EXHIBIT III CONTRACT AND PROGRESS REPORT REVIEW NOTES Customer: Reynolds Shipping Company (Kingston, Ontario] Product: Dockside Crane System Contract signed: January 31, 2015 Installation date: April 30, 201E- Acceptance date: July 31, 2016 Total contract value: $850,000 Contract review notes The file contained numerous versions of the contract. The rst version was based upon a standardform contract that covers all aspects of the work design, construction, progress payments, holdbacks, etc. Each subsequent version had numerous penciledin changes. Based upon a preliminary review, the final contract was significantly different from the original contract. The contract indicated review by the VicePresident Sales and was signed off by one of the senior sales personnel. However, the contract had several changes to it and there was no indication whether they were made prior to the VicePresident 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, 2015: $200,000 - June 30, 2015: $200,000 - September 30, 2015: $200,000 - December 31, 2015: $200,000 *- Upon acceptance of the equipment: $25,000 CEM's chief financial officer indicated that CEM recognizes these payments as revenue when collected and expenses the costs related to the contract as incurred. CEM anticipates the total cost to complete the work 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, 2015, there was a backlog of work and actual construction of the equipment did not begin until May 1, 2015. Engineering time reports showed $25,000 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, 2015 until the planned installation date of April 30, 2010. Based on CEM's experience with other contracts, $20,000 in costs are typically incurred between installation and final acceptance. '- In midJune, a design flaw was identied in the construction plans which resulted in immediate rework 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 onemonth 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 Revnolds...take it out.\