EXHIBIT III CONTRACT AND PROGRESS REPORT REVIEW NOTES Customer: Reynolds Shipping Company Installation date: April 30, 2018 (Kingston, Ontario) Product: Dockside Crane System Acceptance date: July 31, 2018 Contract signed: January 31, 2017 Total contract value: $850,000 Contract review notes The file contained numerous versions of the contract. The first version was based upon a standard-form contract that covers all aspects of the work - design, construction, progress payments, holdbacks, etc. Each subsequent version had numerous penciled-in changes. Based upon a preliminary review, the final contract vas significantly different from the original contract The contract indicated review by the Vice-President Sales and was signed off by one of the senior sales ersonnel. However, the contract had several changes to it and there was no indication whether they were made prior to the Vice-President Sales' review. The contract provides for payments to be made using the following schedule: At the time of completion and approval of design: $25,000 March 31, 2017: $200,000 June 30, 2017: $200,000 September 30, 2017: $200,000 December 31, 2017: $200,000 Upon acceptance of the equipment: $25,000 CEM's chief financial officer indicated that CEM recognizes these pay ments as revenue when collected and expenses the costs related to the contract as incurred. CEM anticipates the total cost to complete the york will be $700,000, generating a margin of $150,000. A review of the project progress reports indicated the following points of interest: Although the design was completed and approved on February 21, 2017, there was a backlog of work and actual construction of the equipment did not begin until May 1, 2017. Engineering time reports showed $75,000 in costs incurred for the initial design phase, which is a labour intensive process. The construction schedule for the equipment provides for constant engineering work and costs on the project from April 1, 2017 until the planned installation date of April 30, 2018. Based on CEM's experience with other contracts, $20,000 in costs are typically incurred between installation and final acceptance. In mid-June, a design flaw was identified in the construction plans which resulted in immediate re- work costs of $22,000. These design revisions will also result in an estimated additional $28,000 in construction costs. It is also anticipated that these changes will result in a one-month delay in the acceptance of the equipment. A clause in the initial contract states that the customer must pay for additional costs. However, the clause was struck out of an early draft of the contract with a note "This won't fly with Reynolds...take it out