Legend Power Fiscal 2018 Q4 Board Report and 2019 Q1 Preview

January 18, 2019

We are pleased to provide our 2018 Fiscal Q4 board report and 2019 Q1 update to the Board on behalf of the Legend Power team. We will discuss both quarters as trends that began in Q4 and impacted Q1 need to be reviewed in tandem.

In Q4 we continued to achieve quarter over previous year quarter growth but our sales momentum slowed. Due to the mix of higher install revenue recorded in the quarter, our margins were significantly reduced compared to recent trends.

This report will be longer than usual and include attachments that we believe will help you better understand our challenges, and our plans to manage them.

We moved Kathleen Reeves, our Director of Sales based in Ontario, to New York in August 2018 to lead our New York sales efforts and the Ontario sales team struggled without Kathleen’s day-to-day leadership. Fiscal 2019 Q1 results showed a material drop in sales and will be discussed in detail.

As a team, we accept full responsibility for the Q1 miss. We are confident in the plans we have put in place and reported on previously and are focused on managing the challenges as they arise. Team morale is high despite the miss and we are strongly committed to implementing our agreed upon 2019 strategy.

We believed there was a sales weakness trend developing during Q4 and once confirmed late in Q4, we took steps to address this concern by engaging a leading US sales improvement organization (SKALED), and the best eastern USA energy market business development consulting firm (Lido Energy). We have ninety days experience with the two consultants and we are pleased with the positive impact to Legend and the milestones achieved to date.

It is critical to Legend’s long-term success to ensure we create the necessary systems, procedures, culture and scalability to be a $100 million plus company. We are doing so. This will cause short-term pain or “lumpiness” but we must set up to scale while growing our current business.

Why did new customer sales slip in Q4 and more so in Q1?

• Whenever you are leveraging scarce resources and have a long sales cycle, growth or ‘scaling up’ is a significant challenge
• We raised capital in April 2018 to grow our US sales and we began to do so in the last six months of Fiscal 2018 as some Ontario-based resources were leveraged in NY
• NY growth plan became the “sexy” Legend initiative and Toronto was seen as “not exciting”
• Focus on US growth in the second half of Fiscal 2018 led to reduced sales prospecting in Ontario
• Change in the Ontario government “spooked” people and delayed some purchase decisions
• Ontario education market took a “pause” to understand government incentive changes and impact on education market capital purchases
• We should have overcome our frugal mindset, and begun to build out US sales team a quarter earlier
• Introduction of SKALED to sales team and extensive review activities did create a distraction and uneasiness with the sales team (high communication and openness was used but there was still uneasiness)
• Several one / two-unit deals in NY were delayed as Legend was asked to look at 5-10 buildings as Fortune 500 customers wanted evaluation deals that are much larger than we have seen in the Ontario market

As presented to you during our November 21, 2018 Board strategy session, we engaged SKALED, a leading US-based sales improvement and development firm to conduct a fundamental review of our sales operations, processes and people. Most of the work was performed during 2018 Fiscal Q1 and an update report is attached.

Key points:

• A 2019 sales growth plan was developed including:
  • A 2019 Hiring Plan complete with hiring forecasts (timing/costs), role descriptions and interview guides
  • Purpose: To greatly improve our hiring practices leading to building a superior Legend sales team
• A Sales Playbook (web-based) with all aspects of sales training and development has been created for Legend to ensure we offer leading sales training and develop outstanding sales talent
• An Onboarding Plan was created to ensure we have a systemic and repeatable onboarding process to ensure the development of consistent high-end sales capabilities

SKALED:

SKALED provided a dedicated sales expert to Legend (Mike Cioce) who provided sales coaching to the Ontario sales team and leadership support to the NY team. With 90 days of SKALED involvement completed, we are very pleased with the engagement and the results. Based on his assessment of the excellent opportunity for Legend to become a successful energy solution provider, Mike, SKALED’s Legend sales coach, has approached Legend to join the team on a full-time basis and lead our sales efforts. We expect to have Mike Cioce under contract as Legend’s first VP Sales by January 21, 2019.

LIDO:

Sarah Driansky, the Managing Director of NY-based Lido Energy, is acting as our NY area ambassador and providing business development process and guidelines, and making introductions for Legend sales personnel throughout the NY energy market ecosystem. We are also very pleased with Lido and the first 90 days of results and deliverables achieved. A detailed Lido/Legend report highlighting our US growth plans is attached and Sarah will walk through the handout during our meeting.

Based on our earlier NY efforts, we learned we will not be successful flying people into NY and must have executive sales leadership and a NY-based sales team. We had to “earn the right to sell” before we could sell. Kathleen’s move to NY combined with an “A-player” like Sarah, have accelerated our progress in NY and we now believe NY sales could exceed Ontario sales in calendar 2019.

In late Q1, we’ve opened and placed an “A-Player” business development person in both Washington State and Washington, DC.

To establish our US presence, we must provide “comfort” to our prospect markets. We know the elements of comfort involve confidence that:

• the SmartGATE^TM technology solves the voltage problems they know they have
• that those results are validated by empirical data
• that it is reliable over time
• that it is an expandable ‘platform’
• that it is supported by the Utilities with incentives
• that cities, provinces, states and businesses see SmartGATE^TM as a significant tool to meeting mandated Energy Efficiency targets

For our Partners in the ecosystem, (resellers, installers, energy experts, ESCO’s, etc.), comfort involves knowing that not only is all of the above true, but that their customer relationship is not only safe, but enhanced. Like our investors, partners also want a product that helps them grow their business today, and into the future. 74.7% of Legend’s sales are multi-unit sales of 2 or more (69.2% of those are 5 units and above). Partners like engineering firm Haven Consultants International with 18 customer installations to date, have turned market potential into proven, and repeatable, market results.

Our investor communications plan objective is to provide honesty and clarity, yet create comfort that our market potential is intact, and any issues identified by short-term ‘misses’ have been addressed and are well on the way to being permanently fixed.

We expect to be back to sales growth in Q2 Fiscal 2019 as our sales activities are building to required levels and our sales funnel grows. Additionally, we have a $1mil. marketing budget to fuel sales growth by driving top-of-funnel leads, enabling our sales team to move from 20% of their time being spent on selling, to 70%.

1. Found, Interviewed, Onboarded & Managed Firm (LIDO) oversaw the completion of Market Rollout Plan / Best Practices while using NYC as the test region.
   1. Outline of the infrastructure and pre-sales building closed that need to be established in order to earn the right to sell
   2. Best practices for developing each vertical of the ecosystem
   3. Examples of an ‘influence map’ of authorities and agencies within a region to determine flow of decision making and funding for the public sector (NYC)
   4. Buyer Personas to aid marketing in developing collateral for each stakeholder in the ecosystem
   5. A market readiness tool, to see the progress made to ensure a region is ready to be sold to.
2. Found, Interviewed, Onboarded & Managed firm (SKALED) to help professionalize our sales program to ensure we have the RIGHT people, and to create a path to REVENUE

Department Updates

Sales:

Kathleen’s Wins Outside of Actual Sales in Q4.

1. Created, developed, trained & supervised Tradeshow & Events Manager position.
   1. Created schedule, implementation strategy leading up to, during, and post tradeshows, created an evaluation tool, tradeshow checklist, work back schedules, to ensure we are spending time at the right shows, and allocated the appropriate resources.
   2. Tradeshows & Events Supported IN Q4:
   • NECA (PHL)
   • ERAPPA (NH)
   • NESEA (NY)
   • Jet’s Tailgate (NJ)
   • Cooperator Expo (NY)
   • Urban Green Career Fair (NY)
   • Bloomberg Sustainability Summit (NY)
   • Mayor’s Megawatt Challenge (TO)
   • ONPHA Tradeshow and Conference (TO)
   • Urban Green Council Gala (NY)
   • Real Estate Tech Event (NY)
   • Greenbuild (CHI) – attended.
   • PM Expo (TO)
   • BOMA Annual Holiday Luncheon (NY)
   • USGBC Holiday Party (NJ)
   • WISE Holiday Party (Building Exchange/NESEA) (NY)
2. Met with Potential Contractors to create a Preferred Contractors Network in New York.
3. Staffing – Changes and Status:
   1. Discontinued – Yehuda Gelman (NYC)
   2. Continued Training – Sales Executive – John Skipper (NYC)
   3. Continued Training – Public Sector (NYC) – Mark Morales
   4. Interviewed, Hired & Onboarding – Sales Engineer (NYC) – Liliya Temes
   5. Interviewing for Account Executive Role in NYC – TBD
   6. Interviewing for Sales Coordinator Role, in NYC/TO – TBD
4. PASSPORT – NOW an APPROVED VENDOR! (Enables Legend to sell to all NYC public entities)

Business Development ─ Washington State

As a leadership team, we recognized the need to listen to, and learn from, the market (customers & ecosystem) as part of our growth and entry into multiple US markets. We also recognized the need for targeted, specific and measurable action – Seattle was selected as an ideal market “trial market” (close proximity to Vancouver with strong utility commitment to efficiency). The focus throughout Q4 2018 was on Planning & Strategizing for our upcoming market expansion, getting ready to “open” the market in the NW the following Quarter. This included:

1. Began the process of developing job descriptions, starting and executing the hiring process – looking for strong A level candidates who can help lead our growth efforts on Westcoast (and East coast following shortly thereafter)
2. Development of partner engagement program framework – who we will be targeting, how we will engage them, get them excited and motivated.
3. Completed initial review of top 10 Market for Legend Across the US, including connecting with utilities, trade associations and other key industry players in all targeted regions.
4. Early in Q1 2019 we hired Mike Bergstrom, who has a strong background in Energy Efficiency Entrepreneurship, to help “open” the northwest.

Events the following Quarter: Q1 2019

Bonneville Power Administration (BPA) – provides oversight to the region’s public utilities. We have connected with the team which runs and approves incentives to Public utilities in Washington state. The team at the BPA are very excited about our solution and have been very supportive of our market entry initiatives.

Sea-Tac Electric – A well established electrical contractor based in Seattle. The Sea-Tac team is visiting Legend’s Vancouver location in January to discuss opportunities to work together in the Northwest.

“I had a chance to sit down with our executive team this morning to discuss things, and I think it’s safe to say our team is excited about this potential opportunity. We’d like to keep the conversations moving with some forward momentum.”

Corey McKinnon
Director of Design, LEED AP BD+C
SEA-TAC ELECTRIC

Key Associations & Influencers – We are now an active member of two key associations in the Northwest – NEEC and 2030 Seattle. Both groups have provided us with introductions to a myriad of partner opportunities in the NW and have been very supportive at integrating us into the ecosystem.

Met and engaged with the region’s largest utilities – Seattle City Light and Puget Sound Energy.

Regional Energy Service Contractors – Established a connection with three of the largest Energy Services Contractors in the Northwest with Lunch & Learns booked with each group during the month of January. All three are interested in the opportunity Legend is introducing in the NW.

1. University Mechanical Contractors Inc.
2. Siemens
3. MacDonaldMiller

Staff – Hired Jason Schwartz to lead our US expansion efforts on the East coast. Leveraging all our learnings, process and methodology from Seattle and New York to continue to improve and speed up our growth engine.

Marketing: Q4 – 2018

Through the quarter, Marketing continued the foundational work that needs to be in place to make the most effective use of marketing spend to drive quality, top-of-funnel lead generation, and subsequent conversion. We also supported significant in-market trade show and other activities.

Key initiatives included:

1. Completed product rebranding − Harmonizer to SmartGATE^TM − to more accurately portray our energy efficiency to key customer verticals.
   • Redid website content, collateral, tradeshow booths etc. to reflect the new branding. (Very good feedback from attendees at PM Expo in Toronto in December… the branding resonated and created interest).
2. Positioning:
   • Working on repositioning Legend from “selling a box” to “Implementing an energy efficiency platform that helps save money and the environment”.
   • Focusing on creating/leveraging the category of ‘Voltage Management’ and communicating to Utilities and other referrers/recommenders in the ecosystem to include this “category” which we then lead. (Alleviates lack of mention because of reticence to recommend ‘single source’)
3. Public Relations:
   • In November, engaged AHA Creative Strategies to do business-side PR, outreach and brand- journalism.
   • Different focus for press releases, i.e. Moncton Airport release was picked up by Sustainable Architecture and Building Magazine (circulation 15,000+ online). These provide third-party validation we can’t buy.
   • Objectives
     1. To establish a strong brand journalism campaign that highlights the benefits of Legend Power® Systems’ products to identified target/niche markets in a credible manner.
     2. To build positive relationships on behalf of Legend Power Systems with journalists and influential bloggers.
     3. To generate bylined articles by Legend Power Systems’ senior executives in key niche trade publications.
4. Digital Marketing:
   • In December, finalized engagement of Optamo Marketing Inc., a talented digital marketing firm to:
   1. Understand how our prospective customers will find us online (Customer Journey)
   2. Determine the biggest opportunities across paid and organic search to attract prospects
   3. Develop a strategy to attract qualified prospects and early stage lead generation
   Objective is to create a top-of-funnel leads for Sales via online marketing. We’ll measure success by tracking traffic, engagement, and leads – working to improve both quality and quantity. Ultimate success metric is increased sales!
   This work is ongoing now and will guide Digital Advertising in the current quarter.
5. Social Media:
   • In Q4, ramped up both the number of Social Media’s (added Facebook and Instagram to existing Linked IN and Twitter channels) and the frequency of posts
   • Instead of just repeating IR press releases, now focusing on thought leadership, industry commentary and being a participant, commentator and resource in the Ecosystem
   • Partly because we were doing little previously, already seeing significant increases in both viewership, participation and followers
6. Video:
   • In Q4, initiated explorations into video use for explaining/familiarizing prospects with our product to create comfort
   • Established contact with Videography resources in TO market which will facilitate creation of hi-quality, cost-effective video elements for use in web, social and email. The following is a spontaneous customer quote from the recording of presentation at Humber College, TO:

“WE LIKED IT BECAUSE… IT’S NOT LIKE WHEN YOU CHANGE A LIGHT…U JUST SAVE ON THE LIGHT. YOU CHANGE THIS… YOU SAVE ON EVERYTHING!”

— SPENCER WOOD, DIRECTOR, FACILITIES MANAGEMENT, HUMBER COLLEGE, ETOBICOKE

Based on the above and other requirements, near-term plans include:

• Completing Customer Journey research (backgrounding) with customers/partners to inform launch of digital advertising programs (Google AdWords, LinkedIn, Remarketing etc.)
• Website rebuild to improve search results and on-site conversion of leads
• Continue ramped up presence of tactical Social Media (thought leadership, industry/trade awareness)
• Low-key content marketing elements to support digital conversion (like thought leadership articles)
• Video elements:
  • Corporate video
  • ‘What is SmartGATE^TM’ whiteboard video,
  • Explainer series on “getting to know SmartGATE^TM”

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