IN THE MATTER OF THE RECEIVERSHIP OF D.L. SERVICES INC. and A.S. CUSTOM CONTRACTING LTD.

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1 Court File No. CV CL IN THE MATTER OF THE RECEIVERSHIP OF D.L. SERVICES INC. and A.S. CUSTOM CONTRACTING LTD. FIRST REPORT TO COURT OF JAMES WILLIAMS & ASSOCIATES INC. AS COURT-APPOINTED RECEIVER OF D.L. SERVICES INC. and A.S. CUSTOM CONTRACTING LTD. I. INTRODUCTION This is the First Report to Court of James Williams & Associates Inc. ( JWAI ), in its capacity as the Court-appointed receiver ( in such capacity, the Receiver ) of D.L. Services Inc. ( DL ) and A.S. Custom Contracting Ltd. ( AS and, together with Floridus, the Companies ). On August 9, 2018 (the Date of Appointment ), an application was made by Royal Bank of Canada ( RBC or the Secured Creditor ) to the Ontario Superior Court of Justice (Commercial List) (the Court ) to appoint JWAI as receiver, without security, over all of the assets, undertaking and properties of the Companies. By Order of the Honourable Justice Dunphy dated the Date of Appointment (the Appointment Order ) JWAI was appointed as Receiver in a limited capacity. The application for a full receiver was adjourned to October 19, Attached as Appendix A to this First Report is a copy of the Appointment Order. Minden Gross LLP ( Minden ) was retained as the Receiver s counsel. Purposes of this First Report The purpose of this First Report is to provide the Court with information relating to the financial position of the Companies, the condition of the real property municipally known as 120 County Road 64, R.R. No. 3 in Brighton, Ontario (the Real Property ), and the steps taken by DL to market the Real Property. Restrictions In preparing this First Report, the Receiver has been provided with, and has relied upon, certain unaudited, draft and / or internal financial information, the Companies books and records, discussions with employees and management of the Companies and information from other third-party sources. Unless otherwise stated herein, the Receiver has not performed an audit or

2 verification of such information for accuracy, completeness or compliance with Accounting Standards for Private Enterprises or International Financial Reporting Standards. Accordingly, the Receiver expresses no opinion or other form of assurance with respect to such information. II. BACKGROUND DL is a Canadian owned, private corporation that carried on business as a provider of environmental assessment and remediation. DL is the owner of the Real Property. AS is a Canadian-owned, private corporation that carried on business as a construction contractor. AS lists its registered address as the Real Property. Douglas Leblanc ( Leblanc ) is listed as the sole officer and director on the corporation profile reports for each of the Companies obtained by the Receiver. Copies of the corporation profile reports for each of the Companies are attached hereto as Appendix B. III. FINANCIAL POSITION OF THE COMPANIES D.L. Services Inc. The Receiver received and reviewed a balance sheet, income statement and accounts payable listing for DL, both dated as at July 31, According to the information provided to the Receiver, DL has liabilities significantly in excess of its assets. A copy of the balance sheet provided to the Receiver is attached hereto as Appendix C. A summary of the balance sheet information is set out below. ASSETS Current Assets $ (247,359) Fixed Assets 648,177 Other Assets (26,482) TOTAL ASSETS $ 374,336 LIABILITIES AND EQUITY Current Liabilities $ 583,322 Long Term Liabilities 252 Equity (209,238) TOTAL LIABILITIES AND EQUITY $ 374,336 (2)

3 The Receiver also reviewed notices of assessment from Canada Revenue Agency in respect of payroll source deductions and GST/HST, as well as a property tax assessment. According to the information reviewed by the Receiver, DL has the following obligations that may rank in priority to secured creditors: OBLIGATION AMOUNT Payroll Arrears $ 34, HST Arrears 3, Vacation Accrual 13, Property Tax 30, $ 82, The Receiver has been advised by DL that DL has had no employees since September, A.S. Custom Contracting Ltd. The Receiver received and reviewed a balance sheet, income statement and accounts payable listing for AS, both dated as at July 31, According to the balance sheet provided to the Receiver, AS principal asset is a related party loan in the amount of $640,000 to D.L. Holdings Inc. ( DLH ), which the Receiver understands to be a holding company controlled by Leblanc. The Receiver has conducted NUANS and corporation profile searches and is unable to find any record of a company named D.L. Holdings Inc. A copy of AS balance sheet at July 31, 2018 is attached hereto as Appendix D. A summary of the balance sheet is set out below. ASSETS Current Assets $ (95,614) Fixed Assets 3,874 Other Assets 636,270 TOTAL ASSETS $ 544,530 LIABILITIES AND EQUITY Current Liabilities $ 138,797 Long Term Liabilities 62,767 Equity 342,965 TOTAL LIABILITIES AND EQUITY $ 544,530 The Receiver wrote to Steven Gammon of Secker, Ross & Perry LLP ( SRP ), the Companies external accountants, on August 21, 2018 requesting (3)

4 copies of the loan documentation reflecting the loan from AS to DLH. On the same day, the Receiver was advised verbally by Leblanc that DLH was not indebted to AS, and that he had injected significant funds into AS, either personally or through DLH. The Receiver again asked for documentation to support the transaction. As at the date of this report, the Receiver has not received the information requested. The Receiver also reviewed notices of assessment issued by Canada Revenue Agency in respect of payroll source deductions and HST/HST. The information reviewed by the Receiver gave no indication that AS has any material obligations that may rank in priority to secured creditors. The Receiver has also been advised that AS has had no employees since September, IV. THE REAL PROPERTY The Receiver attended at the offices of Tri-County Plastics Ltd. ( TCP ) in Brighton, Ontario on Friday, August 17, 2018 to meet with Leblanc. TCP is a private corporation that processes and disposes of plastic waste, primarily from the auto industry. According to a corporation profile report obtained by the Receiver, Leblanc is the sole officer and director of TCP. Leblanc provided the Receiver with a tour of the Real Property, along with a number of other properties he claimed to own or control. Photographs of the Real Property taken during the Receiver s inspection are attached hereto as Appendix E. As shown in the photographs, a large amount of plastic material is currently being stored on the Real Property. The Receiver also identified an apparent fuel spill on the Real Property. Finally, Leblanc advised that a pile of contaminated soil on the adjoining property may extend on to the Real Property; he was unable to identify the exact location of the property line. Leblanc has advised the Receiver that the plastic material stored on the Real Property is the property of TCP. TCP began storing the material on the Real Property in August, 2017, as TCP did not have sufficient space to store the material on its own premises. In February, 2018 TCP began moving the material back to its own premises and in April, 2018 caused grinding equipment to be installed at the Real Property. Leblanc has advised the Receiver that TCP is diligently working to remove the material from the Real Property and expects all of the material to be removed by September 30, Copies of s from Leblanc to the Receiver setting out the foregoing are attached hereto as Appendix F. (4)

5 Marketing Process According to information provided by Leblanc, he listed the Real Property for sale with Jack Green of Sutton Group Masters Realty Inc. ( Green ) on or about May 31, A copy of the listing and Green s initial activity report dated July 27, 2018 are attached hereto as Appendix G. As set out in the activity report, Green was contacted by seven (7) interested parties in regards to the Real Property. On August 20, 2018, Green sent an to the Receiver advising that two of those parties have shown continued interest and three additional parties have requested information. Green also advised that he did not believe the presence of the plastic material on the Real Property would deter interested parties, and that activity was likely to accelerate toward the end of the summer. A copy of Green s to the Receiver is attached hereto as Appendix H. The Receiver wrote to Green seeking additional information on the marketing process on August 21, On August 23, 2018 Green sent an to the Receiver advising that: (a) there had been no feedback from interested parties that the price was inappropriate; (b) it was difficult to estimate a time frame for selling a property like the Real Property; and (c) he anticipated activity on the listing to increase significantly in September. A copy of Green s second to the Receiver is attached hereto as Appendix I. The Receiver was advised by Leblanc that a party he identifies only as Richard offered to extend a $700,000 mortgage on the Real Property. The Receiver has requested additional information on the identify of the offering party, but has not received same as at the date of this report. Leblanc advised that he refused the offer, as he was only interested in selling the Real Property. A copy of Leblanc s to the Receiver setting out the foregoing is attached hereto as Appendix J. The Receiver has advised Leblanc that it intends to schedule additional inspections of the Real Property to monitor the removal of plastic material to September 30, All of which is respectfully submitted. (5)

6 Dated at Toronto this 28 th day of August, 2018 James Williams & Associates Inc., solely in its capacity as Receiver of D.L. Services Inc. and A.S. Custom Contracting Ltd. and not in its personal capacity Per: Richard Williams CIRP, LIT Vice President (6)