEMs incorporate our electric powertrains into their boats, those boats will also compete with traditional fossil fuel power boats. We compete with large manufacturers who are represented by dealers in the markets in which we now operate and into which we plan to expand. We also compete with a wide variety of small, independent manufacturers. Competition in our industry is based primarily on brand name, price and product performance.
The electric recreational powerboat market is evolving and companies within it must be able to adapt without jeopardizing the timing, quality or quantity of their products. We deem our principal competitors within this market to be Duffy Electric Boat Company, Elctracraft, Pender Harbour, Elco Motor Yachts Company (formerly known as Launch Electric Company), Budsin Wood Craft, Ruban Bleu Electric Boats, Frauscher Boats and Boote Marian GmbH. In addition to the matters mentioned above, we compete with other manufactures of recreational electric boats on technological developments (such as powertrain efficiency, life of batteries and battery use per charge) and partnerships with battery and motor suppliers. As electric boat technology improves, we anticipate that more manufacturers will market. As they do, we expect that we will experience significant competition.
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We believe the primary competitive factors in our market include but are not limited to:
| ● | technological innovation; | |
| ● | product quality and safety; | |
| ● | service options; | |
| ● | product performance; | |
| ● | environmental friendliness; | |
| ● | design and styling; and | |
| ● | brand perception. | |
Most of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Most of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition, many of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.
Furthermore, certain large manufacturers offer financing options on their powerboats and also have the ability to market powerboats at a substantial discount, provided that the boats are financed through their affiliated financing company. We do not currently offer any form of direct financing on our boats. The lack of our direct financing options and the absence of customary boat discounts could put us at a competitive disadvantage.
We might not be able to compete successfully in our market. If our competitors introduce new powertrains, powerboats or services that compete with or surpass the quality, price or performance of our powertrains, powerboats or services, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us to generate attractive rates of return on our investment. Increased competition could result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition and operating results.
We believe that our experience, production capability, product offering and management give us the ability to successfully operate in the recreational electric powerboat market in a way that our competitors cannot. In particular, we believe that we have a number of competitive advantages, including:
| · | technological innovation: we have demonstrated our capacity to develop our own products through research and development by introducing the Volt 180, which currently holds the speed record for a certified electric boat, and our recent introduction of the Phoenix 290. We believe that the technological design of our electric powertrain will provide efficiency at a price that our competitors will not be able to match. |
| · | product performance: the efficiency of our powertrain systems provides the boats they are in greater speed and range, results that are magnified when combined with our ultra-hydrodynamic hull designs. |
| · | certification: unlike some of our competitors, our boats, excluding the Phoenix 290 for which we will shortly seek certification, are certified by the U.S. Coast Guard and the Canadian Coast Guard in Canada and meet the European Union’s imported manufactured products standards. We intend to have such certification for our electric powertrain systems as well as that of the ABYC and to receive CE marking indicating their conformity with health, safety, and environmental protection standards within the European Economic Area. |
| · | product price: although the price of our boats depends on the customer’s specifications, we believe that our products are competitively priced across all models and with all customizations. We have not priced our first powertrain system yet but intend to do so in a way that is competitive for its performance. |
| · | management expertise: our founders have extensive experience in offshore power boating and are aware of what is required by customers in regard to power and efficiency of outboard electric powertrain systems. The inherent reputation of our management team over 25 years has built our brand for quality and technologically advanced products. |
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Strategy
As a designer, manufacturer, and marketer of premium electric boats and electric powertrain systems, we strive to design new and innovative products that appeal to a broad customer base. Since fiscal 2014, we have successfully launched a number of new products and features with best-in-class quality leading to increased sales and significant margin expansion. Furthermore, our unique product development process enables us to offer products with innovative offerings that we believe will be difficult for our competitors to match without significant additional capital investments, most notably our outboard electric powertrain system.
We are developing innovative electric outboard powertrain systems designed to enable us to capture market share, as the outboard powertrain industry moves to electric powertrain outboard motors to comply with local green initiatives. The NMMA estimates that total retail orders of outboard engines was US$2.9 billion in 2018, and Global Market Insights estimates that sales of outboard engines will reach US$17 billion by 2025.
We sell our electric boats to retail customers as well as to boat clubs and boat rental operations. We intend to continue to build brand awareness by partnering with marina operators to offer rental fleets of electric boats. We plan to further expand our sales by offering our products via third party dealerships and by attending more tradeshows. As we launch our innovative electric outboard powertrain systems, we will directly market to OEMs of boats, thereby leveraging their support and distribution systems. We will market our electric powertrains to the OEMs by attending trade shows, inviting the OEMs to test the electric outboard powertrains on a prototype boat, introducing the electric powertrain using social media avenues and advertising the electric powertrain systems in trade journals.
We will continue to implement a number of initiatives to reduce our cost base and to improve the efficiency of our manufacturing process. Additionally, we have fostered a culture of operational improvement within our workforce, which will lead to further operational efficiencies. Finally, we intend to invest in further research and development to ensure that we develop innovative electric powertrain systems thus expanding the number of OEMs that will use our products.
We intend to increase our international sales and expand our network of international distributors and dealers.
Manufacturing
We produce our electric recreational powerboats and related components at our 15,000 square foot assembly warehouse in Quebec and intend to produce our electric powertrains in the same facility. In our last two fiscal years, we manufactured 46 and 21 powerboats, and we expect to manufacture approximately 150 electric boats and 300 electric powertrains in the twelve months following the closing of this offering. We run one assembly lines and have a production capacity that allows us to produce up to seven boats a week depending on the type of boats and the specifications of each order. We believe that we will be able to produce up to 300 electric powertrains per year without needing additional manufacturing space.
Marketing
As we intend to sell our electric powertrains to a handful of OEMs, we will market the powertrains to them in a direct and focused manner. This will entail visits to the OEMs and visits from the OEMs at our production facility as well as general exposure of our powertrains at trade shows and in trade journals.
We primarily use our website and social media to sell our boats. We support this effort by attendance at trades shows (boat shows) that exposes our products to the boat buying public and to industry specialists. We intend to continue to expand our social media presence and attend more trade shows in North America and internationally. We also rely on a network of distributors and dealers, and their marketing efforts, for the sale of our boats and seek to grow this network following the initial public offering. We do not currently have a coordinated marketing effort with our network of distributors and dealers.
Sales and Service Model
As we do not have a direct relationship with the purchasers of the boats that incorporate our electric powertrains, we do not intend to service such purchasers directly if there is a problem with the powertrain. Rather, the OEMs of the boats incorporating the powertrains will service such purchasers, and we will provide OEMs instruction on their repair and provide training to OEM personnel at our facilities on a periodic basis, so that the OEMs can provide maintenance, repair and customer support to their customers. As we introduce new electric powertrain systems, we will continue to provide training to OEM personnel.
Currently, most of the sales of our electric boats are directly placed with us online, but approximately 67% of our sales in our 2019 fiscal year were derived from our network of independent dealers. While we will continue to market direct sales through our website, we seek to increase revenues and diversify our sales points by expanding our network of independent dealers. We envision an increase in the number of dealers supporting our products and the quality of their marketing and servicing efforts as being essential to our ability to increase sales. We may not be successful in our effort to grow our network of independent dealers.
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Sales Model
We sell directly to the customer via online, social media marketing and the attendance at boat shows. We also sell our boats through a limited number of dealers and distributors. We will further expand our product offerings to third-party dealerships and by selling directly to OEMs.
Service Model
We do not offer direct servicing of our boats and do not offer a warranty for our boats. Purchasers of our boats are able to rely on the warranties provided by the manufacturers of the parts used in our boats, including the motors, the batteries and certain other components.
Government Regulation
Our operations are subject to extensive and frequently changing federal, state, provincial, local and foreign laws and regulations, including those concerning product safety, environmental protection and occupational health and safety. We believe that our operations and products are in compliance with these regulatory requirements. Historically, the cost of achieving and maintaining compliance with applicable laws and regulations has not been material. However, future costs and expenses required for us to comply with such laws and regulations, including any new or modified regulatory requirements, or an inability to address newly discovered environmental conditions could have a material adverse effect on our business, financial condition, operating results, or cash flows.
The regulatory programs that impact our business include the following:
Certain materials used in our manufacturing, including the resins used in production of our boats, are toxic, flammable, corrosive, or reactive and are classified by the federal, state and provincial governments as “hazardous materials.” Control of these substances is regulated by the Environmental Protection Agency (EPA) and state pollution control agencies under the Federal Resource Conservation and Recovery Act, and related state programs in the United States, and by Environment and Climate Change Canada and Health Canada and provincial pollution control agencies under the Canadian Environmental Protection Act, 1999 and related provincial legislation in Canada. Storage of these materials must be maintained in appropriately labeled and monitored containers, and disposal of wastes requires completion of detailed waste manifests and recordkeeping requirements. Any failure by us to properly store or dispose of our hazardous materials could result in liability, including fines, penalties, or obligations to investigate and remediate any contamination originating from our operations.
The United States Clean Air Act and the Canadian Environmental Protection Act
The United States Clean Air Act (the “CAA”) and the Canadian Environmental Protection Act, 1999 (the “CEPA”) and corresponding state and provincial rules regulate emissions of air pollutants. Because our manufacturing operations involve molding and coating of fiberglass materials, which involves the emission of certain volatile organic compounds, hazardous air pollutants, and particulate matter, we are required to comply with Canadian federal and provincial environmental protection regulations. The hulls used in our products are all manufactured by third parties. The additional cost of complying with these regulations has increased our cost to purchase hulls and, accordingly, has increased the cost to manufacture our products.
In addition to the regulation of our manufacturing operations, the EPA has adopted regulations stipulating that many marine propulsion engines meet certain air emission standards. The engines used in our products, all of which are manufactured by third parties, are warranted by the manufacturers to be in compliance with the EPA’s emission standards. Furthermore, the engines used in our products must comply with the applicable emission standards under the CEPA and corresponding provincial legislation. The additional cost of complying with these regulations has increased our cost to purchase the engines and, accordingly, has increased the cost to manufacture our products.
If we are not able to pass these additional costs along to our customers, it may have a negative impact on our business and financial condition.
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Boat Manufacturing Standards
As a manufacturer of small vessels established in Canada, we are required to ensure that:
| ● | our boats comply with all the applicable construction requirements of Part 7 of the Small Vessel Regulations (Canada) and Transport Canada’s Construction Standards for Small Vessels (TP 1332E); |
| ● | for each boat, a Declaration of Conformity is produced to Transport Canada in accordance with Part 8 of the Small Vessel Regulations (Canada) stating that the boat meets all the construction requirements and that a Compliance Notice is attached to the boat; and |
| ● | each boat is marked with a Hull Serial Number (HIN) (also known as a Hull Identification Number) in accordance with Part 9 of the Small Vessel Regulations (Canada). |
Boat Safety Standards
Our powerboats must be manufactured to meet the standards of certification in the jurisdictions in which they are used or to which they are imported. This means that our powerboats must meet the standards of certification required by the U.S. Coast Guard and the Canadian Coast Guard in Canada and they must be certified to meet the European Union’s imported manufactured products standards in the European Union. These certifications specify standards for the design and construction of powerboats. We believe that all our boats meet these standards. In addition to those standards, we believe that our powerboats meet the safety standards set by the ABYC, a non-profit, member organization that develops voluntary safety standards for the design, construction, maintenance, and repair of recreational powerboats.
Safety of recreational boats in the United States is subject to federal regulation under the Boat Safety Act of 1971, which requires boat manufacturers to recall products for replacement of parts or components that have demonstrated defects affecting safety. Any recall of our boats or components in our boats could result in large expenditures and tarnish our brand.
Labor regulations
The Act respecting occupational health and safety (Quebec) and the regulations made thereunder impose standards of conduct for and regulate workplace safety, including limits on the amount of emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant ventilation. Our facilities are subject to inspection by Canadian, Quebec and local agencies and departments. We believe that our facilities comply in all material aspects with these regulations. We have made a considerable investment in safety awareness programs and provide ongoing safety training for all of our employees.
Research and Development
Among other factors, our boats are distinguished from their competitors as a result of design and technological features. We invest in research and development to develop and improve these features so that we may innovate future product offerings in boat and electric powertrain systems. For example, our Volt 180 was developed in conjunction with a Canadian government grant.
Seasonality
Our current operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including:
| • | seasonal variations in retail demand for boats, with a significant majority of sales occurring during peak boating season; |
| • | product mix, which is driven by boat model mix and higher option order rates; while sales of all our boats generate comparable margins, sales of larger boats and boats with optional content produce higher absolute profits; |
| • | inclement weather, which can affect production at our manufacturing facilities as well as consumer demand; |
| • | competition from other recreational boat manufacturers; and |
| • | general economic conditions. |
We do not envision the sales of our electric powertrains to OEMs will be seasonal. As building a boat is a time-consuming process, we expect that OEMs will build their boats and increase their inventory even in those seasons where sales are generally lower in preparation for the seasons of higher sales.
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Employees
As of July 7, 2020, we employed a total of 14 people full-time and no one part-time. All of our employees were employed at our principal executive offices in Boisbriand, Québec. None of our employees are covered by a collective bargaining agreement.
The breakdown of full-time employees by main category of activity is as follows:
| Activity | Number of Full-Time Employees | ||||
| Administration | 6 | ||||
| Manufacturing | 8 | ||||
Property, Plant and Equipment
Our manufacturing and office space is located in Boisbriand, Québec, just outside of Montreal. This space is in two adjacent units each under a separate lease with a related party. One lease is for approximately 3,600 square feet, has a monthly rent of approximately $3,000 and expires on June 30, 2024. The other lease is for approximately 8,210 square feet, has a monthly rent of approximately $8,550 and expires on May 31, 2022. We consider our office and manufacturing space sufficient to meet our current needs and our needs in the year following this offering.
We do not own any real property and do not lease any other properties.
Legal Proceedings
We are not involved in, or aware of, any legal or administrative proceedings contemplated or threatened by any governmental authority or any other party. As of the date of this prospectus, no director, officer or affiliate is a party adverse to us in any legal proceeding or has an adverse interest to us in any legal proceeding.
Selected Historical Financial Data
You should read the following selected financial data together with our historical financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.
Selected Historical Financial Data
The selected historical financial information set forth below has been derived from our audited financial statements for the fiscal years ended August 31, 2019 and 2018 and from our unaudited financial statements for the six-month period ended February 29, 2020 and February 28, 2019.
Statement of Comprehensive (Loss)
| Year ended August 31, | Six months ended | |||||||||||||||
| 2019 | 2018 | February 29, 2020 |
February 28, 2019 |
|||||||||||||
| Revenue | $ | 2,869,377 | $ | 1,271,566 | $ | 436,193 | $ | 1,271,552 | ||||||||
| Gross Profit | $ | 1,285,364 | $ | 501,727 | $ | 233,560 | $ | 589,844 | ||||||||
| Net and Comprehensive Income/(Loss) | $ | 233,066 | $ | (185,848 | ) | $ | (477,797 | ) | $ | 54,647 | ||||||
| Income/(Loss) per Share – Basic and Fully Diluted | $ | 0.02 | $ | (0.01 | ) | $ | (0.03 | ) | $ | - | ||||||
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Statements of Financial Position
| August 31,
2019 | August 31,
2018 | For the six months ended February 29, 2020 | ||||||||||
| Cash | $ | Nil | $ | Nil | $ | Nil | ||||||
| Current Assets | $ | 1,366,769 | $ | 1,578,282 | $ | 1,855,030 | ||||||
| Total Assets | $ | 1,914,562 | $ | 1,993,194 | $ | 3,043,903 | ||||||
| Current Liabilities | $ | 1,459,534 | $ | 1,890,278 | $ | 1,731,886 | ||||||
| Total Liabilities | $ | 2,046,864 | $ | 2,385,987 | $ | 3,478,927 | ||||||
| Total Equity (Deficiency) | $ | (132,302 | ) | $ | (402,793 | ) | $ | (435,024 | ) | |||
Outstanding Share Data
Our authorized share capital consists of an unlimited number of common shares without nominal or par value, issuable in four series (“Common Shares”), of which an unlimited number are designated as Voting Common Shares – Series Founder, an unlimited number are designated as Voting Common Shares – Series Investor 1, an unlimited number are designated as Voting Common Shares – Series Investor 2 and an unlimited number are designated as Non-Voting Common Shares. As at July 7, 2020, our outstanding equity and convertible securities were as follows:
| Securities | Outstanding | |
| Voting equity securities issued and outstanding | 16,829,500 | |
| Preferred shares | nil | |
| Securities convertible or exercisable into voting equity securities – stock options | 1,940,000 | |
| Securities convertible or exercisable into voting equity securities – warrants | Nil |
Common Shares
The holders of our Voting Common Shares are entitled to vote at all meetings of shareholders, to receive dividends if, as and when declared by the directors and to participate pro rata in any distribution of property or assets upon our liquidation, winding-up or other dissolution. The holders of our Non-Voting Common Shares are not entitled to vote at meetings of shareholders but are entitled to receive dividends if, as and when, declared by the directors and to participate pro rata in any distribution of property or assets upon our liquidation, winding-up or other dissolution. Our common shares carry no pre-emptive rights, conversion or exchange rights, redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring the holders of our common shares to contribute additional capital and no restrictions on the issuance of additional securities by us. There are no restrictions on the repurchase or redemption of common shares by us except to the extent that any such repurchase or redemption would render us insolvent pursuant to the Business Corporations Act.
For additional information regarding our common shares, please see the discussion under the heading entitled “Articles of Incorporation of Our Company - Rights, Preferences and Restrictions Attaching to Our Shares”.
Non-cumulative voting
Holders of our common shares do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
Preferred Shares
We do not have any preferred shares outstanding as of the date of this prospectus.
Stock transfer agent
Our stock transfer agent for our securities is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, Phone: (212) 828-8436.
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Indebtedness as of August 31, 2019:
| Payments due by period | ||||||||||||||||||||
| Contractual Obligations | Total | Less than 1 year | 2-3 years | 4-5 years | Greater than 5 years | |||||||||||||||
| Operating Lease Obligations | $ | 543,300 | $ | 211,100 | $ | 266,000 | 66,200 | nil | ||||||||||||
| Bank Indebtedness | 283,813 | 283,813 | nil | nil | nil | |||||||||||||||
| Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under IFRS | 1,195,994 | 22,005 | 1,086,753 | 15,632 | 71,604 | |||||||||||||||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
This prospectus should be read in conjunction with the accompanying financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the International Accounting Standards Board (IASB).
The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates or other forward-looking statements under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our actual results may differ materially as a result of many factors, including those set forth under the headings entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors”.
Critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments, are outlined below under the heading “Critical Accounting Policies and Estimates”, and have not changed significantly since our founding.
Overview
We were incorporated on August 29, 2012, under the laws of the province of Quebec, Canada, and its principal activity is the design, development and manufacturing of electric outboard powertrain systems and electric boats.
Our head office and principal address is located at 730 Boulevard du Cure-Boivin, Boisbriand, Quebec, Canada, V7G 2A7.
Results of Operations
Results of Operations for the Year Ended August 31, 2019 as Compared to the Year Ended August 31, 2018
Revenue for our fiscal year ended August 31, 2019 was $2,869,377 as compared to $1,271,566 for our 2018 fiscal year. The 126% increase in revenues resulted from an increase in new boat sales compared to the prior year.
Our gross profit increased to $1,285,364 from $501,727 for our 2018 fiscal year. The increase of 156% resulted from a reduction in sub-contracting costs and an increase in sales from new boats which resulted in a higher gross margin.
Our operating expenses for the year ended August 31, 2019 increased to $987,911 from $535,842 for the year ended August 31, 2018. The 84% increase in expenses was primarily due to increases in:
| ● | office salaries and benefits for year ended August 31, 2019 to $372,961 from $105,101 for the year ended August 31, 2018 due to an increase in the size of our office staff; |
| ● | rent paid for the year ended August 31, 2019 to $204,596 from $108,137 for the year ended August 31, 2018 due to an increase in the size of our production facilities; and |
| ● | advertising and promotion expenses for the year ended August 31, 2019 to $157,276 from $111,198 for the year ended August 31, 2018 as we attended more trade shows in our 2019 fiscal year. |
We incurred a reduction in income taxes for the year ended August 31, 2019, of $64,387 as compared to $151,733 for our 2018 fiscal year. The reduction resulted from the usage of losses incurred in prior periods that we intend to utilize to reduce our current tax liabilities.
Income taxes for the year ended August 31, 2019 were $64,387 as compared to $151,733 for the year ended August 31, 2018. The reduction was caused by a decrease in current and deferred taxes.
During the year ended August 31, 2019, we incurred a comprehensive income of $233,066 compared to $185,848 loss for the corresponding period in the prior year. The increase in comprehensive income was due to the increase in new boat sales, thus resulting in an increase in gross profit.
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Results of Operations for the Three Months Ended February 29, 2020 as Compared to the Three Months ended February 28, 2019
Revenue for the three months ended February 29, 2020 was $383,190 as compared to $332,645 for the three months ended February 28, 2019, a 15% increase. The increase was due to an increase in part sales for the period.
Gross margin the three months ended February 29, 2020, was $220,556 as compared to $176,455 for the corresponding period in 2019, a 25% increase. The increase in gross margin was caused by the aforementioned increase in revenue and an increase in closing inventory for the period.
During the three months ended February 29, 2020, we incurred a comprehensive loss of $199,609 compared to $79,603 loss for the corresponding period in 2019. The largest expense items that resulted in an increase in net comprehensive loss for the three months ended February 29, 2020 were;
| ● | Professional fees for the three months ended February 29, 2020 increased to $138,871 (2019: $33,644), caused by an increase in legal and accounting fees related to the registration statement of which this prospectus forms a part; | |
| ● | Advertising and promotion expenses for the three months ended February 29, 2020, increased to $75,619 from $66,847 in the 2019 period, caused by the increased attendance of boat shows during the period and the unveiling of our Phoenix 290 at the Miami Boat Show; | |
| ● | Interest on long-term debt and finance lease expenses for the three months ended February 29, 2020, increased to $16,049 from $861 for the three months ended February 28, 2019 due to an increase in long term debt and finance lease obligations; and | |
| ● | Depreciation of right-of-use assets for the three months ended February 29, 2020, increased to $32,437 from $nil for the 2019 period caused by the addition of leased assets due to the requirements of IFRS 16 – Leased Assets. |
Our operating expenses for the three months ended February 29, 2020 increased to $420,166 from $256,058 for the three months ended February 28, 2019. The increase in operating expenses was caused by the aforementioned increase in expenses for the year.
Net and comprehensive loss of the three months ended February 29, 2020 was $199,609 as compared to $79,603 for the 2019 period.
Results of Operations for the Six Months Ended February 29, 2020 as Compared to the Six Months ended February 28, 2019
Revenue for the six months ended February 29, 2020 was $436,193 as compared to $1,271,552 for the six months ended February 28, 2019. The decrease of approximately 66% resulted from a decrease in new boat sales compared to the prior period. This resulted in our gross profit decreasing to $233,560 over the period from $589,844 in the corresponding 2019 period.
During the six months ended February 29, 2020, we incurred a comprehensive loss of $477,797 compared to $54,647 profit for the corresponding period in 2019. The increase in comprehensive loss was due to the decrease in new boat sales, thus resulting in a decrease in gross profit and an increase in net comprehensive loss.
Expenses for the six months ended February 29, 2020, increased to $711,357 from $519,777 for the six months ended February 28, 2019. The largest expense items that are included in expenses for the six months ended February 29, 2020 were;
| ● | Rent for the six months ended February 29, 2020 decreased to $39,262 from $131,311 for the six months ended February 28, 2019, due to the adoption of the IFRS 16 – Leases; | |
| ● | Professional fees for the six months ended February 29, 2020, increased to $180,895 from $62,146 for the corresponding period in 2019 due to costs associated with our preparation of the registration statement of which this prospectus forms a part; | |
| ● | Travel and entertainment expenses for the six months ended February 29, 2020 increased to $37,945 from $13,738 for the six months ended February 28, 2019 due to an increase in attendances at boat shows, in particular the Miami Boat Show in February 2020 at which we unveiled our newest boat, The Phoenix 290; | |
| ● | Advertising and promotion for the six months ended February 29, 2020, increased to $155,599 from $110,568 for the six months ended February 28, 2019 as we attended more trade shows during the period; | |
| ● | Interest on long-term debt and finance lease expenses for the six months ended February 29, 2020, increased to $29,744 from $1,773 in the prior year due to an increase in long term debt and lease obligations; and | |
| ● | Depreciation of right-of-use assets for the six months ended February 29, 2020 increased to $64,076 from $nil in the corresponding period in 2019 as a result of the addition of leased assets due to the requirements of IFRS 16 – Leased Assets. |
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The operating expenses for the six months ended February 29, 2020 increased by 37% compared to the corresponding year which were caused by the aforementioned expenses for the period.
We incurred a reduction in income taxes for the six months ended February 29, 2020 of $nil from $15,421 in the six months ended February 28, 2019. The reduction resulted from losses incurred in the current period that will not generate any taxes payable.
We had a net and comprehensive loss for the six months ended February 29, 2020 of $477,797 as compared to net and comprehensive income for the six months ended February 28, 2020 of $54,647.
Liquidity and Capital Resources
Our operations consist of the designing and developing electric outboard powertrain systems and designing, developing and manufacturing electric boats. Our financial success depends upon our ability to market and sell our outboard powertrain systems and electric boats and to raise sufficient working capital to enable us to execute our business plan. Our historical capital needs have been met by internally generated cashflow from operations and the support of our shareholders. We cannot assure you that equity funding will be possible at the times we required it. If no funds are can be raised and sales of our outboard powertrain systems and electric boats do not produce sufficient net cash flow, then we may need to significantly curtail operations to ensure our survival.
As of July 7, 2020, we had 16,829,500 issued and outstanding shares and 18,796,500 common shares outstanding on a fully-diluted basis (assuming that all issued options eventually vest).
We had $92,765 of working capital deficiency as at August 31, 2019 compared to $311,996 working capital deficiency as at August 31, 2018. The increase in working capital deficiency resulted from the cash used in operations of $112,368, (2018: $125,037 cash provided by operations); cash used in investing activities of $109,184 (2018: $108,375) resulting from the additions to property and equipment; which was offset by financing activities generating cash of $259,052, (2018: $(16,662)), due to an increase in bank indebtedness and an increase in long term debt; this was partially offset by a repayment of long term debt. We had a working capital surplus of $123,144 as at February 29, 2020.
We had cash and cash equivalents of $nil at each of February 29, 2020, August 31, 2019 and August 31, 2018. We are pursuing equity financing but might not be successful in this endeavor.
As of the date of this prospectus, we have no outstanding commitments, other than rent and lease commitments. We have pledged our assets as security for loans and are subject to customary debt covenants.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Research and Development, Patents and Licenses, etc.
We incur research and development costs associated with the development of our outboard electric powertrains as well as the design of new boats. We have not patented any of our technology.
Going Concern
We prepare our financial statements on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We incurred a net and comprehensive income of $233,066 during the year ended August 31, 2019 and had a cash balance and a working capital deficiency of $nil and $311,993, respectively, as at August 31, 2019. Our ability to meet our obligations as they fall due and to continue to operate as a going concern depends on the continued financial support of the creditors and the shareholders. In the past, we have relied on the support of our shareholders to meet our cash requirements. Funding from this or other sources might not be sufficient in the future to continue our operations. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to us. Failure to obtain such financing on a timely basis could cause us to reduce or terminate our operations.
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Internal control over financial reporting and disclosure controls and procedures
Management is responsible for the design and maintenance of both internal control systems over financial reporting and disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that relevant information is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.
Current disclosure controls include meetings with the Chief Executive Officer, Chief Financial Officer and members of our Board of Directors and Audit Committee through e-mails, on telephone conferences and informal meetings to review public disclosure. All public disclosures are reviewed by certain members of senior management and our Board of Directors and Audit Committee. Our Board of Directors has delegated the duties to the Chief Executive Officer who is primarily responsible for financial and disclosure controls.
Management and the Board of Directors continue to work to mitigate the risk of material misstatement.
Critical Accounting Policies and Estimates
The preparation of our financial statements requires management to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenue and expenses.
Research costs are expensed in the period in which they are incurred. Development costs are capitalized when it probable that the project will be a success considering its commercial and technical feasibility; we are able to use or sell the asset; we have sufficient resources and intent to complete our development; and our costs can be measured reliably. We have not capitalized any development costs.
We account for all stock-based payments and awards using the fair value-based method. Under the fair value-based method, stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity estimates issued, or liabilities incurred, whichever is more reliably measurable.
From time to time, we must make accounting estimates. These are based on the best information available at the time, utilizing generally accepted industry standards.
Recently Adopted Accounting Standards
IFRS 16: Leases
We adopted IFRS 16 as of September 1, 2019. The adoption of IFRS 16 has a significant impact as we recognized new assets and liabilities for our operating leases. In addition, the nature and timing of expenses related to those leases has changed as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for the right-of-use assets and interest expense on lease liabilities. We have elected to apply the modified retrospective method, under which the cumulative effect of initial application is recognized in retained earnings at September 1, 2019, by setting right-of-use assets based on the lease liability at the date of initial application, adjusted by the amount of any prepaid or accrued lease payments, and have applied the following practical expedients:
| • | applied IFRS 16 exclusively to contracts that were previously identified as leases applying IAS 17 at the date of initial application; |
| • | accounted for leases for which the lease term ended within 12 months of the date of initial application as short-term leases; |
| • | did not recognize right-of-use assets and liabilities for leases of low value assets; |
| • | relied on its assessment of whether leases are onerous applying IAS 37 immediately before the date of initial application as an alternative to performing an impairment review; and |
| • | did not separate non-lease components from lease components, and instead accounted for each lease component and any associated non-lease components as a single lease component. |
IFRIC 23: Uncertainty over income tax treatments
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:
| • | Us to determine whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution; |
| • | Us to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and |
| • | If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations. |
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The interpretation is effective for periods beginning on or after September 1, 2019. We adopted the new interpretation with no impact on the financial statements.
DIRECTORS AND EXECUTIVE OFFICERS
Board of Directors
Our Articles of Incorporation are attached as an exhibit to the registration statement of which this prospectus forms a part. Our Articles of Incorporation provide that our company shall have a minimum of one (1) and a maximum of ten (10) directors.
Our Board of Directors (the “Board”) currently consists of three (3) directors. Our directors are elected annually at each annual meeting of our company’s shareholders. The Board assesses potential Board candidates to fill perceived needs on the Board for required skills, expertise, independence and other factors.
Our Board of Directors is responsible for appointing our company’s officers.
Board Committees
We will establish three committees under the board of directors immediately upon closing of this offering: an Audit Committee, a Compensation Committee and a Nominating Committee. Each committee is to be governed by a charter approved by our Board of Directors.
Audit Committee
Our Audit Committee will consist of , and and is chaired by . Each member of the Audit Committee will satisfy the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market and meet the independence standards under Rule 10A-3 under the Exchange Act. Our Audit Committee Financial Expert is who qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses financial sophistication within the meaning of the Listing Rules of the Nasdaq Stock Market. The Audit Committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The Audit Committee is responsible for, among other things:
| · | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm; |
| · | reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K; |
| · | discussing the annual audited financial statements with management and our independent registered public accounting firm; |
| · | annually reviewing and reassessing the adequacy of our Audit Committee charter; |
| · | meeting separately and periodically with the management and our independent registered public accounting firm; |
| · | reporting regularly to the full board of directors; |
| · | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposure; and |
| · | such other matters that are specifically delegated to our Audit Committee by our board of directors from time to time. |
Compensation Committee
Our Compensation Committee will consist of , and and is chaired by . Each of the Compensation Committee members satisfies the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. Our Compensation Committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. No officer may be present at any committee meeting during which such officer’s compensation is deliberated upon. The Compensation Committee will be responsible for, among other things:
| · | reviewing and approving to the board with respect to the total compensation package for our most senior executive officers; |
| · | approving and overseeing the total compensation package for our executives other than the most senior executive officers; |
| · | reviewing and recommending to the board with respect to the compensation of our directors; |
| · | reviewing periodically and approving any long-term incentive compensation or equity plans; |
| · | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and |
| · | programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
Nominating Committee
Our Nominating Committee consists of , and and is chaired by . Each member of the Audit Committee will satisfy the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. The Nominating Committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The Nominating Committee considers persons identified by its members, management, shareholders, investment bankers and others.
Directors and Executive Officers
The following table sets forth the names and ages of all of our directors and executive officers.
Name, Province/State and Country of Residence | Age | Position | Director/Officer Since | |||
| Alexandre Mongeon Quebec, Canada | 44 | Chief Executive Officer and Chairman | August 2014 | |||
| Patrick Bobby Quebec, Canada | 49 | Chief Operating Officer, Secretary and Director | August 2014 | |||
| Kulwant Sandher British Columbia, Canada | 58 | Chief Financial Officer | July 2019 | |||
| Robert Ghetti Quebec, Canada | 57 | Vice Chairman | August 2012 |
Business Experience
The following summarizes the occupation and business experience during the past five years or more for our directors, and executive officers as of the date of this prospectus:
Alexandre Mongeon, Chief Executive Officer
Alexandre Mongeon has been employed by us since 2014 as our Chief Executive Officer. From 1999 to 2015, he imported high-performance boats from the United States to Canada. During much of that time, 1999 to 2016, he also worked as a designer and contractor for a Contractor 91340489 QC and managed several new construction projects on the waterfront in and around Montreal. Mr. Mongeon is a graduate of the School of Construction in Laval, Quebec with a specialization in electricity.
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Patrick Bobby, Chief Operating Officer
Patrick Bobby has been employed by us since 2014. From 1999 to 2015, he imported high-performance boats from the United States to Canada. During much of that time, 1999 to 2016, he also worked as a designer and contractor for a Contractor 91340489 QC Inc. and created a condominium syndicate. Mr. Bobby attended Georgian College in Barrie, Ontario.
Kulwant Sandher, Chief Financial Officer
Kulwant Sandher is a Chartered Professional Accountant with over 25 years of experience in business and finance. Mr. Sandher graduated from Queen Mary, University of London (formerly known as Queen Mary College) in 1986 with a B.Sc. (Eng.) in Avionics. Mr. Sandher became a Chartered Accountant in England in 1991 and received his Chartered Professional Accountant designation in Canada in 1997.
Mr. Sandher has considerable private and public company experience. He served as CFO of ElectraMeccanica Vehicles Corp., a Nasdaq listed electric car manufacturer from June 2016 to November 2018; as CFO of MineSense Technologies Inc. from August 2013 until July 2015; as CFO of Alba Mineral Ltd. from June 2017 to April 1, 2018; as CFO of Delta Oil & Gas from October 2008 to September 2017; as CFO of Astorius Resources Ltd. from June 2017 to February 1, 2018; as CFO of Hillcrest Petroleum from December 2011 to April 2015; as CFO of Intigold Mines Ltd. from December 2010 to April 2017; and as COO & CFO for Marketrend Interactive Inc., from March 2004 to March 2006. Currently, Mr. Sandher serves as President of Hurricane Corporate Services Ltd. and as CFO of Alba Resources Ltd. (TSX-V). Furthermore, Mr. Sandher is currently serving as a director of The Cloud Nine Education Group Inc since December 2015. Prior to August 2013, Mr. Sandher had also served as CFO of several publicly listed companies, including: Hillcrest Petroleum (TSX-V), Millrock Resources Inc. (TSX-V) and St. Elias Mines (TSX-V).
Robert Ghetti – Vice Chairman
Robert Ghetti has been in charge of business development and financing of our company since 2013. He received a diploma in Business Administration – Finance in 1983 from Vanier College in Montreal, Quebec. Since 1997, he has owned and operated Societe de Placements de Robert Ghetti Inc., a holding company with interests in commercial and industrial properties.
Family Relationships
There are no family relationships among any of our directors and executive officers.
Term of Office
Each director of our company is to serve for a term of one year ending on the date of the subsequent annual meeting of shareholders following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director is to serve until his successor is elected and qualified or until his death, resignation or removal. Our Board of Directors appoints our officers and each officer is to serve until his successor is appointed and qualified or until his or her death, resignation or removal.
Involvement in Certain Legal Proceedings
During the past ten years, none of our directors or executive officers have been the subject of the following events:
| 1. | a petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2. | convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
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| i) | acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ii) | engaging in any type of business practice; or |
| iii) | engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4. | the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
| 5. | was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated; |
| 6. | was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| i) | any Federal or State securities or commodities law or regulation; or |
| ii) | any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or |
| iii) | any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8. | was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Director Independence
Our Board has determined that the following directors are “independent” as such directors do not have a direct or indirect material relationship with our company: Robert Ghetti. A material relationship is a relationship which could, in the view of our Board of Directors, be reasonably expected to interfere with the exercise of a director’s independent judgment.
Code of Business Conduct and Ethics
We will adopt a Code of Conduct and Ethics that applies to our directors, officers and other employees prior to the consummation of the offering.
Compensation Discussion and Analysis
This section sets out the objectives of our company’s executive compensation arrangements, our company’s executive compensation philosophy and the application of this philosophy to our company’s executive compensation arrangements. It also provides an analysis of the compensation design, and the decisions that the Board made in fiscal 2019 with respect to our Named Executive Officers (as defined below). When determining the compensation arrangements for the Named Executive Officers, our Board of Directors acting as the Compensation Committee considers the objectives of: (i) retaining an executive critical to our success and the enhancement of shareholder value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and our shareholders; and (iv) rewarding performance, both on an individual basis and with respect to the business in general.
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Benchmarking
Our Board of Directors handles matters relating to compensation, including benchmarking, but upon the closing of this offering, we will form a Compensation Committee for matters of management’s compensation. The Compensation Committee will consider a variety of factors when designing and establishing, reviewing and making recommendations for executive compensation arrangements for all our executive officers. The Compensation Committee does not intend to position executive pay to reflect a single percentile within the industry for each executive. Rather, in determining the compensation level for each executive, the Compensation Committee will look at factors such as the relative complexity of the executive’s role within the organization, the executive’s performance and potential for future advancement and pay equity considerations.
Elements of Compensation
The compensation paid to Named Executive Officers in any year consists of two primary components:
| (a) | base salary; and |
| (b) | long-term incentives in the form of stock options granted under our Stock Option Plan (as defined below). |
The key features of these two primary components of compensation are discussed below:
Base Salary
Base salary recognizes the value of an individual to our company based on his or her role, skill, performance, contributions, leadership and potential. It is critical in attracting and retaining executive talent in the markets in which we compete for talent. Base salaries for the Named Executive Officers are intended to be reviewed annually. Any change in base salary of a Named Executive Officer is generally determined by an assessment of such executive’s performance, a consideration of competitive compensation levels in companies similar to our company (in particular, companies in the EV industry) and a review of our performance as a whole and the role such executive officer played in such corporate performance.
Stock Option Awards
We provide long-term incentives to Named Executive Officers in the form of stock options as part of our overall executive compensation strategy. Our Board of Directors acting as the Compensation Committee believes that stock option grants serve our executive compensation philosophy in several ways: firstly, it helps attract, retain, and motivate talent; secondly, it aligns the interests of the Named Executive Officers with those of the shareholders by linking a specific portion of the officer’s total pay opportunity to the share price; and finally, it provides long-term accountability for Named Executive Officers.
Risks Associated with Compensation Policies and Practices
The oversight and administration of our executive compensation program requires the Board of Directors acting as the Compensation Committee to consider risks associated with our compensation policies and practices. Potential risks associated with compensation policies and compensation awards are considered at annual reviews and also throughout the year whenever it is deemed necessary by the Board of Directors acting as the Compensation Committee.
Our executive compensation policies and practices are intended to align management incentives with the long-term interests of the Corporation and its shareholders. In each case, the Corporation seeks an appropriate balance of risk and reward. Practices that are designed to avoid inappropriate or excessive risks include (i) financial controls that provide limits and authorities in areas such as capital and operating expenditures to mitigate risk taking that could affect compensation, (ii) balancing base salary and variable compensation elements and (iii) spreading compensation across short and long-term programs.
Compensation Governance
The Compensation Committee intends to conduct a yearly review of directors’ compensation having regard to various reports on current trends in directors’ compensation and compensation data for directors of reporting issuers of comparative our size. Director compensation is currently limited to the grant of stock options pursuant to the Stock Option Plan. It is anticipated that the Chief Executive Officer will review the compensation of our executive officers for the prior year and in comparison to industry standards via information disclosed publicly and obtained through copies of surveys. The Board expects that the Chief Executive Officer will make recommendations on compensation to the Compensation Committee. The Compensation Committee will review and make suggestions with respect to compensation proposals, and then makes a recommendation to the Board.
The Compensation Committee will be comprised of independent directors.
The Compensation Committee’s responsibility is to formulate and make recommendations to our directors in respect of compensation issues relating to our directors and executive officers. Without limiting the generality of the foregoing, the Compensation Committee has the following duties:
| (a) | to review the compensation philosophy and remuneration policy for our executive officers and to recommend to our directors’ changes to improve our ability to recruit, retain and motivate executive officers; |
| (b) | to review and recommend to the Board the retainer and fees, if any, to be paid to our directors; |
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| (c) | to review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate the CEO’s performance in light of those corporate goals and objectives, and determine (or make recommendations to our directors with respect to) the CEO’s compensation level based on such evaluation; |
| (d) | to recommend to our directors with respect to non-CEO officer and director compensation including reviewing management’s recommendations for proposed stock options and other incentive-compensation plans and equity-based plans, if any, for non-CEO officer and director compensation and make recommendations in respect thereof to our directors; |
| (e) | to administer the stock option plan approved by our directors in accordance with its terms including the recommendation to our directors of the grant of stock options in accordance with the terms thereof; and |
| (f) | to determine and recommend for the approval of our directors’ bonuses to be paid to our executive officers and employees and to establish targets or criteria for the payment of such bonuses, if appropriate. Pursuant to the mandate and terms of reference of the Compensation Committee, meetings of the Compensation Committee are to take place at least once per year and at such other times as the Chair of the Compensation Committee may determine. |
Summary Compensation Table
The following table sets forth all annual and long-term compensation for services in all capacities to our Company during the fiscal periods indicated in respect of the executive officers set out below (the “Named Executive Officers”):
Named Executive Officer and Principal Position | Year | Salary ($) | Share- based awards ($) | Option- based awards ($)(1) | Annual Plan ($) | Long- term Incentive Plan ($) | Pension Value ($) | All Other Compensation ($) | Total Compensation ($) | |||||||||||||
| Alexandre Mongeon | 2019 | 111,635 | Nil | Nil | Nil | Nil | Nil | Nil | 111,635 | |||||||||||||
| Chief Executive Officer | 2018 | 97,614 | Nil | Nil | Nil | Nil | Nil | Nil | 97,614 | |||||||||||||
| Patrick Bobby | 2019 | 96,116 | Nil | Nil | Nil | Nil | Nil | Nil | 96,116 | |||||||||||||
| Chief Operating Officer | 2018 | 82,336 | Nil | Nil | Nil | Nil | Nil | Nil | 82,336 | |||||||||||||
| Kulwant Sandher | 2019 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||
| Chief Financial Officer | 2018 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil | |||||||||||||
Executive Compensation Agreements
Alexandre Mongeon, Chief Executive Officer
On April 7, 2020, our Board of Directors approved the entering into of an executive services agreement with Alexandre Mongeon with a term commencing on April 1, 2020 and expiring on April 1, 2023 (the “Mongeon Agreement”).
The Mongeon Agreement is subject to automatic renewal on a one-month to one-month term renewal basis unless we provide written notice not to renew the Mongeon Agreement no later than 30 days prior to the end of the then current or renewal term. There are no change of control provisions in the Mongeon Agreement.
Pursuant to the terms and provisions of the Mongeon Agreement: (a) Mr. Mongeon is appointed as our President and Chief Executive Officer and will undertake and perform the duties and responsibilities normally and reasonably associated with such office; (b) we shall pay to Mr. Mongeon a monthly fee of CAD$10,000; (c) provide Mr. Mongeon with employee benefits, if and when such benefits have been adopted by us, including group health insurance, accidental death and dismemberment insurance, travel accident insurance, group life insurance, short-term disability insurance, long-term disability insurance, drug coverage and dental coverage (the “Group Benefits”); (d) our Board of Directors shall, in good faith, consider the payment of reasonable industry standard annual bonuses (“Bonus”) based upon our performance and upon the achievement by Mr. Mongeon and/or the Company of reasonable management objectives to be reasonably established by our Board of Directors; and (e) Mr. Mongeon will be entitled to four weeks’ paid annual vacation per calendar year. Furthermore, our Board of Directors may from time to time, in its sole and absolute discretion, grant to Mr. Mongeon stock options exercisable into Common Shares subject to such exercise terms and conditions as may be determined by the Board of Directors.
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We may terminate the employment of Mr. Mongeon under the Mongeon Agreement without any notice or any payment in lieu of notice for a serious reason. Mr. Mongeon may terminate his employment under the Mongeon Agreement for any reason by providing not less than 90 calendar days’ notice in writing to us, provided, however, that we may waive or abridge any notice period specified in such notice in our sole and absolute discretion.
The employment of Mr. Mongeon will terminate upon the death of Mr. Mongeon. Upon the death of Mr. Mongeon during the continuance of the Mongeon Agreement, we will provide Mr. Mongeon’s estate and, if applicable, Mr. Mongeon’s immediate family members with the following: (a) three month’s base salary, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of Directors determines would likely have been paid to Mr. Mongeon; (c) any outstanding vacation pay as at the effective date of termination; (d) any outstanding expenses owing to Mr. Mongeon as at the effective date of termination; and (e) subject to our then Stock Option Plan as defined in “Stock Option Plans and Stock Options” below and the rules and policies of any regulatory authority and stock exchange having jurisdiction over us, allow Mr. Mongeon’s estate to then exercise any unexercised and fully vested portion of stock options on the effective date of termination at any time during three months from the effective date of termination.
If we elect to terminate the Mongeon Agreement without a serious reason, and provided that Mr. Mongeon is in compliance with the relevant terms and conditions of the Mongeon Agreement, we shall be obligated to provide a severance package to Mr. Mongeon as follows: (a) a cash payment equating to an aggregate of six months of the then monthly fee, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of Directors determines would likely have been paid to Mr. Mongeon; (c) the present value, as determined by us, acting reasonably, of each of the Group Benefits that would have been enjoyed by Mr. Mongeon during the next three months from the effective date of termination; (d) any outstanding vacation pay as at the effective date of termination; (e) any outstanding expenses owing to Mr. Mongeon as at the effective date of termination; (f) maintain Mr. Mongeon’s Group Benefits for a period of six months from the effective date of termination; and (g) subject to our then Stock Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over us, allow Mr. Mongeon to then exercise any unexercised and fully vested portion of stock options on the effective date of termination at any time during three months from the effective date of termination.
Patrick Bobby, Chief Operating Officer
On April 7, 2020, our Board of Directors approved the entering into of an executive services agreement with Patrick Bobby with a term commencing on April 1, 2020 and expiring on April 1, 2023 (the “Bobby Agreement”).
The Bobby Agreement is subject to automatic renewal on a one-month to one-month term renewal basis unless we provide written notice not to renew the Bobby Agreement no later than 30 days prior to the end of the then current or renewal term.
Pursuant to the terms and provisions of the Bobby Agreement: (a) Mr. Bobby is appointed as our Chief Operating Officer and will undertake and perform the duties and responsibilities normally and reasonably associated with such office; (b) we shall pay to Mr. Bobby a monthly fee of CAD$10,000; (c) provide Mr. Bobby with employee benefits, if and when such benefits have been adopted by us, including group health insurance, accidental death and dismemberment insurance, travel accident insurance, group life insurance, short-term disability insurance, long-term disability insurance, drug coverage and dental coverage; (d) our Board of Directors shall, in good faith, consider the Bonus based upon our performance and upon the achievement by Mr. Bobby and/or the Company of reasonable management objectives to be reasonably established by our Board of Directors; and (e) Mr. Bobby will be entitled to four weeks’ paid annual vacation per calendar year. Furthermore, our Board of Directors may from time to time, in its sole and absolute discretion, grant to Mr. Bobby stock options exercisable into common shares subject to such exercise terms and conditions as may be determined by the Board of Directors.
We may terminate the employment of Mr. Bobby under the Bobby Agreement without any notice or any payment in lieu of notice for a serious reason. Mr. Bobby may terminate his employment under the Bobby Agreement for any reason by providing not less than 90 calendar days’ notice in writing to us, provided, however, that we may waive or abridge any notice period specified in such notice in our sole and absolute discretion.
The employment of Mr. Bobby will terminate upon the death of Mr. Bobby. Upon the death of Mr. Bobby during the continuance of the Bobby Agreement, we will provide Mr. Bobby’s estate and, if applicable, Mr. Bobby’s immediate family members with the following: (a) three month’s base salary, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of Directors determines would likely have been paid to Mr. Bobby; (c) any outstanding vacation pay as at the effective date of termination; (d) any outstanding expenses owing to Mr. Bobby as at the effective date of termination; and (e) subject to our then Stock Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over us, allow Mr. Bobby’s estate to then exercise any unexercised and fully vested portion of stock options on the effective date of termination at any time during three months from the effective date of termination.
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If we elect to terminate the Bobby Agreement without a serious reason, and provided that Mr. Bobby is in compliance with the relevant terms and conditions of the Bobby Agreement, we shall be obligated to provide a severance package to Mr. Bobby as follows: (a) a cash payment equating to an aggregate of six months of the then monthly fee, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of Directors determines would likely have been paid to Mr. Bobby; (c) the present value, as determined by us, acting reasonably, of each of the Group Benefits that would have been enjoyed by Mr. Bobby during the next three months from the effective date of termination; (d) any outstanding vacation pay as at the effective date of termination; (e) any outstanding expenses owing to Mr. Bobby as at the effective date of termination; (f) maintain Mr. Bobby’s Group Benefits for a period of six months from the effective date of termination; and (g) subject to our then Stock Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over us, allow Mr. Bobby to then exercise any unexercised and fully vested portion of stock options on the effective date of termination at any time during three months from the effective date of termination.
Kulwant Sandher, Chief Financial Officer
On August 1, 2019, we entered into a Consulting Services Agreement with Hurricane Corporate Services Ltd., an entity controlled by Mr. Kulwant Sandher (the “Consultant”), by which the Consultant would assist us in our corporate development. The agreement is for a term of twelve months, and each year it is automatically renewed for additional twelve-month terms unless notice is given otherwise 30 days prior to the automatic renewal. In exchange for the services, we pay the Consultant $10,000 each month under the Agreement, and we are to issue up to 761,441 common shares upon the occurrence of certain events, which issuance would be triggered in full upon the completion of this offering.
Stock Option Plans and Stock Options
The following table sets forth, as at June 30, 2020, the equity compensation plans pursuant to which our equity securities may be issued:
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights ($) |
Number of securities remaining available for future issuance under equity compensation plans (excluding Securities reflected in column (a)) |
||||||||||
| Plan Category | (a) | (b) | (c) | |||||||||
| Equity compensation plans approved by securityholders | $ | |||||||||||
| Equity compensation plans not approved by securityholders | 1,940,000 | $ | 0.923 | 326,666 | ||||||||
| Total | 1,940,000 | $ | 0.923 | 326,666 | ||||||||
2020 Stock Option Plan
On January 20, 2020, our Board of Directors adopted our 2020 Stock Option Plan (the “Stock Option Plan”) under which an aggregate of 2,226,666 shares may be issued, subject to adjustment as described in the Stock Option Plan.
The purpose of the Stock Option Plan is to retain the services of our valued key employees, directors and consultants and such other persons as the plan administrator, which is currently the Board of Directors, shall select in accordance with the eligibility requirements of the Stock Option Plan, and to encourage such persons to acquire a greater proprietary interest in our Company, thereby strengthening their incentive to achieve the objectives of our shareholders, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the plan administrator. The Stock Option Plan shall be administered initially by our Board of Directors, except that the Board may, in its discretion, establish a committee composed of two or more members of the Board to administer the Stock Option Plan, which committee may be an executive, compensation or other committee, including a separate committee especially created for this purpose.
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Unless accelerated in accordance with the Stock Option Plan, in the event an Option holder's Continuous Service terminates (other than upon the Option holder's death or Disability), the Option holder may exercise his or her Option (to the extent that the Option holder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Option holder's Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if we terminate Continuous Service for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Option holder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate. In the event an Option holder's Continuous Service terminates as a result of the Option holder's death or disability, then the Option may be exercised (to the extent the Option holder was entitled to exercise such Option as of the date of death) by the Option holder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Option holder's death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Option holder's death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
For purposes of the Stock Option Plan, unless otherwise defined in the stock option agreement between us and the optionee, “disability” shall mean unless the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. The Committee shall determine whether an optionee has incurred a disability on the basis of medical evidence acceptable to the plan administrator. Upon making a determination of disability, the Committee shall, for purposes of the Stock Option Plan, determine the date of an optionee’s termination of employment or contractual relationship.
As of July 7, 2020, we have issued 1,940,000 stock options under the stock option plan:
| • | 1,105,000 of these options are exercisable at $1.00 and vest in 1/12ths over a one-year period; |
| • | 600,000 of these options are exercisable at $0.75 and vest quarterly in 1/4ths upon grant and then every three months thereafter; and |
| • | 235,000 of these options are exercisable at $1.00 and vest monthly in 1/36ths starting one-year after their grant. |
Outstanding Option-based Awards for Named Executive Officers and Directors
The following table reflects all option-based awards for each Named Executive Officer and director outstanding as at August 31, 2019. We do not have any other equity incentive plans other than its Stock Option Plan.
| Option–based Awards | ||||||||||
Named Executive Officer or Director | Number of securities underlying unexercised options (#) | Option exercise price ($) | Option expiration date | |||||||
| Alexandre Mongeon, Chief Executive Officer | Nil | |||||||||
| Patrick Bobby, Chief Operating Officer | Nil | |||||||||
| Kulwant Sandher, Chief Financial Officer | Nil | |||||||||
Incentive Plan Awards
The following table provides information concerning our incentive award plans with respect to each Named Executive Officer and directors during the fiscal year ended August 31, 2019.
Named Executive Officer and Director | Option-based Awards – Value Vested During the Year ($)(1) | Non-Equity Incentive Plan Compensation – Value Vested During the Year ($) | ||||||
| Alexandre Mongeon, Chief Executive Officer | $ | Nil | ||||||
| Patrick Bobby, Chief Operating Officer | $ | Nil | ||||||
| Kulwant Sandher, Chief Financial Officer | $ | Nil | ||||||
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Director Compensation for Fiscal 2019
We did not pay our directors for their services as directors in our fiscal 2019, although we did compensate some of our directors in that fiscal year for services that they provided as officers.
Pension Benefits
We do not have any defined benefit pension plans or any other plans providing for retirement payments or benefits.
Termination of Employment and Change of Control Benefits
Details with respect to termination of employment and change of control benefits for our directors and executive officers is reported above under the section titled “Executive Compensation Agreements.”
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of our common shares as of July 7, 2020 by (a) each shareholder who is known to us to own beneficially 5% or more of our outstanding common shares; (b) all directors; (c) our executive officers, and (d) all executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their common shares, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their common shares.
| Name | Common Shares Beneficially Owned (1) |
Percentage of Common Shares Beneficially Owned (2) |
Percentage of Common Shares Beneficially Owned After Offering (2) |
|||||||||
| Directors and Executive Officers: | ||||||||||||
| Alexandre Mongeon, Chief Executive Officer, Director (3)(4) | 7,999,870 | 47.3 | % | [----] | % | |||||||
| Patrick Bobby, Chief Operating Officer, Director (3)(5) | 7,999,870 | 47.3 | % | [----] | % | |||||||
| Kulwant Sandher, Chief Financial Officer (6) | 834,774 | 4.9 | % | [----] | % | |||||||
| Robert Ghetti, Director (7) | 4,027,511 | 23.8 | % | [----] | % | |||||||
| Directors and Executive Officers as a Group (Four Persons) | 12,942,155 | 75.5 | % | [----] | % | |||||||
| Other 5% or more Shareholders: | ||||||||||||
| Michel Amyot (8) | 1,986,178 | 11.8 | % | [----] | % | |||||||
| (1) | Under Rule 13d–3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of common shares actually outstanding on July 7, 2020. |
| (2) | The percentage is calculated based on 16,829,500 common shares that were outstanding as of July 7, 2020. |
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| (3) | Includes (i) 7,919,870 shares held by 9134-0489 Quebec Inc. and (ii) common shares that will be converted simultaneously with the offering from debt held by a subsidiary of 9134-0489 Quebec Inc. at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. This entity is jointly owned by Alexandre Mongeon and Patrick Bobby who each have dispositive and voting control over it. |
| (4) | Includes common shares underlying 80,000 options that have vested or will vest within the next 60 days. Includes common shares that will be converted simultaneously with the offering from debt at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. |
| (5) | Includes common shares underlying 80,000 options that have vested or will vest within the next 60 days. Includes common shares that will be converted simultaneously with the offering from debt at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. |
| (6) | 761,441 of these shares are held by KPAC Holding Ltd., an entity over which Kulwant Sandher has dispositive and voting control. Although all of these shares are outstanding, only 20% of such shares, or 152,288, have vested as of the date hereof. All the remaining share will have vested by the occurrence of this offering. Also includes common shares underlying 73,333 options that have vested or will vest within the next 60 days. |
| (7) | Includes (i) 3,947,511 shares held by Société de Placements Robert Ghetti Inc., an entity over which Robert Ghetti has dispositive and voting control and (ii) common shares that will be converted simultaneously with the offering from debt held by entities over which Robert Ghetti has dispositive and voting control at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. Also includes common shares underlying 73,333 options that have vested or will vest within the next 60 days. Includes common shares that will be converted from debt simultaneously with the offering at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. |
| (8) | Includes (i) 1,986,178 shares held by Gestion Toyma Inc., an entity over which Michel Amyot has dispositive and voting control and (ii) common shares that will be converted simultaneously with the offering from debt held by Gestion Toyma Inc. at a conversion price that will equal the offering price per common share in this offering, which we assume to be US$ , the midpoint of the price range on the cover page of this prospectus. Also includes common shares underlying 33,333 options held by Michel Amyot that have vested or will vest within the next 60 days. |
The information as to shares beneficially owned, not being within our knowledge, has been furnished by the officers and directors.
As at July 7, 2020, there were 58 holders of record of our common shares, of which there was one record shareholder in the United States who holds approximately 0.3% of our common shares on the date thereof.
In addition to employment and consulting agreements described elsewhere in this prospectus, we have entered into the following transactions with our directors, officers, promoters and shareholders who beneficially own more than 10% of our common shares:
| • | We respectively sold $460,531 and $374,459 of boats, parts, services and other items to EB Rental Ltd. in our 2019 and 2018 fiscal years. Our Chief Executive Officer is an affiliate of EB Rental Ltd., an entity that rents electric boats at the Lido Marina Village in Newport, California. In addition, in the six months ended February 29, 2020, we generated revenue of $66,077 from the sale of parts and boat maintenance with EB Rental Ltd. There was no written agreement for any of these sales.; |
| • | We respectively paid rent to California Electric Boat Company Inc. for the use of our manufacturing space and offices totaling $143,376 and $35,056 in our 2019 and 2018 fiscal years. Our Chief Executive Officer is an affiliate of California Electric Boat Company. The manufacturing space and offices are in two adjacent units each under a separate lease. One lease is for approximately 3,600 square feet, has a monthly rent of approximately $3,000 and expires on June 30, 2024. The other lease is for approximately 8,210 square feet, has a monthly rent of approximately $8,550 and expires on May 31, 2022; |
| • | We advanced California Electric Boat Company Inc. $40,310 and $38,710 in our 2019 and 2018 fiscal years. Our Chief Executive Officer is an affiliate of California Electric Boat Company. The advances were not pursuant to a written agreement and have subsequently been repaid; and |
| • | We will enter into written subscription agreements with holders of related-party debt totaling $962,083 to convert that related-party debt into our common shares simultaneous with this offering. The related-party debt will convert at the per share offering price in this offering. Using a US$ per common share offering price, the midpoint of the price range on the cover page of this prospectus, the related-party debt would convert into common shares. |
In addition, we have received advances from related parties some of which are current and other of which are non-current. All of these advances to and from related parties are non-interest bearing and have no specified terms of repayment. Prior to the consummation of the offering, the related parties will waive their right to demand repayment until after the one-year anniversary of this offering . The following amounts were due to related parties as of February 29, 2020:
| Non-Current advances from shareholders or indirect shareholders subordinated in favor of the Company’s lender: | ||||
| Alexandre Mongeon | $ | 141,972 | ||
| Patrick Bobby | $ | 139,472 | ||
| Robert Ghetti | $ | 64,749 | ||
| Immobilier R. Ghetti Inc. | $ | 16,487 | ||
| Société de Placement Robert Ghetti Inc. | $ | 279,376 | ||
| Gestion Toyma | $ | 151,500 | ||
| Total: | $ | 793,556 | ||
| Current advances from shareholders or indirect shareholders: | ||||
| 9335-1427 Quebec Inc. | $ | 129,932 | ||
| Gestion Toyma Inc. | $ | 24,394 | ||
| Alexandre Mongeon | $ | 14,201 | ||
| Total: | 168,527 |
| Due to shareholders and included in Trade and other payables | ||||
| Alexandre Mongeon | $ | 39,668 | ||
| Patrick Bobby | $ | 5,091 | ||
| Total: | $ | 44,759 |
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We have not entered into any material agreements other than in the ordinary course of business and other than those described in this prospectus.
There is currently no market for our common shares. We have applied to have our common shares listed on the Nasdaq Capital Market under the symbol “VMAR”. The offering that we are conducting with the prospectus will not close unless the Nasdaq Capital Market has approved our common shares for listing.
SECURITIES ELIGIBLE FOR FUTURE SALE
Common Shares
Upon completion of this offering at an assumed offering price of US$ [----] per common share, we will have [----------] common shares outstanding, not including (i) shares underlying underwriter’s warrants (please see below “Underwriter’s Warrants”), (ii) any shares that may be sold pursuant to the underwriter’s over-allotment option and (iii) any shares underlying warrants that may be sold pursuant to the underwriter’s over-allotment option. All of the common shares sold in this offering will be freely transferable by persons other than by our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our common share in the public market could adversely affect prevailing market prices of our common share. Prior to this offering, there has been no public market for our common shares. We have applied to list the common shares on the Nasdaq Capital Market under the symbol “VMAR”.
Additionally, we had 1,940,000 options outstanding as of July 7, 2020. We had no warrants outstanding as of July 7, 2020.
Underwriter’s Warrants
In addition to cash compensation, we have agreed to issue to the underwriter’s warrants to purchase up to a total of [--------] common shares (equal to 5.5% of the common shares sold in this offering), assuming an offering price of US$ [----] per common share. The warrants will be exercisable from time to time, in whole or in part, from six months after the effective date of the registration statement of which this prospectus forms a part until five years from the effective date of the registration statement. The warrants are exercisable at a per share price equal to 125% of the per share offering price. The warrants are also exercisable on a cashless basis. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriter (or permitted assignees under FINRA Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the offering, except as provided for in FINRA Conduct Rule 5110(g)(2). The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, subdivisions, combinations, reclassification, merger or consolidation.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
| · | 1% of the number of common shares then outstanding, which will equal [ ] shares immediately after our initial public offering, or |
| · | the average weekly trading volume of the common shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
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Rule 701
In general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of our initial public offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will be eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.
ARTICLES OF INCORPORATION OF OUR COMPANY
Our company was incorporated under the laws of the Province of Québec, Canada on August 27, 2012 under the name Riopel Marine, Inc. We amended our Articles on April 22, 2020 to change our name to Vision Marine Technologies Inc. The following is a description of certain sections of our Articles of Incorporation as amended and as modified by our Bylaws.
Remuneration of Directors
Our directors are entitled to the remuneration for acting as directors as the directors may from time to time determine. Unless otherwise provided for in a unanimous shareholder’s agreement, the board Directors fixes, from time to time, by resolution, the remuneration of the directors. In addition, the board of directors, may, by resolution, grant special compensation to a director who performs a specific or additional mandate on behalf of the Corporation. Directors also have the right to be reimbursed for travel expenses and all reasonable costs and expenses incurred in the exercise of their duties.
Number of Directors
According to Article 11 of our Internal By-laws, under Section D. Interpretation, the number of directors is indicated in the articles. If the articles provide for a minimum and a maximum number of directors, the board of directors is composed of the fixed number of directors, between these minimum and maximum numbers, determined by resolution of the board of directors, or failing that by shareholder resolution. An amendment to the articles which reduces the number of directors does not end the mandate of the directors in office.
Directors
Our directors are elected each year at the annual shareholder’s meeting. The election of a director is made by plurality of votes; the candidates who collect the greatest number of votes are elected in descending order, up to the number of positions to be filled. Our Articles provide that the Board may, between annual meetings, appoint one or more additional directors to serve until the next annual meeting, but the number of additional directors must not at any time exceed the fixed or maximum number of directors provided for by the articles.
Our By-laws provide that our directors may from time to time on behalf of our company, without shareholder approval:
| ● | Take out loans; |
| ● | Issue, reissue, sell or mortgage its debt securities; |
| ● | Give security for the performance of another person’s obligation; |
| ● | Mortgage all or part of his property, present or future, in order to guarantee the performance of any obligation; |
| ● | Fill vacancies in the directors or the auditor or to appoint additional directors; |
| ● | Appoint the chairman of the Corporation and the chairman of the board of directors, the head of management, the head of operations or the head of finance, and fix their remuneration; |
| ● | Authorize the issue of shares; |
| ● | Approve the transfer of unpaid shares; |
| ● | Declare dividends; |
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| ● | Acquire, in particular by purchase, redemption or exchange, shares issued by the Corporation; |
| ● | Subdivide, redesign or convert shares; |
| ● | Authorize the payment of a commission to a person who purchases shares or other securities in the Corporation, or who undertakes to buy or to have these shares or values purchased; |
| ● | Approve the financial statements presented at annual meetings of shareholders; |
| ● | Adopt the rules of procedure, modify or repeal them; |
| ● | Authorize calls for payments; |
| ● | Authorize the confiscation of shares; |
| ● | Approve an amendment to the articles allowing the series division of a class of unissued shares and establish the designation, rights and restrictions; |
| ● | Approve a simplified merger. |
Authorized Capital
Our Certificate of Incorporation, as amended by our Articles of Amendment, provides that our authorized capital consists of one (1) class of shares, being an unlimited number of common shares without par value, issuable in four series, of which an unlimited number are designated as Voting Common Shares – Series Founder, an unlimited number are designated as Voting Common Shares – Series Investor 1, an unlimited number are designated as Voting Common Shares – Series Investor 2 and an unlimited number are designated as Non-Voting Common Shares.
Rights, Preferences and Restrictions Attaching to Our Shares
Our Voting Common Shares, subject to the Business Corporations Act, are entitled to the following rights, privileges, restrictions and conditions attaching to our Voting Common Shares:
| ● | To vote at every shareholders’ meeting and receive a notice of meeting; each shareholder has one vote per share during the meeting; |
| ● | Voting Common Shares carry the right to receive any dividend; |
| ● | Voting Common Shares have the right to share the remainder of the assets in the event of the liquidation or dissolution of the Corporation. |
Our Non-Voting Common Shares, subject to the Business Corporations Act, are entitled to the following rights, privileges, restrictions and conditions attaching to our Non-Voting Common Shares:
| ● | Non-Voting Common Shares do not carry the right to vote at shareholder meetings or to receive notice of such meetings; |
| ● | Non-Voting Common Shares carry the right to receive any dividend; |
| ● | Non-Voting Common Shares have the right to share the remainder of the assets in the event of the liquidation or dissolution of the Corporation. |
Shareholder Meetings
The Business Corporations Act provides that: (i) the corporation must hold an annual meeting of shareholders; if necessary, it can hold one or more special shareholder’s meetings; (ii) shareholders meeting may be held in Quebec, in any place chosen by the board of directors, or may be held at a location outside Quebec if the articles allow it, or if all the shareholders entitled to vote agree; (iii) an annual meeting must be held within 18 months of the incorporation of the Corporation and, thereafter, within 15 months of the previous annual meeting; (iv) the board of directors may at any time call a special meeting; (v) shareholders holding at least 10% of the shares giving the right to vote at the special meeting requested to be convened may, by means of a notice, request the board of directors to convene a special meeting for the purposes set out in their request.
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Pursuant to Article 69 of our By-laws, a shareholder or proxy holder who is entitled to participate in a meeting of shareholders may do so by any means, if all shareholders and proxy holders participating in the meeting are able to communicate with each other; each shareholder participating by such means shall be deemed to be present at the meeting.
LIMITATIONS ON RIGHTS OF NON-CANADIANS
Vision Marine Technologies Inc. is incorporated pursuant to the laws of the Province of Quebec, Canada. There is no law or governmental decree or regulation in Canada that restricts the export or import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares, other than withholding tax requirements. Any such remittances to United States residents are generally subject to withholding tax, however no such remittances are likely in the foreseeable future. See “Certain Canadian Federal Income Tax Considerations For Non-Canadian Holders,” below.
There is no limitation imposed by Canadian law or by the charter or other constituent documents of our company on the right of a non-resident to hold or vote common shares of our company. However, the Investment Canada Act (Canada) (the “Investment Act”) has rules regarding certain acquisitions of shares by non-residents, along with other requirements under that legislation.
The following discussion summarizes the principal features of the Investment Act for a non-resident who proposes to acquire common shares of our company. The discussion is general only; it is not a substitute for independent legal advice from an investor’s own advisor; and it does not anticipate statutory or regulatory amendments.
The Investment Act is a federal statute of broad application regulating the establishment and acquisition of Canadian businesses by non-Canadians, including individuals, governments or agencies thereof, corporations, partnerships, trusts or joint ventures (each an “entity”). Investments by non-Canadians to acquire control over existing Canadian businesses or to establish new ones are either reviewable or notifiable under the Investment Act. If an investment by a non-Canadian to acquire control over an existing Canadian business is reviewable under the Investment Act, the Investment Act generally prohibits implementation of the investment unless, after review, the Minister of Innovation, Science and Economic Development, is satisfied that the investment is likely to be of net benefit to Canada.
A non-Canadian would acquire control of our company for the purposes of the Investment Act through the acquisition of common shares if the non-Canadian acquired a majority of the common shares of our company.
Further, the acquisition of less than a majority but one-third or more of the common shares of our company would be presumed to be an acquisition of control of our company unless it could be established that, on the acquisition, our company was not controlled in fact by the acquirer through the ownership of common shares.
For a direct acquisition that would result in an acquisition of control of our company, subject to the exception for “WTO-investors” that are controlled by persons who are resident in World Trade Organization (“WTO”) member nations, a proposed investment would be reviewable where the value of the acquired assets is $5 million or more, or if an order for review was made by the federal cabinet on the grounds that the investment related to Canada’s cultural heritage or national identity, where the value of the acquired assets is less than $5 million.
For a proposed indirect acquisition that by an investor other than a so-called WTO investor that would result in an acquisition of control of our company through the acquisition of a non-Canadian parent entity, the investment would be reviewable where the value of the assets of the entity carrying on the Canadian business, and of all other entities in Canada, the control of which is acquired, directly or indirectly is $50 million or more. The threshold is reduced to $5 million or more for a direct acquisition of control of the company by a non-WTO investor.
In the case of a direct acquisition by or from a “WTO investor”, the threshold is significantly higher. An investment in common shares of our company by a WTO investor would be reviewable only if it was an investment to acquire control of the company and the enterprise value of the assets of the company was equal to or greater than a specified amount, which is published by the Minister after its determination for any particular year. This amount is currently $1.075 billion (unless the WTO member is party to one of a list of certain free trade agreements, in which case the amount is currently $1.613 billion); beginning January 1, 2019, both thresholds will be adjusted annually by a GDP (Gross Domestic Product) based index.
The higher WTO threshold for direct investments and the exemption for indirect investments do not apply where the relevant Canadian business is carrying on a “cultural business”. The acquisition of a Canadian business that is a “cultural business” is subject to lower review thresholds under the Investment Act because of the perceived sensitivity of the cultural sector.
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In 2009, amendments were enacted to the Investment Act concerning investments that may be considered injurious to national security. If the Minister of Innovation, Science and Economic Development has reasonable grounds to believe that an investment by a non-Canadian “could be injurious to national security,” the Minister of Innovation, Science and Economic Development may send the non-Canadian a notice indicating that an order for review of the investment may be made. The review of an investment on the grounds of national security may occur whether or not an investment is otherwise subject to review on the basis of net benefit to Canada or otherwise subject to notification under the Investment Act. To date, there is neither legislation nor guidelines published, or anticipated to be published, on the meaning of “injurious to national security.” Discussions with government officials suggest that very few investment proposals will cause a review under these new sections. In 2016, the government of Canada released a set of guidelines for the national security review process. The guidelines state that, in assessing a proposed investment under the national security provisions of the Investment Act, the nature of the asset or business activities and the parties, including the potential for third party influence, involved in the transaction will be considered. The guidelines also provide a list of factors that may be taken into account to determine whether a review of an investment on national security grounds will be conducted.
Certain transactions, except those to which the national security provisions of the Investment Act may apply, relating to common shares of our company are exempt from the Investment Act, including
| (a) | the acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities, |
| (b) | the acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions on the Investment Act, and |
| (c) | the acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of our company, through the ownership of common shares, remained unchanged. |
MATERIAL INCOME TAX INFORMATION
Material Canadian Federal Income Tax Considerations for Non-Canadian Holders
The following summary describes, as of the date hereof, the material Canadian federal income tax considerations generally applicable to a purchaser who acquires, as a beneficial owner, common shares pursuant to this offering and who, at all relevant times, for the purposes of the application of the Income Tax Act (Canada) and the Income Tax Regulations, or, collectively, the Canadian Tax Act, (1) is not, and is not deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable income tax treaty or convention; (2) deals at arm’s length with us; (3) is not affiliated with us; (4) does not use or hold, and is not deemed to use or hold, common shares in a business carried on in Canada; (5) has not entered into, with respect to the common shares, a “derivative forward agreement” as that term is defined in the Canadian Tax Act and (6) holds the common shares as capital property (a “Non-Canadian Holder”). Special rules, which are not discussed in this summary, may apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere.
This summary is based on the current provisions of the Canadian Tax Act, and an understanding of the current administrative policies of the Canada Revenue Agency published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the Canadian Tax Act and the Canada-United States Tax Convention (1980), as amended, or the Canada-U.S. Tax Treaty, publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof the (“Proposed Amendments”) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Non-Canadian Holder and no representation with respect to the Canadian federal income tax consequences to any particular Non-Canadian Holder or prospective Non-Canadian Holder is made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, prospective purchasers should consult with their own tax advisors for advice with respect to their own particular circumstances.
Generally, for purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the exchange rates as determined in accordance with the Canadian Tax Act. The amount of any dividends required to be included in the income of, and capital gains or capital losses realized by, a Non-Canadian Holder may be affected by fluctuations in the Canadian exchange rate.
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Dividends
Dividends paid or credited on the common shares or deemed to be paid or credited on the common shares to a Non-Canadian Holder will be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Canadian Holder is entitled under any applicable income tax convention between Canada and the country in which the Non-Canadian Holder is resident. For example, under the Canada-U.S. Tax Treaty, where dividends on the common shares are considered to be paid to or derived by a Non-Canadian Holder that is a beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to benefits of, the Canada-U.S. Tax Treaty, the applicable rate of Canadian withholding tax is generally reduced to 15%.
Dispositions
A Non-Canadian Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of a Common Share, unless the common shares are “taxable Canadian property” to the Non-Canadian Holder for purposes of the Canadian Tax Act and the Non-Canadian Holder is not entitled to relief under an applicable income tax convention between Canada and the country in which the Non-Canadian Holder is resident.
Generally, the common shares will not constitute “taxable Canadian property” to a Non-Canadian Holder at a particular time provided that the common shares are listed at that time on a “designated stock exchange” (as defined in the Canadian Tax Act), which includes the Nasdaq, unless at any particular time during the 60-month period that ends at that time (i) one or any combination of (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder does not deal at arm’s length, and (c) partnerships in which the Non-Canadian Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, has owned 25% or more of the issued shares of any class or series of our capital stock, and (ii) more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of: (i) real or immoveable property situated in Canada, (ii) “Canadian resource properties” (as defined in the Canadian Tax Act), (iii) “timber resource properties” (as defined in the Canadian Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, property in any of the foregoing whether or not the property exists. Notwithstanding the foregoing, in certain circumstances set out in the Canadian Tax Act, common shares could be deemed to be “taxable Canadian property.” Non-Canadian Holders whose common shares may constitute “taxable Canadian property” should consult their own tax advisors.
Material United States Federal Income Tax Considerations
The following is a general summary of material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from the acquisition, ownership and disposition of our securities. This summary applies only to U.S. Holders that acquire securities pursuant to this prospectus, hold our common shares as capital assets within the meaning of Section 1221 of the Code (as defined below) and have the U.S. dollar as their functional currency.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the acquisition, ownership and disposition of our common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. In addition, this summary does not address the U.S. federal alternative minimum, net investment income, U.S. federal estate and gift, U.S. Medicare contribution, U.S. state and local, or non-U.S. tax consequences of the acquisition, ownership or disposition of our common shares. Except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local and non-U.S. tax consequences of the acquisition, ownership and disposition of our common shares.
No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership or disposition of our common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, or contrary to, any position taken in this summary. In addition, because the authorities upon which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
The following discussion does not describe all the tax consequences that may be relevant to any particular U.S. Holders, including those subject to special tax situations such as:
| • | banks and certain other financial institutions; | ||
| • | regulated investment companies; | ||
| • | real estate investment trusts; |
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| • | insurance companies; | ||
| • | broker-dealers; | ||
| • | traders that elect to mark-to-market; | ||
| • | tax-exempt entities or governmental organizations; | ||
| • | individual retirement accounts or other tax deferred accounts; | ||
| • | persons deemed to sell our common shares under the constructive sale provisions of the Code; | ||
| • | persons liable for alternative minimum tax or the Medicare contribution tax on net investment income; | ||
| • | U.S. expatriates; | ||
| • | persons holding our common shares as part of a straddle, hedging, constructive sale, conversion or integrated transaction; | ||
| • | persons that directly, indirectly, or constructively own 10% or more of the total combined voting power or total value of our common shares; | ||
| • | persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States; | ||
| • | persons who acquired our common shares pursuant to the exercise of any employee share option or otherwise as compensation; | ||
| • | persons subject to special tax accounting rules as a result of any item of gross income with respect to our common shares being taken into account in an applicable financial statement; or | ||
| • | persons holding our common shares through partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes. |
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PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF OUR COMMON SHARES.
As used herein, the term “U.S. Holder” means a beneficial owner of our common shares that, for U.S. federal income tax purposes, is or is treated as:
| • | an individual who is a citizen or resident of the United States; |
| • | a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| • | an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
| • | a trust that (1) is subject to the supervision of a court within the United States and the control of one or more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
The tax treatment of a partner (or other owner) in an entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds our common shares, and such entity or arrangement, generally will depend on such partner’s (or other owner’s) status and the activities of such entity or arrangement. A U.S. Holder that is a partner (or other owner) in such an entity or arrangement should consult its tax advisor.
Dividends and Other Distributions on Our Common Shares
Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us with respect to our common shares (including the amount of non-U.S. taxes withheld therefrom, if any) generally will be includible as dividend income in a U.S. Holder’s gross income in the year received, to the extent such distributions are paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, a U.S. Holder should expect all cash distributions will be reported as dividends for U.S. federal income tax purposes. Such dividends will not be eligible for the dividends-received deduction allowed to U.S. corporations with respect to dividends received from other U.S. corporations.
Dividends received by certain non-corporate U.S. Holders (including individuals) may be “qualified dividend income,” which is taxed at the lower applicable capital gains rate, provided that (1) our common shares are readily tradable on an established securities market in the United States, (2) we are neither a passive foreign investment company (as discussed below) nor treated as such with respect to the U.S. Holder for our taxable year in which the dividend is paid or the preceding taxable year, (3) the U.S. Holder satisfies certain holding period requirements, and (4) the U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. Under IRS authority, common shares generally are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Capital Market, as our common shares are expected to be. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for dividends paid with respect to our common shares.
The amount of any distribution paid in foreign currency will be equal to the U.S. dollar value of such currency, translated at the spot rate of exchange on the date such distribution is actually or constructively received by the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars at that time. A U.S. Holder generally should not recognize any foreign currency gain or loss in respect of such distribution if such foreign currency is converted into U.S. dollars on the date received by the U.S. Holder. Any further gain or loss on a subsequent conversion or other disposition of the currency for a different U.S. dollar amount will be U.S. source ordinary income or loss.
Dividends on our common shares generally will constitute foreign source income for foreign tax credit limitation purposes. Subject to certain complex conditions and limitations, non-U.S. taxes withheld, if any, on any distributions on our common shares may be eligible for credit against a U.S. Holder’s U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our common shares will generally constitute “passive category income.” The U.S. federal income tax rules relating to foreign tax credits are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming an itemized deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.
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Sale or Other Taxable Disposition of Our Common Shares
Subject to the passive foreign investment company rules discussed below, upon a sale or other taxable disposition of our common shares, a U.S. Holder will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in such common shares. Any such gain or loss generally will be treated as long-term capital gain or loss if the U.S. Holder’s holding period in common shares exceeds one year. Non-corporate U.S. Holders (including individuals) generally will be subject to U.S. federal income tax on long-term capital gain at preferential rates. The deductibility of capital losses is subject to significant limitations. Gain or loss, if any, recognized by a U.S. Holder on the sale or other taxable disposition of our common shares generally will be treated as U.S. source gain or loss for U.S. foreign tax credit limitation purposes.
If the consideration received upon the sale or other disposition of our common shares is paid in foreign currency, the amount realized will be the U.S. dollar value of the payment received, translated at the spot rate of exchange on the date of the sale or other taxable disposition. If our common shares are treated as traded on an established securities market, a cash basis U.S. Holder or an accrual basis U.S. Holder who has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS) will determine the U.S. dollar value of the amount realized in foreign currency by translating the amount received at the spot rate of exchange on the settlement date of the sale. If our common shares are not treated as traded on an established securities market, or the relevant U.S. Holder is an accrual basis taxpayer that does not make the special election, such U.S. Holder will recognize foreign currency gain or loss to the extent attributable to any difference between the U.S. dollar amount realized on the date of sale or disposition (as determined above) and the U.S. dollar value of the currency received translated at the spot rate on the settlement date.
A U.S. Holder’s initial U.S. federal income tax basis in our common shares generally will equal the cost of such common shares. If a U.S. Holder used foreign currency to purchase the common shares, the cost of the common shares will be the U.S. dollar value of the foreign currency purchase price on the date of purchase, translated at the spot rate of exchange on that date. If our common shares are treated as traded on an established securities market and the relevant U.S. Holder is either a cash basis taxpayer or an accrual basis taxpayer who has made the special election described above, the U.S. Holder will determine the U.S. dollar value of the cost of such common shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase.
Passive Foreign Investment Company Considerations
We will be classified as a passive foreign investment company (a “PFIC”) for any taxable year if either: (1) at least 75% of our gross income is “passive income” for purposes of the PFIC rules or (2) at least 50% of the value of our assets (determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of passive income. For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
Under the PFIC rules, if we were considered a PFIC at any time that a U.S. Holder holds our common shares, we would continue to be treated as a PFIC with respect to such U.S. Holder unless (1) we cease to qualify as a PFIC under the income and asset tests discussed in the prior paragraph and (2) the U.S. Holder has made a “deemed sale” election under the PFIC rules.
Based on the anticipated market price of our common shares in the offering and the current and anticipated composition of our income, assets and operations, we do not expect to be treated as a PFIC for the current taxable year or in the foreseeable future. This is a factual determination, however, that depends on, among other things, the composition of our income and assets and the market value of our shares and assets from time to time, and thus the determination can only be made annually after the close of each taxable year. Therefore, there can be no assurance that we will not be classified as a PFIC for the current taxable year or for any future taxable year.
If we are considered a PFIC at any time that a U.S. Holder holds our common shares, any gain recognized by a U.S. Holder on a sale or other disposition of our common shares, as well as the amount of any “excess distribution” (defined below) received by the U.S. Holder, would be allocated ratably over the U.S. Holder’s holding period for our common shares. The amounts allocated to the taxable year of the sale or other disposition (or the taxable year of receipt, in the case of an excess distribution) and to any year prior to the year in which we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed. For the purposes of these rules, an excess distribution is the amount by which any distribution received by a U.S. Holder on its common shares exceeds 125% of the average of the annual distributions on our common shares received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter.
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Certain elections may be available that would result in alternative treatments (such as qualified electing fund treatment or mark-to-market treatment) of our common shares if we are considered a PFIC. We do not intend to provide the information necessary for U.S. Holders of our common shares to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for an investment in a PFIC described above. If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, the U.S. Holder will be deemed to own shares in any of our subsidiaries that are also PFICs. However, an election for mark-to-market treatment would likely not be available with respect to any such subsidiaries.
If we are considered a PFIC, a U.S. Holder will also be subject to annual information reporting requirements. U.S. Holders should consult their tax advisors about the potential application of the PFIC rules to an investment in our common shares.
U.S. Information Reporting and Backup Withholding
Dividend payments with respect to our common shares and proceeds from the sale, exchange or redemption of our common shares may be subject to information reporting to the IRS and possible U.S. backup withholding. A U.S. Holder may be eligible for an exemption from backup withholding if the U.S. Holder furnishes a correct taxpayer identification number and makes any other required certification or is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status may be required to provide such certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability, and such U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing an appropriate claim for refund with the IRS and furnishing any required information.
Additional Information Reporting Requirements
A U.S. Holder that acquires common shares generally will be required to file Form 926 with the IRS if (1) immediately after the acquisition such U.S. Holder, directly or indirectly, owns at least 10% of the common shares, or (2) the amount of cash transferred in exchange for common shares during the 12-month period ending on the date of the acquisition exceeds US$100,000. Significant penalties may apply for failing to satisfy these filing requirements. U.S. Holders are urged to contact their tax advisors regarding these filing requirements.
Certain U.S. Holders who are individuals (and certain entities) that hold an interest in “specified foreign financial assets” (which may include our common shares) are required to report information relating to such assets, subject to certain exceptions (including an exception for common shares held in accounts maintained by certain financial institutions). Penalties can apply if U.S. Holders fail to satisfy such reporting requirements. U.S. Holders should consult their tax advisors regarding the applicability of these requirements to their acquisition and ownership of our common shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE IMPORTANT TO YOU. EACH PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN OUR COMMON SHARES UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
We have entered into an underwriting agreement, dated [ ], 2020, with ThinkEquity, a division of Fordham Financial Management, Inc., acting as the sole book-running manager (sometimes referred to as the “Representative”). Subject to the terms and conditions of the underwriting agreement, the underwriter named below has agreed to purchase, and we have agreed to sell to it, the number of common shares at the public offering price, less the underwriting discounts and commissions, as set forth on the cover page of this prospectus and as indicated below:
| Name of Underwriter | Number of common shares | |
| ThinkEquity, a division of Fordham Financial Management, Inc. | ||
| Total |
The underwriting agreement provides that the obligations of the underwriter to pay for and accept delivery of the shares of common shares offered by this prospectus are subject to various conditions and representations and warranties, including the approval of certain legal matters by its counsel and other conditions specified in the underwriting agreement. The common shares are offered by the underwriter, subject to prior sale, when, as and if issued to and accepted by it. The underwriter reserves the right to withdraw, cancel or modify the offer to the public and to reject orders in whole or in part. The underwriter is obligated to take and pay for all of the common shares offered by this prospectus if any such shares are taken.
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We have agreed to indemnify the underwriter and certain of its affiliates and controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), among others, against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriter may be required to make in respect thereof.
Discounts and Commissions
The underwriter proposes to offer the common shares directly to the public at the public offering price set forth on the cover page of this prospectus. After the offering to the public, the offering price and other selling terms may be changed by the underwriter without changing the proceeds we will receive from the underwriter.
The following table summarizes the public offering price, underwriting commissions and proceeds before expenses to us. The underwriting commissions are 7.0% of the public offering price. We have also agreed to pay a non-accountable expense allowance to the underwriter equal to 1% of the gross proceeds received at the closing of the offering.
| Per Share | Total Without Over-Allotment Option | Total With
Full Over-Allotment Option | ||||||||||
| Public offering price | US$ | US$ | US$ | |||||||||
| Underwriting discount (7%) | US$ | US$ | US$ | |||||||||
| Non-accountable expense allowance (1%) | US$ | US$ | US$ | |||||||||
| Proceeds, before expenses, to us | US$ | US$ | US$ | |||||||||
We have also agreed to pay certain of the Representative’s expenses relating to the offering, including the fees and expenses of the Representative’s legal counsel and for the underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for this offering, totaling US$192,500
Our total estimated expenses of the offering, including the non-accountable expense allowance, registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, are approximately US$[___].
Over-Allotment Option
We have granted a 45-day option to the Representative to purchase up to [____] additional common shares at the public offering price from us solely to cover over-allotments, if any, less underwriting discounts and commissions.
Representative’s Warrants
Upon closing of this offering, we have agreed to issue to the Representative as compensation warrants to purchase a number of shares of common stock equal to 5.5% of the aggregate number of common shares of common stock sold in this offering (the “Representative’s Warrants”). The Representative’s Warrants will be exercisable at a per share exercise price equal to 125% of the public offering price per share in this offering. The Representative’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four- and one-half year period commencing 180 days from the effective date of the registration statement of which this prospectus is a part.
The Representative’s Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the registration statement. In addition, the warrants provide for registration rights upon request, in certain cases. The one-time demand registration right provided will not be greater than five years from the effective date of the registration statement in compliance with FINRA Rule 5110(f)(2)(G)(iv). The unlimited piggyback registration right provided will not be greater than seven years from the effective date of the registration statement in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
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Discretionary Accounts
The underwriter does not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-Up Agreements
Pursuant to “lock-up” agreements, we, our executive officers and directors, and our stockholders, have agreed, without the prior written consent of the Representative, not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) our common shares, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common shares, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common shares or securities convertible into or exercisable or exchangeable for common shares or any other of our securities or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of 180 days from the date of this prospectus.
Right of First Refusal
We have granted the Representative a right of first refusal, for a period of twenty-four (24) months from the closing of the offering, to act as sole and exclusive investment banker, book-runner, financial advisor, underwriter and/or placement agent, at the underwriter’s sole and exclusive discretion, for each and every future public and private equity and debt offering, including all of our equity linked financings (each, a “Subject Transaction”), or any successor (or any of our subsidiaries), on terms and conditions customary to the Representative for such Subject Transactions.
Nasdaq Capital Market
We have applied to have our common shares listed on the Nasdaq Capital Market under the symbol “VMAR”. Our application might not be approved and the consummation of this offering is contingent upon such approval. There is no established public trading market for the common shares, and such a market might never develop.
Price Stabilization, Short Positions and Penalty Bids
In order to facilitate the offering of our securities, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our securities. In connection with the offering, the underwriter may purchase and sell our securities in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriter of a greater number of shares of securities than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriter’s option to purchase additional shares of securities in the offering. The underwriter may close out any covered short position by either exercising the over-allotment option to purchase shares or purchasing shares in the open market. In determining the source of shares of securities to close out the covered short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option to purchase shares. “Naked” short sales are sales in excess of the over-allotment option to purchase shares. The underwriter must close out any naked short position by purchasing securities in the open market. A naked short position is more likely to be created if the underwriter is concerned that there may be downward pressure on the price of our securities in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of securities made by the underwriter in the open market before the completion of the offering.
Similar to other purchase transactions, the underwriter’s purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities. As result, the price of our securities may be higher than the price that might otherwise exist in the open market.
The underwriter makes no representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our securities. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Offer, Sale and Distribution of Securities
A prospectus in electronic format may be made available on the websites maintained by the underwriter or selling group members, if any, participating in the offering. The underwriter may agree to allocate a number of shares of securities to underwriter and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriter and selling group members that may make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriter’s websites and any information contained in any other website maintained by the underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part.
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Other Relationships
From time to time, the underwriter and/or its affiliates may provide in the future, various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they will receive customary fees and commissions. However, except as disclosed in this prospectus, we have no present arrangements with the underwriter or any of its affiliates for any further services.
Pricing of the Offering
The public offering price was determined by negotiations between us and the Representative. Among the factors considered in determining the public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours. Neither we nor the underwriter can assure investors that an active trading market for the shares will develop or that, after the offering, the shares will trade in the public market at or above the public offering price.
Offer Restrictions Outside the United States
Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Canada
The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to our Company.
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In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Hong Kong
Neither the information in this document nor any other document relating to the offer has been delivered for registration to the Registrar of Companies in Hong Kong, and its contents have not been reviewed or approved by any regulatory authority in Hong Kong, nor have we been authorized by the Securities and Futures Commission in Hong Kong. This document does not constitute an offer or invitation to the public in Hong Kong to acquire shares. Accordingly, unless permitted by the securities laws of Hong Kong, no person may issue or have in its possession for the purpose of issue, this document or any advertisement, invitation or document relating to the shares, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong other than in relation to shares which are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” (as such term is defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“SFO”) and the subsidiary legislation made thereunder) or in circumstances which do not result in this document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance of Hong Kong (Cap. 32 of the Laws of Hong Kong) (the “CO”) or which do not constitute an offer or an invitation to the public for the purposes of the SFO or the CO. The offer of the shares is personal to the person to whom this document has been delivered by or on behalf of our company, and a subscription for shares will only be accepted from such person. No person to whom a copy of this document is issued may issue, circulate or distribute this document in Hong Kong or make or give a copy of this document to any other person. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. No document may be distributed, published or reproduced (in whole or in part), disclosed by or to any other person in Hong Kong or to any person to whom the offer of sale of the shares would be a breach of the CO or SFO.
EXPENSES RELATING TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding placement discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the FINRA filing fee and the Nasdaq Capital Market listing fee, all amounts are estimates.
| Securities and Exchange Commission Registration Fee | US$ | 2,513 | ||
| Nasdaq Capital Market Listing Fee | US$ | 48,000 | ||
| FINRA | US$ | 2,905 | ||
| Legal Fees and Expenses | US$ | 154,113 | ||
| Accounting Fees and Expenses | US$ | 20,000 | ||
| Printing and Engraving Expenses | US$ | 5,000 | ||
| Miscellaneous Expenses | US$ | 25,000 | ||
| Total Expenses | US$ | 257,411 |
Ortoli Rosenstadt LLP is acting as counsel to our company regarding U.S. securities law matters. The current address of Ortoli Rosenstadt LLP is 501 Madison Avenue, 14th Floor, New York, NY 10022. Renno & Co. is acting as our Canadian counsel. The current address of Renno & Co. is Suite 400, 3 Place Ville Marie, Montreal, Québec, H3B 2E3, Canada.
Dentons US LLP, New York, New York is acting as counsel to the underwriter.
The financial statements of Vision Marine Technologies Inc. as of August 31, 2019 and August 31, 2018 and for the years respectively then ended included in this prospectus and registration statement have been so included in reliance on the report of BDO Canada LLP, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing. BDO Canada LLP has offices at 1000 De La Gauchetière Street West, Suite 200, Montréal, Québec H3B 4W5, Canada. Their telephone number is 514-931-0841.
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INTERESTS OF EXPERTS AND COUNSEL
None of the named experts or legal counsel was employed on a contingent basis, owns an amount of shares in our company which is material to that person, or has a material, direct or indirect economic interest in our company or that depends on the success of the offering.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a corporation organized under the laws of Canada, and all of our directors and officers, as well as the Canadian independent registered chartered accountants named in the “Experts” section of this prospectus, reside outside of the United States. Service of process upon such persons may be difficult or impossible to effect within the United States. Furthermore, because a substantial portion of our assets, and substantially all the assets of our directors and officers and the Canadian experts named herein, are located outside of the United States, any judgment obtained in the United States, including a judgment based upon the civil liability provisions of United States federal securities laws, against us or any of such persons may not be collectible within the United States.
In addition, there is doubt as to the applicability of the civil liability provisions of United States federal securities law to original actions instituted in Canada. It may be difficult for an investor, or any other person or entity, to assert United States securities laws claims in original actions instituted in Canada. However, subject to certain time limitations, a foreign civil judgment, including a United States court judgment based upon the civil liability provisions of United States federal securities laws, may be enforced by a Canadian court, provided that:
| • | the judgment is enforceable in the jurisdiction in which it was given; |
| • | the judgment was obtained after due process before a court of competent jurisdiction that recognizes and enforces similar judgments of Canadian courts, and the court had authority according to the rules of private international law currently prevailing in Canada; |
| • | adequate service of process was effected and the defendant had a reasonable opportunity to be heard; |
| • | the judgment is not contrary to the law, public policy, security or sovereignty of Canada and its enforcement is not contrary to the laws governing enforcement of judgments; |
| • | the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; |
| • | the judgment is no longer appealable; and |
| • | an action between the same parties in the same matter is not pending in any Canadian court at the time the lawsuit is instituted in the foreign court. |
Foreign judgments enforced by Canadian courts generally will be payable in Canadian dollars. A Canadian court hearing an action to recover an amount in a non-Canadian currency will render judgment for the equivalent amount in Canadian currency.
The name and address of our agent for service of process in the United States is Corporation Service Company, 251 Little Falls Road, Wilmington, DE 19808.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the common shares offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits thereto, to which reference is hereby made. With respect to each contract, agreement or other document filed as an exhibit to the registration statement, reference is made to such exhibit for a more complete description of the matter involved. The registration statement and the exhibits thereto filed by us with the SEC may be inspected at the public reference facility of the SEC listed below.
The registration statement, reports and other information filed or to be filed with the SEC by us can be inspected and copied at the public reference facilities maintained by the SEC at 100 F. Street NW, Washington, D.C. 20549. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.
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We are subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements are filing reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and will submit to the SEC, on Form 6-K, unaudited quarterly financial information.
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| Table of Contents | |
| Annual Financial Statements for the Year Ended August 31, 2019 | |
| Auditor's report | F-1 |
| Statements of Financial Position | F-2 |
| Statements of Changes in Deficiency | F-3 |
| Statements of Comprehensive Income | F-4 |
| Statements of Cash Flows | F-5 |
| Notes to Financial Statements | F-6 |
| Condensed Interim Financial Statements for the Six-Month Period Ended February 29, 2020 and February 28, 2019 | |
| Condensed Interim Statements of Financial Position | F-30 |
| Condensed Interim Statements of Changes in Deficiency | F-31 |
| Condensed Interim Statements of Comprehensive Income | F-32 |
| Condensed Interim Statements of Cash Flows | F-33 |
| Notes to Condensed Interim Financial Statements | F-34 |
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 |
Tel: 514-931-0841 | BDO Canada s.r.l./S.E.N.C.R.L./LLP | ||||||
| Fax: 514-931-9491 | 1000 De La Gachetière
Street West Suite 200 | |||||||
| www.bdo.ca | Montréal, Québec H3B 4W5 |
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Riopel Marine Inc.
Boisbriand, Québec
Opinion on the Financial Statements
We have audited the accompanying statements of financial position of Riopel Marine Inc. (the “Company”) as of August 31, 2019 and 2018, the related statements of comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company's auditor since 2019.
Montréal, Québec
April 24, 2020
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
| F-1 |
Riopel Marine Inc.
Statements
of Financial Position
As at August 31, 2019 and 2018
| 2019 | 2018 | |||||||
| $ | $ | |||||||
Assets | ||||||||
| Current | ||||||||
| Trade and other receivables (note 6) | 101,784 | 59,248 | ||||||
| Inventories (note 7) | 818,811 | 931,706 | ||||||
| Cash held in trust | 37,500 | - | ||||||
| Prepaid expenses | 8,595 | - | ||||||
| Grants and investment tax credits receivable | 400,079 | 518,960 | ||||||
| Term deposit | - | 68,368 | ||||||
| Total current assets | 1,366,769 | 1,578,282 | ||||||
| Advances to related parties (note 12) | 40,310 | 38,710 | ||||||
| Property and equipment (note 8) | 507,483 | 355,307 | ||||||
| Deferred income taxes (note 17) | - | 20,895 | ||||||
| Total non-current assets | 547,793 | 414,912 | ||||||
| Total assets | 1,914,562 | 1,993,194 | ||||||
Liabilities | ||||||||
| Current | ||||||||
| Bank indebtedness (note 9) | 283,813 | 87,937 | ||||||
| Trade and other payables (note 10) | 376,303 | 472,437 | ||||||
| Contract liabilities (note 11) | 180,072 | 676,070 | ||||||
| Advances from related parties (note 12) | 597,341 | 601,282 | ||||||
| Current portion of long-term debt (note 13) | 17,628 | 52,552 | ||||||
| Current portion of obligation under finance lease (note 14) | 4,377 | - | ||||||
| Total current liabilities | 1,459,534 | 1,890,278 | ||||||
| Non-current | ||||||||
| Advances from related parties (note 12) | 452,723 | 444,732 | ||||||
| Long-term debt (note 13) | 125,862 | 60,977 | ||||||
| Finance lease (note 14) | 3,839 | - | ||||||
| Deferred income taxes (note 17) | 4,906 | - | ||||||
| Total non-current liabilities | 587,330 | 505,709 | ||||||
| Total liabilities | 2,046,864 | 2,395,987 | ||||||
| Commitments (note 15) | ||||||||
| Shareholders' deficiency | ||||||||
| Capital stock (note 16) | 525 | 600 | ||||||
| Capital stock to be issued (note 16) | 37,500 | - | ||||||
| Deficit | (170,327 | ) | (403,393 | ) | ||||
| (132,302 | ) | (402,793 | ) | |||||
| 1,914,562 | 1,993,194 | |||||||
See accompanying notes
| F-2 |
Riopel Marine Inc.
Statements of Changes in Deficiency
For the Years Ended August 31, 2019 and 2018
| Capital stock | Capital stock to be issued | Deficit | Total | |||||||||||||||||
| units | $ | $ | $ | $ | ||||||||||||||||
| Shareholders' deficiency as at August 31, 2017 | 600 | 600 | - | (217,545 | ) | (216,945 | ) | |||||||||||||
| Net and comprehensive loss | - | - | - | (185,848 | ) | (185,848 | ) | |||||||||||||
| Shareholders' deficiency as at August 31, 2018 | 600 | 600 | - | (403,393 | ) | (402,793 | ) | |||||||||||||
| Net and comprehensive income | - | - | - | 233,066 | 233,066 | |||||||||||||||
| Repurchase of capital stock (note 16) | (75 | ) | (75 | ) | - | - | (75 | ) | ||||||||||||
| Subscriptions to capital stock received in advance of issuance (note 16) | -- | - | 37,500 | - | 37,500 | |||||||||||||||
| Shareholders' deficiency as at August 31, 2019 | 525 | 525 | 37,500 | (170,327 | ) | (132,302 | ) | |||||||||||||
See accompanying notes
| F-3 |
Riopel Marine Inc.
Statements of Comprehensive Income
For the Years Ended August 31, 2019 and 2018
2019 $ | 2018 $ | |||||||
| Revenues (notes 12 and 20) | 2,869,377 | 1,271,566 | ||||||
| Cost of sales (note 21) | 1,584,013 | 769,839 | ||||||
| Gross profit | 1,285,364 | 501,727 | ||||||
| Expenses | ||||||||
| Office salaries and benefits | 372,961 | 105,101 | ||||||
| Rent | 204,596 | 108,137 | ||||||
| Professional fees | 111,653 | 104,294 | ||||||
| Travel and entertainment | 30,199 | 23,295 | ||||||
| Advertising and promotion | 157,276 | 111,198 | ||||||
| Office and general | 69,737 | 55,325 | ||||||
| Impairment of trade and other receivables | 3,729 | - | ||||||
| Interest and bank charges | 18,788 | 17,013 | ||||||
| Interest on long-term debt and finance lease | 15,669 | 22,938 | ||||||
| Foreign exchange | 1,790 | (11,959 | ) | |||||
| Depreciation | 1,513 | 500 | ||||||
| 987,911 | 535,842 | |||||||
| Earnings (loss) before income taxes | 297,453 | (34,115 | ) | |||||
| Income taxes | ||||||||
| Current | 38,586 | 65,023 | ||||||
| Deferred | 25,801 | 86,710 | ||||||
| 64,387 | 151,733 | |||||||
| Net and comprehensive income (loss) | 233,066 | (185,848 | ) | |||||
| Weighted average shares outstanding | 527 | 600 | ||||||
| Basic and diluted income (loss) per share | 485 | (203 | ) | |||||
See accompanying notes
| F-4 |
Riopel Marine Inc.
For the Years Ended August 31, 2019 and 2018
2019 $ | 2018 $ | |||||||
| Operating activities | ||||||||
| Net and comprehensive income (loss) | 233,066 | (185,848 | ) | |||||
| Depreciation | 35,109 | 30,371 | ||||||
| Accretion on long-term debt | 5,143 | 9,309 | ||||||
| Deferred income taxes | 25,801 | 86,710 | ||||||
| 299,119 | (59,458 | ) | ||||||
| Net change in non-cash working capital items Trade and other receivables | (42,536 | ) | (23,414 | ) | ||||
| Inventories | 112,895 | (507,093 | ) | |||||
| Grants and investment tax credits receivable | 118,881 | 4,047 | ||||||
| Prepaid expenses | (8,595 | ) | 5,142 | |||||
| Trade and other payables | (96,134 | ) | 105,253 | |||||
| Contract liabilities | (495,998 | ) | 600,560 | |||||
| (411,487 | ) | 184,495 | ||||||
| (112,368 | ) | 125,037 | ||||||
| Investing activities | ||||||||
| Additions to property and equipment | (175,952 | ) | (1,755 | ) | ||||
| Advances to related parties | (1,600 | ) | (38,252 | ) | ||||
| Term deposit | 68,368 | (68,368 | ) | |||||
| (109,184 | ) | (108,375 | ) | |||||
| Financing activities | ||||||||
| Change in bank indebtedness | 195,876 | (5,795 | ) | |||||
| Increase in long-term debt | 84,818 | - | ||||||
| Repayment of long-term debt | (60,000 | ) | (83,326 | ) | ||||
| Repayment of obligations under finance leases | (3,117 | ) | - | |||||
| Repurchase of capital stock | (75 | ) | - | |||||
| Advances from related parties | 4,050 | 72,459 | ||||||
| Subscriptions to capital stock received in advance of issuance | 37,500 | - | ||||||
| 259,052 | (16,662 | ) | ||||||
| Increase in cash and cash equivalents | 37,500 | - | ||||||
| Cash and cash equivalents - end of year | 37,500 | - | ||||||
| Cash and cash equivalents | ||||||||
| Cash held in trust | 37,500 | - | ||||||
See accompanying notes
| F-5 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 1. | Incorporation and nature of business |
Riopel Marine Inc. (the "Company") was incorporated on August 29, 2012. The principal business of the Company is to manufacture and sell electric boats.
The head office and registered office of the Company is located at 730 Curé-Boivin boulevard, Boisbriand, Quebec, J7G 2A7.
| 2. | Basis of preparation |
Compliance with IFRS
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") in effect on August 31, 2019.
The financial statements were authorized for issued by the Board of Directors on April 24, 2020.
Basis of measurement
These financial statements are stated in Canadian dollars, which is also the Company's functional currency, and were prepared on the historical cost basis.
Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Areas where estimates are significant to the financial statements are disclosed in note 4.
| 3. | Significant accounting policies |
Revenue recognition
Revenue is recognized at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Company:
| - | identifies the contract with the customer; |
| - | identifies the performance obligations in the contract; |
| - | determines the transaction price which takes into account estimates of variable consideration and the time value of money; |
| F-6 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 3. | Significant accounting policies (continued) |
Revenue recognition (continued)
| - | allocates the transaction price to separate performance obligations on the basis of relative stand- alone selling price of each distinct good or service to be delivered; and, |
| - | recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. |
The Company enters into contracts with customers, as well as distributor agreements with specific distributors for the sale of boats.
Sale of boats
Revenue from the sale of boats, including incidental shipping fees, is recognized at the point in time when the customer obtains control of the goods, which is generally at the shipping point. In the context of its distributor agreements, control is passed at the shipping point to the distributor as the Company has no further performance obligations at that point. The amount of consideration the Company receives and the revenue recognized varies with volume rebate programs offered to distributors. When the Company offers retrospective volume rebates, it estimates the expected volume rebates based on an analysis of historical experience, to the extent that it is highly probable that a significant reversal will not occur. The Company adjusts its estimate of revenue related to volume rebates at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed.
The Company recognizes customer deposits on the sale of boats as contract liabilities.
Sales of parts and boat maintenance
Revenue from the sale of parts and related maintenance services are recognized at the point in time when the customer obtains control of the parts and when services are completed.
Commission
Commission income is recognized at the point in time when the underlying transaction is settled.
Other
Other revenue is recognized when it is received or when the right to receive payment is established.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, cash held in trust, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and – for the purpose of the statement of cash flows - bank overdrafts. Bank overdrafts are shown within bank indebtedness in current liabilities on the statement of financial position.
| F-7 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
3. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit loss, trade receivables have been grouped based on days overdue.
Other receivables are recognized at amortized cost, less any allowance for expected credit loss.
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realizable value on a first-in first-out basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, and appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Cost of purchased inventory are determined after deducted rebates and discounts received or receivable.
Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset.
Depreciation is recorded to recognize the cost of assets over their useful lives. The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
| Methods | Rates and period | |
| Computer equipment | Declining balance method | 55% |
| Machinery and equipment | Declining balance method | 20% |
| Rolling stock | Declining balance method | 30% |
| Moulds | Straight-line method | 25 years |
Any item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales and proceeds and the carrying amount of the asset and is recognized in profit or loss.
Repairs and maintenance costs that do not improve or extend productive life are recognized in profit or loss in the period in which the costs are incurred.
| F-8 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 3. | Significant accounting policies (continued) |
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalized when it probable that the project will be a success considering its commercial and technical feasibility; the Company is able to use or sell the asset; the Company has sufficient resources and intent to complete its development; and its costs can be measured reliably. The Company has not capitalized any development costs.
Trade and other payables
These amounts represent liabilities for goods and services provided to the entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Taxes
Tax expense comprises current and deferred tax. Tax is recognized in the statement of operations except to the extent it relates to items recognized in other comprehensive income or directly in equity.
Current tax
Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax
Deferred taxes are the taxes expected to be payable or recoverable on differences between the carrying amounts of assets in the balance sheet and their corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences between the carrying amounts of assets and their corresponding tax bases. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets in a transaction that affects neither the taxable profit nor the accounting profit.
| F-9 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 3. | Significant accounting policies (continued) |
Foreign currency
Transactions entered into by the Company in a currency other than their functional currency are recorded at the rates prevailing when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in profit or loss.
Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognized as a finance cost.
Leases
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Company (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognized as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analyzed between capital and interest. The interest element is charged to profit and loss over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Company (an "operating lease"), the total rentals payable under the lease are charged to the statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognized as a reduction of the rental expense over the lease term on a straight-line basis.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market
| F-10 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 3. | Significant accounting policies (continued) |
Fair value measurement (continued)
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
Financial instruments
Classification and measurement of financial instruments
The Company measures its financial assets and financial liabilities at fair value on initial recognition, which is typically the transaction price unless a financial instrument contains a significant financing component. Subsequent measurement is dependent on the financial instrument’s classification which in the case of financial assets, is determined by the context of the Company’s business model and the contractual cash flow characteristics of the financial asset. Financial assets are classified into two categories: (1) measured at amortized cost and (2) fair value through profit and loss (“FVTPL”).
Financial liabilities are subsequently measured at amortized cost at the effective interest rate, other than financial liabilities that are measured at FVTPL or designated as FVTPL where any change in fair value resulting from an entity’s own credit risk is recorded as other comprehensive income (“OCI”).
Amortized cost
The Company classifies trade and other receivables, term deposit, trade and other payables, long- term debt and advances to/from related parties as financial instruments measured at amortized cost. The contractual cash flows received from the financial assets are solely payments of principal and interest and are held within a business model whose objective is to collect the contractual cash flows.
Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets measured at amortized cost. The measurement of the loss allowance depends upon the Company's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has been a significant increase in exposure to credit risk, a 12-month expected credit loss allowance is estimated. The amount of expected credit loss recognized is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
| F-11 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 3. | Significant accounting policies (continued) |
Financial instruments (continued)
Equity instruments
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.
The Company's shares are classified as equity instruments.
Grants and investment tax credits receivable
Grants and investment tax credits received on capital expenditure are deducted in arriving at the carrying amount of the asset purchased. Grants and investment tax credits for revenue expenditure are netted against the cost incurred by the Company. Where retention of a government grant is dependent on the Company satisfying certain criteria, it is initially recognized as deferred income.
When the criteria for retention have been satisfied, the deferred income balance is released to the statement of comprehensive income or netted against the asset purchased.
Cost of sales are presented net of $394,715 (2018 - $691,462) of grants and investment tax credits.
Earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number of common stock outstanding during the year.
Diluted income per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of common stock outstanding, adjusted for the effects of all dilutive potential common stock. The weighted average number of common stock outstanding is increased by the number of additional common stock that would have been issued by the Company assuming exercise of all options with exercise prices below the average market price for the year.
The Company does not hold any dilutive instruments as at August 31, 2019 and 2018.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the about by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
| F-12 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 4. | Significant accounting estimates and assumptions |
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgment. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence.
Income tax
Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax- related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.
| 5. | Future accounting standards issued but not yet effective |
IFRS 16: Leases
The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Under IFRS 16, a lessee recognizes a right-of- use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly and the liability accrues interest. This will typically produce a front-loaded expense profile (whereas operating leases under IAS 17 would typically have had straight-line expenses) as an assumed linear depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting period.
The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.
IFRS 16 supersedes IAS 17 Leases and related interpretations and is effective for periods beginning on or after September 1, 2019, with earlier adoption permitted if IFRS 15 Revenue from Contracts with Customers has also been applied. The Company is currently evaluating the impact of adopting this new standard.
| F-13 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 5. | Future accounting standards issued but not yet effective (continued) |
IFRIC 23: Uncertainty over income tax treatments
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:
| - | The Company to determine whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution; |
| - | The Company to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and |
| - | If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations. |
The interpretation is effective for periods beginning on or after September 1, 2019. The Company is currently evaluating the impact of adopting this new interpretation.
| 6. | Trade and other receivables |
| 2019 $ | 2018 $ | |||||||
| Trade receivable | 73,597 | 9,298 | ||||||
| Allowance for expected credit losses | - | (3,196 | ) | |||||
| Sales taxes receivable | 28,187 | 53,146 | ||||||
| 101,784 | 59,248 | |||||||
Trades receivables disclosed above include amounts that are past due at the end of the reporting period for which the Company has not recognized an allowance for expected credit losses because there has not been a significant change in credit quality and the amounts are still considered recoverable.
| F-14 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 6. | Trade and other receivables (continued) |
As at August 31, 2019, trade receivables of $73,597 (2018 - $1,714) were past due but not impaired. They relate to customers with no default history. The aging analysis of these receivables is as follows:
| 2019 $ | 2018 $ | |||||||
| 0 - 30 | 67,887 | - | ||||||
| 31 - 60 | - | 1,714 | ||||||
| 61 - 90 | - | - | ||||||
| 91 and over | 5,710 | - | ||||||
| 73,597 | 1,714 | |||||||
Movements in the allowance for expected credit losses are as follows:
| 2019 $ | 2018 $ | |||||||
| Opening balance | 3,196 | - | ||||||
| Provision recognized | 530 | 3,196 | ||||||
| Receivables written-off as uncollectable | (3,726 | ) | - | |||||
| Closing balance | - | 3,196 | ||||||
| 7. | Inventories |
| 2019 $ | 2018 $ | |||||||
| Raw materials | 301,939 | 175,620 | ||||||
| Work-in-process | 147,388 | 361,047 | ||||||
| Finished goods | 369,484 | 395,039 | ||||||
| 818,811 | 931,706 | |||||||
For the year ended August 31, 2019, inventories recognized as an expense amounted to $1,584,013 (2018 - $769,839).
For the year ended August 31, 2019, cost of sales includes depreciation of $33,596 (2018 - $29,870).
| F-15 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 8. | Property and equipment |
| Computer | ||||||||||||||||||||||||
| Machinery | equipment | |||||||||||||||||||||||
| and | Rolling | Computer | under | |||||||||||||||||||||
| equipment | stock | equipment | lease | Moulds | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| Balance at August 31, 2017 | 187,850 | 19,875 | 758 | - | 305,295 | 513,778 | ||||||||||||||||||
| Additions | - | - | 1,755 | - | - | 1,755 | ||||||||||||||||||
| Balance at August 31, 2018 | 187,850 | 19,875 | 2,513 | - | 305,295 | 515,533 | ||||||||||||||||||
| Additions | - | 5,800 | 2,918 | 11,333 | 167,234 | 187,285 | ||||||||||||||||||
| Balance at August 31, 2019 | 187,850 | 25,675 | 5,431 | 11,333 | 472,529 | 702,818 | ||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||
| Balance at August 31, 2017 | 110,324 | 12,700 | 726 | - | 6,105 | 129,855 | ||||||||||||||||||
| Depreciation | 15,505 | 2,153 | 500 | - | 12,213 | 30,371 | ||||||||||||||||||
| Balance at August 31, 2018 | 125,829 | 14,853 | 1,226 | - | 18,318 | 160,226 | ||||||||||||||||||
| Depreciation | 12,404 | 2,377 | 1,513 | 453 | 18,362 | 35,109 | ||||||||||||||||||
| Balance at August 31, 2019 | 138,233 | 17,230 | 2,739 | 453 | 36,680 | 195,335 | ||||||||||||||||||
| Net carrying amount | ||||||||||||||||||||||||
| As at August 31, 2018 | 62,021 | 5,022 | 1,287 | - | 286,977 | 355,307 | ||||||||||||||||||
| As at August 31, 2019 | 49,617 | 8,445 | 2,692 | 10,880 | 435,849 | 507,483 | ||||||||||||||||||
| 9. | Credit facility |
The Company has an authorized line of credit of $250,000 and $100,000 letter of guarantee facility, renewable annually, bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all assets, as well as a personal guarantee of $250,000 from the shareholders.
In 2018, the Company had an authorized line of credit of $100,000, renewable annually, bearing interest at prime rate plus 3%, secured by a second ranking movable hypothec of $185,000 on all assets, as well as a personal guarantee of $185,000 from shareholders. The line of credit was not renewed in 2019.
| F-16 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 10. | Trade and other payables |
| 2019 $ |
2018 $ |
|||||||
| Trade payable | 372,217 | 469,231 | ||||||
| Government remittances | 4,086 | 3,206 | ||||||
| 376,303 | 472,437 | |||||||
| 11. | Contract liabilities |
| 2019 | 2018 | |||||||
| $ | $ | |||||||
| Opening balance | 676,070 | 75,509 | ||||||
| Payments received in advance | 140,872 | 676,070 | ||||||
| Transferred to revenues | (636,870 | ) | (75,509 | ) | ||||
| Closing balance | 180,072 | 676,070 | ||||||
| 12. | Related party transactions |
| Company under common control |
| California Electric Boat Company Inc. |
| EBR Ltd. |
| 7858078 Canada Inc |
| Company jointly controlled by the majority shareholder |
| 9335-1427 Quebec Inc. |
| Ultimate shareholders and their individually controlled entities |
| Alexandre Mongeau |
| Patrick Bobby |
| Robert Ghetti |
| Immobilier R. Ghetti Inc. |
| Société de Placement Robert Ghetti Inc. |
| Shareholders |
| Gestion Toyma Inc. |
| Entreprises Claude Beaulac Inc. (former shareholder) |
| Gestion Moka Inc. (former shareholder) |
| F-17 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 12. | Related party transactions (continued) |
The following table summarizes the Company's related party transactions for the year:
| 2019 $ | 2018 $ | |||||||
| Revenues | ||||||||
| Sales of boats | ||||||||
| EBR Ltd. | 429,132 | 327,932 | ||||||
| Sales of parts and boat maintenance | ||||||||
| EBR Ltd. | 26,399 | 42,187 | ||||||
| Claude Beaulac | - | 1,740 | ||||||
| Other | ||||||||
| EBR Ltd. | - | 2,600 | ||||||
| 7858078 Canada Inc | 5,000 | - | ||||||
| Expenses | ||||||||
| Rent expense | ||||||||
| California Electric Boat Company Inc. | 143,376 | 35,056 | ||||||
At the end of the year, the amounts due to and from related parties are as follows:
| 2019 $ | 2018 $ | |||||||
| Advances to related party | ||||||||
| California Electric Boat Company Inc. | 40,310 | 38,710 | ||||||
| Non-current advances from related parties | ||||||||
| Alexandre Mongeau (subordinated in favor of the Company's lender) | 81,061 | 81,061 | ||||||
| Patrick Bobby (subordinated in favor of the Company's lender) | 82,534 | 82,534 | ||||||
| Robert Ghetti (subordinated in favor of the Company's lender) | 45,215 | 45,215 | ||||||
| Immobilier R. Ghetti Inc. (subordinated in favor of the Company's lender) | 1,487 | 1,487 | ||||||
| Société de Placement Robert Ghetti Inc. (subordinated in favor of the Company's lender) | 242,426 | 234,426 | ||||||
| F-18 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 12. | Related party transactions (continued) |
2019 $ | 2018 $ | |||||||
| Current advances from related parties | ||||||||
| 9335-1427 Quebec Inc. | 104,931 | 100,956 | ||||||
| Alexandre Mongeau | 60,911 | 60,911 | ||||||
| Patrick Bobby | 56,939 | 56,939 | ||||||
| Robert Ghetti | 19,535 | 19,535 | ||||||
| Immobilier R. Ghetti Inc. | 15,000 | 15,000 | ||||||
| Société de Placement Robert Ghetti Inc. | 36,950 | 44,950 | ||||||
| Gestion Toyma Inc. | 151,500 | 151,500 | ||||||
| Entreprises Claude Beaulac Inc. (former shareholder) | 151,575 | 101,000 | ||||||
| Gestion Moka Inc. (former shareholder) | - | 50,500 | ||||||
Advances to and from related parties are non-interest bearing and have no specified terms of repayment. Subsequent to year-end, the related parties waived their right to demand repayment until after September 1, 2020.
| 13. | Long-term debt |
| 2019 | 2018 | |||||||
| $ | $ | |||||||
| Loan from Canada Economic Development for Quebec Regions, non-interest bearing, repayable in monthly instalments of $1,667 starting July 2018 and maturing in June 2023. The loan was discounted using an effective interest rate of 8.85% (a) | 58,672 | 73,533 | ||||||
| Term loan, bearing interest at prime rate plus 6%, repaid during the year (b) | - | 39,996 | ||||||
| Term loan, bearing interest at 6.24%, repayable in monthly instalments of $630, including principal and interest, and maturing in December 2038 | 84,818 | - | ||||||
| 143,490 | 113,529 | |||||||
| Current portion of long-term debt | 17,628 | 52,552 | ||||||
| 125,862 | 60,977 | |||||||
| a) | As security for the loan, the Company has subordinated certain advances from related parties for $452,723. |
| b) | As security for the loan, the Company has subordinated certain advances from related parties for $444,732 in 2018. |
| F-19 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 13. | Long-term debt (continued) |
Future minimum payments are as follows:
| $ | ||||
| 2020 | 17,628 | |||
| 2021 | 16,485 | |||
| 2022 | 15,462 | |||
| 2023 | 12,650 | |||
| 2024 | 2,982 | |||
| Thereafter | 71,604 | |||
| 14. | Finance lease |
2019 $ | 2018 $ | |||||||
| Finance lease, bearing interest at 9.34%, secured by the leased equipment, payable in monthly instalments of $365 including principal and interest, maturing in November 2022 | 8,216 | - | ||||||
| Current portion of obligation under finance lease | 4,377 | - | ||||||
| 3,839 | - | |||||||
Future minimum lease payments of obligation under finance lease are as follows:
| $ | ||||
| 2020 | 4,377 | |||
| 2021 | 4,377 | |||
| 2022 | 365 | |||
| 9,119 | ||||
| Interest included in instalments | 903 | |||
| 8,216 | ||||
| F-20 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 15. | Commitments |
The commitments of the Company under lease agreements for premises with California Electric Boat Company Inc., a company under common control, and EB Rentals and for equipment aggregate to $543,300. The minimum annual payments are approximately as follows:
| Equipment | Premise | EB Rentals | ||||||||||
| $ | $ | $ | ||||||||||
| 2020 | 12,700 | 138,700 | 59,700 | |||||||||
| 2021 | 12,800 | 138,700 | - | |||||||||
| 2022 | 1,500 | 113,000 | - | |||||||||
| 2023 | - | 36,100 | - | |||||||||
| 2024 | - | 30,100 | - | |||||||||
| 16. | Capital stock |
Authorized -
Class A shares, voting and participating Class B shares, voting and non-participating
Class C shares, non-voting, preferential non-cumulative dividend over Class D, E, F and A shares at a maximum rate of 1% per month, retractable at the option of the holder at the fair market value of these shares
Class D shares, non-voting, preferential non-cumulative dividend over Class E, F and A shares at a maximum rate of 0.5% per month, retractable at the option of the holder at the fair market value of these shares
Class E shares, non-voting, preferential non-cumulative dividend over Class F and A shares at a maximum rate of 8% per year, retractable at the option of the holder at the amount paid
Class F shares, non-voting, preferential non-cumulative dividend over Class A shares at a maximum rate of 8% per year, redeemable by the Company at the amount paid
| 2019 $ | 2018 $ | |||||||
| Issued - 525 (2018 - 600) Class A shares | 525 | 600 | ||||||
During the year ended August 31, 2019, the Company repurchased 75 Class A shares for a cash consideration of $75.
| F-21 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 16. | Capital stock (continued) |
During the year ended August 31, 2019, the Company received subscription proceeds of $37,500 in advance of the January 20, 2020 issuance of Voting Common Shares - Series Investor 1 (note 24). As at August 31, 2019, the number of shares to be issued was undetermined and therefore the capital stock to be issued is not considered in the computation of basic and diluted earnings (loss) per share.
| 17. | Income taxes |
The income tax expense on the Company's income before tax differs from the theoretical amount that would arise using the federal and provincial statutory tax rates applicable. The difference is as follows:
| 2019 $ |
2018 $ |
|||||||
| Income taxes at the applicable tax rate of 15% (2018 - 17%) | 44,618 | (5,800 | ) | |||||
| Permanent differences | (6,032 | ) | 70,823 | |||||
| Temporary differences | 25,801 | 86,710 | ||||||
| Income tax expense | 64,387 | 151,733 | ||||||
The following tables present the composition of deferred income tax assets and liabilities:
| Balance as at August 31, |
Recognized in profit and |
Balance as at August 31, |
||||||||||
| 2018
$ |
loss
$ |
2019
$ |
||||||||||
| Temporary differences | ||||||||||||
| Property and equipment | (26,389 | ) | (2,102 | ) | (28,491 | ) | ||||||
| Research and development | 47,284 | (23,699 | ) | 23,585 | ||||||||
| Deferred tax (liability) asset | 20,895 | (25,801 | ) | (4,906 | ) | |||||||
| F-22 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 17. | Income taxes (continued) |
| Balance as at August 31, |
Recognized in profit and |
Balance as at August 31, |
||||||||||
| 2017 $ |
loss
$ |
2018
$ |
||||||||||
| Temporary differences | ||||||||||||
| Losses carried forward | 62,736 | (62,736 | ) | - | ||||||||
| Property and equipment | (12,629 | ) | (13,760 | ) | (26,389 | ) | ||||||
| Research and development | 57,498 | (10,214 | ) | 47,284 | ||||||||
| Deferred tax (liability) asset | 107,605 | (86,710 | ) | 20,895 | ||||||||
| 18. | Remuneration of directors and key management of the Company |
The remuneration awarded to directors and senior key management consists of wages of $207,751 (2018 - $179,949).
| 19. | Capital disclosures |
The Company's objectives in managing capital are:
| - | to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and |
| - | to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. |
The Company manages and adjusts its capital structure considering changes in economic conditions. To maintain or adjust its capital structure, the Company may issue debt or new shares. Financing decisions are generally made on a specific transaction basis and depend on such things as the Company’s needs, capital markets and economic conditions at the time of the transaction. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable, given the size of the Company.
The Company does not have any externally imposed capital compliance requirements at August 31, 2019.
| F-23 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 20. | Revenues |
| 2019
$ |
2018 $ |
|||||||
| Sale of boats | 2,664,001 | 1,036,379 | ||||||
| Sales of parts and boat maintenance | 171,217 | 222,945 | ||||||
| Commission | - | 6,052 | ||||||
| Other | 34,159 | 6,190 | ||||||
| 2,869,377 | 1,271,566 | |||||||
| 21. | Cost of sales |
2019 $ | 2018 $ | |||||||
| Inventories - beginning of year | 931,706 | 424,613 | ||||||
| Purchases | 1,453,051 | 1,485,452 | ||||||
| Salaries and benefits | 297,670 | 301,215 | ||||||
| Transport costs | 66,328 | 30,652 | ||||||
| Sub-contracting | 17,870 | 121,205 | ||||||
| Depreciation | 33,596 | 29,870 | ||||||
| Grants and investment tax credits | (397,397 | ) | (691,462 | ) | ||||
| 2,402,824 | 1,701,545 | |||||||
| Inventories - end of year | 818,811 | 931,706 | ||||||
| 1,584,013 | 769,839 | |||||||
| F-24 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 22. | Financial instruments and risk management |
The Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them.
Fair value measurement and hierarchy
The fair value measurement of the Company’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the 'fair value hierarchy'):
| - | Level 1: Quoted prices in active markets for identical items (unadjusted); |
| - | Level 2: Observable direct or indirect inputs other than Level 1 inputs; and |
| - | Level 3: Unobservable inputs (i.e. not derived from market data). |
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur.
The carrying amount of trade and other receivables, term deposit, advances to related parties, trade and other payables and advances from related parties are assumed to approximate their fair value due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has a strict code of credit, including obtaining instalment payments, obtaining agency credit information and setting appropriate credit limits. The maximum exposure to credit risk at the reporting date, is the carrying amount of financial assets. The Company does not hold any collateral.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure for a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company is exposed to liquidity risk primarily from its trade payables and convertible debentures. The Company believes that its recurring financial resources are adequate to cover all its expenditures.
| F-25 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 22. | Financial instruments and risk management (continued) |
| Contractual
cash flows |
Less than
one year |
1-5 years | Greater
than 5 years |
|||||||||||||
| August 31, 2019 | ||||||||||||||||
| Trade and other payables | 376,303 | 376,303 | - | - | ||||||||||||
| Advances from related parties | 1,050,064 | - | 1,050,064 | - | ||||||||||||
| Long-term debt | 136,810 | 17,628 | 47,578 | 71,604 | ||||||||||||
| 1,563,177 | 393,931 | 1,097,642 | 71,604 | |||||||||||||
| August 31, 2018 | ||||||||||||||||
| Trade and other payables | 472,437 | 472,437 | - | - | ||||||||||||
| Advances from related parties | 1,046,014 | - | 1,046,014 | - | ||||||||||||
| Long-term debt | 113,529 | 52,552 | 60,977 | - | ||||||||||||
| 1,631,980 | 524,989 | 1,106,991 | - | |||||||||||||
Interest rate risk
The Company is exposed to interest-rate risk on its variable rate bank indebtedness and variable and fixed rate long-term debt.
Foreign exchange risk
Foreign exchange risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company has certain financial assets and liabilities denominated in United States dollars. As at August 31, 2019, the Company has an amount of trade and other payables denominated in foreign currency of approximately U.S.$96,000; $128,000 (2018 - U.S.$114,000 ($148,000)).
| 23. | Additional cash flows information |
Financing and investing activities not involving cash:
| 2019 $ | 2018 $ | |||||||
| Additions to property and equipment by way of finance lease | 11,333 | - | ||||||
| F-26 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 24. | Subsequent events |
Subscription and issuance of class A common shares and share exchange
On September 3, 2019, the Board of Directors authorized the issuance of 75 class A shares for total consideration of $75. On January 20, 2020, the Board of Directors amended the share capital of the Company. Immediately thereafter, the Board of Directors authorized the exchange of 600 class A shares, being the entire share capital of the Company, for 13,850,916 Voting Common Shares - Series Founder, at a ratio of 23,084.86:1. Immediately thereafter, the Board of Directors authorized the issuance of 2,643 Voting Common Shares - Series Founder for total consideration of $0.11.
Subscription and issuance of Voting Common Shares - Series Investor 1
On January 20, 2020, the Board of Directors authorized the issuance of 283,333 Voting Common Shares - Series Investor 1 for total consideration of $212,500.
On March 4, 2020, the Board of Directors authorized the issuance of 133,333 Voting Common Shares - Series Investor 1 for total consideration of $100,000.
Subscription and issuance of Voting Common Shares - Series Investor 2
On March 5, 2020, the Board of Directors authorized the issuance of 300,000 Voting Common Shares - Series Investor 2, for total consideration of $300,000.
On March 5, 2020, the Board of Directors authorized the issuance of 20,000 Voting Common Shares - Series Investor 2, for total consideration of $20,000.
Share option plan
On January 20, 2020, the Company has adopted a share option plan which provides that the Board of Directors of the Company may from time to time, in its discretion, grant to key employees, consultants, advisors, officers and directors of the Company non-transferable options to purchase up to 2,266,666 Non-Voting Common Shares. No awards have been granted under the plan as at the reporting date.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout Canada and around the world.
As of the date of this report, the Company did experience a disruption while they closed their offices. All employees are now working remotely. The Company has obtained new contracts during the global pandemic and continues to collect its receivables from the majority of its customers with few changes to its collection terms.
| F-27 |
Riopel Marine Inc.
Notes to Financial Statements
August 31, 2019 and 2018
| 24. | Subsequent events (continued) |
Although management cannot be certain of the impact of the pandemic on the financial statements and the duration of such a disruption at the date of the report, management does believe the implication will be temporary and that the Company will be able to continue its operations. As a result, management is unable to estimate the potential impact on the business as of the date of this report.
| F-28 |
Vision
Marine Technologies Inc.
(formerly known as Riopel Marine Inc.)
Condensed Interim Financial Statements
For the Six-Month Periods Ended February 29, 2020 and February 28, 2019 (Unaudited)
| F-29 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Condensed Interim Statements of Financial
Position
(Unaudited)
| As at February 29, 2020 | As at August 31, 2019 | |||||||||
| Note | $ | $ | ||||||||
| Assets | ||||||||||
| Current | ||||||||||
| Trade and other receivables | 90,946 | 101,784 | ||||||||
| Inventories | 1,102,864 | 818,811 | ||||||||
| Cash held in trust | 89,675 | 37,500 | ||||||||
| Prepaid expenses | 77,163 | 8,595 | ||||||||
| Grants and investment tax credits receivable | 494,382 | 400,079 | ||||||||
| Total current assets | 1,855,030 | 1,366,769 | ||||||||
| Non-current assets | ||||||||||
| Advances to related parties | - | 40,310 | ||||||||
| Property and equipment | 483,136 | 507,483 | ||||||||
| Right-of-use assets | 5 | 705,737 | - | |||||||
| Total non-current assets | 1,188,873 | 547,793 | ||||||||
| Total assets | 3,043,903 | 1,914,562 | ||||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Bank indebtedness | 278,683 | 283,813 | ||||||||
| Trade and other payables | 526,315 | 376,303 | ||||||||
| Contract liabilities | 585,060 | 180,072 | ||||||||
| Advances from related parties | 168,527 | 597,341 | ||||||||
| Advances payable, non-interest bearing and repayable on demand | 25,000 | - | ||||||||
| Current portion of long-term debt | 7 | 33,701 | 17,628 | |||||||
| Current portion of lease liabilities | 6 | 114,600 | - | |||||||
| Current portion of obligation under finance lease | - | 4,377 | ||||||||
| Total current liabilities | 1,731,886 | 1,459,534 | ||||||||
| Non-current liabilities | ||||||||||
| Advances from related parties | 10 | 793,556 | 452,723 | |||||||
| Long-term debt | 7 | 349,169 | 125,862 | |||||||
| Finance lease | - | 3,839 | ||||||||
| Deferred income taxes | 4,906 | 4,906 | ||||||||
| Lease liabilities | 6 | 599,410 | - | |||||||
| Total non-current liabilities | 1,747,041 | 587,330 | ||||||||
| Total liabilities | 3,478,927 | 2,046,864 | ||||||||
| Shareholders’ equity (deficit) | ||||||||||
| Capital stock | 8 | 213,100 | 525 | |||||||
| Capital stock to be issued | - | 37,500 | ||||||||
| Retained earnings (deficit) | (648,124 | ) | (170,327 | ) | ||||||
| Total shareholders’ equity (deficit) | (435,024 | ) | (132,302 | ) | ||||||
| Total liabilities and shareholders’ equity (deficit) | 3,043,903 | 1,914,562 | ||||||||
| Subsequent events | 14 | |||||||||
| F-30 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Condensed Interim Statements of Changes
in Deficiency
(Unaudited)
| Capital stock | Capital stock to be issued | Deficit | Total | |||||||||||||||||||||
| Note | Units | $ | $ | $ | $ | |||||||||||||||||||
| Shareholders’ deficiency as at August 31, 2018 | 600 | 600 | - | (403,393 | ) | (402,793 | ) | |||||||||||||||||
| Net and comprehensive income | - | - | - | 54,647 | 54,647 | |||||||||||||||||||
| Shareholders’ deficiency as at February 28, 2019 | 600 | 600 | - | (348,746 | ) | (348,746 | ) | |||||||||||||||||
| Shareholders’ deficiency as at August 31, 2019 | 525 | 525 | 37,500 | (170,327 | ) | (132,302 | ) | |||||||||||||||||
| Share issuance (pre-conversion) | 8 | 75 | 75 | - | - | 75 | ||||||||||||||||||
| Share conversion | 8 | 13,850,841 | - | - | - | - | ||||||||||||||||||
| Share issuance | 8 | 285,976 | 212,500 | (37,500 | ) | 175,000 | ||||||||||||||||||
| Net and comprehensive loss | - | - | (477,797 | ) | (477,797 | ) | ||||||||||||||||||
| Shareholders’ deficiency as at February 29, 2020 | 14,137,492 | 213,100 | - | (648,124 | ) | (435,024 | ) | |||||||||||||||||
| F-31 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Condensed Interim Statements of Comprehensive
Income (Loss)
(Unaudited)
| Three months ended February 29, 2020 | Three months ended February 28, 2019 | Six months ended February 29, 2020 | Six months ended February 28, 2019 | |||||||||||||||
| Note | $ | $ | $ | $ | ||||||||||||||
| Revenues | 10, 11 | 383,190 | 332,645 | 436,193 | 1,271,552 | |||||||||||||
| Cost of sales | 12 | 162,634 | 156,190 | 202,633 | 681,708 | |||||||||||||
| Gross profit | 220,556 | 176,455 | 233,560 | 589,844 | ||||||||||||||
| Expenses | ||||||||||||||||||
| Office salaries and benefits | 92,447 | 92,447 | 167,603 | 177,885 | ||||||||||||||
| Rent | 9,118 | 78,052 | 39,262 | 131,311 | ||||||||||||||
| Professional fees | 138,871 | 33,644 | 180,895 | 62,146 | ||||||||||||||
| Travel and entertainment | 16,044 | 9,256 | 37,945 | 13,738 | ||||||||||||||
| Advertising and promotion | 75,619 | 66,847 | 155,599 | 110,568 | ||||||||||||||
| Office and general | 39,668 | 18,417 | 59,602 | 33,244 | ||||||||||||||
| Interest and bank charges | 2,290 | 3,326 | 10,614 | 7,864 | ||||||||||||||
| Interest on long-term debt and finance lease | 16,049 | 861 | 29,744 | 1,773 | ||||||||||||||
| Foreign exchange | (3,016 | ) | (47,237 | ) | (35,260 | ) | (19,374 | ) | ||||||||||
| Depreciation of right-of-use asset | 32,437 | - | 64,076 | - | ||||||||||||||
| Depreciation | 639 | 445 | 1,277 | 622 | ||||||||||||||
| 420,166 | 256,058 | 711,357 | 519,777 | |||||||||||||||
| (Loss) earnings before income taxes | (199,609 | ) | (79,603 | ) | (477,797 | ) | 70,068 | |||||||||||
| Income taxes | ||||||||||||||||||
| Current | - | - | - | - | ||||||||||||||
| Deferred | - | - | - | 15,421 | ||||||||||||||
| - | - | - | 15,421 | |||||||||||||||
| Net and comprehensive (loss) income | (199,609 | ) | (79,603 | ) | (477,797 | ) | 54,647 | |||||||||||
| Basic and diluted weighted average number of shares outstanding | ||||||||||||||||||
| Basic | 13,982,905 | 13,850,916 | 13,897,884 | 13,850,916 | ||||||||||||||
| Diluted | 13,982,905 | 13,850,916 | 13,897,884 | 13,850,916 | ||||||||||||||
| Income (loss) per share | ||||||||||||||||||
| Basic | (0.01 | ) | (0.01 | ) | (0.03 | ) | - | |||||||||||
| Diluted | (0.01 | ) | (0.01 | ) | (0.03 | ) | - | |||||||||||
| F-32 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Condensed Interim Statements of Cash
Flows
(Unaudited)
| Six months ended February 29, 2020 | Six months ended February 28, 2019 | |||||||||
| Note | $ | $ | ||||||||
| Operating activities | ||||||||||
| Net and comprehensive income (loss) | (477,797 | ) | 54,647 | |||||||
| Depreciation of property and equipment | 19,217 | 17,150 | ||||||||
| Depreciation of right-of-use asset | 64,076 | - | ||||||||
| Accretion on long-term debt and on lease liabilities | 22,913 | (227 | ) | |||||||
| Deferred income taxes | - | 15,421 | ||||||||
| (371,591 | ) | 86,991 | ||||||||
| Net change in non-cash working capital items | ||||||||||
| Trade and other receivables | 10,838 | (88,451 | ) | |||||||
| Inventories | (284,053 | ) | 135,751 | |||||||
| Grants and investment tax credits receivable | (94,303 | ) | 270,904 | |||||||
| Prepaid expenses | (68,568 | ) | (8,065 | ) | ||||||
| Trade and other payables | 150,012 | (142,297 | ) | |||||||
| Contract liabilities | 404,988 | (84,883 | ) | |||||||
| 118,914 | 82,959 | |||||||||
| Cash provided (used) by operating activities | (252,677 | ) | 169,950 | |||||||
| Investing activities | ||||||||||
| Additions to property and equipment | (5,750 | ) | (132,705 | ) | ||||||
| Advances to related parties | 40,310 | (1,600 | ) | |||||||
| Term deposit | - | 68,368 | ||||||||
| Cash provided (used) by investing activities | 34,560 | (65,937 | ) | |||||||
| Financing activities | ||||||||||
| Change in bank indebtedness | (5,130 | ) | (87,937 | ) | ||||||
| Increase in long-term debt | 250,000 | - | ||||||||
| Repayment of long-term debt | (10,620 | ) | (49,998 | ) | ||||||
| Repayment of obligation under finance lease | - | (1,039 | ) | |||||||
| Repayment of lease liability | (76,052 | ) | - | |||||||
| Advances from related parties | (87,981 | ) | 17,800 | |||||||
| Advance payable | 25,000 | 50,000 | ||||||||
| Capital stock issued | 175,075 | - | ||||||||
| Cash provided (used) by investing activities | 270,292 | (71,174 | ) | |||||||
| Increase in cash and cash equivalents | 52,175 | 32,839 | ||||||||
| Cash and cash equivalents – beginning of period | 37,500 | - | ||||||||
| Cash and cash equivalents – end of period | 89,675 | 32,839 | ||||||||
| Non-cash activities include: | ||||||||||
| Additions to property and equipment | (11,333 | ) | ||||||||
| Finance lease | 11,333 | |||||||||
| F-33 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial
Statements
(Unaudited)
| 1. | Incorporation and nature of business |
Vision Marine Technologies Inc. (the “Company”) was incorporated on August 29, 2012 as Riopel Marine Inc. The Company changed its name to Vision Marine Technologies Inc. on April 7,2020. The principal business of the Company is to manufacture and sell electric boats.
The head office and registered office of the Company is located at 730 Curé-Boivin boulevard, Boisbriand, Quebec, J7G 2A7.
| 2. | Basis of preparation |
Compliance with IFRS
These condensed interim financial statements are for the six-month period ended February 29, 2020 and have been prepared in accordance with IAS 34: Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the financial statements for the year ended August 31, 2019.
The condensed interim financial statements were authorized for issued by the Board of Directors on May 28, 2020.
Basis of measurement
These financial statements are stated in Canadian dollars, which is also the Company’s functional currency, and were prepared on the historical cost basis.
| 3. | New standards adopted as at September 1, 2019 |
IFRS 16: Leases
The Company has adopted IFRS 16 as of September 1, 2019. The adoption of IFRS 16 has a significant impact as the Company recognized new assets and liabilities for its operating leases. In addition, the nature and timing of expenses related to those leases has changed as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for the right-of-use assets and interest expense on lease liabilities. The Company has elected to apply the modified retrospective method, under which the cumulative effect of initial application is recognized in retained earnings at September 1, 2019, by setting right-of-use assets based on the lease liability at the date of initial application, adjusted by the amount of any prepaid or accrued lease payments, and has applied the following practical expedients:
| - | Applied IFRS 16 exclusively to contracts that were previously identified as leases applying IAS 17 at the date of initial application; |
| - | Accounted for leases for which the lease term ended within 12 months of the date of initial application as short-term leases; |
| - | Did not recognize right-of-use assets and liabilities for leases of low value assets; |
| - | Relied on its assessment of whether leases are onerous applying IAS 37 immediately before the date of initial application as an alternative to performing an impairment review; and |
| - | Did not separate non-lease components from lease components, and instead accounted for each lease component and any associated non-lease components as a single lease component. |
| F-34 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 3. | New standards adopted as at September 1, 2019 (cont’d) |
IFRS 16: Leases (cont’d)
The effect of adoption of IFRS 16 as at September 1, 2019 is as follows:
| August 31, 2019 | Impact of adoption of IFRS 16 | September 1, 2019 | ||||||||||
| $ | $ | $ | ||||||||||
| Assets | ||||||||||||
| Noncurrent assets | ||||||||||||
| Property and equipment | 507,483 | (10,880 | ) | 496,603 | ||||||||
| Right-of-use assets | - | 760,217 | 760,217 | |||||||||
| Total noncurrent assets | 507,483 | 749,337 | 1,256,820 | |||||||||
| Total assets | 507,483 | 749,337 | 1,256,820 | |||||||||
| Liabilities | ||||||||||||
| Current liabilities | ||||||||||||
| Current portion of obligation under finance lease | 4,377 | (4,377 | ) | - | ||||||||
| Current portion of lease liabilities | - | 106,724 | 106,724 | |||||||||
| Total current liabilities | 4,377 | 102,347 | 106,724 | |||||||||
| Noncurrent liabilities | ||||||||||||
| Finance lease | 3,839 | (3,839 | ) | - | ||||||||
| Lease liabilities | - | 650,829 | 650,829 | |||||||||
| Total noncurrent liabilities | 3,839 | 646,990 | 650,829 | |||||||||
| Total liabilities | 8,216 | 749,337 | 757,553 | |||||||||
The following table reconciles the Company’s operating lease commitments as at August 31, 2019 as previously disclosed in the audited financial statements of the Company, to the lease liability recognized on initial application of IFRS 16 on September 1, 2019:
| $ | ||||
| Operating lease commitments as at August 31, 2019 | 543,300 | |||
| Finance leases as at August 31, 2019 | 8,216 | |||
| Lease payments relating to periods not included in operating lease commitments as at August 31, 2019 | 367,065 | |||
| Effect of discounting using the weighted average incremental borrowing rate | (161,028 | ) | ||
| Lease liability recognized as at September 1, 2019 | 757,553 | |||
| F-35 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 3. | New standards adopted as at September 1, 2019 (cont’d) |
IFRIC 23: Uncertainty over income tax treatments
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:
| - | The Company to determine whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution; |
| - | The Company to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and |
| - | If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations. |
The interpretation is effective for periods beginning on or after September 1, 2019. The Company has adopted the new interpretation with no impact on the financial statements.
| 4. | Significant accounting policies |
The Company has applied the same accounting policies and methods of computation in its condensed interim financial statements as in its 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) September 1, 2019, as disclosed in note 3.
Revenue recognition
Revenue is recognized at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Company:
| - | Identifies the contract with the customer; |
| - | Identifies the performance obligations in the contract; |
| - | Determines the transaction price which takes into account estimates of variable consideration and the time value of money; |
| - | Allocates the transaction price to separate performance obligations on the basis of relative standalone selling price of each distinct good or service to be delivered; and |
| - | Recognizes revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. |
The Company enters into contracts with customers, as well as distributor agreements with specific distributors for the sale of boats.
| F-36 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 4. | Significant accounting policies (cont’d) |
Revenue recognition (cont’d)
Sale of boats
Revenue from the sale of boats, including incidental shipping fees, is recognized at the point in time when the customer obtains control of the goods, which is generally at the shipping point. In the context of its distributor agreements, control is passed at the shipping point to the distributor as the Company has no further performance obligations at that point. The amount of consideration the Company receives, and the revenue recognized, varies with volume rebate programs offered to distributors. When the Company offers retrospective volume rebates, it estimates the expected volume rebates based on an analysis of historical experience, to the extent that it is highly probable that a significant reversal will not occur. The Company adjusts its estimate of revenue related to volume rebates at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed.
The Company recognizes customer deposits on the sale of boats as contract liabilities.
Sales of parts and boat maintenance
Revenue from the sale of parts and related maintenance services are recognized at the point in time when the customer obtains control of the parts and when services are completed.
Commission
Commission income is recognized at the point in time when the underlying transaction is settled.
Other
Other revenue is recognized when it is received or when the right to receive payment is established.
Leases
Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
| F-37 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 4. | Significant accounting policies (cont’d) |
Leases (cont’d)
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. Interest accretion is recorded as interest expense in finance costs. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
| F-38 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 4. | Significant accounting policies (cont’d) |
Financial instruments
Classification and measurement of financial instruments
The Company measures its financial assets and financial liabilities at fair value on initial recognition, which is typically the transaction price unless a financial instrument contains a significant financing component. Subsequent measurement is dependent on the financial instrument’s classification which in the case of financial assets, is determined by the context of the Company’s business model and the contractual cash flow characteristics of the financial asset. Financial assets are classified into two categories: (1) measured at amortized cost and (2) fair value through profit and loss (“FVTPL”). Financial liabilities are subsequently measured at amortized cost at the effective interest rate, other than financial liabilities that are measured at FVTPL or designated as FVTPL where any change in fair value resulting from an entity’s own credit risk is recorded as other comprehensive income (“OCI”).
Amortized cost
The Company classifies trade and other receivables, trade and other payables, long-term debt and advances to/from related parties as financial instruments measured at amortized cost. The contractual cash flows received from the financial assets are solely payments of principal and interest and are held within a business model whose objective is to collect the contractual cash flows.
Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets measured at amortized cost. The measurement of the loss allowance depends upon the Company’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has been a significant increase in exposure to credit risk, a 12-month expected credit loss allowance is estimated. The amount of expected credit loss recognized is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Equity instruments
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.
The Company’s shares are classified as equity instruments.
Share based payments
The Company has a share option plan for key employees, consultants, advisors, officers and directors from which options to purchase common stock of the Company are issued. Share-based compensation costs are accounted for on a fair value basis, as measured at the grant date, using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee. In situations where options have been issued to non-employees and some or all of the services received by the Company cannot be specifically identified, the options are measured at the fair value of the options issued.
| F-39 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 4. | Significant accounting policies (cont’d) |
Share based payments (cont’d)
All share-based remuneration is ultimately recognized as an expense in profit or loss with a corresponding credit to contributed surplus. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Any adjustment to cumulative share-based compensation resulting from a revision is recognized in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
| 5. | Right-of-use assets |
| Premises | Computer equipment | Rolling stock | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Cost | ||||||||||||||||
| Balance at August 31, 2019 | - | - | - | - | ||||||||||||
| Impact of adoption of IFRS 16 | 737,066 | 11,333 | 12,271 | 760,670 | ||||||||||||
| Additions | - | - | 9,596 | 9,596 | ||||||||||||
| Balance at February 29, 2020 | 737,066 | 11,333 | 21,867 | 770,266 | ||||||||||||
| Accumulated depreciation | ||||||||||||||||
| Balance at August 31, 2019 | - | - | - | |||||||||||||
| Impact of adoption of IFRS 16 | - | 453 | - | 453 | ||||||||||||
| Depreciation | 58,903 | 227 | 4,946 | 64,076 | ||||||||||||
| Balance at February 29, 2020 | 58,903 | 680 | 4,946 | 64,529 | ||||||||||||
| Net carrying amount | ||||||||||||||||
| As at February 29, 2020 | 678,163 | 10,653 | 16,921 | 705,737 | ||||||||||||
|
6. | Lease liabilities |
| $ | ||||
| Balance at August 31, 2019 | - | |||
| Impact of adoption of IFRS 16 | 757,553 | |||
| Additions | 9,596 | |||
| Repayment | (76,052 | ) | ||
| Accretion of interest | 22,913 | |||
| Balance at February 29, 2020 | 714,010 | |||
| Current | 114,600 | |||
| Noncurrent | 599,510 | |||
| F-40 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 6. | Lease liabilities (cont’d) |
The minimum annual payments of the Company’s leases are approximately as follows:
| $ | ||||
| Less than one year | 151,024 | |||
| One year to five years | 583,185 | |||
| Greater than five years | 111,872 | |||
| 846,081 | ||||
| 7. | Long-term debt |
| As at February 29, 2020 | As at August 31, 2019 | |||||||
| $ | $ | |||||||
| Loan from Canada Economic Development for Quebec Regions, non-interest bearing, repayable in monthly instalments of $1,667 starting July 2018 and maturing in June 2023. The loan was discounted using an effective interest rate of 8.85% (a) | 52,829 | 58,672 | ||||||
| Term loan, bearing interest at 6.24%, repayable in monthly instalments of $630, including principal and interest, and maturing in December 2038 | 80,041 | 84,818 | ||||||
| Term loan, bearing interest at prime plus 3.68%, repayable in monthly principal payments of $4,165 starting 12 months after the original disbursement date (b) | 250,000 | - | ||||||
| 382,870 | 143,490 | |||||||
| Current portion of long-term debt | 33,701 | 17,628 | ||||||
| 349,169 | 125,862 | |||||||
| a) | As security for the loan, the Company has subordinated certain advances from related parties for $452,723. |
| b) | As security for the loan, the Company has subordinated certain advances from related parties for $793,556. In addition, the loan is guaranteed by a first ranking hypothec of $250,000 plus 20% on all of the assets of the Company, as well as personal guarantees from the ultimate shareholders of $125,000. |
| F-41 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 8. | Capital stock |
Authorized without limit as to number –
Voting Common Shares – Series Founder, voting and participating
Voting Common Shares – Series Investor 1, voting and participating
Voting Common Shares – Series Investor 2, voting and participating
| As at February 29, 2020 | As at August 31, 2019 | |||||||
| $ | $ | |||||||
| 13,853,559 Voting Common Shares – Series Founder | 600 | - | ||||||
| 283,333 Voting Common Shares – Series Investor 1 | 212,500 | - | ||||||
| Nil (2019 – 525) Class A shares | - | 525 | ||||||
| 213,100 | 525 | |||||||
Subscription and issuance of Class A common shares and share exchange
On September 3, 2019, the Board of Directors authorized the issuance of 75 Class A shares for total consideration of $75. On January 20, 2020, the Board of Directors amended the share capital of the Company. Immediately thereafter, the Board of Directors authorized the exchange of 600 Class A shares, being the entire share capital of the Company, for 13,850,916 Voting Common Shares – Series Founder, at a ratio of 23,084.86:1. Immediately thereafter, the Board of Directors authorized the issuance of 2,643 Voting Common Shares – Series Founder for total consideration of $0.11.
Subscription and issuance of Voting Common Shares – Series Investor 1
On January 20, 2020, the Board of Directors authorized the issuance of 283,333 Voting Common Shares – Series Investor 1 for total consideration of $212,500.
Share option plan
On January 20, 2020, the Company has adopted a share option plan which provides that the Board of Directors of the Company may from time to time, in its discretion, grant to key employees, consultants, advisors, officers and directors of the Company non-transferable options to purchase up to 2,266,666 Non-Voting Common Shares. No awards have been granted under the plan as at the reporting date.
| 9. | Remuneration of directors and key management of the Company |
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Salaries | 55,000 | 52,000 | 109,000 | 104,000 | ||||||||||||
| F-42 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 10. | Related party transactions |
The following table summarizes the Company’s related party transactions during the year:
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenues | ||||||||||||||||
| Sale of boats | ||||||||||||||||
| EBR Ltd. | - | 22,851 | - | 100,866 | ||||||||||||
| Sales of parts and boat maintenance | ||||||||||||||||
| EBR Ltd. | 23,746 | - | 66,077 | 9,369 | ||||||||||||
| Expenses | ||||||||||||||||
| Rent expense | ||||||||||||||||
| California Electric Boat Company Inc. | - | 67,556 | - | 80,702 | ||||||||||||
At the end of the period, the amounts due to and from related parties are non-interest bearing and are due on demand, except for those subordinated to the Company’s lenders, and are as follows:
| As at February 29, 2020 | As at August 31, 2019 | |||||||
| $ | $ | |||||||
| Advances to a company under common control | ||||||||
| California Electric Boat Company Inc. | - | 40,310 | ||||||
| Non-current advances from shareholders or indirect shareholders subordinated in favor of the Company’s lender | ||||||||
| Alexandre Mongeon (subordinated in favor of the Company’s lenders) | 141,972 | 81,061 | ||||||
| Patrick Bobby (subordinated in favor of the Company’s lenders) | 139,472 | 82,534 | ||||||
| Robert Ghetti (subordinated in favor of the Company’s lenders) | 64,749 | 45,215 | ||||||
| Immobilier R. Ghetti Inc. (subordinated in favor of the Company’s lenders) | 16,487 | 1,487 | ||||||
| Société de Placement Robert Ghetti Inc. (subordinated in favor of the Company’s lenders) | 279,376 | 242,426 | ||||||
| Gestion Toyma (subordinated in favor of the Company’s lenders) | 151,500 | - | ||||||
| 793,556 | 452,723 | |||||||
| F-43 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 10. | Related party transactions (cont’d) |
| As at February 29, 2020 | As at August 31, 2019 | |||||||
| $ | $ | |||||||
| Current advances from shareholders or indirect shareholders | ||||||||
| 9335-1427 Quebec Inc. | 129,932 | 104,931 | ||||||
| Alexandre Mongeon | 14,201 | 60,911 | ||||||
| Patrick Bobby | - | 56,939 | ||||||
| Robert Ghetti | - | 19,535 | ||||||
| Immobilier R. Ghetti Inc. | - | 15,000 | ||||||
| Société de Placement Robert Ghetti Inc. | - | 36,950 | ||||||
| Gestion Toyma | 24,394 | 151,500 | ||||||
| Entreprises Claude Beaulac Inc. (former shareholder) | - | 151,575 | ||||||
| 168,527 | 597,341 | |||||||
| Due to shareholders and included in trade and other payables | ||||||||
| Alexandre Mongeon | 39,668 | - | ||||||
| Patrick Bobby | 5,091 | - | ||||||
| 44,759 | - | |||||||
| 11. | Revenues |
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Sale of boats | 349,479 | 262,929 | 353,148 | 1,135,407 | ||||||||||||
| Sales of parts and boat maintenance | 33,711 | 69,716 | 83,045 | 105,929 | ||||||||||||
| Other | - | - | 30,216 | |||||||||||||
| 383,190 | 332,645 | 436,193 | 1,271,552 | |||||||||||||
| F-44 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 12. | Cost of sales |
| Three months ended | Six months ended | |||||||||||||||
| February 29, 2020 | February 28, 2019 | February 29, 2020 | February 28, 2019 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Inventories – beginning of period | 1,138,064 | 815,675 | 818,811 | 931,707 | ||||||||||||
| Purchases | 87,043 | 139,626 | 399,083 | 567,050 | ||||||||||||
| Salaries and benefits | 62,772 | 61,447 | 129,824 | 121,426 | ||||||||||||
| Transport costs | 16,433 | 19,891 | 31,496 | 32,634 | ||||||||||||
| Sub-contracting | 12,216 | 6,166 | 28,343 | 6,167 | ||||||||||||
| Depreciation | 8,970 | 8,264 | 17,940 | 16,528 | ||||||||||||
| Grants and investment tax credits | (60,000 | ) | (98,924 | ) | (120,000 | ) | (197,849 | ) | ||||||||
| 1,265,498 | 952,145 | 1,305,497 | 1,477,663 | |||||||||||||
| Inventories – end of period | (1,102,864 | ) | (795,955 | ) | (1,102,864 | ) | (795,955 | ) | ||||||||
| 162,634 | 156,190 | 202,633 | 681,708 | |||||||||||||
| 13. | Fair value measurement and hierarchy |
The fair value measurement of the Company’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the ‘fair value hierarchy’):
| - | Level 1: Quoted prices in active markets for identical items (unadjusted); |
| - | Level 2: Observable direct or indirect inputs other than Level 1 inputs; and |
| - | Level 3: Unobservable inputs (i.e., not derived from market data). |
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur.
The carrying amount of trade and other receivables, advances to related parties, trade and other payables and advances from related parties are assumed to approximate their fair value due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.
| F-45 |
Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)
Notes to Condensed Interim Financial Statements
(Unaudited)
| 14. | Subsequent events |
Subscription and issuance of Voting Common Shares – Series Investor 1
On March 4, 2020, the Board of Directors authorized the issuance of 133,333 Voting Common Shares – Series Investor 1 for total consideration of $100,000.
Subscription and issuance of Voting Common Shares – Series Investor 2
On March 5, 2020, the Board of Directors authorized the issuance of 320,000 Voting Common Shares – Series Investor 2, for total consideration of $320,000.
Share subscriptions
The Company has received share subscriptions of $77,000 to purchase 77,000 common shares at a share price of $1.00 per common share.
Share issuance for services
On April 10, 2020, we issued 118,333 Voting Common Shares – Series Founders to two outside service providers in exchange for services to be provided.
Stock options
On May 27, 2020, the Company granted 1,340,000 stock options at an exercise price of $1.00 per share and 600,000 stock options at an exercise price of $0.75 per share to directors, officers, employees and consultants of the Company. The stock options will expire 4 years from the grant date.
COVID-19
On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout Canada and around the world.
As of the date of this report, the Company did experience a disruption while they closed their offices. All employees are now working remotely. The Company has obtained new contracts during the global pandemic and continues to collect its receivables from the majority of its customers with few changes to its collection terms.
Although management cannot be certain of the impact of the pandemic on the financial statements and the duration of such a disruption at the date of the report, management does believe the implication will be temporary and that the Company will be able to continue its operations. As a result, management is unable to estimate the potential impact on the business as of the date of this report.
| F-46 |
[ ] Common Shares
Vision Marine Technologies, Inc.
PROSPECTUS
ThinkEquity
a division of Fordham Financial Management, Inc.
, 2020
Through and including , 2020 (the 25th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporate laws of Quebec and our By-laws require us (subject to the provisions of the Business Corporations Act noted below), to indemnify our directors and officers and former directors and officers, our mandataries, or any other person who acts or acted at our request as a director or an officer of another group, of all their costs and reasonable expenses incurred in the exercise of their functions, to the greatest extent permitted by Division VII of Chapter VI of the Business Corporations Act.
Notwithstanding the foregoing, we may not indemnify a person referred to in the preceding paragraph if a court or any other competent authority judges that the following conditions are not fulfilled:
(1) the person acted with honesty and loyalty in the interest of the corporation or, as the case may be, in the interest of the other group for which the person acted as director or officer or in a similar capacity at the corporation’s request; and
(2) in the case of a proceeding that is enforced by a monetary penalty, the person had reasonable grounds for believing that his or her conduct was lawful.
Furthermore, we may not indemnify a person referred to in the preceding paragraph if the court determines that the person has committed an intentional or gross fault.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES
In the past three years, we have issued and sold the securities described below without registering the securities under the Securities Act. None of these transactions involved any underwriters’ underwriting discounts or commissions, or any public offering. We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S promulgated under the Securities Act regarding sales by an issuer in offshore transactions, Regulation D under the Securities Act, Rule 701 under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering.
On August 1, 2019, we entered into an agreement with an entity controlled by our Chief Financial Officer pursuant to which we are to issue, upon reaching certain milestones, up to 761,441 Voting Common Shares – Series Founders in exchange for services to be provided.
On September 9, 2019, we issued 1,731,365 Voting Common Shares – Series Founders to affiliates in exchange for $75.
On January 20, 2020, we issued 283,333 Voting Common Shares - Series Investor 1 for total consideration of $212,500.
On March 4, 2020, we issued 133,333 Voting Common Shares - Series Investor 1 for total consideration of $100,000.
On March 5, 2020, we issued 320,000 Voting Common Shares - Series Investor 2 for total consideration of $320,000.
On April 10, 2020, we issued 118,333 Voting Common Shares – Series Founders to two outside service providers in exchange for services to be provided.
In May 2020, we issued 77,000 Voting Common Shares – Series Founders for total consideration of $77,000.
In June 2020, we issued 1,340,000 stock options to purchase common shares at $1.00 per common shares and 600,000 stock options to purchase common shares at $0.75 per common share.
In June 2020, we issued 2,035,000 Voting Common Shares in exchange for services pursuant to a Production Agreement dated March 9, 2020.
In June and July 2020, we issued 1,324,500 Voting Common Shares – Series Founders to 17 persons for total consideration of $1,324,500.
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with this registration statement
| 1.1 | Form of Underwriting Agreement* | |
| 3.1 | Certificate of Incorporation | |
| 3.2 | Certificate of Amendment | |
| 4.1 | Share Certificate – Common Shares* | |
| 4.2 | Form of Underwriter’s Warrant* | |
II-1
Notes:
| * | To be filed by amendment. |
ITEM 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to: |
| (i) | Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | |
| (ii) | Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
| (iii) | Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
II-2
| (4) | To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the Registrant includes in the prospectus, by means of a post- effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of Regulation S- X if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. | |
| (5) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described herein, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (6) | Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form F-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boisbriand, Province of Québec, Canada on July 9, 2020.
| VISION MARINE TECHNOLOGIES INC. | ||
| (Registrant) | ||
| By: | /s/ Alexandre Mongeon | |
| Alexandre Mongeon, Chief Executive Officer | ||
| (Principal Executive Officer) | ||
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alexandre Mongeon as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Alexandre Mongeon | Chief Executive Officer (Principal Executive Officer), Chairman | July 9, 2020 | ||
| Alexandre Mongeon | ||||
| /s/ Kulwant Sandher | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | July 9, 2020 | ||
| Kulwant Sandher | ||||
| /s/ Robert Ghetti | Director | July 9, 2020 | ||
| Robert Ghetti | ||||
| /s/ Patrick Bobby | Director | July 9, 2020 | ||
| Patrick Bobby |
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of Vision Marine Technologies Inc., has signed this registration statement or amendment thereto in New York, New York, on July 9, 2020.
| Ortoli Rosenstadt LLP | ||
| By: | /s/ William S. Rosenstadt | |
| Name: William S. Rosenstadt | ||
| Title: Managing Partner | ||
Exhibit 3.1
 |
Québec |
Certificate of Incorporation
Business Corporations Act
I certify that the Corporation;
RIOPEL MARINE INC.
was incorporated on August 27, 2012, under the Business Corporations Act, as indicated in the attached articles of incorporation.
 |
Filed in the register on August 29, 2012 under the Quebec enterprise number 1168491927. | |
 | ||
Registraire des entreprises
Revenu Québec
*Translated version from the original documents provided by the Registraire des Entreprises du Québec
Registraire des entreprises
Québec
Name: RÉSO GESTION CORPORATIVE INC.
Quebec Business Number (NEQ) 1146100251
Articles of Incorporation
Acknowledgement of Receipt
| Request successfully submitted on August 27, 2012 at 12 h 32 min 52 s. |
| Reference number 020200009036135. |
| Thank you for using our online services. |
Founders
| Name | Address |
| Rolland Achkar | 210-10340 chemin de la Côte-de-Liesse |
| Lachine, Québec H8TIA3 Canada |
Name of the Corporation
RIOPEL MARINE INC.
Declaration regarding the name
I, the undersigned, Roland Achkar, declare that reasonable means have been taken to ensure that the name chosen complies with the law, and that I am the person authorized to sign this declaration.
Share Capital, restrictions on the transfer of securities or shares, limits on activities and other provisions
Share Capital
| ANNEXE A.pdf | Name of file |
| Restrictions on the transfer of securities or shares | |
| ANNEXE B.pdf | Name of file |
| Limits on Business Activities | |
| None | |
| Other Provisions | |
None
Directors
Number of directors
| Number of directors | 1 to 10 |
Date and time to attribute to the certificate
Date of receipt of articles by the Enterprise registrar
*Translated version from the original documents provided by the Registraire des Entreprises du Québec
Annex A
SHARE CAPITAL
The Corporation's share capital consists of six classes of shares with respective rights and restrictions attached to the Class “A”, “B”, “C”, “D”, “E” and “F” shares as follows:
A) CLASS “A” SHARES (COMMON SHARES)
A.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “A” shares. The Class “A” shares have no par value.
A.2 RIGHT TO VOTE: The Class “A” shares carry the right to vote at every shareholder’s meeting. The Class “A” shares confer the right to receive a notice of meeting. Each shareholder has one vote per share during the meeting.
A.3 DIVIDEND AND DISTRIBUTION: Subject to the rights and restrictions associated with the other share classes, the Class “A” shares have the right to: a) receive any declared dividend; b) share the remainder of the property in the event of the liquidation or dissolution of the corporation.
A.4 RESTRICTION: The Corporation may not pay any dividend on the Class “A” shares or make a payment to buy them, if this payment renders it incapable of paying the sums necessary to buy or redeem all the outstanding Class “C” and “D” shares.
B) CLASS “B” SHARES (CONTROL SHARES)
B.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “B” shares. The Class “B” shares have no par value.
B.2 DROIT DE VOTE: The Class “B” shares carry the right to vote at every shareholder’s meeting. The Class “B” shares confer the right to receive a notice of meeting. Each shareholder has ten votes per share during the meeting.
B.3 DIVIDEND: The Class “B” shares do not carry the right to receive a dividend.
B.4 LIQUIDATION AND DISSOLUTION: The Class « B » shares have the right to share the remainder of the assets, in the event of the liquidation or dissolution of the Corporation, for an amount equal to the redemption price of these shares at that time determined in paragraph B.6. This amount is paid in priority over any amount to which the class “C”, “D”, “E”, “F” and “A” shares are entitled in the event of liquidation or dissolution.
B.5 ADDITIONAL PARTICIPATION: Class “B” shares do not participate in the sharing of the remaining assets in the event of the liquidation or dissolution of the Corporation.
B.6 AUTOMATIC REDEMPTION: The Corporation shall repurchase, for a price equal to the redemption price at that time, the Class "B" shares belonging to a shareholder who dies, goes bankrupt or transfers his property, makes a proposal to his creditors, is the subject of a seizure of his shares in the Corporation or, in general, avails himself of any law in favor of insolvent debtors. The redemption price of the Class “B” shares at a given time is equal to the sum paid, when issued, to the subdivision of the issued and paid-up share capital account held for Class “B” shares, increased or decreased to take into account any subsequent increase or reduction in the amount of issued and paid-up share capital that affects these shares. Subject to sections 95 and 96 of the Business Corporations Act, the Corporation must, within sixty (60) days of the redemption, pay the redemption price in full to the person who receives it. If the Corporation is unable to pay this redemption price in full, the person entitled thereto becomes a creditor of the Corporation and has the right to be paid as soon as the Corporation can legally do so. The Corporation must provide this person with proof of its claim. The aforementioned automatic redemption rules do not apply to the “B” shareholder who holds these shares as the beneficiary. The Corporation's repurchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
B.7 MUTUAL AGREEMENT PURCHASE: Subject to sections 95, 96 and 97 of the Business Corporations Act, the Corporation may, without taking into account the other classes of shares, purchase by mutual agreement all or part of the Class "B" shares that it issued. The Corporation must, within 30 days of the acquisition it has made of outstanding Class “B” shares, notify its other shareholders. This notice indicates the number of shares acquired, the name of the shareholders from whom the Corporation acquired these shares, the price paid for these shares and any balance due to the shareholders; if the consideration is not in cash, the notice must indicate the nature of the consideration and its value. The Corporation is not required to send this notice if all shareholders, whether or not their shares carry the right to vote, renounce receiving it. The Corporation sends a notice to shareholders who have not informed it in writing of their desire not to receive it. The Corporation must provide, free of charge, to any shareholder who requests it, a copy of the agreement under which it acquired the Class “B” shares. The Corporation's purchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
C) CLASS “C” SHARES (ROLLOVER SHARES)
C.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “C” shares. The Class “C” shares have no par value.
C.2 RIGHT TO VOTE: Subject to the provisions of the Business Corporations Act, Class “C” shares do not carry the right to vote at meetings of the shareholders of the Corporation, nor to receive notice of or attend such meetings
C.3 DIVIDEND: The Class “C” shares include the right to receive, in priority over Class “D”, “E”, “F” and “A” shares, a monthly, preferential and non-cumulative dividend at a maximum rate of 1 % per month of the redemption price of these shares determined in paragraph C.6. The board of directors sets the terms of payment of this dividend. Once a month has passed, no dividend can be declared for that month.
C.4 LIQUIDATION AND DISSOLUTION: The Class “C” shares have the right to share the remainder of the assets, in the event of the liquidation or dissolution of the Corporation, for an amount equal to the redemption price of these shares at that time determined in paragraph C.6, plus all dividends declared and unpaid on these shares. This amount is paid in priority over any amount to which the Class “D”, “E”, “F” and “A” shares are entitled in the event of liquidation or dissolution.
C.5 ADDITIONAL PARTICIPATION: The right of the Class “C” shares to receive any dividend declared or to share the balance of the property of the Corporation in the event of liquidation or dissolution is limited to those provided above. These shares do not otherwise participate in the property, profits, OR surplus assets of the Corporation
C.6 REDEMPTION AT THE SHAREHOLDER'S REQUEST: A Class “C” shareholder may demand, at any time and upon written request, that the Corporation redeem all or part of the fully paid the Class “C” shares that he holds for a price equal to the redemption price of these shares at this time plus any dividends declared and unpaid on these shares. The Corporation acquires the shares upon receipt of the written request or on any other date provided for on the request; it then has, subject to sections 95 and 96 of the Business Corporations Act, a period of thirty (30) days to pay the redemption price to the shareholder. If the Corporation is not able to pay this redemption price in full, the shareholder becomes a creditor of the Corporation and has the right to be paid as soon as the Corporation can legally do so. The Corporation must provide the shareholder with proof of his claim. The redemption price at a given time is established by adding the following amounts:
1. the amount paid, when issued, to the subdivision of the issued and paid-up share capital account maintained for Class "C" shares, increased or decreased to take into account any subsequent increase or reduction in the amount of issued and paid-up share capital that affects these shares;
2. a premium equal to the difference between the fair market value of all the goods received by the Corporation on the exchange of goods which included, among other things, the issue of Class “C” shares and the total of the amount paid, upon the exchange of goods, to the subdivision of the issued and paid-up share capital account maintained for these shares and the fair market value of any property, other than Class "C" shares, which the Corporation gave during the exchange of goods.
The fair market value of the goods received by the Corporation on the occasion of the exchange is that established by the Corporation and the shareholder at the time of the issue of these shares. If the federal or provincial tax authorities attribute to the property received by the Corporation a fair market value different from that established at the time of the issuance of these shares, the amount of the premium is reduced or increased accordingly, provided that the Corporation and the shareholder have had the opportunity to debate with the tax authority concerned or before the court the validity of this assessment. The assessment chosen is then that:
| 1. | which serves as the basis for any assessment or reassessment if it is not the subject of an appeal; |
2. agreed between the Corporation, the shareholder and the tax authority concerned in settlement of any assessment, reassessment or proposed assessment; or
| 3. | established definitively by the court. |
If there is a difference between the federal and provincial assessments, the adjustment is made based on the lower of these assessments. If the redemption price is adjusted after the redemption of one or more of these shares, the Corporation shall pay the holder of the redeemed shares, or the holder shall reimburse the Corporation, as the case may be, the difference between the redemption price of these shares as adjusted and the redemption price originally paid by the Corporation. If dividends have been paid before the adjustment, the Corporation or the shareholder must, as the case may be, pay or reimburse the amount of dividends due. Payment or reimbursement is made within sixty (60) days of the date of adjustment of the redemption price. However, the Corporation cannot make any payment that contravenes sections 95, 96 and 104 of the Business Corporations Act. The Corporation's repurchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
C.7 MUTUAL AGREEMENT PURCHASE: Subject to sections 95, 96 and 97 of the Business Corporations Act, the Corporation may, without taking into account the other classes of shares, purchase by mutual agreement all or part of the fully paid Class "C" shares that it issued. However, the Corporation cannot purchase these shares for a price higher than their previously fixed redemption price. The Corporation must, within 30 days of the purchase by mutual agreement it has made of outstanding Class “C” shares, notify its other shareholders. This notice indicates the number of shares acquired, the name of the shareholders from whom the Corporation acquired these shares, the price paid for these shares and any balance due to the shareholders; if the consideration is not in cash, the notice must indicate the nature of the consideration and its value. The Corporation is not required to send this notice if all shareholders, whether or not their shares carry the right to vote, renounce receiving it. The Corporation sends a notice to shareholders who have not informed it in writing of their desire not to receive it. The Corporation must provide, free of charge, to any shareholder who requests it, a copy of the agreement under which it acquired the Class "C" shares. The Corporation's purchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
D) CLASS “D” SHARES (ROLLOVER SHARES)
D.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “D” shares. The Class “D” shares have no par value.
D.2 RIGHT TO VOTE: Subject to the provisions of the Business Corporations Act, Class “D” shares do not carry the right to vote at meetings of the shareholders of the Corporation, nor to receive notice of or attend such meetings.
D.3 DIVIDEND: The Class “D” shares include the right to receive, in priority over Class “E”, “F” and “A” shares, a monthly, preferential and non-cumulative dividend at a maximum rate of 0.5% per month of the redemption price of these shares determined in paragraph D.6. The board of directors sets the terms of payment of this dividend. Once a month has passed, no dividend can be declared for that month.
D.4 LIQUIDATION AND DISSOLUTION: The Class “D” shares have the right to share the remainder of the assets, in the event of the liquidation or dissolution of the Corporation, for an amount equal to the redemption price of these shares at that time determined in paragraph D.6, plus all dividends declared and unpaid on these shares. This amount is paid in priority over any amount to which the Class “E”, “F” and “A” shares are entitled, in the event of liquidation or dissolution.
D.5 ADDITIONAL PARTICIPATION: The right of the Class “D” shares to receive any dividend declared or to share the remainder of the property of the Corporation in the event of liquidation or dissolution of the latter is limited to those provided above. These shares do not otherwise participate in the assets, profits, or surplus assets of the Corporation.
D.6 REDEMPTION AT THE SHAREHOLDER'S REQUEST: The Class "D" shareholder may demand, at any time and upon written request, that the Corporation redeem all or part of the fully paid Class "D" shares he holds for a price equal to the redemption price of these shares at this time plus any dividends declared and unpaid on these shares. The Corporation acquires the shares upon receipt of the written request or on any other date provided for on the request; it then has, subject to sections 95 and 96 of the Business Corporations Act, a period of thirty (30) days to pay the redemption price to the shareholder. If the Corporation is not able to pay this redemption price in full, the shareholder becomes a creditor of the Corporation and has the right to be paid as soon as the Corporation can legally do so. The Corporation must provide the shareholder with proof of his claim. The redemption price at a given time is established by adding the following amounts:
1. the amount paid, when issued, to the subdivision of the issued and paid-up share capital account maintained for Class "D" shares, increased or decreased to take into account any subsequent increase or reduction in the amount of issued and paid-up share capital that affects these shares;
2. a premium equal to the difference between the fair market value of all the goods received by the Corporation on the exchange of goods which included, among other things, the issue of Class “D” shares and the total of the amount paid, upon the exchange of goods, to the subdivision of the issued and paid-up share capital account maintained for these shares and the fair market value of any property, other than Class "D" shares, which the Corporation gave during the exchange of goods.
The fair market value of the goods received by the Corporation on the occasion of the exchange is that established by the Corporation and the shareholder at the time of the issue of these shares. If the federal or provincial tax authorities attribute to the property received by the Corporation a fair market value different from that established at the time of the issuance of these shares, the amount of the premium is reduced or increased accordingly, provided that the Corporation and the shareholder have had the opportunity to debate with the tax authority concerned or before the court the validity of this assessment. The assessment chosen is then that:
| 1. | which serves as the basis for any assessment or reassessment if it is not the subject of an appeal; |
2. agreed between the Corporation, the shareholder and the tax authority concerned in settlement of any assessment, reassessment or proposed assessment; or
| 3. | established definitively by the court. |
If there is a difference between the federal and provincial assessments, the adjustment is made based on the lower of these assessments. If the redemption price is adjusted after the redemption of one or more of these shares, the Corporation shall pay the holder of the redeemed shares, or the holder shall reimburse the Corporation, as the case may be, the difference between the redemption price of these shares as adjusted and the redemption price originally paid by the Corporation. If dividends have been paid before the adjustment, the Corporation or the shareholder must, as the case may be, pay or reimburse the amount of dividends due. Payment or reimbursement is made within sixty (60) days of the date of adjustment of the redemption price. However, the Corporation cannot make any payment that contravenes sections 95, 96 and 104 of the Business Corporations Act. The Corporation's repurchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
D.7 MUTUAL AGREEMENT PURCHASE: Subject to sections 95, 96 and 97 of the Business Corporations Act, the Corporation may, without taking into account the other classes of shares, purchase by mutual agreement all or part of the fully paid Class "D" shares that it issued. However, the Corporation cannot purchase these shares for a price higher than their previously fixed redemption price. The Corporation must, within 30 days of the purchase by mutual agreement it has made of outstanding Class “D” shares, notify its other shareholders. This notice indicates the number of shares acquired, the name of the shareholders from whom the Corporation acquired these shares, the price paid for these shares and any balance due to the shareholders; if the consideration is not in cash, the notice must indicate the nature of the consideration and its value. The Corporation is not required to send this notice if all shareholders, whether or not their shares carry the right to vote, renounce receiving it. The Corporation sends a notice to shareholders who have not informed it in writing of their desire not to receive it. The Corporation must provide, free of charge, to any shareholder who requests it, a copy of the agreement under which it acquired the Class "D" shares. The Corporation's purchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
E) CLASS “E” SHARES (INVESTMENT SHARES)
E.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “E” shares. The Class “E” shares have no par value.
E.2 RIGHT TO VOTE: Subject to the provisions of the Business Corporations Act, Class “E” shares do not carry the right to vote at meetings of the shareholders of the Corporation, nor to receive notice of meetings or to attend meetings.
E.3 DIVIDEND: The Class “E” shares include the right to receive, in priority over Class “F” and “A” shares, an annual, preferential and non-cumulative dividend at a maximum rate of 8% per year of the redemption price of these shares determined in paragraph E.6. The board of directors sets the terms of payment of this dividend.
E.4. LIQUIDATION AND DISSOLUTION: The Class “E” shares have the right to share the remainder of the assets, in the event of the liquidation or dissolution of the Corporation, for an amount equal to the redemption price of these shares at that time determined in paragraph E.6, plus all dividends declared and unpaid on these shares. This amount is paid in priority over any amount to which the Class “F” and “A” shares are entitled, in the event of liquidation or dissolution.
E.5 ADDITIONAL PARTICIPATION: The right of the Class “E” shares to receive any dividend declared or to share the remainder of the property of the Corporation in the event of liquidation or dissolution of the latter is limited to those provided above. These shares do not otherwise participate in the assets, profits, or surplus assets of the Corporation.
E.6 REDEMPTION AT THE SHAREHOLDER'S REQUEST: The Class “E” shareholder may demand, at any time and upon written request, that the Corporation redeem all or part of the fully paid Class “E” shares that he holds for a price equal to the redemption price of these shares at the time plus any dividends declared and unpaid on these shares.
The redemption price of the Class “E” shares at a given time is equal to the sum paid, when issued, to the subdivision of the issued and paid-up share capital account maintained for the Class “E” shares, increased or decreased to take into account any subsequent increase or decrease in the amount of issued and paid-up share capital that affects these shares. The Corporation acquires the shares upon receipt of the written request or on any other date provided for in the request; it then has, subject to sections 95 and 96 of the Business Corporations Act, a period of thirty (30) days to pay the redemption price to the shareholder. If the Corporation is unable to pay this redemption price in full, the shareholder then becomes the Corporation's creditor and he has the right to be paid as soon as the Corporation can legally do so. The Corporation must provide the shareholder with proof of his claim. The Corporation's repurchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
E.7 MUTUAL AGREEMENT PURCHASE: Subject to sections 95, 96 and 97 of the Business Corporations Act, the Corporation may, without taking into account the other classes of shares, purchase by mutual agreement all or part of the fully paid Class "E" shares that it issued, at the best possible price. The Corporation must, within 30 days of the purchase by mutual agreement that it has made of outstanding Class “E” shares, notify its other shareholders. This notice indicates the number of shares acquired, the name of the shareholders from whom the Corporation acquired these shares, the price paid for these shares and any balance due to the shareholders; if the consideration is not in cash, the notice must indicate the nature of the consideration and its value. The Corporation is not required to send this notice if all shareholders, whether or not their shares carry the right to vote, renounce receiving it. The Corporation sends a notice to shareholders who have not informed it in writing of their desire not to receive it. The Corporation must provide, free of charge, to any shareholder who requests it, a copy of the agreement under which it acquired the Class “E” shares. The Corporation's purchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
F) CLASS “F” SHARES (INVESTMENT SHARES)
F.1 GENERAL: The Corporation is authorized to issue an unlimited number of Class “F” shares. The Class “F” shares have no par value.
F.2 RIGHT TO VOTE: Subject to the provisions of the Business Corporations Act, Class “F” shares do not carry the right to vote at meetings of the Corporation's shareholders, nor to receive notice of or attend such meetings.
F.3 DIVIDEND: Class “F” shares include the right to receive, in priority over Class “A” shares, an annual, preferential and non-cumulative dividend at a maximum rate of 8% per year of the redemption price of these shares determined in paragraph F.6. The board of directors sets the terms of payment of this dividend.
F.4 LIQUIDATION AND DISSOLUTION: The Class “F” shares have the right to share the remainder of the assets, in the event of the liquidation or dissolution of the Corporation, for an amount equal to the redemption price of these shares at that time determined in paragraph F.6, plus all dividends declared and unpaid on these shares. This amount is paid in priority over any amount to which Class “A” shares are entitled, in the event of liquidation or dissolution.
F.5 ADDITIONAL PARTICIPATION: The right of the Class “F” shares to receive any dividend declared or to share the remainder of the Corporation's assets in the event of its liquidation or dissolution is limited to those provided above. These shares do not otherwise participate in the assets, profits, or surplus assets of the Corporation.
F.6 UNILATERAL REPURCHASE: Subject to sections 95 and 96 of the Business Corporations Act, the Corporation may, at any time, redeem unilaterally the fully paid Class “F” shares it has issued for a price equal to the redemption price of these shares at this time plus any declared and unpaid dividends on these shares. The redemption price for Class “F” shares at a given point in time is equal to the sum paid, when issued, to the subdivision of the issued and paid-up share capital account maintained for the Class "F" shares, increased or decreased to take into account any subsequent increase or reduction in the amount of issued and paid-up share capital that affects these shares. The Corporation gives a written notice to this effect at least thirty (30) days from the date scheduled for redemption. The redemption, if partial, is made in proportion to the number of outstanding Class “F” shares without taking into account fractional shares. The Corporation may unilaterally redeem Class “F” shares only upon full payment of their redemption price. The Corporation's repurchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
F.7 MUTUAL AGREEMENT PURCHASE: Subject to sections 95, 96 and 97 of the Business Corporations Act, the Corporation may, without taking into account the other classes of shares, purchase by mutual agreement all or part of the fully paid Class "F" shares that it issued. However, the Corporation cannot purchase these shares for a price higher than their previously fixed redemption price. The Corporation must, within 30 days of the purchase by mutual agreement it has made of outstanding Class “F” shares, notify its other shareholders. This notice indicates the number of shares acquired, the name of the shareholders from whom the Corporation acquired these shares, the price paid for these shares and any balance due to the shareholders; if the consideration is not in cash, the notice must indicate the nature of the consideration and its value. The Corporation is not required to send this notice if all the shareholders, whether or not their shares carry the right to vote, renounce receiving it. The Corporation sends a notice to shareholders who have not informed it in writing of their desire not to receive it. The Corporation must provide, free of charge, to any shareholder who requests it, a copy of the agreement under which it acquired the Class “F” shares. The Corporation's purchase of these shares results in their cancellation. In addition, the Corporation reduces the subdivision of its issued and paid-up share capital account for these shares by the amount provided for in section 72 of the Business Corporations Act.
Annex B
RESTRICTIONS ON TRANSFER OF SECURITIES OR SHARES
As long as the Corporation benefits from the “private issuer” exemption under Regulation 45-106 respecting prospectus and registration exemptions, any transfer of Corporation securities, except non-convertible debt securities, is subject either to the consent of the board of directors attested by a resolution or to the restrictions contained in an agreement between the holders of these securities.
Exhibit 3.2
REZ-128 (2017-08)
Certificate of Amendment
Business Corporations Act (RLRQ, chapter S-31.1)
I certify that the corporation
RIOPEL MARINE INC.
amended its articles pursuant to the Business Corporations Act to change its name to:
Technologies Marine Vision Inc.
and its version
Vision Marine Technologies Inc.
On 22 April 2020
Filed in the register on 23 April 2020 under the Quebec enterprise number 1168491927.
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*Unofficial translated version from the original documents provided by the Registraire des Entreprises du Québec
Services Québec
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REZ-909 (2017-04) Page 1 of 1 |
Articles of Amendment
Québec enterprise number (NEQ): 1168491927
Business Corporations Act, RLRQ, chapter S-31.1
| 1 | Information about the business corporation |
Name of business corporation
RIOPEL MARINE INC.
Version(s) of the name of the corporation in a language other than French, if applicable
| 2 | Amendment of articles |
| 2.1 | Amendment to the name |
Name of business corporation
Technologies Marine Vision Inc.
Version(s) of the name of the corporation in a language other than French, if applicable
Vision Marine Technologies Inc.
| 2.2 | Other amendments |
| 2.3 | Date and time of certificate, if applicable |
Date Time
| 3 | Correction of articles |
| 4 | Signature |
Name of authorized director or officer
Alexandre Mongeon
Electronic signature of Alexandre Mongeon
For office use only
Reference number of the application: 020200073746731
Designating number:
Services Québec
REZ-909 (2017-04)
Declaration Relating to the Name
Declaration Relating to the Name
Name of business corporation: RIOPEL MARINE INC.
I, undersigned, Alexandre Mongeon, declare that reasonable means have been taken to ensure that the name chosen is in compliance with the law and that I am the person authorized to sign this declaration.
Electronic signature of Alexandre Mongeon
*Unofficial translated version from the original documents provided by the Registraire des Entreprises du Québec
Exhibit 10.1
COMMERCIAL LEASE AGREEMENT
This Lease Agreement (the “Agreement”) is made and effective June 10th, 2017,
| BETWEEN: | CALIFORNIA ELECTRIC BOAT COMPANY INC. (the "Landlord"), a corporation incorporated under the Canada Business Corporation Act, with the main address located at 730 Curé Boivin boulevard, Boisbriand (Qc) J7G 2A7, represented by Alexandre Mongeon, acting as President and Patrick Bobby, acting as Secretary-Treasurer. |
| AND: | RIOPEL MARINE INC., (The '' Tenant '') also doing business as CANADIAN ELECTRIC BOAT COMPANY, manufacturing and selling electric boats, incorporated August 27, 2012 under the Act of the Province of Quebec, Canada, whose head office is located at 730 Boulevard du Cure Boivin, Boisbriand (Qc) J7G 2A7, and represented by Alexandre Mongeon acting as President and Patrick Bobby, acting as Secretary-Treasurer |
| 1. | DESCRIPTION OF PREMISES |
Landlord leases to Tenant the premises located at 730 Cure Boivin boulevard, Boisbriand (Qc) J7G 2A7, a rental space of eight thousand two hundred and nine (8,209) square feet, mainly used for manufacturing electric boats.
| 2. | GRANT OF LEASE |
Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and observed by the Tenant, does hereby lease to the Tenant and the Tenant does hereby lease and take from the Landlord the property described in Paragraph 1 and by reference made a part hereof (the "Leased Premises"), together with, as part of the parcel, all improvements located thereon.
| 3. | LEASE TERM |
| a. | Total Term of Lease: The term of this Lease shall begin on June 10th 2017, and shall terminate on May 31st, 2022. |
| b. | Commencement Date: The "Commencement Date" shall mean the date on which the Tenant shall commence to conduct business on the Leased Premised, so long as such date is not in excess of ten (10) days subsequent to execution hereof. |
| 4. | EXTENSIONS |
The parties hereto may elect to extend this Agreement upon such terms and conditions as may be agreed upon in writing and signed by the parties at the time of any such extension.
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 1 of 19 |
| 5. | DETERMINATION OF RENT |
The Tenant agrees to pay the Landlord and the Landlord agrees to accept, during the term hereof, at such place as the Landlord shall from time to time direct by notice to the Tenant, rent at the following rates and times:
| a. | Annual Rent: The annual rent is sixty-nine thousand seven hundred and seventy-six dollars and fifty-two cents ($69,776,52), plus applicable taxes, representing eight dollars and fifty cents ($8.50) per square foot, on a Net / Net basis. |
| b. | Payment of Yearly Rent: The annual rent shall be payable in advance in equal monthly installments of one-twelfth (1/12th) of the total yearly rent, which shall be five thousand eight hundred and fourteen and seventy one cents ($5,814.71), on the first day of each and every calendar month during the term hereof, and prorata for the fractional portion of any month, except that on the first day of the calendar month immediately following the Commencement Date, the Tenant shall also pay to the Landlord rent at the said rate for any portion of the preceding calendar month included in the term of this Lease. |
| c. | Reference to yearly rent hereunder shall not be implied or construed to the effect that this Lease or the obligation to pay rent hereunder is from year to year, or for any term shorter than the existing Lease term, plus any extensions as may be agreed upon. |
| d. | A late fee in the amount of one hundred dollars ($100.00) shall be assessed if payment is not postmarked or received by Landlord on or before the tenth day of each month. |
| e. | Other expenses: the tenant will pay the costs of telecommunication, heating, electricity and air conditioning. |
| 6. | ADDITIONNAL RENT |
This Lease is what is commonly referred to a “Net / Net’’ Lease, with the understanding that from the first month of the Lease Term, the Landlord will receive the stipulated rent free from any other taxation, liens or expenses of any kind, unless otherwise provided in this Agreement. In addition to the BASIC RENT, the Tenant will pay to the parties entitled thereto all insurance premiums, taxes, assessments, operating expenses, management fees, maintenance fees and any other costs and expenses that occur or may be considered under any provision of this lease, for all premises during the term hereof.
All such fees, costs and expenses will constitute an ADDITIONNAL RENT and, if the Lessee does not pay any of these costs or expenses, the Lessor shall have the same rights and remedies as those provided in this Lease for the Tenant’s failure to: pay the rent. The parties hereto are of the opinion that the Lessee may not terminate this lease for any reason whatsoever and the lessee will not be entitled to any reduction or rent payable under this lease, except in the expressly provided for. Any contrary law, present or future, must not modify this agreement between the parties.
On the execution of this lease, the tenant will have to pay, annually, to the landlord the sum of four dollars ($4.00) per square foot, representing:
ADDITIONAL RENT
total annual:
Thirty two thousand eight hundred and thirty five dollars and ninety six cents ($32,835.96)
ADDITIONAL RENT monthly:
Two thousand seven hundred and thirty six dollars and thirty three cents ($2,736.33)
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 2 of 19 |
| 7. | USE OF PROPERTY BY TENANT |
The Leased Premises may be occupied and used by Tenant exclusively to manufacture, assembly and sale of electric boats, to be known as a Canadian Electric Boat Company.
Nothing herein shall give Tenant the right to use the property for any other purpose or to sublease, assign, or license the use of the property to any Sub-Tenant, assignee, or licensee, which or who shall use the property for any other use.
| 8. | RESTRICTIONS ON USE |
Tenant shall not use the demised premises in any manner that will increase risks covered by insurance on the demised premises and result in an increase in the rate of insurance or a cancellation of any insurance policy, even if such use may be in furtherance of Tenant’s business purposes.
Tenant shall not keep, use, or sell anything prohibited by any policy of fire insurance covering the demised premises, and shall comply with all requirements of the insurers applicable to the demised premises necessary to keep in force the fire and liability insurance.
| 9. | WASTE, NUISANCE, OR UNLAWFUL ACTIVITY |
Tenant shall not allow any waste or nuisance on the demised premises, or use or allow the demised premises to be used for any unlawful purpose.
| 10. | DELAY IN DELIVERING POSSESSION |
This lease agreement shall not be rendered void or voidable by the inability of Landlord to deliver possession to Tenant on the date set forth in Section 3. Landlord shall not be liable to Tenant for any loss or damage suffered by reason of such a delay; provided, however, that Landlord does deliver possession no later than [date]. In the event of a delay in delivering possession, the rent for the period of such delay will be deducted from the total rent due under this lease agreement. No extension of this lease agreement shall result from a delay in delivering possession.
| 11. | SECURITY DEPOSIT |
Not applicable.
| 12. | TAXES |
All Property Taxes are included in the ADDITIONNAL RENT.
| 13. | IMPROVEMENTS BY TENANTS |
Tenant may have prepared plans and specifications for the construction of improvements, and, if so, such plans and specifications are attached hereto as Exhibit "B" and incorporated herein by reference. Tenant shall obtain all certificates, permits, licenses and other authorizations of governmental bodies or authorities which are necessary to permit the construction of the improvements on the demised premises and shall keep the same in full force and effect at Tenant's cost.
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 3 of 19 |
Tenant shall negotiate, let and supervise all contracts for the furnishing of services, labor, and materials for the construction of the improvements on the demised premises at its cost. All such contracts shall require the contracting party to guarantee performance and all workmanship and materials installed by it for a period of one year following the date of completion of construction. Tenant shall cause all contracts to be fully and completely performed in a good and workmanlike manner, all to the effect that the improvements shall be fully and completely constructed and installed in accordance with good engineering and construction practice.
During the course of construction, Tenant shall, at its cost, keep in full force and effect a policy of builder's risk and liability insurance in a sum equal, from time to time, to three times the amount expended for construction of the improvements. All risk of loss or damage to the improvements during the course of construction shall be on Tenant with the proceeds from insurance thereon payable to Landlord.
Upon completion of construction, Tenant shall, at its cost, obtain an occupancy permit and all other permits or licenses necessary for the occupancy of the improvements and the operation of the same as set out herein and shall keep the same in force.
Nothing herein shall alter the intent of the parties that Tenant shall be fully and completely responsible for all aspects pertaining to the construction of the improvements of the demised premises and for the payment of all costs associated therewith. Landlord shall be under no duty to investigate or verify Tenant's compliance with the provision herein. Moreover, neither Tenant nor any third party may construe the permission granted Tenant hereunder to create any responsibility on the part of the Landlord to pay for any improvements, alterations or repairs occasioned by the Tenant. The Tenant shall keep the property free and clear of all liens and, should the Tenant fail to do so, or to have any liens removed from the property within ten (10) days of notification to do so by the Landlord, in addition to all other remedies available to the Landlord, the Tenant shall indemnify and hold the Landlord harmless for all costs and expenses, including attorney's fees, occasioned by the Landlord in having said lien removed from the property; and, such costs and expenses shall be billed to the Tenant monthly and shall be payable by the Tenant with that month's regular monthly rental as additional reimbursable expenses to the Landlord by the Tenant.
| 14. | Utilities |
Tenant shall pay for all water, sanitation, sewer, electricity, light, heat, gas, power, fuel, janitorial, and other services incident to Tenant's use of the Leased Premises, whether or not the cost thereof be a charge or imposition against the Leased Premises.
| 15. | OBLIGATIONS FOR REPAIRS |
| a. | Landlord’s Repairs: Subject to any provisions herein to the contrary, and except for maintenance or replacement necessitated as the result of the act or omission of subtenants, licensees or contractors, the Landlord shall be required to repair only defects, deficiencies, deviations or failures of materials or workmanship in the building. The Landlord shall keep the Leased Premises free of such defects, deficiencies, deviations or failures during the first two (2) months of the term hereof. |
| b. | Tenant’s Repairs: The Tenant shall repair and maintain the Leased Premises in good order and condition, except for reasonable wear and tear, the repairs required of Landlord pursuant hereto, and maintenance or replacement necessitated as the result of the act or omission or negligence of the Landlord, its employees, agents, or contractors. |
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 4 of 19 |
| c. | Requirements of the Law: The Tenant agrees that if any federal, state or municipal government or any department or division thereof shall condemn the Leased Premises or any part thereof as not in conformity with the laws and regulations relating to the construction thereof as of the commencement date with respect to conditions latent or otherwise which existed on the Commencement Date, or, with respect to items which are the Landlord's duty to repair pursuant to Section a) and c) of this Article; and such federal, state or municipal government or any other department or division thereof, has ordered or required, or shall hereafter order or require, any alterations or repairs thereof or installations and repairs as may be necessary to comply with such laws, orders or requirements (the validity of which the Tenant shall be entitled to contest); and if by reason of such laws, orders or the work done by the Landlord in connection therewith, the Tenant is deprived of the use of the Leased Premises, the rent shall be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion of the Leased Premises of which, the Tenant shall be deprived as a result thereof, and the Landlord shall be obligated to make such repairs, alterations or modifications at Landlord's expense. All such rebuilding, altering, installing and repairing shall be done in accordance with Plans and Specifications approved by the Tenant, which approval shall not be unreasonably withheld. If, however, such condemnation, law, order or requirement, as in this Article set forth, shall be with respect to an item which shall be the Tenant's obligation to repair pursuant to Section b) of this Article 9 or with respect to Tenant's own costs and expenses, no abatement or adjustment of rent shall be granted; provided, however, that Tenant shall also be entitled to contest the validity thereof. |
| d. | Tenant's Alterations: The Tenant shall have the right, at its sole expense, from time to time, to redecorate the Leased Premises and to make such non-structural alterations and changes in such parts thereof as the Tenant shall deem expedient or necessary for its purposes; provided, however, that such alterations and changes shall neither impair the structural soundness nor diminish the value of the Leased Premises. The Tenant may make structural alterations and additions to the Leased Premises provided that Tenant has first obtained the consent thereto of the Landlord in writing. The Landlord agrees that it shall not withhold such consent unreasonably. The Landlord shall execute and deliver upon the request of the Tenant such instrument or instruments embodying the approval of the Landlord which may be required by the public or quasi public authority for the purpose of obtaining any licenses or permits for the making of such alterations, changes and/or installations in, to or upon the Leased Premises and the Tenant agrees to pay for such licenses or permits. |
| e. | Permits and Expenses: Each party agrees that it will procure all necessary permits for making any repairs, alterations, or other improvements for installations, when applicable. Each Party hereto shall give written notice to the other party of any repairs required of the other pursuant to the provisions of this Article and the party responsible for said repairs agrees promptly to commence such repairs and to prosecute the same to completion diligently, subject, however, to the delays occasioned by events beyond the control of such party. |
Each party agrees to pay promptly when due the entire cost of any work done by it upon the Leased Premises so that the Leased Premises at all times shall be free of liens for labor and materials. Each party further agrees to hold harmless and indemnify the other party from and against any and all injury, loss, claims or damage to any person or property occasioned by or arising out of the doing of any such work by such party or its employees, agents or contractors. Each party further agrees that in doing such work that it will employ materials of good quality and comply with all governmental requirements, and perform such work in a good and workmanlike manner.
| 16. | TENANT'S COVENANTS |
Tenant covenants and agrees as follows:
| a. | To procure any licenses and permits required for any use made of the Leased Premises by Tenant, and upon the expiration or termination of this Lease, to remove its goods and effects and those of all persons claiming under it, and to yield up peaceably to Landlord the Leased Premises in good order, repair and condition in all respects; excepting only damage by fire and casualty covered by Tenant's insurance coverage, structural repairs (unless Tenant is obligated to make such repairs hereunder) and reasonable wear and tear; |
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 5 of 19 |
| b. | To permit Landlord and its agents to examine the Leased Premises at reasonable times and to show the Leased Premises to prospective purchasers of the Building and to provide Landlord, if not already available, with a set of keys for the purpose of said examination, provided that Landlord shall not thereby unreasonably interfere with the conduct of Tenant's business; |
| c. | To permit Landlord to enter the Leased Premises to inspect such repairs, improvements, alterations or additions thereto as may be required under the provisions of this Lease. If, as a result of such repairs, improvements, alterations, or additions, Tenant is deprived of the use of the Leased Premises, the rent shall be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion of the Leased Premises of which, Tenant shall be deprived as a result thereof. |
| 17. | INDEMNITY BY TENANT |
The Tenant shall save Landlord harmless and indemnify Landlord from all injury, loss, claims or damage to any person or property while on the Leased Premises, unless caused by the willful acts or omissions or gross negligence of Landlord, its employees, agents, licensees or contractors. Tenant shall maintain, with respect to the Leased Premises, public liability insurance with limits of not less than two million dollars ($2,000,000) for injury or death from one accident and two million dollars ($2,000,000) property damage insurance, insuring Landlord and Tenant against injury to persons or damage to property on or about the Leased Premises. A copy of the policy or a certificate of insurance shall be delivered to Landlord on or before the commencement date and no such policy shall be cancelable without TEN (10) days prior written notice to Landlord.
| 18. | SIGNAGE |
| a. | Exterior Signs: Tenant shall have the right, at its sole risk and expense and in conformity with applicable laws and ordinances, to erect and thereafter, to repair or replace, if it shall so elect signs on any portion of the Leased Premises, providing that Tenant shall remove any such signs upon termination of this lease, and repair all damage occasioned thereby to the Leased Premises. |
| b. | Interior Signs: Tenant shall have the right, at its sole risk and expense and in conformity with applicable laws and ordinances, to erect, maintain, place and install its usual and customary signs and fixtures in the interior of the Leased Premises. |
| 19. | INSURANCE |
| a. | Insurance Proceeds: In the event of any damage to or destruction of the Leased Premises, Tenant shall adjust the loss and settle all claims with the insurance companies issuing such policies. The parties hereto do irrevocably assign the proceeds from such insurance policies for the purposes hereinafter stated to any institutional first mortgagee or to Landlord and Tenant jointly, if no institutional first mortgagee then holds an interest in the Leased Premises. All proceeds of said insurance shall be paid into a trust fund under the control of any institutional first mortgagee, or of Landlord and Tenant if no institutional first mortgagee then holds an interest in the Leased Premises, for repair, restoration, rebuilding or replacement, or any combination thereof, of the Leased Premises or of the improvements in the Leased Premises. In case of such damage or destruction, Landlord shall be entitled to make withdrawals from such trust fund, from time to time, upon presentation of: |
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 6 of 19 |
| i. | bills for labor and materials expended in repair, restoration, rebuilding or replacement, or any combination thereof; |
| ii. | Landlord's sworn statement that such labor and materials for which payment is being made have been furnished or delivered on site; and |
| iii. | the certificate of a supervising architect (selected by Landlord and Tenant and approved by an institutional first mortgagee, if any, whose fees will be paid out of said insurance proceeds) certifying that the work being paid for has been completed in accordance with the Plans and Specifications previously approved by Landlord, Tenant and any institutional first mortgagee in a first class, good and workmanlike manner and in accordance with all pertinent governmental requirements. |
Any insurance proceeds in excess of such proceeds as shall be necessary for such repair, restoration, rebuilding, replacement or any combination thereof shall be the sole property of Landlord subject to any rights therein of Landlord's mortgagee, and if the proceeds necessary for such repair, restoration, rebuilding or replacement, or any combination thereof shall be inadequate to pay the cost thereof, Tenant shall suffer the deficiency.
| b. | Subrogation: Landlord and Tenant hereby release each other, to the extent of the insurance coverage provided hereunder, from any and all liability or responsibility (to the other or anyone claiming through or under the other by way of subrogation or otherwise) for any loss to or damage of property covered by the fire and extended coverage insurance policies insuring the Leased Premises and any of Tenant's property, even if such loss or damage shall have been caused by the fault or negligence of the other party. |
| c. | Contribution: Tenant shall reimburse Landlord for all insurance premiums connected with or applicable to the Leased Premises for whatever insurance policy the Landlord, at its sole and exclusive option, should select. |
| 20. | DAMAGE TO DEMISED PREMISES |
| a. | Abatement or Adjustment of Rent: If the whole or any part of the Leased Premises shall be damaged or destroyed by fire or other casualty after the execution of this Lease and before the termination hereof, then in every case the rent reserved in Article IV herein and other charges, if any, shall be abated or adjusted, as the case may be, in proportion to that portion of the Leased Premises of which Tenant shall be deprived on account of such damage or destruction and the work of repair, restoration, rebuilding, or replacement or any combination thereof, of the improvements so damaged or destroyed, shall in no way be construed by any person to effect any reduction of sums or proceeds payable under any rent insurance policy. |
| b. | Repairs and Restoration: Landlord agrees that in the event of the damage or destruction of the Leased Premises, Landlord forthwith shall proceed to repair, restore, replace or rebuild the Leased Premises (excluding Tenant's leasehold improvements), to substantially the condition in which the same were immediately prior to such damage or destruction. The Landlord thereafter shall diligently prosecute said work to completion without delay or interruption except for events beyond the reasonable control of Landlord. Notwithstanding the foregoing, if Landlord does not either obtain a building permit within ten (10) days of the date of such damage or destruction, or complete such repairs, rebuilding or restoration within two (2) months of such damage or destruction, then Tenant may at any time thereafter cancel and terminate this Lease by sending ten (10) days written notice thereof to Landlord, or, in the alternative, Tenant may, during said ten (10) day period, apply for the same and Landlord shall cooperate with Tenant in Tenant's application. Notwithstanding the foregoing, if such damage or destruction shall occur during the last year of the term of this Lease, or during any renewal term, and shall amount to fifty (50%] or more of the replacement cost, (exclusive of the land and foundations), this Lease, may be terminated at the election of either Landlord or Tenant, provided that notice of such election shall be sent by the party so electing to the other within ten (10) days after the occurrence of such damage or destruction. Upon termination, as aforesaid, by either party hereto, this Lease and the term thereof shall cease and come to an end, any unearned rent or other charges paid in advance by Tenant shall be refunded to Tenant, and the parties shall be released hereunder, each to the other, from all liability and obligations hereunder thereafter arising. |
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 7 of 19 |
| 21. | CONDEMNATION |
| a. | Total Taking: If, after the execution of this Lease and prior to the expiration of the term hereof, the whole of the Leased Premises shall be taken under power of eminent domain by any public or private authority, or conveyed by Landlord to said authority in lieu of such taking, then this Lease and the term hereof shall cease and terminate as of the date when possession of the Leased Premises shall be taken by the taking authority and any unearned rent or other charges, if any, paid in advance, shall be refunded to Tenant. |
| b. | Partial Taking: If, after the execution of this Lease and prior to the expiration of the term hereof, any public or private authority shall, under the power of eminent domain, take, or Landlord shall convey to said authority in lieu of such taking, property which results in a reduction by [%] or more of the area in the Leased Premises, or of a portion of the Leased Premises that substantially interrupts or substantially obstructs the conducting of business on the Leased Premises; then Tenant may, at its election, terminate this Lease by giving Landlord notice of the exercise of Tenant's election within ten (10) days after Tenant shall receive notice of such taking. In the event of termination by Tenant of this Lease and the term hereof shall cease and terminate as of the date when possession shall be taken by the appropriate authority of that portion of the Entire Property that results in one of the above takings, and any unearned rent or other charges, if any, paid in advance by Tenant shall be refunded to Tenant. |
| c. | Restoration: In the event of a taking in respect of which Tenant shall not have the right to elect to terminate this Lease or, having such right, shall not elect to terminate this Lease, this Lease and the term thereof shall continue in full force and effect and Landlord, at Landlord's sole cost and expense, forthwith shall restore the remaining portions of the Leased Premises, including any and all improvements made theretofore to an architectural whole in substantially the same condition that the same were in prior to such taking. A just proportion of the rent reserved herein and any other charges payable by Tenant hereunder, according to the nature and extent of the injury to the Leased Premises and to Tenant's business, shall be suspended or abated until the completion of such restoration and thereafter the rent and any other charges shall be reduced in proportion to the square footage of the Leased Premises remaining after such taking. |
| d. | The Award: All compensation awarded for any taking, whether for the whole or a portion of the Leased Premises, shall be the sole property of the Landlord whether such compensation shall be awarded for diminution in the value of, or loss of, the leasehold or for diminution in the value of, or loss of, the fee in the Leased Premises, or otherwise. The Tenant hereby assigns to Landlord all of Tenant's right and title to and interest in any and all such compensation. However, the Landlord shall not be entitled to and Tenant shall have the sole right to make its independent claim for and retain any portion of any award made by the appropriating authority directly to Tenant for loss of business, or damage to or depreciation of, and cost of removal of fixtures, personality and improvements installed in the Leased Premises by, or at the expense of Tenant, and to any other award made by the appropriating authority directly to Tenant. |
| Lease Agreement: 730 Cure Boivin, Boisbriand (Qc) | Page 8 of 19 |
| e. | Release: In the event of any termination of this Lease as the result of the provisions of this Article 20, the parties, effective as of such termination, shall be released, each to the other, from all liability and obligations thereafter arising under this lease. |
| 22. | LANDLORD’S REMEDIES |
In the event that:
| a. | Tenant shall on three or more occasions be in default in the payment of rent or other charges herein required to be paid by Tenant (default herein being defined as payment received by Landlord ten or more days subsequent to the due date), regardless of whether or not such default has occurred on consecutive or non-consecutive months; or |
| b. | Tenant has caused a lien to be filed against the Landlord's property and said lien is not removed within ten (10) days of recordation thereof; or |
| c. | Tenant shall default in the observance or performance of any of the covenants and agreements required to be performed and observed by Tenant hereunder for a period of ten (10) days after notice to Tenant in writing of such default (or if such default shall reasonably take more than ten (10) days to cure, Tenant shall not have commenced the same within the ten (10) days and diligently prosecuted the same to completion); or |
| d. | Ten (10) days have elapsed after the commencement of any proceeding by or against Tenant, whether by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or future Federal Bankruptcy Act or any other present or future applicable federal, state or other statute or law, whereby such proceeding shall not have been dismissed (provided, however, that the non-dismissal of any such proceeding shall not be a default hereunder so long as all of Tenant's covenants and obligations hereunder are being performed by or on behalf of Tenant); then Landlord shall be entitled to its election (unless Tenant shall cure such default prior to such election), to exercise concurrently or successively, any one or more of the following rights: |
| i. | Terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination, with the same force and effect as though the date so specified were the date herein originally fixed as the termination date of the term of this Lease, and all rights of Tenant under this Lease and in and to the Premises shall expire and terminate, and Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination, and Tenant shall surrender the Premises to Landlord on the date specified in such notice; or |
| ii. | Terminate this Lease as provided herein and recover from Tenant all damages Landlord may incur by reason of Tenant's default, including, without limitation, a sum which, at the date of such termination, represents the then value of the excess, if any, of (a) the Minimum Rent, Percentage Rent, Taxes and all other sums which would have been payable hereunder by Tenant for the period commencing with the day following the date of such termination and ending with the date herein before set for the expiration of the full term hereby granted, over (b) the aggregate reasonable rental value of the Premises for the same period, all of which excess sum shall be deemed immediately due and payable; or |
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| iii. | Without terminating this Lease, declare immediately due and payable all Minimum Rent, Taxes, and other rents and amounts due and coming due under this Lease for the entire remaining term hereof, together with all other amounts previously due, at once; provided, however, that such payment shall not be deemed a penalty or liquidated damages but shall merely constitute payment in advance of rent for the remainder of said term. Upon making such payment, Tenant shall be entitled to receive from Landlord all rents received by Landlord from other assignees, tenants, and subtenants on account of said Premises during the term of this Lease, provided that the monies to which tenant shall so become entitled shall in no event exceed the entire amount actually paid by Tenant to Landlord pursuant to the preceding sentence less all costs, expenses and attorney's fees of Landlord incurred in connection with the reletting of the Premises; or |
| iv. | Without terminating this Lease, and with or without notice to Tenant, Landlord may in its own name but as agent for Tenant enter into and upon and take possession of the Premises or any part thereof, and, at landlord's option, remove persons and property there from, and such property, if any, may be removed and stored in a warehouse or elsewhere at the cost of, and for the account of Tenant, all without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby, and Landlord may rent the Premises or any portion thereof as the agent of Tenant with or without advertisement, and by private negotiations and for any term upon such terms and conditions as Landlord may deem necessary or desirable in order to relet the Premises. Landlord shall in no way be responsible or liable for any rental concessions or any failure to rent the Premises or any part thereof, or for any failure to collect any rent due upon such reletting. Upon such reletting, all rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness (other than any rent due hereunder) from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including, without limitation, brokerage fees and attorney's fees and costs of alterations and repairs; third, to the payment of rent and other charges then due and unpaid hereunder; and the residue, if any shall be held by Landlord to the extent of and for application in payment of future rent as the same may become due and payable hereunder. In reletting the Premises as aforesaid, Landlord may grant rent concessions and Tenant shall not be credited therefore. If such rentals received from such reletting shall at any time or from time to time be less than sufficient to pay to Landlord the entire sums then due from Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall, at Landlord's option, be calculated and paid monthly. No such reletting shall be construed as an election by Landlord to terminate this Lease unless a written notice of such election has been given to Tenant by Landlord. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for any such previous default provided same has not been cured; or |
| v. | Without liability to Tenant or any other party and without constituting a constructive or actual eviction, suspend or discontinue furnishing or rendering to Tenant any property, material, labor, Utilities or other service, whether Landlord is obligated to furnish or render the same, so long as Tenant is in default under this Lease; or |
| vi. | Allow the Premises to remain unoccupied and collect rent from Tenant as it comes due; or |
| vii. | Foreclose the security interest described herein, including the immediate taking of possession of all property on or in the Premises; or |
| viii. | Pursue such other remedies as are available at law or equity. |
| e. | Landlord's pursuit of any remedy of remedies, including without limitation, any one or more of the remedies stated herein shall not (1) constitute an election of remedies or preclude pursuit of any other remedy or remedies provided in this Lease or any other remedy or remedies provided by law or in equity, separately or concurrently or in any combination, or (2) sever as the basis for any claim of constructive eviction, or allow Tenant to withhold any payments under this Lease. |
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| 23. | LANDLORD'S Self Help |
If in the performance or observance of any agreement or condition in this Lease contained on its part to be performed or observed and shall not cure such default within ten (10) days after notice from Landlord specifying the default (or if such default shall reasonably take more than ten (10) days to cure, shall diligently prosecuted the same to completion), Landlord may, at its option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such default for the account of Tenant, and any amount paid or contractual liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant and Tenant agrees to reimburse Landlord therefore and save Landlord harmless there from. Provided, however, that Landlord may cure any such default as aforesaid prior to the expiration of said waiting period, without notice to Tenant if any emergency situation exists, or after notice to Tenant, if the curing of such default prior to the expiration of said waiting period is reasonably necessary to protect the Leased Premises or Landlord's interest therein, or to prevent injury or damage to persons or property. If Tenant shall fail to reimburse Landlord upon demand for any amount paid for the account of Tenant hereunder, said amount shall be added to and become due as a part of the next payment of rent due and shall for all purposes be deemed and treated as rent hereunder.
| 24. | TENANT'S Self Help |
If Landlord shall default in the performance or observance of any agreement or condition in this Lease contained on its part to be performed or observed, and if Landlord shall not cure such default within ten (10) days after notice from Tenant specifying the default (or, if such default shall reasonably take more than ten (10) days to cure, and Landlord shall not have commenced the same within ten (10) days and diligently prosecuted the same to completion), Tenant may, at its option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such default for the account of Landlord and any amount paid or any contractual liability incurred by Tenant in so doing shall be deemed paid or incurred for the account of Landlord and Landlord shall reimburse Tenant therefore and save Tenant harmless there from. Provided, however, that Tenant may cure any such default as aforesaid prior to the expiration of said waiting period, without notice to Landlord if an emergency situation exists, or after notice to Landlord, if the curing of such default prior to the expiration of said waiting period is reasonably necessary to protect the Leased Premises or Tenant's interest therein or to prevent injury or damage to persons or property. If Landlord shall fail to reimburse Tenant upon demand for any amount paid or liability incurred for the account of Landlord hereunder, said amount or liability may be deducted by Tenant from the next or any succeeding payments of rent due hereunder; provided, however, that should said amount or the liability therefore be disputed by Landlord, Landlord may contest its liability or the amount thereof, through arbitration or through a declaratory judgment action and Landlord shall bear the cost of the filing fees therefore.
| 25. | TITLE |
| a. | Subordination: Tenant shall, upon the request of Landlord in writing, subordinate this Lease to the lien of any present or future institutional mortgage upon the Leased Premises irrespective of the time of execution or the time of recording of any such mortgage. Provided, however, that as a condition to such subordination, the holder of any such mortgage shall enter first into a written agreement with Tenant in form suitable for recording to the effect that: |
| i. | in the event of foreclosure or other action taken under the mortgage by the holder thereof, this Lease and the rights of Tenant hereunder shall not be disturbed but shall continue in full force and effect so long as Tenant shall not be in default hereunder |
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| ii. | such holder shall permit insurance proceeds and condemnation proceeds to be used for any restoration and repair required by the provisions of this Agreement, respectively. Tenant agrees that if the mortgagee or any person claiming under the mortgagee shall succeed to the interest of Landlord in this Lease, Tenant will recognize said mortgagee or person as its Landlord under the terms of this Lease, provided that said mortgagee or person for the period during which said mortgagee or person respectively shall be in possession of the Leased Premises and thereafter their respective successors in interest shall assume all of the obligations of Landlord hereunder. The word "mortgage", as used herein includes mortgages, deeds of trust or other similar instruments, and modifications, and extensions thereof. The term "institutional mortgage" as used in this Article 24 means a mortgage securing a loan from a bank or trust company, insurance company or pension trust or any other lender institutional in nature and constituting a lien upon the Leased Premises. |
| b. | Quiet Enjoyment: Landlord covenants and agrees that upon Tenant paying the rent and observing and performing all of the terms, covenants and conditions on Tenant's part to be observed and performed hereunder, that Tenant may peaceably and quietly have, hold, occupy and enjoy the Leased Premises in accordance with the terms of this Lease without hindrance or molestation from Landlord or any persons lawfully claiming through Landlord. |
| c. | Zoning and Good Title: Landlord warrants and represents, upon which warranty and representation Tenant has relied in the execution of this Lease, that Landlord is the owner of the Leased Premises, in fee simple absolute, free and clear of all encumbrances, except for the easements, covenants and restrictions of record as of the date of this Lease. Such exceptions shall not impede or interfere with the quiet use and enjoyment of the Leased Premises by Tenant. Landlord further warrants and covenants that this Lease is and shall be a first lien on the Leased Premises, subject only to any Mortgage to which this Lease is subordinate or may become subordinate pursuant to an agreement executed by Tenant, and to such encumbrances as shall be caused by the acts or omissions of Tenant; that Landlord has full right and lawful authority to execute this Lease for the term, in the manner, and upon the conditions and provisions herein contained; that there is no legal impediment to the use of the Leased Premises as set out herein; that the Leased Premises are not subject to any easements, restrictions, zoning ordinances or similar governmental regulations which prevent their use as set out herein; that the Leased Premises presently are zoned for the use contemplated herein and throughout the term of this lease may continue to be so used therefore by virtue of said zoning, under the doctrine of "non-conforming use", or valid and binding decision of appropriate authority, except, however, that said representation and warranty by Landlord shall not be applicable in the event that Tenant's act or omission shall invalidate the application of said zoning, the doctrine of "non-conforming use" or the valid and binding decision of the appropriate authority. Landlord shall furnish without expense to Tenant, within ten (10) days after written request therefore by Tenant, a title report covering the Leased Premises showing the condition of title as of the date of such certificate, provided, however, that Landlord's obligation hereunder shall be limited to the furnishing of only one such title report. |
| d. | Licenses: It shall be the Tenant's responsibility to obtain any and all necessary licenses and the Landlord shall bear no responsibility therefore; the Tenant shall promptly notify Landlord of the fact that it has obtained the necessary licenses in order to prevent any delay to Landlord in commencing construction of the Leased Premises. |
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| 26. | EXTENSIONS/WAIVERS/DISPUTES |
| a. | Extension Period: Any extension hereof shall be subject to the provisions of Article c) hereof. |
| b. | Holding Over: In the event that Tenant or anyone claiming under Tenant shall continue occupancy of the Leased Premises after the expiration of the term of this Lease or any renewal or extension thereof without any agreement in writing between Landlord and Tenant with respect thereto, such occupancy shall not be deemed to extend or renew the term of the Lease, but such occupancy shall continue as a tenancy at will, from month to month, upon the covenants, provisions and conditions herein contained. The rental shall be the rental in effect during the term of this Lease as extended or renewed, prorated and payable for the period of such occupancy. |
| c. | Waivers: Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of its rights hereunder. No waiver by either party at any time, express or implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. If any action by either party shall require the consent or approval of the other party, the other party's consent to or approval of such action on any one occasion shall not be deemed a consent to or approval of said action on any subsequent occasion or a consent to or approval of any other action on the same or any subsequent occasion. Any and all rights and remedies which either party may have under this Lease or by operation of law, either at law or in equity, upon any breach, shall be distinct, separate and cumulative and shall not be deemed inconsistent with each other, and no one of them, whether exercised by said party or not, shall be deemed to be an exclusion of any other; and any two or more or all of such rights and remedies may be exercised at the same time. |
| d. | Disputes: It is agreed that, if at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of the said party to institute suit for the recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease. If at any time a dispute shall arise between the parties hereto as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation to perform the work is asserted may perform such work and pay the costs thereof "under protest" and the performance of such work shall in no event be regarded as a voluntary performance and shall survive the right on the part of the said party to institute suit for the recovery of the costs of such work. If it shall be adjudged that there was no legal obligation on the part of the said party to perform the same or any part thereof, said party shall be entitled to recover the costs of such work or the cost of so much thereof as said party was not legally required to perform under the provisions of this Lease and the amount so paid by Tenant may be withheld or deducted by Tenant from any rents herein reserved. |
| e. | Tenant’s Right to cure Landlord’s Default: In the event that Landlord shall fail, refuse or neglect to pay any mortgages, liens or encumbrances, the judicial sale of which might affect the interest of Tenant hereunder, or shall fail, refuse or neglect to pay any interest due or payable on any such mortgage, lien or encumbrance, Tenant may pay said mortgages, liens or encumbrances, or interest or perform said conditions and charge to Landlord the amount so paid and withhold and deduct from any rents herein reserved such amounts so paid, and any excess over and above the amounts of said rents shall be paid by Landlord to Tenant. |
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| f. | Notices: All notices and other communications authorized or required hereunder shall be in writing and shall be given by mailing the same by certified mail, return receipt requested, postage prepaid, and any such notice or other communication shall be deemed to have been given when received by the party to whom such notice or other communication shall be addressed. If intended for Landlord the same will be mailed to the address herein above set forth or such other address as Landlord may hereafter designate by notice to Tenant, and if intended for Tenant, the same shall be mailed to Tenant at the address herein above set forth, or such other address or addresses as Tenant may hereafter designate by notice to Landlord. |
| 27. | PROPERTY DAMAGE |
| a. | Loss and Damage: Notwithstanding any contrary provisions of this Lease, Landlord shall not be responsible for any loss of or damage to property of Tenant or of others located on the Leased Premises, except where caused by the willful act or omission or negligence of Landlord, or Landlord's agents, employees or contractors, provided, however, that if Tenant shall notify Landlord in writing of repairs which are the responsibility of Landlord under Article VII hereof, and Landlord shall fail to commence and diligently prosecute to completion said repairs promptly after such notice, and if after the giving of such notice and the occurrence of such failure, loss of or damage to Tenant's property shall result from the condition as to which Landlord has been notified, Landlord shall indemnify and hold harmless Tenant from any loss, cost or expense arising there from. |
| b. | Force Majeure: In the event that Landlord or Tenant shall be delayed or hindered in or prevented from the performance of any act other than Tenant's obligation to make payments of rent, additional rent, and other charges required hereunder, by reason of strikes, lockouts, unavailability of materials, failure of power, restrictive governmental laws or regulations, riots, insurrections, the act, failure to act, or default of the other party, war or other reason beyond its control, then performance of such act shall be excused for the period of the delay and the period for the performance of such act shall be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, lack of funds shall not be deemed to be a cause beyond control of either party. |
| 28. | Assignment and Subletting |
Under the terms and conditions hereunder, Tenant shall have the absolute right to transfer and assign this lease or to sublet all or any portion of the Leased Premises or to cease operating Tenant's business on the Leased Premises provided that at the time of such assignment or sublease Tenant shall not be in default in the performance and observance of the obligations imposed upon Tenant hereunder, and in the event that Tenant assigns or sublets this property for an amount in excess of the rental amount then being paid, then Landlord shall require as further consideration for the granting of the right to assign or sublet, a sum equal to twenty-five percent (25%) of the difference between the amount of rental to be charged by Tenant to Tenant's subtenant or assignee and the amount provided for herein, payable in a manner consistent with the method of payment by the subtenant or assignee to the Tenant, and/or [to twenty-five percent (25%) of the consideration paid or to be paid to Tenant by Tenant's or Sub-Tenant or assignee.
| 29. | Fixtures |
All personal property, furnishings and equipment presently and all other trade fixtures installed in or hereafter by or at the expense of Tenant and all additions and/or improvements, exclusive of structural, mechanical, electrical, and plumbing, affixed to the Leased Premises and used in the operation of the Tenant's business made to, in or on the Leased Premises by and at the expense of Tenant and susceptible of being removed from the Leased Premises without damage, unless such damage be repaired by Tenant, shall remain the property of Tenant and Tenant may, but shall not be obligated to, remove the same or any part thereof at any time or times during the term hereof, provided that Tenant, at its sole cost and expense, shall make any repairs occasioned by such removal.
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| 30. | OPTION TO RENEW |
Landlord grants to Tenant an option to renew this lease agreement for a period of five (5) years after expiration of the term of this Lease agreement at a rental to be determined six (6) months prior the expiration of the current Lease agreement, with all other terms and conditions of the renewal lease to be the same as those in this lease agreement. To exercise this option to renew, Tenant must give Landlord written notice of intention to do so at least six (6) months before this lease agreement expires.
| 31. | Estoppel Certificates |
At any time and from time to time, Landlord and Tenant each agree, upon request in writing from the other, to execute, acknowledge and deliver to the other or to any person designated by the other a statement in writing certifying that the Lease is unmodified and is in full force and effect, or if there have been modifications, that the same is in full force and effect as modified (stating the modifications), that the other party is not in default in the performance of its covenants hereunder, or if there have been such defaults, specifying the same, and the dates to which the rent and other charges have been paid.
| 32. | Invalidity of Particular Provision |
If any term or provision of this Lease or the application hereof to any person or circumstance shall, to any extent, be held invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
| 33. | Captions and Definitions of Parties |
The captions of the Sections of this Lease are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and provisions of this Lease. The word "Landlord" and the pronouns referring thereto, shall mean, where the context so admits or requires, the persons, firm or corporation named herein as Landlord or the mortgagee in possession at any time, of the land and building comprising the Leased Premises. If there is more than one Landlord, the covenants of Landlord shall be the joint and several obligations of each of them, and if Landlord is a partnership, the covenants of Landlord shall be the joint and several obligations of each of the partners and the obligations of the firm. Any pronoun shall be read in the singular or plural and in such gender as the context may require. Except as in this Lease otherwise provided, the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
| 34. | RELATIONSHIP OF THE PARTIES |
Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of a joint venture between the parties hereto, it being understood and agreed that neither any provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant.
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| 35. | Brokerage |
No party has acted as, by or through a broker in the effectuation of this Agreement, except as set out hereinafter.
| 36. | Entire Agreement |
This instrument contains the entire and only agreement between the parties, and no oral statements or representations or prior written matter not contained in this instrument shall have any force and effect. This Lease shall not be modified in any way except by a writing executed by both parties.
| 37. | Governing Law |
All matters pertaining to this agreement (including its interpretation, application, validity, performance and breach) in whatever jurisdiction action may be brought, shall be governed by, construed and enforced in accordance with the laws of the Province of Quebec. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in the Province of Quebec.
| 38. | litigation |
In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party's reasonable attorney's fees, court costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be entitled. In such event, no action shall be entertained by said court or any court of competent jurisdiction if filed more than one year subsequent to the date the cause(s) of action actually accrued regardless of whether damages were otherwise as of said time calculable.
If Landlord files an action to enforce any agreement contained in this lease agreement, or for breach of any covenant or condition, Tenant shall pay Landlord reasonable attorney fees for the services of Landlord’s attorney in the action, all fees to be fixed by the court.
| 39. | Contractual Procedures |
Unless specifically disallowed by law, should litigation arise hereunder, service of process therefore may be obtained through certified mail, return receipt requested; the parties hereto waiving any and all rights they may have to object to the method by which service was perfected.
| 40. | Extraordinary remedies |
To the extent cognizable at law, the parties hereto, in the event of breach and in addition to any and all other remedies available thereto, may obtain injunctive relief, regardless of whether the injured party can demonstrate that no adequate remedy exists at law.
| 41. | Reliance on Financial Statement |
Tenant shall furnish concurrently with the execution of this lease, a financial statement of Tenant prepared by an accountant. Tenant, both in corporate capacity, if applicable, and individually, hereby represents and warrants that all the information contained therein is complete, true, and correct. Tenant understands that Landlord is relying upon the accuracy of the information contained therein. Should there be found to exist any inaccuracy within the financial statement which adversely affects Tenant's financial standing, or should Tenant's financial circumstances materially change, Landlord may demand, as additional security, an amount equal to an additional six (6) months' rent, which additional security shall be subject to all terms and conditions herein, require a fully executed guaranty by a third party acceptable to Landlord, elect to terminate this Lease, or hold Tenant personally and individually liable hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written or have caused this Lease to be executed by their respective officers thereunto duly authorized.
| RIOPEL MARINE INC. (The Tenant) | ||
 |
 | |
| x | ||
| Alexandre Mongeon, President | Patrick Bobby, Secretary-Treasurer | |
| Dated: June 10th, 2017 | Dated: June 10th, 2017 |
| CALIFORNIA ELECTRIC BOAT COMPANY INC. (The Landlord) | ||
|
|
|
| x | ||
| Alexandre Mongeon, President | Patrick Bobby, Secretary-Treasurer | |
| Dated: June 10th, 2017 | Dated: June 10th, 2017 |
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EXHIBIT "A" LEGAL DESCRIPTION
A site located in the city of Boisbriand, Province of Quebec, having the cadastral designation of lot 5,251,935 (common part) of the Cadastre of the Province of Quebec, with an approximate area of 245,450 ft². On this site there is a 1-storey building, of approximately 125, 500 ft², with 14 divided co-ownerships vocation of `` Industrial / office / retail '', held by various owners under a Declaration of co-ownership, known as follow:
648 Cure-Boivin boulevard, Boisbriand (private lot 5 368 927)
650 Cure-Boivin boulevard, Boisbriand (private lot 5 251 936)
660 Cure-Boivin boulevard, Boisbriand (private lot 5 251 937)
670 Cure-Boivin boulevard, Boisbriand (private lot 5 251 938)
680 Cure-Boivin boulevard, Boisbriand (private lot 5 251 939)
690 Cure-Boivin boulevard, Boisbriand (private lot 5 251 940)
700 Cure-Boivin boulevard, Boisbriand (private lot 5 251 941)
710 Cure-Boivin boulevard, Boisbriand (private lot 6 032 689)
720 Cure-Boivin boulevard, Boisbriand (private lot 6 032 688)
730 – 750 Cure-Boivin boulevard, Boisbriand (private lot 6 032 687)
760 – 770 Cure-Boivin boulevard, Boisbriand (private lot 5 251 943)
800 – 810 Cure-Boivin boulevard, Boisbriand (private lot 5 251 944)
820 Cure-Boivin boulevard, Boisbriand (private lot 5 251 945)
840 Cure-Boivin boulevard, Boisbriand (private lot 5 251 946)
The Property known as 730 Cure-Boivin boulevard, Boisbriand (Qc), with the private lot number 6 032 687 as cadastral
division of the Province of Quebec, has a an industrial / office building with a rental area of 8,209 ft².
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EXHIBIT "B" TENANT PLANS AND SPECIFICATIONS
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Exhibit 10.2
COMMERCIAL LEASE AGREEMENT
This Lease Agreement (the “Agreement”) is made and effective April 1st, 2019,
| BETWEEN: | CALIFORNIA ELECTRIC BOAT COMPANY INC. (the "Landlord"), a corporation incorporated under the Canada Business Corporation Act, with the main address located at 730 Curé Boivin boulevard, Boisbriand (Qc) J7G 2A7, represented by Alexandre Mongeon, acting as President and Patrick Bobby, acting as Secretary-Treasurer. |
| AND: | RIOPEL MARINE INC., (The '' Tenant '') also doing business as CANADIAN ELECTRIC BOAT COMPANY, manufacturing and selling electric boats, incorporated August 27, 2012 under the Act of the Province of Quebec, Canada, whose head office is located at 730 Boulevard du Cure Boivin, Boisbriand (Qc) J7G 2A7, and represented by Alexandre Mongeon acting as President and Patrick Bobby, acting as Secretary-Treasurer |
| 1. | DESCRIPTION OF PREMISES |
Landlord leases to Tenant the premises located at 720 Cure-Boivin boulevard, Boisbriand (Qc) J7G 2A7, a rental space of three thousand six hundred and seven (3,607) square feet, mainly used for manufacturing electric boats.
| 2. | GRANT OF LEASE |
Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and observed by the Tenant, does hereby lease to the Tenant and the Tenant does hereby lease and take from the Landlord the property described in Paragraph 1 and by reference made a part hereof (the "Leased Premises"), together with, as part of the parcel, all improvements located thereon.
| 3. | LEASE TERM |
| a. | Total Term of Lease: The term of this Lease shall begin on July 1st, 2019, and shall terminate on June 30th, 2024. |
| b. | Commencement Date: The "Commencement Date" shall mean the date on which the Tenant shall commence to conduct business on the Leased Premised, so long as such date is not in excess of ten (10) days subsequent to execution hereof. |
| 4. | EXTENSIONS |
The parties hereto may elect to extend this Agreement upon such terms and conditions as may be agreed upon in writing and signed by the parties at the time of any such extension.
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| 5. | DETERMINATION OF RENT |
The Tenant agrees to pay the Landlord and the Landlord agrees to accept, during the term hereof, at such place as the Landlord shall from time to time direct by notice to the Tenant, rent at the following rates and times:
| a. | Annual Rent: The annual rent is thirty thousand six hundred and fifty-nine dollars and fifty cents ($30,659.50), plus applicable taxes, representing eight dollars and fifty cents ($8.50) per square foot, on a Net / Net basis. |
| b. | Payment of Yearly Rent: The annual rent shall be payable in advance in equal monthly installments of one-twelfth (1/12th) of the total yearly rent, which shall be two thousand five hundred and fifty four dollars and ninety six cents ($2,554.96), on the first day of each and every calendar month during the term hereof, and prorata for the fractional portion of any month, except that on the first day of the calendar month immediately following the Commencement Date, the Tenant shall also pay to the Landlord rent at the said rate for any portion of the preceding calendar month included in the term of this Lease. |
| c. | Reference to yearly rent hereunder shall not be implied or construed to the effect that this Lease or the obligation to pay rent hereunder is from year to year, or for any term shorter than the existing Lease term, plus any extensions as may be agreed upon. |
| d. | A late fee in the amount of one hundred dollars ($100.00) shall be assessed if payment is not postmarked or received by Landlord on or before the tenth day of each month. |
| e. | Other expenses: the tenant will pay the costs of telecommunication, heating, electricity and air conditioning. |
| 6. | ADDITIONNAL RENT |
This Lease is what is commonly referred to a “Net / Net” Lease, with the understanding that from the first month of the Lease Term, the Landlord will receive the stipulated rent free from any other taxation, liens or expenses of any kind, unless otherwise provided in this Agreement. In addition to the BASIC RENT, the Tenant will pay to the parties entitled thereto all insurance premiums, taxes, assessments, operating expenses, management fees, maintenance fees and any other costs and expenses that occur or may be considered under any provision of this lease, for all premises during the term hereof.
All such fees, costs and expenses will constitute an ADDITIONNAL RENT and, if the Lessee does not pay any of these costs or expenses, the Lessor shall have the same rights and remedies as those provided in this Lease for the Tenant’s failure to: pay the rent. The parties hereto are of the opinion that the Lessee may not terminate this lease for any reason whatsoever and the lessee will not be entitled to any reduction or rent payable under this lease, except in the expressly provided for. Any contrary law, present or future, must not modify this agreement between the parties.
On the execution of this lease, the tenant will have to pay, annually, to the landlord the sum of one dollar and fifty cents ($1.50) per square foot, representing:
ADDITIONAL RENT total annual:
Five thousand four hundred and ten dollars and fifty cents ($5,410.50)
ADDITIONAL RENT monthly:
Four hundred dollars and eighty eight cents ($450.88)
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 2 of 19 |
| 7. | USE OF PROPERTY BY TENANT |
The Leased Premises may be occupied and used by Tenant exclusively to manufacture, assembly and sale of electric boats, to be known as a Canadian Electric Boat Company.
Nothing herein shall give Tenant the right to use the property for any other purpose or to sublease, assign, or license the use of the property to any Sub-Tenant, assignee, or licensee, which or who shall use the property for any other use.
| 8. | RESTRICTIONS ON USE |
Tenant shall not use the demised premises in any manner that will increase risks covered by insurance on the demised premises and result in an increase in the rate of insurance or a cancellation of any insurance policy, even if such use may be in furtherance of Tenant’s business purposes.
Tenant shall not keep, use, or sell anything prohibited by any policy of fire insurance covering the demised premises, and shall comply with all requirements of the insurers applicable to the demised premises necessary to keep in force the fire and liability insurance.
| 9. | WASTE, NUISANCE, OR UNLAWFUL ACTIVITY |
Tenant shall not allow any waste or nuisance on the demised premises, or use or allow the demised premises to be used for any unlawful purpose.
| 10. | DELAY IN DELIVERING POSSESSION |
This lease agreement shall not be rendered void or voidable by the inability of Landlord to deliver possession to Tenant on the date set forth in Section 3. Landlord shall not be liable to Tenant for any loss or damage suffered by reason of such a delay; provided, however, that Landlord does deliver possession no later than [date]. In the event of a delay in delivering possession, the rent for the period of such delay will be deducted from the total rent due under this lease agreement. No extension of this lease agreement shall result from a delay in delivering possession.
| 11. | SECURITY DEPOSIT |
Not applicable.
| 12. | TAXES |
All Property Taxes are included in the ADDITIONNAL RENT.
| 13. | IMPROVEMENTS BY TENANTS |
Tenant may have prepared plans and specifications for the construction of improvements, and, if so, such plans and specifications are attached hereto as Exhibit "B" and incorporated herein by reference. Tenant shall obtain all certificates, permits, licenses and other authorizations of governmental bodies or authorities which are necessary to permit the construction of the improvements on the demised premises and shall keep the same in full force and effect at Tenant's cost.
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 3 of 19 |
Tenant shall negotiate, let and supervise all contracts for the furnishing of services, labor, and materials for the construction of the improvements on the demised premises at its cost. All such contracts shall require the contracting party to guarantee performance and all workmanship and materials installed by it for a period of one year following the date of completion of construction. Tenant shall cause all contracts to be fully and completely performed in a good and workmanlike manner, all to the effect that the improvements shall be fully and completely constructed and installed in accordance with good engineering and construction practice.
During the course of construction, Tenant shall, at its cost, keep in full force and effect a policy of builder's risk and liability insurance in a sum equal, from time to time, to three times the amount expended for construction of the improvements. All risk of loss or damage to the improvements during the course of construction shall be on Tenant with the proceeds from insurance thereon payable to Landlord.
Upon completion of construction, Tenant shall, at its cost, obtain an occupancy permit and all other permits or licenses necessary for the occupancy of the improvements and the operation of the same as set out herein and shall keep the same in force.
Nothing herein shall alter the intent of the parties that Tenant shall be fully and completely responsible for all aspects pertaining to the construction of the improvements of the demised premises and for the payment of all costs associated therewith. Landlord shall be under no duty to investigate or verify Tenant's compliance with the provision herein. Moreover, neither Tenant nor any third party may construe the permission granted Tenant hereunder to create any responsibility on the part of the Landlord to pay for any improvements, alterations or repairs occasioned by the Tenant. The Tenant shall keep the property free and clear of all liens and, should the Tenant fail to do so, or to have any liens removed from the property within ten (10) days of notification to do so by the Landlord, in addition to all other remedies available to the Landlord, the Tenant shall indemnify and hold the Landlord harmless for all costs and expenses, including attorney's fees, occasioned by the Landlord in having said lien removed from the property; and, such costs and expenses shall be billed to the Tenant monthly and shall be payable by the Tenant with that month's regular monthly rental as additional reimbursable expenses to the Landlord by the Tenant.
| 14. | Utilities |
Tenant shall pay for all water, sanitation, sewer, electricity, light, heat, gas, power, fuel, janitorial, and other services incident to Tenant's use of the Leased Premises, whether or not the cost thereof be a charge or imposition against the Leased Premises.
| 15. | OBLIGATIONS FOR REPAIRS |
| a. | Landlord’s Repairs: Subject to any provisions herein to the contrary, and except for maintenance or replacement necessitated as the result of the act or omission of subtenants, licensees or contractors, the Landlord shall be required to repair only defects, deficiencies, deviations or failures of materials or workmanship in the building. The Landlord shall keep the Leased Premises free of such defects, deficiencies, deviations or failures during the first two (2) months of the term hereof. |
| b. | Tenant’s Repairs: The Tenant shall repair and maintain the Leased Premises in good order and condition, except for reasonable wear and tear, the repairs required of Landlord pursuant hereto, and maintenance or replacement necessitated as the result of the act or omission or negligence of the Landlord, its employees, agents, or contractors. |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 4 of 19 |
| c. | Requirements of the Law: The Tenant agrees that if any federal, state or municipal government or any department or division thereof shall condemn the Leased Premises or any part thereof as not in conformity with the laws and regulations relating to the construction thereof as of the commencement date with respect to conditions latent or otherwise which existed on the Commencement Date, or, with respect to items which are the Landlord's duty to repair pursuant to Section a) and c) of this Article; and such federal, state or municipal government or any other department or division thereof, has ordered or required, or shall hereafter order or require, any alterations or repairs thereof or installations and repairs as may be necessary to comply with such laws, orders or requirements (the validity of which the Tenant shall be entitled to contest); and if by reason of such laws, orders or the work done by the Landlord in connection therewith, the Tenant is deprived of the use of the Leased Premises, the rent shall be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion of the Leased Premises of which, the Tenant shall be deprived as a result thereof, and the Landlord shall be obligated to make such repairs, alterations or modifications at Landlord's expense. All such rebuilding, altering, installing and repairing shall be done in accordance with Plans and Specifications approved by the Tenant, which approval shall not be unreasonably withheld. If, however, such condemnation, law, order or requirement, as in this Article set forth, shall be with respect to an item which shall be the Tenant's obligation to repair pursuant to Section b) of this Article 9 or with respect to Tenant's own costs and expenses, no abatement or adjustment of rent shall be granted; provided, however, that Tenant shall also be entitled to contest the validity thereof. |
| d. | Tenant's Alterations: The Tenant shall have the right, at its sole expense, from time to time, to redecorate the Leased Premises and to make such non-structural alterations and changes in such parts thereof as the Tenant shall deem expedient or necessary for its purposes; provided, however, that such alterations and changes shall neither impair the structural soundness nor diminish the value of the Leased Premises. The Tenant may make structural alterations and additions to the Leased Premises provided that Tenant has first obtained the consent thereto of the Landlord in writing. The Landlord agrees that it shall not withhold such consent unreasonably. The Landlord shall execute and deliver upon the request of the Tenant such instrument or instruments embodying the approval of the Landlord which may be required by the public or quasi public authority for the purpose of obtaining any licenses or permits for the making of such alterations, changes and/or installations in, to or upon the Leased Premises and the Tenant agrees to pay for such licenses or permits. |
| e. | Permits and Expenses: Each party agrees that it will procure all necessary permits for making any repairs, alterations, or other improvements for installations, when applicable. Each Party hereto shall give written notice to the other party of any repairs required of the other pursuant to the provisions of this Article and the party responsible for said repairs agrees promptly to commence such repairs and to prosecute the same to completion diligently, subject, however, to the delays occasioned by events beyond the control of such party. |
Each party agrees to pay promptly when due the entire cost of any work done by it upon the Leased Premises so that the Leased Premises at all times shall be free of liens for labor and materials. Each party further agrees to hold harmless and indemnify the other party from and against any and all injury, loss, claims or damage to any person or property occasioned by or arising out of the doing of any such work by such party or its employees, agents or contractors. Each party further agrees that in doing such work that it will employ materials of good quality and comply with all governmental requirements, and perform such work in a good and workmanlike manner.
| 16. | TENANT'S COVENANTS |
Tenant covenants and agrees as follows:
| a. | To procure any licenses and permits required for any use made of the Leased Premises by Tenant, and upon the expiration or termination of this Lease, to remove its goods and effects and those of all persons claiming under it, and to yield up peaceably to Landlord the Leased Premises in good order, repair and condition in all respects; excepting only damage by fire and casualty covered by Tenant's insurance coverage, structural repairs (unless Tenant is obligated to make such repairs hereunder) and reasonable wear and tear; |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 5 of 19 |
| b. | To permit Landlord and its agents to examine the Leased Premises at reasonable times and to show the Leased Premises to prospective purchasers of the Building and to provide Landlord, if not already available, with a set of keys for the purpose of said examination, provided that Landlord shall not thereby unreasonably interfere with the conduct of Tenant's business; |
| c. | To permit Landlord to enter the Leased Premises to inspect such repairs, improvements, alterations or additions thereto as may be required under the provisions of this Lease. If, as a result of such repairs, improvements, alterations, or additions, Tenant is deprived of the use of the Leased Premises, the rent shall be abated or adjusted, as the case may be, in proportion to that time during which, and to that portion of the Leased Premises of which, Tenant shall be deprived as a result thereof. |
| 17. | INDEMNITY BY TENANT |
The Tenant shall save Landlord harmless and indemnify Landlord from all injury, loss, claims or damage to any person or property while on the Leased Premises, unless caused by the willful acts or omissions or gross negligence of Landlord, its employees, agents, licensees or contractors. Tenant shall maintain, with respect to the Leased Premises, public liability insurance with limits of not less than two million dollars ($2,000,000) for injury or death from one accident and two million dollars ($2,000,000) property damage insurance, insuring Landlord and Tenant against injury to persons or damage to property on or about the Leased Premises. A copy of the policy or a certificate of insurance shall be delivered to Landlord on or before the commencement date and no such policy shall be cancelable without TEN (10) days prior written notice to Landlord.
| 18. | SIGNAGE |
| a. | Exterior Signs: Tenant shall have the right, at its sole risk and expense and in conformity with applicable laws and ordinances, to erect and thereafter, to repair or replace, if it shall so elect signs on any portion of the Leased Premises, providing that Tenant shall remove any such signs upon termination of this lease, and repair all damage occasioned thereby to the Leased Premises. |
| b. | Interior Signs: Tenant shall have the right, at its sole risk and expense and in conformity with applicable laws and ordinances, to erect, maintain, place and install its usual and customary signs and fixtures in the interior of the Leased Premises. |
| 19. | INSURANCE |
| a. | Insurance Proceeds: In the event of any damage to or destruction of the Leased Premises, Tenant shall adjust the loss and settle all claims with the insurance companies issuing such policies. The parties hereto do irrevocably assign the proceeds from such insurance policies for the purposes hereinafter stated to any institutional first mortgagee or to Landlord and Tenant jointly, if no institutional first mortgagee then holds an interest in the Leased Premises. All proceeds of said insurance shall be paid into a trust fund under the control of any institutional first mortgagee, or of Landlord and Tenant if no institutional first mortgagee then holds an interest in the Leased Premises, for repair, restoration, rebuilding or replacement, or any combination thereof, of the Leased Premises or of the improvements in the Leased Premises. In case of such damage or destruction, Landlord shall be entitled to make withdrawals from such trust fund, from time to time, upon presentation of: |
| i. | bills for labor and materials expended in repair, restoration, rebuilding or replacement, or any combination thereof; |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 6 of 19 |
| ii. | Landlord's sworn statement that such labor and materials for which payment is being made have been furnished or delivered on site; and |
| iii. | the certificate of a supervising architect (selected by Landlord and Tenant and approved by an institutional first mortgagee, if any, whose fees will be paid out of said insurance proceeds) certifying that the work being paid for has been completed in accordance with the Plans and Specifications previously approved by Landlord, Tenant and any institutional first mortgagee in a first class, good and workmanlike manner and in accordance with all pertinent governmental requirements. |
Any insurance proceeds in excess of such proceeds as shall be necessary for such repair, restoration, rebuilding, replacement or any combination thereof shall be the sole property of Landlord subject to any rights therein of Landlord's mortgagee, and if the proceeds necessary for such repair, restoration, rebuilding or replacement, or any combination thereof shall be inadequate to pay the cost thereof, Tenant shall suffer the deficiency.
| b. | Subrogation: Landlord and Tenant hereby release each other, to the extent of the insurance coverage provided hereunder, from any and all liability or responsibility (to the other or anyone claiming through or under the other by way of subrogation or otherwise) for any loss to or damage of property covered by the fire and extended coverage insurance policies insuring the Leased Premises and any of Tenant's property, even if such loss or damage shall have been caused by the fault or negligence of the other party. |
| c. | Contribution: Tenant shall reimburse Landlord for all insurance premiums connected with or applicable to the Leased Premises for whatever insurance policy the Landlord, at its sole and exclusive option, should select. |
| 20. | DAMAGE TO DEMISED PREMISES |
| a. | Abatement or Adjustment of Rent: If the whole or any part of the Leased Premises shall be damaged or destroyed by fire or other casualty after the execution of this Lease and before the termination hereof, then in every case the rent reserved in Article IV herein and other charges, if any, shall be abated or adjusted, as the case may be, in proportion to that portion of the Leased Premises of which Tenant shall be deprived on account of such damage or destruction and the work of repair, restoration, rebuilding, or replacement or any combination thereof, of the improvements so damaged or destroyed, shall in no way be construed by any person to effect any reduction of sums or proceeds payable under any rent insurance policy. |
| b. | Repairs and Restoration: Landlord agrees that in the event of the damage or destruction of the Leased Premises, Landlord forthwith shall proceed to repair, restore, replace or rebuild the Leased Premises (excluding Tenant's leasehold improvements), to substantially the condition in which the same were immediately prior to such damage or destruction. The Landlord thereafter shall diligently prosecute said work to completion without delay or interruption except for events beyond the reasonable control of Landlord. Notwithstanding the foregoing, if Landlord does not either obtain a building permit within ten (10) days of the date of such damage or destruction, or complete such repairs, rebuilding or restoration within two (2) months of such damage or destruction, then Tenant may at any time thereafter cancel and terminate this Lease by sending ten (10) days written notice thereof to Landlord, or, in the alternative, Tenant may, during said ten (10) day period, apply for the same and Landlord shall cooperate with Tenant in Tenant's application. Notwithstanding the foregoing, if such damage or destruction shall occur during the last year of the term of this Lease, or during any renewal term, and shall amount to fifty (50%] or more of the replacement cost, (exclusive of the land and foundations), this Lease, may be terminated at the election of either Landlord or Tenant, provided that notice of such election shall be sent by the party so electing to the other within ten (10) days after the occurrence of such damage or destruction. Upon termination, as aforesaid, by either party hereto, this Lease and the term thereof shall cease and come to an end, any unearned rent or other charges paid in advance by Tenant shall be refunded to Tenant, and the parties shall be released hereunder, each to the other, from all liability and obligations hereunder thereafter arising. |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 7 of 19 |
| 21. | CONDEMNATION |
| a. | Total Taking: If, after the execution of this Lease and prior to the expiration of the term hereof, the whole of the Leased Premises shall be taken under power of eminent domain by any public or private authority, or conveyed by Landlord to said authority in lieu of such taking, then this Lease and the term hereof shall cease and terminate as of the date when possession of the Leased Premises shall be taken by the taking authority and any unearned rent or other charges, if any, paid in advance, shall be refunded to Tenant. |
| b. | Partial Taking: If, after the execution of this Lease and prior to the expiration of the term hereof, any public or private authority shall, under the power of eminent domain, take, or Landlord shall convey to said authority in lieu of such taking, property which results in a reduction by [%] or more of the area in the Leased Premises, or of a portion of the Leased Premises that substantially interrupts or substantially obstructs the conducting of business on the Leased Premises; then Tenant may, at its election, terminate this Lease by giving Landlord notice of the exercise of Tenant's election within ten (10) days after Tenant shall receive notice of such taking. In the event of termination by Tenant of this Lease and the term hereof shall cease and terminate as of the date when possession shall be taken by the appropriate authority of that portion of the Entire Property that results in one of the above takings, and any unearned rent or other charges, if any, paid in advance by Tenant shall be refunded to Tenant. |
| c. | Restoration: In the event of a taking in respect of which Tenant shall not have the right to elect to terminate this Lease or, having such right, shall not elect to terminate this Lease, this Lease and the term thereof shall continue in full force and effect and Landlord, at Landlord's sole cost and expense, forthwith shall restore the remaining portions of the Leased Premises, including any and all improvements made theretofore to an architectural whole in substantially the same condition that the same were in prior to such taking. A just proportion of the rent reserved herein and any other charges payable by Tenant hereunder, according to the nature and extent of the injury to the Leased Premises and to Tenant's business, shall be suspended or abated until the completion of such restoration and thereafter the rent and any other charges shall be reduced in proportion to the square footage of the Leased Premises remaining after such taking. |
| d. | The Award: All compensation awarded for any taking, whether for the whole or a portion of the Leased Premises, shall be the sole property of the Landlord whether such compensation shall be awarded for diminution in the value of, or loss of, the leasehold or for diminution in the value of, or loss of, the fee in the Leased Premises, or otherwise. The Tenant hereby assigns to Landlord all of Tenant's right and title to and interest in any and all such compensation. However, the Landlord shall not be entitled to and Tenant shall have the sole right to make its independent claim for and retain any portion of any award made by the appropriating authority directly to Tenant for loss of business, or damage to or depreciation of, and cost of removal of fixtures, personality and improvements installed in the Leased Premises by, or at the expense of Tenant, and to any other award made by the appropriating authority directly to Tenant. |
| e. | Release: In the event of any termination of this Lease as the result of the provisions of this Article 20, the parties, effective as of such termination, shall be released, each to the other, from all liability and obligations thereafter arising under this lease. |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 8 of 19 |
| 22. | LANDLORD’S REMEDIES |
In the event that:
| a. | Tenant shall on three or more occasions be in default in the payment of rent or other charges herein required to be paid by Tenant (default herein being defined as payment received by Landlord ten or more days subsequent to the due date), regardless of whether or not such default has occurred on consecutive or non-consecutive months; or |
| b. | Tenant has caused a lien to be filed against the Landlord's property and said lien is not removed within ten (10) days of recordation thereof; or |
| c. | Tenant shall default in the observance or performance of any of the covenants and agreements required to be performed and observed by Tenant hereunder for a period of ten (10) days after notice to Tenant in writing of such default (or if such default shall reasonably take more than ten (10) days to cure, Tenant shall not have commenced the same within the ten (10) days and diligently prosecuted the same to completion); or |
| d. | Ten (10) days have elapsed after the commencement of any proceeding by or against Tenant, whether by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or future Federal Bankruptcy Act or any other present or future applicable federal, state or other statute or law, whereby such proceeding shall not have been dismissed (provided, however, that the non-dismissal of any such proceeding shall not be a default hereunder so long as all of Tenant's covenants and obligations hereunder are being performed by or on behalf of Tenant); then Landlord shall be entitled to its election (unless Tenant shall cure such default prior to such election), to exercise concurrently or successively, any one or more of the following rights: |
| i. | Terminate this Lease by giving Tenant notice of termination, in which event this Lease shall expire and terminate on the date specified in such notice of termination, with the same force and effect as though the date so specified were the date herein originally fixed as the termination date of the term of this Lease, and all rights of Tenant under this Lease and in and to the Premises shall expire and terminate, and Tenant shall remain liable for all obligations under this Lease arising up to the date of such termination, and Tenant shall surrender the Premises to Landlord on the date specified in such notice; or |
| ii. | Terminate this Lease as provided herein and recover from Tenant all damages Landlord may incur by reason of Tenant's default, including, without limitation, a sum which, at the date of such termination, represents the then value of the excess, if any, of (a) the Minimum Rent, Percentage Rent, Taxes and all other sums which would have been payable hereunder by Tenant for the period commencing with the day following the date of such termination and ending with the date herein before set for the expiration of the full term hereby granted, over (b) the aggregate reasonable rental value of the Premises for the same period, all of which excess sum shall be deemed immediately due and payable; or |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 9 of 19 |
| iii. | Without terminating this Lease, declare immediately due and payable all Minimum Rent, Taxes, and other rents and amounts due and coming due under this Lease for the entire remaining term hereof, together with all other amounts previously due, at once; provided, however, that such payment shall not be deemed a penalty or liquidated damages but shall merely constitute payment in advance of rent for the remainder of said term. Upon making such payment, Tenant shall be entitled to receive from Landlord all rents received by Landlord from other assignees, tenants, and subtenants on account of said Premises during the term of this Lease, provided that the monies to which tenant shall so become entitled shall in no event exceed the entire amount actually paid by Tenant to Landlord pursuant to the preceding sentence less all costs, expenses and attorney's fees of Landlord incurred in connection with the reletting of the Premises; or |
| iv. | Without terminating this Lease, and with or without notice to Tenant, Landlord may in its own name but as agent for Tenant enter into and upon and take possession of the Premises or any part thereof, and, at landlord's option, remove persons and property there from, and such property, if any, may be removed and stored in a warehouse or elsewhere at the cost of, and for the account of Tenant, all without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby, and Landlord may rent the Premises or any portion thereof as the agent of Tenant with or without advertisement, and by private negotiations and for any term upon such terms and conditions as Landlord may deem necessary or desirable in order to relet the Premises. Landlord shall in no way be responsible or liable for any rental concessions or any failure to rent the Premises or any part thereof, or for any failure to collect any rent due upon such reletting. Upon such reletting, all rentals received by Landlord from such reletting shall be applied: first, to the payment of any indebtedness (other than any rent due hereunder) from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including, without limitation, brokerage fees and attorney's fees and costs of alterations and repairs; third, to the payment of rent and other charges then due and unpaid hereunder; and the residue, if any shall be held by Landlord to the extent of and for application in payment of future rent as the same may become due and payable hereunder. In reletting the Premises as aforesaid, Landlord may grant rent concessions and Tenant shall not be credited therefore. If such rentals received from such reletting shall at any time or from time to time be less than sufficient to pay to Landlord the entire sums then due from Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall, at Landlord's option, be calculated and paid monthly. No such reletting shall be construed as an election by Landlord to terminate this Lease unless a written notice of such election has been given to Tenant by Landlord. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for any such previous default provided same has not been cured; or |
| v. | Without liability to Tenant or any other party and without constituting a constructive or actual eviction, suspend or discontinue furnishing or rendering to Tenant any property, material, labor, Utilities or other service, whether Landlord is obligated to furnish or render the same, so long as Tenant is in default under this Lease; or | |
| vi. | Allow the Premises to remain unoccupied and collect rent from Tenant as it comes due; or |
| vii. | Foreclose the security interest described herein, including the immediate taking of possession of all property on or in the Premises; or |
| viii. | Pursue such other remedies as are available at law or equity. |
| e. | Landlord's pursuit of any remedy of remedies, including without limitation, any one or more of the remedies stated herein shall not (1) constitute an election of remedies or preclude pursuit of any other remedy or remedies provided in this Lease or any other remedy or remedies provided by law or in equity, separately or concurrently or in any combination, or (2) sever as the basis for any claim of constructive eviction, or allow Tenant to withhold any payments under this Lease. |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 10 of 19 |
| 23. | LANDLORD'S Self Help |
If in the performance or observance of any agreement or condition in this Lease contained on its part to be performed or observed and shall not cure such default within ten (10) days after notice from Landlord specifying the default (or if such default shall reasonably take more than ten (10) days to cure, shall diligently prosecuted the same to completion), Landlord may, at its option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such default for the account of Tenant, and any amount paid or contractual liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant and Tenant agrees to reimburse Landlord therefore and save Landlord harmless there from. Provided, however, that Landlord may cure any such default as aforesaid prior to the expiration of said waiting period, without notice to Tenant if any emergency situation exists, or after notice to Tenant, if the curing of such default prior to the expiration of said waiting period is reasonably necessary to protect the Leased Premises or Landlord's interest therein, or to prevent injury or damage to persons or property. If Tenant shall fail to reimburse Landlord upon demand for any amount paid for the account of Tenant hereunder, said amount shall be added to and become due as a part of the next payment of rent due and shall for all purposes be deemed and treated as rent hereunder.
| 24. | TENANT'S Self Help |
If Landlord shall default in the performance or observance of any agreement or condition in this Lease contained on its part to be performed or observed, and if Landlord shall not cure such default within ten (10) days after notice from Tenant specifying the default (or, if such default shall reasonably take more than ten (10) days to cure, and Landlord shall not have commenced the same within ten (10) days and diligently prosecuted the same to completion), Tenant may, at its option, without waiving any claim for damages for breach of agreement, at any time thereafter cure such default for the account of Landlord and any amount paid or any contractual liability incurred by Tenant in so doing shall be deemed paid or incurred for the account of Landlord and Landlord shall reimburse Tenant therefore and save Tenant harmless there from. Provided, however, that Tenant may cure any such default as aforesaid prior to the expiration of said waiting period, without notice to Landlord if an emergency situation exists, or after notice to Landlord, if the curing of such default prior to the expiration of said waiting period is reasonably necessary to protect the Leased Premises or Tenant's interest therein or to prevent injury or damage to persons or property. If Landlord shall fail to reimburse Tenant upon demand for any amount paid or liability incurred for the account of Landlord hereunder, said amount or liability may be deducted by Tenant from the next or any succeeding payments of rent due hereunder; provided, however, that should said amount or the liability therefore be disputed by Landlord, Landlord may contest its liability or the amount thereof, through arbitration or through a declaratory judgment action and Landlord shall bear the cost of the filing fees therefore.
| 25. | TITLE |
| a. | Subordination: Tenant shall, upon the request of Landlord in writing, subordinate this Lease to the lien of any present or future institutional mortgage upon the Leased Premises irrespective of the time of execution or the time of recording of any such mortgage. Provided, however, that as a condition to such subordination, the holder of any such mortgage shall enter first into a written agreement with Tenant in form suitable for recording to the effect that: |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 11 of 19 |
| i. | in the event of foreclosure or other action taken under the mortgage by the holder thereof, this Lease and the rights of Tenant hereunder shall not be disturbed but shall continue in full force and effect so long as Tenant shall not be in default hereunder |
| ii. | such holder shall permit insurance proceeds and condemnation proceeds to be used for any restoration and repair required by the provisions of this Agreement, respectively. Tenant agrees that if the mortgagee or any person claiming under the mortgagee shall succeed to the interest of Landlord in this Lease, Tenant will recognize said mortgagee or person as its Landlord under the terms of this Lease, provided that said mortgagee or person for the period during which said mortgagee or person respectively shall be in possession of the Leased Premises and thereafter their respective successors in interest shall assume all of the obligations of Landlord hereunder. The word "mortgage", as used herein includes mortgages, deeds of trust or other similar instruments, and modifications, and extensions thereof. The term "institutional mortgage" as used in this Article 24 means a mortgage securing a loan from a bank or trust company, insurance company or pension trust or any other lender institutional in nature and constituting a lien upon the Leased Premises. |
| b. | Quiet Enjoyment: Landlord covenants and agrees that upon Tenant paying the rent and observing and performing all of the terms, covenants and conditions on Tenant's part to be observed and performed hereunder, that Tenant may peaceably and quietly have, hold, occupy and enjoy the Leased Premises in accordance with the terms of this Lease without hindrance or molestation from Landlord or any persons lawfully claiming through Landlord. |
| c. | Zoning and Good Title: Landlord warrants and represents, upon which warranty and representation Tenant has relied in the execution of this Lease, that Landlord is the owner of the Leased Premises, in fee simple absolute, free and clear of all encumbrances, except for the easements, covenants and restrictions of record as of the date of this Lease. Such exceptions shall not impede or interfere with the quiet use and enjoyment of the Leased Premises by Tenant. Landlord further warrants and covenants that this Lease is and shall be a first lien on the Leased Premises, subject only to any Mortgage to which this Lease is subordinate or may become subordinate pursuant to an agreement executed by Tenant, and to such encumbrances as shall be caused by the acts or omissions of Tenant; that Landlord has full right and lawful authority to execute this Lease for the term, in the manner, and upon the conditions and provisions herein contained; that there is no legal impediment to the use of the Leased Premises as set out herein; that the Leased Premises are not subject to any easements, restrictions, zoning ordinances or similar governmental regulations which prevent their use as set out herein; that the Leased Premises presently are zoned for the use contemplated herein and throughout the term of this lease may continue to be so used therefore by virtue of said zoning, under the doctrine of "non-conforming use", or valid and binding decision of appropriate authority, except, however, that said representation and warranty by Landlord shall not be applicable in the event that Tenant's act or omission shall invalidate the application of said zoning, the doctrine of "non-conforming use" or the valid and binding decision of the appropriate authority. Landlord shall furnish without expense to Tenant, within ten (10) days after written request therefore by Tenant, a title report covering the Leased Premises showing the condition of title as of the date of such certificate, provided, however, that Landlord's obligation hereunder shall be limited to the furnishing of only one such title report. |
| d. | Licenses: It shall be the Tenant's responsibility to obtain any and all necessary licenses and the Landlord shall bear no responsibility therefore; the Tenant shall promptly notify Landlord of the fact that it has obtained the necessary licenses in order to prevent any delay to Landlord in commencing construction of the Leased Premises. |
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| 26. | EXTENSIONS/WAIVERS/DISPUTES |
| a. | Extension Period: Any extension hereof shall be subject to the provisions of Article c) hereof. |
| b. | Holding Over: In the event that Tenant or anyone claiming under Tenant shall continue occupancy of the Leased Premises after the expiration of the term of this Lease or any renewal or extension thereof without any agreement in writing between Landlord and Tenant with respect thereto, such occupancy shall not be deemed to extend or renew the term of the Lease, but such occupancy shall continue as a tenancy at will, from month to month, upon the covenants, provisions and conditions herein contained. The rental shall be the rental in effect during the term of this Lease as extended or renewed, prorated and payable for the period of such occupancy. |
| c. | Waivers: Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of its rights hereunder. No waiver by either party at any time, express or implied, of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. If any action by either party shall require the consent or approval of the other party, the other party's consent to or approval of such action on any one occasion shall not be deemed a consent to or approval of said action on any subsequent occasion or a consent to or approval of any other action on the same or any subsequent occasion. Any and all rights and remedies which either party may have under this Lease or by operation of law, either at law or in equity, upon any breach, shall be distinct, separate and cumulative and shall not be deemed inconsistent with each other, and no one of them, whether exercised by said party or not, shall be deemed to be an exclusion of any other; and any two or more or all of such rights and remedies may be exercised at the same time. |
| d. | Disputes: It is agreed that, if at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of the said party to institute suit for the recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease. If at any time a dispute shall arise between the parties hereto as to any work to be performed by either of them under the provisions hereof, the party against whom the obligation to perform the work is asserted may perform such work and pay the costs thereof "under protest" and the performance of such work shall in no event be regarded as a voluntary performance and shall survive the right on the part of the said party to institute suit for the recovery of the costs of such work. If it shall be adjudged that there was no legal obligation on the part of the said party to perform the same or any part thereof, said party shall be entitled to recover the costs of such work or the cost of so much thereof as said party was not legally required to perform under the provisions of this Lease and the amount so paid by Tenant may be withheld or deducted by Tenant from any rents herein reserved. |
| e. | Tenant’s Right to cure Landlord’s Default: In the event that Landlord shall fail, refuse or neglect to pay any mortgages, liens or encumbrances, the judicial sale of which might affect the interest of Tenant hereunder, or shall fail, refuse or neglect to pay any interest due or payable on any such mortgage, lien or encumbrance, Tenant may pay said mortgages, liens or encumbrances, or interest or perform said conditions and charge to Landlord the amount so paid and withhold and deduct from any rents herein reserved such amounts so paid, and any excess over and above the amounts of said rents shall be paid by Landlord to Tenant. |
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| f. | Notices: All notices and other communications authorized or required hereunder shall be in writing and shall be given by mailing the same by certified mail, return receipt requested, postage prepaid, and any such notice or other communication shall be deemed to have been given when received by the party to whom such notice or other communication shall be addressed. If intended for Landlord the same will be mailed to the address herein above set forth or such other address as Landlord may hereafter designate by notice to Tenant, and if intended for Tenant, the same shall be mailed to Tenant at the address herein above set forth, or such other address or addresses as Tenant may hereafter designate by notice to Landlord. |
| 27. | PROPERTY DAMAGE |
| a. | Loss and Damage: Notwithstanding any contrary provisions of this Lease, Landlord shall not be responsible for any loss of or damage to property of Tenant or of others located on the Leased Premises, except where caused by the willful act or omission or negligence of Landlord, or Landlord's agents, employees or contractors, provided, however, that if Tenant shall notify Landlord in writing of repairs which are the responsibility of Landlord under Article VII hereof, and Landlord shall fail to commence and diligently prosecute to completion said repairs promptly after such notice, and if after the giving of such notice and the occurrence of such failure, loss of or damage to Tenant's property shall result from the condition as to which Landlord has been notified, Landlord shall indemnify and hold harmless Tenant from any loss, cost or expense arising there from. |
| b. | Force Majeure: In the event that Landlord or Tenant shall be delayed or hindered in or prevented from the performance of any act other than Tenant's obligation to make payments of rent, additional rent, and other charges required hereunder, by reason of strikes, lockouts, unavailability of materials, failure of power, restrictive governmental laws or regulations, riots, insurrections, the act, failure to act, or default of the other party, war or other reason beyond its control, then performance of such act shall be excused for the period of the delay and the period for the performance of such act shall be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, lack of funds shall not be deemed to be a cause beyond control of either party. |
| 28. | Assignment and Subletting |
Under the terms and conditions hereunder, Tenant shall have the absolute right to transfer and assign this lease or to sublet all or any portion of the Leased Premises or to cease operating Tenant's business on the Leased Premises provided that at the time of such assignment or sublease Tenant shall not be in default in the performance and observance of the obligations imposed upon Tenant hereunder, and in the event that Tenant assigns or sublets this property for an amount in excess of the rental amount then being paid, then Landlord shall require as further consideration for the granting of the right to assign or sublet, a sum equal to twenty-five percent (25%) of the difference between the amount of rental to be charged by Tenant to Tenant's subtenant or assignee and the amount provided for herein, payable in a manner consistent with the method of payment by the subtenant or assignee to the Tenant, and/or [to twenty-five percent (25%) of the consideration paid or to be paid to Tenant by Tenant's or Sub-Tenant or assignee.
| 29. | Fixtures |
All personal property, furnishings and equipment presently and all other trade fixtures installed in or hereafter by or at the expense of Tenant and all additions and/or improvements, exclusive of structural, mechanical, electrical, and plumbing, affixed to the Leased Premises and used in the operation of the Tenant's business made to, in or on the Leased Premises by and at the expense of Tenant and susceptible of being removed from the Leased Premises without damage, unless such damage be repaired by Tenant, shall remain the property of Tenant and Tenant may, but shall not be obligated to, remove the same or any part thereof at any time or times during the term hereof, provided that Tenant, at its sole cost and expense, shall make any repairs occasioned by such removal.
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 14 of 19 |
| 30. | OPTION TO RENEW |
Landlord grants to Tenant an option to renew this lease agreement for a period of five (5) years after expiration of the term of this Lease agreement at a rental to be determined six (6) months prior the expiration of the current Lease agreement, with all other terms and conditions of the renewal lease to be the same as those in this lease agreement. To exercise this option to renew, Tenant must give Landlord written notice of intention to do so at least six (6) months before this lease agreement expires.
| 31. | Estoppel Certificates |
At any time and from time to time, Landlord and Tenant each agree, upon request in writing from the other, to execute, acknowledge and deliver to the other or to any person designated by the other a statement in writing certifying that the Lease is unmodified and is in full force and effect, or if there have been modifications, that the same is in full force and effect as modified (stating the modifications), that the other party is not in default in the performance of its covenants hereunder, or if there have been such defaults, specifying the same, and the dates to which the rent and other charges have been paid.
| 32. | Invalidity of Particular Provision |
If any term or provision of this Lease or the application hereof to any person or circumstance shall, to any extent, be held invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
| 33. | Captions and Definitions of Parties |
The captions of the Sections of this Lease are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and provisions of this Lease. The word "Landlord" and the pronouns referring thereto, shall mean, where the context so admits or requires, the persons, firm or corporation named herein as Landlord or the mortgagee in possession at any time, of the land and building comprising the Leased Premises. If there is more than one Landlord, the covenants of Landlord shall be the joint and several obligations of each of them, and if Landlord is a partnership, the covenants of Landlord shall be the joint and several obligations of each of the partners and the obligations of the firm. Any pronoun shall be read in the singular or plural and in such gender as the context may require. Except as in this Lease otherwise provided, the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
| 34. | RELATIONSHIP OF THE PARTIES |
Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of a joint venture between the parties hereto, it being understood and agreed that neither any provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant.
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| 35. | Brokerage |
No party has acted as, by or through a broker in the effectuation of this Agreement, except as set out hereinafter.
| 36. | Entire Agreement |
This instrument contains the entire and only agreement between the parties, and no oral statements or representations or prior written matter not contained in this instrument shall have any force and effect. This Lease shall not be modified in any way except by a writing executed by both parties.
| 37. | Governing Law |
All matters pertaining to this agreement (including its interpretation, application, validity, performance and breach) in whatever jurisdiction action may be brought, shall be governed by, construed and enforced in accordance with the laws of the Province of Quebec. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in the Province of Quebec.
| 38. | litigation |
In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party's reasonable attorney's fees, court costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be entitled. In such event, no action shall be entertained by said court or any court of competent jurisdiction if filed more than one year subsequent to the date the cause(s) of action actually accrued regardless of whether damages were otherwise as of said time calculable.
If Landlord files an action to enforce any agreement contained in this lease agreement, or for breach of any covenant or condition, Tenant shall pay Landlord reasonable attorney fees for the services of Landlord’s attorney in the action, all fees to be fixed by the court.
| 39. | Contractual Procedures |
Unless specifically disallowed by law, should litigation arise hereunder, service of process therefore may be obtained through certified mail, return receipt requested; the parties hereto waiving any and all rights they may have to object to the method by which service was perfected.
| 40. | Extraordinary remedies |
To the extent cognizable at law, the parties hereto, in the event of breach and in addition to any and all other remedies available thereto, may obtain injunctive relief, regardless of whether the injured party can demonstrate that no adequate remedy exists at law.
| 41. | Reliance on Financial Statement |
Tenant shall furnish concurrently with the execution of this lease, a financial statement of Tenant prepared by an accountant. Tenant, both in corporate capacity, if applicable, and individually, hereby represents and warrants that all the information contained therein is complete, true, and correct. Tenant understands that Landlord is relying upon the accuracy of the information contained therein. Should there be found to exist any inaccuracy within the financial statement which adversely affects Tenant's financial standing, or should Tenant's financial circumstances materially change, Landlord may demand, as additional security, an amount equal to an additional six (6) months' rent, which additional security shall be subject to all terms and conditions herein, require a fully executed guaranty by a third party acceptable to Landlord, elect to terminate this Lease, or hold Tenant personally and individually liable hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written or have caused this Lease to be executed by their respective officers thereunto duly authorized.
RIOPEL MARINE INC. (The Tenant)
 |
 |
x
| Alexandre Mongeon, President | Patrick Bobby, Secretary-Treasurer |
| Dated: June 10th, 2017 | Dated: June 10th, 2017 |
CALIFORNIA ELECTRIC BOAT COMPANY INC. (The Landlord)
| |
| |
| x | ||
| Alexandre Mongeon, President | Patrick Bobby, Secretary-Treasurer |
| Dated: June 10th, 2017 | Dated: June 10th, 2017 |
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 17 of 19 |
EXHIBIT "A" LEGAL DESCRIPTION
A site located in the city of Boisbriand, Province of Quebec, having the cadastral designation of lot 5,251,935 (common part) of the Cadastre of the Province of Quebec, with an approximate area of 245,450 ft². On this site there is a 1-storey building, of approximately 125, 500 ft², with 14 divided co-ownerships vocation of “Industrial / office / retail”, held by various owners under a Declaration of co-ownership, known as follow:
648 Cure-Boivin boulevard, Boisbriand (private lot 5 368 927)
650 Cure-Boivin boulevard, Boisbriand (private lot 5 251 936)
660 Cure-Boivin boulevard, Boisbriand (private lot 5 251 937)
670 Cure-Boivin boulevard, Boisbriand (private lot 5 251 938)
680 Cure-Boivin boulevard, Boisbriand (private lot 5 251 939)
690 Cure-Boivin boulevard, Boisbriand (private lot 5 251 940)
700 Cure-Boivin boulevard, Boisbriand (private lot 5 251 941)
710 Cure-Boivin boulevard, Boisbriand (private lot 6 032 689)
720 Cure-Boivin boulevard, Boisbriand (private lot 6 032 688)
730 – 750 Cure-Boivin boulevard, Boisbriand (private lot 6 032 687)
760 – 770 Cure-Boivin boulevard, Boisbriand (private lot 5 251 943)
800 – 810 Cure-Boivin boulevard, Boisbriand (private lot 5 251 944)
820 Cure-Boivin boulevard, Boisbriand (private lot 5 251 945)
840 Cure-Boivin boulevard, Boisbriand (private lot 5 251 946)
The Property known as 720 Cure-Boivin boulevard, Boisbriand (Qc), with the private lot number 6 032 688 as cadastral
division of the Province of Quebec, has a an industrial / office building with a rental area of 3,607 ft².
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 18 of 19 |
EXHIBIT "B" TENANT PLANS AND SPECIFICATIONS
| Lease Agreement: 720 Cure Boivin, Boisbriand (Qc) | Page 19 of 19 |
Exhibit 10.3
AMENDED AND RESTATED Share Option(s) Plan
of
VISION MARINE TECHNOLOGIES INC.
(the “Company” or “Corporation”)
Date of Adoption: April 22, 2020
ARTICLE 1 – PURPOSE OF THE PLAN
| 1.1 | The purpose of this Share Option(s) Plan is to: |
| (a) | Provide an Eligible Employee, Advisor, or Consultant an opportunity to participate in the ownership of the Company; |
| (b) | Encourage teamwork and cooperation with respect to all members and units of the Company; |
| (c) | Improve organizational performance; |
| (d) | Improve the Company's ability to retain skilled Employees, Advisors, and Consultants; and, |
| (e) | Provide an incentive through the granting of Option(s) to acquire Common Shares of the Company in order to secure the benefit of share ownership by key members of the Corporation. |
ARTICLE 2 – PLAN DEFINITIONS AND INTERPRETATION
| 2.1 | In this Plan, the following terms have the following meanings: |
| (a) | “Act Respecting Labour Standards (Quebec)” means the Act respecting labour standards, CQLR c N-1.1, as amended from time to time, including the Regulations; |
| (b) | “Advisor” means a person who gives professional advice and is an expert in their particular field; |
| (c) | “Acquirer” means a person, company, or organization that acquires a controlling interest in the Company; |
| (d) | “Consultant” means a person who provides professional expertise to the Company; |
| (e) | “Consulting Agreement” means a contract signed between a Consultant and the Company that iterates their respective roles and renumeration with respect to the Company. |
| (f) | “Constitution” means the Notice of Articles, Articles, or other constitutional documents of the Company; |
| (g) | “Eligible Employee, Advisor, or Consultant” means: |
| (i) | Any Employee, Advisor, or Consultant of the Company or of affiliates of the Company that the Company’s board of directors defines from time to time subject to any restrictions and rules as stated in relevant Acts and Regulations in addition to their respective Consulting Agreement; |
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who have been working with the Company (or by a predecessor or an affiliate of the Company) for a period of at least 3 months, unless otherwise stipulated in their respective Employee, Advisor, or Consulting Agreement;
| (h) | “Employee Agreement” means a contract between an employer and employee which outlines the specific terms of their employee-employer relationship; |
| (i) | “Employee, Advisor, or Consultant Optionee” means, at any relevant time, those persons who own Option(s) purchased under this Plan; |
| (j) | “Fair Market Value” means the highest price, in dollars, that a property would fetch in a free unrestricted market between two consenting individuals who are knowledgeable, well informed and prudent and who exercise independent judgment.; |
| (k) | “Financial Statements” means the most recent financial statements of the Company; |
| (l) | “Income Tax Act” means the Income Tax Act, RSC 1985, c 1 (5th Supp), as amended from time to time, including the Regulations; |
| (m) | “Offering” means the offering period specified in the Option(s) Offering Document during which an Eligible Employee, Advisor or Consultant will be extended an offer to purchase Option(s) under this Plan; |
| (n) | “Option(s)” means a benefit given by the Company to an Eligible Employee, Advisor or Consultant to buy stock in the Company at a discount or a stated fixed price. |
| (o) | “Optionee” means an Eligible Employee, Advisor or Consultant who has been issued Option(s) under the Plan; |
| (p) | “Option(s) Agreement” means an Agreement, to be signed by both the Company and Optionee, that defines the terms with respect to the issuance of Option(s). |
| (q) | “Option(s) Offering Document” means the offering and information document delivered to the Eligible Employee, Advisor, or Consultant in connection with an offering of Option(s) under this Plan, in the form of Schedule “A” attached to this agreement; |
| (r) | “Plan” means this Amended and Restated Share Option(s) Plan, as amended from time to time, in accordance with its provisions; |
| (s) | “Purchase Price” means the purchase price for the Shares purchased by an the Eligible Employee, Advisor, or Consultant under the Plan, calculated by multiplying the number of Shares purchased with the Strike Price in effect during the applicable Offering; |
| (t) | "Regulations” means the regulations enacted pursuant to the Taxation Act (Quebec), Income Tax Act (Canada), Securities Act (Quebec), or Act respecting labour standards (Quebec) in force from time to time; |
| (u) | “Securities Act (Quebec)” means the Quebec Securities Act, CQLR c V-1.1, as amended from time to time, including the Regulations; |
| (v) | “Share Value” means the value per Share in Canadian dollars determined from time to time as set forth in the Option(s) Offering Document; |
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| (w) | “Shares” means Voting Common Shares - Series Founder of the Company; |
| (x) | “Strike Price” means the price at which Option(s) may be exercised; and, |
| (y) | “Taxation Act (Quebec)” means the Quebec Taxation Act, CQLR c I-3, as amended from time to time, including the Regulations. |
| 2.2 | In this Plan, unless otherwise defined herein, words and phrases defined in the Taxation Act (Quebec), Income Tax Act (Canada), Securities Act (Quebec) or the Regulations have the meanings given to them in the respective Acts or the Regulations. |
ARTICLE 3 – ADOPTION, ADMINISTRATION, COMMENCEMENT, AND TERM OF THE PLAN
| 3.1 | The Company hereby adopts the Plan as its Share Option(s) Plan for the benefit of an Eligible Employee, Advisor or Consultant. |
| 3.2 | The Plan will be administered by the Corporation’s directors (the “Board”), or a duly authorized committee, as the same may be constituted from time to time (the “Committee”). |
| 3.3 | The Board or the Committee shall have full and complete latitude to interpret the Plan and to establish the rules and regulations applying to it and to make all other determinations it deems necessary or useful for the administration of the Plan, provided that such interpretations, rules, regulations and determinations are consistent with applicable financial services authority legislation and the rules and regulations of relevant securities regulators in the Province of Québec and Canada. |
| 3.4 | The Plan will terminate only upon receipt by the Company of consent in writing to its termination from the Board and a majority of Employee, Advisor, and Consultant Optionees. |
ARTICLE 4 – OPTION(S) OFFERINGS TO ELIGIBLE ADVISORS AND CONSULTANTS
| 4.1 | The Company will make the Option(s) offerings described in the Share Option(s) Offering Document to the Eligible Employee, Advisor, or Consultant on the terms and conditions set out in this Plan. |
| 4.2 | The Purchase Price of the Shares in respect of which Option(s) are granted shall be determined by the Board or the Committee, in its discretion, at the time that each Option(s) is granted. |
| 4.3 | Advisors and Consultants are considered as an exempt class as elaborated on in the Securities Act (Quebec) and Regulation 45-106 respecting Prospectus Exemptions (V-1.1, r. 21). |
| 4.4 | Advisors and Consultants are not considered employees under the Civil Code of Quebec and are not bound to the provisions stipulated in the Act Respecting Labour Standards (Quebec). |
| 4.5 | To receive Option(s) under the Plan, the Eligible Employee, Advisor, or Consultant must deliver a completed and signed Option(s) Offering Document to the Company during the applicable period as determined by the Board or Committee. |
| 4.6 | The Board or the Committee may designate, from time to time, a key Employee, Advisor, or Consultant of the Company and its subsidiaries to whom Option(s) may be granted at the discretion of the Board or the Committee (an “Optionee”) and any performance conditions that the Board or the Committee may deem fit, may be attached to the Option(s), such performance conditions to be outlined in the relevant Option(s) Agreements entered into. |
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| 4.7 | Notwithstanding the above stipulations within the Plan or in a relevant Option(s) Offering Agreement, Option(s) will only become exercisable in the event of a “Change in Control” (as defined in Article 6) or listing and will lapse on the tenth anniversary of their date of grant if they have not been exercised by that date. |
| 4.8 | The aggregate Fair Market Value of Shares subject to unexercised Option(s) granted to Optionees (as defined herein below) under the Plan, together with the Fair Market Value of Shares subject to Option(s) granted to the Optionees under the Plan shall not exceed 10% percent of the total Fair Market Value of the Company. |
| 4.9 | In the event of a share dilution of the Company, the Optionee shall receive a proportionate number of Shares with respect to the share dilution. For clarity, the percentage of Shares shall remain the same even if the total Shares outstanding is increased. |
ARTICLE 5 – OPTION(S) VESTING, PAYMENT, AND VESTING SCHEDULE
| 5.1 | Option(s) will be provided under the Plan for cash or certified cheque consideration only. |
| 5.2 | The Eligible Employee, Advisor, or Consultant may pay for Option(s) purchased under the Plan by: |
| (a) | Lump sum payment delivered to the Company under the regulations set forth by the Board or Committee. |
| 5.3 | In advance of each Offering, the Company will notify the Eligible Employee, Advisor, or Consultant in writing of the offering who is eligible to participate in the Plan and how they can get additional information subject to any regulations or rules as stated in their respective Employee, Advisor, or Consultation Agreements. |
| 5.4 | At least 14 days before the start of each Offering, the Company will complete the Option(s) Offering Document to be used during the Offering. |
| 5.5 | Unless provided otherwise, Option(s) granted pursuant to the Plan shall be at the discretion of the Board and be included in the respective Employee, Advisor, or Consulting Agreement. |
| 5.6 | Notwithstanding the above, in the event of an “Change in Control” (as defined in Article 6), the following conditions apply: |
| (a) | In the event of a Change in Control as a result of a sale of the Company, the unvested part of Optionee’s outstanding Options, that Eligible Employees, Consultants, and Advisors are entitled for at the time of sale according to the vesting schedule, shall vest as to 25% and the remaining 75% of unvested Option(s) shall immediately lapse unless and to the extent the Board determines that the circumstances justify the exercise of a greater proportion. |
| (b) | If there is a Change in Control as a result of a sale of the Company, then unless and to the extent the Board determines that the circumstances justify the vesting of a greater proportion, any unexercised Options shall be exercisable to the extent they have then vested and to the extent any applicable performance conditions have then been satisfied and may be exercised in accordance with one of the following sub-rules of this Rule as the Board may determine and which need not be the same in the case of all Optionees: |
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| i. | On the same day as, and immediately prior to, the Change in Control becoming effective; |
| ii. | If the person, company, or organisation making the offer (the ‘Acquirer’) so requests or makes it a condition of the offer that one or more Optionees is locked-in and the Board agrees to such request or requirement, a period of twelve months commencing no later than the date on which the Acquirer obtains Control of the Company and any condition subject to which the offer was made has been satisfied; or, |
| iii. | In the absence of any such request or requirement by the Acquirer, or if the Board does not agree to any such request or requirement, within six months or such longer period as the Board may in its discretion decide following the day on which the Acquirer obtains Control of the Company and any condition subject to which the offer was made has been satisfied, but in any case, no longer than twelve months. |
| 5.7 | All stipulations within this Article 5 may be derogated from via stipulations provided within the relevant Employee, Advisor or Consulting Agreement, or as the Board so determines at their pure and unfettered discretion. |
ARTICLE 6 – EXERCISE, LAPSE OF OPTION(S), AND CHANGE OF CONTROL
| 6.1 | Option(s) may be exercised by the Optionee, in accordance with the provisions of the Plan and the relevant Option(s) Agreement, in whole or in part, from time to time, by delivery of notice of such exercise to the Company marked to the attention of the Committee or Board. |
| 6.2 | The notice must specify the number of Shares with respect to which the Option(s) are being exercised and the purchase thereof. Furthermore, the Option(s) shall be deemed for all purposes to have been exercised to the extent stated in such notice upon delivery of the notice and tender of payment in full notwithstanding any delay in the issuance and delivery of the certificates for the Shares so purchased. |
| 6.3 | On receipt of payment in full (the "Payment Date") of the Purchase Price for Shares, in exercise of said Option(s) purchased under this Plan, the Company will issue a share certificate, dated as of the Payment Date, representing those Shares in the name of the individual Eligible Employee, Advisor, or Consultant. |
| 6.4 | Within 30 days of issuing a share certificate under Section 6.3, the Company will arrange for an investment confirmation setting out the information required by relevant legal statutes and be delivered to the eligible Optionee. |
| 6.5 | If the Company by which Optionee is employed is liable to account for tax or social insurance contributions (in any jurisdiction) for which Optionee is liable by virtue of the exercise of the Option(s), it, any other group company or any other entity may: |
| (a) | withhold the appropriate amount of tax or social security from the Optionee’s remuneration; or |
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| (b) | make such other arrangements as it considers necessary (including the sale of Shares on behalf of the Optionee) to finance the amounts due, |
unless the Optionee discharges the liability himself at the date of exercise.
| 6.6 | Except as provided in this Plan or in the relevant Option(s) Agreement, any Option(s) granted pursuant to the Plan, and whether vested or not at the time of termination of Optionee’s employment, for any reason other than death or disability, shall lapse on a date which is the earlier of: |
| (a) | The date on which such Option(s) would otherwise expire; |
| (b) | The date on which the relevant Optionee ceases to be an employee of the Company; or, |
| (c) | Such other date as determined by the Board which date shall not be more than thirty (30) days after the date on which the holder thereof ceases to be an employee of the Company. |
| 6.7 | In the event of death or disability of the Optionee, any Option(s) held and vested at the time of the death or cessation of employment due to disability, as the case may be, shall: |
| (a) | Lapse on a date which is the earlier of the date on which such Option(s) would otherwise expire or twelve (12) months after the date of such death or cessation; and, |
| (b) | Any Option(s) granted pursuant to the Plan but not vested at the time of death or cessation of employment due to disability shall lapse forthwith unless and to the extent the Board determines that it should vest. |
| 6.8 | Option(s) offered in this Plan will only become exercisable in the event of a “Change in Control” (as defined in this Article) or listing and will lapse on the tenth anniversary of their date of grant if they have not been exercised by that date. |
| 6.9 | Notwithstanding the above provisions, the Board or the Committee may in their discretion, if they consider that the circumstances so justify, allow Option(s) to remain exercisable after termination of the Optionee’s employment regardless of the reason for that termination for such period as they shall determine provided that the Option(s) shall not be capable of exercise after the tenth anniversary of its grant. |
| 6.10 | For the purpose of this Agreement, a Change in Control will be deemed to have occurred when: |
| (a) | Any person, together with all persons acting jointly or in concert with such person, who, immediately prior to the date of the acquisition, beneficially held less than 50% of any class of the outstanding Shares of the Company having the power to vote for the election of Directors of the Company, acquires any class of the outstanding Shares of the Company having the power to vote for the election of the Directors of the Company in one or more transaction or series of transaction and after such transaction or transactions such person or person beneficially own(s) 50% or more of the outstanding Shares of any class of the Company having the power to vote for the election of the Directors of the Company; |
| (b) | There is consummated a sale or other disposition of assets of the Company representing 50% or more of the book value of all assets of the Company as at the date of the last audited financial statements of the Company as well as the rights to the intellectual property in the Company; or, |
| (c) | The Board adopts a resolution to the effect that, for the purposes of this Plan, a Change in Control has occurred. |
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ARTICLE 7 – GENERAL REPRESENTATIONS AND COVENANTS
| 7.1 | With respect of each offering and issuance of Shares under the Plan, the Company represents, warrants and covenants as follows: |
| (a) | The Company is validly existing and in good standing under the laws of Québec and Canada and pursuant to which it was incorporated; |
| (b) | The Plan is a validly subsisting and binding obligation of the Company; |
| (c) | The Company is not party to, and will not become party to, any agreement which prohibits or restricts it from complying with the terms of the Plan; |
| (d) | Option(s) granted pursuant to the Plan may not be transferred, assigned or pledged by the holder thereof. |
| (e) | The participation in the Plan of an employee of the Company shall be entirely optional and shall not be interpreted as conferring upon Optionee any right or privilege whatsoever except for the rights and privileges set out expressly in the Plan and in the relevant Option(s) Offering Documents. Furthermore: |
| i. | Neither the Plan nor any act that is done under the terms of the Plan shall be interpreted as restricting the right of the Company to terminate the employment of an employee at any time; |
| ii. | Any notice of dismissal given to an employee at the time his or her employment is terminated, or any payment in the place and stead of such notice, or any combination of the two, shall not have the effect of extending the duration of the employment for purposes of the Plan; and, |
| iii. | No Optionee is entitled to damages for the loss of Option(s) on cessation of employment for any reason whatsoever. |
| (f) | The Shares are of a class of Shares of the Company, once exercised by the Optionee, that: |
| i. | Are not directly restricted in their right to share in the profits of the Company or in the division of the Company's assets on dissolution or winding up; |
| ii. | Include a restriction on transfer to third parties, pursuant to Article 7.1(d) of this Agreement; and, |
| iii. | Do not have any rights and restrictions prohibited by the Regulations within the Taxation Act (Quebec), Income Tax Act (Canada), or the Securities Act (Quebec); |
| (g) | Option(s) to be issued under the Plan will be from the treasury of the Company and will not have been previously issued; |
| (h) | The Purchase Price per Option(s) at which the Option(s) will be offered to the Eligible Employee, Advisor, or Consultant in any given Offering will not be greater than the Share Value in effect at that time; |
| (i) | The Plan does not provide for any guarantee in respect of any loss or profit which may result from fluctuations in the price of the Shares; |
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| (j) | The Company shall assume no responsibility as regards the tax consequences under the Taxation Act (Quebec) or the Income Tax Act (Canada) that participation in the Plan will have for an employee or director of the Company and such persons are responsible for payment of all taxes incurred in relation to the exercise of Option(s) and urged to consult their own tax advisors in that regard. |
| (k) | All Financial Statements issued under the Plan will be prepared in accordance with generally accepted accounting principles and present fairly the financial position of the Company as at the date thereof and do not omit to state any material liability or financial obligation of the Company as at the date thereof; |
| (l) | Since the date of the Financial Statements there has been no material adverse change in the financial position or condition of the Company, except as disclosed in the Option(s) Offering Document; |
| (m) | The Option(s) Offering Document discloses all outstanding Option(s), warrants and conversion rights granted by the Company in respect of its securities and contains no misrepresentations; |
| (n) | All Option(s) granted under the Plan must be supported by a duly executed individual Option(s) Offering Document as signed by the Optionee and the Company; and, |
| (o) | The Company will comply with the requirements of the Plan, the Taxation Act (Quebec), Income Tax Act (Canada), Securities Act (Quebec), and their Regulations. |
| 7.2 | With respect to the Plan and the Option(s) granted to the Optionee, the Eligible Employee, Advisor, or Consultant shall be bound by a confidentiality covenant. As part of this covenant, the Optionee agrees to maintain secret and confidential all information relating to the Plan and shall not divulge or disclose any such information except as may be required under the obligation of law or is required by the Company during the Optionee's employment. |
| 7.3 | Optionees shall be required, as a condition to the exercise or conversion of any options or convertible securities, either (a) to enter into an appropriate written contractual obligation to become a Party to and bound by any shareholder agreement of the Company; or (b) to become a party to a Share Restriction Agreement. |
| 7.4 | The Eligible Employee, Advisor, or Consultant will be deemed to have relied on the representations and warranties and covenants contained in this Article. |
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ARTICLE 8 – PLAN AMENDMENTS
| 8.1 | With the approval of the Board but without the approval of the Employee, Advisor, or Consultant Optionees, the Company may amend the Plan to reflect changes made to the Securities Act (Quebec), Income Tax Act (Canada), and the Taxation Act (Quebec), Regulations or Policy Statements enacted since the adoption of the Plan. |
| 8.2 | Alterations to the Plan, except as stated in paragraph 8.1, may only be made with the approval of the Board and a majority of the Employee, Advisor, or Consultant Optionees. |
| 8.3 | The Company will not amend its Constitution in any manner which would affect a term of condition of the Plan without the prior written consent of the Board. |
ARTICLE 9 – GENERAL
| 9.1 | The Plan will be construed and enforced in accordance with the laws of the province of Quebec and the laws of Canada applicable therein. |
| 9.2 | Time will be of the essence in this Plan. |
| 9.3 | The Plan will ensure to the benefit of and be binding upon the Eligible Employee, Advisor, or Consultant, the Employee, Advisor, or Consultant Optionees, the Company and their respective heirs, personal representatives and successors. |
| 9.4 | Each of the parties to this Plan will do all such other acts and things as may be required to carry out the true intent and meaning of the Plan. |
IN WITNESS WHEREOF the Company has adopted the Plan as of the date written above.
| VISION MARINE TECHNOLOGIES INC. | ||
| ) | ||
| ) | ||
| Name: Alexandre Mongeon | ) | |
| Title: President | ) | |
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SCHEDULE “A”
SHARE OPTION(S) PLAN
OPTION(S) OFFERING DOCUMENT
(Date)
(Address)
To the Attention of the Committee or Board:
I, the undersigned, , hereby request Option(s) to purchase Voting Common Shares - Series Founder of VISION MARINE TECHNOLOGIES INC. (the “Company”), granted at an exercise price of under the terms of the Share Option(s) Agreement between the undersigned and the Company in accordance with the terms of the Share Option(s) Plan, as well as in accordance with the terms of the relevant Employee, Advisor, or Consulting Agreement, as the case may be, and I enclose herewith my cheque (or cash) made payable to the order of VISION MARINE TECHNOLOGIES INC. in the amount of Canadian Dollars in payment of the desired Option(s).
| (Signature) | |
| (Name) | |
| (Full Address) | |
| (Telephone) |
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Exhibit 10.4
EXECUTIVE SERVICES AGREEMENT
Between:
RIOPEL MARINE INC.
And:
ALEXANDRE MONGEON
Riopel Marine Inc.
730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
eversign Document Hash: d71869450af040979f16d77cbc539a81
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT is made and dated as fully executed on this 7th day of April, 2020, with an Effective Date of April 1, 2020 as set forth below.
BETWEEN:
RIOPEL MARINE INC., a corporation incorporated pursuant to the laws of the Province of Quebec, and having an address for delivery and notice located at 730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
(the “Company”);
OF THE FIRST PART
AND:
ALEXANDRE MONGEON, businessperson, having an address for notice and delivery located at 129 Avenue Bellevue, Laval Quebec, Canada, H7C 1T2
(the “Executive”);
OF THE SECOND PART
(the Company and the Executive being hereinafter singularly also referred to as a “Party” and collectively referred to as the “Parties” as the context so requires).
WHEREAS:
A. The Company is a non-reporting company incorporated under the laws of the Province of Quebec, Canada;
B. The Executive has experience in and specializes in providing companies with valuable management and development services and the Executive is the Company’s current President;
C. The Company is focused on developing technology and business interests related to and associated with the commercialization of its innovative electric boats and related business interests and, as a consequence thereof, the Company is hereby desirous of formally retaining the Executive as an executive of the Company, and the Executive is hereby desirous of accepting such position, in order to provide such related Services (as hereinafter defined) to the Company;
D. As a consequence of the Executive’s valuable role within the Company, the Parties hereby acknowledge and agree that there have been various discussions, negotiations, understandings and agreements between them relating to the terms and conditions of the Services and, correspondingly, that it is their intention by the terms and conditions of this “Executive Services Agreement” (the “Agreement”) to hereby replace, in their entirety, all such prior discussions, negotiations, understandings and agreements with respect to the Services; and
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E. The Parties have agreed to enter into this Agreement which replaces, in its entirety, all such prior discussions, negotiations, understandings and agreements, and, furthermore, which necessarily clarifies their respective duties and obligations with respect to the within Services to be provided hereunder, all in accordance with the terms and conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the mutual covenants and provisos herein contained, THE PARTIES AGREE AS FOLLOWS:
Article 1
INITIAL TERM AND RENEWAL
Term
1.1 The initial term of this Agreement (the “Initial Term”) is for a period of three years commencing on April 1, 2020 (the “Effective Date”), unless such employment is terminated earlier as hereinafter provided.
1.2 Subject at all times to the provisions of Article 7 herein, this Agreement shall renew automatically if not specifically terminated in accordance with the following provisions. The Company agrees to notify the Executive in writing at least 30 calendar days prior to the end of the Initial Term of its intent not to renew this Agreement (the “Company’s Non-Renewal Notice”). Should the Company fail to provide a Company’s Non-Renewal Notice this Agreement shall automatically renew on a one-month to one-month term renewal basis after the Initial Term until otherwise specifically renewed in writing by each of the Parties for the next one-month term of renewal or, otherwise, terminated upon delivery by the Company of a corresponding and follow-up 30 calendar day Company’s Non-Renewal Notice in connection with and within 30 calendar days prior to the end of any such one-month term renewal period. Any such renewal on a one-month basis shall be on the same terms and conditions contained herein unless modified and agreed to in writing by the Parties in advance.
Article 2
TITLE REPORTING AND DUTIES
Title and Services
2.1 Subject as otherwise herein provided, the Company hereby appoints the Executive to the office of President and Chief Executive Officer of the Company, and on and after the Effective Date the Executive will undertake and perform the duties and responsibilities normally and reasonably associated with such office. The Executive agrees that the Executive’s duties and responsibilities may be reasonably modified at the Company’s discretion from time to time. All services to be provided by the Executive hereunder are referred to as the “Services”.
2.2 In this regard it is hereby acknowledged and agreed that the Executive shall initiate, coordinate and implement the Services as contemplated herein subject, at all times, to the final direction and supervision of the Board of Directors of the Company (the “Board of Directors”).
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2.3 It is hereby agreed that as long as the Executive is a member of the Board of Directors, the Executive shall not vote on matters coming before the Board of Directors relating to this Agreement or other agreements relating to the relationship between the Parties. Each Party shall ensure that the Executive recuses himself with respect to Board of Directors matters consistent with this section 2.3.
Conditions
2.4 The Executive’s employment under this Agreement is conditional upon the
Executive:
| (a) | receiving and maintaining all required regulatory and governmental licences and approvals of various jurisdictions as may be required to act as the President and Chief Executive Officer of the Company; and |
| (b) | maintaining, in good standing, all required and recommended professional accreditation as may be deemed necessary by the Company, acting reasonably in consultation with the Executive, in order for the Executive to fulfill all Services under this Agreement |
Services to Subsidiaries
2.5 The Executive will perform the Services on behalf of the Company and its subsidiaries, accordingly:
| (a) | in this Agreement the term “the Company” means the Company and all of its subsidiaries, and |
| (c) | in the course of performing the Services, the Executive will be required to travel. |
Reporting
2.6 The Executive will report to the Board of Directors. The Executive will report fully on the management, operations and business affairs of the Company and advise, to the best of the Executive’s ability and in accordance with reasonable business standards, on business matters that may arise from time to time.
Duties and Obligations
2.7 The Executive acknowledges that, as a senior or executive officer of the
Company, the Executive will owe a fiduciary duty to the Company.
2.8 The Executive will also:
| (a) | devote reasonable efforts and attention to the business and affairs of the Company; |
| (b) | perform the Services in a competent and efficient manner and in a manner consistent with the Executive’s fiduciary obligations to the Company as a senior or executive officer thereof and in compliance with all the Company policies, and will carry out all lawful instructions and directions from time to time given to the Executive; and |
| (c) | promote the interests and goodwill of the Company. |
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2.9 The Executive acknowledges and agrees that all written and oral opinions, reports, advice and materials provided by the Executive to the Company in connection with the Executive’s employment and the Services hereunder are intended solely for the Company’s benefit and for the Company’s uses only, and that any such written and oral opinions, reports, advice and information are the exclusive property of the Company. In this regard the Executive covenants and agrees that the Company may utilize any such opinion, report, advice and materials for any other purpose whatsoever and, furthermore, may reproduce, disseminate, quote from and refer to, in whole or in part, at any time and in any manner, any such opinion, report, advice and materials in the Company’s sole and absolute discretion.
2.10 The Executive warrants that the Executive shall conduct the business and other activities in a manner which is lawful and reputable and which brings good repute to the Company, the Company’s business interests and the Executive. In particular, and in this regard, the Executive specifically warrants to provide the Services in a sound and professional manner such that the same meets superior standards of performance quality within the standards of the industry or as set by the specifications of the Company. In the event that the Board of Directors has a reasonable concern that the business as conducted by the Executive is being conducted in a way contrary to law or is reasonably likely to bring disrepute to the business interests or to the Company’s or the Executive’s reputation, the Company may require that the Executive make such alterations in the Executive’s business conduct as the Board of Directors may reasonably require in its sole and absolute discretion.
2.11 The Executive will comply with all Canadian and foreign laws, whether federal, provincial or state, applicable to the Executive’s respective duties and obligations hereunder and, in addition, hereby represents and warrants that any information which the Executive may provide to any person or company hereunder will, to the best of the Executive’s knowledge, information and belief, be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company.
Article 3
PLACE OF EMPLOYMENT
Relocation
3.1 The Executive will provide Services based in Boisbriand, Quebec, but will, if requested by the Company, move to any place within the Montreal Metropolitan Community, as defined by the territorial portrait outlined by the Communauté métropolitaine de Montréal, where the Company currently or may in the future conduct business.
Article 4
COMPENSATION AND BENEFITS
Base Salary
4.1 It is hereby acknowledged and agreed that the Executive shall render the Services as defined hereinabove during the Initial Term and during the continuance of this Agreement and shall thus be compensated from the Effective Date of this Agreement to the termination of the same by way of the payment by the Company to the Executive, or to the further order or direction of the Executive as the Executive may determine, in the Executive’s sole and absolute discretion, and advise the Company of prior to such payment, of the gross monthly fee of CAD$10,000.00 (the “Base Salary”). All such Base Salary will be due and payable by the Company to the Executive, or to the further order or direction of the Executive as the Executive may determine, in the Executive’s sole and absolute discretion, and advise the Company of prior to any such Base Salary payment, in a manner consistent with the general payroll practice of the Company, or at such other time and in such other manner as the Executive and the Company may agree, from time to time.
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Increase in Base Salary
4.2 The Company will review the Base Salary payable to the Executive from time to time during the Initial Term and during the continuance of this Agreement and may, in its sole and absolute discretion, increase the Base Salary depending on the Executive’s performance of the Services and having regard to the financial circumstances of the Company.
Bonus
4.3 It is hereby also acknowledged that the Board of Directors shall, in good faith, consider the payment of reasonable industry standard annual bonuses (each being a “Bonus”) based upon the performance of the Company and upon the achievement by the Executive and/or the Company of reasonable management objectives to be reasonably established by the Board of Directors (after reviewing proposals with respect thereto defined by the Executive and delivered to the Board of Directors by the Executive at least 30 calendar days before the beginning of the relevant year of the Company (or within 90 calendar days following the commencement of the Company’s first calendar year commencing on the Effective Date)). These management objectives shall consist of both financial and subjective goals and shall be specified in writing by the Board of Directors, and a copy shall be given to the Executive prior to the commencement of the applicable year. The payment of any such Bonus shall be payable, in the sole and absolute discretion of the Company, in cash or common shares of the Company, no later than within 120 calendar days of the ensuing year after any calendar year commencing on the Effective Date.
Stock Options
4.4 Subject to the following and the provisions of section 4.5 hereinbelow, it is hereby acknowledged that the Board of Directors may from time to time, in its sole and absolute discretion, grant to the Executive incentive stock options (each an “Option”) to purchase a number of common shares (each an “Option Share”) of the Company, subject to the terms and conditions of the Company’s existing stock incentive plan (the “Option Plan”), and to such exercise terms and conditions as may be determined by the Board of Directors in its discretion.
4.5 In this regard, and subject also to the following, it is hereby acknowledged and agreed that the exercise of any such Options shall be subject, at all times, to such vesting and resale provisions as may then be contained in the Company’s Option Plan and as may be finally determined by the Board of Directors, acting reasonably. In this regard, and in accordance with the terms and conditions of each final form of Company Option agreement, as the same may exist from time to time, the Parties hereby also acknowledge and agree that:
| (a) | Registration of Option Shares under the Options: if required under the Securities Act, the Company will use reasonable commercial efforts to file with the United States Securities and Exchange Commission (the “SEC”) a registration statement on Form S-8 (the “Form S-8 Registration Statement”) within 90 calendar days after the date of grant of Options covering the issuance of all Option Shares of the Company underlying the then issued Options, and such Form S-8 Registration Statement shall comply with all requirements of the United States Securities Act of 1933, as amended (the “Securities Act”). In this regard the Company shall use its best efforts to ensure that the Form S-8 Registration Statement remains effective as long as such Options are outstanding, and the Executive fully understands and acknowledges that these Option Shares will be issued in reliance upon the exemption afforded under the Form S-8 Registration Statement which is available only if the Executive acquires such Option Shares for investment and not with a view to distribution. The Executive is familiar with the phrase “acquired for investment and not with a view to distribution” as it relates to the Securities Act and the special meaning given to such term in various releases of the SEC; |
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| (b) | Section 16 compliance: the Company shall ensure that all grants of Options are made to ensure compliance with all applicable provisions of the exemption afforded under Rule 16b-3 promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Without limiting the foregoing, the Company shall, if required, have each grant of Options to the Executive approved by an independent committee of the Board of Directors and, if required, by the applicable Regulatory Authorities and the shareholders of the Company. The Company shall file, on behalf of the Executive, all reports required to filed with the SEC pursuant to the requirements of Section 16(a) under the Exchange Act and applicable rules and regulations; |
| (c) | Disposition of any Option Shares: the Executive further acknowledges and understands that, without in anyway limiting the acknowledgements and understandings as set forth hereinabove, the Executive agrees that the Executive shall in no event make any disposition of all or any portion of the Option Shares which the Executive may acquire hereunder unless and until: |
| (i) | there is then in effect a “Registration Statement” under the Securities Act covering such proposed disposition and such disposition is made in accordance with said Registration Statement; or |
| (ii) | (A) the Executive shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (B) the Executive shall have furnished the Company with an opinion of the Executive’s own counsel to the effect that such disposition will not require registration of any such Option Shares under the Securities Act and (C) such opinion of the Executive’s counsel shall have been concurred in by counsel for the Company and the Company shall have advised the Executive of such concurrence; and |
| (d) | Payment for any Option Shares: it is hereby further acknowledged and agreed that, during the Initial Term and any continuance of this Agreement, the Executive shall be entitled to exercise any Option granted hereunder and pay for the same by way of the prior agreement of the Executive, in the Executive’s sole and absolute discretion, and with the prior knowledge of the Company, to settle any indebtedness which may be due and owing by the Company under this Agreement in payment for the exercise price of any Option Shares acquired thereunder. In this regard, and subject to further discussion as between the Company and the Executive, together with the prior approval of the Board of Directors and the establishment by the Company of a new Option Plan predicated upon the same, it is envisioned that, when the Company is in a position to afford the same, the Company may adopt certain additional “cashless exercise” provisions respecting the granting and exercise of incentive stock options during the continuance of this Agreement. |
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Group Insurance and Health Benefits
4.6 It is hereby acknowledged and agreed that, during the continuance of this Agreement, the Executive shall be entitled to participate fully in each of the Company’s respective medical services plans and management and employee benefits program(s) which the Company provides, from time to time, to all senior management personnel and including, without limitation, the following benefits, if and when such benefits have been adopted by the Company (collectively, the “Group Benefits”):
| (a) | group health insurance; |
| (b) | accidental death and dismemberment insurance and including, without limitation, travel accident insurance; |
| (c) | group life insurance; |
| (d) | short-term disability insurance; |
| (e) | long-term disability insurance; |
| (f) | drug coverage; and |
| (g) | dental coverage. |
Payment of compensation and status as a taxable employee
4.7 It is hereby also acknowledged and agreed that, unless otherwise agreed to in advance and in writing by the Parties, the Executive will be classified as a taxable employee of the Company for all purposes, such that all compensation which is provided by the Company to the Executive under this Agreement, or otherwise, will be calculated on a net basis and otherwise for which statutory taxes will first be deducted by the Company.
Article 5
ANNUAL VACATION
Period
5.1 The Executive will be entitled to four weeks’ paid annual vacation per calendar year (the “Vacation”) during the Initial Term and during the continuance of this Agreement, to be taken at a time or times which are approved by the Board of Directors (such approval not to be unreasonably withheld); provided, however, taking into account the operational requirements of the Company and the need for the timely performance of the Executive’s Services; and provided, further, that such weeks shall not be taken consecutively. In this regard it is further understood hereby that the Executive’s entitlement to any such paid Vacation during any year (including the initial year) during the continuance of this Agreement will be subject, at all times, to the Executive’s entitlement to only a pro rata portion of any such paid Vacation time during any year (including the initial year) and to the effective date upon which this Agreement is terminated prior to the end of any such year for any reason whatsoever.
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Unused
5.2 Unused vacation may not be carried over after the completion of each calendar year and any unused vacation will be paid out in cash.
Article 6
EXPENSES
Reimbursement of Expenses
6.1 The Company will reimburse the Executive for all pre-approved and reasonable travel and other out-of-pocket expenses incurred by the Executive directly related to the performance of the Services (collectively, the “Expenses”). The Executive will account for such Expenses in accordance with the policies and directions provided by the Company from time to time.
Article 7
TERMINATION
Definitions
7.1 In this Agreement:
| (a) | “Cause” means any act, omission, behaviour, conduct or circumstance of the Executive that constitutes a serious reason for dismissal of the Executive under the laws of the Province of Quebec. |
Termination by the Company for Cause
7.2 The Company may terminate the employment of the Executive under this Agreement summarily, without any notice or any payment in lieu of notice, for Cause.
Voluntary Termination By the Executive
7.3 The Executive may terminate the Executive’s employment under this Agreement for any reason by providing not less than 90 calendar days’ notice in writing to the Company; provided, however, that the Company may waive or abridge any notice period specified in such notice in its sole and absolute discretion.
Death of the Executive
7.4 The employment of the Executive will terminate upon the death of the Executive.
No Payments in Certain Events
7.5 Upon the date of the termination of the employment of the Executive:
| (a) | for Cause in accordance with section 7.2 herein; or |
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| (b) | by the voluntary termination of employment by the Executive in accordance with section 7.3 herein; |
(in each instance the “Effective Date of Termination” herein), the Executive will be entitled to compensation earned by the Executive before the Effective Date of Termination calculated pro rata up to and including the Effective Date of Termination and will not be entitled to any severance or other payments under this Agreement or otherwise.
Payments in the Event of Termination by Death
7.6 The Company will, upon the death of the Executive during the continuance of this Agreement in accordance with section 7.4 herein (the “Effective Date of Termination” herein), provide the Executive’s estate and, if applicable, the Executive’s immediate family members, with the following:
| (a) | pay to the Executive’s estate the total of: |
| (i) | three month’s Base Salary, less any required statutory deductions, if any; |
| (ii) | that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the Effective Date of Termination, that the Board of Directors determines would likely have been paid to the Executive for the three months from the Effective Date of Termination; such determination to be made fairly and reasonably and taking into account all relevant circumstances; |
| (iii) | any outstanding Vacation pay as at the Effective Date of Termination; and |
| (iv) | any outstanding Expenses as at the Effective Date of Termination; and |
| (b) | subject to the Company’s then Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over the Company, allow for the Executive’s estate to then exercise any unexercised and fully vested portion of the Options on the Effective Date of Termination at any time during three months from the Effective Date of Termination. |
Payments in the Event of Termination Without Cause
7.7 The Company will, if it terminates the employment of the Executive other than for Cause or by death in accordance with sections 7.2 and 7.4 herein (in such instance on the “Effective Date of Termination” herein), provide the Executive with the following:
| (a) | pay to the Executive the total of: |
| (i) | six month’s Base Salary, less any required statutory deductions, if any; |
| (ii) | that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the Effective Date of Termination, that the Board of Directors determines would likely have been paid to the Executive for the three months from the Effective Date of Termination; such determination to be made fairly and reasonably and taking into account all relevant circumstances; |
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| (iii) | the present value, as determined by the Company, acting reasonably, of each of the Group Benefits described under section 4.6 herein that would have been enjoyed by the Executive during the next three months from the Effective Date of Termination assuming the Executive’s employment was not terminated and assuming the then current level of Group Benefits were continued for that three months; |
| (iv) | any outstanding Vacation pay as at the Effective Date of Termination; and |
| (v) | any outstanding Expenses as at the Effective Date of Termination; |
| (b) | maintain the Executive’s Group Benefits for a period of six months from the Effective Date of Termination; and |
| (c) | subject to the Company’s then Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over the Company, allow for the Executive to then exercise any unexercised and fully vested portion of the Options on the Effective Date of Termination at any time during three months from the Effective Date of Termination. |
Executive to Provide Release
7.8 Subject to the Company’s making the payment and maintaining the Group Benefits as provided in section 7.7 herein, the Executive will execute and deliver to the Company a full and final release of the Company, in the form provided by the Company, in respect of the Executive’s employment under this Agreement and otherwise.
Manner of Payment
7.9 The Company may, in its sole and absolute discretion, pay the amounts referred to in sections 7.6 and 7.7 herein either in a manner consistent with the general payroll practice of the Company over the course of the relevant time period or in a lump sum payment within seven business days after receipt by the Company of the executed full and final release referred to in section 7.8 herein.
Return of Materials
7.10 All documents and materials in any form or medium and including, but not limited to, files, forms, brochures, books, correspondence, memoranda, manuals and lists (including lists of customers, suppliers, products and prices), all equipment and accessories and again including, but not being limited to, leased automobiles, computers, computer disks, software products, cellular phones and personal digital assistants, all keys, building access cards, parking passes, credit cards, and other similar items pertaining to the business of the Company that may come into the possession or control of the Executive, will at all times remain the property of the Company and, on termination of the Executive’s employment for any reason, the Executive will promptly deliver to the Company all property of the Company in the possession of the Executive or directly or indirectly under the control of the Executive, and will not reproduce or copy any such property or other property of the Company.
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Article 8
CONFIDENTIALITY
Confidential Information
8.1 The Executive acknowledges that:
| (a) | the Executive may, during the course of employment with the Company, acquire information which is confidential in nature or of great value to the Company and its subsidiaries including, without limitation, matters or subjects concerning corporate assets, cost and pricing data, customer listing, financial reports, formulae, inventions, know-how, marketing strategies, products or devices, profit plans, research and development projects and findings, computer programs, suppliers, and trade secrets, whether in the form of records, files, correspondence, notes, data, information, or any other form, including copies or excerpts thereof (collectively, the “Confidential Information”); the disclosure of any of which to competitors, customers, clients or suppliers of the Company, unauthorized personnel of the Company or to third parties would be highly detrimental to the best interests of the Company; and |
| (b) | the right to maintain the confidentiality of Confidential Information, and the right to preserve the Company’s goodwill, constitute proprietary rights which the Company is entitled to protect. |
8.2 The Executive will, while employed with the Company and at all times thereafter:
| (a) | hold all Confidential Information that the Executive receives in trust for the sole benefit of the Company and in strictest confidence; |
| (b) | protect all Confidential Information from disclosure and will not take any action that could reasonably be expected to result in any Confidential Information losing its character as Confidential Information, and will take all lawful action necessary to prevent any Confidential Information from losing its status as Confidential Information; and |
| (c) | neither, except as required in the course of performing duties and responsibilities under this Agreement, directly or indirectly use, publish, disseminate or otherwise disclose any Confidential Information to any unauthorized personnel of the Company or to any third party, nor use Confidential Information for any purpose other than the purposes of the Company, without the prior written consent of the Company, which consent may be withheld in the Company’s sole and absolute discretion. |
8.3 The restrictions on the Executive’s use or disclosure of all Company Information, as set forth in this Article 8, shall continue following the expiration or termination of the Executive’s employment with the Company regardless of the reasons for or manner of such termination.
8.4 Notwithstanding section 8.2 herein, the Executive may, if and solely to the extent required by lawful subpoena or other lawful process, disclose Confidential Information but, to the extent possible, shall first notify the Company of each such requirement so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Agreement. The Executive will co-operate fully with the Company at the expense of the Company in seeking any such protective order.
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Article 9
NON-COMPETITION AND NON-SOLICITATION
Non-Competition and Payments for Enforcement by the Company during Standstill Period
9.1 The Executive acknowledges that the Executive’s Services under this Agreement are of special, unique and extraordinary character which give the Executive value to the Company; the loss of which cannot adequately be compensated in damages or by an action at law. In addition to, and not in limitation of any other restrictive covenant which may be binding on the Executive, the Executive shall not anywhere in the Montreal Metropolitan Community, as defined by the territorial portrait outlined by the Communauté métropolitaine de Montréal, for a period of one year after the termination of this Agreement (the “Standstill Period” herein) for any reason in any manner whatsoever:
| (a) | carry on, engage in, or be concerned with or interested in; or |
| (b) | permit the Executive’s name or any part thereof to in any manner whatsoever to be used or connected with any business that is, or any interest in any business that is; |
directly competitive with the business of the Company or any of its subsidiaries.
9.2 The Executive agrees that:
| (a) | all restrictions contained in section 9.1 herein are reasonable and valid in the circumstances and all defences to the strict enforcement thereof by the Company are hereby waived by the Executive; |
| (b) | the remedy available to the Company at law for any breach by him of section 9.1 herein will be inadequate and that the Company, on any application to a Court, shall be entitled to temporary and permanent injunctive relief against the Executive without the necessity of proving actual damage to the Company; and |
| (c) | if the foregoing covenant is found to be unreasonable to any extent by a court of competent jurisdiction adjudicating upon the validity of the covenant, whether as to the scope of the restriction, the area of the restriction or the duration of the restriction, then such restriction shall be reduced to that which is in fact declared reasonable by such court, or a subsequent court of competent jurisdiction, requested to make such a declaration. |
9.3 Should this Agreement be terminated for any reason (in such instance on the “Effective Date of Termination” herein) and should the Executive, during the one year Standstill Period from the Effective Date of Termination, secure a bona fide employment or consulting position outside of the Company (which the Executive evidences in writing to the Company; the “Other Position”) which may in any manner infringe the restrictions contained in section 9.1 herein, and should the Company, acting reasonably, not release the Executive from the restrictions contained in sections 9.1 and 9.2 herein in taking such Other Position, then, during the Standstill Period, and in order to compensate the Executive for not being in a position to accept the Other Position, the Company will, during the Standstill Period:
| (a) | continue to pay the Executive the Base Salary; and |
| (b) | continue to maintain the Executive’s Group Benefits. |
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Non-Solicitation
9.4 The Executive hereby agrees that the Executive will not, during the period commencing on the Effective Date hereof and ending one year following the termination or expiration of this Agreement for any reason, be a party to or abet any solicitation of customers, clients, referral services, consultants or suppliers of the Company or any of its subsidiaries, to transfer business from the Company or any of its subsidiaries to any other person, or seek in any way to persuade or entice any employee of the Company or any of its subsidiaries to leave that employment or to be a party to or abet any such action.
Article 10
OWNERSHIP OF INTELLECTUAL PROPERTY
Definitions
10.1 In this Agreement, “Inventions” means, collectively, all:
| (a) | discoveries, inventions, ideas, suggestions, reports, documents, designs, technology, methodologies, compilations, concepts, procedures, processes, products, protocols, treatments, methods, tests, improvements, work product and computer programs (including all source code, object code, compilers, libraries and developer tools, and any manuals, descriptions, data files, resource files and other such materials relating thereto), and |
| (b) | each and every part of the foregoing; |
that are conceived, developed, reduced to practice or otherwise made by the Executive either alone or with others or, in any way, relate to the present or proposed programs, services, products or business of the Company, or to tasks assigned to the Executive in connection with the Executive’s duties or in connection with any research or development carried on or planned by the Company, whether or not such Inventions are conceived, developed, reduced to practice or otherwise made during the Executive’s employment or during regular working hours and whether or not the Executive is specifically instructed to conceive, develop, reduce to practice or otherwise make same.
Exclusive Property
10.2 The Executive agrees that all Inventions, and any and all services and products which embody, emulate or employ any such Invention, shall be the sole property of the Company and all copyrights, patents, patent rights, trademarks, service marks, reproduction rights and all other proprietary title, rights and interest in and to each such Invention, whether or not registrable (collectively, the “Intellectual Property Rights”), shall belong exclusively to the Company.
Work for Hire
10.3 For purposes of all applicable copyright laws to the extent, if any, that such laws are applicable to any such Invention or any such service or product, it shall be considered a work made for hire and the Company shall be considered the author thereof.
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Disclosure
10.4 The Executive will promptly disclose to the Company, or any persons designated by it, all Inventions and all such services or products.
Assignment
10.5 The Executive hereby assigns and further agrees to, from time to time as such Inventions arise, assign to the Company or its nominee (or their respective successors or assigns) all of the Executive’s right, title and interest in and to the Inventions and the Intellectual Property
Rights without further payment by the Company.
Moral Rights
10.6 The Executive hereby waives and further agrees to, from time to time as such Inventions arise, waive for the benefit of the Company and its successors or assigns all the Executive‘s moral rights in respect of the Inventions.
Further Assistance
10.7 The Executive agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and, from time to time, enforce the Intellectual Property Rights and to the Inventions in any and all countries, and to that end will execute all documents for use in applying for, obtaining and enforcing the Intellectual Property Rights in and to such Inventions as the Company may desire, together with any assignments of such Inventions to the Company or persons designated by it. The Executive’s obligation to assist the Company in obtaining and enforcing such Intellectual Property Rights in any and all countries shall continue beyond the termination of this Agreement.
Representations and Warranties
10.8 The Executive hereby represents and warrants that the Executive is subject to no contractual or other restriction or obligation that will in any manner limit the Executive’s obligations under this Agreement or activities on behalf of the Company. The Executive hereby represents and warrants to the Company that the Executive has no continuing obligations to any person (a) with respect to any previous invention, discovery or other item of intellectual property or (b) that require the Executive not to disclose the same.
Article 11
INDEMNIFICATION AND LEGAL PROCEEDINGS
Indemnification
11.1 The Parties hereby each agree to indemnify and save harmless the other Party and including, where applicable, the other Party’s respective subsidiaries and affiliates and each of their respective directors, officers, associates, affiliates and agents (each such party being an “Indemnified Party”), harmless from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatever nature or kind and including, without limitation, any investigation expenses incurred by any Indemnified Party, to which an Indemnified Party may become subject by reason of the terms and conditions of this Agreement.
No indemnification
11.2 This indemnity will not apply in respect of an Indemnified Party in the event and to the extent that a Court of competent jurisdiction in a final judgment shall determine that the Indemnified Party was grossly negligent or guilty of wilful misconduct, or committed a gross or intentional fault.
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Claim of indemnification
11.3 The Parties agree to waive any right they might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy, security or claim payment from any other person before claiming this indemnity.
Notice of claim
11.4 In case any action is brought against an Indemnified Party in respect of which indemnity may be sought against either of the Parties (said Party then being the “Indemnitee”), the Indemnified Party will give both Parties prompt written notice of any such action of which the Indemnified Party has knowledge and the Indemnitee will undertake the investigation and defense thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Party affected and the Indemnitee and the payment of all expenses.
Failure by the Indemnified Party to so notify shall not relieve the Indemnitee of the Indemnitee‘s obligation of indemnification hereunder unless (and only to the extent that) such failure results in a forfeiture by the Indemnitee of substantive rights or defenses.
Settlement
11.5 No admission of liability and no settlement of any action shall be made without the consent of each of the Parties and the consent of the Indemnified Party affected, such consent not to be unreasonable withheld.
Legal Proceedings
11.6 Notwithstanding that the Indemnitee will undertake the investigation and defense of any action, an Indemnified Party will 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 will be at the expense of the Indemnified Party unless:
| (a) | such counsel has been authorized by the Indemnitee; |
| (b) | the Indemnitee has not assumed the defense of the action within a reasonable period of time after receiving notice of the action; |
| (c) | the named parties to any such action include that any Party and the Indemnified Party shall have been advised by counsel that there may be a conflict of interest between any Party and the Indemnified Party; or |
| (d) | there are one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to any Party. |
Contribution
11.7 If for any reason other than the gross negligence, gross or intentional fault, or bad faith of the Indemnified Party being the primary cause of the loss, claim, damage, liability, cost or expense, the foregoing indemnification is unavailable to the Indemnified Party or insufficient to hold them harmless, the Indemnitee shall contribute to the amount paid or payable by the Indemnified Party as a result of any and all such losses, claim, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnitee on the one hand and the Indemnified Party on the other, but also the relative fault of the Indemnitee and the Indemnified Party and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Indemnitee shall in any event contribute to the amount paid or payable by the Indemnified Party, as a result of the loss, claim, damage, liability, cost or expense (other than a loss, claim, damage, liability, cost or expenses, the primary cause of which is the gross negligence, gross or intentional fault, or bad faith of the Indemnified Party), any excess of such amount over the amount of the fees actually received by the Indemnified Party hereunder.
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Article 12
ARBITRATION
Matters for arbitration
12.1 Except for matters of indemnity or in the case of urgency to prevent material harm to a substantive right or asset, the Parties agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof. This provision shall not prejudice a Party from seeking a Court order or assistance to garnish or secure sums.
Notice
12.2 It shall be a condition precedent to the right of any Party to submit any matter to arbitration pursuant to the provisions hereof that any Party intending to refer any matter to arbitration shall have given not less than five business days’ prior written notice of its intention to do so to the other Party together with particulars of the matter in dispute. On the expiration of such five business days the Party who gave such notice may proceed to refer the dispute to arbitration as provided for herein. Except for matters of indemnity or in the case of urgency to prevent material harm to a substantive right or asset, the Parties agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof. This provision shall not prejudice a Party from seeking a Court order or assistance to garnish or secure sums or to seek summary remedy for such matters as counsel may consider amenable to summary proceedings.
Appointments
12.3 The Party desiring arbitration shall appoint one arbitrator, and shall notify the other Party of such appointment, and the other Party shall, within five business days after receiving such notice, appoint an arbitrator, and the two arbitrators so named, before proceeding to act, shall, within five business days of the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator, to act with them and be chairperson of the arbitration herein provided for. If the other Party shall fail to appoint an arbitrator within five business days after receiving notice of the appointment of the first arbitrator, or if the two arbitrators appointed by the Parties shall be unable to agree on the appointment of the chairperson, such arbitrators shall be appointed in accordance with the provisions of the Quebec Code of Civil Procedure (the “Code”). Except as specifically otherwise provided in this section, the arbitration herein provided for shall be conducted in accordance with such Code. The chairperson, or in the case where only one arbitrator is appointed, the single arbitrator, shall fix a time and place in Montreal, Quebec, for the purpose of hearing the evidence and representations of the Parties, and the chairperson shall preside over the arbitration and determine all questions of procedure not provided for by the Code or this section. After hearing any evidence and representations that the Parties may submit, the single arbitrator, or the arbitrators, as the case may be, shall make an award and reduce the same to writing, and deliver one copy thereof to each of the Parties. The expense of the arbitration shall be paid as specified in the award.
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Award
12.4 The Parties agree that the award of a majority of the arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be final and binding upon each of them.
Article 13
OTHER PROVISIONS
Waivers and Amendments
13.1 This Agreement may be amended, modified, superseded, cancelled, renewed or extended, only by a written agreement between the Parties. Failure or delay by either Party to enforce compliance with any term or condition of this Agreement shall not constitute a waiver of such term or condition.
No Representation or Claims
13.2 The Executive agrees that the Executive has not been induced to enter into this Agreement by reason of any statement, representation, understanding or promise not expressly set out in this Agreement. The Executive has no claim against the Company arising from any Services provided by the Executive to the Company in any capacity prior to the Effective Date of this Agreement.
Governing Law
13.3 For all purposes this Agreement will be governed exclusively by and construed and enforced in accordance with the laws prevailing in the Province of Quebec, Canada, and the federal laws of Canada applicable thereto.
Notices
13.4 Any notice or other communication or writing required or permitted to be given under this Agreement or for the purposes of this Agreement will be in writing and will be sufficiently given if delivered personally, or if transmitted by facsimile transmission (with original to follow by mail) or other form of recorded communication, tested prior to transmission, to:
| (a) | if to the Company: |
Riopel Marine Inc.
730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
Attention: Chief Financial Officer
E-mail: admin@electricboats.ca;
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with a copy to counsel for the Company:
Renno & Co. Inc.
Suite 400, 3 Place Ville Marie, Montreal, Quebec, Canada, H3B 2E3
Attention: Toufic Adlouni
Fax: (514) 545-5556
E-mail: notifications@rennoco.com; and
| (b) | if to the Executive: |
Alexandre Mongeon
129 Avenue Bellevue, Laval Quebec, Canada, H7C 1T2
E-mail: am@electricboats.ca;
or to such other address as the Party to whom such notice is to be given will have last notified the Party giving the same in the manner provided in this section. Any notice so delivered will be deemed to have been given and received on the day it is so delivered at such address; provided that such day is not a Business Day (as herein defined) then the notice will be deemed to have been given and received on the Business Day next following the day it is so delivered. Any notice so transmitted by facsimile transmission or other form of recorded communication will be deemed to have been given and received on the day of its confirmed transmission (as confirmed by the transmitting medium), provided that if such day is not a Business Day then the notice will be deemed to have been given and received on the Business Day next following such day. “Business Day” means any day that is not a Saturday, Sunday or civic or statutory holiday in the Province of Quebec, Canada.
Assignment
13.5 The Executive may not assign this Agreement or any right or obligation under it.
Severability
13.6 If any provision of this Agreement is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability shall attach only to such provision or part thereof and the remaining part of such provision and all other provisions hereof shall continue in full force and effect. The Parties agree to negotiate in good faith to agree to a substitute provision which shall be as close as possible to the intention of any invalid or unenforceable provision as may be valid or enforceable.
Independent Legal Advice
13.7 The Executive acknowledges that the Company has recommended that the Executive obtain independent legal advice with respect to this Agreement, and that the Executive has had a reasonable opportunity to do so prior to executing this Agreement.
Force Majeure
13.8 If either Party is at any time either during this Agreement or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, walk-outs, labour shortages, power shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents, protests or demonstrations by environmental lobbyists or native rights groups, delays in transportation, breakdown of machinery, inability to obtain necessary materials in the open market, unavailability of equipment, governmental regulations restricting normal operations, shipping delays or any other reason or reasons beyond the control of that Party, then the time limited for the performance by that Party of its respective obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay. A Party shall within three calendar days give notice to the other Party of each event of force majeure under this section, and upon cessation of such event shall furnish the other Party with notice of that event together with particulars of the number of days by which the obligations of that Party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure.
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Time of the essence
13.9 Time will be of the essence of this Agreement.
Enurement
13.10 This Agreement will enure to the benefit of and will be binding upon the Parties and their respective heirs, executors, administrators and assigns.
Further assurances
13.11 The Parties will from time to time after the execution of this Agreement make, do, execute or cause or permit to be made, done or executed, all such further and other acts, deeds, things, devices and assurances in law whatsoever as may be required to carry out the true intention and to give full force and effect to this Agreement.
No partnership or agency
13.12 The Parties have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party the partner, agent or legal representative of the other Parties, nor create any fiduciary relationship between them for any purpose whatsoever.
Personal Information
13.13 The Executive acknowledges that the Company is obligated to comply with the Quebec Act Respecting the Protection of Personal Information in the Private Sector and with any other applicable legislation governing the collection, use, storage and disclosure of personal information. The Executive agrees to comply with all Company personal information protection policies and with other policies, controls and practices as they may exist, from time to time, in ensuring that the Executive and the Company engage only in lawful collection, storage, use and disclosure of personal information.
Captions
13.14 The headings, captions, Article, section and subsection numbers appearing in this Agreement are inserted for convenience of reference only and shall in no way define, limit, construe or describe the scope or intent of this Agreement nor in any way affect this Agreement.
Counterparts
13.15 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
Language
13.16 The Parties have requested that the present Agreement be drafted in the English language. Les parties aux présentes ont exigé que cette convention soit rédigée en anglais.
[Rest of page left intentionally blank. Signature page follows.]
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IN WITNESS WHEREOF the Parties hereto have executed this Agreement as at the Effective Date as hereinabove determined.
| RIOPEL MARINE INC., | |
| the Company herein: | |
 |
|
| Name: Kulwant Sandher | |
| Title: Chief Financial Officer | |
 |
|
| ALEXANDRE MONGEON |
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Exhibit 10.5
EXECUTIVE SERVICES AGREEMENT
Between:
RIOPEL MARINE INC.
And:
PATRICK BOBBY
Riopel Marine Inc.
730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
EXECUTIVE SERVICES AGREEMENT
THIS EXECUTIVE SERVICES AGREEMENT is made and dated as fully executed on this 7th day of April, 2020, with an Effective Date of April 1, 2020 as set forth below.
BETWEEN:
RIOPEL MARINE INC., a corporation incorporated pursuant to the laws of the Province of Quebec, and having an address for delivery and notice located at 730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
(the “Company”);
OF THE FIRST PART
AND:
PATRICK BOBBY, businessperson, having an address for notice and delivery located at 950 Avenue Saint-Laurent, Laval, Quebec, Canada, H7C 1Y9
(the “Executive”);
OF THE SECOND PART
(the Company and the Executive being hereinafter singularly also referred to as a “Party” and collectively referred to as the “Parties” as the context so requires).
WHEREAS:
A. The Company is a non-reporting company incorporated under the laws of the Province of Quebec, Canada;
B. The Executive has experience in and specializes in providing companies with valuable management and development services and the Executive is the Company’s current Chief Operating Officer;
C. The Company is focused on developing technology and business interests related to and associated with the commercialization of its innovative electric boats and related business interests and, as a consequence thereof, the Company is hereby desirous of formally retaining the Executive as an executive of the Company, and the Executive is hereby desirous of accepting such position, in order to provide such related Services (as hereinafter defined) to the Company;
D. As a consequence of the Executive’s valuable role within the Company, the Parties hereby acknowledge and agree that there have been various discussions, negotiations, understandings and agreements between them relating to the terms and conditions of the Services and, correspondingly, that it is their intention by the terms and conditions of this “Executive Services Agreement” (the “Agreement”) to hereby replace, in their entirety, all such prior discussions, negotiations, understandings and agreements with respect to the Services; and
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E. The Parties have agreed to enter into this Agreement which replaces, in its entirety, all such prior discussions, negotiations, understandings and agreements, and, furthermore, which necessarily clarifies their respective duties and obligations with respect to the within Services to be provided hereunder, all in accordance with the terms and conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the mutual covenants and provisos herein contained, THE PARTIES AGREE AS FOLLOWS:
Article 1
INITIAL TERM AND RENEWAL
Term
1.1 The initial term of this Agreement (the “Initial Term”) is for a period of three years commencing on April 1, 2020 (the “Effective Date”), unless such employment is terminated earlier as hereinafter provided.
1.2 Subject at all times to the provisions of Article 7 herein, this Agreement shall renew automatically if not specifically terminated in accordance with the following provisions. The Company agrees to notify the Executive in writing at least 30 calendar days prior to the end of the Initial Term of its intent not to renew this Agreement (the “Company’s Non-Renewal Notice”). Should the Company fail to provide a Company’s Non-Renewal Notice this Agreement shall automatically renew on a one-month to one-month term renewal basis after the Initial Term until otherwise specifically renewed in writing by each of the Parties for the next one-month term of renewal or, otherwise, terminated upon delivery by the Company of a corresponding and follow-up 30 calendar day Company’s Non-Renewal Notice in connection with and within 30 calendar days prior to the end of any such one-month term renewal period. Any such renewal on a one-month basis shall be on the same terms and conditions contained herein unless modified and agreed to in writing by the Parties in advance.
Article 2
TITLE REPORTING AND DUTIES
Title and Services
2.1 Subject as otherwise herein provided, the Company hereby appoints the Executive to the office of Chief Operating Officer of the Company, and on and after the Effective Date the Executive will undertake and perform the duties and responsibilities normally and reasonably associated with such office. The Executive agrees that the Executive’s duties and responsibilities may be reasonably modified at the Company’s discretion from time to time. All services to be provided by the Executive hereunder are referred to as the “Services”.
2.2 In this regard it is hereby acknowledged and agreed that the Executive shall be entitled to communicate with and shall rely upon the immediate advice, direction and instructions of the President of the Company (the “President”), or upon the advice or instructions of such other director or officer of the Company as the President shall, from time to time, designate in times of the President’s absence, in order to initiate, coordinate and implement the Services as contemplated herein subject, at all times, to the final direction and supervision of the Board of Directors of the Company (the “Board of Directors”).
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2.3 It is hereby agreed that as long as the Executive is a member of the Board of Directors, the Executive shall not vote on matters coming before the Board of Directors relating to this Agreement or other agreements relating to the relationship between the Parties. Each Party shall ensure that the Executive recuses himself with respect to Board of Directors matters consistent with this section 2.3.
Conditions
2.4 The Executive’s employment under this Agreement is conditional upon the Executive:
| (a) | receiving and maintaining all required regulatory and governmental licences and approvals of various jurisdictions as may be required to act as the Chief Operating Officer of the Company; and |
| (b) | maintaining, in good standing, all required and recommended professional accreditation as may be deemed necessary by the Company, acting reasonably in consultation with the Executive, in order for the Executive to fulfill all Services under this Agreement |
Services to Subsidiaries
2.5 The Executive will perform the Services on behalf of the Company and its subsidiaries, accordingly:
| (a) | in this Agreement the term “the Company” means the Company and all of its subsidiaries, and |
(c) in the course of performing the Services, the Executive will be required to travel.
Reporting
2.6 The Executive will report to the person holding the office of President of the Company. The Executive will report fully on the management, operations and business affairs of the Company and advise, to the best of the Executive’s ability and in accordance with reasonable business standards, on business matters that may arise from time to time.
Duties and Obligations
2.7 The Executive acknowledges that, as a senior or executive officer of the Company, the Executive will owe a fiduciary duty to the Company.
2.8 The Executive will also:
| (a) | devote reasonable efforts and attention to the business and affairs of the Company; |
| (b) | perform the Services in a competent and efficient manner and in a manner consistent with the Executive’s fiduciary obligations to the Company as a senior or executive officer thereof and in compliance with all the Company policies, and will carry out all lawful instructions and directions from time to time given to the Executive; and | |
| (c) | promote the interests and goodwill of the Company. |
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2.9 The Executive acknowledges and agrees that all written and oral opinions, reports, advice and materials provided by the Executive to the Company in connection with the Executive’s employment and the Services hereunder are intended solely for the Company’s benefit and for the Company’s uses only, and that any such written and oral opinions, reports, advice and information are the exclusive property of the Company. In this regard the Executive covenants and agrees that the Company may utilize any such opinion, report, advice and materials for any other purpose whatsoever and, furthermore, may reproduce, disseminate, quote from and refer to, in whole or in part, at any time and in any manner, any such opinion, report, advice and materials in the Company’s sole and absolute discretion. The Executive further covenants and agrees that no public references to the Executive or disclosure of the Executive’s role in respect of the Company may be made by the Executive without the prior written consent of the President in each specific instance.
2.10 The Executive warrants that the Executive shall conduct the business and other activities in a manner which is lawful and reputable and which brings good repute to the Company, the Company’s business interests and the Executive. In particular, and in this regard, the Executive specifically warrants to provide the Services in a sound and professional manner such that the same meets superior standards of performance quality within the standards of the industry or as set by the specifications of the Company. In the event that the Board of Directors has a reasonable concern that the business as conducted by the Executive is being conducted in a way contrary to law or is reasonably likely to bring disrepute to the business interests or to the Company’s or the Executive’s reputation, the Company may require that the Executive make such alterations in the Executive’s business conduct as the Board of Directors may reasonably require in its sole and absolute discretion.
2.11 The Executive will comply with all Canadian and foreign laws, whether federal, provincial or state, applicable to the Executive’s respective duties and obligations hereunder and, in addition, hereby represents and warrants that any information which the Executive may provide to any person or company hereunder will, to the best of the Executive’s knowledge, information and belief, be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company.
Article 3
PLACE OF EMPLOYMENT
Relocation
3.1 The Executive will provide Services based in Boisbriand, Quebec, but will, if requested by the Company, move to any place within the Montreal Metropolitan Community, as defined by the territorial portrait outlined by the Communauté métropolitaine de Montréal, where the Company currently or may in the future conduct business.
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Article 4
COMPENSATION AND BENEFITS
Base Salary
4.1 It is hereby acknowledged and agreed that the Executive shall render the Services as defined hereinabove during the Initial Term and during the continuance of this Agreement and shall thus be compensated from the Effective Date of this Agreement to the termination of the same by way of the payment by the Company to the Executive, or to the further order or direction of the Executive as the Executive may determine, in the Executive’s sole and absolute discretion, and advise the Company of prior to such payment, of the gross monthly fee of CAD$ 10,000.00 (the “Base Salary”). All such Base Salary will be due and payable by the Company to the Executive, or to the further order or direction of the Executive as the Executive may determine, in the Executive’s sole and absolute discretion, and advise the Company of prior to any such Base Salary payment, in a manner consistent with the general payroll practice of the Company, or at such other time and in such other manner as the Executive and the Company may agree, from time to time.
Increase in Base Salary
4.2 The Company will review the Base Salary payable to the Executive from time to time during the Initial Term and during the continuance of this Agreement and may, in its sole and absolute discretion, increase the Base Salary depending on the Executive’s performance of the Services and having regard to the financial circumstances of the Company.
Bonus
4.3 It is hereby also acknowledged that the Board of Directors shall, in good faith, consider the payment of reasonable industry standard annual bonuses (each being a “Bonus”) based upon the performance of the Company and upon the achievement by the Executive and/or the Company of reasonable management objectives to be reasonably established by the Board of Directors (after reviewing proposals with respect thereto defined by the Executive and delivered to the Board of Directors by the Executive at least 30 calendar days before the beginning of the relevant year of the Company (or within 90 calendar days following the commencement of the Company’s first calendar year commencing on the Effective Date)). These management objectives shall consist of both financial and subjective goals and shall be specified in writing by the Board of Directors, and a copy shall be given to the Executive prior to the commencement of the applicable year. The payment of any such Bonus shall be payable, in the sole and absolute discretion of the Company, in cash or common shares of the Company, no later than within 120 calendar days of the ensuing year after any calendar year commencing on the Effective Date.
Stock Options
4.4 Subject to the following and the provisions of section 4.5 hereinbelow, it is hereby acknowledged that the Board of Directors may from time to time, in its sole and absolute discretion, grant to the Executive incentive stock options (each an “Option”) to purchase a number of common shares (each an “Option Share”) of the Company, subject to the terms and conditions of the Company’s existing stock incentive plan (the “Option Plan”), and to such exercise terms and conditions as may be determined by the Board of Directors in its discretion.
4.5 In this regard, and subject also to the following, it is hereby acknowledged and agreed that the exercise of any such Options shall be subject, at all times, to such vesting and resale provisions as may then be contained in the Company’s Option Plan and as may be finally determined by the Board of Directors, acting reasonably. In this regard, and in accordance with the terms and conditions of each final form of Company Option agreement, as the same may exist from time to time, the Parties hereby also acknowledge and agree that:
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| (a) | Registration of Option Shares under the Options: if required under the Securities Act, the Company will use reasonable commercial efforts to file with the United States Securities and Exchange Commission (the “SEC”) a registration statement on Form S-8 (the “Form S-8 Registration Statement”) within 90 calendar days after the date of grant of Options covering the issuance of all Option Shares of the Company underlying the then issued Options, and such Form S-8 Registration Statement shall comply with all requirements of the United States Securities Act of 1933, as amended (the “Securities Act”). In this regard the Company shall use its best efforts to ensure that the Form S-8 Registration Statement remains effective as long as such Options are outstanding, and the Executive fully understands and acknowledges that these Option Shares will be issued in reliance upon the exemption afforded under the Form S-8 Registration Statement which is available only if the Executive acquires such Option Shares for investment and not with a view to distribution. The Executive is familiar with the phrase “acquired for investment and not with a view to distribution” as it relates to the Securities Act and the special meaning given to such term in various releases of the SEC; |
| (b) | Section 16 compliance: the Company shall ensure that all grants of Options are made to ensure compliance with all applicable provisions of the exemption afforded under Rule 16b-3 promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Without limiting the foregoing, the Company shall, if required, have each grant of Options to the Executive approved by an independent committee of the Board of Directors and, if required, by the applicable Regulatory Authorities and the shareholders of the Company. The Company shall file, on behalf of the Executive, all reports required to filed with the SEC pursuant to the requirements of Section 16(a) under the Exchange Act and applicable rules and regulations; |
| (c) | Disposition of any Option Shares: the Executive further acknowledges and understands that, without in anyway limiting the acknowledgements and understandings as set forth hereinabove, the Executive agrees that the Executive shall in no event make any disposition of all or any portion of the Option Shares which the Executive may acquire hereunder unless and until: |
| (i) | there is then in effect a “Registration Statement” under the Securities Act covering such proposed disposition and such disposition is made in accordance with said Registration Statement; or |
| (ii) | (A) the Executive shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (B) the Executive shall have furnished the Company with an opinion of the Executive’s own counsel to the effect that such disposition will not require registration of any such Option Shares under the Securities Act and (C) such opinion of the Executive’s counsel shall have been concurred in by counsel for the Company and the Company shall have advised the Executive of such concurrence; and |
| (d) | Payment for any Option Shares: it is hereby further acknowledged and agreed that, during the Initial Term and any continuance of this Agreement, the Executive shall be entitled to exercise any Option granted hereunder and pay for the same by way of the prior agreement of the Executive, in the Executive’s sole and absolute discretion, and with the prior knowledge of the Company, to settle any indebtedness which may be due and owing by the Company under this Agreement in payment for the exercise price of any Option Shares acquired thereunder. In this regard, and subject to further discussion as between the Company and the Executive, together with the prior approval of the Board of Directors and the establishment by the Company of a new Option Plan predicated upon the same, it is envisioned that, when the Company is in a position to afford the same, the Company may adopt certain additional “cashless exercise” provisions respecting the granting and exercise of incentive stock options during the continuance of this Agreement. |
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Group Insurance and Health Benefits
4.6 It is hereby acknowledged and agreed that, during the continuance of this Agreement, the Executive shall be entitled to participate fully in each of the Company’s respective medical services plans and management and employee benefits program(s) which the Company provides, from time to time, to all senior management personnel and including, without limitation, the following benefits, if and when such benefits have been adopted by the Company (collectively, the “Group Benefits”):
(a) group health insurance;
(b) accidental death and dismemberment insurance and including, without limitation, travel accident insurance;
(c) group life insurance;
(d) short-term disability insurance;
(e) long-term disability insurance;
(f) drug coverage; and
(g) dental coverage.
Payment of compensation and status as a taxable employee
4.7 It is hereby also acknowledged and agreed that, unless otherwise agreed to in advance and in writing by the Parties, the Executive will be classified as a taxable employee of the Company for all purposes, such that all compensation which is provided by the Company to the Executive under this Agreement, or otherwise, will be calculated on a net basis and otherwise for which statutory taxes will first be deducted by the Company.
Article 5
ANNUAL VACATION
Period
5.1 The Executive will be entitled to four weeks’ paid annual vacation per calendar year (the “Vacation”) during the Initial Term and during the continuance of this Agreement, to be taken at a time or times which are approved by the President of the Company (such approval not to be unreasonably withheld); provided, however, taking into account the operational requirements of the Company and the need for the timely performance of the Executive’s Services; and provided, further, that such weeks shall not be taken consecutively. In this regard it is further understood hereby that the Executive’s entitlement to any such paid Vacation during any year (including the initial year) during the continuance of this Agreement will be subject, at all times, to the Executive’s entitlement to only a pro rata portion of any such paid Vacation time during any year (including the initial year) and to the effective date upon which this Agreement is terminated prior to the end of any such year for any reason whatsoever.
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Unused
5.2 Unused vacation may not be carried over after the completion of each calendar year and any unused vacation will be paid out in cash.
Article 6
EXPENSES
Reimbursement of Expenses
6.1 The Company will reimburse the Executive for all pre-approved and reasonable travel and other out-of-pocket expenses incurred by the Executive directly related to the performance of the Services (collectively, the “Expenses”). The Executive will account for such Expenses in accordance with the policies and directions provided by the Company from time to time.
Article 7
TERMINATION
Definitions
7.1 In this Agreement:
| (a) | “Cause” means any act, omission, behaviour, conduct or circumstance of the Executive that constitutes a serious reason for dismissal of the Executive under the laws of the Province of Quebec. |
Termination by the Company for Cause
7.2 The Company may terminate the employment of the Executive under this Agreement summarily, without any notice or any payment in lieu of notice, for Cause.
Voluntary Termination By the Executive
7.3 The Executive may terminate the Executive’s employment under this Agreement for any reason by providing not less than 90 calendar days’ notice in writing to the Company; provided, however, that the Company may waive or abridge any notice period specified in such notice in its sole and absolute discretion.
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Death of the Executive
7.4 The employment of the Executive will terminate upon the death of the Executive.
No Payments in Certain Events
7.5 Upon the date of the termination of the employment of the Executive:
| (a) | for Cause in accordance with section 7.2 herein; or |
| (b) | by the voluntary termination of employment by the Executive in accordance with section 7.3 herein; |
(in each instance the “Effective Date of Termination” herein), the Executive will be entitled to compensation earned by the Executive before the Effective Date of Termination calculated pro rata up to and including the Effective Date of Termination and will not be entitled to any severance or other payments under this Agreement or otherwise.
Payments in the Event of Termination by Death
7.6 The Company will, upon the death of the Executive during the continuance of this Agreement in accordance with section 7.4 herein (the “Effective Date of Termination” herein), provide the Executive’s estate and, if applicable, the Executive’s immediate family members, with the following:
| (a) | pay to the Executive’s estate the total of: |
| (i) | three month’s Base Salary, less any required statutory deductions, if any; | |
| (ii) | that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the Effective Date of Termination, that the President of the Company determines would likely have been paid to the Executive for the three months from the Effective Date of Termination; such determination to be made fairly and reasonably and taking into account all relevant circumstances; |
| (iii) | any outstanding Vacation pay as at the Effective Date of Termination; and | |
| (iv) | any outstanding Expenses as at the Effective Date of Termination; and |
| (b) | subject to the Company’s then Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over the Company, allow for the Executive’s estate to then exercise any unexercised and fully vested portion of the Options on the Effective Date of Termination at any time during three months from the Effective Date of Termination. |
Payments in the Event of Termination Without Cause
7.7 The Company will, if it terminates the employment of the Executive other than for Cause or by death in accordance with sections 7.2 and 7.4 herein (in such instance on the “Effective Date of Termination” herein), provide the Executive with the following:
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(a) pay to the Executive the total of:
| (i) | six month’s Base Salary, less any required statutory deductions, if any; | |
| (ii) | that portion of any then declared and/or earned or accrued Bonus, prorated to the end of the three-month period from the Effective Date of Termination, that the President of the Company determines would likely have been paid to the Executive for the three months from the Effective Date of Termination; such determination to be made fairly and reasonably and taking into account all relevant circumstances; |
| (iii) | the present value, as determined by the Company, acting reasonably, of each of the Group Benefits described under section 4.6 herein that would have been enjoyed by the Executive during the next three months from the Effective Date of Termination assuming the Executive’s employment was not terminated and assuming the then current level of Group Benefits were continued for that three months; |
| (iv) | any outstanding Vacation pay as at the Effective Date of Termination; and | |
| (v) | any outstanding Expenses as at the Effective Date of Termination; |
| (b) | maintain the Executive’s Group Benefits for a period of six months from the Effective Date of Termination; and |
| (c) | subject to the Company’s then Option Plan and the rules and policies of any regulatory authority and stock exchange having jurisdiction over the Company, allow for the Executive to then exercise any unexercised and fully vested portion of the Options on the Effective Date of Termination at any time during three months from the Effective Date of Termination. |
Executive to Provide Release
7.8 Subject to the Company’s making the payment and maintaining the Group Benefits as provided in section 7.7 herein, the Executive will execute and deliver to the Company a full and final release of the Company, in the form provided by the Company, in respect of the Executive’s employment under this Agreement and otherwise.
Manner of Payment
7.9 The Company may, in its sole and absolute discretion, pay the amounts referred to in sections 7.6 and 7.7 herein either in a manner consistent with the general payroll practice of the Company over the course of the relevant time period or in a lump sum payment within seven business days after receipt by the Company of the executed full and final release referred to in section 7.8 herein; provided, however, that the Company will pay any such amounts to which the Executive may be entitled under the Quebec Act Respecting Labour Standards, including any compensatory indemnity in lieu of notice of termination, on the Effective Date of Termination.
Return of Materials
7.10 All documents and materials in any form or medium and including, but not limited to, files, forms, brochures, books, correspondence, memoranda, manuals and lists (including lists of customers, suppliers, products and prices), all equipment and accessories and again including, but not being limited to, leased automobiles, computers, computer disks, software products, cellular phones and personal digital assistants, all keys, building access cards, parking passes, credit cards, and other similar items pertaining to the business of the Company that may come into the possession or control of the Executive, will at all times remain the property of the Company and, on termination of the Executive’s employment for any reason, the Executive will promptly deliver to the Company all property of the Company in the possession of the Executive or directly or indirectly under the control of the Executive, and will not reproduce or copy any such property or other property of the Company.
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Article 8
CONFIDENTIALITY
Confidential Information
8.1 The Executive acknowledges that:
| (a) | the Executive may, during the course of employment with the Company, acquire information which is confidential in nature or of great value to the Company and its subsidiaries including, without limitation, matters or subjects concerning corporate assets, cost and pricing data, customer listing, financial reports, formulae, inventions, know-how, marketing strategies, products or devices, profit plans, research and development projects and findings, computer programs, suppliers, and trade secrets, whether in the form of records, files, correspondence, notes, data, information, or any other form, including copies or excerpts thereof (collectively, the “Confidential Information”); the disclosure of any of which to competitors, customers, clients or suppliers of the Company, unauthorized personnel of the Company or to third parties would be highly detrimental to the best interests of the Company; and |
| (b) | the right to maintain the confidentiality of Confidential Information, and the right to preserve the Company’s goodwill, constitute proprietary rights which the Company is entitled to protect. |
8.2 The Executive will, while employed with the Company and at all times thereafter:
| (a) | hold all Confidential Information that the Executive receives in trust for the sole benefit of the Company and in strictest confidence; |
| (b) | protect all Confidential Information from disclosure and will not take any action that could reasonably be expected to result in any Confidential Information losing its character as Confidential Information, and will take all lawful action necessary to prevent any Confidential Information from losing its status as Confidential Information; and |
| (c) | neither, except as required in the course of performing duties and responsibilities under this Agreement, directly or indirectly use, publish, disseminate or otherwise disclose any Confidential Information to any unauthorized personnel of the Company or to any third party, nor use Confidential Information for any purpose other than the purposes of the Company, without the prior written consent of the Company, which consent may be withheld in the Company’s sole and absolute discretion. |
8.3 The restrictions on the Executive’s use or disclosure of all Company Information, as set forth in this Article 8, shall continue following the expiration or termination of the Executive’s employment with the Company regardless of the reasons for or manner of such termination.
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8.4 Notwithstanding section 8.2 herein, the Executive may, if and solely to the extent required by lawful subpoena or other lawful process, disclose Confidential Information but, to the extent possible, shall first notify the Company of each such requirement so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Agreement. The Executive will co-operate fully with the Company at the expense of the Company in seeking any such protective order.
Article 9
NON-COMPETITION AND NON-SOLICITATION
Non-Competition and Payments for Enforcement by the Company during Standstill Period
9.1 The Executive acknowledges that the Executive’s Services under this Agreement are of special, unique and extraordinary character which give the Executive value to the Company; the loss of which cannot adequately be compensated in damages or by an action at law. In addition to, and not in limitation of any other restrictive covenant which may be binding on the Executive, the Executive shall not anywhere in the Montreal Metropolitan Community, as defined by the territorial portrait outlined by the Communauté métropolitaine de Montréal, for a period of one year after the termination of this Agreement (the “Standstill Period” herein) for any reason in any manner whatsoever:
(a) carry on, engage in, or be concerned with or interested in; or
| (b) | permit the Executive’s name or any part thereof to in any manner whatsoever to be used or connected with any business that is, or any interest in any business that is; |
directly competitive with the business of the Company or any of its subsidiaries.
9.2 The Executive agrees that:
| (a) | all restrictions contained in section 9.1 herein are reasonable and valid in the circumstances and all defences to the strict enforcement thereof by the Company are hereby waived by the Executive; |
| (b) | the remedy available to the Company at law for any breach by him of section 9.1 herein will be inadequate and that the Company, on any application to a Court, shall be entitled to temporary and permanent injunctive relief against the Executive without the necessity of proving actual damage to the Company; and |
| (c) | if the foregoing covenant is found to be unreasonable to any extent by a court of competent jurisdiction adjudicating upon the validity of the covenant, whether as to the scope of the restriction, the area of the restriction or the duration of the restriction, then such restriction shall be reduced to that which is in fact declared reasonable by such court, or a subsequent court of competent jurisdiction, requested to make such a declaration. |
9.3 Should this Agreement be terminated for any reason (in such instance on the “Effective Date of Termination” herein) and should the Executive, during the one year Standstill Period from the Effective Date of Termination, secure a bona fide employment or consulting position outside of the Company (which the Executive evidences in writing to the Company; the “Other Position”) which may in any manner infringe the restrictions contained in section 9.1 herein, and should the Company, acting reasonably, not release the Executive from the restrictions contained in sections 9.1 and 9.2 herein in taking such Other Position, then, during the Standstill Period, and in order to compensate the Executive for not being in a position to accept the Other Position, the Company will, during the Standstill Period:
(a) continue to pay the Executive the Base Salary; and
(b) continue to maintain the Executive’s Group Benefits.
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Non-Solicitation
9.4 The Executive hereby agrees that the Executive will not, during the period commencing on the Effective Date hereof and ending one year following the termination or expiration of this Agreement for any reason, be a party to or abet any solicitation of customers, clients, referral services, consultants or suppliers of the Company or any of its subsidiaries, to transfer business from the Company or any of its subsidiaries to any other person, or seek in any way to persuade or entice any employee of the Company or any of its subsidiaries to leave that employment or to be a party to or abet any such action.
Article 10
OWNERSHIP OF INTELLECTUAL PROPERTY
Definitions
10.1 In this Agreement, “Inventions” means, collectively, all:
| (a) | discoveries, inventions, ideas, suggestions, reports, documents, designs, technology, methodologies, compilations, concepts, procedures, processes, products, protocols, treatments, methods, tests, improvements, work product and computer programs (including all source code, object code, compilers, libraries and developer tools, and any manuals, descriptions, data files, resource files and other such materials relating thereto), and |
(b) each and every part of the foregoing;
that are conceived, developed, reduced to practice or otherwise made by the Executive either alone or with others or, in any way, relate to the present or proposed programs, services, products or business of the Company, or to tasks assigned to the Executive in connection with the Executive’s duties or in connection with any research or development carried on or planned by the Company, whether or not such Inventions are conceived, developed, reduced to practice or otherwise made during the Executive’s employment or during regular working hours and whether or not the Executive is specifically instructed to conceive, develop, reduce to practice or otherwise make same.
Exclusive Property
10.2 The Executive agrees that all Inventions, and any and all services and products which embody, emulate or employ any such Invention, shall be the sole property of the Company and all copyrights, patents, patent rights, trademarks, service marks, reproduction rights and all other proprietary title, rights and interest in and to each such Invention, whether or not registrable (collectively, the “Intellectual Property Rights”), shall belong exclusively to the Company.
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Work for Hire
10.3 For purposes of all applicable copyright laws to the extent, if any, that such laws are applicable to any such Invention or any such service or product, it shall be considered a work made for hire and the Company shall be considered the author thereof.
Disclosure
10.4 The Executive will promptly disclose to the Company, or any persons designated by it, all Inventions and all such services or products.
Assignment
10.5 The Executive hereby assigns and further agrees to, from time to time as such Inventions arise, assign to the Company or its nominee (or their respective successors or assigns) all of the Executive’s right, title and interest in and to the Inventions and the Intellectual Property Rights without further payment by the Company.
Moral Rights
10.6 The Executive hereby waives and further agrees to, from time to time as such Inventions arise, waive for the benefit of the Company and its successors or assigns all the Executive’s moral rights in respect of the Inventions.
Further Assistance
10.7 The Executive agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and, from time to time, enforce the Intellectual Property Rights and to the Inventions in any and all countries, and to that end will execute all documents for use in applying for, obtaining and enforcing the Intellectual Property Rights in and to such Inventions as the Company may desire, together with any assignments of such Inventions to the Company or persons designated by it. The Executive’s obligation to assist the Company in obtaining and enforcing such Intellectual Property Rights in any and all countries shall continue beyond the termination of this Agreement.
Representations and Warranties
10.8 The Executive hereby represents and warrants that the Executive is subject to no contractual or other restriction or obligation that will in any manner limit the Executive’s obligations under this Agreement or activities on behalf of the Company. The Executive hereby represents and warrants to the Company that the Executive has no continuing obligations to any person (a) with respect to any previous invention, discovery or other item of intellectual property or (b) that require the Executive not to disclose the same.
Article 11
INDEMNIFICATION AND LEGAL PROCEEDINGS
Indemnification
11.1 The Parties hereby each agree to indemnify and save harmless the other Party and including, where applicable, the other Party’s respective subsidiaries and affiliates and each of their respective directors, officers, associates, affiliates and agents (each such party being an “Indemnified Party”), harmless from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatever nature or kind and including, without limitation, any investigation expenses incurred by any Indemnified Party, to which an Indemnified Party may become subject by reason of the terms and conditions of this Agreement.
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No indemnification
11.2 This indemnity will not apply in respect of an Indemnified Party in the event and to the extent that a Court of competent jurisdiction in a final judgment shall determine that the Indemnified Party was grossly negligent or guilty of wilful misconduct, or committed a gross or intentional fault.
Claim of indemnification
11.3 The Parties agree to waive any right they might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy, security or claim payment from any other person before claiming this indemnity.
Notice of claim
11.4 In case any action is brought against an Indemnified Party in respect of which indemnity may be sought against either of the Parties (said Party then being the “Indemnitee”), the Indemnified Party will give both Parties prompt written notice of any such action of which the Indemnified Party has knowledge and the Indemnitee will undertake the investigation and defense thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Party affected and the Indemnitee and the payment of all expenses. Failure by the Indemnified Party to so notify shall not relieve the Indemnitee of the Indemnitee’s obligation of indemnification hereunder unless (and only to the extent that) such failure results in a forfeiture by the Indemnitee of substantive rights or defenses.
Settlement
11.5 No admission of liability and no settlement of any action shall be made without the consent of each of the Parties and the consent of the Indemnified Party affected, such consent not to be unreasonable withheld.
Legal Proceedings
11.6 Notwithstanding that the Indemnitee will undertake the investigation and defense of any action, an Indemnified Party will 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 will be at the expense of the Indemnified Party unless:
| (a) | such counsel has been authorized by the Indemnitee; | |
| (b) | the Indemnitee has not assumed the defense of the action within a reasonable period of time after receiving notice of the action; |
| (c) | the named parties to any such action include that any Party and the Indemnified Party shall have been advised by counsel that there may be a conflict of interest between any Party and the Indemnified Party; or |
| (d) | there are one or more legal defenses available to the Indemnified Party which are different from or in addition to those available to any Party. |
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Contribution
11.7 If for any reason other than the gross negligence, gross or intentional fault, or bad faith of the Indemnified Party being the primary cause of the loss, claim, damage, liability, cost or expense, the foregoing indemnification is unavailable to the Indemnified Party or insufficient to hold them harmless, the Indemnitee shall contribute to the amount paid or payable by the Indemnified Party as a result of any and all such losses, claim, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnitee on the one hand and the Indemnified Party on the other, but also the relative fault of the Indemnitee and the Indemnified Party and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Indemnitee shall in any event contribute to the amount paid or payable by the Indemnified Party, as a result of the loss, claim, damage, liability, cost or expense (other than a loss, claim, damage, liability, cost or expenses, the primary cause of which is the gross negligence, gross or intentional fault, or bad faith of the Indemnified Party), any excess of such amount over the amount of the fees actually received by the Indemnified Party hereunder.
Article 12
ARBITRATION
Matters for arbitration
12.1 Except for matters of indemnity or in the case of urgency to prevent material harm to a substantive right or asset, the Parties agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof. This provision shall not prejudice a Party from seeking a Court order or assistance to garnish or secure sums.
Notice
12.2 It shall be a condition precedent to the right of any Party to submit any matter to arbitration pursuant to the provisions hereof that any Party intending to refer any matter to arbitration shall have given not less than five business days’ prior written notice of its intention to do so to the other Party together with particulars of the matter in dispute. On the expiration of such five business days the Party who gave such notice may proceed to refer the dispute to arbitration as provided for herein. Except for matters of indemnity or in the case of urgency to prevent material harm to a substantive right or asset, the Parties agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof. This provision shall not prejudice a Party from seeking a Court order or assistance to garnish or secure sums or to seek summary remedy for such matters as counsel may consider amenable to summary proceedings.
Appointments
12.3 The Party desiring arbitration shall appoint one arbitrator, and shall notify the other Party of such appointment, and the other Party shall, within five business days after receiving such notice, appoint an arbitrator, and the two arbitrators so named, before proceeding to act, shall, within five business days of the appointment of the last appointed arbitrator, unanimously agree on the appointment of a third arbitrator, to act with them and be chairperson of the arbitration herein provided for. If the other Party shall fail to appoint an arbitrator within five business days after receiving notice of the appointment of the first arbitrator, or if the two arbitrators appointed by the Parties shall be unable to agree on the appointment of the chairperson, such arbitrators shall be appointed in accordance with the provisions of the Quebec Code of Civil Procedure (the “Code”). Except as specifically otherwise provided in this section, the arbitration herein provided for shall be conducted in accordance with such Code. The chairperson, or in the case where only one arbitrator is appointed, the single arbitrator, shall fix a time and place in Montreal, Quebec, for the purpose of hearing the evidence and representations of the Parties, and the chairperson shall preside over the arbitration and determine all questions of procedure not provided for by the Code or this section. After hearing any evidence and representations that the Parties may submit, the single arbitrator, or the arbitrators, as the case may be, shall make an award and reduce the same to writing, and deliver one copy thereof to each of the Parties. The expense of the arbitration shall be paid as specified in the award.
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Award
12.4 The Parties agree that the award of a majority of the arbitrators, or in the case of a single arbitrator, of such arbitrator, shall be final and binding upon each of them.
Article 13
OTHER PROVISIONS
Waivers and Amendments
13.1 This Agreement may be amended, modified, superseded, cancelled, renewed or extended, only by a written agreement between the Parties. Failure or delay by either Party to enforce compliance with any term or condition of this Agreement shall not constitute a waiver of such term or condition.
No Representation or Claims
13.2 The Executive agrees that the Executive has not been induced to enter into this Agreement by reason of any statement, representation, understanding or promise not expressly set out in this Agreement. The Executive has no claim against the Company arising from any Services provided by the Executive to the Company in any capacity prior to the Effective Date of this Agreement.
Governing Law
13.3 For all purposes this Agreement will be governed exclusively by and construed and enforced in accordance with the laws prevailing in the Province of Quebec, Canada, and the federal laws of Canada applicable thereto.
Notices
13.4 Any notice or other communication or writing required or permitted to be given under this Agreement or for the purposes of this Agreement will be in writing and will be sufficiently given if delivered personally, or if transmitted by facsimile transmission (with original to follow by mail) or other form of recorded communication, tested prior to transmission, to:
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(a) if to the Company:
Riopel Marine Inc.
730 Boulevard du Curé-Boivin, Boisbriand, Quebec, Canada, J7G 2A7
Attention: Chief Executive Officer
E-mail: admin @ electricboats .ca;
with a copy to counsel for the Company:
Renno & Co. Inc.
Suite 400, 3 Place Ville Marie, Montreal, Quebec, Canada, H3B 2E3
Attention: Toufic Adlouni
Fax: (514) 545-5556
E-mail: notifications@rennoco.com; and
(b) if to the Executive:
Patrick Bobby
950 Avenue Saint-Laurent, Laval, Quebec, Canada, H7C 1Y9
E-mail: pb@electricboats.ca;
or to such other address as the Party to whom such notice is to be given will have last notified the Party giving the same in the manner provided in this section. Any notice so delivered will be deemed to have been given and received on the day it is so delivered at such address; provided that such day is not a Business Day (as herein defined) then the notice will be deemed to have been given and received on the Business Day next following the day it is so delivered. Any notice so transmitted by facsimile transmission or other form of recorded communication will be deemed to have been given and received on the day of its confirmed transmission (as confirmed by the transmitting medium), provided that if such day is not a Business Day then the notice will be deemed to have been given and received on the Business Day next following such day. “Business Day” means any day that is not a Saturday, Sunday or civic or statutory holiday in the Province of Quebec, Canada.
Assignment
13.5 The Executive may not assign this Agreement or any right or obligation under it.
Severability
13.6 If any provision of this Agreement is determined to be invalid or unenforceable in whole or in part, such invalidity or unenforceability shall attach only to such provision or part thereof and the remaining part of such provision and all other provisions hereof shall continue in full force and effect. The Parties agree to negotiate in good faith to agree to a substitute provision which shall be as close as possible to the intention of any invalid or unenforceable provision as may be valid or enforceable.
Independent Legal Advice
13.7 The Executive acknowledges that the Company has recommended that the Executive obtain independent legal advice with respect to this Agreement, and that the Executive has had a reasonable opportunity to do so prior to executing this Agreement.
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Force Majeure
13.8 If either Party is at any time either during this Agreement or thereafter prevented or delayed in complying with any provisions of this Agreement by reason of strikes, walk-outs, labour shortages, power shortages, fires, wars, acts of God, earthquakes, storms, floods, explosions, accidents, protests or demonstrations by environmental lobbyists or native rights groups, delays in transportation, breakdown of machinery, inability to obtain necessary materials in the open market, unavailability of equipment, governmental regulations restricting normal operations, shipping delays or any other reason or reasons beyond the control of that Party, then the time limited for the performance by that Party of its respective obligations hereunder shall be extended by a period of time equal in length to the period of each such prevention or delay. A Party shall within three calendar days give notice to the other Party of each event of force majeure under this section, and upon cessation of such event shall furnish the other Party with notice of that event together with particulars of the number of days by which the obligations of that Party hereunder have been extended by virtue of such event of force majeure and all preceding events of force majeure.
Time of the essence
13.9 Time will be of the essence of this Agreement. Enurement
13.10 This Agreement will enure to the benefit of and will be binding upon the Parties and their respective heirs, executors, administrators and assigns.
Further assurances
13.11 The Parties will from time to time after the execution of this Agreement make, do, execute or cause or permit to be made, done or executed, all such further and other acts, deeds, things, devices and assurances in law whatsoever as may be required to carry out the true intention and to give full force and effect to this Agreement.
No partnership or agency
13.12 The Parties have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party the partner, agent or legal representative of the other Parties, nor create any fiduciary relationship between them for any purpose whatsoever.
Personal Information
13.13 The Executive acknowledges that the Company is obligated to comply with the Quebec Act Respecting the Protection of Personal Information in the Private Sector and with any other applicable legislation governing the collection, use, storage and disclosure of personal information. The Executive agrees to comply with all Company personal information protection policies and with other policies, controls and practices as they may exist, from time to time, in ensuring that the Executive and the Company engage only in lawful collection, storage, use and disclosure of personal information.
Captions
13.14 The headings, captions, Article, section and subsection numbers appearing in this Agreement are inserted for convenience of reference only and shall in no way define, limit, construe or describe the scope or intent of this Agreement nor in any way affect this Agreement.
Counterparts
13.15 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
Language
13.16 The Parties have requested that the present Agreement be drafted in the English language. Les parties aux présentes ont exigé que cette convention soit rédigee en anglais.
[Rest of page left intentionally blank. Signature page follows.]
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IN WITNESS WHEREOF the Parties hereto have executed this Agreement as at the Effective Date as hereinabove determined.
| RIOPEL MARINE INC., | |
| the Company herein: | |
| /s/ Alexandre Mongeon | |
| Name: Alexandre Mongeon | |
| Title: Chief Executive Officer | |
| /s/ Patrick Bobby | |
| PATRICK BOBBY |
Exhibit 10.6
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (this “Agreement”) is made and dated as fully executed on this 1st day of August, 2019 (the “Execution Date”), as entered into by and between Hurricane Corporate Services Ltd., (the “Consultant”), of 610 – 700 West Pender Street, Vancouver, BC, V6C 1G8 and Riopel Marine Inc.,(the “Company”), of 730 Boulevard du Curé-Boivin, Boisbriand, QC, J7G 2A7, (and each of the Consultant and the Company being also a “Party” or, in combination, the “Parties”, as the context so
requires).
WHEREAS, the Consultant specializes in providing various corporate development and operational related services for the position of Chief Financial Officer and, as a consequence, the Company is hereby desirous of engaging the valuable services of the Consultant in order to consult, assist and advise the
Company with regards to such services and related activities going forward and with a view to adding additional value to the Company’s underlying business;
AND WHEREAS, the Parties acknowledge and agree that there have been various discussions, negotiations, understandings and agreements between them relating to the terms and conditions of said services and, correspondingly, that it is their intention, by the terms and conditions of this Agreement, to hereby replace, in their entirety, all such prior discussions, negotiations, understandings and agreements with respect to the services, all in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the Parties covenant and agree as follows:
1. Initial Term, termination, and succession. The initial term of this Agreement (the “Initial Term”) is for a period of twelve months from the Execution Date (such date being the “Effective Date” herein).
Other than for the Company’s remaining compensation obligations, if any, resulting from section 3 hereinbelow, this Agreement will automatically renew for a further period of twelve months from the final business day of the Initial Term hereunder unless terminated, 30 days prior to the end of the initial term or otherwise agreed to in writing by the Parties in advance.
Notwithstanding any other provision of this Agreement, this Agreement may be terminated by any Party at any time upon written notice to the other Party of such Party’s intention to do so (the “Notice of Termination” herein) at least thirty calendar days prior to the effective date of any such termination (the end of such thirty-day period from such Notice of Termination being the “Effective Termination Date”
herein).
In any such event, the Consultant's ongoing obligation to provide the Services (as hereinafter defined and determined) will continue only until the Effective Termination Date and the Company's ongoing obligation to provide and to pay to the Consultant all of the remunerations under section 3 hereinbelow will continue only until the Effective Termination Date.
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2. Services. The Company hereby engages the Consultant to act as its non-exclusive consultant to assist in the Company’s corporate development and Investor communication services and initiatives (the “Services”).
In this regard it is hereby acknowledged and agreed that the Consultant shall be entitled to communicate with and shall rely upon the immediate advice, direction, and instructions of the CEO/President of the Company, or upon the advice or instructions of such other director or officer of the Company as the CEO/President of the Company shall, from time to time, designate in times of the CEO/President's absence, in order to initiate, coordinate and implement the Services as contemplated herein subject, at all times, to the final direction and supervision of the Board of Directors of the Company (the "Board of Directors").
The Consultant hereby acknowledges and agrees to abide by the reasonable rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may be adopted from time to time by the same as such rules, regulations, instructions, personnel practices, and policies may be reasonably applied to the Consultant as a non-exclusive consultant and advisor of the Company.
3. Remuneration. It is hereby acknowledged and agreed that the Consultant shall render the Services as defined hereinabove during the Initial Term and during the continuance of this Agreement and shall thus be compensated from the date in which the Consultant’s Services to the Company directly assists the Company in securing not less than two hundred and fifty thousand dollars ($250,000) in a qualified equity financing transaction to the termination of this Agreement, a monthly amount of CAD$10,000 (the “Fee”) plus applicable taxes. Such Fee shall be payable upon the fulfillment of the condition stipulated herein and monthly thereafter.
Subject to this Agreement, the Company shall issue a total of 6.6 pre-money Common Shares (“Shares”) of the Company to “KPAC Holdings Ltd” (“KPAC”) upon the Company securing five hundred thousand dollars ($500,000) in a qualified equity financing transaction in which the Consultant’s Services to the Company directly assisted the Company with the transaction. The Company shall further issue a total of 6.6 Shares to KPAC upon the Company securing every additional five hundred thousand dollars ($500,000) in a qualified equity financing transaction in which the Consultant’s Services to the Company directly assisted the Company with the transaction for a maximum issuance of thirty-three (33) Shares to KPAC by the Company if the Company secures two million five hundred thousand dollars ($2,500,000) in a qualified equity financing transaction in which the Consultant’s Services to the Company directly assisted the Company with the transaction. The stock certificate(s) should be in the name “KPAC Holdings Ltd” (“KPAC”) and issued within 30 working days from the closing of the relevant qualified equity financing transaction The Company and its management further agree to include these shares in connection with any registration statement filed by the Company with the appropriate regulatory authority including but not limited to the Securities and Exchange Commission. At the time of issue, the Company agrees that the “compensation” shares shall be deemed “fully earned”.
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Pursuant to this Agreement the Company has agreed to issue the "compensation" shares of common stock to KPAC. If the Company undertakes a reverse split as part of the Initial Public Offering ("IPO") then the Company agrees to issue additional shares to KPAC so that they will have the "original compensation" shares of the Company's common stock post reverse split.
4 Expenses. It is hereby also acknowledged and agreed that the Consultant shall also be reimbursed for all direct, pre-approved and reasonable expenses actually and properly incurred by the Consultant for the benefit of the Company (collectively, the “Expenses”); and which Expenses, it is hereby acknowledged and agreed, shall be payable by the Company to the order, direction and account of the Consultant as the Consultant may designate in writing, from time to time, in the Consultant’s sole and absolute discretion, as soon as conveniently possible after the prior delivery by the Consultant to the Company of written substantiation on account of each such pre-approved reimbursable Expense.
The Company understands that the Consultant has foregone certain opportunities to accept this engagement, and that any Fee, Common Shares or Incentive Stock Options, (collectively “Compensation”) paid under this Agreement are non-refundable, non-apportionable and not a prepayment for future Services but for Services which have been undertaken by the Consultant both prior to and immediately following the Effective Date hereof. Correspondingly, if the Company decides to terminate this Agreement for any reason whatsoever, it is agreed and understood that the Consultant will not be requested or demanded by the Company to return any of the Compensation paid or vested hereunder. Furthermore, if and in the event that the Company is acquired, in whole or in part through an acquisition, merger or sale of substantially all of its assets, during the Initial Term of this Agreement, it is agreed and understood that the Consultant will not be requested or demanded by the Company to return any of the Compensation paid or vested hereunder.
It is hereby also acknowledged and agreed that the Consultant will be classified as a non-taxable consultant of the Company for all purposes, such that all compensation which is provided by the Company to the Consultant under this Agreement, or otherwise, will be calculated on the foregoing and gross basis. In this regard, and for all matters relating to this Agreement, the Consultant will be a non-taxable consultant of the Company under the meaning or application of all applicable federal and state unemployment, insurance and workers’ compensation laws, and otherwise. Notwithstanding anything contained herein, the Consultant shall be responsible for all taxes and duties including without limitation, sales, income, corporate or payroll taxes.
5. Additional duties and obligations of the Consultant. At such time or times, as may be required by the Board of Directors, acting reasonably, the Consultant will provide the Board of Directors with such information concerning the results of the Consultant's Services and activities hereunder for the previous month as the Board of Directors may reasonably require.
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The Consultant acknowledges and agrees that all written and oral opinions, reports, advice and materials previously provided and to be provided by the Consultant to the Company in connection with the Consultant's engagement hereunder are intended solely for the Company's benefit and for the Company's uses only, and that any such written and oral opinions, reports, advice, and information are the exclusive property of the Company. In this regard the Consultant covenants and agrees that the Company may utilize any such opinion, report, advice, and materials for any other purpose whatsoever and, furthermore, may reproduce, disseminate, quote from and refer to, in whole or in part, at any time and in any manner, any such opinion, report, advice and materials in the Company's sole and absolute discretion. The Consultant further covenants and agrees that no public references to the Consultant or disclosure of the Consultant's role in respect of the Company may be made by the Consultant without the prior written consent of the Board of Directors in each specific instance and, furthermore, that any such written opinions, reports, advice or materials shall, unless otherwise required by the Board of Directors, be provided by the Consultant to the Company in a form and with such substance as would be acceptable for filing with and approval by any regulatory authority having jurisdiction over the affairs of the Company from time to time.
The Consultant will not, except as authorized or required by the Company in writing, reveal or divulge to any person, company or entity any information concerning the respective organization, business, finances, transactions or other affairs of the Company which may come to the Consultant’s knowledge during the continuance of this Agreement, and the Consultant will keep in complete secrecy all confidential information entrusted to the Consultant and will not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the Company's business interests. This restriction will continue to apply after the termination of this Agreement without limit in point of time but will cease to apply to information or knowledge which may come into the public domain. In addition, the Consultant will comply with all U.S., Canadian and foreign laws, whether federal, provincial or state, applicable to its respective duties and obligations hereunder and, in addition, hereby represents and warrants that any information which the Consultant may provide to any person or company hereunder will, to the best of the Consultant's knowledge, information, and belief, be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company.
The Consultant warrants that the Consultant shall conduct the business and other activities in a manner which is lawful and reputable and which brings good repute to the Company, the Company’s business interests and the Consultant. In particular, and in this regard, the Consultant specifically warrants to provide the Services in a sound and professional manner such that the same meets superior standards of performance quality within the standards of the industry or as set by the specifications of the Company.
The Consultant warrants that it has obtained, including without limitation, any qualifications, registrations, permits, or licenses that allow the Consultant to perform the Services and conduct its business in accordance with local, municipal, provincial, state or federal laws and regulations.
6. Additional duties and obligations of the Parties. Each Party will not, except as authorized or required by its respective duties and obligations hereunder, reveal or divulge to any person, company or entity any information concerning the respective organization, business, finances, transactions or other affairs of the other Party, or of any of the other Party’s respective subsidiaries, which may come to the Party’s knowledge during the continuance of this Agreement, and each Party will keep in complete secrecy all confidential information entrusted to the Party and will not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the other Party’s respective business interests. This restriction will continue to apply after the termination of this Agreement without limit in point of time but will cease to apply to information or knowledge which may come into the public domain.
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The Parties respectively hereby agree that during the Term of this Agreement and at all times thereafter, they will not and will use their best efforts to cause their officers and directors to not make any public statement, or engage in any conduct that is disparaging to the other or, any of their officers, directors, or shareholders known to them, including, but not limited to, any statement that disparages the products, services, finances, financial condition, capabilities or other aspects of the business of the Company.
Each Party will comply with all U.S., Canadian and foreign laws, whether federal, provincial or state, applicable to its respective duties and obligations hereunder and, in addition, hereby represents and warrants that any information which the Party may provide to any person or company hereunder will, to the best of the Party's knowledge, information, and belief, be accurate and complete in all material respects and not misleading, and will not omit to state any fact or information which would be material to such person or company.
7. Waiver. The waiver by either Party of a breach of any provision of this Agreement by the other Party shall not operate or be construed as a waiver of any subsequent breach by such other Party.
8. Notices. Each notice, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be sent by prepaid registered mail deposited in a recognized post office and addressed to the Party entitled to receive the same, or delivered to such Party, at the address for such Party specified on the front page of this Agreement or via electronic mail with an acknowledgement of reception for the receiving party. The date of receipt of such notice, demand or other communication shall be the date of delivery thereof if delivered, or, if given by registered mail as aforesaid, shall be deemed conclusively to be the third business day after the same shall have been so mailed, except in the case of interruption of postal services for any reason whatsoever, in which case the date of receipt shall be the date on which the notice, demand or other communication is actually received by the addressee. Any Party may at any time and from time to time notify the other Parties in writing of a change of address and the new address to which notice shall be given to it thereafter until further change.
9. Dispute Resolution. The parties shall endeavor to resolve amicably any dispute in the ordinary course of business between the parties. If the parties are unable to resolve the dispute within thirty (30) days of a Party’s notice to the other Party regarding the said dispute, then the matter will be resolved by arbitration.
The parties agree that any disagreement or dispute relating to this Agreement or resulting from its interpretation, application, or for calculating damages for breach of contract will be settled definitively by arbitration and excluding the courts, according to the laws of the Province of Québec. Unless the parties decide otherwise in an arbitration agreement, the arbitration will be conducted under the aegis of one (1) accredited arbitrator alone, permitted to practice in the Province of Québec, and will be conducted in accordance with the rules of law and the provisions of the Civil Code of Québec in force at the time of the Dispute. The arbitration award shall be final and without appeal and binding on the parties.
The provisions enumerated in this Section 9 do not hinder the right of either Party to seek injunctive relief in order to limit immediate, serious and irreparable injury.
10. Entire agreement, amendment, and construction. This Agreement constitutes the entire agreement to date between the Parties and supersedes every previous agreement, communication, expectation, negotiation, representation or understanding, whether oral or written, express or implied, statutory or otherwise, between the Parties with respect to the subject matter of this Agreement.
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This Agreement and its terms may not be changed orally but only by an agreement in writing signed by the Party against whom enforcement of any waiver, change, modification, extension or discharge is sought.
In the event that any particular provision or provisions of this Agreement shall for any reason hereafter be determined to be unenforceable, or in violation of any law, governmental order or regulation, such unenforceability or violation shall not affect the remaining provisions of this Agreement, which shall continue in full force and act and be binding upon the respective Parties. The language of this Agreement shall be construed as a whole, according to its fair meaning and intent, and not strictly for or against either Party, regardless of who drafted or was principally responsible for drafting the Agreement or the terms or conditions hereof.
11. Time of the essence. Time will be of the essence of this Agreement.
12. Enurement. This Agreement will enure to the benefit of and will be binding upon the Parties and their respective heirs, executors, administrators and assigns.
13. Further assurances. The Parties will from time to time after the execution of this Agreement make, do, execute or cause or permit to be made, done or executed, all such further and other acts, deeds, things, devices and assurances in law whatsoever as may be required to carry out the true intention and to give full force and effect to this Agreement.
14. No partnership or agency. The Parties have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party the partner, agent or legal representative of the other Parties, nor create any fiduciary relationship between them for any purpose whatsoever.
15. Applicable law. This Agreement will be governed exclusively by and construed and enforced in accordance with the laws and Courts prevailing in Quebec, Canada.
16. Counterparts. This Agreement may be signed by the Parties in as many counterparts as may be necessary, and via facsimile if necessary, each of which so signed being deemed to be an original and such counterparts together constituting one and the same instrument and, notwithstanding the date of execution, being deemed to bear the Effective Date as set forth on the front page of this Agreement.
17. Currency. The currency used for purposes of this Agreement shall be Canadian Dollars.
IN WITNESS WHEREOF the Parties have entered into this Agreement as of the Execution Date first above written.
HURRICANE CORPORATE SERVICE LTD
 |
Authorised Signature: Kulwant Sandher
RIOPEL MARINE INC
 |
Authorised Signature: Alexander Mongeon
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Vision Marine Technologies Inc.
Montréal, Québec
We hereby consent to the use in the prospectus constituting a part of this Registration Statement on Form F-1 of our report dated April 24, 2020, relating to the financial statements of Vision Marine Technologies Inc. (formerly known as Riopel Marine Inc.) as of August 31, 2019 and 2018 and for the years ended August 31, 2019 and 2018, which is contained in that prospectus.
We also consent to the reference to us under the caption "Experts" in the Prospectus.
/s/ BDO Canada s.r.l./S.E.N.C.R.L./LLP
BDO Canada LLP
Montreal, Quebec
July 9, 2020
Exhibit 99.1
July 9, 2020
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn: Office of Chief Accountant
| Re: | Vision Marine Technologies Inc. – Registration Statement on Form F-1 (CIK No. 0001813783) — Application for Waiver of Requirements of Form 20-F, Item 8.A.4 |
Ladies and Gentlemen:
Vision Marine Technologies Inc., a foreign private issuer organized under the laws of Quebec, Canada (the “Company), confidentially submitted to the Securities and Exchange Commission (the “Commission”) on June 2, 2020 a draft Registration Statement on Form F-1 (as amended, the “Registration Statement”), relating to a proposed initial public offering (“IPO”) of the Company’s common shares. The Registration Statement has been reviewed by the staff of the Commission (the “Staff”) and the Company intends to respond to the comments of the Staff relating to the Registration Statement contained in the Staff’s letter dated June 26, 2020. The Company is not currently a publicly reporting Company in any jurisdiction.
The Registration Statement currently contains audited IFRS-IASB financial statements for the years ended August 31, 2018 and 2019 and unaudited interim IFRS-IASB financial statements for the six months ended February 29, 2020. As of this submission, the Registration Statement satisfies Item 8.A.4 of Form 20-F, which is applicable to the Registration Statement pursuant to Item 4(a) of Form F-1, because the audited financial statements included in the Registration Statement are less than twelve months old.
At the time of effectiveness, we expect that the Registration Statement will contain audited IFRS-IASB financial statements for the years ended August 31, 2018 and 2019 and unaudited interim IFRS-IASB financial statements for the six months ended February 29, 2020. Item 8.A.4 of Form 20-F, which is applicable to the Registration Statement, states that in the case of a foreign private issuer’s IPO, the registration statement must contain audited financial statements as of a date not older than 12 months at the time of filing and upon effectiveness, unless a waiver is obtained. See also Division of Corporation Finance, Financial Reporting Manual, Section 6220.3.
The Company is submitting this waiver request pursuant to Instruction 2 to Item 8.A.4 of Form 20-F, which provides that the Commission will waive the 12-month age of financial statements requirement “in cases where the company is able to represent adequately to [the Staff] that it is not required to comply with this requirement in any other jurisdiction outside the United States and that complying with this requirement is impracticable or involves undue hardship.” See also the Staff’s 2004 release entitled International Reporting and Disclosure Issues in the Division of Corporation Finance (available on the Commission’s website at http://www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm) at Section III.B.c, in which the Staff notes:
“the instruction indicates that the staff will waive the 12-month requirement where it is not applicable in the registrant’s other filing jurisdictions and is impracticable or involves undue hardship. As a result, we expect that the vast majority of IPOs will be subject only to the 15-month rule. The only times that we anticipate audited financial statements will be filed under the 12-month rule are when the registrants must comply with the rule in another jurisdiction, or when those audited financial statements are otherwise readily available.”
In connection with this request, we as counsel to the Company, represent to the Commission that:
| 1. | The Company is not currently a public reporting company in any other jurisdiction. |
| 2. | The Company is not required by any jurisdiction outside the United States, to have audited financial statements as of a date not older than 12 months from the date of filing a Registration Statement. |
| 3. | The Company does not anticipate that its audited financial statements for the year ended August 31, 2020 will be available until October of 2020. |
| 4. | Compliance with Item 8.A.4 would be impracticable and would involve undue hardship for the Company. |
| 5. | In no event will the Company seek effectiveness of the Registration Statement if the audited financial statements contained therein are older than 15 months at the time of the offering. |
Thank you for your consideration of the Company’s request, which we hope will be acceptable to the Chief Accountant. If additional information would be helpful in your analysis of the Company’s request or you have any questions or comments regarding the information in this letter, please contact the undersigned at 450-951-7009 or William Rosenstadt, our U.S. securities counsel, at 212-558-0022.
Very truly yours,
| /s/ Kulwant Sandher |
Kulwant Sandher