Funding Innovation & Growth

GRANTS & INCENTIVES

PRESENTED BY RICHARD BURDENIUKMarch 28 7, 2018

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GRANTS & INCENTIVES PRESENTATION OUTLINE

Story on Canada’s funding programs

Types of programs and the tools to find them

What’s new in the Federal Budget

5 new ways to identify programs you may have missed

Specific Programs & Details

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GRANTS & INCENTIVES

In the 2012 Jenkins report on incentives found:

• 60 major Federal government programs

• Spread across 17 different departments spending $7B

In 2017 this number had grown; when you add in provincial incentives:

• 513 active programs in Canada

• 151 active programs in Ontario

In 2018 the Federal budget consolidates

• increases spending

• consolidates many Federal programs (92 to 35)

What’s the story?

How do we cover them all in 30 minutes?

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GRANTS & INCENTIVESwww.canadabusiness.ca

5

SO WHAT’S THE PROBLEM?

6

GRANTS & INCENTIVESwww.canadabusiness.ca

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GRANTS & INCENTIVESHOW YOU ACCESS THE FUNDS?

70% Tax Credits

• Look Back

• Entitlement

• Deferred Benefit

23% Grants & Incentives

• Look Ahead

• Competitions

• Matching

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TAX CREDITS ARE EXPENDITURE RECOVERY BASED

$0

$5

$10

$15

$20

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep

Cash Recovery

$20,000 with a

burn Rate of

$1000

Tax credits

pay out after

your fiscal

year end

9

GRANTS CAN BE “FREE” OR “NEARLY FREE” BUT MOST ARE “EXPENDITURE MATCHING”

$0

$5

$10

$15

$20

Jan Mar May Jul Sep Nov Jan Mar May Jul SepCash Recovery

50% matching

expenses

starting in

May, totaling

the same

$7,500

20 month

runway is

extended the

same 7

months

IRAP – CMF – OIDMF etc… are all expense matching

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TYPES OF DIRECT FUNDING

Grants, contributions and financial

assistance

Loans and cash advances

Loan guarantee

Wage subsidies

Equity investments

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DIRECT FUNDING –FIVE MAIN BUCKETS OF “WHY”

Technology

Development

Hiring &

TrainingBusiness

Expansion

Export

Market

Development

Sustainability

& Energy

Efficiency

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FEDERAL BUDGET 2018 PROGRESS – INNOVATION AND SKILLS PLAN

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FEDERAL BUDGET

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FEDERAL BUDGET

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TIPS + TRICKS TO MAKE GRANTS WORK FOR YOU:

Select only the grants with the very best fit for your company - future

growth plans, alignment with your strategy, timeframe, your capacity

to invest

Talk to the funders - but understand what matters to them first

Be specific about expected outcomes and outputs

Make constructive use of project plans and milestones

Integrate grants into your overall funding and financing strategy

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GRANTS AND INCENTIVES

All monetary incentives are designed to encourage specific behavior; they

are “targeted” at different characteristics of your business:

1. Types of Products

2. Technology related to your Product

3. People who produce the Product

4. Location of your Business & Customers

5. Stakeholders

Identifying Additional Programs

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INCENTIVES IN CANADA

Ontario Media Development Corporation (OMDC) tax credits and funds

Film, Animation, Video Production, Book and Interactive Digital Media (40%)

Agri & Agrifood, SDTC Cleantech, GhG

1. Product – Industry Specifics

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INCENTIVES IN CANADA

SWIFT (Southwestern Integrated Fibre Technology)

• POP focused, applications are closed, construction underway

• Addresses quality of living & business competitiveness

• Make last-time connections for ISP’s more affordable

OMAFRA “RED – Rural Economic Development”

• Apply on behalf of not-for profit, municipality, service board, community

between July 30th to September 2018 to Stimulate economic growth

• Up to 50% of project costs capped at $100,000 for Planning &

Implementation

• Linkage with longer term outcomes, alignment with priorities

• Last Business led application Jan 2017 – 20% capped at $1M

1. Product – Telecom Specific

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INCENTIVES IN CANADA

http://www.metronews.ca/news/calgary/2018/03/15/high-speed-internet-to-

be-provided-to-the-remotest-alberta-communities.html $22M

Top 50 *July 19th 2017 – Globe & Mail Funding Portal

• #5 - MDA Systems LTD - $54M – satellite tech

• #21 – Xplornet Communication - $12.5M

• #29 – Pravala Networks -$9.7M – vehicle connectivity

• #31 - Eeyou Communication Network - $8.3M – network expansion

• #34 - Manitoba NetSet LTD - $7.9M – network expansion

• #29 – Commstream gigalinks Inc. $5M

CRTC – new funding July 2018?

1. Product – Telecom Specific – Who’s getting funded?

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GRANTS & INCENTIVES

Helps bridge the pre-commercial gap by awarding contracts up to $500,000

Government becomes your first customer, and provides feedback and

validation

Priority Areas:

• Environment

• Safety and security

• Health

• Enabling technologies

• Military technologies

Innovative Solutions Canada

• Modelled on US Small Business Innovation Research

• Challenge & Procurement Based

Type 1. Product – Build in Canada Innovation Program (BCIP)

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GRANTS & INCENTIVES

Who proves that

It actually works?

2. Technology related to your product

SR&ED is an

“indirect” tax

credit

program, est.

$3.5B

IRAP is a

direct

program, est.

$750M

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INCENTIVES IN CANADA2. Technology related to your product - Technology Readiness Level (TRL)

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INCENTIVES IN CANADA

NRC Industrial Research Assistance Program (IRAP)

Proposal before work is performed

Work to a schedule, monthly reports are filed

Expenses incurred are “matched”

Commercial aspects are critical, as is your credibility and reliability

2. Technology related to your product

$0

$10

$20

Jan Apr Jul Oct Jan Apr Jul

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SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT - SR&EDTHREE CRITERIA separate SR&ED from R&D

Technological Uncertainty *not routine

Systematic Investigation *not ad-hoc

Technological Advancement *not trivial

An SR&ED Project is a subset of your R&D Project

1 2 3 4 5

Requirements

Gathering Development Development Testing

User

Acceptance

Testing

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INCENTIVES IN CANADA

25,000 applicants a year has fallen to as low at 15,000

70% of applicants use a professional to assist in preparing the claims

Starting in 2012 through 2014 new CRA documents linked SR&ED to

the scientific method.

• Defining a problem that cannot be resolved with the information available

to you

• Advancing a plan or theory to resolve that problem,

• Testing and refining the hypothesis with experiments or analysis,

• Using that knowledge to build better methods and techniques

2. Technology in your Product - Scientific Research & Experimental Development

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INCENTIVES IN CANADA

For fiscal year end 2018

Enhanced rate is available to Canadian-controlled private corporations (CCPC), under Taxable Income

(TI) and Taxable Capital (TC) limits

Gross credits generated in a best-case scenario

No Proxy Cap

A portion of the credits are non-refundable.

Best Case Recovery Rates for R&D Tax Credits

ITEM SALARY MATERIALSSUB-

CONTRATORS

Federal (35%) + Ontario ITC (8.5 % + 3.5%)

Enhanced Rate of Return66% 42% 34%

Large Corporation 26% 18% 14%

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INCENTIVES IN CANADA

Income Tax Act: Section 248 – In a field of technology

SR&ED within a Company Project

Accounting Software

XML Parsing, VOIP

metering

Support Work

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INCENTIVES IN CANADASR&ED Descriptions

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INCENTIVES IN CANADASR&ED Evidence Checklist

CRA requests the top 5 pieces of information that are available to support the

specific documentation checked on the T661 Part 2 Section D:

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INCENTIVES IN CANADA

Youth Employment Program (YEP)

50% up to $30,000 of post-secondary graduate’s salary; for work on an

innovative technical project

Additional $448.5 million over five years to the Youth Employment Strategy.

Co-operative Education Tax Credit

Refundable tax credit, 30% capped at $3,000 per 4m term.

Canada Job Grant

Training must be provided by an external trainer (public or private institution)

The government funds up to 2/3 or $10,000 per person for tuition and training

materials

Less than 50 employees allows for some salary cost contribution

3. People - Who produce the product

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INCENTIVES IN CANADA

MITACS

Cost-sharing for access to PHD and other academic resources; typically an

investment of $15,000 per year

NSERC & OCE

Many programs to facilitate and pay for collaboration with Intuitions,

Universities, and Colleges

Finance commercialization

Resolve technical problems

Reduce your cost of hiring skilled professionals

License innovative intellectual property

Access expert advice

Improve your business skills

3. People - You collaborate with

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INCENTIVES IN CANADA

Background - Available once you have $200,000 to 500,000 in sales and 5-500

employees.

Benefit - Grant covering up to 50% of project costs; ranging from $5,000, to

$50,000 per application, with many applications per year.

Four areas are eligible for funding:

1. Direct contacts

2. Marketing tools

3. Market research

4. Foreign bidding projects

4. Development of International Business

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WHO WE AREOur National Incentives Team

80+

Including:

• Scientists

• Technicians

• Bio Researchers

• Software Programmers

• Chemists

• Engineers

• PhDs

• Financial Professionals

11 20Regions Offices

Professionals

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FEDERAL BUDGET 20182030 AGENDA FOR SUSTAINABLE DEVELOPMENT

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QUESTIONS?

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INTRODUCTION

Richard Burdeniuk leads the GTA’s Technology, Media & Telecommunications team in BDO’s

Consulting & Advisory Services. This team specializes in government incentive programs,

that fund growth and innovation.

Richard worked in the telecom space before entrepreneur efforts raising capital in two

ventures that developed software technologies for quality of service monitoring, distributed

computation, image processing. Richard’s experience in private sector business led research

and development led him to government funding programs.

His experience in private sector entrepreneurship helps him appreciate an owner’s bottom

line while also applying the scientific know-how to work with funders, accountants, and

lawyers. He has spent 12+ years helping companies access various tax credits and grants.

Canada’s SR&ED program is one of the more controversial CRA programs and he has

participated in policy development and tax court.

RICHARD BURDENIUKSenior Manager, Advisory Services Practice

rburdeniuk@bdo.ca

Direct: (905) 272-6242

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