COURT FILE NUMBER 2001-03354 COURT COURT OF QUEEN’S BENCH OF ALBERTA JUDICIAL CENTRE CALGARY PLAINTIFF ROYAL BANK OF CANADA DEFENDANT BOLT OFFSITE LTD. APPLICANTS KPMG INC., IN ITS CAPACITY AS COURT-APPOINTED RECEIVER OF BOLT OFFSITE LTD. DOCUMENT FIRST REPORT TO THE COURT SUBMITTED BY KPMG INC., IN ITS CAPACITY AS COURT-APPOINTED RECEIVER AND MANAGER OF BOLT OFFSITE LTD. DATED DECEMBER 7, 2020 ADDRESS FOR SERVICE AND RECEIVER CONTACT INFORMATION OF PARTY FILING THIS DOCUMENT KPMG Inc. Suite 3100, Bow Valley Square II 205 - 5th Ave SW Calgary, Alberta T2P 4B9 Neil Honess/Cristina Pimienta Tel: (403) 691-8014/(403) 691-8406 [email protected] [email protected] COUNSEL Osler, Hoskin & Harcourt LLP Suite 2500, 450 – 1st Street S.W. Calgary, Alberta T2P 5H1 Randal Van de Mosselaer/Emily Paplawski Tel: (403) 260-7060/(403) 260-7071 [email protected] [email protected] Table of Contents 1. INTRODUCTION AND PURPOSE OF REPORT ......................................................................................... 1 2. COMPANY’S PRIMARY ASSETS .............................................................................................................. 3 3. COMPANY’S PRIMARY LIABILITIES ........................................................................................................ 9 4. RECEIVER’S ACTIVITIES TO DATE ......................................................................................................... 11 5. STATEMENT OF RECEIPTS AND DISBURSEMENTS ............................................................................... 16 6. FEES AND DISBURSEMENTS OF THE RECEIVER AND ITS COUNSEL ..................................................... 17 7. DISCHARGE .......................................................................................................................................... 18 8. CONCLUSION AND RECOMMENDATIONS ........................................................................................... 19 Listing of Appendices Appendix “A” - RECEIVERSHIP ORDER Appendix “B” - CORRESPONDENCE FROM LEDCOR Appendix “C” - CORRESPONDENCE WITH CONSCTRUCTSHIELD Appendix “D” - CORRESPONDENCE WITH THE DIRECTORS Appendix “E” - RECEIVERSHIP NOTICE Appendix “F” - LETTER FROM LANDLORD TO TENANT Appendix “G” - STATEMENT OF RECEIPTS AND DISBURSEMENTS Appendix “H” - PROFESSIONAL FEES INVOICES 1. INTRODUCTION AND PURPOSE OF REPORT Bolt Offsite Ltd. (“Bolt” or the “Company”) was incorporated pursuant to the laws of the Province of Alberta and carried on business in Calgary, Alberta as a designer and developer of modular building construction projects. The Company’s primary secured lender is Royal Bank of Canada (“RBC”) who has advanced funds of approximately $1,784,257 (plus interest and fees). These amounts were borrowed by Bolt pursuant to the credit facility between RBC and Bolt dated April 23, 2019 (as amended, restated, modified, replaced or supplemented from time to time) (the “Credit Facility”). Bolt was in default of the Credit Facility by, among other things, failing to make payments to RBC when due. On January 28, 2020, RBC issued a demand letter and Notice of Intention to Enforce Security to the Debtors pursuant to section 244(1) of the Bankruptcy and Insolvency Act (“BIA”), RSC 1985, c B-3 (the “RBC Notice”). On February 28, 2020 RBC filed an application to appoint KPMG Inc. (“KPMG”) as receiver and manager of the Company pursuant to section 243 of the BIA and section 13(2) of the Judicature act, RSA 2000, c J-2, inter alia, in order to take possession of and exercise control over the assets of the Company and any and all proceeds, receipts and disbursements arising out of or from the Company’s assets, undertakings and properties (the “Property”). On March 12, 2020, the Court of Queen’s Bench of Alberta (the “Court”) issued an Order appointing KPMG as the Receiver over all of the Property of the company (the “Receivership Order”). A copy of the Order is attached hereto as Appendix “A”. For further background information on the Company and these receivership proceedings please refer to the Receiver’s website https://home.kpmg/ca/bolt. Purpose of the Receiver’s First Report This is the Receiver’s first report to the Court. This First Report has been prepared to provide this Honourable Court with: 1 a) An overview of the assets and liabilities of the Company; b) An overview of the activities of the Receiver since appointment; c) The Receiver’s statement of receipts and disbursements from March 12, 2020, to discharge, including a discussion of professional fees incurred to date by the Receiver and its counsel; and d) The Receiver’s recommendations. In preparing this report (the “Report” or the “First Report”), the Receiver has been provided with, and has relied upon, unaudited and other financial information and certain records (together, the “Information”) prepared by the Company and/or their representatives, and discussions with Company’s management and/or representatives. The Receiver has reviewed the Information for reasonableness, internal consistency and use in the context in which it was provided, and in consideration of the nature of evidence provided to this Honourable Court. However, the Receiver has not audited, reviewed or otherwise attempted to verify the accuracy or completeness of the Information in a manner that would wholly or partially comply with Canadian Auditing Standards (“CAS”) pursuant to the Chartered Professional Accountants Handbook, and accordingly the Receiver expresses no opinion or other form of assurance in respect of the Information. Some information referred to in this First Report may consist of forecasts and projections, which were prepared based on Management’s estimates and assumptions. Such estimates and assumptions are, by their nature, not ascertainable and as a consequence no assurance can be provided regarding the forecasted or projected results. The reader is cautioned that the actual results will likely vary from the forecasts or projections, even if the assumptions materialize, and the variations could be significant. The information contained in this First Report is not intended to be relied upon by any prospective purchaser or investor in any transaction with the Company. Unless otherwise stated, all monetary amounts noted herein are expressed in Canadian dollars. 2 2. COMPANY’S PRIMARY ASSETS The Company’s primary assets, recorded in the Company’s books and records which were available to the Receiver as at March 12, 2020, are as follows (collectively the “Assets”): Summary of Primary Assets As at March 12, 2020 CAD $ Asset Estimated Book Value Work in progress 5,192,717 Inventory 3,402,594 Accounts receivable 2,101,687 Prepaid expenses 280,408 Miscellaneous assets 268,776 Property, plant, and equipment 231,852 Funds held in trust 5,796 Lien recovery Unknown Total Assets 11,483,830 Work in progress and Accounts Receivable The Company’s work in progress related mainly to ongoing construction projects. At the time of the Receiver’s appointment, the Company had ongoing projects with Alberta Infrastructure (as defined below), Ledcor Construction Inc. (“Ledcor”), the Tsawwassen First Nation (“TFN”), and was involved in a construction project in Kimberly, British Columbia. The Company’s accounts receivable, per the Company’s books and records, consisted of amounts due from various parties for ongoing and completed projects as detailed below: Summary of Accounts Receivable As at March 12, 2020 CAD $ Customer Ledcor Construction Ltd. 919,260 Achieve 884,426 ConstructShield 133,023 Kor Alta Construction Ltd. 76,947 Nomodic Modular Structures Inc. 53,125 Receiver General 34,907 Total Accounts Receivable 2,101,688 3 However, upon investigation by the Receiver, it appeared that the Company’s books and records were inaccurate and incomplete. Accordingly, it has proven difficult to accurately determine the actual quantum – and in some cases the existence – of either the work in progress or the accounts receivable. Alberta Infrastructure Bolt entered into a contract with her Majesty the Queen in right of Alberta, as represented by the Minister of Infrastructure (“Alberta Infrastructure”) on November 7, 2017 to provide 25 modular classrooms. As at the date of receivership, ten classrooms remained outstanding under this contract. Of these, seven were works in progress and three had been completed and were located on the Bolt premises. Upon review of the contract between Bolt and Alberta Infrastructure, and after discussion with the Receiver’s legal counsel and legal counsel for Alberta Infrastructure, the Receiver concluded that the three completed classrooms were property of Alberta Infrastructure. The Receiver could not complete the remaining work on the seven incomplete modular classrooms due to several onerous obligations in the contract. Accordingly, the Receiver disclaimed and terminated the Alberta Infrastructure contract. Upon further discussion with Alberta Infrastructure it was determined that the billing from Bolt to Alberta Infrastructure was done on a progress basis and that there were no amounts outstanding to Bolt. Ledcor Construction Ltd. On July 18, 2019, Ledcor engaged Bolt on the Alexis Courthouse project. The Ledcor contract required Bolt to provide the necessary labour, equipment and materials for the supply and installation of complete building modular units. A performance bond was provided by Bolt to Ledcor. Ledcor had an accounts receivable balance due to Bolt of $919,260 according to the Company’s books and records. Shortly after