As filed with the Securities and Exchange Commission on July 15, 2022
Registration No. 333-264859
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MCLOUD TECHNOLOGIES CORP.
(Exact Name of Registrant as Specified in its Charter)
British Columbia, Canada | 7372 | Not applicable | ||
(State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
550-510 Burrard Street,
Vancouver, British Columbia
Canada, V6C 3A8
Tel: (284)494-2810
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
Russell H. McMeekin
Chief Executive Officer
550-510 Burrard Street
Vancouver, British Columbia
Canada, V6C 3A8
Tel: (284)494-2810
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Marc J. Ross Avital Perlman Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31st Floor New York, NY 10036 Tel: (212) 930-9700 |
Brett Hanson Emily Humbert Fox Rothschild LLP 222 South Ninth Street, Suite 2000 Minneapolis, MN 55402 Tel: (612) 607-7000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act ☐
The term new or revised financial accounting standard refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED JULY 15, 2022 |
mCLOUD TECHNOLOGIES CORP.
1,000,000 9.0% Series A Cumulative Perpetual Preferred Shares
Warrants to purchase 6,250,000 Common Shares
We are offering for sale 9.0% Series A Cumulative Perpetual Preferred Shares, no par value, with a $25.00 liquidation preference per share (the Series A Preferred Shares). Each Series A Preferred Share is being sold with 6.25 warrants (each, a Warrant, and together, the Warrants) to purchase one common share, no par value per share (each, a Common Share, and together, the Common Shares), at an assumed combined public offering price of $25.00 per Series A Preferred Share and related Warrant, representing a public offering price of $24.9375 per Series A Preferred Share and $0.01 per related Warrant. The Warrants are exercisable on the date of issuance and expire on November 29, 2026, at an exercise price per Common Share equal to $4.75. The Series A Preferred Shares and Warrants can only be purchased together in this offering but the Series A Preferred Shares and Warrants are immediately separable and will be issued separately.
We are in the process of applying to have the Series A Preferred Shares sold in this offering listed on the Nasdaq Capital Market (Nasdaq) under the symbol MCLDP. There is no assurance that our listing application will be approved. We will not consummate this offering unless the Series A Preferred Shares will be listed on the Nasdaq Capital Market. The Warrants will be listed on Nasdaq along with the Listed Warrants (as defined below) under the symbol (MCLDW).
The liquidation preference of each Series A Preferred Share is $25.00. Upon liquidation, holders of Series A Preferred Shares will be entitled to receive the liquidation preference with respect to their Series A Preferred Shares plus an amount equal to accumulated but unpaid dividends with respect to such shares.
The Series A Preferred Shares have no voting rights with respect to matters that generally require the approval of voting shareholders. The Series A Preferred Shares are convertible into Common Shares of the Company following the issuance date based on a conversion ratio of (i) the $25.00 per share liquidation preference divided by (ii) $4.00. Therefore, each Series A Preferred Share is convertible into 6.25 Common Shares. Upon such a conversion, any declared but unpaid dividends on the converted Series A Preferred Shares would be paid in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a price of $4.00 per Common Share.
The Series A Preferred Shares are not redeemable prior to [ ], which is the first anniversary of the closing date of this offering, except for the circumstances described below.
On or after [ ], the Series A Preferred Shares may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption, upon the giving of notice.
Upon the occurrence of any Delisting Event, Change of Control, or $8 VWAP Event (each as defined in the Prospectus Summary), whether before or after the twelve (12) month anniversary of the date of issuance of the Series A Preferred Shares, we may, at our option, redeem the Series A Preferred Shares, in whole or in part and within 90 days after the date of the Delisting Event, Change of Control or $8 VWAP Event, by paying $25.00 per share of Series A Preferred Shares, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Stock up to, but not including, the date of such redemption.
Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year following the issuance of the Series A Preferred Shares, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. For example, the initial increase in the dividend rate from 9.0% to 13.0% will result in an increase in the dividend amount, on an annual basis, from $2.25 to $3.25. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. The Company can at its discretion, defer payment of all cumulative dividends under all circumstances until liquidation.
Our Common Shares and our warrants issued in November 2021 (the Listed Warrants) are currently listed on Nasdaq under the symbols MCLD and MCLDW, respectively. On July 13, 2022, the last reported sale price of our Common Shares was $2.82 per share and the last reported sale price of our Listed Warrants was $0.77 per Listed Warrant. Our Common Shares are also listed on the TSXV under the symbol MCLD. On July 13, 2022 the last reported sale price of our Common Shares on the TSXV was CAD$3.75 per share.
An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See Risk Factors beginning on page 13 of this prospectus.
Per Share | Per Related 6.25 Warrant |
Total Without Over-Allotment Option |
Total With Over-Allotment Option |
|||||||||||||
Public offering price |
$ | 24.9375 | $ | 0.0625 | $ | 25,000,000 | $ | 28,750,000 | ||||||||
Underwriting discounts (1) |
$ | 1.995 | $ | 0.005 | $ | 2,000,000 | $ | 2,300,000 | ||||||||
Proceeds, before expenses, to us |
$ | 22.9425 | $ | 0.0575 | $ | 23,000,000 | $ | 26,450,000 |
(1) | See Underwriting on page 113 of this prospectus for a description of all underwriting compensation payable in connection with this offering. |
(2) | The amount of offering proceeds to us presented in this table does not give effect to any exercise of the over-allotment option we have granted to the underwriter as described below. |
We have granted the underwriters an option to purchase an additional 150,000 Series A Preferred Shares and/or Warrants to purchase 937,500 additional Common Shares from us (being up to 15% of the Series A Preferred Shares, and/or up to 15% of the Warrants sold in this offering), in any combination thereof, at the public offering price per Series A Preferred Share and public offering price per Warrant, respectively, less the underwriting discounts and commissions, for 45 days from the date of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2022
Maxim Group LLC
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F-1 |
You should rely only on the information contained in this prospectus or in any free
For investors outside the United States: Neither we, nor the underwriters, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Series A Preferred Shares and Warrants and the distribution of this prospectus outside the United States.
This summary highlights information that we present more fully in the rest of this prospectus. This summary does not contain all of the information you should consider before buying Series A Preferred Shares and Warrants in this offering. This summary contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as anticipate, estimate, plan, project, continuing, ongoing, expect, we believe, we intend, may, should, will, could, and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. You should read the entire prospectus carefully, including the Risk Factors section and the financial statements and the notes to those statements.
Corporate Information
We are a Canadian corporation and our principal executive offices are located at 550-510 Burrard St., Vancouver, British Columbia, V6C 3A8 and the registered office is located at 2686 Point Grey Rd., Vancouver, BC, V6K 1A5, Canada and our phone number is (604) 669-9973.
Our Company
Overview
The Company delivers solutions combining Internet of Things (IoT), artificial intelligence (AI), and the cloud to unlock the untapped potential of energy- intensive assets such as:
| HVAC units and refrigerators in commercial buildings; |
| control systems, heat exchangers, and compressors at process industry facilities; and |
| wind turbines generating renewable energy at onshore wind farms. |
IoT enables inexpensive, readily scalable connectivity to these and other under-served assets. Data from these IoT sensors are taken into the cloud, where digital twins of these assets are created, and AI is applied to identify opportunities to optimize asset performance. Asset operators and maintainers who manage these assets in the field are guided through a portfolio of mobile, connected applications that enable these teams to take asset management actions that ensure optimal performance.
Through the Companys proprietary AssetCare platform, AI is used to identify opportunities to improve asset performance and enable asset operators and maintainers to take direct action creating these measurable improvements. Some key applications of the Companys AssetCare technology at work include:
| curbing wasted energy while improving occupant comfort in commercial facilities through AI-powered adaptive control; |
| maximizing asset availability and production yields of renewable energy sources through continuous performance assessment and predictive maintenance; and |
| optimizing the uptime and manage the operational risk of industrial process plants, including oil and gas facilities, through continuous AI-powered advisory and assistance to process operators in the field. |
In all markets, the Company uses a commercial Software-as-a-Service (SaaS) business model to distribute its AssetCare solution. Customers pay a simple, subscription-based price that is determined by number of assets, asset size or complexity, and the expected efficiency gains to be created using AI and analytics. Set up as multi-year, recurring subscriptions, customers pay no fees upfront to onboard an AssetCare solution; any upfront costs are leveraged across the lifetime of the initial subscription period. Certain software and technologies used in AssetCare solutions are also offered to some customers on a perpetual basis.
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Marketing Channels
The Company maintains a robust presence in seven countries: Canada, the United States, the United Kingdom, the Kingdom of Bahrain as the gateway to markets in the Middle East, China, Singapore and Australia, supplemented by a growing international network of channel and delivery partners around the world.
The Company employs sales team members in these countries charged with direct sales efforts of AssetCare solutions. Global marketing efforts to support these sales efforts include virtual campaigns and events to attract new customers, strengthen relationships with existing customers, and building brand presence and visibility. The Company also hosts an annual user conference called mCloud Connect, which includes head-liners from well-known industry leaders, panels, and interactive sessions to gather voice of the customer feedback, which is used to improve the Companys portfolio of AssetCare offerings.
The Company has conducted extensive research to size the markets and opportunities it can access through its AssetCare platform. The Company estimates it has the capability of serving over 7.3 million commercial buildings and over 34,000 industrial sites in 20 different locales worldwide, with each building or site representing multiple potential connectable assets, workers, or 3D digital twins.
Serviceable commercial buildings include restaurants, mid-size retail (including retail finance sites such as bank branches), and long-term care facilities. In these buildings, the Company connects to assets such as HVAC, lighting, and refrigeration units. Connectable workers include people involved in the day-to-day operation or maintenance of these commercial buildings, including mechanical service workers and facility managers.
Industrial sites include oil and gas, liquefied natural gas, and floating production storage and offloading facilities, as well as wind farms, mining processing plants, and pulp and paper facilities. In these locations, connectable assets include process control systems, heat exchangers, pumps, and gas compressors. Connectable workers include field operators, maintainers, engineers, asset managers, and plant managers. The Companys experience in delivering digital 3D models from entire multi-billion-dollar assets the size of a floating production storage and offloading (FPSO) vessel down to asset subcomponents such as wind turbine blades creates large obtainable market opportunities.
Based on the average monthly fee currently generated per connection or 3D digital twin, the Company estimates the current obtainable market opportunity to be approximately $24 billion in recurring revenue per annum including all potential targeted assets, workers, and 3D digital twins that the Company can currently address.
Intangible Properties
mClouds success depends in part on its ability to create unique intellectual property that improves the Companys ability to create and deliver customer value in the principal markets where it does business. The Company relies on the use of intellectual property rights, including patents, copyrights, registered trademarks, and trade secrets in Canada, the United States and the European Union.
The Company retains a portfolio of 15 technology patents in the areas of HVAC energy efficiency, 3D, and asset management, a global customer base in industries including retail, healthcare, heavy industry, oil and gas, nuclear power generation, and renewable energy, and a portfolio of 12 registered trademarks, including marks related to mCloud and AssetCare. Please see Our Business Intellectual Property.
The Company also uses key domain names, including acrx.com, fdsi.site, fdsi.us, fielddiagnostics.com, fmdiagnosticscoe.com, mysamobile.com, peatanalytics.com, mcloudcorp.com, assetcare.io, assetcare.net, myldar.com, ngrain.com, ngrain.ca, ngrain.net, ngrain.org and i3dimensions.com.
The Company further protects its proprietary source code and algorithms as trade secrets, limiting access to these to employees who have a need to know such information.
Environmental Protection
The Company does not see any financial or operational effects from environmental protection requirements on capital expenditures, profit or loss, and competitive position in this financial year. In the future, the Company may see enhanced demand for AssetCare in businesses who have a mandate to become more energy efficient or demonstrate they have instituted effective methane emission reduction and mitigation programs in response to new government regulations.
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Employees
As of the date of this prospectus, the Company and its subsidiaries have 216 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2021, the Company and its subsidiaries had 216 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2020, the Company and its subsidiaries had 227 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. As of the year ended December 31, 2019, the Company and its subsidiaries had over 216 employees employed in twelve offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. The fluctuation in the Companys number of employees is not significant, and none of the Companys employees belong to any labour unions. Furthermore, all of the Companys employees are employed on a full-time basis.
Incentive stock options may be granted only to employees of the Company or a parent corporation or subsidiary corporation thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock awards other than incentive stock options (including non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively Stock Awards) may be granted to employees, directors and consultants; provided, however, that Stock Awards may not be granted to employees, directors and consultants who are providing Continuous Service only to any parent of the Company, as such term is defined in Rule 405, subject to certain exceptions set out in the Companys Incentive Stock Option Plan.
Foreign Operations
The Company operates in multiple geographies around the world, including North America (the United States and Canada), Europe (the United Kingdom and continental Europe), Southeast Asia (primarily Greater China), the Middle East (primarily Saudi Arabia), and Australia with most of its business taking place outside of Canada. mCloud is not dependent on business in any one region for its success.
Research and Development
The Companys customers use its software to monitor their assets and rely on the Company to provide updates and releases as part of its software maintenance and support services. Consequently, while the Company has not implemented a formal research and development policy for the past three years, the Company is and has been (including, but not limited to, the past three years) engaged with a number of research and development initiatives as a part of its ongoing effort to continually update its software and develop new products.
Fixed Assets
On September 27, 2021, the Company executed a 12-year lease for its office in Calgary, Alberta located at 8 Avenue SW, Stephen Avenue Place, Calgary, Alberta, Canada. In total, the Company has leased 33,000 square feet of the property, situated on the 3rd and 33rd floor of the building located at the aforementioned address. The lease term commences on December 1, 2022, preceded by a fixturing period which the Company will use to build out the office space to their specifications. The Company is currently in the design and scoping stage, and has not yet finalized its plans for the precise use of the property, and does not yet have any plans to construct, expand, or improve the facilities. No environmental issues have currently been identified that will affect the Companys utilization of the asset.
Material Effects
Certain government regulations have a material impact on the Companys business. The Company has implemented certain measures to address and conform to all the frameworks noted below, and others as required, and conducts an annual review to ensure compliance with such frameworks and regulations.
The Company is required to adhere to such frameworks as the EUs General Data Protection Regulations, the EUs ePrivacy Regulation, Brazils General Data Protection Law, the California Consumer Privacy Act, the California Online Privacy Protection Act, and various other regulations in effect in other U.S. states, which require the Company, among other things, to have a valid privacy policy, block cookies before the user provides consent, allow users to opt-in or opt-out of receiving communications from the Company, show a notice of collection, and keep records of consent and processing. While the Company does not yet do business in Brazil, and has not reached the required number of users in California for the applicable regulations noted above to have effect, the Company has implemented measures to ensure that it remains compliant with these frameworks in advance of such compliance being legally required.
Data security practices are monitored and regulated by the Federal Trade Commission in the U.S., the Office of the Privacy Commissioner in Canada, and the European Data Protection Board of the EU. Canada, in particular, has several privacy law statutes that the Company is required to adhere to, such as the Personal Information Protection and Electronic Documents Act, the Personal Information Protection Act (Alberta), the Personal Information Protection Act (British Columbia), and An Act Respecting the Protection of Personal Information in the Private Sector (Quebec).
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Generally speaking, the Company is also required to comply with and respect the competition, consumer protection, and taxation laws, and intellectual property laws and regulations handed down by standard copyright and trademark laws in each of the jurisdictions it operates in. For confidential government contracts that require specific approvals to examine, possess, or transfer intellectual property, the Company is required to adhere to the International Traffic in Arms Regulations in the US, and the Canadian Controlled Goods Program in Canada. Additionally, the Company also follows and adheres to the best practices set out in the various National Institute of Standards and Technology frameworks, the Information Technology Infrastructure Library framework, and the Certified Information Systems Security Professional framework.
Emerging Growth Company Status
As a company with less than $1.07 billion in revenue during our last two fiscal periods (the years ended December 31, 2020 and 2021), we qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
| not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, |
| reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements, and |
| exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the Securities Act). However, if certain events occur before the end of such five-year period, including if we become a large accelerated filer, our annual gross revenues exceed $1.07 billion or we issue more than $1.00 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.
Foreign Private Issuer Status
We are a foreign private issuer, as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Securities Exchange Act of 1934, as amended (the Exchange Act). As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.
As an exempted Canadian company listed on the Nasdaq Capital Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Canada, which is our home country, may differ significantly from the Nasdaq Stock Market corporate governance listing standards.
A description of the significant ways in which our governance practices currently differ from those followed by domestic companies pursuant to the Rule 5600 series of the Nasdaq Stock Market Rules is set out below:
| Quorum RequirementNasdaq Listing Rule 5620(c) provides that the minimum quorum requirement for a meeting of shareholders is 331/3% of the outstanding common voting shares. We do not follow this Nasdaq Listing Rule. Instead, we follow our articles which provide that the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares. |
| Shareholder Approval RequirementsIn certain instances, Nasdaq Listing Rule 5635 requires each issuer to obtain shareholder approval before an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; and (iii) transactions other than public offerings. We do not follow this Nasdaq Listing Rule. Instead, we comply with the laws, rules and regulations of Canada and the Province of British Columbia and the policies of the TSX Venture Exchange, which have different requirements for shareholder approval (including, in certain instances, not requiring any shareholder approval) in connection with issuances of securities in the circumstances listed above. |
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Notes on Prospectus Presentation
Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. Certain market data and other statistical information contained in this prospectus is based on information from independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in this prospectus are also based on managements estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the global bitters and spirits industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.
Except where the context otherwise requires and for purposes of this prospectus only:
| Depending on the context, the terms we, us, our company, and our refer to mCloud Technologies Corp., and its consolidated subsidiaries: |
| preferred shares refer to our Series A Preferred Shares, no par value. |
| all references to CAD, CAD$ and Canadian dollar are to the legal currency of Canada, and all references to USD, $, US$ and U.S. dollars are to the legal currency of the United States. |
Unless otherwise noted, all currency figures in this filing are in U.S. dollars. The financial statements of the Company included herein are reported in Canadian dollars and are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We make no representation that the Canadian dollar amounts or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollar amounts, as the case may be, at any particular rate or at all. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.
The Offering
Series A Preferred Shares | 1,000,000 Series A Preferred Shares on a firm commitment basis | |
Offering Price basis | $25.00 per Series A Preferred Share and Warrant on a combined basis | |
Warrants | Warrants to purchase up to 6,250,000 Common Shares, which are exercisable on the date of issuance and expire on November 29, 2026, at an exercise price per Common Share equal to $4.75. | |
Over-allotment Option to purchase additional Common Shares from us | We have granted the underwriters an option to purchase an additional 150,000 Series A Preferred Shares and/or 937,5000 Warrants to purchase additional Common Shares from us (being up to 15% of the Series A Preferred Shares, and/or up to 15% of the Warrants sold in this offering), in any combination thereof, at the public offering price per Series A Preferred Share and public offering price per Warrant, respectively, less the underwriting discounts and commissions, for 45 days from the date of this prospectus. | |
Number of Series A Preferred Shares issued and outstanding before this offering | 0 | |
Number of Series A Preferred Shares outstanding after this offering | 1,000,000 shares. | |
Number of Common Shares outstanding prior to offering | 16,155,654 shares. |
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Liquidation Preference The liquidation preference of each Series A Preferred Share is $25.00 per share. Upon liquidation, holders of Series A
Preferred Shares will be entitled to receive the liquidation preference with respect to their Series A Preferred Shares plus an amount equal to accumulated but unpaid dividends with respect to such shares. The Series A Preferred Shares will be convertible into common Shares based on a conversion ratio of (i) the $25.00 per
share liquidation preference divided by (ii) $4.00. Therefore, each Series A Preferred Share is convertible into 6.25 Common Shares. Upon such a conversion, any declared but unpaid dividends shall be paid to the holder of Series A Preferred Shares
in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a price of $4.00 per Common
Share. Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking
senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally
available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will
increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. However,
the Company will be entitled to defer the payment of any declared dividends on the Series A Preferred Shares until the occurrence of a liquidation or Board approved Change of Control of the Company. The Series A Preferred Shares will rank, as to dividend rights and rights upon our liquidation, dissolution or winding
up: (1) Senior to all classes or series of our common
shares and to all other equity securities issued by us other than any equity securities issued with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Shares; (2) Junior to any future equity securities issued by us
with terms specifically providing that those equity securities rank senior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and (3) Effectively junior to all our existing and future
indebtedness (including indebtedness convertible into our common shares or preferred shares) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing or future
subsidiaries. The Series A Preferred Shares are perpetual and have no maturity date, and we are not required to redeem the Series A
Preferred Shares. Accordingly, all Series A Preferred Shares will remain outstanding indefinitely, unless and until they are redeemed or converted in accordance with their terms. Holders of Series A Preferred Shares will have no preemptive
rights. 6
In any matter in which the Series A Preferred Shares may vote, as described below, each Series A Preferred Share shall be
entitled to one vote per $25.00 of liquidation preference; provided that if the Series A Preferred Shares and any other stock ranking on parity to the Series A Preferred Shares as to dividend rights and rights as to the distribution of assets upon
the Corporations liquidation, dissolution or winding up are entitled to vote together as a single class on any matter, the holders of each will vote in proportion to their respective liquidation preferences. So long as any Series A Preferred
Shares remain outstanding, the Company will not, without the consent or the affirmative vote of the holders of at least two-thirds of the outstanding Series A Preferred Shares and each other class or series of
preferred stock entitled to vote thereon (voting together as a single class), given in person or by proxy, either in writing without a meeting or by vote at any meeting called by the Company for the purpose: (i) authorize, create or issue, or increase the number of
authorized or issued number of shares of, any class or series of capital stock ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon the liquidation, dissolution or winding up of the
Company or reclassify any authorized capital stock of the Company into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Articles
of Incorporation, as amended, including the terms of the Series A Preferred Shares, whether by merger, consolidation, transfer or conveyance of all or substantially all of the Companys assets or otherwise, so as to materially and adversely
affect the rights, preferences, privileges or voting powers of the Series A Preferred Shares, taken as a whole. If any event described in paragraph (ii) above would materially and adversely affect the rights, preferences,
privileges or voting powers of the Series A Preferred Shares, taken as a whole, disproportionately relative to any other class or series of voting preferred stock (as defined below), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series A Preferred Shares, voting as a separate class, will also be required. Furthermore, if holders of shares of the Series A Preferred Shares receive the $25.00 per
share of the Series A Preferred Shares liquidation preference plus all declared and unpaid dividends thereon or greater amounts pursuant to the occurrence of any of the events described in paragraph (ii) above, then such holders shall not have
any voting rights with respect to the events described in such paragraph. As used herein, voting preferred stock means any other class or series of the Companys preferred stock ranking equally with the Series A Preferred Shares as
to dividends (whether cumulative or non-cumulative) and the distribution of the Companys assets upon liquidation, dissolution or winding up and upon which like voting rights to the Series A Preferred
Shares have been conferred and are exercisable. We intend to use the proceeds from this offering for working capital and general corporate purposes, including retiring
convertible debenture debt that was due June 30, 2022. See Use of Proceeds for more information. 7
So long as any Series A Preferred Share remains outstanding, unless we also have either paid or declared and set apart for
payment full cumulative dividends on the Series A Preferred Shares for all past completed dividend periods, we will not during any dividend period: (1) pay or declare and set apart for payment any dividends or declare or make any distribution of cash or other property on Common Shares or
other capital stock that ranks junior to or on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up (other than,
in each case, (a) a dividend paid in Common Shares or other stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation,
dissolution or winding up or (b) any declaration of a Common Share dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders rights plan, or the redemption or
repurchase of rights pursuant to such plan); (2)
redeem, purchase or otherwise acquire Common Shares or other capital stock that ranks junior to or on parity with the Series A Preferred Shares (other than the Series A Preferred Shares) with respect to dividend rights and rights to the distribution
of assets upon our voluntary or involuntary liquidation, dissolution or winding up (other than (a) by conversion into or exchange for Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend
rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (b) the redemption of shares of capital stock pursuant to the provisions of our memorandum of articles, as amended,
relating to the restrictions upon ownership and transfer of our capital stock, (c) a purchase or exchange offer made on the same terms to holders of all outstanding A Preferred Shares and any other capital stock that ranks on parity with the
Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (d) purchases, redemptions or other acquisitions of shares of our
capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up pursuant to any employment contract,
dividend reinvestment and stock purchase plan, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors, consultants or advisors, (e) through the use of the proceeds of a substantially contemporaneous
sale of stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, or (f) purchases or other
acquisitions of shares of our capital stock pursuant to a contractually binding stock repurchase plan existing prior to the preceding Dividend Payment Date on which dividends were not paid in full); or (3) redeem, purchase or otherwise acquire Series A
Preferred Shares (other than (a) by conversion into or exchange for Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary
or involuntary liquidation, dissolution or winding up, (b) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares or (c) with respect to redemptions, a redemption pursuant to which all
Series A Preferred Shares are redeemed). 8
The Series A Preferred Shares are not redeemable prior to
[ ], which is the first anniversary of the closing date of this offering, except for the circumstances described under Special Optional
Redemption. On or after
[ ], the Series A Preferred Shares may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A
Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption, upon the giving of notice. Upon the occurrence of any Delisting Event, Change of Control, or $8 VWAP Event, whether before or after
[ ], we may, at our option, redeem the Series A Preferred Stock, in whole or in part and within 90 days after the date of the Delisting Event, Change of
Control or $8 VWAP Event, by paying $25.00 per share of Series A Preferred Stock, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Stock up to, but not including, the date of such redemption. A Delisting Event occurs when, after the original issuance of Series A Preferred Stock, both
(i) the shares of Series A Preferred Stock are no longer listed on Nasdaq, the New York Stock Exchange (the NYSE) or the NYSE American LLC (NYSE AMER), or listed or quoted on an exchange or quotation system that is a
successor to Nasdaq, the NYSE or the NYSE AMER, and (ii) the Company not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), but any Series A Preferred Stock is still
outstanding. A Change of Control occurs when, after the original issuance of the Series A Preferred
Stock, the following have occurred and are continuing: (a) any person or persons acting together which would constitute a group for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act), (other than the Company or any subsidiary of the Company) shall beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the total
voting power of all classes of capital stock of the Company entitled to vote generally in the election of the Board; (b) Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members of the
Board (for this purpose, a Current Director shall mean any member of the Board as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Companys shareholders, was approved by
at least a majority of the Current Directors then on the Board); (c) (i) the complete liquidation of the Company or (ii) the merger or consolidation of the Company, other than a merger or consolidation in which (x) the holders of the
common stock of the Company immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or
(y) the Board immediately prior to the merger or consolidation would, immediately after the merger or consolidation, constitute a majority of the board of directors of the continuing or surviving corporation, which liquidation, merger or
consolidation has been approved by the shareholders of the Company; or (d) the sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Company pursuant to an agreement (or
agreements) which has (have) been approved by the shareholders of the Company. 9
An $8 VWAP Event occurs when, after the original issuance of Series A Preferred Stock, the
volume weighted average price of the Common Shares on the Nasdaq Capital Market for five consecutive trading days (as reported by Bloomberg L.P. based on a trading day from 9:30 a.m. to 4:02 p.m. (New York City time)) is at least $8.00. Upon the occurrence of a Board Approved Change of Control, holders of our Series A Preferred Shares may (i) require us
to redeem their shares of our Series A Preferred Shares at a per share redemption price of $25.00, plus declared and unpaid dividends to, but excluding, the effective date of the Change of Control, or (ii) continue to hold our Series A
Preferred Shares (subject to the Companys option to redeem the Series A Preferred Shares as set forth above). The Company shall establish a segregated account that will be funded at closing of the offering with proceeds in an amount
equal to nine (9) months of dividends on the maximum number of Series A Preferred Shares. The segregated account may only be used to pay dividends declared on the Series A Preferred Shares, when legally permitted, and may not be used for other
corporate purposes. We are in the process of applying to have the Series A Preferred Shares listed on Nasdaq under the symbol MCLDP.
There is no assurance that our listing application will be approved. Our Warrants will trade on the Nasdaq along with the Listed Warrants under the symbol MCLDW. Our Common Shares are listed on Nasdaq under the symbol
MCLD and our Listed Warrants are listed under the symbol MCLDW. Our Common Shares are also listed on the TSXV under the symbol MCLD. Investing in these securities involves a high degree of risk. As an investor, you should be able to bear a complete
loss of your investment. You should carefully consider the information set forth in the Risk Factors section of this prospectus before deciding to invest in our Series A Preferred Shares and Warrants. Summary Financial Data The following tables summarize our historical financial data. The summary consolidated statements of operation for the years
ended December 31, 2019, 2020 and 2021 and the summary consolidated Statements of Financial Position as of December 31, 2019, 2020 and 2021 have been derived from our consolidated financial statements included elsewhere in this prospectus.
The following summary financial data should be read in conjunction with the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related
notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of the results to be expected
for a full fiscal year. 10
The following table presents our summary consolidated
statements of operation for the three months ended March 31, 2022 and the years ended December 31, 2021 2020, and 2019 (unless indicated otherwise, and converted amounts in the following table are expressed in Canadian dollars as set out
in Currency and Exchange Rates.): Revenue Cost of sales Gross profit Expenses Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total expenses Operating loss Other expenses (income) Finance costs Foreign exchange loss (gain) Business acquisition costs and other expenses Impairment Fair value loss on derivatives Other income Loss before tax Current tax expense (recovery) Deferred tax (recovery) expense Net loss for the year Other comprehensive (income) loss Foreign subsidiary translation differences Comprehensive loss for the year Net loss (income) for the year attributable to: mCloud Technologies Corp. shareholders Non-controlling interest Comprehensive loss (income) for the year attributable to: mCloud Technologies Corp. shareholders Non-controlling interest Loss per share attributable to mCloud shareholders basic and diluted Weighted average number of common shares outstanding basic and diluted 11
The following table presents our summary consolidated
balance sheets data as of March 31, 2022, December 31, 2021, 2020 and 2019 (Unless indicated otherwise, and converted amounts in the following table are expressed in Canadian dollars as set out in Currency and Exchange Rates.): ASSETS Current assets Cash and cash equivalents Trade and other receivables Current portion of prepaid expenses and other assets Current portion of long-term receivables Total current assets Non-current assets Prepaid expenses and other assets Long-term receivables Right-of-use
assets Property and equipment Intangible assets Goodwill Total non-current assets Total assets LIABILITIES Current liabilities Bank indebtedness Trade payables and accrued liabilities Deferred revenue Current portion of loans and borrowings Current portion of convertible debentures Warrant liabilities Current portion of lease liabilities Current portion of other liabilities Current portion of business acquisition payable Total current liabilities Non-current liabilities Convertible debentures Lease liabilities Loans and borrowings Deferred income tax liabilities Other liabilities Business acquisition payable Total liabilities EQUITY Share capital Contributed surplus Accumulative other comprehensive income Deficit Total shareholders equity Non-controlling interest Total equity Total liabilities and equity 12
Investing in our securities is speculative and involves a high degree of risk. You should consider carefully the following
risk factors, as well as the other information in this prospectus, including our consolidated financial statements and notes thereto, before you decide to purchase our securities. If any of the following risks actually occur, our business, financial
condition, results of operations and prospects could be materially adversely affected, the value of our securities could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See Cautionary Note Regarding Forward-Looking
Statements. Summary Risk Factors As a company primarily based outside of the United States, our business is subject to economic, political,
regulatory and other risks associated with international operations. mCloud may be unable to identify and complete suitable platform acquisitions and acquisitions in its existing
vertical markets. Potential acquisitions could be difficult to consummate and integrate into mClouds operations, and they
and investment transactions could disrupt mClouds business, dilute stockholder value or impair mClouds financial results. The loss of one or more of mClouds key personnel, or its failure to attract and retain other highly
qualified personnel in the future, could harm its business. We may acquire contingent liabilities through acquisitions that could adversely affect mClouds operating
results. Acquisitions, investments, joint ventures and other business ventures may negatively affect mClouds
operating results. We may not be able to protect our intellectual property rights, which could make us less competitive and cause
us to lose market share. The loss of our rights to use technology currently licensed by third parties could increase operating expenses by forcing us to seek alternative technology and adversely affect our ability to compete. If mCloud is not able to maintain and enhance the AssetCare brand, or if events occur that damage the
AssetCare reputation and brand, mClouds ability to expand its base of users may be impaired, which could adversely affect mClouds business and financial results. Because we are a corporation incorporated in British Columbia and some of our directors and officers are
resident in Canada, it may be difficult for investors in the United States to enforce civil liabilities against us based solely upon the federal securities laws of the United States. Similarly, it may be difficult for Canadian investors to enforce
civil liabilities against our directors and officers residing outside of Canada. Factors Influencing Serviceable Obtainable
Market. The Companys statements regarding serviceable obtainable market reflect the Companys estimate
of the entire market available to the Company and its competitors. The markets for the Companys AssetCare offering are subject to substantial competition and mCloud may not capture as much market share as it currently expects to capture.
mCloud has direct competitors in these markets who may have credible advantages over the Company in areas such as financial strength, regional presence, and human resources, which could influence the Companys ability to capture market share.
Certain prospective customers in these markets may also have the means to develop and deploy their own solutions. Furthermore, current mCloud customers in these markets may decide not to renew or reduce the scope of their AssetCare subscriptions
following the completion of their subscription term based on business need or changes in their strategy. The Company partners with third-parties such as mechanical contractors and engineering service providers to deliver AssetCare, and in the event
mCloud captures greater market share, the Companys ability to successfully deliver to customers depends on either these partnerships or mClouds ability to scale its local presence to meet demand. The Company believes that statements
about its serviceable obtainable market are reasonable. However, there is no guarantee that mCloud will be able to capture or service any portion of the market, which could adversely affect mClouds business and financial results. Force Majeure Events COVID-19. Major health issues and pandemics, such as COVID-19, may adversely affect trade, global
and local economies, and the trading prices of our securities. Outbreaks may affect the supply chain of the Company and may restrict the level of economic activity in affected areas, which may adversely affect the price and demand for the
Companys products and services, as well as the Companys ability to collect outstanding receivables from its customers. Given the ongoing and dynamic nature of the circumstances surrounding
COVID-19, the extent to which the coronavirus will impact the Companys financial results and operations is uncertain. It is possible, however, that the Companys business operations and financial
performance in 2022 and beyond may be materially adversely affected by COVID-19. 13
Going Concern Assumption. The financial statements of mCloud have been prepared in accordance with International Financial Reporting Standards (IFRS) on
a going concern basis, which presumes that mCloud will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. mClouds continuation as a going concern is uncertain
and is dependent upon, amongst other things, attaining a satisfactory revenue level, the support of its customers, its ability to continue profitable operations, the generation of cash from operations, and its ability to obtain financing
arrangements and capital in the future. These material uncertainties represent risk to mClouds ability to continue as a going concern and realize its assets and pay its liabilities as they become due. If the going concern
assumption was not appropriate for the financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
mCloud may be unable to identify and complete suitable platform acquisitions and acquisitions in its existing
vertical markets. mCloud cannot be certain that it will be able to identify suitable new acquisition candidates
that are available for purchase at reasonable prices. Even if mCloud is able to identify such candidates, it may be unable to consummate an acquisition on suitable terms. When evaluating an acquisition opportunity, mCloud cannot assure investors
that it will correctly identify the risks and costs inherent in the business that it is acquiring. If mCloud is to proceed with one or more significant future acquisitions in which the consideration consists of cash, a substantial portion of its
available cash resources may be used, or it may have to seek additional financing to complete such acquisitions. Potential acquisitions could be difficult to consummate and integrate into mClouds operations, and they and
investment transactions could disrupt mClouds business, dilute stockholder value or impair mClouds financial results. As part of mClouds business strategy, it may continue, from time to time, to seek to grow its business through
acquisitions of or investments in new or complementary businesses, technologies or products that it believes can improve its ability to compete in its existing customer markets or allow it to enter new markets. The potential risks associated with
acquisitions and investment transactions include, but are not limited to: failure to realize anticipated returns on investment, cost savings and synergies; difficulty in assimilating the operations, policies, and personnel of the acquired company;
unanticipated costs associated with acquisitions; challenges in combining product offerings and entering into new markets in which we may not have experience;
distraction of managements attention from normal business operations; potential loss of key employees of the acquired company; 14
difficulty implementing effective internal controls over financial reporting and disclosure controls and
procedures; impairment of relationships with customers or suppliers; possibility of incurring impairment losses related to goodwill and intangible assets; and
other issues not discovered in due diligence, which may include product quality issues or legal or other
contingencies. Acquisitions and/or investments may also result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on
mClouds operating results or financial condition. Investments in immature businesses with unproven track records and technologies have an especially high degree of risk, with the possibility that mCloud may lose its entire investment or incur
unexpected liabilities. mCloud may experience risks relating to the challenges and costs of closing a business combination or investment transaction and the risk that an announced business combination or investment transaction may not close. There
can be no assurance that mCloud will be successful in making additional acquisitions in the future or in integrating or executing on its business plan for existing or future acquisitions. mCloud may acquire contingent liabilities through acquisitions that could adversely affect mClouds operating
results. mCloud may acquire contingent liabilities in connection with acquisitions it has completed, which may be
material. Although management uses its best efforts to estimate the risks associated with these contingent liabilities and the likelihood that they will materialize, their estimates could differ materially from the liabilities actually incurred.
Acquisitions, investments, joint ventures, and other business initiatives may negatively affect mClouds
operating results. The growth of mCloud through the successful acquisition and integration of complementary
businesses is a critical component of its corporate strategy. mCloud continually evaluates acquisition opportunities within its respective marketplace and may be in various stages of discussions with respect to such opportunities. mCloud plans to
continue to pursue acquisitions that complement its existing business, represent a strong strategic fit, and are consistent with its overall growth strategy and disciplined financial management. mCloud may also target future acquisitions to expand
or add functionality and capabilities to its existing portfolio of solutions, as well as add new solutions to its portfolio. mCloud may also consider opportunities to engage in joint ventures or other business collaborations with third parties to
address market segments. These activities create risks such as: (i) the need to integrate and manage the businesses and products acquired with mClouds own business and products; (ii) additional demands on its resources, systems,
procedures and controls; (iii) disruption of its ongoing business; and (iv) diversion of managements attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or
financings by issuance of debt or equity or equity-related securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of product lines or businesses. Also, such activities could result in charges and expenses and have the potential to either dilute the interests of existing
shareholders or result in the issuance or assumption of debt. This could have a negative impact on the credit ratings of mClouds outstanding debt securities. 15
Such acquisitions, investments, joint ventures, or other business
collaborations may involve significant commitments of financial and other resources of mCloud. Any such activity may not be successful in generating revenues, income, or other returns to mCloud, and the resources committed to such activities will
not be available to it for other purposes. Moreover, if mCloud is unable to access capital markets on acceptable terms or at all, it may not be able to consummate a specific acquisition, or a series of acquisitions. Alternatively, mCloud may have to
complete a transaction on the basis of a less than optimal capital structure. mClouds potential inability (i) to take advantage of growth opportunities for its business or for its products and services, or (ii) to address risks
associated with acquisitions or investments in businesses, may negatively affect its operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges associated with
any acquisition or investment activity, may materially impact mClouds results of operations which, in turn, may have an adverse material effect on the market price of Shares or credit ratings of its outstanding debt securities. The loss of one or more of mClouds key personnel, or its failure to attract and retain other highly qualified
personnel in the future, could harm its business. mCloud currently depends on the continued services and
performance of its key personnel, including its executive officers. The loss of key personnel could disrupt mClouds operations and have an adverse effect on its business and financial results. As mCloud continues to grow, it cannot guarantee that it will continue to attract the personnel it needs to maintain its
competitive position. As mCloud scales, the total cash and equity compensation structure necessary to retain and attract key personnel may have to change to be in line with market rates for the verticals in which mCloud competes. If mCloud fails in
attracting, hiring, and integrating key personnel with industry-specific experience, or retaining and motivating existing personnel, it may be unable to grow effectively. mCloud cannot be certain that additional financing will be available on reasonable terms when required, or at all.
From time to time, mCloud may need additional financing, including to fund potential acquisitions. Its ability to
obtain additional financing, if and when required, will depend on investor demand, mClouds operating performance, the condition of the capital markets, and other factors. To the extent mCloud draws on its credit facilities, if any, to fund
certain obligations, it may need to raise additional funds, and mCloud cannot provide assurance that additional financing will be available to it on favorable terms when required, or at all. If mCloud raises additional funds through the issuance of
equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of mClouds Common Shares or Series A Preferred Shares, and existing shareholders may experience dilution. mCloud may not be able to protect its intellectual property rights, which could make it less competitive and cause it to
lose market share. mClouds software is proprietary. mClouds strategy is to rely on a combination of
copyright, patent, trademark and trade secret laws in the United States, Canada, and other jurisdictions, and to rely on license and confidentiality agreements and software security measures to further protect its proprietary technology and brand.
mCloud has obtained or applied for patent protection with respect to some of its intellectual property, but generally does not rely on patents as a principal means of protecting its intellectual property. mCloud has registered or applied to register
some of its trademarks in the United States and in selected other countries. mCloud generally enters into non-disclosure agreements with its employees and customers, and historically has restricted third-party
access to its software and source code, which it regards as proprietary information. 16
The steps mCloud has taken to protect its proprietary rights may not be
adequate to avoid the misappropriation of its technology or independent development by others of technologies that may be considered a competitor. mClouds intellectual property rights may expire or be challenged, invalidated, or infringed upon
by third parties or it may be unable to maintain, renew or enter into new licenses on commercially reasonable terms. Any misappropriation of mClouds technology or development of competitive technologies could harm its business and could
diminish or cause it to lose the competitive advantages associated with its proprietary technology and could subject it to substantial costs in protecting and enforcing its intellectual property rights, and/or temporarily or permanently disrupt its
sales and marketing of the affected products or services. The laws of some countries in which mClouds products are licensed do not protect its intellectual property rights to the same extent as the laws of the United States. Moreover, in some non-U.S. countries, laws affecting intellectual property rights are uncertain in their application, which can affect the scope of enforceability of mClouds intellectual property rights. mClouds software research and development initiatives and its customer relationships could be compromised if the
security of its information technology is breached as a result of a cyberattack. This could have a material adverse effect on mClouds business, operating results, and financial condition, and could harm its competitive position. mCloud devotes significant resources to continually updating its software and developing new products, and its financial
performance is dependent in part upon its ability to bring new products and services to market. mClouds customers use its software to monitor their assets and rely on mCloud to provide updates and releases as part of its software maintenance
and support services. The security of mClouds information technology environment is therefore important to its research and development initiatives, and an important consideration in its customers purchasing decisions. If the security of
mClouds systems is impaired, its development initiatives might be disrupted, and it might be unable to provide service. mClouds customer relationships might deteriorate, its reputation in the industry could be harmed, and it could be
subject to liability claims. This could reduce mClouds revenues, and expose it to significant costs to detect, correct and avoid any breach of security and to defend any claims against it. The loss of mClouds rights to use technology currently licensed by third parties could increase operating expenses
by forcing mCloud to seek alternative technology and adversely affect mClouds ability to compete. mCloud
occasionally licenses technology, including software and related intellectual property, from third parties for use in its products and may be required to license additional intellectual property. There are no assurances that mCloud will be able to
maintain its third-party licenses or obtain new licenses when required on commercially reasonable terms, or at all. For each of the last three fiscal years, mCloud has had two customers that each comprise greater than 10% of annual
revenues. mCloud may have customers which comprise greater than 10% of annual revenues. There are risks whenever a
large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the level of demand for our products that will be generated by any of these customers in the future. In addition, revenues
from these larger customers may fluctuate from time to time based on these customers business needs and customer experience, the timing of which may be affected by market conditions or other factors outside of our control. Information technology systems. mClouds operations depend in part upon IT systems. mClouds IT systems are subject to disruption, damage, or failure
from many sources, including computer viruses, security breaches, natural disasters, power loss, and defects in design. To date, mCloud has not experienced any material losses relating to IT system disruptions, damage, or failure, but there are no
assurances that it will not incur such losses in the future. Any of these and other events could result in IT systems failures, operational delays, production downtimes, destruction or corruption of data, security breaches, or other manipulation or
improper use of mClouds systems and networks. mClouds products are highly technical, and if they
contain undetected errors mClouds business and financial results could be adversely affected. mClouds
products are highly technical and complex. mClouds products may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in mClouds products may only be discovered after they have been released. Any errors,
bugs, or vulnerabilities discovered in mClouds products after release could result in damage to mClouds reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely affect mClouds business and
financial results. 17
If mClouds products are unable to work with devices, platforms,
or interfaces to deliver targeted user experiences, this could adversely affect mClouds business and financial results. mCloud is dependent on the interoperability of AssetCare with popular cloud systems that it does not control, such as Google.
Any changes in such systems that degrade the functionality of mClouds products or give preferential treatment to competitive products could adversely affect mClouds business and financial results. Reliance on third party networks. mCloud is dependent on third party mobile networks such as those provided by major telecommunications companies to provide
services. These third-party networks are controlled by third parties and are subject to compromise or failure. Extended disruptions of such networks could adversely affect mClouds business and financial results. If mCloud is not able to maintain and enhance the AssetCare brand, or if events occur that damage the AssetCare
reputation and brand, mClouds ability to expand its base of users may be impaired, which could adversely affect mClouds business and financial results. mCloud believes that the AssetCare brand will significantly contribute to the success of its business. mCloud also believes
that maintaining and enhancing its own brands, the AssetCare brand, is critical to expanding its base of users. Many of its new users are referred by existing users, and therefore mCloud strives to ensure that users remain favorably inclined towards
AssetCare. Maintaining and enhancing the AssetCare brand will depend largely on mClouds ability to continue to provide useful, reliable, trustworthy, and innovative products, which it may not do successfully. mCloud may introduce new products
or terms of service that users do not like, which could adversely affect mClouds business and financial results. If mCloud fails to increase market awareness of AssetCare and expand sales and marketing operations, mClouds
business and financial results could be adversely affected. mCloud believes that the AssetCare brand will continue
to significantly contribute to the success of its business. mCloud intends to spend significant resources on increasing the market awareness of the AssetCare brand and expanding its sales and marketing operations. There is no guarantee that mCloud
will be successful in its efforts to increase market awareness. Failure to increase market awareness of the AssetCare brand or the failure of customers to adopt the AssetCare brand could adversely affect mClouds business and financial results.
If mCloud does not continue to develop technologically advanced products that successfully integrate with the
software products and enhancements used by its customers, future revenues and its operating results may be negatively affected. mClouds success depends upon its ability to design, develop, test, market, license and support new software products,
services, and enhancements of current products and services on a timely basis in response to both competitive threats and marketplace demands. The software industry is increasingly focused on cloud computing, mobility, social media, and SaaS among
other continually evolving shifts. In addition, mClouds software products, services, and enhancements must remain compatible with standard platforms and file formats. Often, mCloud must integrate software licensed or acquired from third
parties with its proprietary software to create or improve its products. If mCloud is unable to achieve a successful integration with third party software, it may not be successful in developing and marketing its new software products, services, and
enhancements. If mCloud is unable to successfully integrate third party software to develop new software products, services, and enhancements to existing software products and services, or to complete the development of new software products and
services which it licenses or acquires from third parties, its operating results will materially suffer. In addition, if the integrated or new products or enhancements do not achieve acceptance by the marketplace, mClouds operating results
will materially suffer. Moreover, if new industry standards emerge that mCloud does not anticipate or adapt to, or with rapid technological change occurring, if alternatives to its services and solutions are developed by its competitors, its
software products and services could be rendered obsolete, causing it to lose market share and, as a result, harm its business and operating results and its ability to compete in the marketplace. 18
mClouds new products and changes to existing products could fail
to attract or retain users or generate revenue. mClouds ability to retain, increase, and engage its user
base and to increase its revenue will depend heavily on mClouds ability to create or acquire successful new products, both independently and in conjunction with software and platform developers or other third parties. mCloud may introduce significant changes to its existing products or develop and introduce new and unproven products,
including using technologies with which it has little or no prior development or operating experience. If new or enhanced products fail to engage users, mCloud may fail to attract or retain users or to generate sufficient revenue, operating margin,
or other value to justify certain investments, and the business may be adversely affected. In the future, mCloud may invest in new products and initiatives to generate revenue. There is no guarantee these approaches will be successful. If mCloud is
not successful with new approaches to monetization, it may not be able to maintain or grow its revenue as anticipated or recover any associated development costs, which could adversely affect mClouds business and financial results. mCloud may be unable to meet its ESG-related targets and objectives.
As environmental, social and governance (ESG) forms a significant part of mClouds overall value proposition,
mCloud may, especially in its public disclosure, voluntary or otherwise, set certain targets and goals with respect to its own ESG performance and its efforts to help existing and future users meet their
ESG-related goals. Investors may choose to invest in mCloud in partial or total reliance on these ESG targets and goals. In spite of mClouds commitment and allocation of resources accordingly, there is
no guarantee that such goals will be met. mCloud may incur liability as a result of information retrieved from or
transmitted over or through mCloud products or network. mCloud may face claims relating to information that is
retrieved from or transmitted over the Internet or through mCloud and claims related to mClouds products. In particular, the nature of mClouds business exposes it to claims related to intellectual property rights, rights of privacy, and
personal injury torts. Changes in worldwide capital spending and continued economic growth may have a material
adverse effect on mCloud. One factor that significantly affects mClouds financial results is the impact of
economic conditions on the willingness of mClouds current and potential customers to make capital investments. Changes in economic growth or the global economy could lead customers to be cautious about capital spending, which places additional
pressure on departments to demonstrate acceptable return on investment. Uncertain worldwide economic and political environments, and uncertain policy directives, would make it difficult for mCloud, its customers and suppliers to accurately predict
future product demand, which could result in an inability to satisfy demand for mClouds products and a loss of market share. mClouds revenues may decline in such circumstances and profit margins could be eroded, or mCloud could incur
significant losses. 19
Moreover, economic conditions worldwide may contribute to slowdowns in the
markets in which mCloud operates, resulting in reduced demand for mClouds solutions as a result of customers choosing to refrain from capital investments. Turmoil in the geopolitical environment in many parts of the world, including terrorist activities and military actions, as
well as political and economic issues in many regions, may put pressure on global economic conditions. mClouds business and financial results and its ability to expand into other international markets may also be affected by changing economic
conditions particularly germane to that sector or to particular customer markets within that sector. mCloud is
exposed to fluctuations in currency exchange rates that could negatively impact mClouds business and financial result. Because a portion of mClouds business is conducted outside of North America, mCloud faces exposure to adverse movements
in foreign currency exchange rates. These exposures may change over time as business practices evolve, which could adversely affect mClouds business and financial results. Any changes to existing accounting pronouncements or taxation rules or practices may affect how mCloud conducts
business. New accounting pronouncements, taxation rules and varying interpretations of accounting pronouncements
or taxation rules have occurred in the past and may occur in the future. The change to existing rules, future changes, if any, or the need for mCloud to modify a current tax position may adversely affect the way mCloud conducts business. mClouds business is subject to complex and evolving domestic and foreign laws and regulations. Many of these laws
and regulations are subject to change and uncertain interpretation, and could result in claims, changes to mClouds business practices, increased cost of operations, or declines in user growth or engagement, or otherwise harm mClouds
business. mCloud is subject to a variety of laws and regulations in the United States and abroad that involve
matters central to its business, including user privacy, data protection, intellectual property, distribution, contracts and other communications, competition, consumer protection, and taxation. Foreign laws and regulations are often more
restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and
regulations are often uncertain, particularly in the new and rapidly evolving industry in which mCloud operates. Existing and proposed laws and regulations may be costly to comply with and can delay or impede the development of new products, result
in negative publicity, increase mClouds operating costs, require significant management time and attention, and subject mCloud to claims or other remedies, including fines or demands that mCloud modify or cease existing business practices.
mClouds business is highly competitive. Competition presents an ongoing threat to the success of its
business. If mCloud fails to compete successfully against industry peers, mClouds ability to increase revenues and achieve profitability will be impaired. In North American and international markets, mCloud faces competition from various types of technology and remote asset
management businesses. mCloud directly competes with global asset care management companies, including: IBM Corporation, AT&T Intellectual Property, Hitachi, Ltd., Verizon Communications, Inc., PTC Inc., SAP GE, Rockwell Automation, Inc.,
Schneider Electric SE, Infosys Limited, Honeywell International Inc., Siemens AG, and General Electric Company, among others. 20
As mCloud introduces new products and as its existing products evolve,
or as other companies introduce new products and services, mCloud may become subject to additional competition. Some of mClouds current and potential competitors have significantly greater resources and hold advantageous competitive
positions in certain market segments than mCloud currently holds. These factors may allow mClouds competitors to respond more effectively than mCloud to new or emerging technologies and changes in market requirements. mClouds competitors
may develop products that are similar to mClouds or that achieve greater market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt
more aggressive pricing policies. Certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against mCloud. As a result, mClouds competitors may acquire and engage users of mClouds
current products at the expense of the growth or engagement of its user base, which could adversely affect mClouds business and financial results. mCloud believes that its ability to compete effectively depends upon many factors both within and beyond mClouds
control, including: the usefulness, ease of use, performance, and reliability of mClouds products compared to its
competitors; the size and composition of mClouds user base; the engagement of mClouds users with its products; the timing and market acceptance of mClouds products, including developments and enhancements, or
similar improvements by its competitors; mClouds ability to monetize its products, including its ability to successfully monetize AssetCare;
customer service and support efforts; marketing and selling efforts; mClouds financial condition and results of operations; changes mandated by legislation, regulatory authorities, or litigation, including settlements and consent
decrees, some of which may have a disproportionate effect on mCloud; acquisitions or consolidation within mClouds industry, which may result in more formidable competitors;
mClouds ability to attract, retain, and motivate talented employees, particularly computer engineers;
mClouds ability to cost-effectively manage and grow its operations; and the mCloud reputation and brand strength relative to competitors. If mCloud is not able to effectively compete, its user base and level of user engagement may decrease, which could adversely
affect mClouds business and financial results. 21
mClouds compensation structure may hinder its efforts to attract
and retain vital employees. A portion of mClouds total compensation program for its executive officers and
key personnel includes the award of options or restricted stock units to buy Common Shares. If the market price of the Common Shares performs poorly, such performance may adversely affect mClouds ability to retain or attract critical
personnel. In addition, any changes made to mClouds equity incentive award policies, or to any other of its compensation practices, which are made necessary by governmental regulations or competitive pressures, could adversely affect its
ability to retain and motivate existing personnel and recruit new personnel. For example, any limit to total compensation which may be prescribed by the government or applicable regulatory authorities or any significant increases in personal income
tax levels levied in countries where mCloud has a significant operational presence may hurt its ability to attract or retain its executive officers or other employees whose efforts are vital to its success. Additionally, payments under mClouds
long-term incentive plan are dependent to a significant extent upon the future performance of mCloud both in absolute terms and in comparison, to similarly situated companies. Any failure to achieve the targets set under mClouds long-term
incentive plan could significantly reduce or eliminate payments made under this plan, which may, in turn, materially and adversely affect its ability to retain the key personnel who are subject to this plan. 22
The price of the securities of mCloud may fluctuate significantly,
which may make it difficult for holders of securities of mCloud to sell its securities at a time or price they find attractive. mClouds stock price may fluctuate significantly as a result of a variety of factors, many of which are beyond its
control. In addition to those described under Forward-Looking Statements, these factors include: actual or anticipated quarterly fluctuations in its financial results and financial condition;
changes in financial estimates or publication of research reports and recommendations by financial analysts
with respect to it or other financial institutions; reports in the press or investment community generally or relating to mClouds reputation or the industry
in which it operates; strategic actions by mCloud or its competitors, such as acquisitions, restructurings, dispositions, or
financings; fluctuations in the stock price and financial results of mClouds competitors; future sales of mClouds equity or equity-related securities; proposed or adopted regulatory changes or developments; domestic and international economic factors unrelated to mClouds performance; and general market conditions and, in particular, developments related to market conditions for the remote asset
management industry. In addition, in recent years, the stock market in general has experienced extreme
price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies, including for reasons unrelated to their operating performance. These broad market fluctuations may adversely
affect mClouds stock price, notwithstanding mClouds financial results. mCloud expects that the market price of the Common Shares will fluctuate and there can be no assurances about the levels of the market prices for such Common Shares.
mCloud does not know whether an active, liquid and orderly trading market will develop for the securities of mCloud
or what the market price of the securities of mCloud will be, and as a result it may be difficult for investors to sell its securities of mCloud. An active trading market for securities of mCloud may not be sustained. The lack of an active market may impair an
investors ability to sell its securities of mCloud at the time they wish to sell them or at a price that they consider reasonable. The lack of an active market may also reduce the fair market value of an investors securities of mCloud.
Further, an inactive market may also impair mClouds ability to raise capital by selling securities of mCloud and may impair its ability to enter into collaborations or acquire companies or products by using securities of mCloud as
consideration. The market price of securities of mCloud may be volatile, and an investor could lose all or part of their investment. 23
mCloud does not intend to pay dividends on the Common Shares for the
foreseeable future. mCloud currently does not plan to declare dividends on the Common Shares in the foreseeable
future. Any determination to pay dividends in the future will be at the discretion of the Board. Consequently, an investors only opportunity to achieve a return on the investment in mCloud will be if the market price of Common Shares
appreciates and the investor sells shares at a profit. There is no guarantee that the trading price of mClouds Common Shares in the market will ever exceed the price that an investor paid. If research analysts do not publish research about mClouds business or if they issue unfavorable commentary or
downgrade mClouds securities, mClouds stock price and trading volume could decline. The trading market
for the securities of mCloud may depend in part on the research and reports that research and investment analysts publish about mCloud and its business. If mCloud does not maintain adequate research coverage, or if one or more analysts who covers
mCloud downgrades its stock, or publishes inaccurate or unfavorable research about mClouds business, the price of mClouds securities could decline. If one or more of the research analysts ceases to cover mCloud or fails to publish
reports on it regularly, demand for securities of mCloud could decrease, which could cause mClouds stock price or trading volume to decline. The market price of mClouds securities may decline due to the large number of outstanding Shares eligible for
future sale. Sales of substantial amounts of mCloud securities in the public market, or the perception that these
sales could occur, could cause the market price of the securities to decline. These sales could also make it more difficult for mCloud to sell equity or equity-related securities in the future at a time and price that it deems appropriate. Certain shares, such as those shares subject to lock-up agreements, will have
restrictions on trading. mCloud may also issue Common Shares or securities convertible into Common Shares from time to
time in connection with a financing, acquisition or otherwise. Any such issuance could result in substantial dilution to existing holders of securities and cause the trading price of mClouds securities to decline. mCloud may issue additional equity securities or engage in other transactions that could dilute its book value or affect
the priority of Common Shares or Series A Preferred Shares, which may adversely affect the market price of the Common Shares or Series A Preferred Shares. The Board may determine from time to time that it needs to raise additional capital by issuing additional Common Shares or
other securities in connection with its business and strategic plans, particularly with respect to its growing operations. Except as otherwise described in this prospectus, mCloud will not be restricted from issuing additional Common Shares,
including securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares. Because mClouds decision to issue securities in any future offering will depend on market conditions and other factors
beyond mClouds control, it cannot predict or estimate the amount, timing, or nature of any future offerings, or the prices at which such offerings may be affected. There is no assurance that the Company will be successful in obtaining required
financing as and when needed on acceptable terms, if at all. Additional equity offerings may dilute the holdings of its existing shareholders thereby reducing the value of their investments, or reduce the market price of its common stock, or both.
Holders of Common Shares are not entitled to pre-emptive rights or other protections against dilution. New investors also may have rights, preferences and privileges that are senior to, and that adversely
affect, mClouds then-current holders of Common Shares. Additionally, if mCloud raises additional capital by making offerings of debt or preference shares, upon liquidation of mCloud, holders of its debt securities and preference shares, and
lenders with respect to other borrowings, may receive distributions of its available assets before the holders of Common Shares. 24
mCloud is a holding company. mCloud is a holding company and may have no material non-financial assets other than
its direct ownership of its subsidiaries. mCloud will have no independent means of generating revenue. To the extent that mCloud needs funds beyond its own financial resources to pay liabilities or to fund operations, and its subsidiaries are
restricted from making distributions to it under applicable laws or regulations or agreements, or do not have sufficient earnings to make these distributions, mCloud may have to borrow or otherwise raise funds sufficient to meet these obligations
and operate its business and, thus, its liquidity and financial condition could be materially adversely affected. mCloud may suffer reduced profitability if it loses foreign private issuer status in the United States. If, as of the last business day of mClouds second fiscal quarter for any year, more than 50% of mClouds outstanding
voting securities (as defined in the United States Securities Act of 1933) are directly or indirectly held of record by residents of the United States, mCloud will no longer meet the definition of a Foreign Private Issuer under
the rules of the U.S. Securities and Exchange Commission. If mCloud fails to qualify for Foreign Private Issuer status, it will remain unqualified unless it meets the test as of the last business day of its second fiscal quarter. This change in
status could have a significant effect on the Company as it would significantly complicate the raising of capital through the offer and sales of securities and reporting requirements, resulting in increased audit, legal and administration costs. The
ability of mCloud to be profitable could be significantly affected. Asset Location and Legal Proceedings.
mCloud has assets located outside of Canada, and therefore it may be difficult to enforce judgments obtained by
mCloud in foreign jurisdictions by Canadian courts. Similarly, to the extent that mClouds assets are located outside of Canada, investors may have difficulty collecting from mCloud any judgments obtained in Canadian courts and predicated on
the civil liability provisions of applicable securities legislation. Furthermore, mCloud may be subject to legal proceedings and judgments in foreign jurisdictions and it may be difficult for U.S. stockholders to effect service of process against
the officers of mCloud. mCloud is exposed to credit risk. Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract.
Credit risk is limited to the following instruments and mClouds maximum exposure to credit risk is the carrying value of the financial assets. mCloud is mainly exposed to credit risk from credit sales. Management monitors the creditworthiness of its customers by
performing background checks on all new customers. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances. mCloud considers that there has been a significant increase in
credit risk when contractual payments are more than 90 days past due. 25
Provisions for outstanding balances are established based on forward-looking
information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as well as the frequency of payments
received. Accounts receivable are completely written off once management determines the probability of collection to be remote. Trade and other receivables, unbilled revenue and long-term receivables are from individual customers and are not assessed
based on external credit rating agencies. mCloud uses a provision matrix to measure the lifetime expected credit loss of these balances. Receivables are grouped based on similar credit risk profiles and days past due. Loss rates are based on actual
credit loss experience and reflect the forward-looking conditions over the expected life of the receivable. If the
debenture trustee elects or is instructed to enforce payment under the Indenture and mCloud is unable to pay all amounts owing thereunder, mClouds business and results of operations could be adversely affected mCloud is currently in default under the convertible debenture indenture dated November 14, 2019 (the Indenture)
governing its 10% convertible unsecured debentures (the 2019 Debentures) as a result of its failure to pay the outstanding principal and interest owing under the 2019 Debentures, being $23,740,275 in the aggregate (the Outstanding
Amount), on or before the maturity date of June 30, 2022 and the subsequent 10 business day cure period. As such, pursuant to the terms of the Indenture, the debenture trustee may at any time during the period of default, in its discretion,
and shall, upon direction of the holders of not less than 25% in principal amount of the outstanding 2019 Debentures, declare the Outstanding Amount, and interest incurred thereon during the period of default, to be immediately due and payable. If
mCloud were to fail to pay such amounts forthwith following such demand, the debenture trustee may, in its discretion, and shall, upon direction of the holders of not less than 25% of the 2019 Debentures (subject to the debenture trustee being
funded and indemnified against the costs of such), proceed to obtain or enforce payment of such amounts. Although mCloud intends to repay the Outstanding Amount and all interest incurred thereon during the period of default using a portion of the
proceeds of the Offering, there can be no assurance that sufficient proceeds will be raised in the Offering to fully or partially satisfy payment of such amounts. If the debenture trustee elects or is instructed to enforce payment under the
Indenture and mCloud is unable to pay all amounts owing thereunder, mClouds business and results of operations could be adversely affected. The Indenture does not contain default penalty or interest rate terms. mCloud is exposed to interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of mClouds financial instruments will fluctuate
because of changes in market interest rates. mCloud is exposed to interest rate risk on its credit facility and factoring facility with Nations Interbanc as these instruments have variable rates. Management does not believe interest rate risk is
currently material to its business. Risks Related to Our Securities and this Offering The Series A Preferred Shares represent perpetual equity interests. The Series A Preferred Shares represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a
claim for payment of a principal amount at a particular date. As a result, holders of the Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time. If the Series A Preferred Shares are delisted from Nasdaq, the ability to transfer or sell the Series A Preferred Shares
may be limited and the market value of the Series A Preferred Shares will likely be materially adversely affected. We plan to list the Series A Preferred Shares on Nasdaq and the Series A Preferred Shares do not contain provisions that are
intended to protect investors if the Series A Preferred Shares are delisted from Nasdaq. In order to maintain that listing, we must satisfy all of the following continued listing requirements: (1) Minimum bid price of at least $1 per share; (2) At least 100 Public Holders; (3) At least 100,000 Publicly Held Shares; (4) Market Value of Publicly Held Shares of at least $1 million; and (5) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid. There can be no assurances that we will be able to comply with the applicable listing standards. If the Series A Preferred
Shares are delisted from Nasdaq, investors ability to transfer or sell the Series A Preferred Shares will be limited and the market value of the Series A Preferred Shares will likely be materially adversely affected. Moreover, since the Series
A Preferred Shares have no stated maturity date, investors may be forced to hold the Series A Preferred Shares indefinitely while receiving stated dividends thereon when, as and if authorized by the Board and paid by us with no assurance as to ever
receiving the liquidation value thereof. 26
We may incur additional indebtedness and obligations to pay dividends
on preferred stock, some of which may be senior to the rights of the Series A Preferred Shares. We and our
subsidiaries may incur additional indebtedness and obligations to pay cumulative dividends on preferred stock, some of which may be senior to the rights of the Series A Preferred Shares. The terms of the Series A Preferred Shares do not prohibit us
or our subsidiaries from incurring additional indebtedness or issuing additional series of preferred stock. Any such indebtedness will in all cases be senior to the rights of holders of Series A Preferred Shares. We may also issue additional series
of preferred stock that contain dividend rights and liquidation preferences that are senior to the rights of holders of Series A Preferred Shares. Our subsidiaries may also incur indebtedness that is structurally senior to the Series A Preferred
Shares, and we and our subsidiaries could incur indebtedness secured by a lien on our assets, entitling the holders of such indebtedness to be paid first from the proceeds of such assets. If we issue any additional preferred stock that ranks senior
or pari passu with the Series A Preferred Shares, the holders of those shares will be entitled to a senior or ratable share with the holders of the Series A Preferred Shares in any proceeds distributed in connection with our insolvency, liquidation,
reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the holders of Series A Preferred Shares. Market interest rates may adversely affect the value of the Series A Preferred Shares. One of the factors that continues to influence the price of the Series A Preferred Shares will be the dividend yield on the
Series A Preferred Shares (as a percentage of the price of the Series A Preferred Shares) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Shares to expect a higher
dividend yield, and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividends. Accordingly, higher market interest rates could cause the market price of the Series A Preferred Shares to
decrease. The amount of the liquidation preference on the Series A Preferred Shares is fixed and investors in this
Offering that receive Series A Preferred Shares will have no right to receive any greater payment. The payment
due upon liquidation on the Series A Preferred Shares is fixed at the liquidation preference of $25.00 per share, plus an amount equal to all accumulated and unpaid dividends thereon to the date of liquidation, whether or not declared. If, in the
case of our liquidation, there are remaining assets to be distributed after payment of this amount, you will have no right to receive or to participate in these amounts. In addition, if the market price of a holders Series A Preferred Shares
is greater than the liquidation preference, such holder will have no right to receive the market price from us upon our liquidation. There may be future sales of Series A Preferred Shares or similar securities, which may adversely affect the market
price of the Series A Preferred Shares. Subject to the terms of the Certificate of Designations, our Articles of
Incorporation and Canadian law, we are not restricted from issuing additional Series A Preferred Shares or securities similar to the Series A Preferred Shares, including any securities that are convertible into or exchangeable for, or that represent
the right to receive, Series A Preferred Shares. Holders of the Series A Preferred Shares have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series. The market price of the
Series A Preferred Shares could decline as a result of sales of Series A Preferred Shares, sales of other securities made after this Offering or the Registered Direct Offering, or as a result of the perception that such sales could occur. Because
our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. Thus, holders of the Series A
Preferred Shares bear the risk of our future offerings reducing the market price of the Series A Preferred Shares and diluting their holdings in the Series A Preferred Shares. The Series A Preferred Shares may not have an active trading market. The Series A Preferred Shares are a recent issue of securities and do not have a long-established trading market. Although we
plan to list the Series A Preferred Shares on Nasdaq, we cannot assure you that an active market for the Series A Preferred Shares will be sustained or that holders of the Series A Preferred Shares will be able to sell their Series A Preferred
Shares at favorable prices or at all. The difference between bid and ask prices in any secondary market for the Series A Preferred Shares could be substantial. Accordingly, no assurance can be given as to the liquidity of, or trading market for, the
Series A Preferred Shares, and holders of the Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time. The voting rights of holders of the Series A Preferred Shares are limited. Holders of the Series A Preferred Shares have no voting rights with respect to matters that generally require the approval of
voting shareholders. The limited voting rights of holders of the Series A Preferred Shares include the right to vote as a single class on certain matters that may affect the preference or special rights of the Series A Preferred Shares, as described
under Description of the Series A Preferred SharesLimited Voting Rights. 27
Dividends or other payments with respect to the Series A Preferred
Shares may be subject to withholding taxes in circumstances where we are not obliged to make gross up payments, and this could result in holders receiving less than expected in such circumstances. In the event of certain changes to current tax law that require tax to be withheld from dividends or other payments on the
Series A Preferred Shares, we are not required to make gross up payments in respect of such taxes. This would result in holders of Series A Preferred Shares receiving less than expected and could materially adversely affect the return on your
investment. The Warrants are speculative in nature. The Warrants will be exercisable until November 29, 2026 at an initial exercise price equal of $4.75. There can be no
assurance that the market price of the Common Shares will ever equal or exceed the exercise price of the Warrants. In the event that our common share price does not exceed the exercise price of the Warrants during the period when the Warrants are
exercisable, a holder of Warrants may be unable to profit from exercising such Warrants before they expire. Except as otherwise provided in the
Warrants, holders of Warrants purchased in this offering will have no rights as shareholders until such holders exercise their Warrants and acquire our common stock. Except as otherwise provided in the Warrants, until holders of Warrants acquire our Common Shares upon exercise of the
Warrants, holders of Warrants will have no rights with respect to our Common Shares underlying such Warrants. Upon exercise of the Warrants, the holders will be entitled to exercise the rights of a holder of our Common Shares only as to matters for
which the record date occurs after the exercise date. Additional stock offerings in the future may dilute then-existing shareholders
percentage ownership of the Company. Given our plans and expectations that we will need additional capital and
personnel, we anticipate that we will need to issue additional Common Shares or securities convertible or exercisable for Common Shares, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional
securities in the future will dilute the percentage ownership of then current stockholders. The requirements of
being a public company may strain mClouds resources, divert managements attention and affect its ability to attract and retain executive management and qualified board members. As a reporting issuer, mCloud is subject to the reporting requirements of applicable securities legislation of the
jurisdiction in which it is a reporting issuer, the listing requirements of Nasdaq and the TSXV and other applicable securities rules and regulations. Compliance with these rules and regulations will increase mClouds legal and financial
compliance costs, make some activities more difficult, time consuming or costly and increase demand on its systems and resources. Applicable securities laws will require mCloud to, among other things, file certain annual and quarterly reports with
respect to its business and results of operations. In addition, applicable securities laws require mCloud to, among other things, maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve its disclosure controls and procedures and internal control over financial
reporting to meet this standard, significant resources and management oversight are required. Specifically, due to the increasing complexity of its transactions, it is anticipated that mCloud will improve its disclosure controls and procedures and
internal control over financial reporting primarily through the continued development and implementation of formal policies, improved processes and documentation procedures, as well as the continued sourcing of additional finance resources. As a
result, managements attention may be diverted from other business concerns, which could harm mClouds business and results of operations. To comply with these requirements, mCloud may need to hire more employees in the future or engage
outside consultants, which will increase its costs and expenses. In addition, changing laws, regulations and standards
relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. mCloud intends to continue to invest resources to comply with evolving laws, regulations and standards, and this
investment may result in increased general and administrative expenses and a diversion of managements time and attention from revenue-generating activities to compliance activities. If its efforts to comply with new laws, regulations and
standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against mCloud, which could adversely affect
mClouds business and financial results. 28
As a public company subject to these rules and regulations, mCloud may find
it more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for mCloud to
attract and retain qualified members of its Board, particularly to serve on its Audit Committee and Compensation Committee, and qualified executive officers. As a result of disclosure of information in filings required of a public company, mClouds business and financial
condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, mClouds business and results of operations could be harmed, and even if
the claims do not result in litigation or are resolved in its favor, these claims, and the time and resources necessary to resolve them, could divert the resources of mClouds management and harm its business and results of
operations. We are a foreign private issuer and may have disclosure obligations that are
different from those of U.S. domestic reporting companies. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which could limit the information publicly available to our shareholders.
As a foreign private issuer, we are subject to reporting obligations that, in certain respects, are
less detailed and less frequent than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or
individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required
to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders are exempt from the insider reporting and short-swing profit recovery requirements in
Section 16 of the Exchange Act. Accordingly, our shareholders may not know on as timely a basis when our officers, directors and principal shareholders purchase or sell their Common Shares, as the reporting deadlines under the corresponding
Canadian insider reporting requirements are not applicable. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy
to specific information about an issuer before other investors. As a result of such varied reporting obligations, shareholders should not expect to receive the same information at the same time as information provided by U.S. domestic companies.
In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices
rather than those of the United States, except to the extent that such laws would be contrary to U.S. securities laws, provided that we disclose the requirements we are not following and describe the Canadian practices we follow instead. As a
result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all domestic U.S. corporate governance requirements. We may lose our foreign private issuer status in the future, which could result in additional costs and
expenses to us. We are a foreign private issuer, as such term is defined in Rule 405 under the
Securities Act of 1933, as amended (the Securities Act), and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. We may in the future lose foreign private issuer status if a majority of our
Common Shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if: (i) a majority of our directors or executive officers are U.S. citizens or
residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic
issuer would be significantly more than the costs incurred as an Canadian foreign private issuer. If we are not a foreign private issuer, we would be required to file periodic and current reports and registration statements on U.S. domestic issuer
forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to
foreign private issuers. We are an emerging growth company, and any decision on our part to comply only
with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our Common Shares less attractive to investors. We are an emerging growth company, as defined in Section 2(a) of the Securities Act. For as long as we
continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not
limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404, reduced disclosure obligations regarding executive compensation in our periodic
reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company until
the fifth anniversary of the fiscal year end date following the completion of this offering, however, our status would change more quickly if we have more than US$1.07 billion in annual revenue, if the market value of our Common Shares held by non-affiliates equals or exceeds US$700 million as of June 30 of any year, or we issue more than US$1.0 billion of non-convertible debt over a three-year period
before the end of that period. We have not opted in to the extended transition period for emerging growth companies under the JOBS Act for complying with new or revised accounting standards. 29
Investors could find our Common Shares less attractive if we choose to rely
on these exemptions. If some investors find our Common Shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Shares and our share price may be more volatile. 30
If we fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of
our securities. Effective internal controls over financial reporting are necessary for us to provide reliable
financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail
to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over
financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also
cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities. For as long as we are an emerging growth company, our independent registered public accounting firm will not be
required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an emerging growth company until the fifth anniversary of the fiscal year end date following the
completion of this offering. An independent assessment of the effectiveness of our internal controls could detect problems that our managements assessment might not. Undetected material weaknesses in our internal controls could lead to
financial statement restatements and require us to incur the expense of remediation. If we identify material weaknesses
in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered
public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market
price of our securities could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and
management resources. 31
Our management team will have broad discretion to use the net proceeds
from this offering and its investment of these proceeds may not yield a favorable return. They may invest the proceeds of this offering in ways with which investors disagree. Our management team will have broad discretion in the application of the net proceeds from this offering and could spend or
invest the proceeds in ways with which our shareholders disagree. Accordingly, investors will need to rely on our management teams judgment with respect to the use of these proceeds. We intend to use the proceeds from this offering in the
manner described in the section entitled Use of Proceeds. The failure by management to apply these funds effectively could negatively affect our ability to operate and grow our business. We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this
offering. In addition, the amount, allocation and timing of our actual expenditures will depend upon numerous factors. Accordingly, we will have broad discretion in using these proceeds. Until the net proceeds are used, they may be placed in
investments that do not produce significant income or that may lose value. The market price of shares may be
subject to wide price fluctuations. The market price of our securities may be subject to wide fluctuations in
response to many factors, including variations in the financial results of mCloud and its subsidiaries, divergence in financial results from analysts expectations, changes in earnings estimates by stock market analysts, changes in the business
prospects for mCloud and its subsidiaries, general economic conditions, legislative changes, and other events and factors outside of mClouds control. In addition, stock markets have from time-to-time experienced extreme price and volume fluctuations, including general economic and political conditions, which could adversely affect the market price for our securities. If the Company fails to maintain compliance with Nasdaq Listing Rules, the Company may be delisted from Nasdaq, which
would result in a limited public market for trading the Companys Common Shares and make obtaining future debt or equity financing more difficult for the Company. The issued and outstanding Common Shares of the Company are listed and posted for trading on the TSXV and on the Nasdaq under
the symbol MCLD. The Listed Warrants of the Company are listed on the Nasdaq under the symbol MCLDW and the Warrants will also be traded on the Nasdaq under the symbol MCLDW. We are in the process of applying to
have the Series A Preferred Shares sold in this offering listed on the Nasdaq Capital Market (Nasdaq) under the symbol MCLDP. However, there is no assurance that we will be able to continue to maintain our compliance with the
Nasdaq continued listing requirements. If we fail to do so, our securities may lose their status on Nasdaq Capital Market and they would likely be traded on the
over-the-counter markets, including the Pink Sheets market. As a result, selling our securities could be more difficult because smaller quantities of shares or warrants
would likely be bought and sold, transactions could be delayed, and security analysts coverage of us may be reduced. In addition, in the event our securities are delisted, broker dealers would bear certain regulatory burdens which may
discourage broker dealers from effecting transactions in the securities and further limit the liquidity of the securities. These factors could result in lower prices and larger spreads in the bid and ask prices for the securities. Such delisting
from Nasdaq and continued or further declines in the share price of the securities could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution
to shareholders caused by our issuing equity in financing or other transactions. If the Company was delisted from
Nasdaq, it may become subject to the trading complications experienced by Penny Stocks in the over-the-counter market. Delisting from Nasdaq may cause the securities of the Company to become subject to the SECs penny stock
rules. The SEC generally defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. One such exemption is to be listed on Nasdaq.
Therefore, if we were to be delisted from Nasdaq, the securities of the Company could become subject to the SECs penny stock rules. These rules require, among other things, that any broker engaging in a purchase or sale of our
securities provide its customers with: (i) a risk disclosure document, (ii) disclosure of market quotations, if any, (iii) disclosure of the compensation of the broker and its salespersons in the transaction, and (iv) monthly
account statements showing the market values of our securities held in the customers accounts. A broker would be required to provide the bid and offer quotations and compensation information before effecting the transaction. This information
must be contained on the customers confirmation. Generally, brokers are less willing to effect transactions in penny stocks due to these additional delivery requirements. These requirements may make it more difficult for shareholders to
purchase or sell the Shares of the Company. Since the broker, not us, prepares this information, we would not be able to assure that such information is accurate, complete or current. 32
If securities or industry analysts do not publish research or publish
inaccurate or unfavorable research about our business, our share price and trading volume could decline. The
trading market for our shares will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide
favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our securities, our share price would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly
publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. We have made statements in this prospectus, including under Prospectus Summary, Risk Factors,
Managements Discussion and Analysis of Financial Condition and Results of Operations, Our Business and elsewhere that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties,
such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as anticipate, estimate, plan,
project, continuing, ongoing, expect, we believe, we intend, may, should, will, could and similar expressions denoting
uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any
future results, performances or achievements expressed or implied by the forward-looking statements. Examples of forward-looking statements include: the timing of the development of future services, projections of revenue, earnings, capital structure and other financial items, statements regarding the capabilities of our business operations, statements of expected future economic performance, statements regarding competition in our market, and assumptions underlying statements regarding us or our business. The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We
discuss our known material risks under the heading Risk Factors above. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place
undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events
or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statements. 33
We estimate that the net proceeds from this offering will be approximately $22,296,067 USD ($25,746,067 if the underwriters exercise their
option to purchase additional securities in full), assuming a combined public offering price per Series A Preferred Share and related Warrants of $25.00, after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us. If the Warrants are exercised in full for cash, the estimated net proceeds will increase to $51,983,567 (or $55,433,567 if the underwriters option to purchase additional securities is exercised in full. We intend to use the proceeds from this offering for working capital and general corporate purposes, including paying off
convertible debenture debt in the amount of CAD$23,457,500 with an interest rate of 10% per annum due June 30, 2022. The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations,
and the rate of growth, if any, of our business, and our plans and business conditions. The foregoing represents our
intentions as of the date of this prospectus based upon our current plans and business conditions to use and allocate the net proceeds of the offering. However, our management will have significant flexibility and discretion in the timing and
application of the net proceeds of the Offerings. Unforeseen events or changed business conditions may result in application of the proceeds of the Offerings in a manner other than as described in this prospectus. To the extent that the net proceeds we receive from the offering are not immediately applied for the above purposes, we plan
to invest the net proceeds in short-term, interest-bearing debt instruments or bank deposits. Management believes that
the proceeds from the offering will be sufficient to satisfy the Companys cash needs for at least the next 12 months. Our Board has never declared a dividend on our Common Shares and does not anticipate declaring a
dividend in the foreseeable future. The holders of our Series A Preferred Shares are entitled to dividends out of funds
legally available when and as declared by our Board of Directors subject to the BCBCA. Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares
as to dividends, the holders of the Series A Preferred Shares are entitled to receive, when, as and if declared by the Board of Directors (or a duly authorized committee of the Board), only out of funds legally available for the payment of
dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will increases 4.0% per calendar
quarter until it reaches a maximum of 25.0%. Our ability, as a holding company, to pay dividends in the future and meet
other obligations depends upon the receipt of dividends or other payments from our operating subsidiary and other holdings and investments. In addition, our operating company may, from time to time, be subject to restrictions on their ability to
make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions. All dollar amounts in this prospectus are expressed in U.S. dollars unless otherwise indicated. The Companys accounts
are maintained in Canadian dollars and the Companys financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All references to Canadian
dollars, CAD, or CAD$ are to Canadian dollars. The following table sets forth, for each
period indicated, exchange rate for U.S. dollars expressed in Canadian dollars. These rates are based on the noon buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the
Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our consolidated financial statements or elsewhere in this prospectus or will use in the
preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or
Canadian dollars, as the case may be, at any particular rate or at all. December 31, 2019 December 31, 2020 December 31, 2021 March 31, 2022 34
We make no representation that any Canadian dollar or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars., as the case may be, at any particular rate, or at all. We do not currently engage in currency hedging transactions. The following table sets forth our cash and our capitalization as of March 31, 2022: On an actual basis, as determined in accordance with IFRS; and On an as adjusted basis to reflect the issuance and sale by us of 1,000,000 Series A Preferred Shares and
warrants to purchase up to 6,250,000 Common Shares at an assumed combined public offering price of $25.00 per Series A Preferred Share and related Warrants, assuming no exercise of the Warrants and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us. The information below is
illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the combined public offering price of our Series A Preferred Shares and Warrants and other terms of this offering determined at
pricing. You should read this capitalization table together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the Managements Discussion and Analysis of Financial Condition and
Results of Operations section and other financial information included elsewhere in this prospectus. The table and footnotes below reflect an assumed raise of $25,000,000 and an assumed share price of $25.00 per share net of transaction
related fees and converted into Canadian dollars as set out in Currency and Exchange Rates. As of March 31, 2022 Pro Forma As Adjusted Cash and Cash Equivalents Current portion of loans and borrowings Current portion of convertible debentures Warrant Liabilities Long term convertible debentures Loans and borrowings Equity Common shares, no par value; unlimited number of shares authorized, shares issued and outstanding,
actual; unlimited number of shares authorized, 16,151,500 shares issued and outstanding, 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value; 1,000,000 shares issued and
outstanding Equity Share Capital Contributed Surplus Accumulated Other Comprehensive Income Deficit Total Shareholders Deficit Total Deficit Assumes filing of the Rights and Restrictions for 9.0% Cumulative Series A Preferred Shares, which was filed
on July 14, 2022. 35
The amount to be attributed to the warrants has not yet been determined, and has been included in the amount
attributed to Equity Share Capital. Upon issuance of the Series A Preferred Shares and Warrants, the total net proceeds will be allocated to Equity Share Capital and Warrant Liabilities. The pro forma adjustment to Cash and Cash Equivalents reflects the increase in cash after payment of the
principal value of the convertible debenture and the related accrued interest at March 31, 2022. The above discussion and table is based on 16,150,100 Common Shares outstanding as of March 31, 2022, and do not include, as
of that date: 1,136,141 Common Shares issuable upon exercise of Listed Warrants; 7,529,274 Common Shares issuable upon exercise of Non-Listed Warrants; 806,734 Common Shares issuable upon exercise of Options 213,293 Common Shares issuable upon exercise of Restricted Share Units; 1,579,583 Common Shares issuable upon exercise of Convertible Debt; and MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our financial statements and related notes
included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events
could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Risk Factors and elsewhere in this prospectus. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to
differ from those estimates or other forward-looking statements under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our actual results may differ
materially as a result of many factors, including those set forth under the headings entitled Forward-Looking Statements and Risk Factors. 36
Recent Developments Significant Business Contracts and Partnerships On February 2, 2021, the Company announced it had signed a memorandum of understanding with Invest Alberta Corporation
(Invest Alberta), an Alberta crown corporation. The goal of the memorandum was for the Company to leverage its technology to help Canadian and global energy companies reduce carbon emissions and act on ESG issues. The Company believes
the move may accelerate the development and adoption of its offerings through increased engagement with key customers and local industry in Alberta. On February 16, 2021, the Company announced that it had signed a memorandum of understanding with Fidus Global, LLC
(Fidus) to commence sales, implementation, and ongoing field services for the Companys AssetCare segment for connected buildings in the United States. On April 21, 2021, the Company announced that it would be offering its AssetCare solutions for HVAC and IAQ to small
business customers of three major North American energy utility providers, two in the continental United States and one in Canada. Based on information provided by the three utilities, the Company estimated that these utility partnerships will make
AssetCare HVAC and IAQ solutions available to approximately one million commercial buildings in the United States and Canada. On May 18, 2021, the Company announced that it had successfully implemented AssetCare to customers associated with these
utility program partnerships. Among these customers are two prominent car dealership properties in the State of New York. On May 3, 2021, the Company announced that it had equipped the head office of Cadence Financial Group, located in
Vancouver, Canada, with a combination of IoT-enabled 24/7 air quality monitoring and AI-driven connected air purification capable of outperforming standard HEPA
filtration by continuously eliminating up to 95% of harmful particulates and contaminants smaller than one micron in size. On June 15, 2021, the Company announced that pursuant to its partnership with Fidus, the Companys AssetCare
solution was now being offered at various government buildings operated by the State of Arkansas, as the state seeks to improve indoor air safety across government properties, including office buildings, schools, and other state-run facilities in the wake of COVID-19. On June 23, 2021, the Company announced its partnership with Prosaris Solutions Ltd., through which the Company began its
rollout of a new AssetCare solution targeting fugitive gas emissions for operators in the oil and gas sector in Alberta, and enabling such operators to continuously inspect and correct such gas leaks at their facilities. On July 13, 2021, mCloud announced it had signed a memorandum of understanding to partner with URBSOFT, a strategic
provider of advanced ground and aerial inspection technology solutions in the Kingdom of Saudi Arabia. This partnership paved the way for mCloud to take AssetCare to support the digitalization and ESG objectives of Saudi Vision 2030, the Kingdom of
Saudi Arabias national economic plan. On July 20, 2021, mCloud announced it had begun to offer its AssetCare
solutions for HVAC and IAQ to small business customers of Con Edison, the energy company that serves New York City and Westchester County, N.Y. The Company is a solutions provider in Con Edisons Business Energy Pro program, which offers energy
saving incentives to businesses located on Staten Island and in Westchester County. Business Energy Pro is one of the first pay-for-performance incentive
programs in the country. Small businesses that participate earn payments for measured energy savings over a multi-year period. Through mClouds partnership with Con Edison, AssetCare customers in New York state can earn payments for measured
energy savings achieved through AssetCare over a multi-year period. On October 13, 2021, mCloud announced it
received approval and a license to conduct business activities from the Ministry of Investment of Saudi Arabia (MISA). The MISA license marks a major milestone in mClouds activities in the Middle East and North Africa
(MENA) region, enabling mCloud to provide AssetCare solutions to the Kingdom of Saudi Arabia and other countries in the MENA region. 37
On September 27, 2021, the Company executed a 12-year lease for its office in Calgary, Alberta. The lease term commences on December 1, 2022, preceded by a fixturing period which the Company will use to build out the office space to their specifications.
On November 9, 2021, the Company announced it had equipped two initial locations in Saudi ArabiaCasa Pasta and
CHICK N DIP restaurantswith its AssetCare solution for HVAC and IAQ, to optimize the indoor air quality and energy efficiency in the restaurants. This was facilitated through the Companys partnership with URBSOFT, previously
announced on July 13, 2021. On November 30, 2021, the Company announced a three-year agreement with Colliers
Macaulay Nicolls Inc., an appointed agent of Slate Asset Management, to deploy mClouds AssetCare solution for HVAC and IAQ at Life Plaza, one of Slate Asset Managements premier office towers in downtown Calgary, Alberta, and the
Companys largest IAQ deployment to date. The initial subscription term for this agreement would become effective at the completion of AssetCare installation and is set to renew in November 2025. On December 15, 2021, the Company announced it had signed an agreement with Virtual Vision (the V2
Agreement), a local provider of cloud computing services within Saudi Arabia, to host the Companys AssetCare solutions on the V2 Public Cloud for use in the Kingdom. The V2 Agreement enables mCloud to complete the onboarding of several
new Saudi customers and immediately take these customers live with AssetCare. The V2 Agreement also ensures mCloud is ready for scalable deployment within Saudi Arabia and in a manner compliant with Saudi legal requirements by geo-locating AssetCare data within the Kingdom. On January 20, 2022, the Company
announced a partnership with the Mercedes-EQ Formula E Team as an official team partner, through which the use of mClouds AssetCare portfolio of solutions to drive the ESG performance of the Formula E
business would be explored. This announcement was made just ahead of the official opening of Season 8 of the ABB FIA Formula E World Championship the worlds only all- electric FIA World
Championship and the only sport certified net zero carbon since inception. The Mercedes-EQ Formula E Team is collaborating with the Company to explore the use of the Companys AssetCare portfolio of
solutions to drive the ESG performance of their business, including technologies to reduce harmful emissions, the carbon footprint of their facilities, and further enhancing the safety and comfort of the work environment. On January 25, 2022, the Company announced it had signed a memorandum of understanding with Saudi Arabian Oil Company
(Aramco) to explore the co-development of a digital technology hub for delivering ESG solutions in the Kingdom of Saudi Arabia. The hub would enable the Company and Aramco to jointly develop new AI-powered innovations to facilitate the carbon reduction of complex energy-intensive assets throughout the Kingdom and abroad. Additionally, the Company announced that it planned to develop a center of excellence
that will serve as a home base for a dedicated team of ESG and digital transformation experts based in Saudi Arabia, particularly to leverage Virtual Visions high-performance infrastructure in accordance with the V2 Agreement. On January 26, 2022, the Company announced the creation of a new
ESG-Digital Hub based in Houston Texas, to serve as an additional focal point for local mCloud teams driving the ongoing technological development and customer delivery of AssetCare solutions. The
new Houston-based location joins other Company hubs in Calgary, Alberta, established in collaboration with Invest Alberta, and the hub based in Saudi Arabia, in collaboration with Aramco. On March 21, 2022, the Company announced it had signed an agreement on March 17, 2022 to deliver its AssetCare for
Connected Buildings solution to manage the energy efficiency of the Vail Buick Dealership in Bedford Hills, New York, the first of 15 planned installations for auto dealerships in New York state to help control rising energy costs in the electric
vehicle (EV) era. mCloud will deploy an innovative combination of AI in the cloud, solar power generation, and battery storage to continuously manage the energy cost and carbon footprint of the entire dealership, including the
substantial increased energy consumption from EV charging now being implemented onsite. The Vail Buick Dealership agreement covers a 17-year term commencing on or before June 2022. On March 30, 2022, the Company announced it had signed an agreement on March 28, 2022 with Carbon Royalty Corp to
proceed with closing and funding the first 30 AssetCare solutions to optimize Electric Vehicle (EV) charging efficiency at auto dealerships in the states of New York and California. The agreement partners mCloud with Carbon Royalty Corp,
enabling the implementation of these AssetCare contracts to be fully funded via Carbon Royalty Corp. As a benefit of this partnership, Carbon Royalty Corp receives 50% of the tax incentives, carbon credits, and other accretive financial benefits
mCloud would be eligible to receive in the United States resulting from the implementation of these solutions. These benefits would be split between mCloud and Carbon Royalty Corp over the expected 20-year
contract terms of AssetCare arrangements. 38
Financing The Company completed the issuance of six tranches of a convertible debenture financing pursuant to which it has issued an
aggregate of US$7.043 million convertible debentures (2021 Convertible Debentures). On July 12, 2021, the Company entered into debt conversion and exchange agreements with the holders of more than 99.2% of the outstanding
principal amount of the 2021 Convertible Debentures, pursuant to which the Company issued an aggregate of 2,107,787 common shares and 2,107,787 warrants in consideration for the extinguishment of 99.2% of the principal and accrued interest owing
under the 2021 Convertible Debentures. On April 15, 2021, the Company issued a total of 2,300,000 units of the
Company at an issue price of $6.30 per unit for aggregate gross proceeds of CAD$14.490 million (the Brokered Offering). Each unit consisted of one common share and one warrant of the Company. Each warrant is exercisable for one
common share at an exercise price of $8.55 per common share, subject to adjustment in certain events. The Brokered Offering was led by ATB Capital Markets Inc. (the Agent). The Agent was paid a cash fee equal to 7% of the gross proceeds
raised under the Brokered Offering. On May 17, 2021, the Company announced it had entered into a secured credit
facility with ATB, which is a $5 million margined, demand operating loan facility (the ATB Facility). The proceeds of the ATB Facility were used in part, to repay in full all indebtedness and liability owing by the Company to HSBC
Bank of Canada and for general corporate purposes. The ATB Facility is a demand operating line bearing interest at a floating rate equal to the prime rate per annum established by ATB from time to time for commercial loans denominated in Canadian
dollars made by ATB in Canada, plus an applicable margin rate based on the senior debt to EBITDA ratio of the Company at the time of determination. Repayments under the ATB Facility will be made on a monthly interest-only basis until demand. The ATB
Facility is secured against certain assets of the Company and its principal subsidiaries. On June 24, 2021,
$2.5 million was drawn from the ATB Facility, in accordance with the maximum amount permitted under the Companys intercreditor agreement with Fiera Private Debt Fund VI LP (Fiera). On November 8, 2021, the ATB Facility was amended. As part of the amendment, ATB provided an additional $5 million
in available funding to the Company via an accordion, subject to lender consent. In consideration of ATB making available to the Company additional advances under the ATB Facility, the Company granted to ATB
non-transferable warrants to acquire up to 183,486 common shares at an exercise price of $5.45 per common share for a term not exceeding one year. On November 9, 2021, the Company amended its term loan and amended the associated intercreditor agreement between Fiera,
ATB and the Company. The intercreditor agreement determines the priority of security interests in the case of default, with Fiera having first priority on all assets other than accounts receivable. The amendments to the term loan include: increase
in interest rate from 6.85% to 7.5% per annum; certain changes to financial covenants which are applicable for the period from July 1, 2021 to December 31, 2022; and, the addition of two mCloud subsidiaries as additional guarantors. On August 13, 2021, the Company completed a non-brokered private placement,
pursuant to a subscription agreement dated July 12, 2021, offering of 75,676 units of the Company at a unit price of $5.55 for gross proceeds of $0.420 million. Each unit consists of one common share and one share purchase warrant at an
exercise price of $8.55 per common share with warrants expiring April 2024. On November 24, 2021, the Company
announced that its common shares had begun trading on the Nasdaq Capital Market (Nasdaq) under the symbol MCLD in connection with the completion of a 3:1 share consolidation (the 2021 Share Consolidation). On
November 29, 2021, the Company announced the completion of an underwritten public offering of 2,100,000 units at a price to the public of US$4.50 per unit. Each unit issued in the offering consisted of one common share and one warrant to
purchase one common share at an exercise price of USD$4.75. The common shares began trading on the NASDAQ on November 24, 2021 under the symbol MCLD. The Company received gross proceeds of approximately US$9.5 million, before
deducting underwriting discounts and commissions and other estimated offering expenses. 39
The Company had also granted the underwriters, Maxim Group LLC, to purchase
up to an additional 315,000 common shares and an additional 315,000 warrants (each on a post-consolidation basis) at the public offering price to cover over-allotments. On November 29, 2021, the Company announced that Maxim Group LLC had
purchased the 315,000 warrants in accordance with the over-allotment option, and on December 6, 2021 announced that Maxim Group LLC had exercised the over-allotment option in full to purchase an additional 315,000 common shares at the Offering
Price. The proceeds from the over- allotment option were US$1.417 million. The aggregate gross proceeds of the offering, including the over- allotment option, were US$10.867 million. In conjunction with the USD equity offering described
above, the Company agreed to list the warrants issued as part of the unit offering on the Nasdaq. On February 15, 2022, these warrants commenced trading in USD under the symbol MCLDW. The Warrants will be trading under the symbol
MCLDW along with the Listed Warrants. In conjunction with the Companys agreements to provide AssetCare
solutions to optimize Electric Vehicle (EV) charging efficiency at auto dealerships in the states of New York and California (the EV Dealership Projects), on March 28, 2022, a subsidiary of the Company executed a promissory
note in the aggregate principal amount of US$15,000,000 (the Note) with Carbon Royalty Corp. (Carbon). EV Dealership Projects are the design, installation and operation of integrated power systems consisting of solar panels,
batteries and EV charging power stations for auto dealerships. The initial principal amount under the Note of
US$5,000,000 was funded on April 1, 2022 and an additional US$10,000,000 was funded on May 5, 2022 (the Loans). The Loans mature on March 31, 2025, with 10% per annum interest payable monthly in arrears in USD. In addition to the
interest payments, the Note requires certain income-based payments, including tax incentives, be made from the borrower to the lender based on income resulting from the EV dealership projects over their 20-year term. The Loan may not be prepaid
unless authorized by the lender. The Loans contain representations, warranties and covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst
other implications. Subsequent to March 31, 2022, the Company, Carbon and Fiera executed an agreement specifying the security held by Carbon. Subsequent to quarter end, on May 5, 2022, the Company, Carbon and Fiera Private Debt Fund VI LP (Fiera) executed
a Subordination and Postponement Agreement (the Subordination Agreement), whereby the parties agreed that the security previously held by Fiera would be subordinate to the security to be granted to Carbon commencing on the date of the
agreement. The security granted to Carbon means the EV Dealership Projects and to the extent related to the EV Dealership projects, all accounts receivable, equipment and machinery, contracts and contract rights, including contracts with auto
dealerships, inventory, cash and proceeds, rent and profits for each of the preceding. Execution of the Subordination Agreement was required for the additional funding under the Note to be released. A total of US$15,000,000 was funded subsequent to
March 31, 2022. Since the beginning of 2020, governments around the world have been forced to enact emergency measures in
response to the World Health Organizations declaration of the COVID-19 pandemic. Businesses around the world have suffered material disruption resulting in economic slowdown and uncertainty and
significant volatility in the financial markets. To date, the impacts to the Companys operations and financial matters associated with COVID-19 have included (i) a slow-down in technical services
due to the in-person nature of these activities and the restrictions placed such as lock-downs and social distancing by governments around the world with many of the most restrictive measures in the most
recent quarter being in our core geographic markets, (ii) a delay in the collection of receivables closely associated with business who were most widely impacted by shut-downs and restrictions, and (iii) a delay in certain projects. The
long-term impact on the Companys financial results and cash flows is unknown. While the Company has been negatively impacted by COVID-19, given the nature of the Companys operations, COVID-19 has increased customer demand and created new opportunities for mCloud to engage with new and existing customers using the remote connectivity offered by AssetCare. ANNUAL RESULTS FOR THE THREE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 COVID Government Support The Company received government assistance in both Canada the United States and Australia to help temper the financial impact
of the crisis. During the three and twelve months ended December 31, 2021, government assistance of $0.472 million and $4.202 million, respectively, was recorded in Other Income on the consolidated Statements of Loss and Comprehensive
Loss (three months and year ended December 31, 2020, $0.821 and $2.776 million, respectively). Impact on Strategic Plan and Growth The Company continues to assess the economic impacts of COVID-19 pandemic on its future
operations, including the liquidity forecast and valuation of the Companys intangible and goodwill assets related to recent acquisitions. As at December 31, 2021, the Companys senior management team has determined that the value of
the Companys assets is not materially impacted. In making this judgment, management has assessed various criteria including, but not limited to, existing laws, regulations, orders, disruptions, and potential disruptions in commodity prices and
capital markets. Overview Critical Accounting Policies and Estimates Management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities
and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. 40
The estimates and associated assumptions are limited by the relevance of
historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the
revision affects both current and future years. Determination of control of subsidiaries Judgement is required to determine when the Company has control of subsidiaries. This requires an assessment of the relevant
activities of the investee, being those activities that significantly affect the investees returns. Despite owning no shares, or having any voting rights, the Company determined that it exercises control over Agnity Global, Inc.
(Agnity) as the Company has the right to nominate a majority of the members of Agnitys Operations Committee and therefore the right and ability to direct the relevant activities of Agnity and to significantly affect its returns
through the use of its rights. The Company has the right to receive royalty collectability from Agnity on a monthly basis in perpetuity and the Company has credit risk with respect to the collectibility of these royalty payments. Assessment of indicators of impairment of goodwill, long-lived assets and intangible assets Management reviews, goodwill, depreciable long-lived assets and intangible assets for impairment triggers to determine if any
events or changes in circumstances exist that would indicate that the carrying amount of an asset may not be recoverable over time. If impairment indicators exist, impairment assessments are conducted as the asset level or level of cash generating
units (CGUs) as appropriate. Leases In measuring the Companys leases judgement is required to determine the lease term of the contract including whether the
Company is reasonably certain to exercise extension options where it is the lessee. A longer lease term results in a larger lease liability and right-of-use asset to be
recognized by the Company and future changes in this lease term will result in modifications. In addition, estimates and assumptions are required to determine the incremental borrowing rate used to measure lease liabilities on adoption and at
inception of a lease. Contingent consideration Management uses judgement to assess the existence of contingencies. By their nature, contingencies will only be resolved when
one or more future events occur or fail to occur. Management also uses judgement to assess the likelihood of the occurrence of one or more future events which impacts the fair value of the contingent consideration at the end for the Reporting
Period. Value of components for convertible debt and equity offerings Management makes judgements related to the measurement of the fair value of the convertible debentures and equity offerings issued in the
period, including the determination of the allocation of the proceeds between the components of the instrument. At inception of an instrument, the Company determines the value of each piece of the instrument and judgement is required in determining
the inputs used in the fair value calculations and in determining the probability of certain outcomes. Determination of stand-alone selling price
The total transaction price of certain revenue contacts is allocated to each performance obligation on a relative
stand-alone selling price (SSP) basis, representing the selling price as if it was sold separately. This is a formal process involving judgement which could impact the timing of recognized revenue. In most cases, the SSP is based on
observable data. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for perpetual software licenses is highly variable and therefore the Company applies the
residual approach. 41
Expected credit loss allowance and provision The Company recognizes an amount equal to the lifetime expected credit loss (ECL) on trade and long term
receivables, other receivables, unbilled revenue and amounts due from related parties for which there has been a significant increase in credit risk since initial recognition. Loss allowances are measured based on historical experience and
forecasted economic conditions. The amount of ECL is sensitive to changes in circumstances of forecast economic conditions. Impairment of goodwill and
other non-financial assets Goodwill is reviewed annually on December 31
of each financial year, or more frequently if changes in circumstances indicate that the carrying value may be impaired. The Company completed its annual impairment testing as at December 31, 2021 and determined there was no impairment.
Determining whether an impairment has occurred requires the valuation of the respective assets or CGUs, which the Company estimate the recoverable amount using a discounted cash flow method. The key estimates and assumptions used are revenue growth,
gross margin, and discount rate. These estimates are based on past experience and managements expectations of future changes in the market and forecasted growth initiatives. Share-based payments The
Company uses the Black-Scholes option -pricing model to determine the fair value of stock options and other equity instruments where the goods and services cannot be valued. In estimating the fair value, management is required to make certain
assumptions and estimates such as the expected life of options, volatility of the Companys future share price, risk-free rate, future dividend yields and estimated forfeitures at the initial grant measurement date. Changes in assumptions used
to estimate fair value could result in different outcomes. Business combinationspurchase price allocation The consideration transferred and acquired assets and assumed liabilities are recognized at fair value on the date the Company
effectively obtains control. The measurement of each business combination is based on the information available on the acquisition date. The estimate of fair value of the consideration transferred and acquired intangible assets (including goodwill),
property and equipment, other assets and the liabilities assumed are based on estimates and assumptions. The measurement is largely based on projected cash flows, discount rates and market conditions at the date of acquisition. See Fair Market
Value in this MD&A for further discussion. Taxation Calculations for current and deferred taxes require managements interpretation of tax regulations and legislation in the
various tax jurisdictions in which the Company operates, which are subject to change. The measurement of deferred tax assets and liabilities requires estimates of the timing of the reversal of temporary differences identified and managements
assessment of the Companys ability to utilize the underlying future tax deductions against future taxable income before they expire, which involves estimating future taxable income. The Company is subject to assessments by various taxation authorities in the tax jurisdictions in which it operates, and these
taxation authorities may interpret the tax legislation and regulations differently. In addition, the calculation of income taxes involves many complex factors. As such, income taxes are subject to measurement uncertainty and actual amounts of taxes
may vary from the estimates made by management. 42
CONTROLS AND PROCEDURES Prior to 2022, the Company was not required to establish and maintain DC&P and ICFR pursuant to National Instrument
(NI) 52-107. The Company is listed on the TSX-V and on November 24, 2021 also listed and commenced trading its shares on NASDAQ. As a result of the
NASDAQ listing, the Company is no longer a venture issuer. Accordingly, commencing in 2022, mCloud is required to establish and maintain DC&P and ICFR. In light of these new requirements for 2022, the following discussion provides preliminary commentary about the Companys
D&CP and ICFR. Disclosures Controls and Procedures The Companys disclosure controls and procedures (DC&P), as defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual Filings (NI 52-109) are designed to provide reasonable assurance that information required to be
disclosed in our filings under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also designed to provide reasonable assurance that all information required
to be disclosed in these filings is accounted for, accumulated and communicated to the Companys senior management team including the CEO and Chief Financial Officer (CFO) as appropriate. This is meant to allow for timely decisions
regarding public disclosure. The Company cannot provide absolute assurance that all information required to be disclosed
in its filings is reported within the time periods specified in securities legislation because of the limitations in control systems to prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. Internal
Controls over Financial Reporting The Companys senior management team is responsible for establishing and
maintaining adequate internal controls over financial reporting (ICFR), as defined in NI 52-109. ICFR means a process designed by or under the supervision of the CEO and CFO, and effected by the
Companys board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, and
includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) are designed to provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (3) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material
effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with
the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis. Commencing the first quarter of 2022, the Company will be required to report any material weaknesses in the design of ICFR.
Any such material weaknesses would also impact DC&P. Although we have not completed a full evaluation as of this date, we are aware of material weaknesses. 43
Management has identified the following material weaknesses: An ineffective control environment resulting from an insufficient number of trained financial reporting and
accounting, information technology (IT) and operational personnel with the appropriate skills and knowledge and with assigned responsibility and accountability related to the design, implementation and operating effectiveness of internal control
over financial reporting. The insufficient number of personnel described above contributed to an ineffective risk assessment process
necessary to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting. An ineffective information and communication process resulting from (i) insufficient communication of
internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls and ineffective controls related to spreadsheets, resulting in insufficient controls to ensure
the relevance, timeliness and quality of information used in control activities. As a consequence of the above and as a result of inadequate segregation of duties and secondary review, the
Company had ineffective control activities related to the design, implementation and operating effectiveness of process level and financial reporting controls which had a pervasive impact on the Companys internal control over financial
reporting. An ineffective monitoring process resulting from the evaluation and communication of internal control
deficiencies, including monitoring corrective actions, not being performed in a timely manner. These
material weaknesses resulted in material misstatements, which were corrected prior to the release of the consolidated financial statements as of and for the year ended December 31, 2021, and also in immaterial misstatements, some of which were
corrected prior to the release of the consolidated financial statements as of and for the year ended December 31, 2021. These material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial
statements will not be prevented or detected on a timely basis. 44
Remediation The Company is still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above,
however the current remediation plan includes: Identifying key positions necessary to support the Companys initiatives related to internal controls
over financial reporting, and expanding its hiring efforts accordingly. Hiring consultants to assist with process improvements and control remediation efforts in targeted accounting,
IT and operations processes. Formalizing its entity-wide risk assessment process, and documenting internal ownership of risk monitoring and
mitigation efforts, with improved risk monitoring activities and regular reporting to those charged with governance at an appropriate frequency. Finalize a delegation of authority matrix to enforce desired limits of authority for key transactions, events,
and commitments, and communicating these limits of authority to relevant personnel throughout the Company. Further simplify and streamline its spreadsheet models to reduce the risk of errors in mathematical formulas
and improve the ability to verify the logic of spreadsheets. Hiring a consultant to assist management with process improvements and control remediation for general IT
controls. Continuing to perform scoping exercises and planning for an ERP implementation to streamline the number of
applications used for financial reporting activities. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT A description of the Companys financial instruments and the financial risks that the Company is exposed to and management
of these risks can be found in Notes 26 and 27, respectively, of the Companys 2021 Financial Statements. Fair Values The carrying values of cash and cash equivalents, trades and other receivables, bank indebtedness, trade payables and accrued liabilities,
other liabilities, business acquisition payable, and due to related parties approximate their fair values due to the immediate or short-term nature of these instruments. The fair values of long-term receivables, loans and borrowings, and convertible
debentures approximate their carrying values as they were either recently issued by the Company or fair valued as part of the acquisition purchase price allocations or their interest rate approximates market rate. There has been no significant
change in credit and market interest rates since the date of their issuance. The derivative asset is carried at fair value and revalued at each reporting date. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial
instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Risk Management The
Companys board of directors has overall responsibility for determining the Companys capital and risk management objectives and policies, while retaining ultimate responsibility for ensuring the successful execution of such objectives and
policies. The Companys overall capital and risk management program has not changed throughout the year. This program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.
Risk management is carried out by the Companys finance department under policies approved by the Companys board of directors. The finance department identifies and evaluates financial risks in close cooperation with the Companys
senior management team. 45
Credit Risk Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract.
Credit risk is limited to the following instruments and the Companys maximum exposure to credit risk is the carrying value of the financial assets. The Company is mainly exposed to credit risk from credit sales. Management of the Company monitors the creditworthiness of its
customers by performing background checks on all new customers. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances. The Company considers that there has been a
significant increase in credit risk when contractual payments are more than 90 days past due. Provisions for outstanding
balances are established based on forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of
outstanding balances as well as the frequency of payments received. Accounts receivable are completely written off once management determines the probability of collection to be remote. Trade and other receivables, unbilled revenue and long-term receivables are from individual customers and are not assessed
based on external credit rating agencies. The Company uses a provision matrix to measure the lifetime expected credit loss (ECL) of these balances. Receivables are grouped based on similar credit risk profiles and days past due. Loss
rates are based on actual credit loss experience and reflect the forward looking conditions over the expected life of the receivable. Market risk
This is the risk that changes in market prices such as interest rates or foreign exchange rates will affect the Companys results
or value as a result of holding these financial instruments. The object of market risk management is to manage and control market risk exposures within acceptable parameters given the nature of the business. Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of the Companys financial instruments will
fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its credit facility. Management does not believe interest rate risk is currently material to its business. Foreign Currency Risk Currency risk is the risk that the fair values or future cash flows of the Companys financial instruments will fluctuate
because of changes in foreign currency rates and the degree of volatility of these rates. The Company conducts its business in Canada, Asia-Pacific, the United States and Europe, the Middle East and Africa, which gives rise to exposure to markets
from changes in foreign currency rates. Currently, the Company does not use derivative instruments or other measures to reduce its exposure to foreign currency risk. At December 31, 2021, the C$ equivalent carrying amount of the Companys US$ denominated monetary assets and
liabilities was C$14.554 million (December 31, 2020 - C$8.291 million) and C$11.685 million (December 31, 2020 - C$16.399 million), respectively. Assuming all other variables remain constant, a fluctuation of +/- 5.0% in the exchange rate
between C$ and US$ would impact the net loss for the period by approximately C$0.143 million (December 31, 2020 - C$0.405 million). 46
SELECTED ANNUAL FINANCIAL INFORMATION The information in the tables below is derived from the Companys audited consolidated financial statements for each of
the three most recently completed financial years. These have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and are
presented in Canadian dollars which is the functional and presentation currency of the Company. All figures reported in the MD&A are reported in millions, except for per share, stock option, common share, percentages and unit amounts. The
information below is not necessarily indicative of results for any future financial year. Years ended December 31 Revenues Gross profit Total expenses Other expenses (income) Net loss Loss per share attributable to mCloud shareholders basic and diluted Total assets Total non-current financial liabilities Review of Annual Financial Results The table below provides key financial performance metrics of the Company for the years ended December 31, 2021,
December 31, 2020 and December 31, 2019. This information should be read in conjunction with the Annual 2021 and 2020 Financial Statements. Years ended December 31, Revenue Cost of Sales Gross Profit Expenses Salaries, wages and benefits Sales and marketing Research and development General and administrative Professional and consulting fees Share-based compensation Depreciation and amortization Total expenses Operating loss Other Expenses (income) Finance costs Foreign exchange loss (gain) Impairment Business acquisition costs and other expenses Fair value loss on derivatives Other income Loss before tax Current tax expense (recovery) Deferred tax (recovery) expense Net loss for the period 47
Revenue In the following tables, revenue is disaggregated by nature and timing of revenue recognition. See Segment Reporting
Information in Note 4 to the Annual 2021 and 2020 Financial Statements for further information on revenue by location. Years ended December 31,
Major Service Line AssetCare Initialization AssetCare Over Time Engineering Services Total The material factors driving the Companys 83% increase in AssetCare Over Time revenues
from 2020 to 2021 are the increase in subscription and post-contract support and maintenance revenues related to AssetCare solutions that were initialized in 2019 and 2020 and new customer contracts to provide engineering services involving the use
of AssetCare. These solutions contributed to AssetCare Over Time revenues as the Company provided ongoing service in 2021. 48
Timing of revenue recognition Revenue recognized over time Revenue recognized at point in time upon completion Total Revenues for the year ended December 31, 2021 were $25.597 million, compared to
$26.928 million for the same period in 2020, a decrease of $1.331 million, or 5%, primarily due to $6.439 million lower AssetCare Initialization and $5.545 million lower engineering services, partially offset by
$10.653 million higher sales from AssetCare Over Time. Restrictions associated with COVID-19 prevented the delivery of the planned AssetCare Initialization at commercial sites and a reduction in Engineering Services. In particular, restrictions
in the province of Alberta where the Company has significant business precluded in-person access to sites where assets were expected to be connected, and reduced operations at some commercial sites meant AssetCare benefits were not fully realized
while restrictions were in place. For the year ended December 31, 2020, revenues increased by $8.588 million, to
$26.928 million from $18.340 million for the same period in 2019. The increase was due to an increase of $9.869 million in AssetCare Over Time, and higher AssetCare Initialization of $1.724 million due to an increase of customers
onboarded during 2020, partially offset by lower Engineering Services of $3.005 million attributable to COVID-19 delays performing in-person engineering services.
The Company operates in one operating segment. For the purpose of segment reporting, the Companys Chief Executive
Officer (CEO) is the Chief Operating Decision Maker. The determination of the Companys operating segment is based on its organizational structure and how the information is reported to the CEO on a regular basis. The Companys
revenue is generated from its customers in Canada, the United States of America, Asia-Pacific, Europe, and the Middle East and Africa. The Companys assets primarily reside in North America and Australia. See Risk Factors in
the Companys Annual Information Form for further discussion on the risks and uncertainties that the Company believes may materially affect the Companys future performance, including total revenue. The Companys revenue by location of the ultimate customer or consumer of product solution are as
follows: Canada United States Japan Australia Other Total revenue The change in revenues in Canada was due to the impacts of the COVID-19 pandemic. Restrictions
associated with COVID-19 prevented the delivery of the planned AssetCare Initialization at commercial sites and a reduction in the associated Engineering Services required to prepare commercial sites for the delivery of services in Canada. In
particular, restrictions in the province of Alberta where the Company has significant business precluded in-person access to sites where assets were expected to be connected, and reduced operations at some commercial sites meant AssetCare benefits
were not fully realized while restrictions were in place. We do not believe that the changes in year over year revenue in the other countries had significant impact other than the timing associated with certain contracts. Modest changes in revenue in countries outside of Canada were driven largely by timing of certain renewals and new contracts
signed with customers located in Japan during 2020. 49
The table below presents significant customers who accounted for greater
than 10% of total revenues for the years ended December 31, 2021, 2020 and 2019: Customer A Customer B Customer C Customer D Cost of Sales, Gross Profit, Gross Margin % Years ended December 31, Cost of Sales Gross Profit Gross Margin % Cost of sales for the year ended December 31, 2021 were $9.684 million, a decrease of 6% from the same
period in 2020 of $10.282 million, in line with the overall decrease in revenue of 5%. Gross margin % was relatively flat year over year. Cost of sales for the year ended December 31, 2020 increased to $10.282 million from $7.583 million for the year ended December
31, 2019. Gross profit for the year ended December 31, 2020 increased to $16.647 million from $10.757 million for the year
ended December 31, 2019 due to a change in revenue types and significantly higher revenues. Expenses Years ended December 31, Expenses Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total 50
Total expenses for the year ended December 31, 2021 increased by 18% or $8.305 million
compared with the same period in 2020. For the year ended December 31, 2020, total expenses increased 71% or $19.222 million, compared to the same period in 2019. The most significant changes for the periods presented are as follows: General and administration expenses, which typically consist of public company fees, bad debt expense, rent
expense, and recruitment costs, increased by 49% or $2.797 million in 2021 compared to 2020, primarily due to an increase in the loss allowance of $1.162 million related to uncollectible receivables, and $1.000 million associated with
the Companys NASDAQ listing, combined with costs associated with a full year of the Companys ownership of its kanepi subsidiary that were not present in the year ended December 31, 2020. General and administration expenses increased
by 74% or $2.447 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to facilities and overhead costs associated with a full year of ownership of its subsidiaries including mCloud
Technologies Services (MTS), acquired in Q3 2019, Construction Systems Associates, Inc. USA (CSA), acquired in Q1 2020, and kanepi, acquired in Q4 2020. Depreciation and amortization expenses increased by 32% or $2.147 million in 2021 compared to 2020,
attributable to a full year of amortization of intangibles acquired through business and asset acquisitions in Fiscal 2020. Depreciation and amortization expenses increased by 68% or $2.734 million in 2020 compared to 2019, due to amortization
of intangibles assets acquired through acquisitions of Agnity, MTS and CSA. The Companys customers use its software to monitor their assets and rely on the Company to provide
updates and releases as part of its software maintenance and support services. While the Company has not developed a formal research and development policy, the Company is and has been engaged with a number of research and development initiatives as
a part of its ongoing effort to continually update its software and develop new products. Research and development expenses increased by $2.101 million in 2021 compared to 2020, due to ongoing development and investments in AssetCare Mobile,
IAQ Badge and 3D technologies. Research and development expenses increased by $0.580 million in 2020 compared to 2019, due to the development of AssetCare project investments. Professional and consulting expenses increased by $0.199 million in 2021 compared to 2020, due to the
Company retaining more consultants for various accounting and professional service functions that were previously performed by employees in 2020, combined with the costs associated with a full year of the Companys ownership of its kanepi
subsidiary. Professional and consulting expenses increased by $4.534 million in 2020 compared to 2019, attributable to professional legal and advisory, as well as accounting and valuation services related to business acquisitions and financings
completed during the year. For the year ended December 31, 2021, salaries, wages and benefits were flat year over year, compared to
the same period in 2020. Salaries, wages and benefits increased by 102% or $10.571 million in 2020 compared to 2019, due to higher headcount attributable to acquisitions of CSA and kanepi, combined with added personnel in the asset purchase of
AirFusion. The above noted increases were partially offset by a decrease in the Companys sales and marketing costs
by 10% or $0.159 million due to lower marketing spending early in 2021, as the pandemic curtailed industry activity and the Company elected to spend less. This decrease in spending was partially offset by the mCloud Connect event that took
place in 2021. For the year ended December 31, 2020, sales and marketing decreased by 51% or $1.631 million compared to the same period in 2019, due to the curtailment of activities attributable to ongoing
COVID-19 restrictions. Expenses Years ended December 31, Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total Total expenses for the year ended December 31, 2021 increased by 18% or $8.305 million compared with the same
period in 2020. For the year ended December 31, 2020, total expenses increased 71% or $19.222 million, compared to the same period in 2019. The most significant changes for the periods presented are as follows: General and administration expenses, which typically consist of public company fees, bad debt expense, rent expense, and recruitment costs,
increased by 49% or $2.797 million in 2021 compared to 2020, primarily due to an increase in the loss allowance of $1.162 million related to uncollectible receivables, and $1.000 million associated with the Companys NASDAQ listing, combined
with costs associated with a full year of the Companys ownership of its kanepi subsidiary that were not present in the year ended December 31, 2020. General and administration expenses increased by 74% or $2.447 million for the year ended
December 31, 2020 compared to the year ended December 31, 2019, primarily due to facilities and overhead costs associated with a full year of ownership of its subsidiaries including mCloud Technologies Services (MTS), acquired in Q3
2019, Construction Systems Associates, Inc. USA (CSA), acquired in Q1 2020, and kanepi, acquired in Q4 2020. Depreciation and amortization expenses increased by 32% or $2.147 million in 2021 compared to 2020,
attributable to a full year of amortization of intangibles acquired through business and asset acquisitions in Fiscal 2020. Depreciation and amortization expenses increased by 68% or $2.734 million in 2020 compared to 2019, due to amortization of
intangibles assets acquired through acquisitions of Agnity, MTS and CSA. The Companys customers use its software to monitor their assets and rely on the Company to provide
updates and releases as part of its software maintenance and support services. While the Company has not developed a formal research and development policy, the Company is and has been engaged with a number of research and development initiatives as
a part of its ongoing effort to continually update its software and develop new products. Research and development expenses increased by $2.101 million in 2021 compared to 2020, due to ongoing development and investments in AssetCare Mobile, IAQ
Badge and 3D technologies. Research and development expenses increased by $0.580 million in 2020 compared to 2019, due to the development of AssetCare project investments. Professional and consulting expenses increased by $0.199 million in 2021 compared to 2020, due to the Company
retaining more consultants for various accounting and professional service functions that were previously performed by employees in 2020, combined with the costs associated with a full year of the Companys ownership of its kanepi subsidiary.
Professional and consulting expenses increased by $4.534 million in 2020 compared to 2019, attributable to professional legal and advisory, as well as accounting and valuation services related to business acquisitions and financings completed during
the year. For the year ended December 31, 2021, salaries, wages and benefits were flat year over year, compared to the
same period in 2020. Salaries, wages and benefits increased by 102% or $10.571 million in 2020 compared to 2019, due to higher headcount attributable to acquisitions of CSA and kanepi, combined with added personnel in the asset purchase of
AirFusion. The above noted increases were partially offset by a decrease in the Companys sales and marketing costs
by 10% or $0.159 million due to lower marketing spending early in 2021, as the pandemic curtailed industry activity and the Company elected to spend less. This decrease in spending was partially offset by the mCloud Connect event that took place in
2021. For the year ended December 31, 2020, sales and marketing decreased by 51% or $1.631 million compared to the same period in 2019, due to the curtailment of activities attributable to ongoing COVID-19 restrictions. 51
Other Expenses (Income) Years ended December 31, Other expenses (income) Finance costs Foreign exchange loss (gain) Impairment of intangible asset Business acquisition costs and other expenses Fair value loss on derivatives Other income Total Other expenses (income) increased by $1.500 million during the year ended December 31, 2021, compared
to the same period in 2020. For the year ended December 31, 2020, Other expenses (income) decreased $7.914 million, compared to the same period in 2019. The primary driver for these changes are as follows: Finance costs increased by $2.585 million during the year ended December 31, 2021, compared to the same
period in 2020, due to increased interest and transaction costs associated with the 2021 Convertible Debentures, which were converted in Q3 2021, along with interest and fees on new borrowings, partially offset by lower interest on repaid
borrowings. Finance costs increased by $2.816 million for the year ended December 31, 2020, compared with the same period in 2019, due to higher interest expense on the 2019 Convertible Debentures, with the funds used for business
acquisitions. Foreign exchange was a gain of $0.267 million for the year ended December 31, 2021, compared to a loss of
$1.198 million for the same period in 2020, due to an increase in US denominated financings in 2021. For the year ended December 31, 2020, the foreign exchange loss increased by $0.704 million to $1.198 million from
$0.494 million for the same period in 2019, as a result of the timing of cash receipts and payments. During the year ended December 31, 2021, the Company determined that the amount of the contingent
consideration recognized at the date of acquisition of CSA would not be payable as the operational performance metrics were not achieved. In addition, the fair value of the contingent consideration recognized at the date of acquisition for kanepi
remeasured based on managements estimate of the likelihood the performance metrics would be met by October 2022, resulting in a decrease in fair value and an offsetting amount recognized as other income, presented as business acquisition costs
and other expenses, . For the year ended December 31, 2019, business acquisition costs included $9.870 million incurred as transaction costs in connection with acquisitions including consulting fees, legal and professional fees and fair
value of $8.880 million for 800,000 common shares issued for brokering and due diligence services. Fair value changes in derivatives were a loss of $6.040 million for the year ended December 31, 2021.
These are non-cash losses as a result of the conversion of the 2021 Convertible Debenture into common shares and warrants. The initial fair value loss on the convertible debentures along with losses on
modification and remeasurement of the financial liability, partially offset by gains on the remeasurement of the warrant liability from date of issuance on August 13, 2021 to December 31, 2021 are the primary drivers of this amount. The
additional element of these fair value changes in derivatives relates to the remeasurement of warrant liabilities issued in November 2021, at December 31, 2021. 52
Other Income increased by $4.194 million for the year ended December 31, 2021, to
$7.126 million from $2.932 million for the same period in 2020. The majority of Other Income includes wage and rent subsidies received from the Canadian government and low-interest loans from the US
government, which were partially forgiven in 2021 and 2020. Also during the year ended December 31, 2021, contingent consideration associated with the acquisition of CSA and kanepi was determined not to be payable and as such, $1.010 million
was recognized in Other Income. For the year ended December 31, 2020, Other Income increase by $2.764 million compared to the same period in 2019, primarily due to wage subsidies and benefits from
low-interest loans received from US and Canadian government COVID-19 relief programs. Current and Deferred Income Taxes Years ended December 31, Expenses Current tax expense (recovery) Deferred tax expense (recovery) For the year ended December 31, 2021, current tax expense was $0.157 million compared to
a current tax recovery of $0.296 million, compared to the same period in 2020. The increase in current tax expense of $0.453 million was due to taxes owing attributable to taxable income in the US operations. For the year ended December
31, 2020, current taxes decreased by $0.478 million from a current tax expense of $0.182 million for the same period in 2019, attributable to the carry back of 2020 tax losses for refunds of past taxes paid. For the year ended December 31, 2021, the Company recorded a deferred tax recovery of $1.822 million compared with a
deferred tax recovery of $0.668 million, for the same period in 2020. The increase in the deferred tax recovery was primarily due to foreign tax rate and other foreign tax differences. For the year ended December 31, 2020, the deferred tax
recovery decreased by $2.024 million, to $2.692 million for the same period in 2019. The decrease was due to the recognition of deferred tax assets, recognized through profit and loss to offset deferred tax liabilities recognized in equity
on the issuance of convertible debentures. The Company has net operating losses of approximately USD$60.9 million
and non-capital losses of C$70.2 million (December 31, 2020 USD$44.1 million and C$49.6 million) which are available to reduce future years taxable income in the United States and
Canada, respectively. The net operating losses will commence to expire in 2029 while the non-capital losses will commence to expire in 2027 if not utilized. The Company has foreign tax losses in various jurisdictions of C$2.3 million (December 31, 2020C$1.2 million) which
are available to reduce future years taxable income in their respective countries. The losses vary in expiry from five years to indefinite life. The investment tax credit balance is C$0.5 million (December 31, 2020 C$0.5 million) which is available to reduce
future years taxes payable in Canada. The investment tax credits begin to expire in 2022 if not utilized. 53
REVIEW OF QUARTER FINANCIAL RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020
Revenue In the following
tables, revenue is disaggregated by nature and timing of revenue recognition. Three months ended December 31, Major Service Line AssetCare Initialization AssetCare Over Time Engineering Services Total Timing of revenue recognition Revenue recognized over time Revenue recognized at point in time upon completion Total For the three months ended December 31, 2021, total revenue was $4.170 million, a decrease of
$5.053 million, compared to $9.223 million for the same period in 2020. This decrease is attributable the resurgence of the Omicron COVID-19 variant and the return of stricter COVID-19 restrictions, which led to a decrease of $2.499 million and $1.660 million, respectively, in revenues generated from the AssetCare Initialization and AssetCare Over Time categories, combined with
a decrease of $0.894 million in revenues generated from Engineering Services. These revenue streams are dependent on performing in-person services and have been impacted by the COVID-19 restrictions. Cost of Sales, Gross Profit, Gross Margin % Three months ended December 31, Cost of Sales Gross Profit Gross margin % Cost of sales for the three months ended December 31, 2021 were $1.507 million, a decrease of 58% from
$3.579 million for the same period in 2020, primarily due to a decrease of in-person services related to tighter COVID-19 restrictions in the last quarter of the
year. For the three months ended December 31, 2021, gross profit decreased by $2.981 million to $2.664 million from $5.644 million for the same period in 2020, primarily due to a decrease in revenues of $5.053 million,
partially offset by a decrease in cost of sales by $2.072 for the reasons noted above. Expenses Three months ended December 31, Expenses Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total 54
Total expenses for the three months ended December 31, 2021 increased by 45% or
$5.105 million compared with the same period in 2020. The most significant changes between 2021 and 2020 are as follows: General and administration expenses increased by 118% or $2.263 million primarily as the result of costs
associated with the Companys NASDAQ listing, which occurred in November 2021, combined with a bad debts provision. Research and development expenses increased by $0.782 million in Q4 2021 compared with 2020, related
specifically to the ongoing development of AssetCare Mobile, IAQ Badge and 3D technologies. Spending in prior year was curtailed as a means of conserving cash. Professional and consulting expenses increased by 17% or $0.356 million, primarily related to increased
costs for professional services associated with the general efforts to raise capital to explore current and future acquisition opportunities, perform technical accounting and advisory fees and prepare and file the Companys prospectus
supplements. Consultants filled positions in 2021 that were previously held by employees in 2020. Salaries, wages and benefits costs increased by 25% or $1.122 million, primarily due to a full year of
the costs associated with a full year of the Companys ownership of its kanepi subsidiary, as compared with the prior year when kanepi was acquired in October 2020. This was partially offset by the use of consultants in 2021 for tasks
previously performed by employees in 2020. Depreciation and amortization non-cash costs increased by 12% or
$0.229 million for Q4 2021. These changes were related to intangible assets which were acquired as part of business and assets acquisitions completed throughout Fiscal 2020 acquired from CSA, and the intangible assets acquired as part of the
Companys acquisition of kanepi. Sales and marketing costs increased by 32% mainly as a result of investments by the Company to explore
opportunities in the AssetCare solutions across all industries and in particular, in the IAQ space. 55
Other Expenses (Income) Three months ended December 31, Other expenses (income) Finance costs Foreign exchange loss (gain) Business acquisition costs and other expenses Fair value gain on derivatives Other income Total Total other expenses (income) decreased by $4.830 million in the three months ended
December 31, 2021. The primary drivers are as follows: Finance costs increased by $1.030 million for the three months ended December 31, 2021, due to
higher interest and fees on new borrowings. Foreign exchange changed from a loss of $1.583 million for the comparative period in 2020 to a gain of
$0.041 million in Q4 2021. These movements were the result of the timing of cash receipts and payments, combined with the USD public offering that closed in the last quarter of 2021. Fair value changes in derivatives constituted a gain of $3.075 million for the three months ended
December 31, 2021. These non-cash changes relate to the fair value adjustment for the warrants and was partially offset by the remeasurement of warrant liabilities, issued in November 2021, being revalued
at December 31, 2021. Other Income increased by $0.683 million for the three months ended December 31, 2021. The majority
of Other Income includes wage and rent subsidies received from the Canadian government and low-interest loans from the US government which have been partially forgiven in the periods. Current and Deferred Income Taxes Three months ended December 31, Expenses Current tax expense (recovery) Deferred tax expense (recovery) For the three months ended December 31, 2021, the Company recorded a current tax recovery of
$0.704 million, an increase of $0.307 million, compared to $0.397 million for the same period in 2020. Deferred tax
recovery was $0.854 million for the three months ended December 31, 2020, a decrease of $1.535 million from a deferred tax expense $0.682 million, for the same period in 2019. 56
SUMMARY OF QUARTERLY RESULTS The Companys selected financial information for the eight completed fiscal quarters ending December 31, 2021 is shown in the table below.
Accounting policies under IFRS were consistently applied across all periods. Unless indicated otherwise, and converted amounts in this section are expressed in Canadian dollars as set out in Currency and Exchange Rates. For the quarter ended: Total revenue Net loss Net loss - mCloud shareholders Basic and diluted loss per share Total assets Total non- current financial liabilities (1) The results for each of the quarters ended March 31, June 30 and September 30, 2021 have been adjusted
for an immaterial error correction which: impacted revenue, current and non-current long-term accounts receivables; deferred revenue, and correspondingly, impacted net loss and net loss attributable to mCloud
shareholders and related loss per share attributable to mCloud shareholders - basic and diluted. During the quarters ended: March 31, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders
and loss per share attributable to mCloud shareholders - basic and diluted by $0.945 million ($0.10 per share); June 30, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders and loss
per share attributable to mCloud shareholders - basic and diluted by $0.652 million ($0.13 per share); September 30, 2021, increased revenue and decreased net loss, net loss attributable to mCloud shareholders and
loss per share attributable to mCloud shareholders - basic and diluted by $0.098 million ($0.01 per share). 57
Total revenue was $4.171 million in Q4 2021, a decrease of
$5.053 million, compared to $9.223 million in Q4 2020. This decrease is attributable to lower revenues as a result of COVID-19 restrictions. Net losses in Q4 2021 increased to $10.331 million compared to a net loss of $8.918 million in Q4 2020, resulting in a change of
$1.413 million quarter over quarter, primarily attributable to a decrease of $5.053 million of revenue due to COVID-19 restrictions and delays. These were partially offset by a change in other
expenses (income) of $4.830 million primarily related to fair value gain on derivatives. Net losses in Q4 2021 decreased to $10.331 million compared to a net loss of $15.616 million in Q3 2021, primarily due to a non-cash derivative loss on the 2021 Convertible Debentures, partially offset by higher revenues in Q3 2021. Basic and diluted net loss per share of $0.70/share in Q4 2021, was a decrease of $0.37/share, from $1.07/share in Q4 2020. This decrease was
primarily attributable to the lower net loss as described above, combined with the increase in share count as a result of the conversion of the 2021 Convertible Debentures in Q3 2021. See Year in Review Financing for
further discussion on the 2021 Convertible Debentures and the Companys listing and public offering on the NASDAQ. CAPITAL RESOURCES The Companys objective and polices for managing capital are to safeguard its ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages its capital structure and makes changes based on economic conditions including the impact of
the ongoing pandemic, risks that impact the consolidated operations and future significant capital investment opportunities. In order to maintain or adjust its capital structure, the Company may issue new equity instruments or raise additional debt
financing. Analysis of Cash Flows On December 31, 2021, the Company had $4.588 million in cash ($1.111 million as at December 31, 2020; $0.529 million as at
December 31, 2019). All cash was held in bank accounts, primarily with Canadian and US banks. The following table summarizes cash inflows
and outflows for the periods shown. Cash provided by (used in): Operating activities Investing activities Financing activities Increase in cash, before effect of exchange rate fluctuation Cash flows used in operating activities increased to $28.330 million in 2021 compared with
$24.856 million in 2020, primarily as a result of a higher net loss in 2021. This was partially offset by increased Other Income and more non-cash charges in 2021 compared with 2020. Cash flow from
operations can vary significantly from period to period as a result of the Companys working capital requirements which are dependent on operations and increased spending to grow the Company and expand its presence in the market. Cash flows
used in operating activities for the year ended December 31, 2020 increased to $24.856 million, from $14.516 million for the same period in 2019, due to increased spending to expand the Companys presence in markets. Cash flows used in investing activities decreased in 2021 to $1.064 million compared with $6.395 million in 2020, as there were no
acquisitions in 2021 compared to 2020, during which time kanepi was acquired along with assets from AirFusion. This was partially offset by higher spending in 2021 on the acquisition of property and equipment and the development of intangible assets
compared with 2020. This spending was focused on furthering development of new AssetCare products. Cash used in investing activities was $6.395 million for the year ended December 31, 2020 as compared $20.732 million for the same period in
2019, a net decrease of $14.337 million, due to the acquisitions of CSA, AirFusion, kanepi and ongoing development of the Companys technology. For the same period in 2019, the cash used in investing activities primarily related to the
acquisition of MTS. 58
Cash flows provided by financing activities increased to $32.927 million for the year
ended December 31, 2021 compared with $31.857 million for the year ended December 31, 2020. The net increase was primarily attributable to the brokered public offering of $12.281 million, net of transaction costs, in conjunction
with the Companys NASDAQ listing, combined with an increase in net proceeds received from bank indebtedness, partially offset by net proceeds received, after transaction costs, for warrants issued in 2020. For the year ended December 31,
2020, the Company had net cash received of $31.857 million compared with net cash received of $34.465 million for the same period in 2019, a net decrease of $2.608 million. The decrease is primarily due to the issuance of the 2019
Convertible Debentures, partially offset by cash flows received from public offerings, debentures and special warrants during the year ended December 31, 2020. Factoring and Security Agreement with Nations Interbanc Under a factoring and security agreement with Nations Interbanc (Nations), Agnity Communications Inc. (Agnity), an
entity controlled by the Company, receives advances up to a maximum of US$2 million from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing
agreement and the accounts receivables factored still carry credit risk, are not sold, and are not derecognized from Agnitys statement of financial position. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the
first 30 days and a daily proration of 0.06% per day thereafter. The amount of funds advanced varies and is dependent on the cash requirements of Agnity. The MasterCard Facility The
Companys credit facility with MasterCard (the MasterCard Facility) with a total limit of $0.425 million provides cash security to MasterCard held on deposit for expenses outstanding on the Company issued credit cards. As at
December 31, 2021, the MasterCard Facility was drawn to $0.297 million (December 31, 2020$0.601 million). Short-Form Base Shelf
Prospectus On April 28, 2020, the Company filed a final short form base shelf prospectus which allows the Company to offer, from
time to time, over a 25-month period, common shares, preferred shares of any series, senior or subordinated secured or unsecured debt securities, subscription receipts, warrants, and units comprised of one or
more of the aforementioned securities, with an aggregate value of up to $200 million. Securities may be offered separately or together, in amounts, at prices, and on terms to be determined based on market conditions at the time of sale and set
forth in an accompanying prospectus supplement. This final short form base shelf prospectus was updated and refiled with the British Columbia Securities Commission on November 18, 2021 and with the US Securities and Exchange Commission on Form F-10/ A on November 19, 2021 in connection with the Companys listing to the NASDAQ. On
November 26, 2021, a supplement was filed in connection with the November 18, 2021 prospectus through which the Company offered 2,100,000 units at a price of US$4.50 per unit. Each unit consisted of one common share in the capital of the
Company and one transferable common share purchase warrant. Each warrant is exercisable to purchase one common share at a price of US$4.75 per share up to November 29, 2026, being five years after the closing date of November 29, 2021.
LIQUIDITY The principal liquidity
needs of the Company are for working capital requirements, debt servicing and repayment obligations, and costs associated with the growth of the business. The Company is exposed to liquidity risk which is the risk that the Company will not have
sufficient cash resources to meet its financial obligations as they come due in the normal course of business. The Company manages its liquidity risk by monitoring its operating requirements, reducing costs were possible given the status of the COVID-19 pandemic, and applying for any available government funding to support its business. The Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to
meet budgeted operating requirements. The Company assesses its liquidity on an ongoing basis based on current market factors and cannot make any statements regarding any known trends or fluctuations likely to affect the Companys liquidity
beyond standard market conditions. See Note 26 of the Financial Statements for further discussion on the Companys liquidity risk. 59
The Companys ability to fund current and future operations is dependent on its ability
to generate sources of cash through positive cash flows from operations combined with equity and/or debt financing as needed, including, but not limited to the ATB Facility. Based on its current business plan and the impacts of COVID-19, the Company has identified near-term
capital needs. The Companys near-term cash requirements relate primarily to the repayment of the 2019 Convertible Debentures, operations, working capital and general corporate purposes. The Company updates its forecast regularly and considers
additional financial resources as appropriate. Additionally, the shares in the capital of the Company became dually listed and began trading on the NASDAQ on November 24, 2021. See Year in Review Financing for further
discussion on the Companys NASDAQ listing. The Company has created aggressive marketing and sales plans and increased headcount related to sales and business development, while balancing this with the
re-opening from pandemic restrictions, which is expected to increase revenues and operating cash flows. To date, the Company received wage subsidies totaling $5.817 million and rent subsidies of $1.120 from the Canadian Government. During
the year ended December 31, 2021, wage and rental subsidies of $4.202 million were included in Other Income in the 2021 Financial Statements. To date, the Company received low-interest government loans
totaling $1.961 million under the Paycheck Protection Program (the PPP) with the US Government, which ceased on May 31, 2021, to help alleviate the negative economic impacts on COVID-19
to its business. During the year ended December 31, 2021, other income of $1.825 million was recognized associated with these loans as they represent government grants. The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide
to mitigate the pandemics spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the in-person nature of these activities and delay the
start of certain projects for a duration of the year. This negatively impacted the Companys financial performance and liquidity position. During the year ended December 31, 2021, the Company generated a net loss of $44.699 million and negative cash flows from operating
activities of $28.330 million. At December 31, 2021, the Company had a working capital deficiency of $42.108 million. Working capital deficiency is a non-IFRS measure which is calculated as current
assets less current liabilities. Current liquidity levels and available sources of capital are not adequate to fund the working capital
deficiency. The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of $23.458 million if not converted on or before May 31, 2022; loans and borrowings of
$11.764 million including principal and interest payments; payment of trade and other payables of $12.421 million and payments associated with leases of approximately $1 million. While restrictions started to ease in the three months ended December 31, 2021, there is still uncertainly over how COVID-19 will impact the Companys business and the timing of future revenues. Based on the Companys liquidity position at the date of authorization of these consolidated financial statements and
considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet is financial obligations. The Company is currently working with stakeholders and others to address the working
capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash flow from operations, and, as necessary, to obtain the
necessary equity or debt financing to continue with expand its operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising capital in the past and anticipates the
lenders will not accelerate repayment of loans with covenant breaches as of December 31, 2021 and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing further financings in the future
or obtaining waivers of the covenant breaches. 60
As a result, these factors are indicators that material uncertainties exist that raises
significant doubt about the Companys ability to continue as a going concern and, therefore, its ability to realize assets and discharge liabilities in the normal course of business. In making their assessment, management considered all available information, together with forecasts and other mitigating strategies, about
the future which is at least, but not limited to, twelve months from the end of the reporting period. Management has considered in its assessment its plans for the repayment of the 2019 Convertible Debentures, the likelihood of repayment of the term
loan which has been classified as current, the required cash principal and interest payments on indebtedness, and the likelihood of payments required under contingent consideration arrangements. Management also considered cash inflows from current operations, expected government assistance in the form of wage and rent subsidies, and
expected increases in revenues and cash flows resulting from new revenue contracts expected over the next twelve months due to the anticipated reduction of COVID-19 related restrictions. Future debt and equity
raises have been considered in determining that the going concern assumption remains appropriate. Contractual Obligations and Commitments Below is a summary of the Companys contractual obligations and commitments as at December 31, 2021. At December 31, 2021 Bank indebtedness 1 Trade payables and accrued liabilities Loans and borrowings 2 Lease liabilities 3 2019 Convertible Debentures 2021 Convertible Debentures Warrant liabilities 5 Business acquisition payable Contractual obligations At December 31, 2021 Variable lease payments 5 Lease payments related to leases which have not yet commenced 6 Commitments 61
No contractual maturity, due on demand. Excludes interest charged on facility. Includes term loan with a carrying value of $9.276 classified as current due to covenant breach. Assuming
term loan is repaid in accordance with agreement to maturity, the undiscounted contractual cash flows for loans and borrowings would be $2.934 million, $5.472 million, and $4.144 million, respectively for the periods presented above.
Variable costs payable under lease agreements are not included in this amount. Minimum payment related to
leases which have not yet commenced are not included in this amount. Majority of liability will be settled by issuing common shares when warrants are exercised during the year.
The remaining amount may be settled in cash or common shares of Agnity. Variable lease payments associated with lease liabilities. In October 2021, the Company executed a 12-year lease for office
space in Calgary, Alberta. Base rent and estimated common expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. The Company will receive a tenant improvement allowance which is
expected to cover the majority of the costs. REVIEW OF QUARTER FINANCIAL RESULTS FOR THE THREE MONTHS ENDED
MARCH 31, 2022, 2021 The Companys selected financial information for the last eight completed fiscal quarters is shown in the
table below. Accounting policies under IFRS were consistently applied across all periods. For the quarter ended: Total Revenue Net loss Net Loss - mCloud shareholders Basic and diluted loss per share Total assets Total non- current financial liabilities The results for each of the quarters ended March 31, June 30 and September 30, 2021 have been adjusted
for an immaterial error correction which impacted revenue, current and non-current long-term accounts receivables; deferred revenue, and correspondingly, impacted net loss and net loss attributable to mCloud
shareholders and related loss per share attributable to mCloud shareholders - basic and diluted. During the quarters ended: March 31, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders
and loss per share attributable to mCloud shareholders - basic and diluted by $0.945 million ($0.10 per share); June 30, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders and
loss per share attributable to mCloud shareholders - basic and diluted by $0.652 million ($0.13 per share); September 30, 2021, increased revenue and decreased net loss, net loss attributable to mCloud shareholders
and loss per share attributable to mCloud shareholders - basic and diluted by $0.098 million ($0.01 per share). Total revenue was $4.430 million in Q1 2022, compared to $7.436 million in Q1 2021, a decrease of $3.006 million, due to
challenges remaining from COVID-19 restrictions effecting the Company carrying out work. During Q1 2022, the Company executed on marketing strategies and expects to see a gradual return to pre-pandemic levels. Net losses in Q1 2022 increased to $11.023 million compared to a net loss of $9.752 million in Q1 2021, resulting in a change of $1.272 million, primarily attributable to a fair
value gain on derivatives of $4.057 million, partially offset by decrease of $1.512 million of other income, attributable to the wind down of government COVID-19 programs and grants. In addition, as
the Company ramped up to resume to normal activity levels increased expenses of $3.305 million quarter over quarter with higher costs related to professional fees and general and administrative costs, due to an increased number of consultants
performing tasks formerly done by employees in Q1 2021. Net losses in Q1 2022 increased to $11.023 million compared to a net loss of $10.331 million in Q4 2021, primarily due to the decrease in the fair value gain on derivatives and other
income. Basic and diluted net loss per share of $0.61/share in Q1 2022, was an increase of $0.51/share, from $1.12/share in Q1 2021 due to higher net loss as described above, combined with a change in the number of shares. 62
The table below provides key financial performance metrics of the Company for Q1 2022,
compared with Q1 2021. This information should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2021. Three months ended March 31 Revenue Cost of Sales (1.932 ) (3.259 ) 1.327 (41 )% Gross Profit Expenses Salaries, wages and benefits Sales and marketing Research and development General and administrative Professional and consulting fees Share-based compensation Depreciation and amortization Total expenses Operating loss Other Expenses (income) Finance costs Foreign exchange loss Business acquisition costs and other expenses Fair value (gain) loss on derivatives Other income Loss before tax Current tax expense Deferred tax recovery Net loss for the period Revenue In the following tables, revenue is disaggregated by nature and timing of revenue recognition. Three months ended March 31, Major Service Line AssetCare initialization AssetCare over time Engineering services Total Regarding the 38% decline in AssetCare Over Time for the three months ended March 31, 2022, the Company
experienced challenges in delivering AssetCare services and benefits to certain customers during that period. This stemmed from restricted access to certain customer sites related to the COVID-19 pandemic,
which prevented the Company from providing ongoing service and drove lower-than-usual end-customer use of AssetCare solutions. These impacts were uniquely limited to this time period as these certain customers did not have similar restrictions in
place during previous periods that affected the Companys ability to deliver AssetCare. 63
Timing of revenue recognition Revenue recognized over time Revenue recognized at point in time upon completion Total For the three months ended March 31, 2022, total revenue was $4.430 million, a decrease of
$3.006 million, compared to $7.436 million for the same period in 2021, primarily due to lingering challenges with the Companys ability to carry out substantive areas of work until mid-March
2022, largely driven by COVID-19 restrictions. By the end of Q1 2022, the Company began to see patterns emerging that point to a gradual return to pre-pandemic levels.
This has also been reflected in the Companys ability to execute on key marketing strategies in many of its geographic regions, as collaborated by the increased sales marketing expenditures in Q1 2022 as discussed below. Cost of Sales, Gross Profit, Gross Margin % Three months ended March 31, Cost of Sales Gross Profit Gross margin % Cost of sales for the three months ended March 31, 2022 were $1.932 million, a decrease of 41% from
$3.259 million for the same period in 2021. This decrease is primarily attributable to effects on projects connectivity and installation of assets up until mid-March 2022 when COVID-19 restrictions were fully lifted, partially offset by costs incurred on the IAQ project. For the three months ended March 31, 2022, gross profit decreased by $1.680 million to
$2.497 million from $4.177 million for the same period in 2021, primarily due to a decrease in revenues of $3.006 million, partially offset by a decrease in cost of sales by $1.326 million for the reasons noted above. Expenses Three months ended March 31,
Expenses Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total 64
Total expenses for the three months ended March 31, 2022 increased by 29% or
$3.306 million compared with the same period in 2021. The most significant changes between 2022 and 2021 are as follows: Professional and consulting expenses increased by 83% or $1.437 million, primarily related to increased
costs for professional services in Q1 2022. Consultants also filled positions in Q2 2021 that were previously held by employees. General and administration expenses increased by 91% or $1.215 million primarily due to increased
insurance premiums following the Companys NASDAQ listing in Q4 2021, combined with increased IT subscriptions as the Company ramps up to return its resources to pre-COVID 19 levels.
Sales and marketing costs increased by 312% or $0.577 million, due to sponsorships with the Mercedes-Benz Formula E Limited racing team and increased marketing initiatives in Q1 2022. Salaries, wages and benefits costs increased by 9% or $0.444 million, primarily attributable to increased
headcount related to the Companys post COVID-19 expansion, ramping up for expected growth later in 2022. Research and development expenses decreased by $0.217 million in Q1 2022 compared with the same period in
2021, as a means of conserving cash in Q1 2022. Research and development specifically relates to the ongoing development of AssetCare Mobile, IAQ Badge and 3D technologies. Depreciation and amortization non-cash costs decreased by 1% or
$0.028 million for Q1 2022, due to a decrease in new assets for property and equipment, combined with fully depreciated assets at or nearing the end of their useful life. Other Expenses (Income) Three months ended
March 31, Other expenses (income) Finance costs Foreign exchange loss (gain) Business acquisition costs and other expenses Fair value (gain) loss on derivatives Other income Total Other expenses (income) decreased by $2.990 million during the three months ended March 31, 2022,
compared to the same period in 2021. Fair value changes in derivatives were a gain of $2.493 million for the three months ended March 31,
2022. These are non-cash gains as a result of the remeasurement of the warrant liabilities at March 31, 2022. The warrant liabilities include the warrants issued on conversion of the 2021 Convertible
Debenture and the warrant liabilities issued in November 2021. Finance costs decreased by $0.377 million during the three months ended March 31, 2022, compared to the
same period in 2021, primarily due to transaction costs on the issuance of convertible debentures expensed in Q1 2021. 65
There were no business acquisition costs in either Q1 2022 or Q1 2021. Other expenses vary depending on
activity. Other Income decreased by $1.512 million for the three months ended March 31, 2022, to
$0.398 million from $1.910 million for the same period in 2021. The majority of Other Income includes wage and rent subsidies for COVID-19 programs received from the Canadian government and low-interest loans from the US government. The majority of these programs have now ended. Foreign exchange was a loss of $0.623 million for the three months ended March 31, 2022, compared to a
loss of $0.367 million for the same period in 2021, due to a stronger Canadian dollar. CAPITAL RESOURCES The Companys objective and polices for managing capital are to safeguard its ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages its capital structure and makes changes based on economic conditions including the impact of
the ongoing pandemic, risks that impact the consolidated operations and future significant capital investment opportunities. In order to maintain or adjust its capital structure, the Company may issue new equity instruments or raise additional debt
financing. The Company assesses its capital resources on an ongoing basis based on current market factors, and has not identified any
trends or fluctuations likely to affect the Companys capital resources beyond standard market conditions. Analysis of Cash Flows As at March 31, 2022, the Company had $1.873 million in cash (December 31, 2021 - $4.588 million). All cash was held in bank accounts,
primarily with Canadian and US banks. The following table summarizes cash inflows and outflows. Three months ended March 31, Cash provided by (used in): Operating activities Investing activities Financing activities Increase in cash, before effect of exchange rate fluctuation Cash flows used in operating activities increased to $3.771 million in 2021 compared with
$4.930 million in 2020, primarily as a result of a higher net loss in Q1 2022, offset by an increase in working capital in 2022 compared with 2021. Cash flow from operations can vary significantly from period to period as a result of the
Companys working capital requirements which are dependent on operations and increased spending to grow the Company and expand its presence in the market. Cash flows used in investing activities decreased in Q1 2022 to $0.011 million compared with $0.461 million in Q1 2021, as a means
of conserving cash with lower spending in the acquisition of property and equipment. 66
Cash flows provided by financing activities decreased to $1.090 million for the three
months ended March 31, 2022 compared with $4.608 million for the same period in 2021, primarily due to the issuance of convertible debentures in Q1 2021. Financing Arrangements and Credit Facilities Factoring and Security Agreement with Nations Interbanc Under a factoring and security agreement with Nations Interbanc (Nations), Agnity receives advances up to a maximum of
US$2 million from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing agreement and the accounts receivables factored still carry credit risk, are
not sold, and are not derecognized from Agnitys statement of financial position. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the first 30 days and a daily proration of 0.06% per day thereafter. The amount of
funds advanced varies and is dependent on the cash requirements of Agnity. ATB Financial Facility The Companys secured revolving operating facility (ATB Facility) with ATB Financial (ATB) is described in Note 13
to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, additional draws of $1.077 million were made. Subsequent to quarter end, $0.670 million was repaid in accordance with the agreement. The ATB Facility is subject to certain reporting and financial covenants. The Company was in compliance with these covenants at March 31,
2022. At March 31, 2022, ATB had the ability to restrict further advances under the ATB Facility as a result of the Fiera covenant breach. Fiera Loan On May 5, 2022, the
Company and Fiera executed an Accommodation Agreement (the Accommodation Agreement) and the parties agreed that a portion of the outstanding principal amount under the term loan would be paid in addition to a prepayment penalty and
accommodation fee. The Company paid a total of $2.044 million on May 6, 2022. The parties also agreed that the remainder of the principal and interest due under the loan would be paid on or before October 31, 2022 (the Repayment
Date). The term loan was amended to increase the interest rate charged from 6.85% to 9.5% effectively immediately and clarified that the Company is not required to maintain the financial covenants set out in the November 9, 2021 amending
agreement. The Company may be required to repay the loan before the Repayment Date if the Company is in default or breach of the Accommodation Agreement. As part of the Accommodation Agreement, Fiera signed an agreement, whereby Fieras
security is subordinate to the security granted to Carbon. The MasterCard Facility The Companys credit facility with MasterCard (the MasterCard Facility) with a total limit of $0.750 million provides
cash security to MasterCard held on deposit for expenses outstanding on the Company issued credit cards. As at March 31, 2022, the MasterCard Facility was drawn to $0.397 million (December 31, 2021 - $0.297 million). LIQUIDITY The principal liquidity needs
of the Company are for working capital requirements, debt servicing and repayment obligations, and costs associated with the growth of the business. The Company is exposed to liquidity risk which is the risk that the Company will not have sufficient
cash resources to meet its financial obligations as they come due in the normal course of business. The Company manages its liquidity risk by monitoring its operating requirements, reducing costs were possible given the status of the COVID-19 pandemic, and applying for any available government funding to support its business. The 67
Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to meet budgeted operating requirements. The Company assesses its liquidity on
an ongoing basis based on current market factors, and has not identified any trends or fluctuations likely to affect the Companys liquidity beyond standard market conditions. See Note 26 of the 2021 Annual Financial Statements for further
discussion on the Companys liquidity risk. The outbreak of the COVID-19 pandemic and the
measures adopted by governments in countries worldwide to mitigate the pandemics spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the
in-person nature of these activities and delayed the start of certain projects throughout 2021 and into 2022. This negatively impacted the Companys financial performance and liquidity position. While
restrictions continue to ease there have been increased cases of COVID-19 and there is still uncertainty over how COVID-19 will impact the Companys business and
the timing of future revenues. During the three months ended March 31, 2022, the Company generated a net loss of $11.023 million and
negative cash flows from operating activities of $3.771 million. At March 31, 2022, the Company had a working capital deficiency of $51.423 million. Working capital deficiency is a non-IFRS measure
which is calculated as current assets less current liabilities. Current liquidity levels and available sources of capital are not adequate to fund the working capital deficiency. The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of
$24.044 million if not converted on or before June 30, 2022; loans and borrowings of $14.087 million including principal and interest payments; payment of trade and other payables of $17.080 million; and payments associated with
leases of approximately $1.350 million. Based on the Companys liquidity position at the date of authorization of these
condensed consolidated interim financial statements and considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet its financial obligations. The Company is currently
working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash
flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising
capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of March 31, 2022, and potential breaches forecasted over the coming year, there is no assurance that it will be successful in
closing further financings in the future or obtaining waivers of the covenant breaches. As a result, these factors are indicators that
material uncertainties exist that raises significant doubt about the Companys ability to continue as a going concern and, therefore, its ability to realize assets and discharge liabilities in the normal course of business. In making their assessment, management considered all available information, together with forecasts and other mitigating strategies, about
the future which is at least, but not limited to, 12 months from the end of the reporting period. Management has considered the following in its assessment that the going concern assumption remains appropriate: the plans for the repayment of the 2019 Convertible Debentures; the repayment of a portion of the term loan on May 6, 2022 and the agreement executed whereby the term loan
will be repaid in full on or before October 31, 2022; the likelihood that undrawn funds under the revolving operating facility will be available and will not be
required to be repaid; the required cash principal and interest payments on indebtedness; 68
the likelihood of payments required under contingent consideration arrangements; the available funding of US$15 million under a promissory note executed on March 28, 2022;
cash inflows from current operations, expected government assistance in the form of wage and rent subsidies,
and expected increases in revenues and cash flows resulting from new revenue contracts expected over the next 12 months due to the anticipated reduction of COVID-19 related restrictions; and
future debt and equity raises. In the preparation of the condensed consolidated interim financial statements and the application of the Companys accounting policies,
management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts
of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized in the period in which the estimates are revised and in any future period. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT A description of the Companys financial instruments and financial risks that the Company is exposed to and management of these risks can
be found in Notes 25 and 26, respectively, of the Companys 2021 Financial Statements. Except for those noted below, there were no significant changes to the Companys exposures to those risks during Q1 2022. Contractual Obligations Information regarding the Companys undiscounted contractual cash flows payable and the Companys commitments at December 31,
2021 are disclosed in Note 26(a) and Note 30, respectively, to the 2021 Annual Financial Statements. During the three months ended March
31, 2022, the most significant changes in contractual obligations were: (a) the addition of a new 12-year lease obligation of $9.529 million for Calgary office space and variable lease payments
associated with the Calgary office space of approximately $8.564 million; and (b) an additional $1.077 million drawn under the ATB Facility, a portion of which was repaid in April 2022. Contractual obligations at December 31, 2021,
have been reduced by normal course payments made during the period to March 31, 2022 and have changed as trade payables and accrued liabilities continue to fluctuate. Transactions Between Related Parties The Companys related parties include its subsidiaries, its non-controlling interest and key
management personnel. The related party transactions are in the normal course of operations and have been valued at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Key Management Personnel Compensation Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of
the Company as a whole. The Company defines key management personnel as key officers and executives of the Company and directors. For the three months ended March 31, 2022, the contractual and discretionary compensation awarded to key
management personnel including director fees is as follows: Three months ended March 31, Salaries, fees and short-term benefits Share-based compensation As at March 31, 2022, the Company had $0.174 million (December 31, 2021 - $0.234 million) due to an
entity controlled by the principal owner of Agnity for the purchase of assets. The amount is unsecured, non-interest bearing and due on demand. The Company engaged an entity partially owned by the principal owner of Agnity to perform consulting services in the amount of
$1.239 million during the three months ended March 31, 2022, (three months ended March 31, 2021 - $0.589 million). As at March 31, 2022, the Company owed the entity $1.316 million (December 31, 2021 - $1.112 million). 69
ACCOUNTING MATTERS Basis of Presentation and Accounting Policies The condensed consolidated interim financial statements include the accounts of mCloud, the ultimate parent company of the consolidated group,
and its subsidiaries and are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB). Certain disclosures
included in the Companys annual financial statements prepared under IFRS as issued by the IASB have been condensed or omitted. Accordingly, the Companys condensed consolidated interim financial statements should be read in conjunction
with the Companys consolidated financial statements for the year ended December 31, 2021. The accounting policies applied in
the preparation of the Q1 2022 Financial Statements are consistent with those applied and disclosed in Note 33 of the Companys Annual Financial Statements. Critical Accounting Estimates and Judgements Management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure
of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data
and uncertainty of future events. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. The Company applied critical judgements and estimates, including significant areas of estimation uncertainty in applying policies, as
described in Note 3 of the 2021 Annual Financial Statements. 70
Off-Balance Sheet Arrangements Various forms of security have been granted by the Company and certain of its subsidiaries in favour of arms length lenders. The security
granted gives the lenders a comprehensive level of protection against a default by the borrower in the performance of its obligations including the repayment of the indebtedness and interest thereon. CONTROLS AND PROCEDURES Prior to 2022, the Company was not required to establish and maintain DC&P and ICFR pursuant to National Instrument (NI) 52-107. The Company is listed on the TSX-V and on November 24, 2021 also listed and commenced trading its shares on NASDAQ. As a result of the NASDAQ listing, the Company is
no longer a venture issuer. Accordingly, commencing in 2022, mCloud is required to establish and maintain DC&P and ICFR. In light of
these new requirements for 2022, the following discussion provides commentary about the Companys D&CP and ICFR. Disclosures Controls and
Procedures The Companys disclosure controls and procedures (DC&P), as defined in National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings (NI 52-109) are designed to provide reasonable assurance that information required
to be disclosed in the Companys filings under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also designed to provide reasonable assurance that all
information required to be disclosed in these filings is accounted for, accumulated and communicated to the Companys senior management team including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
as appropriate. This is meant to allow for timely decisions regarding public disclosure. The Company cannot provide absolute assurance
that all information required to be disclosed in its filings is reported within the time periods specified in securities legislation because of the limitations in control systems to prevent or detect all misstatements due to error or fraud. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. Internal Controls over Financial Reporting The Companys senior management team is responsible for establishing and maintaining adequate internal controls over financial reporting
(ICFR), as defined in NI 52-109. ICFR means a process designed by or under the supervision of the CEO and CFO, and effected by the Companys board of directors, management and other personnel
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, and includes those policies and procedures that: (1) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) are designed to provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) are designed to
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. 71
Because of its inherent limitations, internal controls over financial reporting may not
prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the
policies or procedures may deteriorate. Managements Evaluation of Disclosure Controls and Procedures and Internal Controls over Financial
Reporting The Companys management, under the supervision and with the participation of its CEO and CFO, will conduct an
evaluation of the effectiveness of the Companys ICFR as of December 31, 2022, using the criteria set forth by the COSO 2013 Framework. Commencing the first quarter of 2022, the Company is required to report any material weaknesses in the
design of ICFR. Any such material weaknesses would also impact DC&P. Although we have not completed a full evaluation as of March 31, 2022, we are aware of material weaknesses in the design of ICFR at March 31, 2022 as described below.
Management have concluded that the Companys ICFR were not designed effectively as of March 31, 2022. A material weakness is a
deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented
or detected on a timely basis. Management identified the following material weaknesses: An ineffective control environment resulting from an insufficient number of trained financial reporting and
accounting, information technology (IT) and operational personnel with the appropriate skills and knowledge and with assigned responsibility and accountability related to the design, implementation and operating effectiveness of internal control
over financial reporting. The insufficient number of personnel described above contributed to an ineffective risk assessment process
necessary to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting. An ineffective information and communication process resulting from (i) insufficient communication of
internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls and ineffective controls related to spreadsheets, resulting in insufficient controls to ensure
the relevance, timeliness and quality of information used in control activities. As a consequence of the above and as a result of inadequate segregation of duties and secondary review, the
Company had ineffective control activities related to the design, implementation and operating effectiveness of process level and financial reporting controls which had a pervasive impact on the Companys internal control over financial
reporting. An ineffective monitoring process resulting from the evaluation and communication of internal control
deficiencies, including monitoring corrective actions, not being performed in a timely manner. Remediation During Q1 2022, the Company continued to consider the full extent of the procedures to implement in order to remediate the material weaknesses
described above. As at the date of this MD&A, the current remediation plan includes: Identifying key positions necessary to support the Companys initiatives related to internal controls
over financial reporting, and expanding its hiring efforts accordingly. 72
Hiring consultants to assist with process improvements and control remediation efforts in targeted accounting,
IT and operations processes. Formalizing its entity-wide risk assessment process, and documenting internal ownership of risk monitoring and
mitigation efforts, with improved risk monitoring activities and regular reporting to those charged with governance at an appropriate frequency. Finalize a delegation of authority matrix to enforce desired limits of authority for key transactions, events,
and commitments, and communicating these limits of authority to relevant personnel throughout the Company. Further simplify and streamline its spreadsheet models to reduce the risk of errors in mathematical formulas
and improve the ability to verify the logic of spreadsheets. Hiring a consultant to assist management with process improvements and control remediation for general IT
controls. Continuing to perform scoping exercises and planning for an ERP implementation to streamline the number of
applications used for financial reporting activities. Material Changes to the Control Environment There have been no changes to the Companys ICFR during the three months ended March 31, 2022 that have materially affected, or are likely
to materially affect, the Companys ICFR. 73
The Companys authorized capital includes an unlimited number of common shares. As at
June 6, 2022, the following common shares, share purchase warrants, stock options, restricted share units and convertible debt conversion options were outstanding: Shares issued and outstanding Share purchase warrants (1) Stock options Restricted share units 2019 Convertible Debentures (2) 2021 Convertible Debentures (3) Total Share purchase warrants offer the holder the right to purchase a common share of the Company at a specified
price by a specific date. Share purchase warrants outstanding have exercise prices ranging from Canadian dollar equivalent at date of issuance between $4.12 - $22.50 and a weighted average remaining contractual life of 2.6 years.
Debentures are convertible at the option of the holder and have a conversion price of $15.00 and mature June
30, 2022. Debentures are convertible at the option of the holder and have a conversion price of $5.98 which has been
converted to Canadian dollars at May
12, 2022. The Debentures have a remaining life to maturity of 1.6 years. Name and Address The Company is
a publicly-traded technology solutions provider that combines the Internet of Things (IoT), the cloud, and AI to create new efficiencies for energy assets including heating, ventilation, and air conditioning (HVAC) units,
wind turbines, and oil and gas controls. The Companys head office is located at 550-510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8. The Company also has technology and operations
centers in Edmonton, Alberta; San Francisco, California; Atlanta, Georgia; Houston, Texas; Perth, Australia; Singapore; Beijing, China; London, United Kingdom; and Trnava, Slovakia. The Companys telephone number is (604) 669- 9973. Incorporation The Company (formerly UVI) was incorporated on December 21, 2010 pursuant to the Business Corporations Act (British Columbia)
(BCBCA). The Companys British Columbia incorporation number is BC0898477. The Articles do not contain a description of the Companys objects and purposes. On April 21, 2017, UVI entered into a merger agreement (Merger Agreement) with its wholly-owned subsidiary, UVI Subco,
a corporation incorporated pursuant to the Delaware General Corporation Law (DGCL), and mCloud Corp., a corporation incorporated pursuant to the DGCL. Pursuant to the Merger Agreement, UVI acquired all of the issued and
outstanding securities of mCloud Corp. by way of a reverse triangular merger of UVI Subco into mCloud Corp. (Merger). The amalgamated company, a new private company named Universal mCloud USA Corp., continued as a
wholly-owned subsidiary of the Company. On October 13, 2017, the Company changed its name from Universal Ventures Inc.
to Universal mCloud Corp., and on October 18, 2017, the Company began trading on the TSXV as a Tier 2 Technology Issuer (as defined in TSXV Policy 2.1 Initial Listing Requirements) under the new symbol
MCLD. On May 18, 2018, the Company also began trading on the OTCQB under the symbol MCLDF. The Company subsequently changed its name in October of 2019 to mCloud Technologies Corp.. On December 13, 2019,
the Company announced a change in the trading symbol of its Shares on the OTCQB from MCLDF to MCLDD. On November 24, 2021, the Shares began trading on the NASDAQ under the symbol MCLD. 74
Directors Under the Articles, a director or senior officer who holds a disclosable interest (as such term is defined in the BCBCA) in a contract or a
transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only and if to the extent
provided under the BCBCA. A director with a disclosable interest in a contract or a transaction into which the Company has entered or
proposes to enter is not entitled to vote on any directors resolution approving the contract or transaction, unless all directors have a disclosable interest in the contract or transaction, in which case any or all of those directors may vote
on such a resolution. A director with a disclosable interest in a contract or a transaction into which the Company has entered or
proposes to enter and who is present at the meeting of the directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions
considered at the meeting. A director or senior officer who holds any office or possesses any property, right, or interest that could
result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individuals duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the
BCBCA. The Articles, by-laws, or charter documents of the Company do not specify a retirement age
for directors. Directors are not required to hold a Share of the Company as qualification for his or her office but must be qualified as required by the BCBCA to become, act or continue to act as a director. Shareholders Meetings The Companys Articles provide that (a) the Company must hold an annual general meeting at least once in each calendar year and not
more than 15 months after the last annual reference date at such time and place as may be determined by the directors; (b) the directors may, at any time, call a meeting of shareholders to be held at such time and place as may be determined by
the directors; (c) the quorum for the transaction of business at any meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at
the meeting; and (d) in addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the
assistant secretary (if any), any lawyer for the Company, the auditor of the Company, any other persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the BCBCA or the
Articles to be present at the meeting. Limitations on Ownership of Securities Except as provided in the Investment Canada Act, there are no limitations specific to the rights of
non-Canadians to hold or vote the Shares under the laws of Canada or British Columbia or in the Companys Articles, by-laws, or charter documents. Change in Control There
are no provisions in the Articles, charter documents, or by-laws that would have the effect of delaying, deferring or preventing a change in the control of the Company, or that would operate with respect to
any proposed merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries. Ownership Threshold The Articles do not require disclosure of Share ownership. Securities legislation in Canada, however, requires that shareholder ownership (as
well as ownership of an interest in, or right or obligation associated with, a related financial instrument of a security of the Company) must be disclosed once a person beneficially owns or has control or direction over, directly or indirectly,
securities of a reporting issuer carrying more than 10% of the voting rights attached to all the reporting issuers outstanding voting securities. Share ownership of director nominees must also be reported annually in proxy materials sent to
the Companys shareholders. Additionally, as the Company is listed on the NASDAQ, it must comply with United States federal securities laws, which requires it to disclose in its annual report, or Form
20-F, holders who own 5% or more of its issued and outstanding shares. 75
Intercorporate Relationships The Company has four material, wholly-owned subsidiaries in which it has a direct or indirect material interest: mCloud USA, a corporation
incorporated pursuant to the DGCL; mCloud Services, a corporation incorporated pursuant to the Business Corporations Act (Alberta) (ABBCA); NGRAIN, a corporation incorporated pursuant to the Canada Business Corporations
Act; and kanepi, a corporation incorporated pursuant to the laws of Australia. mCloud Technologies (USA) Inc.,
(M-USA) M-USA is an operating company that carries on its business and
operations in the United States. mCloud USA has three wholly owned subsidiaries: mCloud Technologies (Canada) Inc., a corporation incorporated pursuant to the BCBCA; FDSI, a corporation organized pursuant to the DGCL; and CSA, a corporation
organized pursuant to the laws of the State of Georgia. mCloud Technologies (Canada) Inc., is an operating company with business and operations in Canada. FDSI provides advanced enterprise software, handheld energy efficiency diagnostic tools and
related training, and project management services that enable more rapid and accurate servicing of HVAC equipment, which decreases energy and operational costs. FDSI provides expertise in HVAC diagnostics and building data energy analytics and
testing tools, analysis outcomes and programmatic solutions for national and restaurant chains. FDSIs diagnostics technology is embedded in energy management systems and HVAC units. CSA, which was acquired by the Company on January 27,
2020, is an Atlanta-based 3D technology company. Its operatings were immediately amalgamated with M-USA and the legal entity was formally wound- up effective December 31, 2021. mCloud Technolgies (Canada) Holdings, Inc., (MTCH) MTCH is a holding company with one direct subsidiary, mCloud Technologies Services Inc., (MTS) a professional engineering and
integration firm specializing in the design and implementation of high-value industrial automation solutions to the oil and gas industry in Alberta, Canada. On July 11, 2019, the Company indirectly acquired MTCH, a corporation incorporated
pursuant to the ABBCA, by way of an amalgamation between one of the Companys subsidiaries, 2199027, and Fulcrum, which had acquired MTCH and its subsidiary immediately prior to its acquisition by the Company. The acquisition of MTCH, by
Fulcrum, was pursuant to a share purchase agreement dated June 12, 2019 between Mike Lane, Bob Beattie, Fulcrum, MTCH and the Company. The amalgamation of 2199027 and Fulcrum was completed pursuant to the terms of an amalgamation agreement
dated June 12, 2019 between the Company, Fulcrum and 2199027 (Amalgamation Agreement). The amalgamated company, renamed Autopro Automation Ltd., continued as a wholly-owned subsidiary of the Company, and was later
renamed mCloud Technologies (Canada) Holdings, Inc., with MTS being a wholly-owned subsidiary. NGRAIN (Canada) Corp. NGRAIN is an operating company carrying on business and operations in Canada. NGRAIN contributes its AI and 3D technology to the Companys
AssetCare solutions. The Company acquired NGRAIN pursuant to the terms of a share purchase agreement dated January 2, 2018. NGRAIN owns all of the issued and outstanding shares of NGrain (US) Corp., a corporation incorporated pursuant to the
laws of the State of Nevada. mCloud Technologies Australia Holdings Pty Ltd. On October 8, 2020, the company acquired, via its wholly-owned subsidiary mCloud Technologies Australia Pty Ltd., kanepi Group Pty. Ltd.
Both kanepi Services Pty Ltd., and mCloud Technologies Singapore (previously kanepi PTE Ltd) are operating companies carrying on operations in Australia and Singapore. kanpei contributes advanced visual analytics solutions and its technologies are
incorporated into the AssetCare platform. The Company also provides the Company with a strategic base in which the Company can increase its product offerings in the southern hemisphere. 76
The following chart identifies each of the Companys wholly owned subsidiaries as of
the date of this prospectus (including jurisdiction of formation, incorporation or continuance of the various entities)*:
Despite owning no shares, or having any voting rights, the Company determined that it exercises control over
Agnity Global, Inc. (Agnity) as the Company has the right to nominate a majority of the members of Agnitys Operations Committee and therefore the right and ability to direct the relevant activities of Agnity and to significantly
affect its returns through the use of its rights. As a result, the financial results of Agnity have been consolidated into the Companys financial statements. Ownership of the above noted entities is 100% unless otherwise indicated. The Company delivers solutions combining IoT, AI, and the cloud to unlock the untapped potential of energy- intensive assets such as: HVAC units and refrigerators in commercial buildings; control systems, heat exchangers, and compressors at process industry facilities; and wind turbines generating renewable energy at onshore wind farms. IoT enables inexpensive, readily scalable connectivity to these and other under-served assets. Data from these IoT sensors are taken into the
cloud, where digital twins of these assets are created, and AI is applied to identify opportunities to optimize asset performance. Asset operators and maintainers who manage these assets in the field are guided through a portfolio of mobile,
connected applications that enable these teams to take asset management actions that ensure optimal performance. Through the
Companys proprietary AssetCare platform, AI is used to identify opportunities to improve asset performance and enable asset operators and maintainers to take direct action creating these measurable improvements. Some key applications of the
Companys AssetCare technology at work include: curbing wasted energy while improving occupant comfort in commercial facilities through AI-powered adaptive
control; maximizing asset availability and production yields of renewable energy sources through continuous performance
assessment and predictive maintenance; and optimizing the uptime and manage the operational risk of industrial process plants, including oil and gas
facilities, through continuous AI-powered advisory and assistance to process operators in the field. 77
In all markets, the Company uses a commercial Software-as-a-Service (SaaS) business model to distribute its AssetCare solution. Customers pay a simple, subscription-based price that is determined
by number of assets, asset size or complexity, and the expected efficiency gains to be created using AI and analytics. Set up as multi- year, recurring subscriptions, customers pay no fees upfront to onboard an AssetCare solution; any upfront costs
are leveraged across the lifetime of the initial subscription period. Certain software and technologies used in AssetCare solutions are also offered to some customers on a perpetual basis. The Company serves five key market segments: Connected Buildings, which includes AI and analytics to automate and remotely manage commercial
buildings, driving improvements in energy efficiency, occupant health and safety through IAQ optimization and food safety and inventory protection; Connected Workers, which includes cloud software connected to third party hands-free, head- mounted
smart glasses combined with AI capabilities to help workers in the field stay connected to experts remotely, facilitate repairs, and provide workers with an AI-powered digital
assistant; Connected Energy, which includes inspection of wind turbine blades using AI-powered computer vision and the deployment of analytics to improve wind farm energy production yield and availability; Connected Industry, which includes process assets and control endpoint monitoring, equipment health,
and asset inventory management capabilities, driving lower cost of operation for field assets and access to high-precision 3D digital twins enabling remote management of change operations across distributed teams; and Connected Health, which includes remote health monitoring and connectivity to caregivers using mobile
apps and wireless sensors that enable 24/7 care without the need for in-person visits, including at elder care facilities,
age-in-place situations and medical clinics which also have strict requirements for IAQ and greenhouse gas standards. 78
All of the target market segments are powered by common technology unique to the Company,
enabling it to create and scale asset energy solutions using IoT, AI and cloud capabilities, with real-time information contextualized to each asset, and secure communications and 3D digital twin technologies. The Company serves customers globally with a local presence in North America, the United Kingdom and Continental Europe, the Middle East,
Southeast Asia, and Greater China. As of March 31, 2022, December 31, 2021 and December 31, 2020, we had an aggregate of , 111, 144, and 119 customers globally. Production and Services The
Companys principal method of production is software development associated with the evolution of the AssetCare platform. Actual delivery and ongoing asset management is provided using AI and analytics supported by an internal team of asset
management experts, with experience in all of the defined asset classes that mCloud serves in market. Certain aspects of AssetCare onboarding, such as the installation of IoT hardware, may involve third party service providers who partner with
mCloud in all of the markets where mCloud does business. Specialized Skill and Knowledge The Company retains specialized skills and knowledge within each of its lines of business. In its Connected Buildings business,
mCloud possesses talent and experience in building energy management, specifically energy efficient management of HVAC units and lighting. Within its Connected Energy business, mCloud has a team of experts in wind turbine engineering and
turbine operations and maintenance. In its Connected Industry segment, the Company possesses talent and experience related to the management of process assets used in the refinement of oil and gas products. From a core technology perspective, the team also retains specialized skills and expertise in specific areas of software development, namely
the development of artificial intelligence capabilities, such as neural networks and deep learning. Team members also possess backgrounds in data science and statistics. To support the delivery of AssetCare capabilities that support mobile workers,
the mCloud team has special knowledge and experience in the development of advanced mobile applications, and 3D capabilities including augmented and virtual reality (collectively known as mixed reality). Competitive Conditions In the principal
markets that mCloud operates, there are numerous incumbent solution providers including Honeywell International Inc., Siemens AG, and General Electric Company, which also operate commercial offerings that overlap or compete with AssetCare.
mClouds competitive advantage lies in its combined use of IoT, AI, and the cloud to make enterprise-grade asset management capabilities available to an entire underserved market of assets that have traditionally gone unmanaged because
conventional solutions have been too expensive to be economical. The Company also competes with emerging technology ventures that overlap
with target market segments for AssetCare solutions. These include ventures such as C3.ai and Cognite who offer technologies to heavy industries and BrainBox and Airthings, who provide connected HVAC energy efficiency and IAQ technologies to
commercial buildings. The Company observes that in the principal markets it serves, most incumbent asset management solutions place a
heavy focus on acquiring data, storing it, then reporting it to make it available to end customers. mCloud differentiates itself from the competition by using AI and analytics to create actionable insight that help customers decide what actions are
the best ones to take to get the most out of their assets instead of simply reporting on data, mClouds AssetCare platform helps customers take action based on data, which ultimately creates customer benefit. 79
Marketing Channels The Company maintains a robust presence in seven countries: Canada, the United States, the United Kingdom, the Kingdom of Bahrain as the
gateway to markets in the Middle East, China, Singapore and Australia, supplemented by a growing international network of channel and delivery partners around the world. The Company employs sales team members in these countries charged with direct sales efforts of AssetCare solutions. Global marketing efforts
to support these sales efforts include virtual campaigns and events to attract new customers, strengthen relationships with existing customers, and build brand presence and visibility. The Company also hosts an annual user conference called mCloud
Connect, which includes head-liners from well- known industry leaders, panels, and interactive sessions to gather voice of the customer feedback, which is used to improve the Companys portfolio of AssetCare offerings. The Company has conducted extensive research to size the markets and opportunities it can access through its AssetCare platform. The Company
estimates that, with its current capabilities, it has the capability of serving over 7.3 million commercial buildings and over 34,000 industrial sites in 20 different locales worldwide, with each building or site representing multiple potential
connectable assets, workers, or 3D digital twins. These statements refer to the serviceable obtainable market, that is, the market the Company believes it can address with its current capabilities. This estimate assumes and considers only asset
types that can currently be connected and served by the Companys AssetCare offering, namely commercial building types with standalone rooftop HVAC units, onshore wind turbines, and industrial facilities that depend on the use of process
control systems. The estimate also only considers assets that can be found in key geographies where the Company currently has the ability to deliver AssetCare, namely the United States, Canada, the United Kingdom, China, Germany, Italy,
Singapore, Australia, and Saudi Arabia. Serviceable commercial buildings include restaurants,
mid-size retail (including retail finance sites such as bank branches), and long-term care facilities. In these buildings, the Company connects to assets such as HVAC, lighting, and refrigeration units.
Connectable workers include people involved in the day-to-day operation or maintenance of these commercial buildings, including mechanical service workers and facility
managers. Industrial sites include oil and gas, liquefied natural gas, and floating production storage and offloading facilities, as well
as wind farms, mining processing plants, and pulp and paper facilities. In these locations, connectable assets include process control systems, heat exchangers, pumps, and gas compressors. Connectable workers include field operators, maintainers,
engineers, asset managers, and plant managers. The Companys experience in delivering digital 3D models from entire multi-billion-dollar assets the size of a FPSO vessel down to asset subcomponents such as wind turbine blades creates large
obtainable market opportunities. Based on the average monthly fee currently generated per connection or 3D digital twin, the Company
estimates the current obtainable market opportunity to be approximately $24 billion in recurring revenue per annum including all potential targeted assets, workers, and 3D digital twins that the Company can currently address. Intangible Properties mClouds
success depends in part on its ability to create unique intellectual property that improves the Companys ability to create and deliver customer value in the principal markets where it does business. The Company relies on the use of
intellectual property rights, including patents, copyrights, registered trademarks, and trade secrets in Canada, the United States and the European Union. 80
The Company retains a portfolio of 15 technology patents in the areas of HVAC energy
efficiency, 3D, and asset management, a global customer base in industries including retail, healthcare, heavy industry, oil and gas, nuclear power generation, and renewable energy, and a portfolio of 12 registered trademarks, including marks
related to mCloud and AssetCare: Patent Patent No. / App. Serial No. Jurisdiction Date Issued / Date Filed Status Registered Owner Apparatus and method for detecting faults and providing diagnostics
in vapor compression cycle equipment Estimating operating parameters of vapor compression cycle
equipment Estimating evaporator airflow in vapor compression cycle cooling
equipment Apparatus and method for detecting faults and providing diagnostics
in vapor compression cycle equipment Method for Determining Evaporator Airflow Verification Method and Apparatus for Transforming Polygon Data to Voxel Data for
General Purpose Applications Method and System for Rendering Voxel Data while Addressing Multiple
Voxel Set Interpenetration Method and Apparatus for Transforming Point Cloud Data to Volumetric
Data Method, System and Data Structure for Progressive Loading and
Processing of a 3D Dataset 81
Method and System for Calculating Visually Improved Edge Voxel Normals when Converting Polygon Data to Voxel Data System, Method and Computer-Readable Medium for Organizing and Rendering 3D Voxel Models in a Tree Structure 10,346,725 072239.0004 / BR BR 11 2017
024598 1 072239.0005 / MX
MX/a/2017/014648 072239.0006 / EU EP16797087.0 072239.0007 / IN 201747045184 072239.0008 / CN 2016800413571 072239.0009 / CA 072239.0010 /
ZA 2018/01638 US Patent National Stage Filings in BR / MX / EU / IN / CN / CA / ZA 82
(ii) Trademarks 83
The Company also uses key domain names, including acrx.com, fdsi.site, fdsi.us,
fielddiagnostics.com, fmdiagnosticscoe.com, mysamobile.com, peatanalytics.com, mcloudcorp.com, assetcare.io, assetcare.net, myldar.com, ngrain.com, ngrain.ca, ngrain.net, ngrain.org and i3dimensions.com. The Company further protects its proprietary source code and algorithms as trade secrets, limiting access to these to employees who have a
need to know such information. Environmental Protection The Company does not see any financial or operational effects from environmental protection requirements on capital expenditures, profit or
loss, and competitive position in this financial year. In the future, the Company may see enhanced demand for AssetCare in businesses who have a mandate to become more energy efficient or demonstrate they have instituted effective methane emission
reduction and mitigation programs in response to new government regulations. Employees As of the year ended December 31, 2021 and as of the date of this prospectus, the Company and its subsidiaries have 216 employees employed
in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2020, the Company and its subsidiaries had 227 employees employed in 14 offices in Canada, the United
States, Greater China, the Middle East, and Southeast Asia. As of the year ended December 31, 2019, the Company and its subsidiaries had over 216 employees employed in twelve offices in Canada, the United States, Greater China, the Middle East,
and Southeast Asia. The fluctuation in the Companys number of employees is not significant, and none of the Companys employees belong to any labour unions. Furthermore, all of the Companys employees are employed on a full-time
basis. Incentive stock options may be granted only to employees of the Company or a parent corporation or subsidiary
corporation thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock awards other than incentive stock options (including non-statutory stock options, stock appreciation
rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively Stock Awards) may be granted to employees, directors and consultants; provided, however, that Stock Awards may not be
granted to employees, directors and consultants who are providing Continuous Service only to any parent of the 84
Company, as such term is defined in Rule 405, subject to certain exceptions set out in the
Companys Incentive Stock Option Plan. Foreign Operations The Company operates in multiple geographies around the world, including North America (the United States and Canada), Europe (the United
Kingdom and continental Europe), Southeast Asia (primarily Greater China), the Middle East (primarily Saudi Arabia), and Australia with most of its business taking place outside of Canada. mCloud is not dependent on business in any one region for
its success. Research and Development The Companys customers use its software to monitor their assets and rely on the Company to provide updates and releases as part of its
software maintenance and support services. Consequently, while the Company has not implemented a formal research and development policy for the past three years, the Company is and has been (including, but not limited to, the past three years)
engaged with a number of research and development initiatives as a part of its ongoing effort to continually update its software and develop new products. Fixed Assets On September 27, 2021,
the Company executed a 12-year lease for its office in Calgary, Alberta located at 8 Avenue SW, Stephen Avenue Place, Calgary, Alberta, Canada. In total, the Company has leased 33,000 square feet of the
property, situated on the 3rd and 33rd floor of the building located at the aforementioned address. The lease term commences on
December 1, 2022, preceded by a fixturing period which the Company will use to build out the office space to their specifications. The Company is currently in the design and scoping stage, and has not yet finalized its plans for the precise use
of the property, and does not yet have any plans to construct, expand, or improve the facilities. No environmental issues have currently been identified that will affect the Companys utilization of the asset. Material Effects Certain government
regulations have a material impact on the Companys business. The Company has implemented certain measures to address and conform to all the frameworks noted below, and others as required, and conducts an annual review to ensure compliance with
such frameworks and regulations. The Company is required to adhere to such frameworks as the EUs General Data Protection
Regulations, the EUs ePrivacy Regulation, Brazils General Data Protection Law, the California Consumer Privacy Act, the California Online Privacy Protection Act, and various other regulations in effect in other U.S. states, which require
the Company, among other things, to have a valid privacy policy, block cookies before the user provides consent, allow users to opt-in or opt-out of receiving
communications from the Company, show a notice of collection, and keep records of consent and processing. While the Company does not yet do business in Brazil, and has not reached the required number of users in California for the applicable
regulations noted above to have effect, the Company has implemented measures to ensure that it remains compliant with these frameworks in advance of such compliance being legally required. Data security practices are monitored and regulated by the Federal Trade Commission in the U.S., the Office of the Privacy Commissioner in
Canada, and the European Data Protection Board of the EU. Canada, in particular, has several privacy law statutes that the Company is required to adhere to, such as the Personal Information Protection and Electronic Documents Act, the Personal
Information Protection Act (Alberta), the Personal Information Protection Act (British Columbia), and An Act Respecting the Protection of Personal Information in the Private Sector (Quebec). 85
Generally speaking, the Company is also required to comply with and respect the competition,
consumer protection, and taxation laws, and intellectual property laws and regulations handed down by standard copyright and trademark laws in each of the jurisdictions it operates in. For confidential government contracts that require specific
approvals to examine, possess, or transfer intellectual property, the Company is required to adhere to the International Traffic in Arms Regulations in the US, and the Canadian Controlled Goods Program in Canada. Additionally, the Company also
follows and adheres to the best practices set out in the various National Institute of Standards and Technology frameworks, the Information Technology Infrastructure Library framework, and the Certified Information Systems Security Professional
framework. The following table sets forth our executive officers and directors, their ages and the positions held by them: Name Position Appointed Russel H. McMeekin Michael Allman Costantino Lanza Elizabeth MacLean Ian Russell Chantal Schutz MANAGEMENT BIOGRAPHIES Russel H. McMeekin: Director, President and Chief Executive Officer Mr. McMeekin was previously a founding partner of Energy Knowledge, Inc., which was acquired by Yokogawa Electric
Corporation. Mr. McMeekin went on to serve as Executive Chairman of Yokogawa Venture Group, leading the acquisitions of Industrial Evolution and KBC Advanced Technologies, an energy software and consulting company publicly listed in the United
Kingdom. Mr. McMeekin was the founding Chief Executive Officer of SCI Energy Inc., a Silicon Valley cloud-based energy-efficiency company now based in Dallas, Texas. Previously, Mr. McMeekin was the President and Chief Executive Officer of
Nasdaq-listed Progressive Gaming International for six years, a company that led the use of RFID technologies for critical item tracking., Mr. McMeekin spent more than 10 years at Honeywell International Inc., including serving as President of
Honeywell International Inc.s Digital and Software Business Units. At Honeywell International Inc., he led joint ventures with Microsoft Corporation, United Technologies Corporation and i2 Technologies. Mr. McMeekin started his career at
SACDA Inc., a University of Western Ontario Computer Aided Design Venture which was later acquired by Honeywell International Inc. Mr. McMeekin graduated in Engineering Technology from Sault College of Applied Technology, continued his studies
at the University of Waterloo. and he completed a Honeywell International Inc. Sponsored Executive Leadership Program through the Harvard Business School. He also completed the Stanford School of Law Executive Director Program. Mr. McMeekin is
also a director of GoodGamer Inc. a TSXV listed company Ticker (GOOD). Michael Allman: Director Mr. Allman is a highly accomplished Chief Executive Officer and Chairman, with extensive experience in growing,
restructuring and optimizing business strategies and operations for Fortune 300 companies and top-tier consulting firms around the world. He recently was the Chief Operating Officer of Bitstew, Inc. a leading
IoT cloud company acquired by GE Digital. Mr. Allman previously served as President and Chief Executive Officer of Southern California Gas Company. Mr. Allman has a masters degree in business administration from the University of
Chicago Graduate School of Business and a bachelors degree in chemical engineering from Michigan State University. He is a Certified Management Accountant and a Certified Internal Auditor. Costantino Lanza: Director, Chief Growth Officer, and Corporate Secretary Mr. Lanza, a former partner of Energy Knowledge, Inc., is versed in applying advanced technologies to traditional asset
intensive industries with many years of direct experience, most recently with Yokogawa Venture Group, where he led the integration of KBC Advanced Technologies, Yokogawas largest ever acquisition. Mr. Lanza has served in leadership roles
at Honeywell International Inc. and ExxonMobil Corporation before becoming Chief Executive Officer of INOVx Solutions, Inc. from 2006 to 2015, where 3D technologies were used to improve asset performance management. Mr. Lanza holds a BS and MS
degree in Chemical Engineering from Columbia University. 86
Elizabeth MacLean: Director Ms. MacLean is Chief Financial Officer for Newgioco Group, Inc. (OTCQB:NWGI), a vertically integrated leisure- gaming
technology company headquartered in Toronto, Canada. Ms. MacLean has more than 20 years of experience leading finance teams in various industries in both the United States and the United Kingdom. Since September 2016, Ms. MacLean has
served as the Treasurer of H. MacLean Realty Company, Inc. Since August 2018, Ms. MacLean has served as an adjunct faculty member at Ottawa University. Ms. MacLean received an MBA in global finance from Stanford Universitys Graduate
School of Business and a Bachelor of Arts in biology from the University of Chicago. Ian Russell: Director Mr. Russell has long held prominent positions in the investment industry, both on a domestic and global level. He is the
President and Chief Executive Officer of IIAC, a position he has held since the inauguration of the IIAC in April 2006. Prior to his appointment at the IIAC, Mr. Russell was Senior Vice-President with the Investment Dealers Association of
Canada, a national self-regulatory organization. Mr. Russell worked as an executive at the highly respected international publication, The Bank Credit Analyst, and spent nearly a decade at the Bank of Canada. His experience has
given him a unique and deep knowledge of the investment business, including underwriting, debt and equity trading and financial advice, as well as an understanding of the market and economic trends that drive the decisions of investors and issuers.
He is active in the international investment community: Chair of the International Council of Securities Associations from 2014 to 2017; designated leader of the Canadian mission to the Asia Financial Forum; and invited guest and regular participant
at Cumberland Lodge Financial Summit in the U.K., a roundtable of European and international leaders to discuss future policy and regulation in European capital markets. Mr. Russell is a prolific writer and columnist, both in industry
publications and newspapers. He is also a frequent commentator in the media, and a sought-after presenter and speaker. Mr. Russell has a postgraduate degree (MSc Economics) from the London School of Economics and Political Science, and an
Honours degree in Economics and Business from the University of Western Ontario. He has completed the Partners, Directors and Seniors Officers Qualifying Examination and is a Fellow of the Canadian Securities Institute. Chantal Schutz: Chief Financial Officer Ms. Schutz is a Chartered Professional Accountant (CPA,CA) with over 20 years of experience as a financial leader and
entrepreneur. Prior to joining mCloud, Ms. Schutz was the Chief Executive Officer of NYCE Sensors. Ms. Schutz has extensive expertise in both private and publicly traded markets, having held Chief Financial Officer roles in businesses of
varying size prior to joining NYCE Sensors Inc. As the Chief Financial Officer and member of the Executive Team at Back In Motion Rehab, Inc., she helped secure financing and developed and implemented systems and procedures which saw the doubling of
revenue and headcount, as well as a corporate restructuring. Formerly, Ms. Schutz worked as an independent, contracted Chief Financial Officer for small and medium sized, owner-managed businesses, assisting in the development and implementation
of strategic plans and financial reorganizations, as well as implementation of Sarbanes-Oxley and Bill 198. Ms. Schutz has also been an instructor of Financial Management at the B.C. Institute of Technology and facilitated for over 10 years in
the Chartered Accountant School of Business. Ms. Schutz articled with both KPMG and PwC and earned her Bachelor of Commerce in Entrepreneurial Management from Royal Roads University. Ms. Schutz is passionate about ensuring that business
owners, teens and young adults understand the need for strong financial literacy, and she is a sought-after speaker and advisor at business events and conferences around North America. Board of Directors and Board Committees Corporate Governance We intend to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future
decide to use other foreign private issuer exemptions with respect to some of the other Nasdaq listing requirements. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on
the Nasdaq, may provide less protection than is accorded to investors under the Nasdaq Rules applicable to U.S. domestic issuers. The Canadian securities regulatory authorities have issued corporate governance guidelines pursuant to National Policy 58-201Corporate Governance Guidelines, or the Corporate Governance Guidelines, together with certain related disclosure requirements pursuant to NI 58-101. The
Corporate Governance Guidelines are recommended as best practices for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we
have adopted, or in connection with the closing of this offering will adopt, certain corporate governance policies and practices which reflect our consideration of the recommended Corporate Governance Guidelines. 87
The disclosure set out below includes disclosure required by NI 58-101 describing our approach to corporate governance in relation to the Corporate Governance Guidelines. Board
Composition and Election of Directors Our board of directors currently consists of five directors. Our board of
directors will facilitate its exercise of independent supervision over management by ensuring that a majority of its members are independent following this offering. Under our organizational documents, at each annual general meeting one-third of the directors, other than the Managing Director, or if their number is not a multiple of three, then the number nearest to one-third (rounded upwards in case of
doubt) of the directors must retire. The term of office for each director of the Company expires immediately before each annual meeting of the shareholders of the Company. Notwithstanding the above, no director, other than the Managing Director, shall hold office for a period in excess of 3 years,
or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself for re-election. A retiring director remains in office until the relevant shareholder meeting and will be eligible for re-election at that meeting. A director who has a material interest in a matter before
our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of
directors or any committee on which he or she serves, such director may be required to remove himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Meetings of Directors Our board of directors will hold regularly-scheduled quarterly meetings as well as ad hoc meetings from time to time.
The independent members of our board of directors will also meet, as required, without the non-independent directors and members of management before or after each regularly scheduled board meeting. A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is
required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director
may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the BCBCA regarding conflicts of
interest. Remuneration and Borrowing The directors may receive such remuneration as our Board of Directors may determine from time to time. Each director is entitled to be repaid
or prepaid for all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our Board of Directors or committees of our Board of Directors or shareholder meetings or otherwise in connection
with the discharge of his or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Our Board of Directors may exercise all the powers of the company to
borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of
any third party. Foreign Private Issuer Status We are a foreign private issuer under SEC and Nasdaq rules, which also exempts us, as well as our directors, executive officers and
10% shareholders, from certain requirements that apply to U.S. public companies and their directors, executive officers and 10% shareholders. See Risk Factors We are a foreign private issuer and may have disclosure
obligations that are different from those of U.S. domestic reporting companies. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which could limit the information publicly available
to our shareholders. Board Committees We currently have an audit committee, a compensation committee, a nominating and corporate governance committee and a
technology oversight committee, with each committee having a written charter. 88
Audit Committee The members of the Audit Committee are Ms. MacLean, as Chairperson, Mr. Allman and Mr. Russell. Each of the members of the Audit
Committee are independent for the purposes of NI 52-110. All members of the Audit Committee are financially literate for the purposes of NI
52-110. All three members of the Audit Committee have been senior officers and/or directors of
publicly traded companies or have been business executives, in each case with the responsibility of performing financial functions, for a number of years. In these positions, each such director has been responsible for receiving financial
information relating to the entities of which they were directors, officers or executives. They have, or have developed, an understanding of financial statements generally and of how statements are used to assess the financial position of a company
and its operating results. Each member of the Audit Committee also has a significant understanding of the business in which the Company is engaged and has an appreciation for the relevant accounting principles used in the Company`s business. Further, each member has the requisite education and experience that has provided the member with: an understanding of the accounting principles used by the Company to prepare the Companys financial
statements; the ability to assess the general application of the above-noted principles in connection with estimates,
accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level
of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Companys financial statements, or experience actively supervising individuals engaged
in such activities; and an understanding of internal controls and procedures for financial reporting. The Audit Committees primary responsibility is to assist the Board in discharging its oversight responsibilities with
respect to financial matters and compliance with laws and regulations. The Audit Committees specific responsibilities with respect to its oversight of financial matters include, among other things: to select, evaluate, monitor the independence
of, and recommend an auditor to the Board for appointment or reappointment, as the case may be, by the Company`s shareholders and make recommendations with respect to the auditors compensation; to review and determine the auditors fee
and the terms of the auditors engagement and inform the Board thereof; where the Audit Committee may deem it appropriate, to recommend to the Board that the auditor be terminated; to meet with senior management without the auditor present to
discuss the performance of the auditor; to pre-approve any audit services, and any non-audit services permitted under applicable law, to be performed by the auditor; to
review and approve the audit plan; to review with senior management and the auditor the annual audited consolidated financial statements, together with the auditors report thereon and the interim financial statements, before recommending them
to the Board, and review with senior management and the auditor the relevant managements discussion and analysis relating thereto; to review other financial reporting and disclosures, including earnings press releases and other press releases
disclosing financial information and all other financial statements of the Company that require approval by the Board before they are released to the public; to oversee the integrity of the Company`s financial reporting processes and disclosures,
including its internal controls, disclosure controls and procedures and compliance with legal and regulatory requirements, and to report regularly to the Board on such matters; to oversee the Companys risk management function; to review with
senior management the status of taxation matters; and to review and oversee the Company`s investment strategies and policies. The Audit Committee reviews and pre-approves all audit and non-audit services to be provided to the Company by its external auditors on an annual basis. Before the appointment of the external auditor for any non-audit service, the
Audit Committee considers the compatibility of the service with the auditors independence. Audit Committee Charter The responsibilities and duties of the Audit Committee are set out in the committees charter. Audit Committee Oversight At no time has a recommendation of the Audit Committee to nominate or compensate an external auditor not been adopted by the
Board. 89
Principal Accountants Fees Aggregate fees billed by KPMG LLP, our independent auditor, in the fiscal years ended December 31, 2021 and 2020 were
approximately CAD$2,249,147 and CAD$1,129,749, respectively, as detailed below. Service Retained Audit fees(1) Audit-related fees(2) Tax fees(3) All other fees(4) Total Includes fees necessary to perform the annual audit of our consolidated financial statements, reviews of the
interim financial statements, and services related to prospectus filings. Includes other audit related services that are performed by the auditor. Includes fees for tax compliance, tax planning and tax advice. These services include preparing tax returns
and corresponding with government tax authorities. Includes French translation services related to prospectus filings and historical financial statements and
managements discussion and analysis. Compensation Committee The administration of the Corporations compensation practices is handled by the Compensation Committee. Among other things, the Compensation Committees role is to ensure that the total compensation paid to the Corporations executive
officers, including the Named Executive Officers, is fair, reasonable and competitive. In the course of reviewing and recommending to the Board the compensation of executive officers other than the Chief Executive Officer, the Compensation Committee
annually reviews the performance of the executive officers with the Chief Executive Officer, and the Chief Executive Officer makes recommendations to the Compensation Committee regarding their compensation. 90
The Compensation Committee will evaluate the performance of the Chief Executive Officer,
based on its evaluation, review and make recommendations to the Board with respect to all direct and indirect compensation, benefits and perquisites (cash and non-cash) for the Chief Executive Officer based on
such evaluation. The Compensation Committee will also review and make recommendations to the Board with respect to compensation, benefits and perquisites for all other senior executive officers of the Corporation, incentive-compensation plans and
equity-based plans, and policies regarding management benefits and perquisites. Neither the Board nor any committee of the Board has
formally established a mechanism to consider the implications of the risks associated with the Corporations compensation policies and practices. However, the Board and the Compensation Committee inherently consider these risks. The
Compensation Committee reviews and manages the policies and practices of the Corporation and ensures that they are aligned with the interests of the shareholders. The Compensation Committee reviews, among other things, the overall compensation and
the annual salary increases of the executive officers of the Corporation while keeping as a reference both the financial performance of the Corporation and the turnover risk for the Corporation. The Board also addresses risk related to compensation
policies in the context of compensation mechanisms that are linked to the achievement of certain goals or targets (e.g. short term and long-term objectives), both financial and otherwise. The Board is involved in the supervision of key projects and
initiatives of the Corporation and the manner in which they are being carried out. Consequently, the Board is in a position where it can control significant risks that may be taken by the Corporations management and ensures that those risks
remain appropriate and that members of management do not expose the Corporation to excessive risks. Each member of the Compensation
Committee has direct experience relevant to compensation matters resulting from their respective current and past backgrounds and/or roles. The members of the Compensation Committee have experience dealing with compensation matters in large and
small organizations, including public companies. The Corporation does not have a policy in place that limits the ability for directors or Named Executive Officers to hedge the shares of the Corporation that they own. However, none of the current
directors or Named Executive Officers of the Corporation are hedging any of the shares of the Corporation that they own. Compensation Process
The Corporation has no formal or informal policy or target for allocating compensation between long-term and short-term
compensation, between cash and non-cash compensation, or among the different forms of non-cash compensation. Instead, the Board determines subjectively what it believes
to be the appropriate level and mix of the various compensation components based on the recommendations of the Compensation Committee. Compensation
Objectives The Corporations compensation philosophy for Named Executive Officers is designed to attract well-qualified
individuals by paying modest base salaries plus short and long-term incentive compensation in the form of equity-based or other suitable long-term incentives. In making its determinations regarding the various elements of executive compensation, the
Board has utilized published studies of compensation paid in comparable businesses, specifically the 2016 study conducted by Culpepper and Associates. These studies have been used to ensure that the compensation received by the Board will be in line
with industry standards. The duties and responsibilities of the Chief Executive Officer are typical of those of a business entity of the
Corporations size in a similar business and include direct reporting responsibility to the Chairman of the Board, overseeing the activities of all other executives of the Corporation, representing the Corporation, providing leadership and
responsibility for achieving corporate goals and implementing corporate policies and initiatives. 91
The objectives of the Corporations executive compensation program are as follows: to attract, retain and motivate talented executives who create and sustain the Corporations continued
success; to align the interests of the Corporations executives with the interests of the Corporations
shareholders; and to provide total compensation to executives that is competitive with that paid by other companies of
comparable size engaged in similar businesses in appropriate regions. The Corporation believes that its current
compensation programs are structured to support the achievement of the foregoing strategic objectives. Overall, the executive compensation program aims to design executive compensation packages that meet executive compensation packages for
executives with similar talents, qualifications and responsibilities at companies with similar financial, operating and industrial characteristics. The Corporation expects to undergo significant growth and is committed to retaining its key
executives for the next several critical years, but at the same time ensuring that executive compensation is tied to specific corporate goals and objectives. The Corporations executive compensation program has been designed to reward
executives for reinforcing the Corporations business objectives and values, for achieving the Corporations performance objectives and for their individual performances. Elements of Compensation The
Company seeks to achieve the compensation objectives described earlier through different elements of compensation, including salary and both short-term and long-term incentive plans, with the incentives having both equity and non-equity components. The Company believes that these various elements are important to effectively achieve the objectives of its executive compensation philosophy. The elements of the Named Executive Officers compensation are: base salaries; performance bonuses; and equity incentive grants. There is no regulatory oversight of the Companys compensation process for the Named Executive Officers. Base Salary The Company pays its
executive officers a base salary to compensate them for services rendered during a fiscal year. Base salaries are determined for each executive officer based on an evaluation of such officers experience, skills, knowledge, scope of
responsibility and performance. Base salary levels are reviewed and considered annually, and from time to time adjustments may be made to base salary levels based upon promotions or other changes in job responsibility or merit-based increases based
on assessments of individual performance. The base salary review of any executive officer will take into consideration the current
competitive market conditions, experience, proven or expected performance, and the particular skills of the executive officer. Base salary is not evaluated against a formal peer group. 92
Performance Bonuses In addition to a base salary, the Named Executive Officers are eligible to receive performance-based bonuses meant to motivate the Named
Executive Officers to achieve shorter-term goals. The pre-established, quantitative target(s) used to determine performance bonuses will be set by the Board or a committee thereof each fiscal year. Awards
under the plan will be made by way of cash payments only, which payments will be made at the end of the relevant fiscal year. Each Named Executive Officer will be measured against the financial targets within his or her control and, while overall
company performance is part of the plan, individual targets will represent the highest percentage of the plan payout. The cash bonuses are primarily designed to align the financial interests of the Corporations executives with the interests of
the Corporations shareholders. Equity-Based Compensation The executive officers are eligible to receive option, restricted stock or other equity and equity-linked awards under the Equity Incentive
Plan. The Company intends for equity awards to be an integral part of its overall compensation program as the Company believes that the long-term performance of the Company will be enhanced through the use of equity-based awards that reward
executive officers for increasing long-term shareholder value. The Company also believes that such awards will promote an ownership perspective among its executive officers and encourage executive retention. Equity based compensation awarded to
executive officers (including Named Executive Officers) will typically be subject to time-based vesting provisions. The Company does not have any formal policy regarding when equity-based compensation is to be granted or the size of any given grant.
In determining the number of awards to be granted to executive officers, the Compensation Committee takes into account the individuals position, scope of responsibility, ability to affect profits and shareholder value and the value of the
awards in relation to other elements of the individual executive officers total compensation, including base salary and cash bonuses. When considering equity or equity-linked awards to an executive officer, consideration of the number of
awards previously granted to the executive may be taken into account, however, the extent to which such prior awards remain subject to resale restrictions will generally not be a factor. Broad-Based Benefits Programs All
full-time employees, including the Companys Named Executive Officers, may participate in the Companys health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance. The
Company does not intend to provide perquisites or personal benefits to its Named Executive Officers that are not otherwise available to other employees generally. Pension Plan Benefits The Company
does not have a defined benefits pension plan, a defined contribution plan or a deferred compensation plan. Nominating and Corporate Governance
Committee Corporate governance and nominating committees are not mandatory in Canada. However, NP 58-201 recommends that a board appoint a corporate governance committee composed entirely of independent directors with responsibility for overseeing the process for nominating directors for election by
shareholders. The members of the corporate governance committee are not required to be independent or to have any particular expertise. Our corporate governance and nominating committee is appointed by the Board to assist in fulfilling its corporate governance
responsibilities under applicable laws. Our corporate governance and nominating committee is responsible for, among other things, developing our approach to governance issues and establishing sound corporate governance practices that are in the
interests of our shareholders and that contribute to effective and efficient decision-making. 93
Our corporate governance and nominating committee is currently comprised of
Mr. Russell, Mr. Allman and Ms. MacLean, and chaired by Mr. Allman. The corporate governance and
nominating committees principal responsibilities include: developing and recommending to the Board criteria for selecting board and committee members;
establishing procedures for identifying and evaluating director candidates, including nominees recommended by
shareholders; identifying individuals qualified to become board members; recommending to the Board the persons to be nominated for election as directors and to each of the
Boards committees; reviewing and making recommendations to the Board regarding the appointment and succession of our directors
and officers; developing and recommending to the Board a code of business conduct and ethics and a set of corporate
governance guidelines; and overseeing the evaluation of the Board, its committees and our management. The corporate governance and nominating committee regularly reviews the current profile of the Board, including the
representation of various areas of expertise, experience and diversity, to ensure that the Board has a sufficient range of skills, expertise and experience to enable it to carry out its duties and responsibilities effectively. Technology Oversight Committee The members of the technology oversight committee are Mr. Lanza, as Chairperson, Mr. McMeekin and Ms. MacLean.
Of the members of the technology oversight committee, only Ms. MacLean is independent. The technology oversight
committee will oversee our overall technology strategy. The technology oversight committees responsibilities shall include: meeting with our technical management team at least once per calendar quarter; assessing whether the product delivery schedule is being met and whether it needs to be adjusted;
ensuring that all third-party software we use is properly licensed; making recommendations to the Board concerning our technology strategy, roadmap and investment plans;
assessing the health and oversight of the execution of our technology strategies; including architecture, use
of open source software, development best practices and third-party dependencies; ensuring that best practice Q&A policies and procedures are in place and are adhered to;
assessing the scope and quality of our intellectual property, including its support of our approved business
plan; providing guidance on technology as it may pertain to market entry and exit, investments, mergers,
acquisitions and divestitures, research and development investments, and key competitor and partnership strategies; performing such other duties and responsibilities as are enumerated in and consistent with its charter
Exculpation, Insurance and Indemnification of Directors and Officers Under the BCBCA, a company may indemnify: (i) a current or former director or officer of that company; (ii) a current
or former director or officer of another corporation if, at the time such individual held such office, the corporation was an affiliate of the company, or if such individual held such office at the companys request; or (iii) an individual
who, at the request of the company, held, or holds, an equivalent position in another entity (an indemnifiable person) against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by him or her in respect of any civil, criminal, administrative or other legal proceeding or investigative action (whether current, threatened, pending or completed) in which he or she is involved because of that persons
position as an indemnifiable person, unless: (i) the individual did not act honestly and in good faith with a view to the best interests of such company or the other entity, as the case may be; or (ii) in the case of a proceeding other
than a civil proceeding, the individual did not have reasonable grounds for believing that the individuals conduct was lawful. A company cannot indemnify an indemnifiable person if it is prohibited from doing so under its articles or by
applicable law. A company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an indemnifiable person in respect of that proceeding only if the indemnifiable
person has provided an undertaking that, if it is ultimately determined that the payment of expenses was prohibited, the indemnifiable person will repay any amounts advanced. Subject to the aforementioned prohibitions on indemnification, a company
must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an indemnifiable person in respect of such eligible proceeding if such indemnifiable person has not been reimbursed for such expenses,
and was wholly successful, on the merits or otherwise, in the outcome of such eligible proceeding or was substantially successful on the merits in the outcome of such eligible proceeding. On application from an indemnifiable person, a court may make
any order the court considers appropriate in respect of an eligible proceeding, including the indemnification of penalties imposed or expenses incurred in any such proceedings and the enforcement of an indemnification agreement. As permitted by the
BCBCA, under Article 21.1, we are required to indemnify our directors and former directors (and such individuals respective heirs and legal representatives) and permit us to indemnify any person to the extent permitted by the BCBCA. 94
The BCBCA provides certain protections under Part 5 Management,
Division 5Indemnification of Directors and Officers and Payment of Expenses, to our current and former directors and officers, as well as other eligible parties defined in Section 159 of the BCBCA (the Eligible
Parties, each an Eligible Party). The Company will indemnify the Eligible Parties, to the fullest extent permitted by law and subject to certain limitations listed in Section 163 of the BCBCA, against any proceeding in which
an Eligible Party or any of the heirs and personal or other legal representatives of the Eligible Party, by reason of the Eligible Party being or having been a director or officer of, or holding or having held a position equivalent to that of a
director or officer of, the Company or an associated corporation (a) is or may be joined as a party, or (b) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related tom, the proceeding. We maintain insurance policies relating to certain liabilities that our directors and officers may incur in such capacity.
Code of Conduct We have adopted a
Code of Conduct applicable to all of our directors, officers and employees. We post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code
of Conduct. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of, this prospectus. Monitoring Compliance with the Code of Business Conduct and Ethics Our board of directors is responsible for reviewing and evaluating the Code of Conduct periodically and will make any necessary changes
thereto. Our board of directors is also charged with the monitoring of compliance with the Code of Conduct and will be responsible for considering any waivers of the Code of Conduct. Interests of Directors In accordance with the BCBCA, each director and officer must disclose the nature and extent of any interest that he or she has
in a material contract or material transaction whether made or proposed with us, if the director or officer is a party to the contract or transaction, is a director or an officer or an individual acting in a similar capacity of a party to the
contract or transaction, or has a material interest in a party to the contract or transaction. Subject to certain limited exceptions under the BCBCA, no director may vote on a resolution to approve a material contract or material transaction which
is subject to such disclosure requirement. As of the date hereof, except as otherwise disclosed in this prospectus, to
the knowledge of the Board or the management of the Company, there are no material interests, whether direct or indirect, of any informed person of the Company, any proposed director of the Company, or any associate or affiliate of any informed
person or proposed director, in any transaction since the commencement of the Companys most recently completed financial year or in any proposed transaction which has materially affected or would materially affect the Company of any of its
subsidiaries. Complaint Reporting and Whistleblower Policy In order to foster a climate of openness and honesty in which any concern or complaint pertaining to a suspected violation of
the law, our Code of Conduct or any of our policies or any unethical or questionable act or behavior, the board of directors will adopt a whistleblower policy that requires that our employees promptly report such violation or suspected violation. In
order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, our whistleblower policy will contain procedures that are aimed to facilitate confidential,
anonymous submissions by our employees. Family Relationships None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K. 95
Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any
legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K. EXECUTIVE
COMPENSATION As of December 31, 2021, the Corporation had three Named Executive Officers: Russel H. McMeekin, Chantal Schutz and
Costantino Lanza. 96
The following table sets out the compensation paid or payable to the Named
Executive Officers of the Company for the fiscal year ended December 31, 2021: Name and Position Russel H. McMeekin(1) Director, President and Chief Executive Officer Costantino Lanza(2) Director and Chief Growth Officer Chantal Schutz Chief Financial Officer Michael Allman Director Elizabeth MacLean Director Ian Russell Director Michael A. Sicuro(3) NOTES: Inclusive of the total compensation, Mr. McMeekin received no compensation for his role as director of
the Company. Inclusive of the total compensation, Mr. Lanza received no compensation for his role as director of the
Company. Mr. Sicuro resigned effective as of May 31, 2021. 97
Stock Options and Other Compensation Securities On December 17, 2016, we established an equity incentive plan, or Equity Incentive Plan, which provides for the granting
of incentive share options, non-statutory share options, share appreciation rights, restricted share awards, restricted share unit awards, and other share awards, collectively the Share Awards, to selected
directors, employees and consultants for a period of 10 years from the establishment of the Equity Incentive Plan. The Equity Incentive Plan is intended to help us secure and retain the services and provide incentives for increased efforts for our
success. The Board of Directors grants Share Awards from time to time based on its assessment of the appropriateness of
doing so in light of our long-term strategic objectives, our current stage of development, our need to retain or attract particular key personnel, the number of Share Awards already outstanding and overall market conditions. The following table provides a summary of all compensation securities granted or issued to each director, officer and senior
management as of December 31, 2021: Name and Principal Position Type of Date of Issue or Grant Expiry Date Russel H. McMeekin Russel H. McMeekin Russel H. McMeekin Costantino Lanza Costantino Lanza Costantino Lanza Michael A. Sicuro Ian Russel Chantal Schutz Chantal Schutz Chantal Schutz Chantal Schutz Chantal Schutz Chantal Schutz 98
Oversight and Description of Compensation Compensation Objectives Our compensation philosophy for named executive officers is designed to attract well- qualified individuals by paying modest
base salaries plus short and long-term incentive compensation in the form of equity-based or other suitable long-term incentives. In making its determinations regarding the various elements of executive compensation, the Board has utilized published
studies of compensation paid in comparable businesses, specifically the 2016 study conducted by Culpepper and Associates. These studies have been used to ensure that the compensation received by the Board will be in line with industry standards.
The duties and responsibilities of our chief executive officer are typical of those of a business entity of our size in a
similar business and include direct reporting responsibility to the chairman of the Board, overseeing the activities of all of our other executives, representing us, providing leadership and responsibility for achieving corporate goals and
implementing corporate policies and initiatives. The objectives of our executive compensation program are as follows:
to attract, retain and motivate talented executives who create and sustain our continued success;
to align our interests with the interests of our shareholders; and to provide total compensation to executives that is competitive with that paid by other companies of
comparable size engaged in similar businesses in appropriate regions. We believe that our current
compensation programs are structured to support the achievement of the foregoing strategic objectives. Overall, the
executive compensation program aims to design executive compensation packages that meet executive compensation packages for executives with similar talents, qualifications and responsibilities at companies with similar financial, operating and
industrial characteristics. We expect to undergo significant growth and are committed to retaining our key executives for the next several critical years, but at the same time ensuring that executive compensation is tied to specific corporate goals
and objectives. Our executive compensation program has been designed to reward executives for reinforcing our business objectives and values, for achieving our performance objectives and for their individual performances. 99
Compensation Process We have no formal or informal policy or target for allocating compensation between long-term and short-term compensation,
between cash and non-cash compensation, or among the different forms of non-cash compensation. Instead, the Board determines subjectively what it believes to be the
appropriate level and mix of the various compensation components based on the recommendations of our compensation committee. Elements of Compensation
We seek to achieve the compensation objectives described earlier through different elements of compensation, including
salary and both short-term and long-term incentive plans, with the incentives having both equity and non-equity components. We believe that these various elements are important to effectively achieve the
objectives of our executive compensation philosophy. The elements of the named executive officers compensation are:
base salaries; performance bonuses; and equity incentive grants. There is no regulatory oversight of our compensation process for our named executive officers. Base Salary We pay our
executive officers a base salary to compensate them for services rendered during a fiscal year. Base salaries are determined for each executive officer based on an evaluation of such officers experience, skills, knowledge, scope of
responsibility and performance. Base salary levels are reviewed and considered annually, and from time to time adjustments may be made to base salary levels based upon promotions or other changes in job responsibility or merit-based increases based
on assessments of individual performance. The base salary review of any executive officer will take into consideration
the current competitive market conditions, experience, proven or expected performance, and the particular skills of the executive officer. Base salary is not evaluated against a formal peer group. Performance Bonuses In
addition to a base salary, the named executive officers are eligible to receive performance-based bonuses meant to motivate the named executive officers to achieve shorter-term goals. The pre-established,
quantitative target(s) used to determine performance bonuses will be set by the Board or a committee thereof each fiscal year. Awards will be made by way of cash payments only, which payments will be made at the end of the relevant fiscal year. Each
named executive officer will be measured against the financial targets within his or her control and, while our overall performance is part of the plan, individual targets will represent the highest percentage of the plan payout. The cash bonuses
are primarily designed to align our financial interests with the interests of our shareholders. Equity Based Compensation Our executive officers are eligible to receive option awards under the Equity Incentive Plan. We intend for equity awards to be
an integral part of our overall compensation program as we believe that our long-term performance will be enhanced through the use of equity based awards that reward executive officers for increasing long-term shareholder value. We also believe that
such awards will promote an ownership perspective among our executive officers and encourage executive retention. Equity based compensation awarded to executive officers (including named executive officers) will typically be subject to time-based
vesting provisions. We do not have any formal policy regarding when equity based compensation is to be granted or the size of any given grant. In determining the number of awards to be granted to executive officers, our compensation committee takes
into account the individuals position, scope of responsibility, ability to affect profits and shareholder value and the value of the awards in relation to other elements of the individual executive officers total compensation, including
base salary and cash bonuses. When considering equity or equity-linked awards to an executive officer, consideration of the number of awards previously granted to the executive may be taken into account, however, the extent to which such prior
awards remain subject to resale restrictions will generally not be a factor. 100
Broad-Based Benefits Programs All full-time employees, including our named executive officers, may participate in our health and welfare benefit programs,
including medical, dental and vision care coverage, disability insurance and life insurance. We do not intend to provide perquisites or personal benefits to our named executive officers that are not otherwise available to other employees generally.
Pension Plan Benefits We do not have a defined benefits pension plan, a defined contribution plan or a deferred compensation plan. Employment Agreements with Executive Officers and Significant Employees Name Position Russel H. McMeekin Chief Executive Officer, President, Director Michael Allman Director Costantino Lanza Chief Growth Officer, Corporate Secretary, Director Elizabeth MacLean Director Ian Russell Director Chantal Schutz Chief Financial Officer Employment Agreement with Russel McMeekin On May 1, 2017, we entered into an employment agreement, or the McMeekin Agreement, with Russel McMeekin, or McMeekin, to
serve as our Chief Executive Officer. The base salary for McMeekin under the McMeekin Agreement is $250,000 per annum. The McMeekin Agreement had an initial term of two years and it automatically renews for successive one year terms unless either
party delivers written notice not to renew at least 90 days prior to the end of the current term. Pursuant to the McMeekin Agreement, McMeekin received 3,167 common shares upon execution and is entitled to receive additional equity compensation in
the discretion of the board of directors. Pursuant to the McMeekin Agreement, if we terminate McMeekins employment
without Cause (as defined in the McMeekin Agreement) or McMeekin resigns for Good Reason (as defined in the McMeekin Agreement), McMeekin is entitled to the following payments and benefits: (1) McMeekin fully earned but unpaid base salary
through the date of termination at the rate then in effect; (2) a lump sum cash payment in an amount equal to 12 months of McMeekin base salary as in effect immediately prior to the date of termination; (3) monthly payment of health
benefits for McMeekin and McMeekin eligible dependents for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards. In the event McMeekin
is terminated in connection with a change of control event, then he is entitled to all the above benefits, except that the lump sum cash payment will be in an amount equal to 24 months of McMeekin base salary as in effect immediately prior to the
date of termination. 101
Employment Agreement with Chantal Schutz On May 24, 2019, we entered into an employment agreement, as amended on October 1, 2019, the Schutz Agreement, with
Chantal Schutz, or Schutz, to serve as our Chief Financial Officer. The base salary for Schutz under the Schutz Agreement is $250,000 per annum. The Schutz Agreement has an indefinite term, subject to termination by either party. Pursuant to the
Schutz Agreement, Schutz received 8,333 shares of restricted stock and options to purchase 8,333 common shares and is entitled to receive additional equity compensation in the discretion of the board of directors. Pursuant to the Schutz Agreement, if we terminate Schutzs employment without Cause (as defined in the Schutz Agreement)
or Schutz resigns for Good Reason (as defined in the Schutz Agreement), Schutz is entitled to the following payments and benefits: (1) Schutzs fully earned but unpaid base salary and accrued vacation through the date of termination at the
rate then in effect; (2) a lump sum cash payment in an amount equal to nine months of Schutzs base salary as in effect immediately prior to the date of termination; and (3) continuation of benefits for Schutz for a period of nine
months following the date of termination. Employment Agreement with Constantino Lanza On May 1, 2017, we entered into an employment agreement, or the Lanza Agreement, with Constantino Lanza, or Lanza, to
serve as our Chief Growth Officer. The base salary for Lanza under the Lanza Agreement is $250,000 per annum. The Lanza Agreement had an initial term of two years and it automatically renews for successive one year terms unless either party delivers
written notice not to renew at least 90 days prior to the end of the current term. Pursuant to the Lanza Agreement, Lanza received 3,167 common shares upon execution and is entitled to receive additional equity compensation in the discretion of the
board of directors. Pursuant to the Lanza Agreement, if we terminate Lanzas employment without Cause (as defined in
the Lanza Agreement) or Lanza resigns for Good Reason (as defined in the Lanza Agreement), Lanza is entitled to the following payments and benefits: (1) Lanzas fully earned but unpaid base salary through the date of termination at the
rate then in effect; (2) a lump sum cash payment in an amount equal to 12 months of Lanzas base salary as in effect immediately prior to the date of termination; (3) monthly payment of health benefits for Lanza and Lanzas
eligible dependents for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards. In the event Lanza is terminated in connection with a
change of control event, then he is entitled to all the above benefits, except that the lump sum cash payment will be in an amount equal to 24 months of Lanzas base salary as in effect immediately prior to the date of termination. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS There have been no material transactions, or series of related material transactions to which we are a party and in which the
other parties include our directors, executive officers, holders of more than 5% of our voting securities, or any member of the immediate family of any of the foregoing persons. 102
The following tables set forth certain information with respect to the beneficial ownership of our Common Shares for: each shareholder known by us to be the beneficial owner of more than 5% of our outstanding Common Shares,
each of our directors, each of our named executive officers, and all of our directors and executive officers as a group. We have determined beneficial ownership in accordance with the rules of the SEC. Under such rules, beneficial ownership
includes any Common Shares over which the individual has sole or shared voting power or investment power as well as any Common Shares that the individual has the right to subscribe for within 60 days of July 15, 2022, through the exercise of
any warrants or other rights. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the
economic benefit with respect to all Common Shares that they beneficially own, subject to applicable community property laws. None of the shareholders listed in the table are a broker-dealer or an affiliate of a broker dealer. Applicable percentage ownership prior to the offering is based on 16,155,654 Common Shares outstanding at July 15, 2022.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is C/O mCloud Technologies, Corp., 550-510 Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8. Name of Beneficial Owner Russel H. McMeekin Michael Allman Costantino Lanza Elizabeth MacLean Ian Russell Chantal Schutz All officers and directors as a group Less than 1% Calculated assuming full conversion of all Series A Preferred Shares into Common Shares
As of July 13, 2022, there were 213 holders of record entered in our share register. The number of
individual holders of record is based exclusively upon our share register and does not address whether a common share or Common Shares may be held by the holder of record on behalf of more than one person or institution who may be deemed to be the
beneficial owner of a common share or Common Shares in our company. Common Shares The
authorized capital of the Company consists of an unlimited number of Common Shares, no par value. As of July 15, 2022, there were 16,155,654 Common Shares outstanding. As of July 13, 2022, there were 171 U.S. shareholders holding 5,228,924
Common Shares, or approximately 32.70% of the total number of Common Shares issued and outstanding. The holders of Common Shares are entitled to one vote per Common Share at all meetings of the shareholders of the Company either in person or by
proxy. The holders of Shares are also entitled to dividends, if and when declared by the directors of the Company, and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up of the Company.
All Common Shares rank equally as to all benefits which might accrue to the holders thereof, including the right to
receive dividends, voting powers, and participation in assets and in all other respects, on liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other disposition of
the assets of the Company among its shareholders for the purpose of winding up its affairs after the Company has paid out its liabilities. The Shares are not subject to any call or assessment rights, any
pre-emptive rights, any conversion or any exchange rights. The Common Shares are not subject to any redemption, retraction, purchase for cancellation, surrender, sinking or purchase fund provisions.
Additionally, the Common Shares are not subject to any provisions permitting or restricting the issuance of additional securities and any other material restrictions or any provisions requiring a securityholder to contribute additional capital to
the Company. Subject to the BCBCA, the Company may by special resolution make alterations to the authorized Common Share structure and special rights or restrictions to change the rights of the shareholders. The majority of votes required for the
Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution. 103
Blank Check Preferred Stock Under the terms of our Articles of Incorporation, our Board of Directors has authority, without any further vote or action by
our shareholders, to issue an unlimited number of blank check preferred shares issuable in series, with such rights, privileges, restrictions and conditions as the Board may determine from time to time Series A Preferred Shares The following is a summary of some general terms and provisions of our Series A Preferred Shares. Because it is a summary, it
does not contain all of the information that may be important to you. If you want more information, you should read our Articles of Incorporation and Bylaws, copies of which have been filed with the SEC. See Where You Can Find More
Information. Ranking. The Series A Preferred Shares will rank, as to dividend rights and rights upon our
liquidation, dissolution or winding up: (1) Senior to all classes or series of our common shares and to all other equity
securities issued by us other than any equity securities issued with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Shares; (2) Junior to any future equity securities issued by us with terms specifically providing that those equity securities rank
senior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and (3) Effectively junior to all our existing and future indebtedness (including indebtedness convertible into our common shares
or preferred shares) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing or future subsidiaries. Voting Rights. In any matter in which the Series A Preferred Shares may vote, as described below, each Series A
Preferred Share shall be entitled to one vote per $25.00 of liquidation preference; provided that if the Series A Preferred Shares and any other stock ranking on parity to the Series A Preferred Shares as to dividend rights and rights as to the
distribution of assets upon the Corporations liquidation, dissolution or winding up are entitled to vote together as a single class on any matter, the holders of each will vote in proportion to their respective liquidation preferences. So long as any Series A Preferred Shares remain outstanding, the Company will not, without the consent or the affirmative vote
of the holders of at least two-thirds of the outstanding Series A Preferred Shares and each other class or series of preferred stock entitled to vote thereon (voting together as a single class), given in
person or by proxy, either in writing without a meeting or by vote at any meeting called by the Company for the purpose: (i) authorize, create or issue, or increase the number of authorized or issued number of shares of, any class or series of
capital stock ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon the liquidation, dissolution or winding up of the Company or reclassify any authorized capital stock of the Company
into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Articles of Incorporation, as amended, including the terms of the Series A
Preferred Shares, whether by merger, consolidation, transfer or conveyance of all or substantially all of the Companys assets or otherwise, so as to materially and adversely affect the rights, preferences, privileges or voting powers of the
Series A Preferred Shares, taken as a whole. 104
If any event described in paragraph (ii) above would materially and
adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Shares, taken as a whole, disproportionately relative to any other class or series of voting preferred stock (as defined below), the affirmative vote of
the holders of at least two-thirds of the outstanding shares of the Series A Preferred Shares, voting as a separate class, will also be required. Furthermore, if holders of shares of the Series A Preferred
Shares receive the $25.00 per share of the Series A Preferred Shares liquidation preference plus all declared and unpaid dividends thereon or greater amounts pursuant to the occurrence of any of the events described in paragraph (ii) above,
then such holders shall not have any voting rights with respect to the events described in such paragraph. As used herein, voting preferred stock means any other class or series of the Companys preferred stock ranking equally with
the Series A Preferred Shares as to dividends (whether cumulative or non-cumulative) and the distribution of the Companys assets upon liquidation, dissolution or winding up and upon which like voting
rights to the Series A Preferred Shares have been conferred and are exercisable. Dividends. Subject to the
preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as
and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year
(equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. Dividends on the Series A Preferred Shares will accumulate and be
cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. However, the Company will be entitled to defer the payment of any declared dividends on the Series A Preferred Shares until the occurrence of a
liquidation or Board Approved Change of Control of the Company. Segregated Payment Account. The Company shall
establish a segregated account that will be funded at closing of the offering with proceeds in an amount equal to nine (9) months of dividends on the maximum number of Series A Preferred Shares. The segregated account may only be used to pay
declared dividends on the Series A Preferred Shares, when legally permitted, and may not be used for other corporate purposes. Excess funds are returned to Company treasury. Liquidation. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the
Company, holders of Series A Preferred Shares will be entitled to be paid out of the assets of the Company legally available for distribution to its stockholders (i.e., after satisfaction of all the Companys liabilities to creditors, if
any) and, subject to the rights of holders of any shares of each other class or series of capital stock ranking, as to rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up,
senior to the Series A Preferred Shares, a liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment may be made to
holders of shares of the Common Shares or any other class or series of the Companys capital stock ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, junior to the
Series A Preferred Shares (the liquidation preference). If, upon such voluntary or involuntary liquidation,
dissolution or winding up of the Companys affairs, the assets of the Company legally available for distribution to the Companys stockholders are insufficient to pay the full amount of the liquidation preference on all outstanding Series
A Preferred Shares and the corresponding amounts payable on all shares of each other class or series of capital stock of the Company ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or
winding up, on parity with the Series A Preferred Shares, then the holders of the Series A Preferred Shares and each such other class or series of capital stock of the Company ranking, as to rights to the distribution of assets upon the
Companys voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series A Preferred Shares will share ratably in any distribution of assets in proportion to the full liquidation preference to which they would
otherwise be respectively entitled. Preemptive Rights. No holders of Series A Preferred Shares will, as holders of
Series A Preferred Shares, have any preemptive rights to purchase or subscribe for the Common Shares or any other security. 105
Optional Redemption. The Series A Preferred Shares is not redeemable
prior to the twelve (12) month anniversary of the effective date of this Offering, except for the circumstances described under Special Optional Redemption. On or after the twelve (12) month anniversary of the date of issuance,, the Series A Preferred Shares may be redeemed at
our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date
of such redemption, upon the giving of notice. Special Optional Redemption. Upon the occurrence of any Delisting
Event, Change of Control, or $8 VWAP Event, whether before or after the twelve (12) month anniversary of the date of issuance of the Series A Preferred Shares, we may, at our option, redeem the Series A Preferred Shares, in whole or in part and
within 90 days after the date of the Delisting Event, Change of Control or $8 VWAP Event, by paying $25.00 per share of Series A Preferred Shares, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Stock up
to, but not including, the date of such redemption. A Delisting Event occurs when, after the original
issuance of Series A Preferred Shares, both (i) the shares of Series A Preferred Shares are no longer listed on Nasdaq, the New York Stock Exchange (the NYSE) or the NYSE American LLC (NYSE AMER), or listed or quoted on
an exchange or quotation system that is a successor to Nasdaq, the NYSE or the NYSE AMER, and (ii) the Company not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), but any
Series A Preferred Shares is still outstanding. A Change of Control occurs when, after the original issuance
of the Series A Preferred Shares, the following have occurred and are continuing: (a) any person or persons acting together which would constitute a group for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), (other than the Company or any subsidiary of the Company) shall beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of
the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of the Board; (b) Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members
of the Board (for this purpose, a Current Director shall mean any member of the Board as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Companys shareholders, was
approved by at least a majority of the Current Directors then on the Board); (c) (i) the complete liquidation of the Company or (ii) the merger or consolidation of the Company, other than a merger or consolidation in which (x) the
holders of the common stock of the Company immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or
merger or (y) the Board immediately prior to the merger or consolidation would, immediately after the merger or consolidation, constitute a majority of the board of directors of the continuing or surviving corporation, which liquidation, merger
or consolidation has been approved by the shareholders of the Company; or (d) the sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Company pursuant to an agreement (or
agreements) which has (have) been approved by the shareholders of the Company. An $8 VWAP Event occurs when,
after the original issuance of Series A Preferred Shares, the volume weighted average price of the Common Shares on the Nasdaq Capital Market for five consecutive trading days (as reported by Bloomberg L.P. based on a trading day from 9:30 a.m. to
4:02 p.m. (New York City time)) is at least $8.00. 106
Restrictions on Dividends, Redemptions and Repurchases. So long as
any Series A Preferred Share remains outstanding, unless we also have either paid or declared and set apart for payment full cumulative dividends on the Series A Preferred Shares for all past completed dividend periods, we will not during any
dividend period: (1) pay or declare and set apart for payment any dividends or declare or make any distribution of cash or
other property on Common Shares or other capital stock that ranks junior to or on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation,
dissolution or winding up (other than, in each case, (a) a dividend paid in Common Shares or other stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary
or involuntary liquidation, dissolution or winding up or (b) any declaration of a Common Share dividend in connection with any stockholders rights plan, or the issuance of rights, stock or other property under any stockholders
rights plan, or the redemption or repurchase of rights pursuant to such plan); (2) redeem, purchase or otherwise acquire
Common Shares or other capital stock that ranks junior to or on parity with the Series A Preferred Shares (other than the Series A Preferred Shares) with respect to dividend rights and rights to the distribution of assets upon our voluntary or
involuntary liquidation, dissolution or winding up (other than (a) by conversion into or exchange for Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the
distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (b) the redemption of shares of capital stock pursuant to the provisions of our memorandum of articles, as amended, relating to the restrictions
upon ownership and transfer of our capital stock, (c) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares and any other capital stock that ranks on parity with the Series A Preferred
Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (d) purchases, redemptions or other acquisitions of shares of our capital stock ranking
junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up pursuant to any employment contract, dividend reinvestment and
stock purchase plan, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors, consultants or advisors, (e) through the use of the proceeds of a substantially contemporaneous sale of stock ranking
junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, or (f) purchases or other acquisitions of shares of our
capital stock pursuant to a contractually binding stock repurchase plan existing prior to the preceding Dividend Payment Date on which dividends were not paid in full); or (3) redeem, purchase or otherwise acquire Series A Preferred Shares (other than (a) by conversion into or exchange for
Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (b) a
purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares or (c) with respect to redemptions, a redemption pursuant to which all Series A Preferred Shares are redeemed). Conversion Rights. The Series A Preferred Shares will be convertible into common Shares based on a conversion ratio of
(i) the $25.00 per share liquidation preference divided by (ii) $4.00. Therefore, each Series A Preferred Share is convertible into approximately 6.25 Common Shares. Upon such a conversion, any declared but unpaid dividends shall be paid to the
holder of Series A Preferred Shares in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a
price of $4.00 per Common Share. Nonassessability. All outstanding shares of our Series A Preferred Shares
are fully paid and nonassessable. Warrants The following sets forth certain general terms and provisions of the Warrants. Terms of the Warrants Overview. The Warrants offered hereby will be issued pursuant to a Warrant Agent Agreement, dated as of the effective date of this
Offering (the Warrant Agent Agreement), between us and American Stock Transfer & Trust Company LLC, as the warrant agent (the Warrant Agent). Certain provisions of the Warrants are set forth herein but are only a
summary and are qualified in their entirety by the relevant provisions of the Warrant Agent Agreement and the form of Warrant. The
Warrants issued in this Offering entitle the registered holder to purchase one Common Share at a price equal to $4.75 per share, subject to adjustment as discussed below, immediately following the issuance of such Warrant and terminating at 5:00
p.m., New York City time, on November 29, 2026. 107
Exercisability. The Warrants are exercisable at any time after their original
issuance until November 29, 2026. The Warrants may be exercised by delivering a duly executed exercise notice on or prior to the expiration date at the offices of the Warrant Agent, accompanied by full payment of the exercise price, by
certified or official bank check payable to the Warrant Agent, for the number of Warrants being exercised. Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current
prospectus relating to Common Shares issuable upon exercise of the Warrants until the expiration of the Warrants. Exercise
Limitation. A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding Common Shares after
exercise, as such percentage ownership is determined in accordance with the terms of the Warrant, except that the holder may waive such limitation up to a percentage not in excess of 9.99%. Exercise Price. The exercise price per Common Shares purchasable upon exercise of the Warrants is $4.75. The exercise price is subject
to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or
other property to our stockholders. However, the Warrants will not be adjusted for issuances of Common Shares at prices below its exercise price. Fractional Shares. No fractional Common Shares Stock will be issued upon exercise of the Warrants. If, upon exercise of the Warrant, a
holder would be entitled to receive a fractional interest in a share, we will, upon exercise, pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price. If multiple Warrants are exercised
by the holder at the same time, we shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price. Transferability. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred, or assigned without our consent.
Exchange Listing. The Warrants will be listed on a national securities exchange along with the Listed Warrants, which are listed
on Nasdaq under the symbol MCLDW. Warrant Agent; Global Certificate. The Warrants will be issued in registered form
under the Warrant Agent Agreement. The Warrants shall initially be represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of
Cede & Co., a nominee of DTC, or as otherwise directed by DTC. Fundamental Transactions. In the event of a fundamental
transaction, as described in the Warrants and generally including any reorganization, recapitalization or reclassification of our Common Shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our
consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Common Shares, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Shares,
upon any subsequent exercise of the Warrants, the holders of the Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to
such fundamental transaction. Rights as a Stockholder. The warrant holders do not have the rights or privileges of holders of
Common Shares or any voting rights until they exercise their Warrants and receive Common Shares. After the issuance of shares of Common Shares upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on
all matters to be voted on by stockholders. Governing Law. The Warrants and the Warrant Agent Agreement are governed by New York
law. Warrant certificates, if issued in registered form, will be exchangeable for new warrant certificates of different
denominations. No charge will be made to the holder for any such exchange or transfer except for any tax or government charge incidental thereto. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders
of the Securities subject to the Warrants. 108
Modifications We may amend any warrant agreement and the Warrants without the consent of the holders of the Warrants in certain circumstances including to
cure any ambiguity, to cure, correct or supplement any defective or inconsistent provision, or in any other manner that will not materially and adversely affect the interests of holders of outstanding Warrants. Enforceability The warrant agent
will act solely as our agent. The warrant agent will not have any duty or responsibility if we default under the warrant agreements or the warrant certificates. A Warrant holder may, without the consent of the warrant agent, enforce, by appropriate
legal action on its own behalf, the holders right to exercise the holders Warrants Listing The Company will apply to list the Series A Preferred Shares on Nasdaq under the symbol MCLDP. Our shares of Common Shares and Listed Warrants
are listed on Nasdaq under the symbols MCLD and MCLDW, respectively. The Warrants will be listed Nasdaq along with the Listed Warrants under the symbol MCLDW. Our Common Shares are also listed on the TSXV under
the symbol MCLD. On July 13, 2022 the last reported sale price of our Common Shares on the TSXV was CAD$3.75 per share. Transfer
Agent, Warrant Agent and Registrar The transfer agent and registrar for our Common Shares and Series A Preferred Shares is American
Stock Transfer & Trust Company (Transfer Agent). The Transfer Agents address is 6201 15th Ave, Brooklyn, NY 11219. The warrant agent for the Warrants is also American Stock Transfer & Trust Company. CERTAIN INCOME TAX CONSIDERATIONS Certain Material U.S. Federal Income Tax Considerations The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition by U.S.
Holders (as defined below) of the Series A Preferred Shares offered under this prospectus (the Offered Shares) and/or Warrants acquired pursuant to this prospectus. This summary does not address tax consequences to investors who are not
U.S. Holders. This discussion does not address all potentially relevant U.S. federal income tax considerations applicable to the ownership or disposition by U.S. Holders of the Offered Shares and/or Warrants acquired pursuant to this Prospectus, and
unless otherwise specifically provided, it does not address any state, local or non-U.S. tax considerations, or any aspect of U.S. federal tax law other than income taxation (e.g., alternative
minimum tax, net investment income tax, estate tax or gift tax). Except as specifically set forth below, this summary does not discuss applicable income tax reporting requirements. As used herein, the term U.S. Holder means a beneficial owner of Offered Shares and/or Warrants that, for U.S. federal income tax
purposes, is: (1) a citizen or individual resident of the United States; (2) a corporation (or other entity classified as a corporation for U.S. federal tax purposes) organized under the laws of the United States, any state thereof, or the
District of Columbia, (3) an estate whose income is subject to U.S. federal income taxation regardless of its source, or (4) a trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions of the trust, or (B) that has elected to be treated as a U.S. person under applicable U.S. Treasury regulations. 109
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal
tax purposes) holds the Offered Shares and/or Warrants, the tax treatment of a partner in the partnership or other entity or arrangement will generally depend upon the status of the partner and the activities of the partnership. Prospective
investors who are partners in partnerships (or other entities or arrangements treated as partnerships for U.S. federal tax purposes) that are beneficial owners of the Offered Shares and/or Warrants are urged to consult their tax advisors regarding
the tax consequences of the ownership and disposition of the Offered Shares and/or Warrants acquired pursuant to this Prospectus. No
legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (IRS) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of the Offered Shares
and/or Warrants. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the Code), administrative pronouncements, judicial decisions and existing and proposed U.S. Treasury regulations, all of which are subject to
differing interpretations and changes to any of which subsequent to the date of this Prospectus may affect the tax consequences described herein, possibly on a retroactive basis. This summary is not binding on the U.S. Internal Revenue Service (the
IRS), and the IRS is not precluded from taking a position that is different from, and contrary to, the discussion set forth in this summary. In addition, because the authorities on which this summary is based are subject to various
interpretations, the IRS and U.S. courts could disagree with one or more of the positions taken in this summary. This summary assumes
that the Offered Shares and Warrants are held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), in the hands of a U.S. Holder at all relevant times. This summary does not purport to
address all U.S. federal income tax consequences that may be relevant to a U.S. Holder as a result of the ownership and disposition of the Offered Shares and/or Warrants acquired pursuant to this Prospectus, nor does it take into account the
specific circumstances of any particular holder, some of which may be subject to special tax rules, including, but not limited to, tax-exempt organizations, partnerships and other pass through
entities and their owners, banks or other financial institutions, insurance companies, qualified retirement plans, individual retirement accounts or other tax-deferred accounts, persons that hold the
Offered Shares as part of a straddle, conversion transaction, constructive sale or other similar arrangements, dealers or traders subject
to mark-to-market taxation for the Offered Shares, U.S. persons whose functional currency (as defined in the Code) is not the U.S. dollar, U.S. expatriates,
persons that acquire their common shares as part of a compensation arrangement, persons that hold the Offered Shares and/or Warrants other than as a capital asset within the meaning of the Code, or persons that own directly, indirectly or by
application of the constructive ownership rules of the Code 10% or more of our shares by voting power or by value. THIS SUMMARY IS OF A GENERAL NATURE
ONLY AND IS NOT INTENDED TO BE TAX ADVICE TO ANY PROSPECTIVE INVESTOR, AND NO REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR IS MADE. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS RELEVANT TO THEM, IN ORDER TO TAKE INTO ACCOUNT THEIR PARTICULAR FINANCIAL AND TAX CIRCUMSTANCES.
Treatment of the Company as a Domestic Corporation for U.S. Federal Income Tax Purposes For U.S. federal income tax purposes, a corporation is generally considered to be a tax resident in the jurisdiction of its organization or
incorporation. Accordingly, under the generally applicable U.S. federal income tax rules, the Company, which is incorporated under the laws of Canada, would be classified as a non-U.S. corporation
(and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. However, Section 7874 of the Code, provides an exception to this general rule, under which a non-U.S. incorporated
entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and there is limited guidance regarding their application. A number of significant and complicated U.S. federal
income tax consequences may result from such classification, and this summary does not attempt to describe all such U.S. federal income tax consequences. Section 7874 of the Code and the Treasury Regulations promulgated thereunder do not
address all the possible tax consequences that arise from the Company being treated as a U.S. domestic corporation for U.S. federal income tax purposes. Accordingly, there may be additional or unforeseen U.S. federal income tax consequences to the
Company that are not discussed in this summary. 110
Under such rules, even though the Company is organized as a Canadian corporation, it will be
treated as a U.S. domestic corporation for U.S. federal income tax purposes as a result of the Companys prior acquisition of a United States target corporation and application of
the so-called inversion rules under Section 7874 of the Code. As such, the Company will be subject to U.S. federal income tax as if it were organized under the laws of the United
States or a state thereof. Generally, the Company will be required to file a U.S. federal income tax return annually with the IRS. The Company is also subject to tax in Canada. It is unclear how the foreign tax credit rules under the Code will
operate in certain circumstances, given the treatment of the Company as a U.S. domestic corporation for U.S. federal income tax purposes and the taxation of the Company in Canada. Accordingly, it is possible that the Company will be subject to
double taxation with respect to all or part of its taxable income. It is anticipated that such U.S. and Canadian tax treatment will continue indefinitely and that the Offered Shares will be treated indefinitely as shares in a U.S. domestic
corporation for U.S. federal income tax purposes. The Companys status as a domestic corporation for U.S. federal income tax purposes has implications for all shareholders, although only the application to U.S. Holders is discussed in this
summary. The remaining discussion contained in this Certain Material U.S. Federal Income Tax Considerations assumes that the Company will be treated as a domestic corporation pursuant to Section 7874 of the Code. Allocation of Purchase Price U.S.
Holders will generally allocate the amount paid for Offered Shares and Warrants based on their respective relative fair market values when computing the holders basis in the Offered Shares and Warrants for U.S. federal income tax purposes.
Distributions The Company may pay a
dividend on the Series A Preferred Shares. A U.S. Holder that receives a distribution with respect to the securities of the Company generally will be required to include the gross amount of such distribution (before reduction for any Canadian
withholding taxes) in gross income as a dividend when actually or constructively received to the extent of the U.S. Holders pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax
principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holders pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holders Offered Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S.
Holders Offered Shares, the remainder will be taxed as capital gain. However, we cannot provide any assurance that we will maintain or provide earnings and profits determinations in accordance with U.S. federal income tax principles.
Therefore, U.S. Holders should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital
gain under the rules described above. The U.S. dollar value of any distribution on securities of the Company made in Canadian dollars
generally should be calculated by reference to the exchange rate between the U.S. dollar and the Canadian dollar in effect on the date of receipt (or deemed receipt) of such distribution by the U.S. Holder regardless of whether the Canadian dollars
so received are in fact converted into U.S. dollars at that time. If the Canadian dollars received are converted into U.S. dollars on the date of receipt (or deemed receipt), a U.S. Holder generally should not recognize currency gain or loss on such
conversion. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt (or deemed receipt), a U.S. Holder generally will have a basis in such Canadian dollars equal to the U.S. dollar value of such Canadian dollars
on the date of receipt (or deemed receipt). Any gain or loss on a subsequent conversion or other disposition of such Canadian dollars by such U.S. Holder generally will be treated as ordinary income or loss and generally will be income or loss from
sources within the United States for U.S. foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income
tax consequences of receiving, owning, and disposing of foreign currency. Distributions made by the Company in respect of its securities
to U.S. Holders will be treated as U.S.-source dividends includible in the gross income of a U.S. Holder as ordinary income to the extent of the Companys current and accumulated earnings and profits, as described above. Subject to applicable
limitations and requirements, dividends received on the securities generally should be eligible for the dividends received deduction available to corporate shareholders. A dividend paid by the Company to
a non-corporate U.S. Holder generally will be eligible for preferential rates if certain holding period requirements are met. If a U.S. Holder is subject to Canadian withholding tax on dividends paid
on the holders securities to the U.S. Holder, the dividends will be considered U.S. source income, which could limit the ability of a U.S. Holder to claim a foreign tax credit for the Canadian withholding taxes imposed in respect of such a
dividend. See Foreign Tax Credit Limitations below. 111
Sale, Exchange or Other Disposition of Offered Share and/or Warrants Upon a sale, exchange or other taxable disposition of a security, a U.S. Holder will generally recognize a capital gain or loss equal to the
difference between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on such sale, exchange or other taxable disposition (or, if the amount realized is denominated in Canadian dollars, its U.S.
dollar equivalent, determined by reference to the spot rate of exchange on the date of the sale, exchange or disposition) and the U.S. Holders adjusted tax basis of such security. Such gain or loss will be a long-term capital gain or loss if
the U.S. Holders holding period in such security exceeds one year. Such gain or loss generally will be considered U.S. source gain or loss for U.S. foreign tax credit purposes, except as otherwise provided in an applicable income tax treaty
and if an election is properly made under the Code. Long-term capital gains of certain non-corporate taxpayers are eligible for reduced rates of taxation. For both corporate and non-corporate taxpayers, limitations apply to the deductibility of capital losses. To the extent a U.S. Holder pays any Canadian tax on a sale, exchange or disposition of Offered Shares
or Warrants, a U.S. foreign tax credit may not be available. See Foreign Tax Credit Limitations below. Exercise, Expiration and Disposition of Warrants A U.S. Holder will not recognize gain or loss upon exercise of a Warrant (except with respect to any cash received in lieu of a fractional
Common Share). A U.S. Holder will have a tax basis in the Common Shares received upon the exercise of a Warrant equal to the sum of its tax basis in the Warrant and the aggregate cash exercise price paid in respect of such exercise, less any amount
attributable to any fractional Common Share. The holding period of the Common Shares received upon the exercise of a Warrant will commence on the day after the Warrant is exercised, except in the situation where a Warrant is exercised pursuant to a
cashless exercise feature in which case the holding period of the Common Share may include the period in which the Warrant was held, under certain reporting positions taken by investors under the Code. If a Warrant expires without being
exercised, a U.S. Holder will recognize a capital loss in an amount equal to its tax basis in the Warrant. Upon the sale, exchange or
redemption of a Warrant that is not exercised, a U.S. Holder will recognize a gain or loss equal to the difference between the amount realized on the sale, exchange or redemption of the Warrant and the U.S. Holders tax basis in such Warrant.
Such gain or loss will be long-term capital gain or loss if, at the time of such sale, exchange, or redemption, the Warrant has been held for more than one year. Long term capital gains of individuals (as well as certain trusts and estates) are
subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to significant limitations. A U.S. Holders gain or loss on the sale, exchange, or redemption of a Warrant will be treated as U.S. source
income or loss for U.S. foreign tax credit limitation purposes. Foreign Tax Credit Limitations Because the Company is subject to tax both as a U.S. domestic corporation and as a Canadian corporation, a U.S. Holder may pay, through
withholding, Canadian tax, as well as U.S. federal income tax, with respect to dividends paid on its securities. For U.S. federal income tax purposes, a U.S. Holder may elect for any taxable year to receive either a credit or a deduction for all
foreign income taxes paid by the holder during the year. Complex limitations apply to the foreign tax credit, including a general limitation that the credit cannot exceed the proportionate share of a taxpayers U.S. federal income tax that the
taxpayers foreign source taxable income bears to the taxpayers worldwide taxable income. In applying this limitation, items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source. The status of the Company as a U.S. domestic corporation for U.S. federal income tax purposes will cause dividends paid by the Company to be
treated as U.S. source rather than foreign source income for this purpose. As a result, a foreign tax credit may be unavailable for any Canadian tax paid on dividends received from the Company. Similarly, to the extent a sale or disposition
securities by a U.S. Holder results in Canadian tax payable by the U.S. Holder (for example, because the Series A Preferred Shares and Warrants constitute taxable Canadian property within the meaning of the Canadian Tax Act), a U.S. foreign tax
credit may be unavailable to the U.S. Holder for such Canadian tax. In each case, however, the U.S. Holder may be able to take a deduction for the U.S. Holders Canadian tax paid, provided that the U.S. Holder has not elected to credit other
foreign taxes during the same taxable year. The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax advisor regarding these rules. 112
Information Reporting and Backup Withholding Dividends on and proceeds from the sale or other disposition of securities may be reported to the IRS unless the U.S. Holder establishes a basis for exemption.
Backup withholding may apply to amounts subject to reporting if (1) the U.S. holder fails to provide an accurate taxpayer identification number or otherwise establish a basis for exemption, (2) the U.S. Holder is notified by the IRS that
backup withholding applies, or (3) the payment is described in certain other categories of persons. Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holders U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the
IRS. The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may
apply to a U.S. Holder. U.S. Holders should consult with their own tax advisors regarding their reporting obligations, if any, as a result of their acquisition, ownership, or disposition of our Series A Preferred Shares and Warrants. THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY. EACH U.S. HOLDER OF OFFERED SHARES OR WARRANTS SHOULD CONSULT
ITS TAX ADVISOR AS TO THE CONSEQUENCES OF AN INVESTMENT IN THE COMPANY IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES. LIABILITIES mCloud has assets located outside of Canada, and therefore it may be difficult to enforce judgments obtained by mCloud in
foreign jurisdictions by Canadian courts. Similarly, to the extent that mClouds assets are located outside of Canada, investors may have difficulty collecting from mCloud any judgments obtained in Canadian courts and predicated on the civil
liability provisions of applicable securities legislation. Furthermore, mCloud may be subject to legal proceedings and judgments in foreign jurisdictions and it may be difficult for U.S. stockholders to effect service of process against the officers
of mCloud. DETERMINATION OF OFFERING PRICE The public offering price for our Series A Preferred Shares and Warrants will be determined through negotiations between us
and the representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us,
estimates of our business potential, the present state of our development and other factors deemed relevant. We offer no assurances that the initial public offering price will correspond to the price at which our securities will trade in the public
market subsequent to this offering or that an active trading market for our securities will develop and continue after this offering. Maxim Group LLC is acting as the lead managing underwriter and sole book running manager in
connection with this offering. Under the terms and subject to the conditions in the Underwriting Agreement, the Company has agreed to issue and sell and the Underwriter has agreed to purchase, on a firm commitment basis, on the Closing Date, or such
other date as the Company and the Underwriter may agree, the number of Series A Preferred Shares and Warrants indicated below at the public offering price per Unit less the underwriting discounts set forth on the cover page of this Prospectus. Underwriter Maxim Group LLC Total The Underwriting Agreement provides that the underwriter is obligated to purchase all the
Series A Preferred Shares and Warrants in the offering if any are purchased, other than those covered by the over-allotment option described below. The Underwriting Agreement also provides that if the underwriter defaults, the offering may be
terminated. 113
The Offering is being made only in the United States. The Offered Shares will be offered in
the United States by the Underwriter either directly or through its duly registered U.S. broker dealer affiliates or agents. Any securities sold by the Underwriter to securities dealers will be sold at the public offering price less a selling
concession not in excess of $[ ] per Series A Preferred Share. No securities will be offered or sold to Canadian purchasers, and there will be no solicitations or advertising activities undertaken in Canada in connection with
the Offering. The Units are offered subject to a number of conditions, including: receipt and acceptance of the Units by the Underwriter; the Underwriters right to withdraw, cancel or modify offers to the public and to reject orders in whole
or in part; and other conditions contained in the Underwriting Agreement, such as the receipt by the Underwriter of
officers certificates and legal opinions. Over-Allotment Option The Company has granted an option to the Underwriter to purchase up to an
additional Series A Preferred Shares and/or Warrants to purchase an additional Series A Preferred Shares
at the public offering price, less the underwriting discount. The Underwriter may exercise the Over-Allotment Option for 45 days from the Closing Date. If any of these additional Series A Preferred Shares or Warrants are purchased, the Underwriter
will offer the additional Series A Preferred Shares or Warrants on the same terms as those on which the securities are being offered. Underwriting
Discounts and Commissions Series A Preferred Shares and Warrants sold by the Underwriter to the public will initially be offered at
the offering price set forth on the cover of this prospectus. Any securities sold by the Underwriter to securities dealers may be sold at a discount of up to 8%, or per Series A Preferred Share, from
the public offering price. If all of the securities are not sold at the public offering price, the Underwriter may change the offering price and the other selling terms. Upon execution of the Underwriting Agreement, the Underwriter will be obligated
to purchase the securities at the prices and upon the terms stated therein and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms. The following table shows the per Series A Preferred Share or Warrant and total underwriting discount the Company will pay to the Underwriter:
114
We estimate that the total expenses of the Offering payable by us, not including the
underwriting discount, will be approximately USD$[ ]. We have agreed to be responsible and pay for all expenses related to the offering including all filing fees, legal fees and communication expenses
relating to the registration of the securities to be sold in the offering (including the over-allotment securities). Upon Maxims request, we will provide funds to pay all fees, expenses and disbursements in excess of the USD$25,000 advance
provided to Maxim upon execution of the engagement letter for reasonable out-of-pocket expenses. The maximum amount of legal fees, costs and expenses incurred
by Maxim that we shall be responsible for shall not exceed USD$125,000. The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriter will be returned to the extent
that offering expenses are not actually incurred in accordance with Financial Industry Regulatory Authority (FINRA) Rule 5110(f)(2)(C). Discretionary Accounts The Underwriter
does not intend to confirm sales of the securities to any accounts over which it has discretionary authority. Lock-Up Agreements Our officers, directors and holders or 3% or more of our outstanding common shares have entered into customary lock up agreements
in favor of Maxim pursuant to which such persons and entities have agreed, for a period of six months after the offering is completed, that they shall neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or
otherwise dispose of any our securities without Maxims prior written consent. Indemnification We have agreed to indemnify Maxim against certain liabilities, including liabilities under Securities Act, and liabilities arising from
breaches of representations and warranties contained in the underwriting agreement and to contribute to payments that the underwriter may be required to make for these liabilities. 115
Price Stabilization, Short Positions and Penalty Bids In connection with this offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our
securities. Specifically, the underwriter may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our shares for its own account. The short
position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that it may purchase in the
over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. To close out a short position, the underwriter may elect to exercise all or part of the
over-allotment option. The underwriter may also elect to stabilize the price of our shares or reduce any short position by bidding for, and purchasing, shares in the open market. The underwriter may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it
for distributing a security in this offering because the underwriter repurchases that security in stabilizing or short covering transactions. Finally, the underwriter may bid for, and purchase, shares in market making transactions, including passive market making
transactions as described below. These activities may stabilize or maintain the market price of our shares at a price that is higher than
the price that might otherwise exist in the absence of these activities. The underwriter is not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the
Nasdaq Capital Market, in the over-the-counter market, or otherwise. In connection with this offering, the underwriter and selling group members, if any, or their affiliates may engage in passive market making
transactions in our shares immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that: a passive market maker may not effect transactions or display bids for our shares in excess of the highest
independent bid price by persons who are not passive market makers; net purchases by a passive market maker on each day are generally limited to 30% of the passive market
makers average daily trading volume in our shares during a specified two-month prior period or 200 shares, whichever is greater, and must be discontinued when that limit is reached;
and passive market making bids must be identified as such. Right of First Refusal Subject to the
closing of this offering and certain conditions set forth in the underwriting agreement, for a period of nine (9) months after the closing of the offering, the underwriter shall have a right of first refusal to act as lead managing underwriter
and book-runner or minimally as a co-lead manager and co-book-runner and/or co-lead placement agent for any and all future public
or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by us, or any of our successors or subsidiaries. Tail Financing Payments If we terminate
our engagement agreement with Maxim, other than for cause, and we subsequently complete any public or private financing any time during the twelve (12) months after such termination with any investors contacted by Maxim in connection with this
offering, then Maxim shall be entitled to receive the same compensation for such offering as it would have been entitled to in connection with this offering. Other Relationships From time to time,
the Underwriter and/or its affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us for which they would expect to receive customary fees and commissions. 116
In addition, in the ordinary course of its business activities, the Underwriter and its
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers.
Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The Underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in
respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. International Selling Restrictions Other
than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by
this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an
offer or a solicitation is unlawful. Electronic Distribution A prospectus in electronic format may be made available on the web sites maintained by the underwriter, or selling group members, if any,
participating in this offering and the underwriter may distribute prospectuses electronically. The underwriter may agree to allocate a number of shares to selling group members for sale to their online brokerage account holders. Internet
distributions will be allocated by the underwriter and selling group members that will make internet distributions on the same basis as other allocations. Copies of this prospectus in electronic format may be made available on the websites maintained by the Underwriter. In addition, securities
may be sold by the Underwriter to securities dealers who resell shares to online brokerage account holders. Item 13. Other Expenses of Issuance
and Distribution The estimated expenses payable by us in connection with the offering described in this registration
statement (other than the placement discounts and commissions) will be as follows. With the exception of the filing fees for the U.S. Securities Exchange Commission, FINRA and Nasdaq, all amounts are estimates. U.S. Securities and Exchange Commission registration fee FINRA filing fee Nasdaq listing fee Legal fees and expenses Accounting fees and expenses Transfer agent fees and expenses Printing fees and expenses Miscellaneous Total 117
The validity of the Series A Preferred Shares and certain legal matters relating to the offering as to Canadian law will be
passed upon for us by Morton Law LLP. Certain matters as to U.S. federal law in connection with this offering will be passed upon for us by Sichenzia Ross Ference LLP, New York, New York. Fox Rothschild LLP, Minneapolis, Minnesota has
acted as counsel for the underwriters with respect to this offering. The consolidated financial statements of mCloud Technologies Corp. as of December 31, 2021 and 2020, and for each of the
years in the three-year period ended December 31, 2021, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2021
consolidated financial statements contains an explanatory paragraph that states that the Companys recurring losses from operations and net working capital deficiency raise substantial doubt about the entitys ability to continue as a
going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on
Form F-1 under the Securities Act with respect to the Series A Preferred Shares and Warrants offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain
all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the Series A Preferred Shares and Warrants offered hereby, reference is made to the registration statement and the
exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance, we refer you
to the copy of such contract or other document filed as an exhibit to the registration statement. We are subject to the
information and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with the SEC. These periodic reports, and other information are available for inspection and copying at the
website of the SEC referred to above. You may access our annual reports on Form 20-F, reports on Form 6-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be
accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by
the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the website is www.sec.gov. 118
mCloud Technologies Corp. TABLE OF CONTENTS F-1
KPMG LLP 205 5th Avenue SW Suite 3100 Calgary AB T2P 4B9 Tel (403) 691-8000 Fax (403) 691-8008 www.kpmg.ca Report of
Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of mCloud Technologies Corp.: Opinion on the Consolidated Financial Statements We have audited the
accompanying consolidated statements of financial position of mCloud Technologies Corp., (the Company) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in equity, and cash
flows for each of the years in the three-year period ended December 31, 2021 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the each of the years in the three-year period ended December 31, 2021, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has had recurring net losses and cash used in operating activities, covenant violations and a net working capital deficiency as of December 31, 2021 that raise substantial doubt about the Companys
ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 2 F-2
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that our audits provide a reasonable basis for our opinion. We have served as the Companys auditor since 2019. /s/ KPMG LLP Chartered Professional Accountants Calgary, Canada April 29, 2022 3 F-3
mCloud Technologies Corp. Consolidated Statements of Financial Position Expressed in Canadian Dollars ASSETS Current assets Cash and cash equivalents Trade and other receivables Current portion of prepaid expenses and other assets Current portion of long-term receivables Total current assets Non-current assets Prepaid expenses and other assets Long-term receivables Right-of-use assets Property and equipment Intangible assets Goodwill Total non-current assets Total assets LIABILITIES Current liabilities Bank indebtedness Trade payables and accrued liabilities Deferred revenue Current portion of loans and borrowings Current portion of convertible debentures Warrant liabilities Current portion of lease liabilities Current portion of other liabilities Current portion of business acquisition payable Total current liabilities Non-current liabilities Convertible debentures Lease liabilities Loans and borrowings Deferred income tax liabilities Other liabilities Business acquisition payable Total liabilities EQUITY Share capital Contributed surplus Accumulative other comprehensive income Deficit Total shareholders equity Non-controlling interest Total equity Total liabilities and equity Going concern (Note 2); Events after the reporting period (Note 31); Commitments and contingencies (Note 29) The accompanying notes are an integral part of these consolidated financial statements. Approved on behalf of the Board of Directors on April 29, 2022 1 | Consolidated Financial Statements F-4
mCloud Technologies Corp. Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars except number of shares) Revenue Cost of sales Gross profit Expenses Salaries, wages and benefits Sales and marketing Research and development General and administration Professional and consulting fees Share-based compensation Depreciation and amortization Total expenses Operating loss Other expenses (income) Finance costs Foreign exchange loss (gain) Business acquisition costs and other expenses Impairment Fair value loss on derivatives Other income Loss before tax Current tax expense (recovery) Deferred tax (recovery) expense Net loss for the year Other comprehensive (income) loss Foreign subsidiary translation differences Comprehensive loss for the
year Net loss (income) for the year attributable to: mCloud Technologies Corp. shareholders Non-controlling interest Comprehensive loss (income) for the year attributable to: mCloud Technologies Corp. shareholders Non-controlling interest Loss per share attributable to mCloud shareholders basic and diluted Weighted average number of common
shares outstanding - basic and diluted The accompanying notes are an integral part of these consolidated financial statements. 2 | Consolidated Financial Statements F-5
mCloud Technologies Corp. Consolidated Statements of Changes in Equity For the Years Ended December 31, 2021 and 2020 (Expressed in Canadian Dollars except number of shares) Non- controlling Balance, December 31, 2020 Share-based payments RSUs exercised Broker warrants issued Shares issued in public offering, net of costs Warrants issued in public offering, net of costs Shares issued in private placement Shares issued on 2021 Debentures conversion, net Shares issued in USD public offering, net of costs Underwriter warrants issued in USD public offering Net loss for the year Other comprehensive (loss) income for the year Balance, December 31, 2021 3 | Consolidated Financial Statements F-6
mCloud Technologies Corp. Consolidated Statements of Changes in Equity For the Years Ended December 31, 2021 and 2020 (Expressed in Canadian Dollars except number of shares)
Non- controlling Balance, December 31, 2019 Share-based payments RSUs exercised Stock options exercised Warrants exercised Shares issued in business combination - CSA Shares issued in business combination - kanepi Shares issued for transaction costs - kanepi Shares issued for asset acquisition - AirFusion Shares issued on conversion of 2019 debentures Issue of special warrants, net Conversion of special warrants Settlement of debt with RSUs Shares issued in public offering, net of costs Net (loss) income for the year Other comprehensive (loss) income for the year Balance, December 31, 2020 4 | Consolidated Financial Statements F-7
mCloud Technologies Corp. Consolidated Statements of Changes in Equity For the Years Ended December 31, 2021 and 2020 (Expressed in Canadian Dollars except number of shares)
Non- controlling Balance, December 31, 2018 Share-based payments RSUs exercised Stock options exercised Share purchase warrants exercised Shares issued on business combination Transaction costs on business combination Shares issued to extinguish the loan from Flow Capital Shares issued to settle liabilities Share issuance costs Warrants issued Equity component of convertible debentures Contingent shares issuable to Flow Capital Non-controlling interest recognized in business combination Net (loss) income for the year Other comprehensive income for the year Balance, December 31, 2019 5 | Consolidated Financial Statements F-8
mCloud Technologies Corp. Consolidated Statements of Cash Flows (Expressed in Canadian Dollars) Operating activities Net loss Items not affecting cash: Depreciation and amortization Share-based compensation Finance costs Fair value loss on derivatives Impairment Other income Provision for expected credit loss Unrealized foreign currency exchange gain Business acquisition costs Current tax expense (recovery) Deferred income tax recovery Gain on settlement of lease liability Decrease in working capital Interest paid Taxes paid Net cash used in operating
activities Investing activities Acquisition of property and equipment Acquisition of and expenditure on intangible assets Acquisition of royalty agreement Acquisition of assets of AirFusion Acquisition of business, net of cash
acquired Net cash used in investing
activities Financing activities Payment of lease liabilities Repayment of loans Proceeds from loans and bank indebtedness, net of transaction costs Net (repayments) advances of bank indebtedness Proceeds from issuance of shares, net of issuance costs Proceeds from issuance of convertible debentures, net of costs Proceeds from issuance of warrants, net of issuance costs Proceeds from the exercise of stock options, net of issuance costs Proceeds from exercise of warrants, net Income tax withholding on RSUs Net cash provided by financing
activities Increase in cash and cash equivalents Effect of exchange rate fluctuations on cash held Cash and cash equivalents, beginning of
year Cash and cash equivalents, end of
year Supplemental cash flow information (Note 30) The
accompanying notes are an integral part of these consolidated financial statements. 6 | Consolidated Financial Statements F-9
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted) NOTE 1 NATURE OF OPERATIONS mCloud Technologies Corp. (mCloud or the Company), is a provider
of proprietary technology solutions, AssetCare. Customers use AssetCare software-as-a-service (SaaS) and data solutions to ensure assets continuously operate at peak performance. AssetCare is an asset management platform combining IoT,
AI and the cloud to drive next-level performance and efficiency. mCloud offers foundational enterprise technology solutions enabling capabilities such as secure communications, connected work, and remote monitoring. The Company is domiciled in Vancouver, Canada with
its head office in Calgary, Alberta and its registered offices located at 550-510 Burrard Street, Vancouver, British Columbia, V6C 3A8. The Company met the listing requirements of the Nasdaq Stock Market LLC
(NASDAQ) and received approval to be listed on November 23, 2021. On November 24, 2021, the Companys shares began trading on the NASDAQ under the stock symbol MCLD in U.S. dollars (Note 31). The Companys shares also
trade on the TSX.V trading in Canadian dollars under the symbol MCLD and on the OTCQB Venture Market under the symbol MCLDF. NOTE 2 BASIS OF ACCOUNTING The consolidated financial statements include the accounts of mCloud, the ultimate parent
of the consolidated group, and its subsidiaries and are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), effective as of
December 31, 2021. These
consolidated financial statements of the Company were approved by the Companys Board of Directors and authorized for issue on April 29, 2022. Basis of preparation These consolidated financial statements were prepared on a going-concern basis, under the historical cost convention except for derivative financial instruments classified as at fair value
through profit or loss. The Companys accounting policies are described in Note 32 and these policies are consistently applied to all the periods presented. The Companys presentation currency is Canadian dollars, and all amounts are
presented in Canadian dollars unless otherwise stated. The consolidated financial statements include the accounts of the Company and those of its subsidiaries which are entities over which the Company has control (Note 32(A)). The Company has reclassified certain comparative
figures in the consolidated financial statements to conform to the current year presentation. In addition to the Canadian dollar presentation, certain disclosures include the use of U.S. Dollars (USD or US$) in describing
certain financing transactions. Share consolidation On November 19, 2021, the Company initiated a 3-to-1 consolidation of the Companys issued and outstanding common shares which took effect at
market opening on November 24, 2021. This share consolidation was approved by the Companys shareholders in connection with the Companys NASDAQ listing. The Companys issued and outstanding convertible debentures, stock options,
warrants and restricted share units were also subject to this share consolidation. The par value of the common shares was not adjusted as a result of this share consolidation. Accordingly, all share and per share amounts for the periods presented in
these consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this share consolidation. Going
Concern The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate the
pandemics spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the in-person nature of these activities and delay the start of certain projects for a duration of the year.
This negatively impacted the Companys financial performance and liquidity position. During the year ended December 31, 2021, the Company generated a net loss of $44,699,313 and negative cash flows from operating activities of $28,329,771. At December 31, 2021, the
Company had a working capital deficiency of $42,108,177. Working capital deficiency is a non-IFRS measure which is calculated as current assets less current liabilities. Current liquidity levels and available
sources of capital are not adequate to fund the working capital deficiency. 7 | Notes to the Consolidated Financial Statements F-10
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 2 BASIS OF ACCOUNTING (continued) Going Concern (continued) The most significant cash outflows included in current liabilities include the repayment of the 2019
Convertible Debentures of $23,457,500 if not converted on or before May 31, 2022 (Note 14(a)); loans and borrowings of $11,763,697 including principal and interest payments; payment of trade and other payables of $12,421,309; and payments associated with leases of approximately $1,000,000. While restrictions started to ease in the three months ended December 31, 2021, there is still uncertainly over how COVID-19 will impact the
Companys business and the timing of future revenues. Based on the Companys liquidity position at the date of authorization of these consolidated financial statements and considering the uncertainty surrounding the impact of the pandemic,
management estimates that it will need additional financing to meet its financial obligations. The Company is currently working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to
operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with operations. To date,
the Company has funded its operations through debt and equity financing. While the Company has been successful in raising capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of
December 31, 2021, March 31, 2022 and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing further financings in the future or obtaining waivers of the covenant breaches. As a result, these factors are indicators that material uncertainties exist that raises significant doubt about the Companys ability to continue as
a going concern and, therefore, its ability to realize assets and discharge liabilities in the normal course of business. In making their
assessment, management considered all available information, together with forecasts and other mitigating strategies, about the future which is at least, but not limited to, twelve months from the end of the reporting period. Management has
considered in its assessment its plans for the repayment of the 2019 Convertible Debentures, the likelihood of repayment of the term loan which has been classified as current (Note 12), the likelihood that undrawn funds under the operating facility
will be available (Note 13), the required cash principal and interest payments on indebtedness, and the likelihood of payments required under contingent consideration arrangements. Management also considered available funding under a US$15,000,000
promissory note executed on March 28, 2022, which includes a $5,000,000 loan which was funded on April 1, 2022 but for which its use is restricted (Note 31). Management also considered cash inflows from current operations, expected government assistance in the form of wage and rent subsidies, and expected
increases in revenues and cash flows resulting from new revenue contracts expected over the next 12 months due to the anticipated reduction of COVID-19 related restrictions. Future debt and equity raises have been considered in determining that the
going concern assumption remains appropriate. These consolidated financial statements have been prepared on a going concern basis, which
contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. These consolidated financial statements do not
include any adjustments to the carrying amounts and classifications of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate. NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS In the preparation of the consolidated financial statements and the application of the Companys accounting policies, management is required to make
judgements, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during
each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to estimates are recognized in the period in which the estimates are revised and in any future period. 8 | Notes to the Consolidated Financial Statements F-11
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Beginning in March 2020, the COVID-19 pandemic has had a substantial impact on economies around the
world. As a result of the uncertainty associated with the unprecedented nature of the pandemic, certain of the Companys significant assumptions may be impacted. Uncertain environments make estimating several items in the consolidated financial
statements more challenging and are likely to result in more frequent changes in managements expectations about the future. The long-term impact on the Companys financial results and cash flows is unknown at this time. The Company has
received government assistance in Canada, the United States and Australia to help temper the financial impact of COVID-19 (Note 24). Critical judgements in applying accounting policies Judgement is used in situations when there is a choice and/or assessment required by
management. Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements, are as follows:
Determination of control of subsidiaries Judgement is required to determine when the Company has control of subsidiaries. This
requires an assessment of the relevant activities of the investee, being those activities that significantly affect the investees returns. Despite owning no shares, or having any voting rights, the Company determined that it exercises control
over Agnity Global, Inc. (Agnity) as the Company has the right to nominate a majority of the members of Agnitys Operations Committee and therefore the right and ability to direct the relevant activities of Agnity and to
significantly affect its returns through the use of its rights. The Company has the right to receive royalty payments from Agnity on a monthly basis in perpetuity and the Company has credit risk with respect to the collectability of these royalty
payments. Assessment of indicators of impairment of goodwill,
long-lived assets and intangible assets Management reviews goodwill,
depreciable long-lived assets and intangible assets for impairment triggers to determine if any events or changes in circumstances exist that would indicate that the carrying amount of an asset may not be recoverable over time. If impairment
indicators exist, impairment assessments are conducted as the asset level or level of cash generating units (CGUs) as appropriate. Leases In measuring the Companys leases judgement is required to determine the lease term
of the contract including whether the Company is reasonably certain to exercise extension options where it is the lessee. A longer lease term results in a larger lease liability and right-of-use asset to be recognized by the Company and future
changes in this lease term will result in modifications. In addition, estimates and assumptions are required to determine the incremental borrowing rate used to measure lease liabilities at inception of a
lease. Contingent consideration Management uses judgement to assess the existence of contingencies. By their nature,
contingencies will only be resolved when one or more future events occur or fail to occur. At initial recognition at the date of a business combination and at the end of each reporting period, management also uses judgement to assess the likelihood
of the occurrence of one or more future events which impacts the fair value of the contingent consideration. Determination of CGUs For the purposes of assessing
impairment of goodwill and non-financial assets, the Company must identify CGUs. Assets and liabilities are grouped into CGUs at the lowest level of separately identified cash flows. Determination of what constitutes a CGU is subject to management
judgment. The composition of a CGU can directly impact the recoverability of non-financial assets included within the CGU. Management has determined that the Company has two CGUs: Agnity and the rest of mCloud. 9 | Notes to the Consolidated Financial Statements F-12
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Key sources of estimation uncertainty Information about assumptions and estimation uncertainties that have a significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities and results of operations where a different estimate or assumption is used, are as follows: Value of components for convertible debt and equity offerings Management makes judgements related to the measurement of the fair value of the
convertible debentures and equity offerings issued in the period, including the determination of the allocation of the proceeds between the components of the instrument. At inception of an instrument, the Company determines the value of each piece
of the instrument and judgement is required in determining the inputs used in the fair value calculations and in determining the probability of certain outcomes. Determination of stand-alone selling price The total transaction price of certain revenue contacts is allocated to each performance obligation on a relative stand-alone selling price (SSP) basis, representing the selling price as if it was sold separately. This is a formal process involving judgement which
could impact the timing of recognized revenue. In most cases, the SSP is based on observable data. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for
perpetual software licenses is highly variable and therefore the Company applies the residual approach (Note 32(C)). Expected credit loss allowance and provision The Company recognizes an amount equal to the lifetime expected credit loss (ECL) on trade and long-term receivables, other receivables, unbilled revenue and amounts due from
related parties for which there has been a significant increase in credit risk since initial recognition. Loss allowances are measured based on historical experience and forecasted economic conditions. The amount of ECL is sensitive to changes in
circumstances of forecast economic conditions. Impairment of
goodwill and other non-financial assets Goodwill is reviewed annually on
December 31 or more frequently if changes in circumstances indicate that the carrying value may be impaired. The Company completed its annual impairment testing at December 31, 2021 and determined there was no impairment. Determining
whether an impairment has occurred requires the valuation of the recoverable amount of the CGUs as described in Note 10(b). Share-based payment arrangements The Company uses the Black-Scholes option-pricing model (Black-Scholes model)
to determine the fair value of stock options and other equity instruments where the goods and services cannot be valued. In estimating the fair value, management is required to make certain assumptions and estimates such as the expected life of
options, volatility of the Companys future share price, risk-free rate, future dividend yields and estimated forfeitures at the initial measurement date. Changes in assumptions used to estimate fair value could result in different
outcomes. Business combinations - purchase price allocation
The consideration transferred and acquired assets and assumed liabilities are
recognized at fair value on the date the Company effectively obtains control. The measurement of each business combination is based on the information available on the acquisition date. The estimate of fair value of the consideration transferred and
acquired intangible assets (including goodwill), property and equipment, other assets and the liabilities assumed are based on estimates and assumptions. The measurement is largely based on projected cash flows, discount rates and market conditions
at the date of acquisition. 10 | Notes to the Consolidated Financial Statements F-13
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Key sources of estimation uncertainty (continued) Taxation Calculations for current and deferred taxes require managements interpretation of tax
regulations and legislation in the various tax jurisdictions in which the Company operates, which are subject to change. The measurement of deferred tax assets and liabilities requires estimates of the timing of the reversal of temporary differences
identified and managements assessment of the Companys ability to utilize the underlying future tax deductions against future taxable income before they expire, which involves estimating future taxable income. The Company is subject to assessments by various
taxation authorities in the tax jurisdictions in which it operates, and these taxation authorities may interpret the tax legislation and regulations differently. In addition, the calculation of income taxes involves many complex factors. As such,
income taxes are subject to measurement uncertainty and actual amounts of taxes may vary from the estimates made by management. NOTE 4 SEGMENT REPORTING The Company operates in one operating segment. For the purpose of segment reporting, the
Companys Chief Executive Officer (CEO) is the Chief Operating Decision Maker. The determination of the Companys operating segment is based on its organization structure and how the information is reported to the CEO on a
regular basis. The Companys
revenue by location of the ultimate customer or consumer of product solution are as follows: Canada United States Japan Australia Other Total revenue The table below presents significant customers who accounted for greater than 10% of total revenues. Customer A Customer B Customer C Customer D The Companys non-current assets by country are as follows: Canada Australia United States Total non-current assets 11 | Notes to the Consolidated Financial Statements F-14
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 5 - REVENUE The Companys operations and main revenue streams are those described in Note 32(C).
All of the Companys revenue is derived from contracts with customers. In the following tables, revenue is disaggregated by major service line and timing of revenue recognition. AssetCare initialization 1 AssetCare over time 2 Engineering services
3 Revenues from initial implementation and activation of AssetCare projects, including the sale of hardware.
Revenues include sales of subscriptions to AssetCare, other subscriptions, post contract support and maintenance,
perpetual software licenses, and installation and engineering services. Revenues includes consulting, implementation and integration services entered into on a time and materials basis or
fixed fee basis without the use of AssetCare. Over time At a point in time upon completion Significant changes in unbilled revenue and deferred revenue balances are as follows: Balance at January 1, 2019 Acquired in business combination (Note 17(c)) Acquired in business combination (Note 17(b)) Additions Less: transferred to trade and other receivables Less: recognized in revenue Less: Loss allowance Effect of movement in exchange rates Balance at December 31, 2019 Acquired in business combination Additions Less: transferred to trade and other receivables Less: write-offs Less: recognized in revenue Less: applied to outstanding trade receivables Effect of movement in exchange rates Balance at December 31, 2020 Additions Less: transferred to trade and other receivables Less: recognized in revenue Effect of movement in exchange rates Balance at December 31, 2021 1 Unbilled revenue is included in trade and other receivables (Note 6) and relates to the Companys right to
consideration for work completed but not billed at the reporting date. Unbilled revenue is transferred to trade and other receivables when services are billed to customers. 12 | Notes to the Consolidated Financial Statements F-15
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 6 - TRADE AND OTHER RECEIVABLES AND LONG-TERM RECEIVABLES Trade receivables from contracts with customers Unbilled revenue (Note 5) Indirect taxes receivable Income taxes receivable Other receivables Contract asset 1 Loss allowance (Note 26(b)) Total trade and other receivables -
current At December 31, 2021, the total contract assets were $90,200 with the non-current portion of $3,423 included in
other assets (December 31, 2020 - $314,894 total and $161,716 non-current). No new contract assets were recognized and amortization to cost of sales over the life of the contract assets continues to occur until June 30, 2023.
Long-term receivables Long-term receivables represent receivables associated with revenue contracts whereby
certain customers make fixed monthly installment payments over a period of time, ranging from one to three years, for performance obligations delivered upfront. For contracts where all performance obligations were completed except for monthly post
contract and support maintenance, amounts due are included in trade receivables from contracts with customers. Current portion of long-term receivables 1 Non-current portion of long-term receivables 2 Total long-term receivables Net of expected credit loss allowance of $95,064 at December 31, 2021 and $131,364 at December 31, 2020 (Note
26(b)). Net of expected credit loss allowance of $61,619 at December 31, 2021 and nil at December 31, 2020 (Note
26(b)). NOTE 7 - PREPAID EXPENSES AND OTHER ASSETS Prepaid insurance Advances Deposits Prepaid licenses Prepaid services Other prepaid costs Other assets Prepaid expenses and other assets Current
portion Non-current portion 13 | Notes to the Consolidated Financial Statements F-16
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 8 - LEASES The Company leases buildings for its office space, vehicles and other office
equipment. The length of a lease depends on the location of the office, with leases generally ranging from three to five years with an option to renew the lease after that date. The majority of office leases require the payment of variable rent for
operating costs and taxes which are not based on an index or rate and are recognized as rent expense. Lease payments for short-term leases and low-value assets are recognized as rent expense on a straight-line basis over the lease term. The maturity
analysis of the undiscounted cash flows for lease liabilities is included in Note 26(a). a) Right-of-use assets The following table presents the change in carrying amount of the Companys
right-of-use assets: Balance at January 1, 2019 Acquired right-of-use assets (Note 17) Additions to right-of-use assets Depreciation charge for the year Impairment charge for the year Effect of movement in exchange rates Balance at January 1, 2020 Acquired right-of-use assets (Note 17) Additions to right-of-use assets Depreciation charge for the year Impact of lease modification Effect of movement in exchange rates Balance at December 31, 2020 Depreciation charge for the year Impact of lease modification Effect of movement in exchange rates Balance at December 31,
2021 b) Amounts recognized in consolidated statements of loss and comprehensive loss 2021 Accretion of lease liabilities included in finance costs Depreciation of right-of-use assets 1 Expense related to variable lease payments 2 Expense related to short-term leases 2 Included in depreciation and amortization expense. Included in rent expense within general and administrative expense. 14 | Notes to the Consolidated Financial Statements F-17
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 8 - LEASES (continued) c) Amounts recognized in consolidated statements of cash flows 2021 Total cash outflows included in operating activities Total cash outflows included in financing activities NOTE 9 - PROPERTY AND EQUIPMENT Office Leasehold Computer Total Cost: At January 1, 2019 Additions Acquisitions Impairment Effect of movement in exchange rates At December 31, 2019 Additions Effect of movement in exchange rates Balance at December 31, 2020 Additions Disposals Effect of movement in exchange rates Balance at December 31,
2021 Accumulated depreciation: At January 1, 2019 Depreciation Effect of movement in exchange rates At December 31, 2019 Depreciation Effect of movement in exchange rates Balance at December 31, 2020 Depreciation Disposals Other movements Effect of movement in exchange rates Balance at December 31,
2021 Carrying amounts: Balance at December 31, 2020 Balance at December 31, 2021 15 | Notes to the Consolidated Financial Statements F-18
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 10 - INTANGIBLE ASSETS AND GOODWILL a) Intangible assets Cost: At January 1, 2019 Additions Acquisitions Effect of movements in exchange rates Balance at December 31, 2019 Additions Acquisitions Effect of movements in exchange rates Balance at December 31, 2020 Additions Effect of movement in exchange rates Balance at December 31,
2021 Accumulated amortization and impairments: At January 1, 2019 Amortization 1 Impairment Effect of movements in exchange rates Balance at December 31, 2019 Amortization 1 Effect of movements in exchange rates Balance at December 31, 2020 Amortization 1 Effect of movement in exchange rates Balance at December 31,
2021 Carrying amounts: Balance at December 31, 2020 Balance at December 31, 2021 Amortization charges are included in depreciation and amortization in the consolidated statements of loss and
comprehensive loss. b) Goodwill Goodwill is tested for impairment on an annual basis at December 31, and when there
are indicators the carrying amount may be impaired. In reviewing indicators of impairment, the Company considers the relationship between its market capitalization and its book value, among other qualitative and quantitative factors. At
December 31, 2021, the Company had two CGUs, mCloud Technologies Corp. and Agnity (December 31, 2020 - two CGUs). Goodwill is all allocated to mCloud Technologies Corp. as this CGU benefits from prior business combinations. Furthermore, the
Company has no ownership of the Agnity CGU but instead 100% non-controlling interest and this CGU does not include goodwill. The carrying amount of goodwill is as follows: 16 | Notes to the Consolidated Financial Statements F-19
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 10 - INTANGIBLE ASSETS AND GOODWILL - (continued) Opening balance Acquisitions, business combinations (Note 18) Effect of movements in exchange rates Total goodwill The recoverable amount of the mCloud CGU was determined
using fair value less costs of disposal (FVLCD) with reference to the market capitalization of the Company. The impairment test of goodwill at December 31, 2021, concluded that the recoverable amount exceeded the carrying amount of
the CGU, including goodwill, and as such no goodwill impairment existed. At December 31, 2021, the enterprise value implied by market capitalization of the Company was $146,500,000 compared to a net asset carrying value of $36,160,000. NOTE 11 - TRADE PAYABLES AND ACCRUED LIABILITIES Trade payables Accrued liabilities Interest payable Mastercard facility (Note 13) Due to related parties (Note 28) Income taxes payable Indirect taxes payable Other Total trade payables and accrued
liabilities NOTE 12 - LOANS AND BORROWINGS The carrying value of loans and borrowings by entities controlled by the Company are as follows: Term loan Nations Interbanc facility Debenture payable to Industry Canada Loan payable to related party 1 Oracle financing 2 Other loans and financing Total 3 Current Non-current Loan assumed as part of CSA Acquisition (Note 17(d)) which bears interest at 6% and matures in
January 2023. Interest is payable annually and accrued interest is included in trade payables and accrued liabilities. Financing arrangements provided by Oracle Credit Corporation (Oracle) bearing
interest between 6.2% and 6.6%. Interest is due in quarterly installments with loans maturing in May 2023 and February 2024. During the year ended December 31, 2021, proceeds from additional funding received was $577,378 (December 31, 2020 -
$495,944) Note 30(b) includes the reconciliation of movements of liabilities to cash flows arising from
financing activities. 17 | Notes to the Consolidated Financial Statements F-20
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 12 - LOANS AND BORROWINGS (continued) Term loan In 2019, a subsidiary of the Company, mCloud Technology Services Inc. (MTS),
entered into a term loan facility with Fiera Private Debt Fund VI LP (Fiera, formerly Integrated Private Debt Fund VI LP) in the amount of $13,000,000. The term loan payments are blended payments of principal and interest until maturity
in August 2026 and the loan is secured against the assets of MTS. The Company and certain subsidiaries are guarantors. On November 9, 2021, the Company amended its term loan and amended the associated
intercreditor agreement between Fiera, ATB Financial (ATB) and the Company. The intercreditor agreement determines the priority of security interests in the case of default, with Fiera having first priority on all assets other than
accounts receivable (Note 13). The amendments to the term loan include: increase in interest rate from 6.85% to 7.5% per annum; certain changes to financial covenants which are applicable for the period from July 1, 2021 to
December 31, 2022; and, the addition of two mCloud subsidiaries as additional guarantors. The principal amount of the loan and the maturity date of August 7, 2026 remained the same. During the year ended December 31, 2021 there were $2,343,036 of principal and interest
payments made. A modification loss associated with this change in terms of $138,908 is included in finance costs in the consolidated statement of loss for the year ended December 31, 2021 with an offsetting increase in the carrying value of the
term loan. Transaction costs of $191,310 were incurred and are netted against the carrying value of the term loan. Breach of loan covenants The term loan contains
covenants with quarterly and quarter end metrics. For the quarter ended December 31, 2021, the Company did not meet certain minimum covenants and therefore the term loan is due on demand and has been classified as current until such time as the
covenants are in compliance. For the quarter ended March 31, 2022, the Company continued not to meet certain minimum covenants and did not receive a waiver from the lender. Nations Interbanc facility Under a factoring and security agreement with Nations Interbanc (Nations), Agnity, an entity controlled by the Company, receives advances up to a maximum of US$2,000,000 at any one
time from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing agreement and the accounts receivables factored still carry credit risk, are not sold, and
are not derecognized from Agnitys statement of financial position. Nations advances funds up to a value of 85% of the accounts receivables factored. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the first 30 days
and a daily proration of 0.06% per day thereafter. The amount of funds advanced varies and is dependent on the cash requirements of Agnity. During the year ended December 31, 2021, Nations advanced $9,246,693 and Agnity repaid $7,954,698
of this balance. NOTE 13 BANK INDEBTEDNESS ATB Financial revolving operating facility Operating loan facility 1 Bank overdraft
1 Total At December 31, 2020, the Company had access to an operating loan facility and Mastercard
facility. On April 15, 2021, the operating loan facility was repaid and closed. The Mastercard facility remains in place and at December 31, 2021, $296,669 was drawn (December 31, 2020 - $600,590) and this
amount is included in trade payables and accrued liabilities on the consolidated statements of financial position. The bank overdraft at December 31, 2020 was repaid in October 2021. 18 | Notes to the Consolidated Financial Statements F-21
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 13 BANK INDEBTEDNESS (continued) ATB Financial Facility On May 17, 2021, one of the Companys subsidiaries executed a commitment letter
for a $5,000,000 secured revolving operating facility with ATB which is a financial institution wholly owned by the Province of Alberta. The facility is available by way of a variety of instruments. On June 24, 2021, $2,500,000 was drawn which
was the maximum amount under the intercreditor agreement with Fiera at that time. The facility is due on demand, bears interest at the prime rate plus 2% per annum with interest and fees due at the end of each month and may be prepaid without
penalty. On November 8, 2021, the
Company and ATB amended the commitment letter between the parties governing the revolving operating facility. The amendment added an accordion feature which allows the Company to request ATB to increase the maximum principal amount of the facility
from $5,000,000 to $10,000,000, funded in increments of $1,250,000, subject to certain requirements and approval from Fiera and ATB under an intercreditor agreement. The facility is subject to certain reporting and financial covenants. The Company was in
compliance with these covenants at December 31, 2021. The facility is secured against certain assets of the Company and its principal subsidiaries. In addition, the Company and certain of its subsidiaries have provided an unlimited guarantee
for repayment of all amounts due under the facility. As part of the commitment letter amendment, the Company agreed to issue warrants to ATB (Note 15). On November 9, 2021, Fiera, ATB and the Company amended the intercreditor agreement
which allows the Company to draw the full $5,000,000 of the facility subject to a limit which is equal to the lesser of $5,000,000 and the aggregate of eligible accounts receivable less priority payables as defined in the agreement. An additional
$950,000 was drawn under the facility on November 12, 2021. At December 31, 2021, as a result of the Fiera covenant breach ATB has the ability to restrict further advances under the ATB facility.
NOTE 14 CONVERTIBLE DEBENTURES 2019 Convertible debentures liability (a) 2021 Convertible debentures liability (b) 2021 Convertible debentures embedded derivative (b) Total Current debentures Non-current debentures 2019 Convertible debentures Opening balance Conversion of debentures into common shares Interest paid Accreted interest at effective interest rate Carrying amount of liability component Less: interest payable Total 19 | Notes to the Consolidated Financial Statements F-22
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 14 CONVERTIBLE DEBENTURES (continued) 2019 Convertible debentures (continued) In July 2019, the Company completed a
private placement offering of convertible unsecured subordinated debentures (the 2019 Debentures) for total aggregate gross proceeds of $23,507,500 and net cash proceeds of $22,865,049. The 2019 Debentures bear interest at a rate of 10% per annum, paid quarterly, and mature on May 31, 2022, at which time the outstanding
principal amount of $23,457,500 and any unpaid interest is repayable in cash if the 2019 Debentures have not been converted at the option of
the holder or otherwise extinguished. The principal amount of the 2019 Debentures is convertible into 1,563,833 units of the
Company at the option of the holder at any time prior to maturity at a conversion price of $15.00 per unit. Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable to acquire one common share at an
exercise price of $22.50 until June 2024. 2021 Convertible debentures Issuance of Convertible Debentures On December 7, 2020, the Company commenced efforts to raise an aggregate of
US$10,000,000 through a private placement offering (the Offering) of convertible unsecured subordinated debentures (the 2021 Debentures) at a price of US$100 per debenture. At December 31, 2020, total proceeds of
$5,285,997 (US$4,146,825) had been received associated with two tranches of the Offering; however, as the debenture certificates were not yet issued the proceeds were recorded as other liabilities in the consolidated statement of financial position
at December 31, 2020 (Note 16). The Offering closed in six tranches between December 7, 2020 and May 25, 2021
with total gross proceeds of $11,328,870 (US$8,884,000). Each tranche had a specific maturity date and USD conversion price which was set at the date of close. The conversion prices ranged between $4.11 (US$3.42) and $8.28 (US$6.60) depending on the
tranche. Up until the date of
conversion as described below under Conversion of Convertible Debentures, the maturity date of the 2021 Debentures was 36 months following the closing date of the applicable tranche. The principal amounts of the 2021 Debentures were
convertible into common shares at the option of the holder at any time prior to maturity at the calculated conversion price stated in the debenture. The 2021 Debentures bore interest at 8% per annum, payable, at the option of the Company, in
cash or common shares of the Company calculated in accordance with the debenture agreement which considered such factors as the price of the common stock on the TSX.V converted into USD at the date of record. The Company elected to pay all accrued
interest in common shares which were issued on the conversion date. On initial recognition, the 2021 Debentures included a host liability and embedded derivative conversion option. The fair value of the embedded derivative was determined first, with the
residual amount of the total fair value of the convertible debentures allocated to the host liability. The host liability was classified as a financial liability recognized at amortized cost and the embedded derivative conversion option was an
embedded derivative classified as fair value through profit or loss (FVTPL). The fair value measurement is further described in Note 26(b) - Financial Instruments under Valuation methodologies used in the measurement of fair value for
Level 3 financial liabilities. Conversion of Convertible Debentures
On July 12, 2021, the Company announced that it had entered into
Debt Conversion and Exchange Agreements (Conversion Agreements) with holders of more than 99.2% of the outstanding principal amount of the 2021 Debentures subject to a number of conditions including TSX.V approval. The Conversion
Agreements provided for certain changes in terms including a reduced conversion price on certain tranches of the 2021 Debentures and the addition of a common share purchase warrant for each common share to be issued upon conversion. On August 13, 2021, the Company received TSX.V
approval and issued an aggregate of 2,107,787 common shares and 2,107,787 common share purchase warrants (Note 19(a)) to extinguish 99.2% of the principal and accrued interest thereon to the date of the Conversion Agreements. The following reconciliation includes: (a) the
original issuance of and accounting for the convertible debentures up to July 12, 2021; (b) the derecognition of the host liability and embedded derivative on July 12, 2021 as the change in terms of the agreement was determined to be
a substantial modification and resulted in recognition of a new financial liability at this date; (c) the extinguishment of the amount due under the 2021 Debentures on August 13, 2021 in exchange for common shares and warrants; and
(d) the accounting for the remaining debenture which was not converted. The warrants issued continue to be financial liabilities of the Company as further described in Note 15. 20 | Notes to the Consolidated Financial Statements F-23
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 14 CONVERTIBLE DEBENTURES (continued) 2021 Convertible debentures (continued) Proceeds from issue of convertible debentures Fair value adjustments (Note 23) Total fair value of convertible debentures Less: fair value of embedded derivative Less: transaction costs 1 Carrying value of liability at inception Interest expense associated with liability Debt extinguishment, including interest payable Foreign exchange adjustments Less: accrued interest included in accrued liabilities Carrying value of liability at end of
period 2 Total transaction costs were $1,061,854 which include cash compensation paid to brokers and the value of 115,760 broker
warrants issued. Transaction costs of $401,250 allocated to the embedded derivative portion of the convertible debentures were expensed in finance costs in the consolidated statements of loss and comprehensive loss for the year ended
December 31, 2021. Convertible debt in the principal amount of US$75,000 which matures January 2024, bears interest at 8% per annum
and is convertible to the Companys shares at a conversion price of $5.84 (US$4.59). Fair value of embedded derivative at inception Fair value decrease 1 Derecognition of embedded derivative on conversion Foreign exchange adjustments Balance, embedded derivative The fair value of the embedded derivative is remeasured at the end of each reporting period and on conversion and
recognized in fair value (gain) loss on derivatives in the consolidated statements of loss and comprehensive loss (Note 23). NOTE 15 - WARRANT LIABILITIES Derivative warrant liabilities - 2021 Debentures (a) Derivative warrant liabilities - USD equity financing (b) Warrant liability related to business acquisition (c) Other warrant liability (c) Total, all current 21 | Notes to the Consolidated Financial Statements F-24
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 15 - WARRANT LIABILITIES (continued) warrant liabilities The Company issued
warrants in conjunction with debt and equity transactions. Certain of these warrants are classified as derivatives which are recognized as financial liabilities. The estimated fair value of the derivative warrant liabilities has been calculated
using the Black-Scholes model. At the issuance date and each reporting date until warrants are exercised, the fair value of the liability is remeasured, with changes in the fair value recorded as gains or losses in the consolidated statements of
loss and comprehensive loss. In
conjunction with the USD equity offering described at (b) below, the Company agreed to list the warrants issued as part of the unit offering on the NASDAQ. On February 15, 2022, these warrants commenced trading under the symbol MCLDW (Note
31). Derivative warrant liabilities are
classified as a Level 3 fair value measurement as further described in Note 26. There were no exercises of the warrants described below since issuance. a) Warrants associated with 2021 Debentures On August 13, 2021, the Company issued 2,107,787 common share purchase warrants in
conjunction with the conversion and extinguishment of the 2021 Debentures (Note 14(b); 19(b)). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$6.87 and mature in August
2024. The fair value of the warrants at August 13, 2021 was $5,947,689. At December 31, 2021, the warrants were remeasured at a fair value of $1,868,541 and the Company recorded a gain on remeasurement since initial recognition of $4,177,825. The
Black-Scholes model inputs and assumptions include: Share price at date of valuation Exercise price Risk free rate Expected life (years) Expected volatility
1 Fair value per warrant 2 Expected volatility at December 31, 2021 measured at implied volatility of traded
warrants. Considers a liquidity discount of 20% in determining the fair value per warrant as these warrants
are not publicly traded. b) Warrants associated with USD equity financing On November 29, 2021, the Company issued 2,415,000 common share purchase warrants in
conjunction with the November 2021 USD unit offering (Note 19). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$4.75 and mature five years after issuance. The fair value of
the warrants at issuance was $5,302,004 (US4,158,396) and at December 31, 2021, the remeasured fair value was $6,106,596. The Black-Scholes model inputs and assumptions include: Share price at date of valuation Exercise price Risk free rate Expected life (years) Expected volatility
1 Fair value per warrant Expected volatility at represents implied volatility of the Companys traded
warrants. 22 | Notes to the Consolidated Financial Statements F-25
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 15 - WARRANT LIABILITIES (continued) Other warrant liabilities Warrant
liability related to business acquisition - Associated with the acquisition of Agnity, the Company assumed a warrant liability whereby the holder of the warrant has the option to convert the warrant into shares of Agnity, not the Company, by
April 15, 2022, or receive a cash payment of US$552,250 at any time before the expiry of the warrant. The liability is measured at the Canadian dollar equivalent to its cash redemption amount which varies as a function of movements in exchange
rates. Warrant liability related
to ATB Financial - At December 31, 2021, the Company had an obligation to issue warrants to ATB (Note 13). The fair value of the warrants was measured at the date the services were received in the amount of $195,066. On January 17,
2022, the Company issued 183,486 share purchase warrants to ATB to purchase an equivalent number of common shares of the Company at an exercise price of $5.45 per share, maturing one year from date of issuance (Note 31). NOTE 16 - OTHER LIABILITIES US Government loans 2021 Debentures subscriptions payable (Note 14(b)) Total Current portion 1 Non-current portion Includes US Government loans of $717,841 at December 31, 2020. These forgivable loans are
considered to be government grants when there is reasonable assurance that they will be forgiven. During the year ended December 31, 2021, the Company received two additional US Government loans as part of the Paycheck Protection Program (PPP) totaling $840,845
(US$668,689), each bearing interest at 1% per annum with maturity dates in February and May 2026. During the year ended December 31, 2020, the Company received four PPP US Government loans totaling $1,120,139 (US$805,246). A portion or the
entirety of the amounts funded may be forgiven if all the funds are used for qualifying expenses which include payroll costs, rent and utility costs, and employment and compensation levels are maintained. The Company has used the entire loan amounts
for qualifying expenses and as such expects these loans will be forgiven and no principal or interest payments will be made. During the year ended December 31, 2021, five government loans were forgiven resulting in $1,825,237 being included in
other income (Note 24). 23 | Notes to the Consolidated Financial Statements F-26
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS Acquisition of Royalty interests On January 22, 2019, the Company executed a Purchase Agreement with Flow Capital Corp. (Flow) pursuant to which the Company acquired
Flows interest in a Royalty Purchase Agreement (Royalty Agreement) with Agnity Global, Inc. (Agnity). According to the Purchase Agreement, the Company assumed the Royalty agreement and acquired an interest in a
financial asset with the following characteristics: a receivable owing by Agnity to Flow of USD $2,834,750; a monthly royalty payment stream until October 31, 2020 equal to the greater of: A monthly amount of USD $41,667; or 4.25% of Agnitys revenue for each calendar month; and commencing November 1, 2020, a monthly royalty payment stream equal to 4.25% of Agnitys revenue for each
calendar month in perpetuity. The Royalty Agreement includes a formula by which the royalty percentage is
proportionately adjusted for any subsequent further advances to or repayments from Agnity. As consideration for acquiring the interest in the Royalty
Agreement, the Company paid $204,604 (USD $153,227) in cash at the closing date and entered into the following agreements with Flow: A secured loan agreement for USD $2,000,000. The loan bears interest at 25% per annum and is due on demand. The
Company had the option to repay 100% of the loan, at any time, by paying an amount equal to the principal of the loan and any unpaid interest. Upon prepayment of the loan, the Company, at the option of Flow (the Flows option), was
obligated to pay either: Cash of USD $525,000; or Issue 50,000 common shares of the Company (repayment shares) The fair value of the loan was initially determined to be $2,670,600 (USD $2,000,000) which is equivalent to its face value as it is due on demand. It is
classified as other financial liabilities and subsequently measured at amortized cost. The fair value of Flows option to receive either USD $525,000 in cash or repayment shares upon prepayment of the loan by the Company was determined to be
USD $606,495 on initial recognition. The option was accounted for as a compound instrument which includes a liability component of USD $525,000 and an equity conversion option of USD $81,495. The liability component was classified as other financial
liabilities and subsequently measured at the amortized cost while the equity component was accounted for as an equity instrument in contribute surplus. The Company used the Black-Scholes option model to determine the fair value of the option using
the following inputs at January 22, 2019: Share price Risk free rate Expected life Expected volatility Expected dividends 24 | Notes to the Consolidated Financial Statements F-27
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of Royalty interests (continued) On July 26, 2019, the Company settled the USD $2,000,000 loan and Flows option in cash of
$2,703,148 and the issuance of 50,000 common shares. The value attributable to the option of USD $606,495 was reclassified from liabilities and contributed surplus to share capital (note 19a)). The Company also agreed to issue a quantity of its common shares based on the trading price of the Company.
Specifically, for the period after January 22, 2019 and prior to January 22, 2025, if the five-day volume weighted average trading price of the Companys common shares equals or exceeds: $30.00, 50,000 common shares will be issued; $60.00, 33,333 common shares will be issued; $90.00, 33,333 common shares will be issued. The fair value of these shares issuable to Flow was determined to be $712,000 on initial recognition. They are accounted for as equity instruments and
recorded in contributed surplus. The Company used Black-Scholes option model to determine the fair value of these shares using the following inputs at January 22, 2019: Barrier share price Risk free rate Expected life Expected volatility Expected dividends As of December 31, 2021, 2020 and 2019, none of the share trading price thresholds noted above have been met. Acquisition of Agnity On April 22, 2019, the Company executed an amending agreement with Agnity to modify the terms of the Royalty Agreement acquired. Pursuant to the
amending agreement, both parties agreed to establish an Operations Committee for which at all times the Company has the right to nominate a majority of the members. As consideration for the amendment, the Company agreed to fix the royalty payment at
US$10,000 per month commencing March 2019 and to assume $43,050 of Agnitys liabilities payable to a third party. Pursuant to the amending
agreement the Company determined that it had obtained control over Agnity and its subsidiaries pursuant to IFRS 10 Consolidated Financial Statements. The Company considered several factors in determining if and when it gained control over
Agnity including, if it had the right and ability to direct the relevant activities of the entity, the ability to significantly affect its returns through the use of its rights, and whether it had exposure to variable returns. Factors evaluated included, but were not limited to, delegation of power by Agnitys Board for the Company to direct Agnitys relevant
activities through the formation and activities of the Operations Committee controlled by the Company. Determination of whether the Company has obtained control over Agnity involves judgement based on interpretation of the amending agreement with
Agnity and identification and analysis of the relevant facts. In addition, judgement was required to determine if the acquisition represented a business combination or an asset purchase. The Company determined that Agnity and its related
subsidiaries represented a business as the assets were an integrated set of activities with inputs, processes and outputs. Accordingly, the
acquisition of Agnity is accounted as a business combination effective on April 22, 2019 using the acquisition method in accordance with IFRS 3 Business Combinations. Given the Company owns nil voting interests in Agnity, the
non-controlling interest is measured at the 100% of the acquired net identifiable assets of Agnity. 25 | Notes to the Consolidated Financial Statements F-28
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of Agnity (continued) Agnity develops and sells software applications and technology services that enable telecommunication
service providers, network equipment manufacturers and enterprises to design, develop, and deploy communication-centric application solutions on a world-wide basis. Taking control of Agnity has enabled the Company to gain access to Agnitys
patented technology and its customer base. In addition, Agnitys communication platform ensures that AssetCare deployments around the globe are assured of connectivity, supported by Agnity telecommunication solutions. The following table summarizes the acquisition-date fair value of each major class of consideration transferred, the recognized amounts of the
identifiable assets acquired, and liabilities assumed, and the resulting measurement of 100% NCI recorded by the Company at the date of acquisition: Consideration transferred: Change in fair-value of interest in Royalty Agreement (i) Assumption of Agnitys liabilities Total consideration transferred The fair value of interest in the Royalty Agreement at April 22, 2019 was estimated using the discounted cash flow
model. The major inputs employed in the model include forecasted royalty payments and the discount rate of 16%. Fair value of assets and liabilities recognized: Cash and cash equivalents Trade and other receivables Prepaid expenses and deposits Long term receivable Property and equipment Intangible Asset Technology Intangible Asset Customer Relationship Accounts payable and accrued liabilities Deferred revenue Loans and borrowings Warrant liability (i) Due to related party Deferred income tax liability Net identifiable assets acquired (liabilities
assumed) Allocation to non-controlling interest A warrant was issued by Agnity in 2015 which entitles the warrant holder to acquire 6,324,660 common shares of Agnity
at the exercise price of $0.000036 per share at any time until April 15, 2022. The exercise price of the warrant is subject to certain anti-dilution adjustment provisions in the event of certain capital or business transactions. The warrant
holder has the option to demand a cash settlement of the warrant for US$552,250 at any time prior to its expiry date if the warrant is not exercised. It is classified as other financial liabilities and measured at its redemption amount of US$552,250
or $737,419 in Canadian dollars on acquisition date, which is equivalent to its assessed acquisition date fair value. The fair value in Canadian dollar equivalent as at December 31, 2021 was $709,835 (December 31, 2020 - $710,924;
December 31, 2019 - $725,086). There have been no adjustments to the preliminary purchase price allocation recognized at
December 31, 2019 in the period ended December 31, 2020. 26 | Notes to the Consolidated Financial Statements F-29
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of Agnity (continued) There are no acquisition costs associated with this transaction as the business combination with Agnity
was effected by way of assessed control in accordance with IFRS 3 and 10. Acquisition of mCloud Technologies Services Inc. On July 10, 2019, the Company closed a series of merger and acquisition transactions resulting in the acquisition of 100% control of mCloud
Technologies Services Inc. (MTS), formerly known as Autopro Automation Consultants Ltd. (Autopro). The acquisition was completed by way of an amalgamation between 2199027 Alberta Ltd., a subsidiary of the Company, and Fulcrum
Automated Technologies Ltd. (Fulcrum), an entity established to facilitate the acquisition, with the amalgamated entity being a wholly owned subsidiary of the Company, named Autopro Automation Ltd. Immediately prior to the amalgamation,
Fulcrum acquired MTS. The consideration transferred to the original shareholders of MTS included cash, issuance of promissory notes and 1,200,000 common shares of the Company. MTS is a professional engineering and integration firm that specializes in design and implementation of industrial automation solutions, focusing on
Canadian oil and gas companies. The acquisition has provided the Company with an increased share of the market through access to MTS customer base in the Canadian oil and gas industry, petrochemical, and process manufacturing markets. The following table summarizes the acquisition-date fair value of each major class of consideration transferred, the recognized amounts of the
identifiable assets acquired, and liabilities assumed, and the resulting value of goodwill: Consideration transferred: Cash consideration Fair value of demand promissory notes issued(1) Fair value of common shares transferred(2) Total consideration transferred (1) Comprised of two promissory notes with fair-value of
$6,000,000 and $12,000,000 which were fully repaid and settled on July 10 and August 8, 2019 respectively; there was no gain or loss on settlement. (2) The fair value of shares transferred as consideration is based on the quoted share price on the
date of acquisition 27 | Notes to the Consolidated Financial Statements F-30
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of mCloud Technologies Services Inc. (continued)
Fair value of assets and liabilities recognized: Cash and cash equivalents Trade and other receivables (includes Unbilled revenue of $2,347,207) Prepaid expenses and deposits Right-of-use assets Property and equipment Intangible asset Customer relationships Intangible asset Technology Accounts payable and accrued liabilities Deferred revenue Lease liabilities Deferred income tax liability Fair value of net assets acquired Goodwill There have been no adjustments to the preliminary purchase price allocation recognized at December 31, 2019 or in the
periods ended December 31, 2020. Goodwill arising from the acquisition is attributable mainly to the skills and technical talent of MTS
work force and the synergies expected to be achieved from integrating MTS into the Companys existing business. The talent and domain expertise of MTS workforce has enabled the Company to establish credibility in the oil and gas,
petrochemical, and process manufacturing markets, and accelerate the development of artificial intelligence applications geared toward process industries. None of the goodwill recognized is expected to be deductible for tax purposes. Transaction costs of $9,869,589 were incurred in connection with the acquisition including consulting fees of $750,000, legal and professional fees of
$239,589 and fair value of $8,880,000 for 800,000 common shares issued to the original shareholders of Fulcrum for brokering and due diligence services and were recognized in the consolidated statement of loss and comprehensive loss. 28 | Notes to the Consolidated Financial Statements F-31
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of Construction Systems Associates, Inc. USA
On January 24, 2020, the Company completed its
acquisition of all the outstanding and issued common shares of Construction Systems Associates, Inc. USA (CSA). The acquisition was accounted for as a business combination using the acquisition method whereby the assets acquired, and the
liabilities assumed were recorded at fair value. At acquisition date the fair values assigned to intangible assets, goodwill and the deferred tax liabilities were measured on a provisional basis and were revised by the Company as additional
information was received. On
January 24, 2021, the measurement period for the acquisition ended and there were no further measurement period adjustments during the year ended December 31, 2021. The following table summarizes the final balances of each major class of
consideration transferred, the recognized amounts of the identifiable assets acquired and liabilities assumed, and the resulting value of goodwill. Consideration transferred: Cash consideration Fair value of common share consideration Fair value of contingent consideration payable Total consideration The fair value of common shares transferred as consideration is based on the quoted share price on the date of
acquisition, which is at $18.18 per common share. The fair value of the contingent
consideration payable was based on an estimated weighted probability of certain revenue and EBITDA targets being met in the 2-year period following the acquisition date. At December 31, 2021, the Company assessed the fair value of the
contingent consideration to be nil as these targets were not expected to be met and as such $838,932 was recognized in other income in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021 (Note
24). The Company is required during the
measurement period to retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period adjustments
from acquisition date to the end of the measurement period are reflected above with the cumulative changes increasing goodwill. The impact on net income (loss) of recognizing these adjustments to the provisional amounts as if the accounting had been
completed at the acquisition date are limited to a decrease in amortization of intangibles and related foreign currency translation differences. 29 | Notes to the Consolidated Financial Statements F-32
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 17 - BUSINESS ACQUISITIONS (continued) Acquisition of kanepi On October 8, 2020, the Company completed its acquisition of all the outstanding and
issued common shares of kanepi. kanepi provides advanced visual analytics solutions designed to deliver an immediate and positive impact on the industrial operations of asset intensive industries. The acquisition was accounted for as a business
combination using the acquisition method whereby the net assets acquired, and the liabilities assumed were recorded at fair value. At acquisition date the fair values assigned to intangible assets, goodwill and the deferred tax liabilities were
measured on a provisional basis. The
Company is required during the measurement period to retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. On
October 8, 2021, the measurement period for the acquisition ended and the following table summarizes the acquisition-date fair value and the final balances of each major class of consideration transferred, the recognized amounts of the
identifiable assets acquired and liabilities assumed, and the resulting value of goodwill. The preliminary balances were reported in the consolidated financial statements for the year ended December 31, 2020 and there were no measurement period
adjustments. Consideration transferred: Cash consideration Fair value of common share consideration Fair value of contingent consideration payable Total consideration The fair value of the contingent consideration payable is
based on an estimated weighted probability of certain revenue or customer acquisition targets being met in a two-year period from the acquisition date. At acquisition date and December 31, 2020, the fair value of the contingent consideration
was determined to be $568,638 based on estimates of achievement of targets. The fair value of the contingent consideration is determined using a discounted cash flow model at a discount rate of 27%. At December 31, 2021, the Company assessed
the likelihood of achievement of the targets and determined the fair value of the contingent consideration decreased by $171,092 and this amount was recognized in other income in the consolidated statements of loss and comprehensive loss for the
year ended December 31, 2021 (Note 24). 30 | Notes to the Consolidated Financial Statements F-33
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 18 - BUSINESS ACQUISITION PAYABLE Opening balance Contingent consideration changes related to CSA (Note 17) Contingent consideration changes related to kanepi (Note 17) Effect of foreign exchange differences Current portion Non-current portion During the year ended December 31, 2021, the Company
determined that the amount of the contingent consideration recognized at the date of acquisition of Construction Systems Associates, Inc. USA (CSA) would not be payable as the operational performance metrics were not expected to be
achieved. In addition, the fair value of the contingent consideration recognized at the date of acquisition for kanepi Group Pty Ltd. and its subsidiaries (kanepi) was remeasured based on managements estimate of the likelihood the
performance metrics would be met by October 2022, resulting in a decrease in fair value and an offsetting amount recognized as other income. At December 31, 2021, $383,368 of contingent consideration payable remains associated
with the kanepi acquisition. The remaining balance of $1,015,604 relates to the acquisition consideration payable associated with the Field Diagnostic Services, Inc. (FDSI) acquisition completed in 2017. NOTE 19 - SHARE CAPITAL Common shares The Company has an unlimited number of authorized voting shares with no par value. The
following is a summary of shares issued during the year ended December 31, 2021. The Company issued 71,190 common shares on exercise of Restricted Share Units (RSUs) (Note 20(b)). Brokered public offering On April 15, 2021, the Company closed a public offering of 2,300,000 units of the Company at a price of $6.30 per unit for aggregate gross proceeds of $14,490,000. Each unit consists of
one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at an exercise price of $8.55 for 36 months following closing subject to adjustment in certain events. The public offering was brokered, and the
underwriting agent received cash commissions of $1,014,300 or 7% of the gross proceeds under the offering. In addition, the Company also incurred $459,986 of share issuance costs in connection with the offering, for total net proceeds of
$13,015,714. Net proceeds were allocated $12,395,918 to share capital with the residual of $619,796 allocated to warrants which is included in contributed surplus in the consolidated statement of changes in equity for the year ended
December 31, 2021. Non-brokered private placement offering On August 13, 2021, the Company completed a non-brokered private placement, pursuant
to a subscription agreement dated July 12, 2021, of 75,676 units of the Company at a unit price of $5.55 for gross proceeds of $420,000. Each unit consists of one common share and one share purchase warrant at an exercise price of $8.55 per
common share with warrants expiring April 2024. Net proceeds of $420,000 were allocated fully to the common shares. 31 | Notes to the Consolidated Financial Statements F-34
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 19 - SHARE CAPITAL (continued) Conversion of 2021 Convertible Debentures On August 13, 2021, the Company extinguished 99.2% of the principal and accrued
interest of the 2021 Debentures (Note 14(b)). The principal and interest payable balance of converted debentures was settled by issuing an aggregate of 2,107,787 common shares and 2,107,787 common share purchase warrants. The value of the common
shares at August 13, 2021, net of transaction costs was $14,436,728. See Note 15 for description of warrants issued. USD Brokered public offering On November 29, 2021, the Company closed a public offering of 2,100,000 units of the
Company at US$4.50 per unit for aggregate gross proceeds of $12,040,198 (US$9,450,000) and net proceeds of $10,912,251 after underwriting discounts and commissions payable. On December 3, 2021, an additional 315,000 units, representing the
over-allotment option under the offering, were issued for aggregate gross proceeds of $1,820,070 (US$1,417,450) and net proceeds of $1,674,464. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant
entitles the holder to purchase one common share, a warrant share, at an exercise price of US$4.75 per warrant share for five years following closing subject to adjustment in certain circumstances. The common shares and the share purchase warrants
were issued separately. Gross proceeds
were allocated $5,302,004 to the warrants with the residual of $8,558,264 allocated to share capital. Transaction costs of $1,738,087 associated with the issuance of the units were allocated proportionately with the allocation of gross proceeds with
$1,073,262 net against share capital and $664,825 allocated to finance costs (Note 22). The Company also issued warrants to the underwriter of the offering to purchase 126,000 common shares at an exercise price of US$4.95 which are exercisable to May 22, 2025. The fair value
of these warrants of $162,947 were recorded to contributed surplus and are considered transaction costs of which a portion is expensed in the consolidated statements of loss and comprehensive loss. In addition to the transaction costs associated with the issuance of the units, the Company
incurred additional expenses related to the registration process and listing of its common shares on the NASDAQ which are included in general and administrative costs in the consolidated statements of loss and comprehensive loss. Common shares in escrow At December 31, 2021, the Company has 681,024 (December 31, 2020 -
1,674,284; December 31, 2019 - 2,381,826) common shares subject to escrow conditions resulting from business combinations and asset acquisitions in prior years. There were no additional common shares subject to escrow conditions added
during the year ended December 31, 2021. Escrow restrictions will be released on 458,599 shares in the year ending December 31, 2022, and the remaining 222,425 shares in the year ending December 31, 2023. 32 | Notes to the Consolidated Financial Statements F-35
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 19 - SHARE CAPITAL (continued) Shares issued for debt settlement During February and September 2019, the Company issued 1,964 and 5,000 common shares respectively for settlement of outstanding debt to vendors for
services provided. The Company valued these common shares based on the trading price of the Companys shares on the date of issuance. The Companys warrants outstanding at December 31, 2021, 2020 and 2019 are as follows and includes warrants classified as equity-settled and
warrants classified as financial liabilities (Note 15): Weighted Average $ December 31, 2018 Issued Exercised Expired December 31, 2019 Issued Exercised Expired December 31, 2020 Issued Expired December 31, 2021 During the year ended December 31, 2021, the Company issued share purchase warrants in conjunction with the
following transactions: Equity classified warrants 115,760 warrants to brokers in connection with the issuance of the 2021 Debentures (Note 14(b)). Warrants issued to
brokers are denominated in USD with exercise prices that range between $4.12 (US$3.42) and $8.28 (US$6.60) and are exercisable for 24 months with maturity dates ranging from December 2022 to May 2023. The total fair value of warrants issued to brokers of $294,894 was calculated using the Black-Scholes model with the following weighted
average inputs and assumptions: issue date share price of $6.39; exercise price of $5.85; risk-free rate of 0.26%; expected life of 1.88 years; expected volatility of 69%; and no expected dividends. 2,300,000 warrants in connection with the April 15, 2021 public offering (Note 19(a)); 75,676 warrants in connection with the non-brokered private placement offering (Note 19(a)); and 126,000 warrants issued to the underwriter of the November 2021 USD public offering (Note 19(a)). The total fair value
of warrants of $162,947 was calculated using the Black-Scholes model with the following inputs and assumptions: issue date share price of $5.70; exercise price of $6.31; risk-free rate of 1.04%; expected life of 3.48 years; expected volatility of
45%; and no expected dividends. 33 | Notes to the Consolidated Financial Statements F-36
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 19 - SHARE CAPITAL (continued) Derivative liability warrants 2,107,787 warrants in connection with the August 13, 2021, conversion and interest settlement of the majority of the
2021 Debentures (Note 14(b)); and 2,415,000 warrants in connection with the November 2021 USD public offering (Note 19(a); Note 15). Warrants outstanding at December 31, 2021 were as follows: June 2022 July 2022 December 2022 January 2023 January 2023 February 2023 March 2023 May 2023 April 2024 June 2024 August 2024 January 2025 May 2025 July 2025 November
2026 The weighted average remaining contractual life of outstanding warrants was 3.09 years at December 31, 2021
(December 31, 2020 - 2.29 years; December 31, 2019 - 1.37 years). Exercise prices for warrants denominated in USD as presented above were converted to the C$ equivalent exercise prices on the date of the applicable transaction. 34 | Notes to the Consolidated Financial Statements F-37
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 20 SHARE-BASED PAYMENT ARRANGEMENTS The Company has an equity incentive plan (the Plan) which allows management to grant incentive stock options, non-statutory stock options,
share appreciation rights, restricted share awards, restricted share unit awards, and other share awards to selected directors, employees, and consultants. A maximum of 10% of the issued and outstanding common shares of the Company may be reserved
for issuance under the Plan. The Company recorded share-based compensation as follows. Stock options (a) Restricted share units (b) Total Stock Options The board of directors or designated committee set the terms of the share-based payment arrangements under the Plan; however, the general terms of stock
options are as follows. The options have a maximum term of 10 years and vest as to 33% on each anniversary date of the date of grant over three years. In limited cases, options vest immediately. For the majority of grants, the exercise price is
equal to the closing price of the Companys common shares on the grant date. On the date the option holder ceases to be employed, vested options are exercisable for a period of three months following that date, and unvested options are
forfeited. Compensation is recognized on a graded vesting basis over the vesting period. Movement in the number of stock options outstanding and
their related weighted-average exercise prices were as follows: Opening balance Granted Exercised Forfeited Expired Cancelled Outstanding at December 31 Exercisable at December 31 35 | Notes to the Consolidated Financial Statements F-38
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 20 SHARE-BASED PAYMENT ARRANGEMENTS (continued) Stock Options (continued) The following summarizes information about the Companys stock options outstanding at
December 31, 2021: $5.67 - $8.70 $8.71 - $10.95 $10.96 - $12.59 $12.60 - $18.02 At December 31, 2021, if all exercisable options were exercised total cash received would be $3,057,750 (December 31,
2020 - $1,886,555; December 31, 2019 - $1,206,687). Unrecognized share-based compensation expense related to unvested stock options granted was $1,824,812 at December 31, 2021 (December 31, 2020 - $710,934; December 31, 2019 -
$1,061,013). Measurement of fair values for equity-settled arrangements The weighted average fair value of stock options granted during the year ended December 31, 2021 of $4.25 per option, or $2,061,007 (December 31,
2020 - $4.54 per option or $698,949; December 31, 2019 - $4.91 per option or $1,597,043) was calculated at the grant date using the Black-Scholes model with the following weighted average assumptions and inputs. Grant date share price Exercise price Risk-free rate Expected life, years Expected volatility Expected dividends Forfeiture rate Expected volatility is based on an evaluation of the historical volatility of the Companys share prices since the
Company commenced trading which is a reasonable approximation of the volatility over the expected term of the stock option. The expected term of the options has been based on historical experience and general option holder behavior. The forfeiture
rate reflects the anticipated level of forfeitures of options in the future. Restricted Share Units (RSUs) RSUs are granted to directors, employees and consultants and each RSU entitles the holder to one common share at the end of the vesting period. RSUs have
various terms ranging from immediate vesting to vesting on either the first, second or third anniversary of the grant date, or as to 33% on each anniversary date of the grant over three years. Compensation is recognized on a graded vesting basis
over the vesting period. The Company issues common shares to the RSU holder equal to the number of vested RSUs at the RSU holders request. 36 | Notes to the Consolidated Financial Statements F-39
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 20 SHARE-BASED PAYMENT ARRANGEMENTS (continued) Restricted Share Units (RSUs) (continued) The Companys obligation to issue
shares on the vesting of RSUs is an unfunded and unsecured obligation of the Company. A continuity of RSUs is as follows: Number of RSUs Outstanding at January 1 Granted Exercised 1 Forfeited Withheld
1 Outstanding at December 31 Exercisable at December 31 71,190 common shares issued on exercise of 79,638 RSUs at a weighted average grant date exercise
price of $8.87. Certain RSU holders elected for RSUs exercised to be settled net of any tax withholding obligations. The fair value of each RSU is based on the market price of the Companys common shares on the date of grant and the total fair value of RSUs granted in the year ended December 31,
2021 was $528,028 (December 31, 2020 - $1,069,042; December 31, 2019 - $829,976). Unrecognized share-based compensation expense related to unvested RSUs was $277,686 at December 31, 2021 (December 31, 2020 - $807,830;
December 31, 2019 - $702,373). NOTE 21 NON-CONTROLLING INTEREST
In April 2019, the Company obtained control over Agnity and its
subsidiaries via a business combination and the non-controlling interest (NCI) was measured at 100% of the acquired net identifiable assets of Agnity at the date of acquisition. Agnity develops and sells software applications and
technology services that enable telecommunication service providers, network equipment manufacturers and enterprises to design, develop, and deploy communication-centric application solutions on a world-wide basis. Having control of Agnity has
enabled the Company to gain access to Agnitys patented technology and its customer base. In addition, Agnitys communication platform ensures that AssetCare deployments around the globe are assured of connectivity, supported by Agnity
telecommunication solutions. The
movement in the equity attributable to the non-controlling interest in the Company is detailed in the consolidated statements of changes in equity. There was no change to the non-controlling interest percentage in the years ended December 31,
2021, 2020 or 2019. 37 | Notes to the Consolidated Financial Statements F-40
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 21 NON-CONTROLLING INTEREST (continued) The following table summarizes the
information relating to Agnity, before any intercompany eliminations. NCI percentage Current assets Non-current assets Current liabilities Non-current liabilities Net assets attributable to NCI For the years ended Revenue Income (loss) allocated to NCI Other comprehensive income allocated to NCI Total comprehensive (loss) income attributable to NCI Cash flows (used in) provided by operating activities Cash flows used in investing activities Cash flows (used in) provided by financing activities Foreign exchange impact on cash held in USD Net (decrease) increase in cash and cash equivalents NOTE 22 - FINANCE COSTS Interest on loans and borrowings (Note 12) Interest on convertible debentures (Note 14) Interest on lease liabilities (Note 8) Transaction costs expensed 1 Other finance costs Total finance costs Transaction costs include costs incurred associated with financing or equity transactions that are not otherwise netted
against the debt or equity instrument. The majority of costs are associated with the USD brokered public offering (Note 19(a)), the 2021 Debentures (Note 14(b)), the Fiera term loan amendment (Note 12) and the ATB facility amendment (Note 13).
38 | Notes to the Consolidated Financial Statements F-41
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 23 - FAIR VALUE LOSS (GAIN ) ON DERIVATIVES Gain on embedded derivatives 1 Deferred charge loss 1 Loss on substantial modification and conversion
1 Gain on warrant liability remeasurement (Note 15) 2 Total Associated with the 2021 Debentures (Note 14(b)) of which the majority is realized at December 31, 2021.
Change in fair value unrealized (Note 26). NOTE 24 - OTHER INCOME Government assistance 1 US Government loan forgiveness 2 (Note
16) Derecognition of contingent consideration (Note 18) Other Total other income Majority represents amounts received from the Canadian Government for wage and rental subsidies associated with
COVID-19. The amount of government assistance available is dependent on the programs in place and the Companys eligibility for these programs. Includes other income recognized as below market interest rate benefit. NOTE 25 - INCOME TAXES a) Amounts recognized in net loss Current tax expense Current year Changes in estimates related to prior years Deferred tax expense (recovery) Origination and reversal of temporary differences Change in unrecognized deferred income tax assets Tax expense (recovery) 39 | Notes to the Consolidated Financial Statements F-42
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 25 - INCOME TAXES (continued) b) Reconciliation of effective tax rate The following table is a reconciliation of income tax expense (recovery), at the
Canadian income tax rate and the amount of reported income tax recovery in the consolidated statements of loss and comprehensive loss. The Companys operations are subject to income taxes primarily in Canada and the United States. Loss before taxes Statutory income tax rate 1 Income tax recovery at statutory rate Increase (decrease) in taxes resulting from: Change in deferred tax assets not recognized Foreign tax rate and other foreign tax differences Change in enacted rates Share issuance costs and other Non-deductible transaction costs Other non-deductible items Tax expense (recovery) Comprised of the Canadian Federal effective corporate tax rate of 15.0% and blended provincial tax rates.
c) Movement in deferred tax balances The significant components of the Companys deferred income tax asset (liabilities) are as follows: Property and equipment Intangible assets Loans and accrued liabilities Share issuance costs Foreign exchange Non-capital losses/net operating losses Total Recovery/ (expense) Property and equipment Intangible assets Loans and accrued liabilities Share issuance costs Foreign exchange Non-capital losses/net operating losses Total 40 | Notes to the Consolidated Financial Statements F-43
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 25 - INCOME TAXES (continued) Deferred tax assets not recognized and tax losses carried forward
The Company recognizes deferred tax assets to the extent that it is probable that future taxable profit will be
available against which the Company can utilize the benefits of the deductible temporary differences and unused tax losses. Deductible temporary differences and unused tax losses for which a future benefit has not been recognized as a deferred tax
asset include the following: Net operating losses - United States Non-capital losses - Canada Foreign tax losses Investment tax credits and research and development expenditures Property and equipment Share issuance costs Other The Company has net operating losses of approximately US$60,837,326 and non-capital losses of approximately $70,204,681
(2020: US$44.1 million and $49.6 million) which are available to reduce future years taxable income in the United States and Canada, respectively. The net operating losses will start expiring in 2029 while the non-capital losses will start
expiring in 2027 if not utilized. The Company has foreign tax losses in various jurisdictions of approximately $2,307,882 (2020 - $1.2 million)
which are available to reduce future years taxable income in their respective countries. The losses have expiry dates ranging from five years to indefinite life. The investment tax credit balance is $500,000 (2020 - $500,000) which is
available to reduce future years taxes payable in Canada. The investment tax credits begin to expire in 2022 if not utilized. Management
estimates future income using forecasts based on the best available current information. No deferred tax liability has been recognized at December 31, 2021 or December 31, 2020 on temporary differences associated with earnings retained in
the Companys investments in foreign subsidiaries in which it has an equity percentage. The Company is able to control the timing of the reversal of these differences and currently has no plans in the foreseeable future to repatriate any funds
in excess of its foreign investment. 41 | Notes to the Consolidated Financial Statements F-44
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 26 - FINANCIAL INSTRUMENTS Classification and measurement of financial assets and liabilities by category
The following represents the carrying values of the financial assets and liabilities of the Company and the
associated measurement basis for each balance. Cash and cash equivalents Trade and other receivables 1 Long-term receivables Derivative asset Bank indebtedness Trade payables and accrued liabilities 1 Loans and borrowings Lease liabilities 2 2019 Debentures - host liability 3 2021 Debentures - host liability 3 2021 Debentures embedded derivative Warrant liability - business acquisition Warrant liabilities - derivatives (Note 15) Business acquisition payable Other liabilities Excludes amounts for indirect taxes, income taxes and contract asset, where applicable. Note 27 describes credit risk
associated with trade receivables including reconciliation of expected credit loss allowance. Lease liabilities are not subject to classification in the fair value hierarchy. 2019 Debentures (Note 14(a)) and 2021 Debentures host liability (Note 14(b)). Financial instruments not measured at fair value The carrying values of the financial assets and liabilities where the measurement basis
is other than FVTPL approximate their fair values due to the immediate or short-term nature of these instruments considering there have been no significant changes in credit and market interest rates since origination date. Measurement of fair value The fair value hierarchy establishes three levels to classify the significance of inputs
to valuation techniques used in making fair value measurements of all financial assets and liabilities (Note 32(L)). At December 31, 2021 and 2020, there were no financial assets or financial liabilities measured and recognized at fair value on
a non-recurring basis subsequent to initial recognition. The Companys policy for determining when a transfer between levels of the fair value hierarchy occurs is to assess the impact at the date of the event or change in circumstance that
could result in the transfer. During the year ended December 31, 2021, subscriptions payable included in other liabilities of $5,285,997 were transferred from Level 2 to Level 3 on issuance of the 2021 Debentures, of which only $110,540 remain
at December 31, 2021 (Note 14(b)). There were no other transfers between levels during the year ended December 31, 2021. 42 | Notes to the Consolidated Financial Statements F-45
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 26 - FINANCIAL INSTRUMENTS (continued) Measurement of fair value (continued) Valuation methodologies used in the measurement of fair value for Level 2 financial
assets and financial liabilities The measurement of Level 2 financial assets and liabilities is made by reference to the inputs
used to determine the fair value of each instrument using an appropriate valuation method. The fair value of long-term receivables is based on the present value considering the expected time of collection of the long-term contracts. The fair value of loans and borrowings approximates their carrying value and has been determined by discounting the contractual cash flows using implied
yields of obligations with similar credit risk and maturities. The fair value of the host liability for the 2019 Debentures approximates the carrying value and the fair value was initially calculated using a discount rate of 25% for an equivalent,
non-convertible loan at the date of issue. The warrant liability associated with a previous business combination is measured based on the amount of cash that is payable in certain circumstances. A portion of other liabilities at December 31,
2020, represent subscriptions payable and the carrying amount of these balances approximates fair value. Valuation methodologies used
in the measurement of fair value for Level 3 financial liabilities 2021 Debentures The fair value of the entire financial instrument associated with the 2021 Debentures was determined using a partial differential equation model for
convertible debt which considered that the convertible debt consists of two components, each having different default risks. The model calculates the value based on key inputs, which impact the value of the convertible debt including: yield to
maturity, principal and coupon payments, share price, exercise price, volatility, term, risk free rates and dividends. The risk adjusted discount rate was applied in determining yield to maturity and this is the most significant unobservable input,
and the estimated fair value would increase (decrease) if the risk-adjusted discount rate were lower (higher). The 2021 Debentures include an
embedded derivative for the conversion option. The fair value of the embedded derivative was determined using the same methodology as above adjusted for the nature of the instrument. The embedded derivative includes a foreign currency component
which reflects the foreign exchange exposure to convert a USD denominated liability to common shares which are denominated in Canadian dollars. The fair value of the embedded derivative was determined first with the residual of the total fair value
of the instrument allocated to the host debt. The embedded derivative will be remeasured at each period end with changes in the fair value recognized in the consolidated statements of loss and comprehensive loss. The Company determined that at the initial recognition date, which was the date of issuance of the debentures, that the fair value of the financial
instruments was in excess of the transaction price for tranches one through five (i.e., the fair value of the proceeds received) and the fair value of the tranche six financial instrument was equal to the proceeds received. There were fluctuations
in the fair value inputs that arose in the period between the closing of tranches one through five of the Offering and the date of the actual issuance of the debenture certificates. As such the difference between the fair value and transaction price
was deferred at initial recognition and the deferred difference was recognized as a loss as factors including the passage of time were met which required recognition. The reconciliation of the opening to closing balances associated with the 2021
Debentures is presented in Note 14(b) including fair value changes. The 2021 Debentures were derecognized at July 12, 2021 (with the exception
of the US$75,000 principal balance which did not convert) as the instruments were substantially modified, and a new financial liability measured at FVTPL was recognized. The fair value was based on the price of common shares at July 12, 2021
and the warrant value was determined using the Black-Scholes model. These instruments were remeasured directly before conversion to equity. The remaining instruments are warrant liabilities as described following. Warrant liabilities With
the exception of the warrant liability associated with a previous acquisition, the fair value of warrant liabilities is measured on a recurring basis using the Black-Scholes model based on the quoted price of the Companys common stock in an
active market, expected volatility, expected life and risk-free rate (Note 15). 43 | Notes to the Consolidated Financial Statements F-46
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 26 - FINANCIAL INSTRUMENTS (continued) Measurement of fair value (continued) Business acquisition payable The business acquisition payable consists of contingent consideration payable, the values of which were determined using a discounted cash flow model
based on the present value of probability weighted average amount of expected payments discounted at an appropriate discount rate. The reconciliation of the opening to closing balances for Level 3 fair values are presented in Note 18. NOTE 27 CAPITAL AND RISK MANAGEMENT Capital and Risk Management The Companys objective and polices for managing capital are to safeguard its ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages its capital structure and makes changes based on economic conditions including the impact of the ongoing
pandemic, risks that impact the consolidated operations and future significant capital investment opportunities. In order to maintain or adjust its capital structure, the Company may issue new equity instruments or raise additional debt financing.
The Company is exposed to a variety of financial risks by virtue of its activities: liquidity risk, credit risk, interest rate risk and currency
risk. The Board of Directors has overall responsibility for the determination of the Companys capital and risk management objectives and policies while retaining ultimate responsibility for them. The Companys overall capital and risk
management program has not changed throughout the year. It focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the finance department under
policies approved by the Board of Directors. The finance department identifies and evaluates financial risks in close cooperation with management. The Companys risks related to financial instruments and the Companys strategy to manage risks, are described below. a) Liquidity risk Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal
course of business. The Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to meet expected operating requirements. The Company manages its liquidity risk by monitoring its operating
requirements, reducing costs where possible and applying for any available government COVID-19 support to support its business. The Company also engaged in fundraising activities throughout the year. Cash and cash equivalents as at December 31,
2021 were $4,588,057 (December 31, 2020 - $1,110,889). Total working capital deficit increased to $42,108,177 at December 31, 2021 from
$13,052,702 at December 31, 2020. Current assets increased by $6,712,207 at December 31, 2021 from December 31, 2020, the majority of which are increases in cash and cash equivalents and trade and other receivables. Current
liabilities increased by $35,767,682 at December 31, 2021 from December 31, 2020; however, management anticipates a portion of this amount will not be paid in cash due to the nature of the instruments as detailed in the table following.
Liquidity risk has increased during the year ended December 31, 2021, and current liquidity levels are not adequate to fund the working capital deficiency at December 31, 2021. The Company anticipates it will need additional financing to
meet its current and future demands and the Company is in the process of securing additional financing; however, a material uncertainty exists that may cast doubt on the Companys ability to continue as a going concern (Note 2). 44 | Notes to the Consolidated Financial Statements F-47
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 27 CAPITAL AND RISK MANAGEMENT (continued) Liquidity risk (continued) Maturities of financial liabilities The Companys carrying values of financial liabilities and the contractual
undiscounted cash flows associated with these liabilities broken into relevant maturity grouping based on their contractual maturities are as follows: Bank indebtedness 1 Trade payables and accrued liabilities Loans and borrowings 2 Lease liabilities 3 2019 Debentures 2021 Debentures Warrant liabilities 4 Business acquisition payable No contractual maturity. Excludes interest charged on facility as detailed in Note 13.
Includes term loan with a carrying value of $9,275,683 classified as current due to covenant
breach. Assuming term loan is repaid in accordance with agreement to maturity, the undiscounted contractual cash flows for loans and borrowings would be $2,933,739, $5,472,193, and $4,143,888 , respectively for the periods presented above.
Variable costs due under leases not included in this amount. Minimum payment related to leases
which have not yet commenced are not included in this amount. See Note 29. Majority of liability will be settled by issuing common shares of the Company when warrants are
exercised during the year. The remaining amount may be settled in cash or common shares of Agnity (Note 15). Bank indebtedness Trade payables and accrued liabilities Loans and borrowings Lease liabilities 2019 Debentures Warrant liabilities Business acquisition payable Other liabilities Credit risk Credit risk is the risk that a third party might fail to discharge its obligations under
the terms of a financial contract. Credit risk is limited to the following instruments and the Companys maximum exposure to credit risk is the carrying value of the financial assets (Note 26(a)).
The Company is mainly exposed to credit risk from credit sales. Management of
the Company monitors the creditworthiness of its customers by performing background checks on all new customers. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances. The
Company considers that there has been a significant increase in credit risk when contractual payments are more than 90 days past due. 45 | Notes to the Consolidated Financial Statements F-48
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 27 CAPITAL AND RISK MANAGEMENT (continued) Credit risk (continued) Provisions for outstanding balances are
established based on forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as
well as the frequency of payments received. Accounts receivable amounts are completely written off once management determines the probability of collection to be remote. Trade and other receivables, unbilled revenue and long-term receivables are from
individual customers and are not assessed based on external credit rating agencies. The Company uses a provision matrix to measure the lifetime expected credit loss (ECL) of these balances. Receivables are grouped based on similar credit
risk profiles and days past due. Loss rates are based on actual credit loss experience and reflect the forward looking conditions over the expected life of the receivable. As of December 31, 2021, substantially all of the Companys trade
receivables were outstanding for less than 60 days and a loss rate of 1% was applied in determining the ECL. The majority of the ECL is based on specific provisions related to specific customers. The movement in the ECL allowance related to trade receivables and long-term receivables
was as follows (Note 6): Beginning balance Increase in loss allowance Amounts written off during the year as uncollectible Effects of movement in exchange rates Total Market risk Market risk is the risk that changes in market prices such as interest rates or foreign
exchange rates will affect the Companys results or value as a result of holding these financial instruments. The object of market risk management is to manage and control market risk exposures within acceptable parameters given the nature of
the business. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the
Companys financial instruments will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its credit facility and as this instrument is subject to variable rate interest. Management does not
believe interest rate risk is currently material to its business. Foreign currency risk
Currency risk is the risk that the fair values or future cash flows of
the Companys financial instruments will fluctuate because of changes in foreign currency rates and the degree of volatility of these rates. The Company conducts its business in the regions of Canada, Asia-Pacific, the United States and Europe,
the Middle East and Africa, which gives rise to exposure to markets from changes in foreign currency rates. Currently, the Company does not use derivative instruments or other measures to reduce its exposure to foreign currency risk. At December 31, 2021, the C$ equivalent
carrying amount of the Companys USD denominated monetary assets and liabilities was $14,554,193 (December 31, 2020 - $8,291,005) and $11,685,160 (December 31, 2020 - $16,398,521), respectively. Assuming all other variables remain constant, a
fluctuation of +/- 5.0% in the exchange rate between C$ and USD would impact the net loss for the period by approximately $143,452 (December 31, 2020 - $405,376). 46 | Notes to the Consolidated Financial Statements F-49
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 28 RELATED PARTY TRANSACTIONS The Companys related parties includes its subsidiaries and key management personnel.
During its normal course of operations, the Company enters into transactions with its related parties for goods and services that are measured at the amount exchanged. Key management personnel compensation Key management personnel include those persons having authority and responsibility for
planning, directing, and controlling the activities of the Company as a whole. The Company defines key management personnel as key officers and directors. Salaries, management and directors fees Share-based payments Total Other related party balances and transactions 1
Due to principal owner of Agnity 2 Due to officer of Company for working capital loan
2 Due to key management personnel 2 Due to Agnity Communications Private Ltd.
3 Loan due to former shareholder of CSA 4 Amount due to related parties Unless otherwise noted, all amounts due are unsecured, non-interest bearing and due on demand. Included in trade accounts payable and accrued liabilities on the consolidated statements of financial position.
Associated with consulting services paid to a company partially owned by the principal owner of Agnity. Consulting
services were $3,765,201 for the year ended December 31, 2021 (December 31, 2020 - $2,532,550; December 31, 2019 - $1,630,119). Balance due included in trade accounts payable and accrued liabilities on the consolidated statements of financial
position. Included in loans and borrowings (Note 12) on the consolidated statements of financial position. NOTE 29 COMMITMENTS AND CONTINGENCIES Commitments The Company has the
following minimum payments for contractual commitments that are not recognized as liabilities at December 31, 2021, which are disclosed in Note 27(a) - Risk Management, Liquidity Risk. Variable lease payments 1 Lease payments related to leases which have not yet commenced 2 Variable lease payments associated lease liabilities (Note 8). In October 2021, the Company executed a 12-year lease for office space in Calgary, Alberta. Basic rent and estimated
common expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. The Company will receive a tenant improvement allowance which is expected to cover the majority of the costs.
47 | Notes to the Consolidated Financial Statements F-50
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 29 COMMITMENTS AND CONTINGENCIES (continued) Contingencies The Company may be party to legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. The Company
analyzes all legal proceedings and the allegations therein. The outcome of any proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on the Companys financial position, results of operations or
liquidity. NOTE 30 SUPPLEMENTAL CASH FLOW INFORMATION a) Changes in non-cash working capital Trade and other receivables (increase) Long-term receivables decrease (increase) Prepaid expenses and other assets decrease (increase) Trade payables and accrued liabilities (decrease) increase Deferred revenue increase Decrease in working capital b) Changes in liabilities arising from financing activities Balance of loans, borrowings and PPP loans, beginning of year New advances Repayments of principal Repayments of interest Liability assumed Liability related items Assumption of loans in business combination Forgiveness of PPP Loans Finance fees paid Non-cash related items Accretion of interest and debt issuance costs Loss on debt modification Foreign exchange and other Balance of loans, borrowings and PPP loans, end of
year 48 | Notes to the Consolidated Financial Statements F-51
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 30 SUPPLEMENTAL CASH FLOW INFORMATION (continued) c) Non-cash investing and financing activities Value of shares issued in business combination Value of shares issued on conversion of 2021 Debentures Value of share issued on conversion of 2019 Debentures Value of shares issued on AirFusion asset acquisition Settlement of liabilities through issuance of common shares or RSUs Non-cash accretion of interest included in finance cost Non-cash broker warrants compensation Non-cash underwriter warrants compensation Non-cash warrants consideration associated with credit facility Shares issued to extinguish the loan from Flow Capital Addition to right-of-use assets Addition to lease liabilities NOTE 31 EVENTS AFTER THE REPORTING PERIOD Financing of Electric Vehicle Development Projects In conjunction with the Companys agreements to provide AssetCare solutions to
optimize Electric Vehicle (EV) charging efficiency at auto dealerships in the states of New York and California, on March 28, 2022, a subsidiary of the Company executed a promissory note with the Noteholder in the aggregate
principal amount of US$15,000,000 (the Note). Initially US$5,000,000 is available to be funded with the remainder available only after certain corporate tax reorganization work is completed by the Company. The initial principal amount of
US$5,000,000 (the Loan) was funded on April 1, 2022. The Loan matures on March 31, 2025, with 10% per annum interest payable monthly in arrears in USD. The Loan may not be prepaid unless authorized by the lender and is
unsecured until certain conditions are met. The Loan contains representations, warranties and covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%,
amongst other implications. The use of
proceeds of is solely for the development of the Companys EV dealership projects. In addition to the Loan, the Note requires certain income based payments, including sharing on a 50/50% basis, all EV, solar and carbon reduction related tax
credits and incentives, be made from the borrower to the lender based on income resulting from this project over the term of the 20-year EV dealership projects. The Note is subject to change of control provisions and right of first refusal
provisions for additional financing related to the EV projects. Warrant activity
On February 15, 2022, the Companys warrants associated with the
USD equity offering described in Note 15(b), commenced trading under the symbol MCLDW (Notes 1 and 15). On January 17, 2022, the Company issued warrants to ATB to purchase an equivalent
number of common shares of the Company and the warrant liability of $195,066 described in Note 15(c) was derecognized with an offsetting credit to contributed surplus for the value assigned to the warrants.
49 | Notes to the Consolidated Financial Statements F-52
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES The Company has consistently applied the following accounting policies to all periods presented in these
consolidated financial statements. A. Basis of Consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiaries as at December 31, 2021. Control
exists over an investee when the Company is exposed, or has rights, to variable returns from its investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the consolidated financial
results of the Company from the effective date of acquisition up to the effective date of disposition or loss of control. Unless otherwise stated, the subsidiaries have share capital consisting solely of ordinary shares and the proportion of
ownership interests held equals the voting rights held by the entity. Subsidiaries The Companys principal subsidiaries include the following entities many of which have 100% ownership in other entities. The Company directly and
indirectly owns 100% of all subsidiaries except for the Agnity group of companies. While the Company does not have an ownership interest in the Agnity entities, the Company controls them and as such the financial results are consolidated into the
Companys consolidated financial statements. mCloud Technologies Corp. mCloud Technologies (USA) Inc. mCloud Technologies (Canada) Inc. Field Diagnostic Services, Inc. (FDSI) Construction Systems Associates, Inc. (CSA) mCloud Technologies Services Inc. (MTS) NGRAIN (Canada) Corporation (NGRAIN) kanepi Group Pty. Ltd. kanepi Services Pty. Ltd. mCloud Technologies Singapore Pte. Ltd. mCloud Corp (HK) Ltd. mCloud Technologies (Saudi Arabia) Agnity Global, Inc. (Agnity) Agnity Communications, Inc. (ACI) Agnity Healthcare, Inc. (AHI) When the Company
loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognized in net income (loss). Any interest
retained by the former subsidiary is measured at fair value when control is lost. All intercompany transactions, balances, revenues and expenses
have been eliminated on consolidation. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Company. Profit or loss and other comprehensive
income of subsidiaries acquired or disposed of during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable. 50 | Notes to the Consolidated Financial Statements F-53
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Consolidation (continued) Non-controlling interests Non-controlling interests arise from business combinations in which the Company acquires less than 100% ownership interest. Non-controlling interests,
presented as part of equity, represent the portion of a subsidiarys profit or loss and net assets that is not attributable to the common shareholders of the Company. The entire portion of the Agnity operations is a non-controlling interest.
The interests of the non-controlling shareholders are initially measured at either fair value or at the non-controlling interests proportionate share of the recognized amounts of the acquirees identifiable net assets. Any subsequent
income/loss, dividends and foreign translation adjustments attributable to the non-controlling interests is recognized as part of the non-controlling interests income or equity. When changes in ownership interests are disproportionate to
cumulative contributions, distributions and income (loss) allocations, non-controlling interest are adjusted through direct charges to equity. The Company attributes total comprehensive income or loss of subsidiaries between the owners of the parent
and the non-controlling interests based on their respective ownership interests. Changes in the Companys interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Business combinations Acquisitions of subsidiaries and assets that meet the definition of a business under IFRS are accounted for using the acquisition method. The
consideration transferred in the acquisition is measured at acquisition date fair value. The identifiable assets acquired and liabilities assumed that meet the conditions for recognition under IFRS 3 Business Combinations are recognized at
their fair values at the acquisition date. Any excess consideration over the fair value of the identifiable net assets is recognized as goodwill. Acquisition-related costs, other than those associated with the issuance of debt or equity, are
recognized in profit or loss as incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in
which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement period, or additional assets or liabilities are
recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. The measurement period is the period from the date of
acquisition to the date the Company obtains complete information about facts and circumstances that existed as of the acquisition date up to a maximum of one year. Any contingent consideration is measured at fair value at the acquisition date. If contingent consideration that meets the definition of a financial
instrument is classified as equity, it is not remeasured and its subsequent settlement is accounted for within equity. Other contingent consideration is remeasured at fair value at each reporting date with changes in fair value recognized in profit
or loss. Foreign currency Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the parent company and
its material subsidiaries are presented in the table in Note 32(A). These consolidated financial statements are presented in Canadian dollars. Foreign currency transactions. In preparing the financial statements of each individual subsidiary, transactions in currencies other than
the entitys functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at
the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the dates those fair values are determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise. Presentation currency translations. For the purposes of presenting consolidated financial statements, the assets and liabilities of the
Companys foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income (loss) and accumulated in equity (attributed
to non-controlling interests as appropriate). 51 | Notes to the Consolidated Financial Statements F-54
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue recognition The Companys revenues are derived from the sales of perpetual software
licenses, subscriptions to AssetCare, installation and engineering services, hardware and post contract support and maintenance (PCS). Revenue from the sale of hardware and perpetual software licenses is recognized at the point in time when control is transferred to the customer,
generally upon delivery at the customers location. Installation services involve the installation and implementation of energy efficient
hardware, perpetual software licenses and IoT connections which feed information to the AssetCare platform. Engineering services include consulting, implementation and integration services entered into either on a time and materials basis or fixed
fee basis. Revenue from installation and engineering services is recognized overtime, using an input method based on direct labour hours to measure progress towards complete satisfaction of the service. Revenues from PCS and subscriptions to the AssetCare platform are recognized ratably overtime over the term of the PCS or subscription. Any amounts
received for which performance obligations have not been completed are recognized as deferred revenue. The Companys contracts often include a
number of promised goods or services, which are typically distinct from other performance obligations, and are therefore accounted for separately. A good or service is distinct if the customer can benefit from it on its own or together with other
readily available resources, and the Companys promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer. In determining the transaction price of a contract with a customer, the Company considers the effects of variable consideration, existence of a
significant financing component, non-cash consideration, and any consideration payable to the customer. The total transaction price is allocated to each performance obligation on a relative stand-alone selling price (SSP) basis,
representing the selling price as if it was sold separately. This is a formal process involving judgement which could impact the timing of recognized revenue. In most cases, the SSP is based on observable data. Where possible, a narrow SSP range for each product and service is established and this range is
assessed on a periodic basis or when material changes in facts and circumstances warrant a review. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for
perpetual software licenses is highly variable and therefore the Company applies the residual approach, which determines the SSP by subtracting the SSP of hardware, installation and other services in the contract from the total transaction price.
Long-term contracts The Company enters into multi-year contracts with some customers for goods and services. Under the terms of these contracts, the customer is billed an
equal monthly amount over the term of the contract. Revenue is recognized as performance obligations are completed, generally with a significant portion of the transaction price being recognized at the beginning of the contract based on the
calculated SSP for performance obligations that are satisfied at the point in time at which goods are delivered to customers. The remainder of the revenue is recognized over the life of the contract over time or as services are completed. Financial Instruments Recognition and initial measurement On initial recognition, all financial assets and liabilities are classified and recorded at fair value, net of attributable transaction costs, except for
financial assets and liabilities classified as at fair value through profit or loss (FVTPL). Cash and bank indebtedness Cash is held in bank accounts. The Company considers only those investments that are highly liquid, readily convertible to cash with original maturities
of three months or less at date of purchase as cash equivalents. Bank indebtedness consists of bank overdrafts and draws from the credit facility
account repayable on demand for cash management purposes. 52 | Notes to the Consolidated Financial Statements F-55
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Classification and subsequent measurement Financial Assets On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other comprehensive income; or fair value
through profit or loss, depending on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial assets that do not meet the below classifications are classified as fair value through profit or
loss. A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding. A financial asset is measured at fair value through other comprehensive income if it meets both
of the following conditions and is not designated as at FVTPL: it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding. Financial Liabilities Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative, or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other
financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in
net income (loss). When a financial liability is non-substantially modified, a gain or loss is recognized into net income (loss). The gain or loss
is calculated at the date of modification as the difference between the remaining original contractual cash flows and the modified cash flows both discounted at the original effective interest rate. Any costs associated with the modified loan is
added to the loan carrying amount and amortized over the remaining modified loan term. The carrying amount of the loan is revised to reflect the new cash outflows at the date of modification. Derecognition of financial assets and liabilities Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or the Company transfers the rights to
receive the contractual cash flow in a transaction in which substantially all the risks and rewards of ownership have been transferred. A financial
liability is derecognized when its contractual obligations are discharged, cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different,
in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non- cash
assets transferred or liabilities assumed) is recognized in net income (loss). Impairment of non-derivative financial assets The Company applies an expected credit loss (ECL) impairment model, which applies to financial assets measured at amortized cost, contract
assets, lease receivables, and financial guarantee contracts. The ECL model results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual loss event. Except for trade receivables, the ECL
model requires the recognition of credit losses based on 12 months of expected losses for financial assets and the recognition of lifetime expected losses on financial assets that have experienced a significant increase in credit risk since
origination or which are considered credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. ECLs are
probability-weighted estimates of credit losses. Credit losses are measured as the present value of all cash shortfalls representing the difference between the cash flows due to the entity in accordance with the contract and the cash flow an entity
expects to receive. The Company has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs. 53 | Notes to the Consolidated Financial Statements F-56
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of non-derivative financial assets (continued)
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the
Companys historical experience and including forward looking information. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. The gross carrying amount of a financial asset
is written off when the Company has no reasonable expectations of recovering a portion or the full amount. The Company assesses the timing of write-offs based on whether there is a reasonable expectation of recovery. Impairment losses related to
trade and other receivables are presented within general and administrative expenses. Property and equipment Property and equipment are recorded at cost, less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are
directly attributable to the acquisition of the asset. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows: Computer equipment Office furniture and equipment Leasehold improvements The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of
any changes in estimate accounted for on a prospective basis. An item of property and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognized in profit or loss. Repairs and maintenance costs that do not improve or extend productive life are recognized in profit or loss in the period in which the costs are incurred. Intangible assets and goodwill Intangible assets Intangible assets
acquired separately Intangible assets patents and trademarks, customer relationships and technology, all of which have a finite life.
Intangible assets acquired separately are measured on initial recognition at cost and intangible assets acquired in a business combination are recognized at fair value at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalized only when it increases
the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and intangible assets are recognized in profit or loss as incurred. Intangible assets are amortized over their estimated useful lives, on a straight-line basis, as follows: Patents and trademarks Customer relationships Technology Amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if
required on a prospective basis. 54 | Notes to the Consolidated Financial Statements F-57
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Intangible assets and goodwill (continued) An intangible asset is derecognized on disposal, or when no future economic benefits are expected from
use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
Internally generated intangible assets Expenditures on research
activities are recognized as an expense in the period in which they were incurred. Internally-generated intangible assets arising from
development or from the development phase of an internal project are recognized if all of the following factors have been demonstrated: Technical feasibility of completing the intangible asset results in the intangible asset being available for use or sale;
There is an intention to complete the intangible asset and use or sell it; There is an ability to use or sell the intangible asset; Evidence to suggest how the intangible asset will generate probable future economic benefits; There is availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and, An ability to reliably measure the expenditure(s) attributable to the intangible asset during its development exists.
The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis. Where no internally-generated intangible asset can be recognized, development expenditures are recognized in profit or loss in the period in which it is incurred. Goodwill Goodwill,
representing the excess of the consideration paid for entities acquired over the fair values of the assets acquired and liabilities assumed, is initially measured at cost and is not amortized. After initial recognition, goodwill is measured at cost
less any accumulated impairment losses and is tested annually for impairment. For the purpose of impairment testing, goodwill is allocated to each
of the Companys cash-generating units that are expected to benefit from the synergies of the business combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is
indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to
the other assets of the unit pro-rata based on the carrying amount of each asset in the cash generating unit. The recoverable amount is the greater of an assets fair value less costs of disposal or its value in use. In determining fair value
less costs of disposal, recent market transactions are considered or an appropriate valuation model is used. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset or CGU. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statements of loss on comprehensive loss. Goodwill
impairments are not reversed. Management evaluates goodwill for impairment annually as of December 31 unless impairment indicators exist at another reporting date. On disposal of a cash-generating unit, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal. Impairment of non-financial assets The carrying amount of property and equipment and intangible assets with a finite life are reviewed each reporting period to determine whether events or
changes in circumstances indicate that their carrying amounts may not be recoverable. Intangible assets with an indefinite life are reviewed and tested on an annual basis or whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an assets fair value less costs of disposal or its value in use. To assess value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are considered or an appropriate valuation model is used. 55 | Notes to the Consolidated Financial Statements F-58
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of non-financial assets (continued) To assess impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows (cash-generating units). For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses recognized in
prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Leases Recognition and initial measurement as a lessee At the commencement date of a lease, the Company recognizes a right-of-use asset and a lease liability for all leases except leases of low-value assets
and leases with a duration of 12 months or less. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A
lease is defined as a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an
identified asset, the Company determines whether, throughout the period of use, it has the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. The
Company reassesses whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed. Lease liabilities are
initially measured at the present value of unpaid lease payments at the commencement date of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Companys incremental borrowing
rate. Lease payments included in the measurement of the lease liability comprise the following: fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payments that depend on an index or a rate (such as CPI), initially measured using the index or rate as
at the commencement date; amounts expected to be payable by the Company under residual value guarantees; exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease term reflects the Company exercising an option to terminate
the lease. Variable rent payments that are not based on an index or rate, including additional rent for operating costs and taxes
and non-recoverable goods and services tax, are recognized as rent expense, within general and administrative expense or direct costs, as incurred. Lease payments for short-term leases and leases of low-value assets are recognized as rent expense on
a straight-line basis over the lease term. Right-of-use assets are initially measured at cost comprised of the initial lease liability adjusted for
any lease payments made at or before commencement of the lease, plus initial direct costs incurred less lease incentives received. Classification and subsequent measurement as a lessee Subsequent to the commencement date of the lease, the lease liability is measured at amortized cost using the effective interest method. The lease
liability is remeasured by discounting the revised lease payments using a revised discount rate when there is a change in the lease term or there is a change in the assessment of an option to purchase the underlying asset. The lease liability is
remeasured by discounting the revised lease payments using an unchanged discount rate when there is a change in the amounts expected to be payable under a residual value guarantee or there is a change in future lease payments resulting from a change
in an index or a rate used to determine variable payments. Upon remeasurement of a lease liability, a corresponding adjustment to the right-of-use asset is recognized. Subsequent to the commencement date of the lease, the Company measures the right-of-use asset at cost, less accumulated depreciation, and any accumulated
impairment losses, and adjusted for any remeasurement of the lease liability. 56 | Notes to the Consolidated Financial Statements F-59
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Leases (continued) The right-of-use asset is depreciated using the straight-line method from the commencement date of the
lease to the earlier of the end of the useful life of the underlying asset and the end of the lease term. The Company assesses its right-of-use assets for impairment and accounts for identified impairment losses similar to its assessment of
impairment on other property and equipment. Refundable security deposits are classified as financial assets measured at amortized cost and included
in current other receivables or other non-current assets. Tenant improvement allowances are recognized as a reduction in the costs of the associated leasehold improvement assets. The Company has taken the practical expedient not to assess whether rent concessions arising as a result of COVID-19 are lease modifications. These rent
concessions are in the form of rent deferrals and there is no change to the amount recognized in profit or loss as a result of these changes. Government grants Government grants are assistance by government agencies in the form of transfers of resources to an entity in return for past or future compliance with
certain conditions related to the operating activities of the entity. Government grants are recognized where there is reasonable assurance that the grant will be received, and the Company will comply with all attached conditions. Government grants
related to costs are deferred, if applicable, and recognized gross in profit or loss on a systematic basis in the periods in which the expenses are recognized. When the grant relates to an asset, it is recognized as income in equal amounts over the
expected useful life of the related asset. Government loans are analyzed to determine whether they qualify as grants or are required to be treated as financial liabilities. Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the
liability. Provisions are measured using managements best estimate as to the outcomes, based on known facts, risks and uncertainties at the reporting date. Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Company.
Contingent liabilities are not recognized in the consolidated financial statements but are disclosed unless the possibility of an outflow of economic resources is considered remote. Share related items Stock options The Company
grants stock options to employees, directors, officers, and consultants. The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. The fair value is measured for each tranche at grant
date and is recognized on a graded-vesting basis over the period during which the options vest. Stock options granted to non-employees are measured at the fair value of the goods or services received except where the fair value cannot be estimated,
in which case it is measured at the fair value of the equity instrument granted. The fair value of the share-based compensation to non-employees is periodically re-measured until counterparty performance is complete, and any change therein is
recognized over the period and in the same manner as if the Company had paid cash instead of paying with stock options. The fair value of options is
determined using the Black-Scholes option pricing model which incorporates all the market vesting conditions. The number of options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for
services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the
original estimate. The impact of the revision of the original estimate is recognized in net loss such that the cumulative expense reflects the revised estimate. Upon exercise of stock options, consideration received on exercise of these equity
instruments is recorded as share capital and the related share-based payment reserve is transferred to share capital. 57 | Notes to the Consolidated Financial Statements F-60
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Share related items (continued) Restricted share units The Company grants RSUs to directors, employees and consultants which are measured at fair value based on the closing price of the Companys
common shares for the day preceding the date of the grant. The fair value of the grant is recognized as a share-based payment expense over the vesting period with a corresponding charge to contributed surplus. Common shares of the Company are issued
on exercise by the holder of vested RSUs. Warrants issued as consideration for services In certain circumstances, the Company issues warrants as consideration for services provided generally in conjunction with debt or equity financings.
Where identifiable services are not reliability measured the services are measured with reference to the fair value of the equity instruments issued using the Black-Scholes model. The measurement date is when the entity obtains the goods or is
provided the services and the warrants are not remeasured thereafter. Loss per share Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Company by the weighted average number of common
shares outstanding during the respective reporting periods. Where a loss is reported, diluted loss per share is the same as basic loss per shares as all potential equity instruments are anti-dilutive and not included in the calculation. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date or, in its absence, the most advantageous market to which the group has access at that date. Several of the companys accounting policies and disclosures require the measurement of fair values for both financial and
non-financial assets and liabilities. The Company uses the fair value hierarchy to classify the significance of inputs to valuation techniques used in making fair value measurements of financial assets and liabilities. The categories are: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company can access at the
measurement date; Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 inputs are unobservable inputs for the asset or liability. When one level one input is available the Company measures the fair value of the instrument using the quoted price in an active market for that
instrument (Level 1). A market is regarded as active if transactions for the asset or a liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the group uses valuation techniques that maximize the use of relevant observable inputs and
minimizes the use of unobservable inputs (Level 2 or Level 3). The chosen valuation technique incorporates all the factors that market participants would consider in pricing a transaction. Convertible debentures Convertible debentures are accounted for depending on the terms of the contract. The fair
value of the debentures are allocated into components parts, which may include separate host debt, embedded derivative(s) and/or equity components based on the terms of the contract. Where the fair value of the financial instrument is different than
the transaction price then the measurement is dependent on whether the fair value was determined based on a valuation technique that only uses data from observable markets (Level 1 input) or otherwise. For compound financial instruments such as the
2019 Debentures where there is a liability and equity component, on issuance of the convertible debentures, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. The proceeds are allocated to the liability
component first with the remainder of the proceeds allocated to the conversion option that is recognized and included in equity. The liability component (net of transaction costs) is subsequently measured at amortized cost using the effective
interest rate method until it is extinguished on conversion or redemption. The carrying amount of the conversion option is not remeasured in subsequent periods. 58 | Notes to the Consolidated Financial Statements F-61
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Convertible debentures (continued) For the majority of the 2021 Debentures,
the fair value of the financial instruments was greater than the transaction price. The residual is treated as a deferred amount and recognized similar to fair value adjustments on derivatives. For hybrid financial instruments such as the 2021
Debentures where there is a liability and embedded derivative component, the fair value of the embedded derivative is determined first with the residual of the total fair value for the instrument allocated to the host debt. The host debt
(liability), net of transaction costs, is subsequently measured at amortized cost using the effective interest rate method until it is extinguished on conversion or redemption. Transaction costs are apportioned between each component of the convertible debentures
based on a percentage of proceeds when the instruments are initially recognized. Transaction costs attributable to the liability and equity components are offset against the respective balances with transaction costs attributable to embedded
derivatives directly expensed. Warrant liabilities Warrants issued where the number of common shares to be issued or the value of the common
shares varies as they are denominated in a foreign currency are classified as derivative financial liabilities. The derivative warrant liability is measured at fair value with changes in fair value recognized in the consolidated statements of loss
at the end of each reporting period. Income taxes and deferred taxation Income tax expense of the Company represents current tax and deferred tax. The Company records current tax based on the taxable profits for the period which is calculated using tax rates that have been enacted or substantively
enacted by the reporting date. Taxable profit differs from profit as reported in the consolidated statements of loss and comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. Deferred income taxes are accounted for using the liability method. Under this method, deferred tax assets and liabilities
are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and measured using the substantively enacted tax rates and laws in effect when the differences are expected to reverse. The effect
of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as unused tax losses, income tax reductions, and certain items that have a tax basis but cannot be identified with an asset
or liability on the statement of financial position, are recognized to the extent it is probable that taxable profit will be available against which the difference can be utilized. Deferred tax assets and liabilities are offset when the Company has
a legally enforceable right to offset current assets and liabilities. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the
deferred tax asset to be recovered. When there is uncertainty concerning the Companys filing position regarding the tax bases of assets or
liabilities, the taxability of certain transactions or other tax-related assumptions, then the Company: (a) considers whether uncertain tax treatments should be considered separately, or as a group, based on which approach provides better
predictions of the resolution; (b) determines if it is probable that the tax authorities will accept the uncertain tax treatment; and (c) if it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainly
based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. Companies are to assume in making this measurement that a taxation authority with the right to examine any amounts
reported to it will examine those amounts and will have full knowledge of all relevant information when making those examinations. 59 | Notes to the Consolidated Financial Statements F-62
mCloud Technologies Corp. Notes to the Consolidated Financial Statements For the Years Ended December 31, 2021, 2020 and 2019 (Expressed in Canadian Dollars except otherwise noted)
NOTE 32 SIGNIFICANT ACCOUNTING POLICIES (continued) Accounting standards development (a) Application of new and revised IFRSs The Company did not apply any new standards or amendments for the year ended December 31, 2021. (b) New accounting standards, interpretations and amendments not yet effective There are a number of new accounting standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in
future accounting periods that are not expected to have a material impact on the Company in the year of adoption and as such are not included here. In February 2021, the IASB issued amendments to two existing accounting standards regarding accounting estimates and accounting policies. The amendments
issued were Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2), which helps preparers determine which accounting policies to disclose in their financial statements, and Definition of Accounting
Estimates (Amendment to IAS 8) which helps entities to distinguish between accounting policies and accounting estimates. These amendments are applicable starting January 1, 2023 with early adoption permitted and are not expected to
have a material impact on the Company. 60 | Notes to the Consolidated Financial Statements F-63
mCloud Technologies Corp. Condensed Consolidated Interim
Statements of Financial Position Unaudited - Expressed in Canadian Dollars Going concern (Note 2); Events after the reporting
period (Note 8, 9, 17) The accompanying notes are an integral
part of these condensed consolidated interim financial statements. Approved on behalf of the Board of Directors on
May 16, 2022 mCloud Technologies Corp. Condensed Consolidated Interim Statements of
Loss and Comprehensive Loss (Unaudited - Expressed in Canadian dollars except number of shares) Other comprehensive (income) loss Foreign subsidiary translation differences
The accompanying notes are an integral part of these condensed consolidated interim financial statements. mCloud Technologies Corp. Condensed Consolidated Interim Statements
of Changes in Equity (Deficit) For the Three
Months Ended March 31, 2022 and 2021 (Unaudited - Expressed in Canadian Dollars except number of shares) Notes Number of Shares Share Capital Contributed Surplus Accumulated Other Comprehensive Income (loss) Total Total
Equity (Deficit) The accompanying notes are an integral part of these condensed consolidated interim financial statements. mCloud Technologies Corp. Condensed Consolidated Interim Statements of
Cash Flows (Unaudited -
Expressed in Canadian Dollars) Investing activities Financing activities Net decrease in cash and cash
equivalents Supplemental cash flow
information (Note 16) The accompanying notes are an integral
part of these condensed consolidated interim financial statements. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements NOTE 1 - NATURE OF OPERATIONS mCloud Technologies Corp. (mCloud or the Company), is a provider of proprietary technology solutions, AssetCare. Customers use AssetCare software-as-a-service
(SaaS) and data solutions to ensure assets continuously operate at peak performance. AssetCare is an asset management platform combining IoT, AI and the cloud to drive next-level performance and efficiency. mCloud offers foundational
enterprise technology solutions enabling capabilities such as secure communications, connected work, and remote monitoring. The Company is domiciled in Vancouver, Canada with its head office in Calgary, Alberta and its registered offices located at 550-510 Burrard Street, Vancouver, British Columbia, V6C 3A8. The Companys common shares trade on the TSX.V trading in Canadian dollars
under the symbol MCLD, on the Nasdaq Stock Market LLC (NASDAQ) in U.S. dollars under the symbol MCLD, and on the OTCQB Venture Market under the symbol MCLDF. NOTE
2 - BASIS OF ACCOUNTING Basis of preparation These condensed consolidated interim financial statements of the Company include the accounts of the Company, the ultimate parent company of its consolidated group, and its subsidiaries, and are
prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB). Certain disclosures included in the annual
financial statements prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the IASB have been condensed or omitted as they are not required for interim financial statements. Accordingly, these
condensed consolidated interim financial statements should be read in conjunction with the Companys audited consolidated annual financial statements and notes thereto for the year ended December 31, 2021 (the 2021 Annual Financial
Statements), which are available on SEDAR at www.sedar.com. Selected explanatory notes are included in the interim financial statements to explain events and transactions that are significant to the understanding of changes in the
Companys financial position and performance since the last annual financial statements. The Companys presentation currency is Canadian dollars, and all amounts are presented in Canadian dollars unless otherwise stated. Certain disclosures include the use of U.S. Dollars
(USD or US$) in describing certain financing transactions. These condensed consolidated interim financial statements have been prepared on a going-concern basis, under the historical cost convention except for certain
financial instruments that have been measured at fair value. There were no changes in the entities contained in the consolidated results or the equity percentage held by the Company from December 31, 2021, as presented in Note 33(A) to the 2021
Annual Financial Statements. The Company has reclassified certain
comparative figures in the condensed consolidated interim financial statements to conform to the current year presentation. Total revenues recognized in the consolidated statement of loss and comprehensive loss during the year ended December 31,
2021, have been corrected between the four quarters ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021. The adjustment to the previously reported amounts for the three months ended March 31, 2021, resulted in a decrease to
revenue and a corresponding increase to net loss and net loss attributable to mCloud shareholders of $945,470. Net loss per share increased to a net loss of $1.12 per share from $1.02 per share -
basic and diluted. The accounting policies applied in the preparation of these condensed
consolidated interim financial statements are consistent with those applied and disclosed in Note 33 to the 2021 Annual Financial Statements. These condensed consolidated interim financial statements were authorized for
issue by the Audit Committee, on behalf of the Board of Directors, on May 16, 2022. Going Concern The outbreak of the COVID-19 pandemic and the measures
adopted by governments in countries worldwide to mitigate the pandemics spread have impacted the Company. These measures required the Company to restrict deployment of technical
services due to the in-person nature of these activities and delayed the start of certain projects throughout 2021 and into 2022. This negatively impacted the Companys financial performance and liquidity position. While restrictions continue
to ease there have been increased cases of COVID-19 and there is still uncertainty over how COVID-19 will impact the Companys business and the timing of future revenues. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements NOTE 2 - BASIS OF ACCOUNTING (continued) Going concern
(continued) During the
three months ended March 31, 2022, the Company generated a net loss of $11,023,121 and negative cash flows from operating activities of $3,770,521. At March 31, 2022, the Company had a working capital deficiency of $51,422,591. Working capital
deficiency is a non-IFRS measure which is calculated as current assets less current liabilities. Current liquidity levels and available sources of capital are not
adequate to fund the working capital deficiency. The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of $24,043,938 if not converted on or before June 30, 2022 (Note 10(a));
loans and borrowings of $14,087,476 including principal and interest payments; payment of trade and other payables of $17,079,919; and payments associated with leases of approximately $1,350,000. Based on the Companys liquidity position at the date of authorization of
these condensed consolidated interim financial statements and considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet its financial obligations. The Company is currently
working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash
flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising
capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of March 31, 2022, and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing
further financings in the future or obtaining waivers of the covenant breaches. As a result, these factors are indicators that material uncertainties exist that raises significant doubt about the Companys ability to continue as a going concern and, therefore, its ability
to realize assets and discharge liabilities in the normal course of business. In making their assessment, management considered all available information, together with forecasts and other mitigating strategies, about the future which is at least, but not
limited to, 12 months from the end of the reporting period. Management has considered the following in its assessment that the going concern assumption remains appropriate: These condensed consolidated interim financial statements have been prepared on
a going concern basis, which contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. These condensed
consolidated interim financial statements do not include any adjustments to the carrying amounts and classifications of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not
appropriate. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS In the preparation of the condensed consolidated interim financial statements and
the application of the Companys accounting policies, management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the
consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual
results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized in the period in which the estimates are revised and in any future period. The Company applied critical judgements and estimates, including significant
areas of estimation uncertainty in applying policies, in preparing these condensed consolidated interim financial statements, as described in Note 3 to the 2021 Annual Financial Statements. NOTE
4 - REVENUE The Companys operations and main revenue streams are those described in Note 33(C) to the 2021 Annual Financial Statements. All of the Companys revenue is derived from
contracts with customers. In the following tables, revenue is disaggregated by major service line and timing of revenue recognition. 1 Revenues from initial implementation and activation of
AssetCare projects, including the sale of hardware. The Companys revenue by
location of the ultimate customer or consumer of product solution are as follows: mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 4 - REVENUE (continued) Significant changes in unbilled revenue and deferred revenue balances are as
follows: NOTE 5 - TRADE AND OTHER
RECEIVABLES AND LONG-TERM RECEIVABLES Long-term receivables Long-term receivables represent receivables associated with revenue contracts
whereby certain customers make fixed monthly installment payments over a period of time, ranging from one to three years, for performance obligations delivered upfront. For contracts where all performance obligations were completed except for
monthly post contract and support maintenance, amounts due are included in trade receivables from contracts with customers. Current portion of
long-term receivables 1 1
Net of expected credit loss allowance of $94,590 at March 31, 2022 (December 31, 2021 - $95,064). 2 Net of expected credit loss allowance of $61,619 at March 31, 2022 (December 31, 2021 - $61,619). NOTE 6 - LEASES Information about the
Companys leases are presented in Note 8, Note 26(a) and Note 30 to the Companys 2021 Annual Financial Statements. In October 2021, the Company executed a 12-year lease for office space in Calgary, Alberta. Basic rent and estimated common
area expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. Effective January 2022, the
Company recognized a right-of-use asset associated with this office space of $6,322,509 and a related lease liability of $6,221,749. The carrying
value of all right-of-use assets at March 31, 2022 was $7,033,377 (December 31, 2021 - $916,028). Total lease liabilities were $7,227,845 at March 31, 2022 (December 31, 2021 - $1,045,472). The change in undiscounted contractual cash flows
associated with this new lease are described in Note 14(c). mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 7 - TRADE PAYABLES AND
ACCRUED LIABILITIES NOTE 8 - LOANS AND BORROWINGS The Companys loans and borrowings are described in Note 12 to the 2021
Annual Financial Statements. The carrying value of loans and borrowings by entities controlled by the Company are as follows:
Loan repayment terms vary depending on the nature of the debt. Total interest expense
associated with loans and borrowings recognized in net loss was $396,703 for the three months ended March 31, 2022 (three months ended March 31, 2021 - $247,364) (Note 15(a)). At
March 31, 2022, the term loan with Fiera Private Debt Fund VI LP (Fiera) matures in August 2026 and the loan is secured against the assets of the Company. Blended payments of principal and interest of $585,759 were paid for the three
months ended March 31, 2022 (three months ended March 31, 2021 - $585,759). The term loan contains covenants with quarterly and quarter end metrics. For the three months ended March 31, 2022, the Company did not meet certain minimum covenants and
therefore the term loan is due on demand as was the case at December 31, 2021, has been classified as current until such time as the covenants are in compliance. Subsequent to March 31, 2022, the Company entered into an agreement which impacts the
terms and repayment of this loan (Note 17(a)). mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 8 - LOANS AND BORROWINGS (continued) In conjunction with the Companys agreements to provide AssetCare solutions to
optimize Electric Vehicle (EV) charging efficiency at auto dealerships in the states of New York and California (the EV Dealership Projects), on March 28, 2022, a subsidiary of the Company executed a promissory note in the
aggregate principal amount of US$15,000,000 (the Note) with Carbon Royalty Corp. (Carbon). EV Dealership Projects are the design, installation and operation of integrated power systems consisting of solar, batteries and EV
charging power stations for auto dealerships. The initial principal amount under the Note of US$5,000,000 was funded on April 1, 2022 and an additional US$10,000,000 was funded on May 5, 2022 (the Loans). The Loans mature on March
31, 2025, with 10% per annum interest payable monthly in arrears in USD. In addition to the interest payments, the Note requires certain income-based payments, including tax incentives, be made from the
borrower to the lender based on income resulting from the EV dealership projects over their 20-year term. The Loan may not be prepaid unless authorized by the lender. The Loans contain representations, warranties and covenants which must be complied
with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst other implications. Subsequent to March 31, 2022, the Company, Carbon and Fiera executed an agreement specifying the
security held by Carbon (Note 17(b)). NOTE 9 - BANK INDEBTEDNESS ATB Financial
Facility The
Companys secured revolving operating facility (ATB Facility) with ATB Financial (ATB) is described in Note 13 to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, additional draws of
$1,077,000 were made. Subsequent to March 31, 2022, $670,000 was repaid in accordance with the agreement. The ATB Facility is subject to certain reporting and financial covenants. The
Company was in compliance with these covenants at March 31, 2022. At March 31, 2022, ATB had the ability to restrict further advances under the ATB Facility as a result of the Fiera covenant breach. NOTE 10
- CONVERTIBLE DEBENTURES a) 2019
Convertible debentures mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements NOTE 10 - CONVERTIBLE DEBENTURES (continued) The
Company completed a private placement offering of convertible unsecured subordinated debentures (the 2019 Debentures) for total aggregate gross proceeds of $23,507,500 in July 2019. The 2019
Debentures bear interest at a rate of 10% per annum, paid quarterly, and mature on June 30, 2022, at which time the principal amount of $23,457,500 and any unpaid interest is repayable in cash if the 2019 Debentures have not been converted at the
option of the holder or otherwise extinguished. The principal amount of the 2019 Debentures is convertible into 1,563,833 units of
the Company at the option of the holder at a conversion price of $15.00 per unit. Each unit is comprised of one common share and one share purchase warrant. If the debentures are converted, each warrant is exercisable to acquire one common share at
an exercise price of $22.50 until June 2024. Note 14(b) to the 2021 Annual Financial Statements describes the transactions
associated with the Companys issuance and subsequent conversion of the majority of the 2021 Debentures. At December 31, 2021, there was only one remaining convertible debenture outstanding in the principal amount of U$75,000 which matures January 2024, bears interest at 8% per annum and is convertible to the Companys equity at a conversion price of $5.75 (US$4.59). Interest is due and paid in cash on a quarterly basis. NOTE
11 - WARRANT LIABILITIES Derivative warrant
liabilities The Company
issued warrants in conjunction with debt and equity transactions. Certain of these warrants are classified as derivatives which are recognized as financial liabilities. At the issuance date and each reporting date until warrants are exercised, the
fair value of the liability is remeasured, with changes in the fair value recorded as gains or losses in the consolidated statements of loss and comprehensive loss. There were no new derivative warrants issued or warrants exercised in the three
months ended March 31, 2022. A description of the warrants issued in the year ended December 31, 2021, and the valuation thereof, are disclosed in Note 15 to the 2021 Annual Financial Statements. The
2,107,787 common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$6.87 and expire August 13, 2024. At March 31, 2022, the warrants were remeasured at a fair value of $1,183,883,
resulting in a $656,001 gain on remeasurement. The fair value of derivative warrants at March 31, 2022 of $0.56 per warrant was calculated using the Black-Scholes option pricing model (Black-Scholes model) with the following inputs and
assumptions: share price of $5.50, Canadian dollar equivalent exercise price of $8.61, risk free rate of 2.34%, expected life of 2.37 years, expected volatility of 42%, and no expected dividends. These warrants are classified as a Level 3 fair value
measurement. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements NOTE 11 - WARRANT LIABILITIES
(continued) The 2,415,000 common share purchase warrants entitle the holder to purchase one
common share of the Company at an exercise price of US$4.75 and expire November 29, 2026. On February 15, 2022, these warrants commenced trading on the NASDAQ, under the symbol MCLDW, and as a result, these warrants are classified as a Level 1 fair
value measurement (previously Level 3) at March 31, 2022 (Note 14(b)). At March 31, 2022, the warrants were remeasured at a fair value of $4,175,673, resulting in a $1,837,269 gain on remeasurement. The fair value of derivative warrants at March 31,
2022 of $1.73 per warrant was based on the closing price of the warrants. Warrant liability related to business acquisition - Associated with the acquisition of Agnity, the Company assumed a warrant liability whereby the holder of the warrant has the option to convert the warrant into shares of Agnity, not the Company, by
April 15, 2022, or receive a cash payment of US$552,250 at any time before the expiry of the warrant. The liability is measured at the Canadian dollar equivalent to its cash redemption amount which varies as a function of movements in exchange
rates. Subsequent to March 31, 2022, the holder of the warrant provided notice to Agnity that they intend to receive a cash repayment. Warrant
liability related to ATB Financial - At December 31, 2021, the Company had an obligation to issue warrants to ATB. The fair value of the warrants was measured at the date the services were received
in the amount of $195,066. On January 17, 2022, the Company issued 183,486 share purchase warrants to ATB which gives them the ability to purchase an
equivalent number of common shares of the Company at an exercise price of $5.45 per share, maturing one year from date of issuance (Note 12(b)). NOTE 12 - SHARE CAPITAL The Company has an unlimited number of authorized voting shares with no par
value. A summary of the shares issued during the year ended December 31, 2021 is described in Note 18(a) to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, the Company issued 12,031 common shares on exercise of
Restricted Share Units (Note 13(b)). Commons shares in
escrow At March 31, 2022,
the Company has 662,868 (December 31, 2021 - 681,024) common shares subject to escrow conditions resulting from business combinations and asset acquisitions in prior years. There were no additional common shares subject to escrow conditions added
during the three months ended March 31, 2022. Escrow restrictions will be released on 441,912 shares in the year ending December 31, 2022, and for the remaining 220,956 shares in the year ending December 31, 2023. The Companys warrants outstanding as at March 31, 2022 and December 31, 2021
are as follows and include both warrants classified as equity-settled and warrants classified as financial liabilities (Note 11): On January 17, 2022, the Company issued warrants to ATB to purchase an equivalent number of common shares of the Company and the warrant liability of $195,066 described in
Note 11(c) was derecognized with an offsetting credit to contributed surplus for the value assigned to the warrants. The weighted average remaining contractual life of outstanding warrants was 2.8 years at March 31, 2022 (December 31, 2021 - 3.09 years). In addition to the outstanding warrants issued in the three months ended March 31, 2022 described above, Note 18(b) to the 2021 Annual Financial Statement includes a list of the outstanding
warrants at December 31, 2021 by expiry date and exercise price. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 13 - SHARE BASED PAYMENT
ARRANGEMENTS Share-based payment arrangements are discussed in Note 19 to the 2021 Annual Financial
Statements. The Company recorded share-based compensation as follows: Weighted Price Weighted Average Remaining Contractual Life (years) At March 31, 2022, 285,295 stock options were exercisable at a weighted average
exercise price of $10.94. Exercise prices of stock options range from $4.73 to $18.02 per option. As at March 31, 2022, unrecognized share-based compensation expense related to non-vested stock options granted is $1,231,192 (December 31, 2021 - $1,824,812). The weighted
average fair value of stock options granted during the three months ended March 31, 2022 of $151,094, or $3.13 per option, was calculated at the date of grant using the Black-Scholes model with the following weighted average assumptions and inputs:
grant date share price of $5.18, exercise price of $5.17, risk-free rate of 1.62%, expected life of 6.5 years, expected volatility of 74%, forfeiture rate of 10%, and no expected dividends. Expected volatility is estimated taking into account
historical share price volatility. There were no grants of stock options during the three months ended March 31, 2021. The Companys obligation to issue shares on the vesting of RSUs is an
unfunded and unsecured obligation of the Company. A continuity of RSUs is as follows: During the three months ended March 31, 2022, 12,031 common shares were issued on the
exercise of 12,031 RSUs at a weighted average share price at exercise of $6.69. The fair value of each RSU is based on the market price of the Companys common
shares on the date of grant and the total fair value of RSUs granted in the three months ended March 31, 2022 was $174,329. As at March 31, 2022, unrecognized share-based compensation expense related to non-vested RSUs granted was $310,434 (December
31, 2021 - $277,686). mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 14 - FINANCIAL
INSTRUMENTS AND FINANCIAL RISK MANAGEMENT The following represents the carrying values of the financial assets and liabilities of the Company
and the associated measurement basis for each balance. Financial assets March 31, 2022 December 31, 2021 1 Excludes amounts for indirect taxes, income taxes and
contract assets, where applicable. Financial instruments not measured at fair
value The carrying values
of the financial assets and liabilities where the measurement basis is other than FVTPL approximate their fair values due to the immediate or short-term nature of these instruments considering there have been no significant change in credit and
market interest rates since origination date. As described in Note 25 and Note 33(L) to the 2021 Annual Financial Statements,
the fair value hierarchy establishes three levels to classify the significance of inputs to valuation techniques used in making fair value measurements of all financial assets and liabilities. At March 31,
2022 and December 31, 2021, there were no financial assets and financial liabilities measured and recognized at fair value on a non-recurring basis subsequent to initial recognition. The Companys policy for determining when a transfer between levels of the
fair value hierarchy occurs is to assess the impact at the date of the event or change in circumstance that could result in the transfer. During the three months ended March 31, 2022, the warrant liabilities associated with the USD Equity financing
were transferred from Level 3 to Level 1 as these warrants are now measured by reference to the closing price of the traded warrants (Note 11(b)). There were no other transfers between any of the levels during the three months ended March 31,
2022. Valuation methodologies used in the measurement of fair value for Level 2 financial assets
and financial liabilities The measurement of Level 2 financial assets and liabilities is made by reference to the inputs used to determine the fair value of each instrument using an appropriate valuation method. There were no
changes in the valuation methodologies from those at December 31, 2021. Valuation methodologies used in the measurement of fair value for Level 3 financial liabilities There were no
changes in the valuation methodologies for Level 3 financial liabilities from those at December 31, 2021, except from the transfer between Level 3 to Level 1 described above. The Black-Scholes model remains in use for the warrants issued on
conversion of the 2021 Debentures and is based on the quoted price of the Companys common stock in an active market, expected volatility, expected life and risk-free rate. mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 14 - FINANCIAL INSTRUMENTS
AND FINANCIAL RISK MANAGEMENT (continued) A description of the financial instruments and financial risks that the Company
is exposed to and the management of these risks is included in Note 26 to the 2021 Annual Financial Statements. There were no significant changes in the Companys exposure to those risks during the three months ended March 31, 2022, except for
the additional commitments as noted below which impacts liquidity risk. Contractual Obligations and
Commitments Information
regarding the Companys undiscounted contractual cash flows payable and the Companys commitments at December 31, 2021 are disclosed in Note 26(a) and Note 30, respectively, to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, the most significant changes in
contractual obligations disclosed in Note 26(a) were: (a) the addition of a new 12-year lease obligation of $9,529,000 for Calgary office space and variable lease payments associated with the Calgary office space of approximately $8,564,000, which
were previously included in Note 30 as commitments; and (b) an additional $1,077,000 drawn under the ATB Facility, a portion of which was repaid subsequent to March 31, 2022 (Note 9). Contractual obligations at December 31, 2021, have been reduced
by normal course payments made during the period to March 31, 2022 and have changed as trade payables and accrued liabilities continue to fluctuate. NOTE 15 - OTHER INCOME /
EXPENSE Gain on warrant
liability remeasurement (Note 11) 1 Gain on embedded
derivatives 2
1 Change in fair value unrealized. 2 Associated with the 2021 Debentures (Note 10(b)). mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 15 - OTHER INCOME / EXPENSE (continued) 1 Majority of government grants from the Canadian Government
for wage and rental subsidies. NOTE 16 - SUPPLEMENTAL
CASH FLOW INFORMATION mCloud Technologies
Corp. Notes to the Condensed Consolidated Interim Financial
Statements
NOTE 17 - EVENTS AFTER
THE REPORTING PERIOD On May 5, 2022, the Company and Fiera executed an Accommodation Agreement (the
Accommodation Agreement) and the parties agreed that a portion of the outstanding principal amount under the term loan would be paid in addition to a prepayment penalty and accommodation fee. The Company paid a total of $2,044,086 on May
6, 2022. The parties also agreed that the remainder of the principal and interest due under the loan would be paid on or before October 31, 2022 (the Repayment Date). The term loan was amended to increase the interest rate charged from
6.85% to 9.5% effectively immediately and clarified that the Company is not required to maintain the financial covenants set out in the November 9, 2021 amending agreement. The Company may be required to repay the loan before the Repayment Date if
the Company is in default or breach of the Accommodation Agreement. As part of the Accommodation Agreement, Fiera signed an agreement, whereby Fieras security is subordinate to the security granted to Carbon (Note 17(b)). On May 5, 2022, the Company, Carbon and Fiera executed a Subordination and
Postponement Agreement (the Subordination Agreement), whereby the parties agreed that the security previously held by Fiera would be subordinate to the security to be granted to Carbon
commencing on the date of the agreement. The security granted to Carbon means the EV Dealership Projects and to the extent related to the EV Dealership projects, all accounts, equipment and machinery, contracts and contract rights, including
contracts with auto dealerships, inventory, cash and proceeds, rent and profits for each of the preceding. Execution of the Subordination Agreement was required for the additional funding under the Note to be released. A total of US$15,000,000 was
funded subsequent to March 31, 2022 (Note 8(b)).
SUBJECT TO COMPLETION, DATE
[ ], 2022 1,000,000 9.0% Series A
Cumulative Preferred Shares 1,000,000 Warrants to Purchase 6,250,000 Common Shares PROSPECTUS MCLOUD
TECHNOLOGIES CORP. Until [_], (25 days after commencement of our initial public offering), all dealers that
effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 6. Indemnification of Directors, Officers, Employees and Agents Under the BCBCA, a company may indemnify: (i) a current or former director or officer of that company; (ii) a current
or former director or officer of another corporation if, at the time such individual held such office, the corporation was an affiliate of the company, or if such individual held such office at the companys request; or (iii) an individual
who, at the request of the company, held, or holds, an equivalent position in another entity (an indemnifiable person) against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment,
reasonably incurred by him or her in respect of any civil, criminal, administrative or other legal proceeding or investigative action (whether current, threatened, pending or completed) in which he or she is involved because of that persons
position as an indemnifiable person, unless: (i) the individual did not act honestly and in good faith with a view to the best interests of such company or the other entity, as the case may be; or (ii) in the case of a proceeding other
than a civil proceeding, the individual did not have reasonable grounds for believing that the individuals conduct was lawful. A company cannot indemnify an indemnifiable person if it is prohibited from doing so under its articles or by
applicable law. A company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an indemnifiable person in respect of that proceeding only if the indemnifiable
person has provided an undertaking that, if it is ultimately determined that the payment of expenses was prohibited, the indemnifiable person will repay any amounts advanced. Subject to the aforementioned prohibitions on indemnification, a company
must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an indemnifiable person in respect of such eligible proceeding if such indemnifiable person has not been reimbursed for such expenses,
and was wholly successful, on the merits or otherwise, in the outcome of such eligible proceeding or was substantially successful on the merits in the outcome of such eligible proceeding. On application from an indemnifiable person, a court may make
any order the court considers appropriate in respect of an eligible proceeding, including the indemnification of penalties imposed or expenses incurred in any such proceedings and the enforcement of an indemnification agreement. As permitted by the
BCBCA, our articles require us to indemnify our directors and former directors (and such individuals respective heirs and legal representatives) and permit us to indemnify any person to the extent permitted by the BCBCA. Item 7. Recent Sales of Unregistered Securities In the prior three years, we have issued and sold the securities described below without registering the securities under the Securities Act.
We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S promulgated under the Securities Act regarding sales by an issuer in offshore transactions, Regulation D under the
Securities Act, Rule 701 under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering. On August 13, 2021, the Company completed a non-brokered Offering of Units and issued 75,676
common shares at a price of $8.55 CDN for total proceeds of $647,030 On April 14, 2021, the Company completed a Public Offering and
issued 2,300,000 common shares at a price of $6.30 USD per share for total proceeds of $14,490,000 which consists of one common share and one common share purchase warrant of the Company. Each Warrant entitles the holder to acquire on Common Share
at an exercise price of $8.55 per Warrant Share at any time prior to 5pm on the date that is 3 months following the closing of the Offering. On July 16, 2020, the Company closed a non-brokered unit offering issuing an aggregate of 365,297
units of the Company at a price of $10.95 per unit. Each Unit consists of one common share of the Company and one-half of one common share purchase warrant, with each Warrant being exercisable to acquire one
common share of the Company at an exercise price of $14.25 for a term of 5 years following the closing of the Offering. On July 6,
2020, the Company closed a brokered public offering for 1,050,229 common shares at a price of $10.95 per Unit for aggregate gross proceeds to the Company of $11,500,003. Each Unit comprised on one common share and
on-half of one common share purchase warrant of the Company exercisable to acquire one common share of the company until July 6,2022 at an exercise price of $14.25 per share.
Item 8. Exhibits and Financial Statement Schedules (a) Exhibits The
following exhibits are filed herewith or incorporated by reference in this prospectus:
(b) Financial Statement Schedules None. Item 9.
Undertakings The undersigned registrant hereby undertakes: To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; To reflect in the prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective registration statement. To include any material information with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the registration statement; To
provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective. To remove from registration by
means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the
initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser: Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to
be filed pursuant to Rule 424 (§230.424 of this chapter);
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant
or used or referred to by the undersigned registrant; The portion of any other free writing prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and Any other communication that is an offer in the offering made by the undersigned registrant to the
purchaser. That, insofar as indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in
City of Vancouver, Province of British Columbia, Canada on July 15, 2022. /s/ Russell H. McMeekin Chief Executive Officer (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Russell H. McMeekin Chief Executive Officer Russell H. McMeekin (Principal Executive Officer) /s/ Chantal Schutz Chief Financial Officer July 15, 2022 Chantal Schutz (Principal Accounting and Financial Officer) /s/ * Director July 15, 2022 Michael Allman /s/ * Director July 15, 2022 Constantino Lanza /s/ * Director July 15, 2022 Elizabeth MacLean /s/ * Director July 15, 2022 Ian C. W. Russell *By: /s/ Russell H. McMeekin Attorney-in-fact Russell H. McMeekin
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of the
Company has signed this registration statement or amendment thereto in the United States on July 15, 2022. By: /s/ Russell H. McMeekin Name: Russell H. McMeekin Title: Chief Executive Officer
Conversion
Dividends
Ranking
No Maturity Date
Preemptive Rights
Voting Rights
Use of Proceeds
Restrictions on Dividends, Redemption and Repurchases
Optional Redemption
Special Optional Redemption
Redemption Upon Request of Holder in Connection with Change of Control:
Segregated Dividend Payment Account
Listing
Risk Factors
Year ended December 31,
Three months
ended
March 31, 2022
2021
2020
2019
$
4,429,603
$
25,596,972
$
26,928,439
$
18,340,249
(1,932,356
)
(9,683,748
)
(10,281,922
)
(7,583,127
)
$
2,497,247
$
15,913,224
$
16,646,517
$
10,757,122
5,314,330
21,691,774
20,885,044
10,313,803
762,231
1,377,255
1,536,420
3,166,788
531,950
3,179,353
1,078,164
498,099
2,552,013
8,538,854
5,741,872
3,294,550
3,176,043
9,085,436
8,886,341
4,351,812
252,933
1,867,915
1,454,235
1,468,361
1,943,213
8,924,812
6,778,100
4,044,143
$
14,532,713
$
54,665,399
$
46,360,176
$
27,137,556
$
12,035,466
$
38,752,175
$
29,713,659
$
16,380,434
1,858,637
8,618,794
6,033,510
3,217,500
622,509
(267,294
)
1,198,372
494,404
346,420
1,811,682
9,880,170
600,657
(2,493,270
)
6,040,121
(398,268
)
(7,126,097
)
(2,932,342
)
(167,913
)
$
11,625,074
$
46,364,119
$
35,824,881
$
30,405,252
288,863
157,303
(295,709
)
181,895
(890,816
)
(1,822,109
)
(668,209
)
(2,692,313
)
11,023,121
$
44,699,313
$
34,860,963
$
27,894,834
(649,089
)
69,460
(1,209,006
)
(607,302
)
$
10,374,032
$
44,768,773
$
33,651,957
$
27,287,532
9,777,570
44,329,707
36,870,267
29,839,342
1,245,551
369,606
(2,009,304
)
(1,944,508
)
$11,023,121
$44,699,313
$ 34,860,963
$27,894,834
9,147,568
44,427,305
35,563,921
29,431,628
1,226,464
341,468
(1,911,964
)
(2,144,096
)
$10,374,032
$44,768,773
$ 33,651,957
$27,287,532
$
0.61
$
3.73
$
5.07
$
7.30
16,147,560
11,898,183
7,272,464
4,085,322
March 31, 2022
December 31, 2021
December 31, 2020
December 31, 2019
$
1,873,021
$
4,588,057
$
1,110,889
529,190
13,736,106
14,566,975
12,312,814
9,091,654
2,287,443
2,355,350
1,326,319
839,012
471,909
397,060
445,213
378,221
$
18,368,479
$
21,907,442
$
15,195,235
$
10,838,077
165,698
622,577
1,011,847
86,913
992,732
343,371
2,091,059
1,586,429
7,033,377
916,028
3,660,717
4,206,808
564,253
649,403
506,387
710,552
18,923,489
20,585,833
27,766,839
23,671,089
27,042,823
27,081,795
27,086,727
18,758,975
54,722,372
$
50,199,007
$
62,123,576
49,020,766
73,090,851
$
72,106,449
$
77,318,811
59,858,843
4,710,549
$
3,460,109
$
976,779
1,471,805
17,079,919
12,421,309
12,924,256
9,636,405
4,694,450
2,811,408
1,771,120
1,138,281
12,480,038
12,447,939
3,431,251
3,004,717
22,922,383
22,185,170
6,060,782
8,880,038
710,924
725,086
453,855
410,674
835,472
720,457
6,003,838
1,389,094
1,398,972
1,594,297
1,043,314
69,791,070
$
64,015,619
$
28,247,937
17,740,065
111,411
110,540
19,534,988
17,535,946
6,773,990
634,798
3,109,604
3,641,627
646,137
767,662
9,721,049
10,968,338
1,407,503
2,291,057
4,168,905
3,854,614
232,577
845,232
78,730,111
$
67,819,676
$
65,860,292
53,740,590
118,275,850
118,195,363
83,120,611
45,368,745
11,408,263
11,040,751
8,518,476
7,278,119
2,202,000
1,571,998
1,669,596
363,250
(139,793,643
)
(130,016,073
)
(85,686,366
)
(48,816,099
)
(7,907,530
)
$
792,039
$
7,622,317
4,194,015
2,268,270
3,494,734
3,836,202
1,924,238
$
(5,639,260
)
$
4,286,773
$
11,458,519
6,118,253
$
73,090,851
$
72,106,449
$
77,318,811
59,858,843
Year Ended
Period End
$
1.2988
$
1.2732
$
1.2678
$
1.2482
Actual
Pro forma
Adjustments
$
1,873,021
5,000,525
(3)
$
6,873,546
12,480,038
12,480,038
22,922,383
(22,922,383
)
6,060,782
(2)
6,060,782
111,411
111,411
646,137
646,137
$
118,275,850
28,740,800
(2)
147,016,650
$
11,408,263
11,408,263
$
2,202,000
2,202,000
$
(139,793,643
)
(535,117
)
(140,328,760
)
$
(7,907,530
)
$
28,205,683
$
20,298,153
$
(5,639,260
)
$
28,205,683
$
22,566,423
(1)
(2)
(3)
2021
2020
2019
$
25.597
$
26.928
$
18.340
15.913
16.647
$
10.757
54.665
46.360
$
27.138
5.947
5.148
$
11.514
44.699
34.861
$
27.895
3.73
$
5.07
$
2.43
72.106
$
77.319
$
59.859
1.513
$
33.443
$
32.146
2021
2020
2019
2021 vs 2020
Change $
2021 vs 2020
Change %
2020 vs 2019
Change $
2020 vs 2019
Change %
$
25.597
$
26.928
$
18.340
$
(1.331
)
(5
)%
$
8.588
47
%
(9.684
)
(10.282
)
(7.583
)
0.598
(6
)%
(2.699
)
36
%
$
15.913
$
16.647
$
10.757
$
(0.733
)
(4
)%
$
5.890
55
%
$
21.692
$
20.885
$
10.314
$
0.807
4
%
$
10.571
102
%
1.377
1.536
3.167
(0.159
)
(10
)%
(1.631
)
(51
)%
3.179
1.078
0.498
2.101
195
%
0.580
116
%
8.539
5.742
3.295
2.797
49
%
2.447
74
%
9.085
8.886
4.352
0.199
2
%
4.534
104
%
1.868
1.454
1.468
0.414
28
%
(0.014
)
(1
)%
8.925
6.778
4.044
2.147
32
%
2.734
68
%
$
54.665
$
46.360
$
27.138
$
8.305
18
%
$
19.222
71
%
$
38.752
$
29.714
$
16.380
$
9.039
30
%
$
13.334
81
%
$
8.619
$
6.034
$
3.218
$
2.585
43
%
$
2.816
88
%
(0.267
)
1.198
0.494
(1.466
)
(122
)%
0.704
143
%
0.601
(0.601
)
(100
)%
0.346
1.812
9.880
(1.465
)
(81
)%
(8.068
)
(82
)%
6.040
6.040
100
%
%
(7.126
)
(2.932
)
(0.168
)
(4.194
)
143
%
(2.764
)
1645
%
$
46.364
$
35.825
$
30.405
$
10.539
29
%
$
5.420
18
%
$
0.157
$
(0.296
)
$
(0.182
)
$
0.453
(153
)%
$
(0.114
)
63
%
(1.822
)
(0.668
)
2.692
(1.154
)
173
%
(3.360
)
(125
)%
$
44.699
$
34.861
$
27.895
$
9.838
28
%
$
6.966
25
%
2021
2020
2019
2021 vs 2020
Chabrnge $
2021 vs 2020
%
2020 vs 2019
Change $
2020 vs 2019
%
$
1.250
$
7.689
$
5.965
$
(6.439
)
(84
)%
$
1.724
29
%
23.462
12.809
2.940
10.653
83
%
9.869
336
%
0.885
6.430
9.436
(5.545
)
(86
)%
(3.005
)
(32
)%
$
25.597
$
26.928
$
18.340
$
(1.331
)
(5
)%
$
8.588
47
%
2021
2020
2019
2021 vs 2020
Change $
2021 vs 2020
%
2020 vs 2019
Change $
2020 vs 2019
%
$
24.423
$
18.551
$
12.375
$
5.872
32
%
$
6.176
50
%
1.174
8.377
5.965
(7.202
)
(86
)%
2.412
40
%
$
25.597
$
26.928
$
18.340
$
(1.331
)
(5
)%
$
8.588
47
%
Year ended December 31,
2021
2020
2019
$
10.734
$
13.833
$
10.890
6.564
5.691
7.451
5.850
6.447
0.994
0.152
1.455
0.805
$
25.597
$
26.928
$
18.341
2021
2020
2019
Less than 10
%
13.6
%
n/a
Less than 10
%
13.1
%
11.0
%
11.3
%
Less than 10
%
20.0
%
10.7
%
Less than 10
%
n/a
2021
2020
2019
2021 vs 2020
Change $
2021 vs 2020
%
2020 vs 2019
Change $
2020 vs 2019
%
$
9.684
$
10.282
$
7.583
$
(0.598
)
(6
)%
$
2.699
36
%
15.913
16.647
10.757
(0.733
)
(4
)%
5.890
55
%
62.2
%
61.8
%
58.6
%
1
%
3
%
2021
2020
2019
2021 vs 2020
Change $
2021 vs 2020
%
2020 vs 2019
Change $
2020 vs 2019
%
$
21.692
$
20.885
$
10.314
$
0.807
4
%
$
10.571
102
%
1.377
1.536
3.167
(0.159
)
(10
)%
(1.631
)
(51
)%
3.179
1.078
0.498
2.101
195
%
0.580
116
%
8.539
5.742
3.295
2.797
49
%
2.447
74
%
9.085
8.886
4.352
0.199
2
%
4.534
104
%
1.868
1.454
1.468
0.414
28
%
(0.014
)
%
8.925
6.778
4.044
2.147
32
%
2.734
68
%
$
54.665
$
46.360
$
27.138
$
8.305
18
%
$
19.222
71
%
Expenses
2021
2020
2019
2021 vs 2020
Change $
2021 vs 2020
%
2020 vs 2019
Change $
2020 vs 2019
%
$
21.692
$
20.885
$
10.314
$
0.807
4
%
$
10.571
102
%
1.377
1.536
3.167
(0.159
)
(10)
%
(1.631
)
(51)
%
3.179
1.078
0.498
2.101
195
%
0.580
116
%
8.539
5.742
3.295
2.797
49
%
2.447
74
%
9.085
8.886
4.352
0.199
2
%
4.534
104
%
1.868
1.454
1.468
0.414
28
%
(0.014
)
%
8.925
6.778
4.044
2.147
32
%
2.734
68
%
$
54.665
$
46.360
$
27.138
$
8.305
18
%
$
19.222
71
%
2021
2020
2019
2021 vs
2020
Change $
2021 vs
2020
%
2020 vs
2019
Change $
2020 vs
2019
%
$
8.619
$
6.034
$
3.218
$
2.585
43
%
$
2.816
88
%
(0.267
)
1.198
0.494
(1.465
)
(122
)%
$
0.704
143
%
0.601
%
$
(0.601
)
(100
)%
0.346
1.812
9.880
(1.466
)
(81
)%
$
(8.068
)
(82
)%
6.040
6.040
%
$
%
(7.126
)
(2.932
)
(0.168
)
(4.194
)
143
%
$
(2.764
)
1645
%
$
7.612
$
6.111
$
14.025
$
1.500
25
%
$
(7.914
)
4713
%
2021
2020
2019
2021 vs
2020
Change $
2021 vs
2020
%
2020 vs
2019
Change $
2020 vs
2019
%
$
0.157
$
(0.296
)
$
0.182
$
0.453
(153
)%
$
(0.478
)
(262
)%
$
(1.822
)
$
(0.668
)
$
(2.692
)
$
(1.154
)
173
%
$
2.024
(75
)%
2021
2020
Change $
Change %
$
0.173
$
2.672
$
(2.499
)
(94
)%
3.886
5.546
(1.660
)
(30
)%
0.111
1.005
(0.894
)
(89
)%
$
4.170
$
9.223
$
(5.053
)
(55
)%
2021
2020
Change $
Change %
$
4.073
$
4.757
$
(0.684
)
(14
)%
0.097
4.466
(4.369
)
(98
)%
$
4.170
$
9.223
$
(5.053
)
(55
)%
2021
2020
Change $
Change %
$
1.507
$
3.579
$
(2.072
)
(58
)%
2.664
5.644
(2.981
)
(53
)%
63.9
%
61.2
%
4
%
2021
2020
Change $
Change %
$
5.608
$
4.486
$
1.122
25
%
0.400
0.304
0.096
32
%
1.105
0.323
0.782
242
%
4.187
1.924
2.263
118
%
2.446
2.090
0.356
17
%
0.684
0.427
0.257
60
%
2.146
1.917
0.229
12
%
$
16.576
$
11.471
$
5.105
45
%
2021
2020
Change $
Change %
$
2.724
$
1.694
$
1.030
61
%
(0.041
)
1.583
(1.624
)
(103
)%
0.023
0.501
(0.478
)
(95
)%
(3.075
)
(3.075
)
%
(1.654
)
(0.971
)
(0.683
)
70
%
$
(2.023
)
$
2.807
$
(4.830
)
(172
)%
2021
2020
Change $
Change %
$
(0.704
)
$
(0.397
)
$
(0.307
)
77
%
$
(0.854
)
$
0.682
$
(1.535
)
(225
)%
Q4 2021
Q3 2021
(1)
Q2 2021
(1)
Q1 2021
(1)
Q4 2020
Q3 2020
Q2 2020
Q1 2020
$
4.171
$
7.434
$
6.556
$
7.436
$
9.223
$
6.137
$
5.010
$
6.558
10.331
15.616
9.000
9.752
8.918
8.713
9.353
7.878
9.662
15.466
8.930
10.271
9.725
9.417
9.707
8.021
$
0.70
$
1.22
$
0.88
$
1.12
$
1.07
$
1.15
$
1.53
$
1.47
$
72.106
$
73.818
$
79.868
$
75.803
$
77.319
$
68.113
$
64.349
$
67.869
$
1.513
$
12.978
$
24.565
$
43.440
$
33.443
$
33.319
$
37.223
$
32.795
2021
2020
2019
$
(28.330
)
$
(24.856
)
$
(14.516
)
(1.064
)
(6.395
)
(20.732
)
32.927
31.857
34.465
$
3.533
$
0.606
$
(0.784
)
Undiscounted Contractual Cash Flows
Contractual Obligations
< 1 year
1 2
years
> 2
years
Total
$
3.460
$
$
$
3.460
12.421
12.421
11.764
0.786
12.550
0.522
0.534
0.179
1.235
24.630
24.630
0.008
0.103
0.111
0.710
0.710
1.399
1.399
$
54.913
$
1.423
$
0.179
$
56.516
Undiscounted Contractual Cash Flows
Commitments
< 1 year
2 3
years
4 5
years
More than 5
years
Total
0.397
0.478
0.125
0.013
1.013
0.105
2.589
2.763
12.636
18.093
$
0.501
$
3.067
$
2.888
$
12.649
$
19.106
1
2
3
4
5
6
Q1 2022
Q4 2021
Q3 2021 (1)
Q2 2021 (1)
Q1 2021 (1)
Q4 2020
Q3 2020
Q2 2020
4.430
4.171
7.434
6.556
7.436
9.223
6.137
5.010
11.023
10.331
15.616
9.000
9.752
8.918
8.713
9.353
9.778
9.662
15.466
8.930
10.271
9.725
9.417
9.707
$
0.61
$
0.70
$
1.22
$
0.88
$
1.12
$
1.07
$
1.15
$
1.53
73.091
72.106
73.818
79.868
75.803
77.319
68.113
64.349
7.532
1.513
12.978
24.565
43.440
33.443
33.319
37.223
(1)
2022
2021
Change $
Change %
$
4.430
$
7.436
$
(3.006
)
(40
)%
$
2.497
$
4.177
$
(1.680
)
(40
)%
$
5.314
$
4.870
$
0.444
9
%
0.762
0.185
0.577
312
%
0.532
0.749
(0.217
)
(29
)%
2.552
1.337
1.215
91
%
3.176
1.739
1.437
83
%
0.253
0.375
(0.122
)
(33
)%
1.943
1.971
(0.028
)
(1
)%
$
14.533
$
11.227
$
3.306
29
%
$
12.035
$
7.050
$
4.985
71
%
$
1.859
$
2.236
$
(0.377
)
(17
)%
0.623
0.367
0.256
70
%
0.324
(0.324
)
(100
)%
(2.493
)
1.564
(4.057
)
(259
)%
(0.398
)
(1.910
)
1.512
(79
)%
$
11.625
$
9.632
$
1.993
21
%
$
0.289
$
0.239
$
0.050
21
%
(0.891
)
(0.119
)
(0.772
)
647
%
$
11.023
$
9.752
$
1.271
13
%
2022
2021
Change $
Change %
$
0.415
$
0.515
$
(0.100
)
(20
)%
3.989
6.435
(2.446
)
(38
)%
0.026
0.486
(0.460
)
(95
)%
$
4.430
$
7.436
$
(3.006
)
(40
)%
2022
2021
Change $
Change %
$
3.862
$
5.449
$
(1.587
)
(29
)%
$
0.568
1.987
(1.419
)
(71
)%
$
4.430
$
7.436
$
(3.006
)
(40
)%
2022
2021
Change $
Change %
$
1.932
$
3.259
$
(1.326
)
(41
)%
2.497
4.177
(1.680
)
(40
)%
56.4
%
56.2
%
%
2022
2021
Change $
Change %
$
5.314
$
4.870
$
0.444
9
%
0.762
0.185
0.577
312
%
0.532
0.749
(0.217
)
(29
)%
2.552
1.337
1.215
91
%
3.176
1.739
1.437
83
%
0.253
0.375
(0.122
)
(33
)%
1.943
1.971
(0.028
)
(1
)%
$
14.533
$
11.227
$
3.306
29
%
2022
2021
Change $
Change %
$
1.859
$
2.236
$
(0.377
)
(17
)%
0.623
0.367
0.256
70
%
0.324
(0.324
)
(100
)%
(2.493
)
1.564
(4.057
)
(259
)%
(0.398
)
(1.910
)
1.512
(79
)%
$
(0.410
)
$
2.582
$
(2.990
)
(116
)%
2022
2021
$
(3.771
)
$
(4.930
)
(0.011
)
(0.461
)
1.090
4.608
$
(2.692
)
$
(0.783
)
2022
2021
Change %
$
0.399
$
0.374
7
%
0.121
0.057
112
%
$
0.520
$
0.431
21
%
Securities Outstanding
16,155,654
8,665,406
870,146
251,265
1,563,833
15,750
27,522,054
(1)
(2)
(3)
*
1)
2)
3)
4)
5)
6,658,373
US Patent
12/2/2003
Live
Field Diagnostic Services, Inc.
6,701,725
US Patent
3/9/2004
Live
Field Diagnostic Services, Inc.
6,973,793
US Patent
12/13/2005
Live
Field Diagnostic Services, Inc.
7,079,967
US Patent
7/18/2006
Live
Field Diagnostic Services, Inc.
8,024,938
US Patent
9/27/2011
Live
Field Diagnostic Services, Inc.
6,867,774
US Patent
3/15/2005
Live
NGRAIN (Canada) Corporation
7,218,323
US Patent
5/15/2007
Live
NGRAIN (Canada) Corporation
7,317,456
US Patent
1/8/2008
Live
NGRAIN (Canada) Corporation
7,965,290
US Patent
6/21/2011
Live
NGRAIN (Canada) Corporation
8,217,939
US Patent
7/16/2012
Live
NGRAIN (Canada) Corporation
System and Method for Optimal Geometry Configuration Based on Parts Exclusion
9,159,170
US Patent
10/13/2015
Live
NGRAIN (Canada) Corporation
Method and System for Emulating Kinematics
9,342,913
US Patent
5/17/2016
Live
NGRAIN (Canada) Corporation
System, Computer- Readable Medium and Method for 3D Differencing of 3D Voxel Models
9,600,929
US Patent
3/21/2017
Live
NGRAIN (Canada) Corporation
9,754,405
US Patent
9/10/2015
Live
NGRAIN (Canada) Corporation
Portable apparatus and method for decision support for real time automated multisensor data fusion and analysis
7/9/2019
Live
mCloud Corp.
Age
56
Chief Executive Officer, President, Director
October 2017
61
Director
October 2017
68
Chief Growth Officer, Corporate Secretary, Director
October 2017
57
Director
October 2018
73
Director
September 2019
48
Chief Financial Officer
May 2019
Fees billed for the fiscal year ended
December 31,
2021
2020
CAD$
1,799,383
CAD$
769,826
CAD$
6,420
CAD$
CAD$
339,624
CAD$
321,050
CAD$
102,720
CAD$
38,873
CAD$
2,248,147
CAD$
1,129,749
1.
2.
3.
4.
(a)
(b)
(b)
Principal
Year
Salary
($)
Bonus
($)
Committee
or meeting
fees
($)
Value of
perquisites
($)
All other
compensation
($)
Total
compensation
($)
2021
$
249,999.84 USD
Nil
Nil
Nil
$
93,500 USD
$
343,499.84 USD
2021
$
249,999.84 USD
Nil
Nil
Nil
$
42,358 USD
$
292,357 USD
2021
$
262,000 CAD
Nil
Nil
Nil
Nil
$
262,000 CAD
2021
Nil
Nil
$
48,000 USD
Nil
Nil
$
48,000 USD
2021
Nil
Nil
$
48,000 USD
Nil
Nil
$
48,000 USD
2021
Nil
Nil
$
48,000 USD
Nil
Nil
$
48,000 USD
2021
Nil
Nil
$
20,000 USD
Nil
Nil
$
20,000 USD
(1)
(2)
(3)
Security
Number of
Compensation
Securities,
Number of
Underlying
Securities,
and
Percentage of
Class(1)
Issue,
Conversion
or Exercise
Price
($)
Closing Price
of Security or
Underlying
Security on
Date of Grant
($)
Closing Price
of Security
or
Underlying
Security at
Year End
($)
Stock Options
25,000
October 24, 2019
Exercise
price $12.90
$
12.30 CAD
$
6.10 CAD
October 24, 2029
RSUs
50,000
April 12, 2018
$9.75 CAD
$
9.75 CAD
$
6.10 CAD
No expiry
RSUs
25,000
October 24, 2019
$12.30 CAD
$
12.30 CAD
$
6.10 CAD
No expiry
Stock Option
12,500
October 24, 2019
Exercise
price $12.90
$
12.30 CAD
$
6.10 CAD
October 24, 2029
RSUs
3,333
April 12, 2018
$9.75 CAD
$
9.75 CAD
$
6.10 CAD
No expiry
RSUs
12,500
October 24, 2019
$12.30 CAD
$
12.30 CAD
$
6.10 CAD
No expiry
RSUs
6,667
April 12, 2018
$9.75 CAD
$
9.75 CAD
$
6.10 CAD
No expiry
Stock Option
5,000
October 24, 2019
Exercise
price $11.85
$
12.30 CAD
$
6.10 CAD
October 24, 2029
Stock Option
8,333
October 24, 2019
Exercise
Price $11.70
$
12.30 CAD
$
6.10 CAD
October 24, 2029
Stock Option
8,333
July 31, 2021
Exercise
Price $7.65
$
7.65 CAD
$
6.10 CAD
July 31, 2031
Stock Option
28,800
October 22, 2021
Exercise
Price $6.99
$
6.99 CAD
$
6.10 CAD
October 22, 2031
Stock Option
733
Jan 1, 2022
Exercise
Price $6.99
$
6.32 CAD
$
6.10 CAD
Jan 1, 2032
RSUs
8,333
October 24, 2019
$12.30 CAD
$
12.30 CAD
$
6.10 CAD
No Expiry
RSUs
8,333
July 31, 2021
$7.65 CAD
$
7.65 CAD
$
6.10 CAD
No Expiry
a)
b)
c)
Beneficial Ownership
Prior to Offering
Following Offering(1)
Common Shares
Percentage
Common Shares
Percentage
229,538
1.42
%
229,538
1.02
%
135,157
*
%
135,157
*
%
182,845
1.13
%
182,845
*
%
0
0
%
0
0
%
18,702
*
%
18,702
*
%
8,808
*
%
8.808
*
%
*
(1)
Series A Preferred
Shares
Warrants
$
5,829.97
9,933.59
5,000
264,000
150,000
5,000
70,000
50,000
$
553,933.59
Notes
December 31, 2021
December 31, 2020
$
4,588,057
$
1,110,889
6
14,566,975
12,312,814
7
2,355,350
1,326,319
6
397,060
445,213
$
21,907,442
$
15,195,235
7
622,577
1,011,847
6
343,371
2,091,059
8
916,028
3,660,717
9
649,403
506,387
10
20,585,833
27,766,839
10
27,081,795
27,086,727
$
50,199,007
$
62,123,576
$
72,106,449
$
77,318,811
13
$
3,460,109
$
976,779
11
12,421,309
12,924,256
5
2,811,408
1,771,120
12
12,447,939
3,431,251
14
22,185,170
15
8,880,038
710,924
8
410,674
835,472
16
6,003,838
18
1,398,972
1,594,297
$
64,015,619
$
28,247,937
14
110,540
19,534,988
8
634,798
3,109,604
12
767,662
9,721,049
25
2,291,057
4,168,905
16
232,577
18
845,232
$
67,819,676
$
65,860,292
19
118,195,363
83,120,611
11,040,751
8,518,476
1,571,998
1,669,596
(130,016,073
)
(85,686,366
)
$
792,039
$
7,622,317
21
3,494,734
3,836,202
$
4,286,773
$
11,458,519
$
72,106,449
$
77,318,811
Russ McMeekin
Michael Allman
Director
Director
Year ended December 31,
Notes
2021
2020
2019
4, 5
$
25,596,972
$
26,928,439
$
18,340,249
(9,683,748
)
(10,281,922
)
(7,583,127
)
$
15,913,224
$
16,646,517
$
10,757,122
21,691,774
20,885,044
10,313,803
1,377,255
1,536,420
3,166,788
3,179,353
1,078,164
498,099
8,538,854
5,741,872
3,294,550
9,085,436
8,886,341
4,351,812
20
1,867,915
1,454,235
1,468,361
8-10
8,924,812
6,778,100
4,044,143
$
54,665,399
$
46,360,176
$
27,137,556
$
38,752,175
$
29,713,659
$
16,380,434
22
8,618,794
6,033,510
3,217,500
(267,294
)
1,198,372
494,404
17
346,420
1,811,682
9,880,170
9,10(a)
600,657
23
6,040,121
24
(7,126,097
)
(2,932,342
)
(167,913
)
$
46,364,119
$
35,824,881
$
30,405,252
25
157,303
(295,709
)
181,895
25
(1,822,109
)
(668,209
)
(2,692,313
)
$
44,699,313
$
34,860,963
$
27,894,834
69,460
(1,209,006
)
(607,302
)
$
44,768,773
$
33,651,957
$
27,287,532
44,329,707
36,870,267
29,839,342
369,606
(2,009,304
)
(1,944,508
)
$
44,699,313
$
34,860,963
$
27,894,834
44,427,305
35,563,921
29,431,628
341,468
(1,911,964
)
(2,144,096
)
$
44,768,773
$
33,651,957
$
27,287,532
$
3.73
$
5.07
$
7.30
11,898,183
7,272,464
4,085,322
Notes
Number of
Shares
Share Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit
Total
Shareholders
Equity
Interest
Total Equity
9,168,416
$
83,120,611
$
8,518,476
$
1,669,596
$
(85,686,366
)
$
7,622,317
$
3,836,202
$
11,458,519
20
1,867,915
1,867,915
1,867,915
20
71,190
337,104
(423,277
)
(86,173
)
(86,173)
19(b)
294,894
294,894
294,894
19(a)
2,300,000
12,395,918
12,395,918
12,395,918
19(a)
619,796
619,796
619,796
19(a)
75,676
420,000
420,000
420,000
19(a)
2,107,787
14,436,728
14,436,728
14,436,728
19(a)
2,415,000
7,485,002
7,485,002
7,485,002
19(a)
162,947
162,947
162,947
(44,329,707
)
(44,329,707
)
(369,606)
(44,699,313)
(97,598
)
(97,598
)
28,138
(69,460)
16,138,069
$
118,195,363
$
11,040,751
$
1,571,998
$
(130,016,073
)
$
792,039
$
3,494,734
$
4,286,773
Notes
Number of
Shares
Share Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit
Total
Shareholders
Equity
Interest
Total Equity
5,282,904
$
45,368,745
$
7,278,119
$
363,250
$
(48,816,099
)
$
4,194,015
$
1,924,238
$
6,118,253
20
1,454,235
1,454,235
1,454,235
20(b)
35,877
384,613
(529,006
)
(144,393
)
(144,393)
20(a)
7,639
166,400
(96,400
)
70,000
70,000
117,977
1,923,118
(427,426
)
1,495,692
1,495,692
17(d)
126,737
2,304,073
2,304,073
2,304,073
17(e)
867,631
5,882,547
5,882,547
5,882,547
17(e)
22,064
149,596
149,596
149,596
66,667
820,000
820,000
820,000
19(b)
3,333
50,000
24,000
74,000
74,000
12,217,171
12,217,171
12,217,171
1,222,063
12,217,171
(12,217,171
)
143,002
143,002
143,002
1,415,526
13,854,348
671,952
14,526,300
14,526,300
(36,870,267
)
(36,870,267
)
2,009,304
(34,860,963)
1,306,346
1,306,346
(97,340
)
1,209,006
9,168,416
$
83,120,611
$
8,518,476
$
1,669,596
$
(85,686,366
)
$
7,622,317
$
3,836,202
$
11,458,519
Notes
Number of
Shares
Share
Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
Income
Deficit
Total
Shareholders
Equity
Interest
Total Equity
3,030,021
$
19,815,174
$
1,759,217
$ (44,464
)
$ (18,976,757
)
$
2,553,170
$
$
2,553,170
20
1,468,361
1,468,361
1,468,361
20(b)
11,905
142,277
(142,277
)
20(a)
50,838
658,074
(114,825
)
543,249
543,249
18(b)
133,176
1,865,773
(138,571
)
1,727,202
1,727,202
17(c)
1,200,000
13,320,000
13,320,000
13,320,000
17(c)
800,000
8,880,000
8,880,000
8,880,000
17(a)
50,000
606,495
606,495
606,495
19(a)
6,964
84,252
84,252
84,252
(3,300
)
(3,300
)
(3,300)
61,000
61,000
61,000
3,673,214
3,673,214
3,673,214
17(a)
712,000
712,000
712,000
(219,858
)
(219,858)
(29,839,342
)
(29,839,342
)
1,944,508
(27,894,834)
407,714
407,714
199,588
607,302
5,282,904
$
45,368,745
$
7,278,119
$ 363,250
$ (48,816,099)
$
4,194,015
$
1,924,238
$
6,118,253
Year ended December 31,
Notes
2021
2020
2019
$
(44,699,313
)
$
(34,860,963
)
$
(27,894,834
)
8-10
8,924,812
6,778,100
4,044,143
20
1,867,915
1,454,235
1,468,361
22
8,618,794
6,020,636
3,217,500
23
6,040,121
600,657
24
(2,675,671
)
(92,535
)
(167,913
)
26
1,159,742
223,129
432,073
(534,993
)
1,034,501
542,016
149,596
8,880,000
25
157,303
(295,709
)
181,895
25
(1,822,109
)
(668,209
)
(2,692,313
)
(99,979
)
30
(1,988,521
)
(904,212
)
(2,131,240
)
(3,377,851
)
(3,535,805
)
(1,992,496
)
(158,564
)
(376,093
)
$
(28,329,771
)
$
(24,855,800
)
$
(15,988,223
)
9
$
(625,202
)
$
(127,688
)
$
(138,123
)
10
(438,725
)
(809,764
)
17(a)
(204,604
)
(835,302
)
17
(4,622,400
)
(20,389,426
)
$
(1,063,927
)
$
(6,395,154
)
$
(20,732,153
)
8
$
(1,095,327
)
$
(814,072
)
$
(422,783
)
12
(9,781,554
)
(9,011,638
)
(6,787,528
)
12, 13
13,752,698
8,726,766
16,539,700
13
(1,004,211
)
(495,026
)
1,471,805
19(a)
20,300,920
14,526,300
14
5,424,661
5,285,997
22,865,049
19(a)
5,415,864
12,217,171
1,727,202
70,000
543,249
1,495,692
(86,173
)
(144,393
)
$
32,926,878
$
31,856,797
$
35,936,694
$
3,533,180
$
605,843
$
(783,682
)
(56,012
)
(24,144
)
(12,922
)
1,110,889
529,190
1,325,794
$
4,588,057
$
1,110,889
$
529,190
(a)
(b)
(b)
Year ended December 31,
2021
2020
2019
$
10,733,922
$
13,832,691
$
10,889,542
6,564,271
5,691,202
7,450,707
5,849,967
6,446,939
993,933
152,301
1,454,879
805,306
$
25,596,972
$
26,928,439
$
18,340,249
For the years ended December 31,
2021
2020
2019
Less than 10%
14 %
n/a
Less than 10%
13 %
11 %
11 %
Less than 10%
20 %
11 %
Less than 10%
n/a
December 31, 2021
December 31, 2020
$
30,812,581
$
37,966,772
10,372,410
11,731,960
9,014,016
12,424,844
$
50,199,007
$
62,123,576
Year ended December 31,
2021
2020
2019
$
1,250,181
$
7,689,232
$
5,964,663
23,461,748
12,809,054
2,939,582
885,043
6,430,153
9,436,004
$
25,596,972
$
26,928,439
$
18,340,249
1
2
3
Year ended December 31,
Timing of revenue recognition
2021
2020
2019
$
24,422,749
$
18,551,736
$
12,375,586
1,174,223
8,376,703
5,964,663
$
25,596,972
$
26,928,439
$
18,340,249
Unbilled revenue
Deferred revenue
$
$
133,678
2,347,207
133,556
457,259
9,595,535
5,309,436
(11,278,312
)
(4,878,419
)
(5,499
)
(17,229
)
$
658,931
$
1,138,281
117,686
11,478,436
6,316,586
(11,557,665
)
(146,489
)
(5,612,896
)
(30,586
)
3,841
(40,265
)
$
554,740
$
1,771,120
7,470,881
10,616,893
(7,269,579
)
(9,585,211
)
8,606
$
756,042
$
2,811,408
1
December 31, 2021
December 31, 2020
$
14,204,320
$
10,182,229
756,042
554,740
148,200
341,583
2,217
594,036
919,954
961,714
86,777
153,178
(1,550,535
)
(474,666
)
$
14,566,975
$
12,312,814
1
December 31, 2021
December 31, 2020
$
397,060
$
445,213
343,371
2,091,059
$
740,431
$
2,536,272
1
2
December 31, 2021
December 31, 2020
$
348,063
$
122,893
121,806
38,593
862,338
189,734
938,887
1,075,797
505,448
292,552
197,962
325,481
3,423
293,116
$
2,977,927
$
2,338,166
$
2,355,350
$
1,326,319
622,577
1,011,847
$
2,977,927
$
2,338,166
Office
Equipment and
Vehicles
Total
$
285,086
$
$
285,086
4,207,837
95,378
4,303,215
183,617
183,617
(433,617
)
(48,360
)
(481,977
)
(78,764
)
(78,764
)
(4,369
)
(4,369
)
$
3,976,173
$
230,635
$
4,206,808
509,290
509,290
84,413
6,158
90,571
(780,767
)
(145,661
)
(926,429
)
(221,590
)
(221,590
)
2,648
(582
)
2,067
$
3,570,167
$
90,550
$
3,660,717
(748,058
)
(80,198
)
(828,256
)
(1,924,504
)
(1,924,504
)
8,122
(51
)
8,071
$
905,727
$
10,301
$
916,028
Year ended December 31,
2020
2019
$
137,272
$
350,792
$
168,571
828,256
926,429
481,977
825,212
824,062
4,550
$
1,795,290
$
2,101,283
$
650,548
1
2
Year ended December 31,
2020
2019
$
137,272
$
350,792
$
168,571
$
1,095,327
$
814,072
$
422,783
Furniture and
Equipment
Improvements
Equipment
$
10,117
$
239,555
$
52,966
$
302,638
30,529
74,641
32,952
138,122
253,057
64,366
232,175
549,598
(14,460
)
(14,460
)
(1,339
)
(1,973
)
(6,990
)
(10,302
)
$
292,364
$
376,589
$
296,643
$
965,596
30,543
97,145
127,688
(917
)
(1,351
)
(6,964
)
(9,232
)
$
321,990
$
375,238
$
386,824
$
1,084,052
626,841
626,841
(29,459
)
(43,409
)
(124,544
)
(197,412
)
(504
)
(744
)
(4,588
)
(5,836
)
$
292,027
$
331,085
$
884,533
$
1,507,645
$
410
$
13,433
$
13,318
$
27,161
44,729
71,143
123,272
239,144
(1,321
)
(1,577
)
(8,363
)
(11,261
)
$
43,818
$
82,999
$
128,227
$
255,044
78,289
77,906
175,027
331,222
(923
)
(1,436
)
(6,242
)
(8,601
)
$
121,184
$
159,469
$
297,012
$
577,665
75,117
73,864
336,765
485,746
(29,458
)
(43,409
)
(123,240
)
(196,107
)
6,746
(6,746
)
(505
)
(744
)
(7,813
)
(9,062
)
$
173,084
$
189,180
$
495,978
$
858,242
$
200,806
$
215,769
$
89,812
$
506,387
$
118,943
$
141,905
$
388,555
$
649,403
Patents and
trademarks
Customer
relationships
Technology
Total
$
192,032
$
2,118,739
$
1,590,958
$
3,901,729
14,168,830
10,212,390
24,381,220
(9,374
)
(46,579
)
(47,366
)
(103,319
)
$
182,658
$
16,240,990
$
11,755,982
$
28,179,630
2,333,666
2,333,666
3,434,334
3,846,189
7,280,523
(2,957
)
(38,494
)
(32,016
)
(73,467
)
$
179,701
$
19,636,830
$
17,903,821
$
37,720,352
440,965
440,965
(343
)
(3,217
)
1,556
(2,004
)
$
179,358
$
19,633,613
$
18,346,342
$
38,159,313
$
51,238
$
333,430
$
349,188
$
733,856
36,564
1,668,090
1,618,368
3,323,022
507,433
507,433
(3,219
)
(23,895
)
(28,656
)
(55,770
)
$
84,583
$
1,977,625
$
2,446,333
$
4,508,541
35,243
2,696,767
2,753,602
5,485,612
(3,078
)
(19,774
)
(17,788
)
(40,640
)
$
116,748
$
4,654,618
$
5,182,147
$
9,953,513
32,073
3,099,234
4,479,503
7,610,810
85
3,820
5,252
9,157
$
148,906
$
7,757,672
$
9,666,902
$
17,573,480
$
62,953
$
14,982,212
$
12,721,674
$
27,766,839
$
30,452
$
11,875,941
$
8,679,440
$
20,585,833
1
December 31, 2021
December 31, 2020
$
27,086,727
$
18,758,975
8,405,341
(4,932)
(77,589)
$
27,081,795
$
27,086,727
December 31, 2021
December 31, 2020
$
5,591,316
$
5,903,789
5,398,389
4,795,742
233,854
425,054
296,669
600,590
265,074
846,228
266,753
21,752
150,577
242,703
218,677
88,398
$
12,421,309
$
12,924,256
December 31, 2021
December 31, 2020
$
9,275,683
$
10,928,055
2,639,143
1,137,360
26,412
76,227
335,860
318,428
826,418
427,250
112,085
264,980
$
13,215,601
$
13,152,300
12,447,939
3,431,251
767,662
9,721,049
$
13,215,601
$
13,152,300
1
2
3
December 31, 2021
December 31, 2020
$
3,460,109
$
923,461
53,318
$
3,460,109
$
976,779
1
December 31, 2021
December 31, 2020
$
22,185,170
$
19,534,988
69,034
41,506
$
22,295,710
$
19,534,988
$
22,185,170
$
110,540
19,534,988
$
22,295,710
$
19,534,988
a)
December 31, 2021
December 31, 2020
$
19,767,472
$
17,753,016
(50,000)
(2,345,750)
(2,345,750)
4,958,927
4,410,206
$
22,380,649
$
19,767,472
(195,479)
(232,484)
$
22,185,170
$
19,534,988
a)
b)
b)
December 31, 2021
$
11,328,870
1,615,102
12,943,972
(5,060,776
)
(660,604
)
7,222,592
813,615
(7,735,230
)
(224,286
)
76,691
(7,657
)
$
69,034
1
2
December 31, 2021
$
5,060,776
(784,261
)
(4,214,198
)
(20,811
)
$
41,506
1
December 31, 2021
December 31, 2020
$
1,868,541
$
6,106,596
709,835
710,924
195,066
$
8,880,038
$
710,924
Derivative
December 31, 2021
August 13, 2021
$
6.18
$
6.90
$
8.74
$
8.74
0.88 %
0.43 %
2.62
3.00
45.0 %
71.5 %
$
0.89
$
2.82
1
2
December 31, 2021
November 29, 2021
$
6.18
$
5.70
$
6.04
$
6.05
1.25 %
1.18 %
4.92
5.00
45.0 %
45.0 %
$
2.53
$
2.19
1
c)
December 31, 2021
December 31, 2020
$
$
950,418
5,285,997
$
$
6,236,415
$
6,003,838
232,577
$
$
6,236,415
1
a)
i.
ii.
iii.
(i)
$10.50
1.90%
0.5 years
60.00%
Nil
a)
(i)
$30 - $90
1.90%
6 years
80.00%
Nil
b)
b)
Final
$
167,488
43,050
$
210,538
(i)
Final
$
33,524
1,387,723
46,483
1,281
8,412,390
1,468,830
(3,232,910
)
(457,259
)
(5,556,587
)
(737,419
)
(930,608
)
(444,768
)
(9,320
)
$
219,858
(i)
b)
c)
Final
$
4,650,689
18,000,000
13,320,000
$
35,970,689
c)
Final
$
2,227,739
5,120,830
611,104
4,303,215
548,317
12,700,000
1,800,000
(2,030,470)
(133,556
)
(4,303,215
)
(3,632,250
)
17,211,714
$
18,758,975
$
35,970,689
d)
Final
$
703,212
2,304,073
879,066
$
3,886,351
e)
Final
$
4,657,512
5,882,547
568,638
$
11,108,697
December 31, 2021
December 31, 2020
$
2,439,529
$
1,043,314
(853,308
)
879,066
(171,092
)
568,638
(16,157
)
(51,489
)
1,398,972
2,439,529
1,398,972
1,594,297
845,232
$
1,398,972
$
2,439,529
a)
b) Warrants
Number of Warrants
Exercise Price
1,104,378
$
13.50
19,957
$
14.46
(133,176)
$
12.96
(209,899)
13.50
781,260
$
13.80
2,433,081
13.72
(1,228,935)
12.06
(53,880)
13.31
1,931,526
$
14.82
7,140,223
7.64
(589,820)
13.97
8,481,929
$
8.83
Expiry Date
Exercise Price $
Outstanding Warrants
15.00
19,584
14.25
525,114
5.63
1,000
5.72
37,400
6.97
25,400
7.80
8,000
8.28
9,000
4.12
34,960
8.55
2,375,676
22.50
3,333
8.60
2,107,787
16.20
611,027
6.31
126,000
14.25
182,648
6.05
2,415,000
$
8.83
8,481,929
Year Ended December 31,
2021
2020
2019
$
908,293
$
677,452
$
820,613
959,622
776,783
647,748
$
1,867,915
$
1,454,235
$
1,468,361
a)
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
2021
2021
2020
2020
2019
2019
423,303
$
11.01
349,657
$
11.48
95,000
$
11.70
487,775
7.10
153,828
9.99
323,278
11.20
(7,639
)
10.50
(50,838
)
10.62
(40,088
)
9.87
(32,777
)
11.52
(17,783
)
10.35
(4,201
)
11.03
(6,433
)
10.67
(33,333
)
10.50
866,789
$
8.81
423,303
$
11.01
349,657
$
11.48
275,473
$
11.10
161,244
$
11.70
17,014
$
12.87
a)
Options Outstanding
Options exercisable
Range of prices
Number
Weighted
average
exercise price
Weighted
average life
(years)
Number
Weighted
average
exercise price
506,502
$
6.88
9.0
25,389
$
6.56
200,706
$
10.67
4.9
138,622
$
10.57
104,303
$
11.78
6.1
71,461
$
11.78
55,278
$
14.11
6.4
40,001
$
14.59
866,789
$
8.81
7.5
275,473
$
11.10
2021
2020
2019
$
7.00
$
8.93
$
10.88
$
7.10
$
9.74
$
11.13
1.32 %
0.36 %
1.57 %
6.2 years
5.0 years
3.9 years
75 %
66 %
54 %
%
%
%
7 %
%
10 %
b)
b)
2021
2020
2019
222,222
151,790
101,778
73,164
123,797
71,640
(71,190)
(35,877)
(11,905)
(7,074)
(3,332)
(9,723)
(8,448)
(14,156)
208,674
222,222
151,790
115,468
33,516
32,036
1
December 31, 2021
December 31, 2020
100%
100%
$
11,906,502
$
7,778,252
10,320,732
11,362,870
(7,341,257)
(5,318,366)
(226,583)
(820,848)
$
14,659,394
$
13,001,908
December 31, 2021
December 31, 2020
December 31, 2019
$
11,192,716
$
11,215,876
$
6,010,753
(369,606)
2,009,304
1,944,508
28,138
(97,340)
199,588
$
(341,468)
$
1,911,964
$
2,144,096
$
(1,859,900)
(405,548)
483,245
(578,483)
(3,731)
2,081,137
655,347
(417,068)
(6,383)
155,274
5,976
$
(363,629)
$
405,073
$
68,422
Year Ended December 31,
2021
2020
2019
$
1,179,234
$
1,272,512
$
918,682
5,740,346
4,410,206
2,130,247
137,245
350,792
168,571
1,471,219
90,750
$
8,618,794
$
6,033,510
$
3,217,500
1
Year Ended December 31,
2021
$
(784,261
)
1,615,102
8,571,881
(3,362,601
)
$
6,040,121
1
2
Year Ended December 31,
2021
2020
2019
$
(4,201,822)
$
(2,775,677)
$
(1,825,237)
(124,507)
(1,010,024)
(89,014)
(32,158)
(167,913)
$
(7,126,097)
$
(2,932,342)
$
(167,913)
1
2
Year Ended December 31,
2021
2020
2019
157,303
(295,709
)
181,895
157,303
(295,709)
181,895
(13,161,689
)
(10,744,803
)
(6,261,674
)
11,339,580
10,076,594
3,569,361
(1,822,109)
(668,209)
(2,692,313)
$
(1,664,806)
$
(963,918)
$
(2,510,418)
Year Ended December 31,
2021
2020
2019
$
(46,364,119)
$
(35,824,882)
$
(30,405,252)
27
%
27
%
27
%
(12,518,312)
(9,672,718)
(8,209,418)
11,339,580
10,076,594
3,569,361
(2,089,761)
(2,293,503)
(1,015,536)
608,064
(58,050)
(828,082)
126,247
49,210
38,776
424,828
2,664,789
1,784,929
432,684
431,176
$
(1,664,806)
$
(963,918)
$
(2,510,418)
1
At December
31, 2020
Recovery/
(expense)
through
earnings
Recovery/
(expense)
through
equity
Recovery/
(expense)
through OCI
At December
31, 2021
$
261,661
$
(195,977)
$
$
2,575
$
68,259
(5,012,355)
1,415,370
73,801
(3,523,184)
(1,714,850)
1,471,654
(1,816)
(245,012)
27,453
25,467
52,920
(6,765)
24
(6,741)
2,269,186
(887,640)
(18,845)
1,362,701
$
(4,168,905)
$
1,822,109
$
$
55,739
$
(2,291,057)
At December
31, 2019
Acquired in
business
combinations
Recovery/
(expense)
through
earnings
Recovery/
(expense)
through
equity
through OCI
At December
31, 2020
$
$
(376)
$
263,436
$
$
(1,399)
$
261,661
(5,321,008)
(1,136,429)
1,280,692
164,390
(5,012,355)
(1,696,435)
(41,233)
24,000
(1,182)
(1,714,850)
27,453
27,453
(39,533)
39,533
0
3,202,361
(901,672)
(31,503)
2,269,186
$
(3,854,615)
$
(1,136,805)
$
668,209
$
24,000
$
130,306
$
(4,168,905)
d)
Year Ended December 31,
2021
2020
$
77,415,498
$
55,395,751
68,018,286
45,619,846
157,602
865,599
6,603,163
6,603,287
948,765
753,467
6,510,677
1,282,965
2,046,890
1,922,194
$
161,700,881
$
112,443,109
a)
Financial assets
Measurement
basis
December 31, 2021
December 31, 2020
Amortized cost
$
4,588,057
$
1,110,889
Amortized cost
14,329,781
11,224,017
Amortized cost
740,431
2,536,272
FVTPL
131,400
$
19,658,269
$
15,002,578
Financial liabilities
Amortized cost
$
3,460,109
$
976,779
Amortized cost
12,003,979
12,693,256
Amortized cost
13,215,601
13,152,300
Amortized cost
1,045,472
3,945,076
Amortized cost
22,185,170
19,534,988
Amortized cost
69,034
FVTPL
41,506
FVTPL
709,835
710,924
FVTPL
7,975,137
Amortized cost
1,398,972
2,439,529
Amortized cost
6,236,415
$
62,104,815
$
59,689,267
1
2
3
b)
b)
b)
a)
At December 31, 2021
Undiscounted Contractual Cash Flows
Carrying
Amount
< 1 year
1 2 years
> 2 years
Total
$
3,460,109
$
3,460,109
$
$
$
3,460,109
12,421,309
12,421,309
12,421,309
13,215,601
11,763,697
786,123
12,549,820
1,045,472
521,506
534,241
179,281
1,235,028
22,185,170
24,630,375
24,630,375
110,540
7,635
103,073
110,708
8,880,038
709,835
709,835
1,398,972
1,398,972
1,398,972
$
62,717,211
$
54,913,438
$
1,423,437
$
179,281
$
56,516,156
1
2
3
4
As at December 31, 2020
Undiscounted Contractual Cash Flows
Carrying
Amount
< 1 year
1 2 years
> 2 years
Total
$
976,779
$
976,779
$
$
$
976,779
12,924,256
12,924,256
12,924,256
13,152,300
4,248,351
2,617,443
8,796,757
15,662,551
3,945,076
1,131,528
939,108
2,815,695
4,886,331
19,534,988
2,350,750
24,629,655
26,980,405
710,924
710,924
710,924
2,439,529
1,594,297
845,232
2,439,529
6,236,415
6,003,838
232,577
6,236,415
$
59,920,267
$
29,940,723
$
29,264,015
$
11,612,452
$
70,817,190
b)
b)
December 31, 2021
December 31, 2020
$
606,030
$
382,901
1,162,537
443,961
(65,930
)
(220,832
)
4,581
$
1,707,218
$
606,030
c)
For the years ended December 31,
2021
2020
2019
$
1,613,502
$
1,683,015
$
1,460,296
432,098
628,019
388,398
$
2,045,600
$
2,311,034
$
1,848,694
December 31, 2021
December 31, 2020
$
234,278
$
813,023
30,796
33,205
121,852
116,091
1,111,521
1,138,630
335,860
318,428
$
1,834,307
$
2,419,377
1
2
3
4
Undiscounted Contractual Cash Flows
< 1 year
2 - 3 years
4 - 5 years
More than 5
years
Total
$
396,719
$
477,562
$
125,275
$
12,999
$
1,012,555
104,702
2,589,330
2,762,597
12,636,454
18,093,083
$
501,421
$
3,066,892
$
2,887,872
$
12,649,453
$
19,105,638
1
2
2021
2020
2019
$ (3,342,737)
$ (2,006,780)
$ (169,896)
1,682,646
(924,625)
(3,662,207)
(591,737)
(1,119,123)
150,991
(782,561)
2,513,477
1,102,361
1,045,868
632,839
447,511
$ (1,988,521)
$ (904,212)
$ (2,131,240)
2021
2020
2019
$ 14,102,718
$ 13,973,055
$ 78,285
10,664,916
8,726,766
16,539,700
(9,781,554)
(9,011,638)
(6,787,528)
(757,950)
(642,809)
(500,413)
2,904,355
371,609
1,339,546
(1,835,237)
(124,507)
(191,310)
869,567
959,058
445,762
138,908
5,543
(148,816)
(46,652)
$ 13,215,601
$ 14,102,718
$ 13,973,055
For the years ended December 31,
2021
2020
2019
$
$
8,186,620
$
13,320,000
14(b)
$
14,436,728
$
$
$
$
50,000
$
$
$
820,000
$
$
$
143,002
$
84,252
$
3,015,294
$
2,145,706
$
909,158
19(b)
$
294,894
$
$
19(b)
$
162,947
$
$
$
195,066
$
$
$
$
$
606,495
$
$
599,861
$
468,703
$
$
599,861
$
586,000
Principle
activity
Place of
business and
operations
Functional
currency
Parent company
Canada
CDN $
Operations
United States
USD $
Operations
Canada
CDN $
Operations
United States
USD $
Operations
United States
USD $
Operations
Canada
CDN $
Operations
Canada
CDN $
Operations
Australia
AUD $
Operations
Australia
AUD $
Operations
Singapore
SGD $
Operations
China
RMB ¥
Operations
Saudi Arabia
SAR $
Operations
United States
USD $
Operations
United Stated
USD $
Operations
United States
USD $
A.
B.
C.
D.
i.
ii.
iii.
iv.
iv.
E.
Life
2 -5 years
7 years
lesser of useful lives or lease term
F.
Life
5 - 15 years
5 - 20 years
5 years
F.
G.
G.
H.
i.
ii.
H.
I.
J.
K.
K.
L.
M.
M.
N.
O.
P.
Notes
March 31, 2022
December 31, 2021
ASSETS
Current assets
Cash and cash equivalents
$
1,873,021
$
4,588,057
Trade and other receivables
5
13,736,106
14,566,975
Current portion of prepaid expenses and other assets
2,287,443
2,355,350
Current portion of long-term receivables
5
471,909
397,060
Total current assets
$
18,368,479
$
21,907,442
Non-current assets
Prepaid expenses and other assets
$
165,698
$
622,577
Long-term receivables
5
992,732
343,371
Right-of-use assets
6
7,033,377
916,028
Property and equipment
564,253
649,403
Intangible assets
18,923,489
20,585,833
Goodwill
27,042,823
27,081,795
Total non-current assets
$
54,722,372
$
50,199,007
Total assets
$
73,090,851
$
72,106,449
LIABILITIES
Current liabilities
Bank indebtedness
9
$
4,710,549
$
3,460,109
Trade payables and accrued liabilities
7
17,079,919
12,421,309
Deferred revenue
4
4,694,450
2,811,408
Current portion of loans and borrowings
8
12,480,038
12,447,939
Current portion of convertible debentures
10
(a)
22,922,383
22,185,170
Warrant liabilities
11
6,060,782
8,880,038
Current portion of lease liabilities
6
453,855
410,674
Business acquisition payable
1,389,094
1,398,972
Total current liabilities
$
69,791,070
$
64,015,619
Non-current liabilities
Convertible debentures
10
(b)
$
111,411
$
110,540
Lease liabilities
6
6,773,990
634,798
Loans and borrowings
8
646,137
767,662
Deferred income tax liabilities
1,407,503
2,291,057
Total liabilities
$
78,730,111
$
67,819,676
EQUITY (DEFICIT)
Share capital
118,275,850
118,195,363
Contributed surplus
11,408,263
11,040,751
Accumulative other comprehensive income
2,202,000
1,571,998
Deficit
(139,793,643
)
(130,016,073
)
Total shareholders equity (deficit)
$
(7,907,530
)
$
792,039
Non-controlling interest
2,268,270
3,494,734
Total equity (deficit)
$
(5,639,260
)
$
4,286,773
Total liabilities and equity
$
73,090,851
$
72,106,449
Russ McMeekin
Michael Allman
Director
Director
1
| Condensed Consolidated Interim Financial Statements
Three months ended March 31,
Notes
2022
2021
Recast (Note 2)
Revenue
4
4,429,603
$
7,435,566
Cost of sales
(1,932,356
)
(3,258,730
)
Gross profit
$
2,497,247
$
4,176,836
Expenses
Salaries, wages and benefits
5,314,330
4,870,395
Sales and marketing
762,231
184,699
Research and development
531,950
749,164
General and administration
2,552,013
1,337,361
Professional and consulting fees
3,176,043
1,739,421
Share-based compensation
13
252,933
375,274
Depreciation and amortization
1,943,213
1,970,950
Total expenses
$
14,532,713
$
11,227,264
Operating loss
$
12,035,466
$
7,050,428
Other expenses (income)
Finance costs
15(a)
$
1,858,637
$
2,235,927
Foreign exchange loss
622,509
367,428
Business acquisition costs and other expenses
324,410
Fair value (gain) loss on derivatives
15(b)
(2,493,270
)
1,564,149
Other income
15(c)
(398,268
)
(1,910,306
)
Loss before tax
$
11,625,074
$
9,632,036
Current tax expense
288,863
238,797
Deferred tax recovery
(890,816
)
(119,224
)
Net loss for the period
$
11,023,121
$
9,751,609
(649,089
)
(385,347
)
Comprehensive loss for the period
$
10,374,032
$
9,366,262
Net loss (income) for the period attributable to:
mCloud Technologies Corp. shareholders
$
9,777,570
$
10,270,725
Non-controlling interest
1,245,551
(519,116
)
$
11,023,121
$
9,751,609
Comprehensive loss (income) for the period attributable to:
mCloud Technologies Corp. shareholders
$
9,147,568
$
9,923,174
Non-controlling interest
1,226,464
(556,912
)
$
10,374,032
$
9,366,262
Loss per share attributable to mCloud shareholders - basic and diluted
$
0.61
$
1.12
Weighted average number of common shares outstanding - basic and diluted
16,147,560
9,171,378
2
| Condensed Consolidated Interim Financial Statements
Deficit
Shareholders Equity
(Deficit)
Non-
controlling
Interest
Balance, December 31, 2021
16,138,069
$
118,195,363
$
11,040,751
$
1,571,998
$
(130,016,073
)
$
792,039
$
3,494,734
$
4,286,773
Share-based payments
13
252,933
252,933
252,933
RSUs exercised
12(a)
12,031
80,487
(80,487
)
Warrants issued in financing
12(b)
195,066
195,066
195,066
Net loss for the period
(9,777,570
)
(9,777,570
)
(1,245,551
)
(11,023,121
)
Other comprehensive income for the period
630,002
630,002
19,087
649,089
Balance, March 31, 2022
16,150,100
$
118,275,850
$
11,408,263
$
2,202,000
$
(139,793,643
)
$
(7,907,530
)
$
2,268,270
$
(5,639,260
)
Balance, December 31, 2020
9,168,416
$
83,120,611
$
8,518,476
$
1,669,596
$
(85,686,366
)
$
7,622,317
$
3,836,202
$
11,458,519
Share-based payments
375,274
375,274
375,274
RSUs exercised
4,278
53,429
(53,429
)
Broker warrants issued
360,108
360,108
360,108
Net (loss) income for the period
(10,270,725
)
(10,270,725
)
519,116
(9,751,609
)
Other comprehensive income for the period
347,551
347,551
37,796
385,347
Balance, March 31, 2021 - Recast (Note
2)
9,172,694
$
83,174,040
$
9,200,429
$
2,017,147
$
(95,957,091
)
$
(1,565,475
)
$
4,393,114
$
2,827,639
3
| Condensed Consolidated Interim Financial Statements
Three months ended March 31,
Notes
2022
2021
Operating activities
Recast (Note 2)
Net loss for the period
$
(11,023,121
)
$
(9,751,609
)
Items not affecting cash:
Depreciation and amortization
1,943,213
1,970,950
Share-based compensation
13
252,933
375,274
Finance costs
15(a)
1,858,637
2,235,927
Fair value (gain) loss on derivatives
15(b)
(2,493,270
)
1,564,149
Other income
15(c)
(2,841
)
(697,237
)
Recovery of expected credit loss
(54,782
)
Unrealized foreign currency exchange (gain) loss
(26,400
)
71,956
Current tax expense
288,863
238,797
Deferred income tax recovery
(890,816
)
(119,224
)
Increase (decrease) in working capital
16(a)
7,353,522
(41,509
)
Interest paid
(976,459
)
(777,149
)
Net cash used in operating activities
$
(3,770,521
)
$
(4,929,675
)
Acquisition of property and equipment
$
(11,040
)
$
(20,486
)
Expenditure on intangible assets
(440,965
)
Net cash used in investing activities
$
(11,040
)
$
(461,451
)
Payment of lease liabilities
$
(121,068
)
$
(297,637
)
Repayment of loans
(3,273,055
)
(2,641,604
)
Proceeds from loans and bank indebtedness, net of transaction costs
4,310,588
2,151,212
Net change in bank overdraft
173,102
66,153
Proceeds from issuance of convertible debentures, net of costs
5,329,835
Net cash provided by financing activities
$
1,089,567
$
4,607,959
$
(2,691,994
)
$
(783,167
)
Effect of exchange rate fluctuations on cash held
(23,042
)
(18,297
)
Cash and cash equivalents, beginning of period
4,588,057
1,110,889
Cash and cash equivalents, end of period
$
1,873,021
$
309,425
4
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
5
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
the plan for the repayment of the 2019 Convertible Debentures;
the repayment of a portion of the term loan on May 6, 2022 and the agreement executed whereby the term loan will be repaid in full on or before October 31,
2022 (Note 8);
the likelihood that undrawn funds under the revolving operating facility will be available and will not be required to be repaid (Note 9);
the required cash principal and interest payments on indebtedness;
the likelihood of payments required under contingent consideration arrangements;
the available funding of US$15,000,000 under a promissory note executed on March 28, 2022 (Note 8);
cash inflows from current operations, expected government assistance in the form of wage and rent subsidies, and expected increases in
revenues and cash flows resulting from new revenue contracts expected over the next 12 months due to the anticipated reduction of COVID-19 related restrictions; and
future debt and equity raises.
6
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
Three months ended March 31,
2022
2021
AssetCare initialization 1
$
414,491
$
515,243
AssetCare over time 2
3,989,128
6,434,509
Engineering services 3
25,984
485,814
$
4,429,603
$
7,435,566
2
Revenues include sales of subscriptions to AssetCare, other subscriptions, post contract support and maintenance, perpetual software licenses, and
installation and engineering services.
3
Revenues includes consulting, implementation and integration services entered into on a time and materials basis or fixed fee basis without the use of
AssetCare.
Three months ended March 31,
Revenue recognized
2022
2021
Over time
$
3,862,204
$
5,448,710
At a point in time upon completion
567,399
1,986,856
$
4,429,603
$
7,435,566
Three months ended March 31,
2022
2021
Canada
$
2,038,976
$
4,411,599
Americas
1,520,075
1,249,604
Asia Pacific
677,868
1,718,738
Other
192,684
55,625
Total revenue
$
4,429,603
$
7,435,566
7
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
Unbilled revenue
Deferred revenue
Balance at December 31, 2021
$
756,042
$
2,811,408
Additions
701,415
3,878,164
Less: transferred to trade and other receivables
(365,250
)
Less: recognized in revenue
(2,008,935
)
Effect of movements in exchange rates
13,813
Balance at March 31, 2022
$
1,092,207
$
4,694,450
March 31, 2022
December 31, 2021
Trade receivables from contracts with customers
$
13,228,784
$
14,204,320
Unbilled revenue (Note 4)
1,092,207
756,042
Indirect taxes receivable
201,567
148,200
Income taxes receivable
4,027
2,217
Other receivables
660,041
919,954
Contract asset
66,794
86,777
Loss allowance
(1,517,314
)
(1,550,535
)
Total trade and other receivables - current
$
13,736,106
$
14,566,975
March 31, 2022
December 31, 2021
$
471,909
$
397,060
Non-current portion of long-term receivables 2
992,732
343,371
Total long-term receivables
$
1,464,641
$
740,431
8
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
March 31, 2022
December 31, 2021
Trade payables
$
9,885,772
$
5,591,316
Accrued liabilities
5,516,799
5,398,389
Interest payable
230,120
233,854
Mastercard facility
397,098
296,669
Due to related parties
205,366
265,074
Income taxes payable
521,788
266,753
Indirect taxes payable
221,651
150,577
Other
101,325
218,677
Total trade payables and accrued liabilities
$
17,079,919
$
12,421,309
March 31, 2022
December 31, 2021
Term loan (a)
$
8,878,345
$
9,275,683
Nations Interbanc facility 2
2,911,501
2,639,143
Debenture payable to Industry Canada
27,430
26,412
Loan payable to related party
335,129
335,860
Oracle financing
714,197
826,418
Other loans and financing
259,573
112,085
Total
$
13,126,175
$
13,215,601
Current
$
12,480,038
$
12,447,939
Non-current
$
646,137
$
767,662
Total 1
$
13,126,175
$
13,215,601
1
Note 16(b) includes the reconciliation of liabilities to cash flows arising from financing
activities.
2
Nations advanced $3,053,250 under the factor and security agreement and was repaid $2,907,550 in the three months ended March 31, 2022 (three months
ended March 31, 2021 - $1,516,107 advances and $2,200,370 repayments).
a)
Term Loan
9
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
b)
Financing of Electric Vehicle Development Projects
March 31, 2022
December 31, 2021
ATB Financial revolving operating facility
$
4,543,133
$
3,460,109
Bank overdraft
167,416
Total
$
4,710,549
$
3,460,109
March 31, 2022
December 31, 2021
Opening balance
$
22,380,649
$
19,767,472
Interest paid
(586,438
)
(2,345,750
)
Accreted interest at effective interest rate
1,323,651
4,958,927
Carrying amount of liability component
$
23,117,862
$
22,380,649
Less: interest payable
(195,479
)
(195,479
)
Total - current
$
22,922,383
$
22,185,170
10
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
a)
2019 Convertible debentures (continued)
b)
2021 Convertible debentures
March 31, 2022
December 31, 2021
2021 Convertible debenture liability
$
70,542
$
69,034
2021 Convertible debenture embedded derivative
40,869
41,506
Total - non-current
$
111,411
$
110,540
March 31, 2022
December 31, 2021
Derivative warrant liabilities - 2021 Debentures (a)
$
1,183,883
$
1,868,541
Derivative warrant liabilities - USD equity financing (b)
4,175,673
6,106,596
Warrant liability related to business acquisition (c)
701,226
709,835
Other warrant liability (c)
195,066
Total, all current
$
6,060,782
$
8,880,038
a)
Warrants associated with 2021 Debentures
11
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
b)
Warrants associated with USD equity financing
c)
Other warrant liabilities
a)
Common shares
b)
Warrants
Number of Warrants
Weighted Average Exercise Price
Balance, December 31, 2021
8,481,929
$
8.83
Issued
183,486
5.45
Balance, March 31, 2022
8,665,415
$
8.76
12
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
Three months ended March 31,
2022
2021
Stock options (a)
$
192,147
$
130,898
Restricted share units (b)
60,786
244,376
Total
$
252,933
$
375,274
a)
Stock Options
Number of
Options
Average Exercise
Outstanding, December 31,
2021
866,789
$
8.81
7.5
Granted
48,199
$
5.17
9.6
Forfeited
(92,453
)
$
7.09
9.1
Expired
(15,801
)
$
10.10
8.4
Outstanding, March 31, 2022
806,734
$
8.76
7.5
b)
Restricted Share Units (RSUs)
Number of RSUs
Outstanding, December 31, 2021
208,674
Granted
34,167
Exercised
(12,031
)
Forfeited
(17,517
)
Outstanding, March 31, 2022
213,293
Exercisable at March 31,
2022
115,257
13
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
a)
Classification and measurement of financial assets and liabilities by category
Measurement
basis
Cash and cash equivalents
Amortized cost
$
1,873,021
$
4,588,057
Trade and other receivables 1
Amortized cost
13,463,718
14,329,781
Long-term receivables
Amortized cost
1,464,641
740,431
$
16,801,380
$
19,658,269
Financial liabilities
Bank indebtedness
Amortized cost
$
4,710,549
$
3,460,109
Trade payables and accrued liabilities
1
Amortized cost
16,336,480
12,003,979
Loans and borrowings
Amortized cost
13,126,175
13,215,601
Lease liabilities
Amortized cost
7,227,845
1,045,472
2019 Debentures - host liability
Amortized cost
22,922,383
22,185,170
2021 Debentures - host liability
Amortized cost
70,542
69,034
2021 Debentures embedded derivative
FVTPL
40,869
41,506
Warrant liability - business acquisition
FVTPL
701,226
709,835
Warrant liabilities - derivatives (Note 11)
FVTPL
5,359,556
7,975,137
Business acquisition payable
FVTPL
1,389,094
1,398,972
$
71,884,719
$
62,104,815
b)
Measurement of fair value
14
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
c)
Financial instruments risk
a)
Finance Costs
Three months ended March 31,
2022
2021
Interest on loans and borrowings (Note 8)
$
396,703
$
247,364
Interest on convertible debentures
1,328,046
1,512,636
Interest on lease liabilities
83,049
79,675
Transaction costs expensed
18,929
367,504
Other finance costs
31,910
28,748
Total finance costs
$
1,858,637
$
2,235,927
b)
Fair value gain (loss) on derivatives
Three months ended March 31,
2022
2021
$
(2,493,270
)
$
(56,275
)
Deferred charge loss 2
1,620,424
Total fair value (gain) loss on derivatives
$
(2,493,270
)
$
1,564,149
15
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
c)
Other income
Three months ended March 31,
2022
2021
Government assistance 1
$
(379,646
)
$
(1,176,374
)
Government loan forgiveness
(117,312
)
Derecognition of contingent consideration
(581,117
)
Other
(18,622
)
(35,503
)
Total other income
$
(398,268
)
$
(1,910,306
)
a)
Changes in non-cash working capital
For the three months ended March 31,
2022
2021
Trade and other receivables decrease (increase)
$
660,336
$
(775,128
)
Long-term receivables (increase)
(735,779
)
(3,332
)
Prepaid expenses and other assets decrease (increase)
478,464
(36,106
)
Trade payables and accrued liabilities increase
5,016,881
166,407
Deferred revenue increase
1,933,620
606,650
Increase (decrease) in working capital
$
7,353,522
$
(41,509
)
b)
Changes in liabilities arising from financing activities
For the three months ended March 31,
2022
2021
Balance of loans, borrowings and PPP loans, beginning of period
$
13,215,601
$
14,102,718
New advances
3,233,250
2,151,212
Repayments of principal
(3,273,055
)
(2,641,604
)
Repayments of interest
(355,085
)
(190,684
)
Liability related items
Finance fees paid
170,530
12,981
Non-cash related items
Accretion of interest and debt issuance costs
206,849
230,392
Benefit from below market interest rate
(117,482
)
Foreign exchange and other
(71,915
)
(86,499
)
Balance of loans, borrowings and PPP loans, end of period
$
13,126,175
$
13,461,034
c)
Non-cash investing and financing activities
For the three months ended March 31,
2022
2021
Non-cash accretion of interest included in finance costs
1
$
739,729
$
759,709
Addition of right-of-use assets (Note 6)
$
6,322,509
$
Addition to lease liabilities (Note 6)
$
6,221,749
$
Non-cash broker warrants compensation
$
$
360,108
1
Associated with convertible debentures.
16
| Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021
(Unaudited - Expressed in Canadian Dollars except otherwise noted)
a)
Loans and Borrowings - Change to Term Loan
b)
Loans and Borrowings - Additional funding under promissory note with Carbon
17
| Condensed Consolidated Interim Financial Statements
(i)
(ii)
(iii)
(i)
(ii)
(iii)
(iv)
mCloud Technologies Corp.
By:
Name:
Russell H. McMeekin
Title:
Dated:
July 15, 2022
Signature
Title
Date
July 15, 2022
July 15, 2022
Authorized U.S. Representative
Exhibit 1.1
[●] UNITS
EACH CONSISTING OF
ONE 9.0% SERIES A CUMULATIVE PERPETUAL PREFERRED SHARE
AND 6.25 WARRANTS TO PURCHASE ONE COMMON SHARE
MCLOUD TECHNOLOGIES CORP.
UNDERWRITING AGREEMENT
[●], 2022
Maxim Group LLC
Investment Banking
300 Park Avenue, 16th Floor
New York, New York 10022
As Representative of the Several Underwriters, if any, named in Schedule I hereto
Ladies and Gentlemen:
The undersigned, MCLOUD TECHNOLOGIES CORP., a company incorporated under the Business Corporations Act (British Columbia) (collectively with its subsidiaries, including, without limitation, all entities disclosed or described in the Registration Statement as being subsidiaries of MCLOUD TECHNOLOGIES CORP., the Company), hereby confirms its agreement (this Agreement) with the several underwriters (such underwriters, including the Representative (as defined below), the Underwriters and each an Underwriter) named in Schedule I hereto for which MAXIM GROUP LLC (Maxim) is acting as representative to the several Underwriters (in such capacity, the Representative and if there are no Underwriters other than the Representative, references to multiple Underwriters shall be disregarded and the term Representative as used herein shall have the same meaning as Underwriter) on the terms and conditions set forth herein.
It is understood that the several Underwriters are to make a public offering of the Securities as soon as the Representative deems it advisable to do so. The Securities are to be initially offered to the public at the public offering price set forth in the Prospectus. The Representative may from time to time thereafter change the public offering price and other selling terms. The Company understands that the Underwriters propose to make a public offering of the Units in the United States, directly and through other investment dealers and brokers in the United States upon the terms and conditions set forth in the Prospectuses (as defined below). It is acknowledged that neither the Company nor the Underwriters will market the Securities or provide marketing materials to any prospective purchasers in Canada.
It is further understood that Maxim will act as the Representative for the Underwriters in the offering and sale of the Closing Securities and, if any, the Option Securities in accordance with this Agreement.
ARTICLE 1
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
$ or dollar shall mean U.S. dollars.
Action shall have the meaning ascribed to such term in Section 3.1(m).
Advance shall have the meaning ascribed to such term in Section 4.6(d).
Affiliate means with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person as such terms are used in and construed under Rule 405 under the Securities Act.
Benefit Arrangements shall have the meaning ascribed to such term in Section 3.1(ss).
BHCA shall have the meaning ascribed to such term in Section 3.1(mm).
Board of Directors means the board of directors of the Company.
Business Day means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided that banks shall not be deemed to be authorized or obligated to be closed due to a shelter in place, non-essential employee or similar closure of physical branch locations at the direction of any governmental authority if such banks electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.
Canadian Securities Authorities means the securities regulatory authorities in the province of British Columbia.
Canadian Securities Laws means the applicable rules and regulations under such laws, together with applicable published national, multilateral and local policy statements, instruments, notices and blanket orders of the Canadian Securities Authorities.
Closing means the closing of the purchase and sale of the Closing Securities pursuant to Section 2.1.
Closing Date means the hour and the date on the Trading Day on which all conditions precedent to (i) the Underwriters obligations to pay the Closing Purchase Price and (ii) the Companys obligations to deliver the Closing Securities, in each case, have been satisfied or waived, but in no event later than 10:00 a.m. (New York City time) on the second (2nd) Trading Day following the date hereof or at such earlier time as shall be agreed upon by the Representative and the Company.
Closing Purchase Price shall have the meaning ascribed to such term in Section 2.1(b), which aggregate purchase price shall be net of underwriting discounts and commissions.
Closing Securities shall have the meaning ascribed to such term in Section 2.1(a).
Closing Shares shall have the meaning ascribed to such term in Section 2.1(a).
Closing Units shall have the meaning ascribed to such term in Section 2.1(a).
Closing Warrants shall have the meaning ascribed to such term in Section 2.1(a).
Code shall have the meaning ascribed to such term in Section 3.1(ll).
2
Commission means the United States Securities and Exchange Commission.
Common Shares means the common shares of the Company, without par value, and any other class of securities into which such securities may hereafter be reclassified or changed.
Common Share Equivalents means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
Company Auditor means KPMG LLP, with offices located at Suite 3100 205 - 5 Avenue SW, Calgary, Alberta T2P 4B9.
Company Counsel means Sichenzia Ross Ference LLP, 1185 Avenue of Americas, 31st Floor, New York, NY 10036.
Company Canadian Counsel means Morton Law LLP, 1200-750 W. Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
Company IT Systems shall have the meaning ascribed to such term in Section 3.1(tt).
Disclosure Schedules means the Disclosure Schedules of the Company delivered concurrently herewith.
EDGAR shall have the meaning ascribed to such term in Section 3.1(a).
Effective Date means the date and time as of which the Registration Statement became effective in accordance with the rules and regulations under the Securities Act.
Environmental Laws shall have the meaning ascribed to such term in Section 3.1(p).
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Execution Date shall mean the date on which the parties execute and enter into this Agreement.
Exempt Issuance means the issuance of (a) Common Shares, restricted stock, restricted stock units or options to employees, officers, consultants, other service providers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into Common Shares issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as restricted securities (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.21(a) herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
3
FCPA means the Foreign Corrupt Practices Act of 1977, as amended.
FINRA means the Financial Industry Regulatory Authority.
General Disclosure Package shall have the meaning ascribed to such term in Section 3.1(c).
Federal Reserve shall have the meaning ascribed to such term in Section 3.1(mm).
Fox Rothschild means Fox Rothschild LLP, counsel to the Underwriters, with offices located at 222 South Ninth Street, Suite 2000, Minneapolis, MN 55402.
Hazardous Materials shall have the meaning ascribed to such term in Section 3.1(p).
IFRS shall have the meaning ascribed to such term in Section 3.1(k).
Indebtedness means (a) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business); (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Companys consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with IFRS.
Intellectual Property Rights shall have the meaning ascribed to such term in Section 3.1(s).
Liens means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
Lock-Up Agreements means the lock-up agreements that are delivered on the date hereof by each of the Companys officers and directors and each other holder of Common Shares and Common Share Equivalents holding, on a fully diluted basis, three percent (3%) or more of the Companys issued and outstanding Common Shares, in substantially the form of Exhibit A attached hereto.
Marketing Materials shall have the meaning ascribed to such term in Section 6.1.
Material Adverse Effect shall have the meaning assigned to such term in Section 3.1(e).
Material Permit shall have the meaning ascribed to such term in Section 3.1(ii).
Money Laundering Laws shall have the meaning ascribed to such term in Section 3.1(nn).
Offering shall have the meaning ascribed to such term in Section 2.1(c).
Option Closing Date shall have the meaning ascribed to such term in Section 2.2(c).
4
Option Closing Purchase Price shall have the meaning ascribed to such term in Section 2.2(b), which aggregate purchase price shall be net of the underwriting discounts and commissions.
Option Securities shall have the meaning ascribed to such term in Section 2.2(a).
Option Shares shall have the meaning ascribed to such term in Section 2.2(a).
Option Warrants shall have the meaning ascribed to such term in Section 2.2(a).
Over-Allotment Option shall have the meaning ascribed to such term in Section 2.2(a).
Permitted Free Writing Prospectus shall have the meaning ascribed to such term in Section 4.2(c).
Person means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
Preliminary Prospectus shall have the meaning ascribed to such term in Section 3.1(a).
Privacy and Data Security Laws shall have the meaning ascribed to such term in Section 3.1(a).
Proceeding means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
Prospectus shall have the meaning ascribed to such term in Section 3.1(a).
Registration Statement shall have the meaning ascribed to such term in Section 3.1(a).
Required Approvals shall have the meaning ascribed to such term in Section 3.1(h).
Right of First Refusal shall have the meaning ascribed to such term in Section 4.20.
Rule 144 means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.
Rule 424 means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule. Securities means the Closing Securities, the Option Securities and the Warrant Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Series A Preferred Shares shall mean the 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value.
5
Share Purchase Price shall have the meaning ascribed to such term in Section 2.1(b).
Shares shall mean, collectively, the Series A Preferred Shares delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2(a).
Subject Transaction shall have the meaning ascribed to such term in Section 4.18.
Subsidiary means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
Trading Day means a day on which the principal Trading Market is open for trading.
Trading Market means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the OTCQB Venture Market, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the TSX Venture Exchange (or any successors to any of the foregoing).
Transaction Documents means this Agreement and all exhibits and schedules hereto, the Lock-Up Agreements, the Warrants, the Warrant Agent Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.
Transfer Agent means American Stock Transfer & Trust Company, LLC, with a mailing address of 6201 15th Avenue, Brooklyn, New York 11219, and any successor transfer agent of the Company.
Underwriters Information shall have the meaning ascribed to such term in Section 6.1.
Units shall have the meaning ascribed to such term in Section 2.1(a)(i).
Warrant Agent means the Transfer Agent.
Warrant Agent Agreement means the warrant agent agreement by and between the Company and the Transfer Agent, as warrant agent, for the purpose of administering the Warrants, in the form of Exhibit G attached hereto.
Warrant Purchase Price shall have the meaning ascribed to such term in Section 2.1(b).
Warrant Shares means the Common Shares issuable upon exercise of the Warrants.
Warrants means, collectively, the Common Share purchase warrants delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2, which Warrants shall be exercisable immediately and have a term of exercise equal to five (5) years, in the form of Exhibit E attached hereto.
6
ARTICLE 2
PURCHASE AND SALE
2.1 Closing.
(a) Upon the terms and subject to the conditions set forth herein, the Company agrees to sell in the aggregate [●] Units (the Units), with each Unit consisting of one Series A Preferred Share and 6.25 Warrants to purchase one Common Share, subject to the terms and conditions stated herein, and each Underwriter agrees to purchase, severally and not jointly, at the Closing, the following securities of the Company:
(i) number of Units (the Closing Units) set forth opposite the name of such Underwriter on Schedule I hereto;
(ii) the number of Series A Preferred Shares (the Closing Shares) set forth opposite the name of such Underwriter on Schedule I hereto included in the Closing Units; and
(iii) the number of Warrants (Closing Warrants) to purchase Common Shares set forth opposite the name of such Underwriter on Schedule I hereto included in the Closing Units, which shall have an exercise price of $4.75 per share (subject to adjustment as provided therein) (collectively with the Closing Units and the Closing Shares, the Closing Securities).
The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The Common Shares and the Warrants comprising the Units are immediately separable and will be issued separately in the Offering.
(b) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Closing Units set forth opposite their respective names on Schedule I attached hereto and made a part hereof at a purchase price of $[●] per Closing Unit (92% of the public offering price per Closing Unit)(the Closing Purchase Price), and the purchase price of each Closing Unit shall be allocated as follows: (i) $[●] per Closing Share (the Share Purchase Price) and (ii) $0.092 per Closing Warrant (the Warrant Purchase Price). The Closing Units are to be offered initially to the public at the price of $[●] per Unit ($[●] per Series A Preferred Share and $0.01 per Warrant), which offering price is also set forth on the cover page of the Prospectus.
(c) On the Closing Date, each Underwriter shall deliver or cause to be delivered to the Company, via wire transfer, immediately available funds equal to such Underwriters Closing Purchase Price and the Company shall deliver to, or as directed by, such Underwriter its respective Closing Securities and the Company shall deliver the other items required pursuant to Section 2.3 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4, the Closing shall occur at the offices of Fox Rothschild or such other location as the Company and Representative shall mutually agree (including remotely by means of electronic transmission). The Securities are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (the Offering).
2.2 Over-Allotment Option.
(a) For the purposes of covering any over-allotments in connection with the distribution and sale of the Closing Securities, the Representative is hereby granted an option (the Over-Allotment Option) to purchase up to [●] Series A Preferred Shares, representing fifteen percent (15%) of the Closing Shares sold as part of the Closing Units sold in the Offering (the Option Shares), and/or Warrants to purchase up to [●] Common Shares, representing fifteen percent (15%) of the Closing Warrants sold as part of the Closing Units sold in the Offering (the Option Warrants and, collectively with the Option Shares, the Option Securities), which may be purchased in any combination of Option Shares and/or Option Warrants at the Share Purchase Price and/or Warrant Purchase Price, respectively.
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(b) In connection with an exercise of the Over-Allotment Option, (a) the purchase price to be paid for any Option Shares is equal to the product of the Share Purchase Price multiplied by the number of Option Shares to be purchased and (b) the purchase price to be paid for any Option Warrants is equal to the product of the Warrant Purchase Price multiplied by the number of Option Warrants to be purchased (the aggregate purchase price to be paid on an Option Closing Date, the Option Closing Purchase Price).
(c) The Over-Allotment Option granted pursuant to this Section 2.2 may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares and/or Option Warrants in any combination thereof within 45 days after the Execution Date. An Underwriter will not be under any obligation to purchase any Option Securities prior to the exercise of the Over-Allotment Option by the Representative. The Over-Allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares and/or Option Warrants to be purchased and the date and time for delivery of and payment for the Option Securities (each, an Option Closing Date), which will not be later than the earlier of (i) 45 days after the Execution Date and (ii) two (2) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Fox Rothschild or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Securities does not occur on the Closing Date, each Option Closing Date will be as set forth in the notice. Upon exercise of the Over-Allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Shares and/or Option Warrants specified in such notice. The Representative may cancel the Over-Allotment Option at any time prior to the expiration of the Over-Allotment Option by written notice to the Company.
2.3 Deliveries. The Company shall deliver or cause to be delivered to each Underwriter (if applicable) the following:
(a) At the Closing Date, the Closing Shares included in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Shares, which shares shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;
(b) At the Closing Date, the Closing Warrants included in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Warrants, which Warrants shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;
(c) Contemporaneously herewith, evidence that the Company has filed an amendment to the Companys articles creating the Series A Preferred Shares and setting forth the rights and restrictions thereof;
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(d) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Company Counsel addressed to the Underwriters, dated as of the Closing Date and as to each Option Closing Date, if any, bring-down opinions and negative assurance letters from Company Counsel addressed to the Underwriters in form and substance satisfactory to counsel to the Underwriters;
(e) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Company Canadian Counsel for the Company with respect to certain matters related to Canadian law, addressed to the Underwriters, dated as of the Closing Date and each Option Closing Date, if any, in form and substance satisfactory to counsel to the Underwriters;
(f) Contemporaneously herewith, a cold comfort letter, addressed to the Underwriters and in form and substance satisfactory in all respects to the Representative from the Company Auditor dated, respectively, as of the date of this Agreement and a bring-down letter dated as of the Closing Date and each Option Closing Date, if any;
(g) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Officers Certificate, substantially in the form required by Exhibit B attached hereto;
(h) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Secretarys Certificate, substantially in the form required by Exhibit C attached hereto;
(i) On the Closing Date and on each Option Closing Date, if any, a duly executed and delivered Chief Financial Officers Certificate, substantially in the form required by Exhibit D attached hereto, addressed to the Underwriters; and
(j) Such other customary certificates or documents as the Underwriters and Underwriters Counsel may have reasonably requested.
2.4 Closing Conditions. The respective obligations of each Underwriter hereunder in connection with the Closing and each Option Closing Date are subject to the following conditions being met:
(a) the accuracy in all material respects when made and on the date in question (other than representations and warranties of the Company already qualified by materiality, which shall be true and correct in all respects) of the representations and warranties of the Company contained herein (unless as of a specific date therein);
(b) all obligations, covenants and agreements of the Company required to be performed at or prior to the date in question shall have been performed;
(c) the delivery by the Company of the items set forth in Section 2.3 of this Agreement;
(d) the Registration Statement shall be effective on the date of this Agreement and at each of the Closing Date and each Option Closing Date, if any, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representative;
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(e) if required by FINRA, the Underwriters shall have received a notice of no objections from FINRA as to the amount of compensation allowable or payable to and the terms and arrangements for acting as the Underwriters as described in the Registration Statement;
(f) the (i) Series A Preferred Shares, including the Closing Shares and the Option Shares and (ii) Warrants, including the Warrant, have been approved for listing on the Nasdaq Capital Market;
(g) the Company has filed with the Commission a 8-A on the date hereof providing for the registration pursuant to Section 12(b) under the Exchange Act of the Series A Preferred Shares; and such 8-A has become effective under the Exchange Act. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares or the Warrants under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration; and
(h) prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company and its Subsidiaries taken as a whole, from the latest dates as of which such condition is set forth in the Registration Statement, the General Disclosure Package and Prospectus; (ii) no Action, at law or in equity, shall have been pending or threatened against the Company or any Affiliate of the Company before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the General Disclosure Package and Prospectus; (iii) no stop order applicable to the Company shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; (iv) the Company has not incurred any material liabilities or obligations, direct or contingent, nor has it entered into any material transactions not in the ordinary course of business, other than pursuant to this Agreement and the transactions referred to herein; (v) the Company has not paid or declared any dividends or other distributions of any kind on any class of its capital stock; (vi) the Company has not altered its method of accounting; and (vii) the Registration Statement, the General Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the rules and regulations thereunder and shall conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder, and neither the Registration Statement, the General Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
If any of the conditions specified in this Section 2.4 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Representatives counsel pursuant to this Section 2.4 shall not be reasonably satisfactory in form and substance to the Representative and to Representatives counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the applicable Closing. Notice of such cancellation shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding Section of the Disclosure Schedules, the Company represents and warrants to the Underwriters as of the Execution Date, as of the Closing Date and as of each Option Closing Date, if any, as follows:
(a) Registration Statement; Prospectuses. The Company has filed with the Commission the Registration Statement, including any related Preliminary Prospectus or Prospectuses, for the registration of the Series A Preferred Shares under the Securities Act, which Registration Statement has been prepared by the Company in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act. The registration of the Common Stock under the Exchange Act has been declared effective by the Commission on the date hereof. Copies of such Registration Statement and of each amendment thereto, if any, including the related Preliminary Prospectuses, heretofore filed by the Company with the Commission have been delivered to the Underwriters. The term Registration Statement means such registration statement on Form F-1 (File No. 333-264859), as amended, as of the relevant Effective Date, including financial statements, all exhibits and any information deemed to be included or incorporated by reference therein, including any information deemed to be included pursuant to Rule 430A or Rule 430B of the Securities Act and the rules and regulations thereunder, as applicable. If the Company files a registration statement to register a portion of the Public Shares and relies on Rule 462(b) of the Securities Act and the rules and regulations thereunder for such registration statement to become effective upon filing with the Commission (the Rule 462 Registration Statement), then any reference to the Registration Statement shall be deemed to include the Rule 462 Registration Statement, as amended from time to time. The term Preliminary Prospectus as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Securities Act and the rules and regulations thereunder as included at any time as part of, or deemed to be part of or included in, the Registration Statement. The term Prospectus means the final prospectus in connection with this Offering as first filed with the Commission pursuant to Rule 424(b) of the Securities Act and the rules and regulations thereunder or, if no such filing is required, the form of final prospectus included in the Registration Statement at the Effective Date, except that if any revised prospectus or prospectus supplement shall be provided to the Representative by the Company for use in connection with the Public Shares which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term Prospectus shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Representative for such use. Any reference herein to the terms amend, amendment or supplement with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Exchange Act after the Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (EDGAR). The term General Disclosure Package means, collectively, the Permitted Free Writing Prospectus(es) (as defined below) issued at or prior to the date hereof, the most recent preliminary prospectus related to this Offering, and the information included on Schedule I and Schedule II hereto.
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(b) Effectiveness of Registration. At the time of filing the Registration Statement, the Company met, and as of the date hereof the Company meets, the general eligibility requirements for use of Form F-1 under the Securities Act. Any amendment or supplement to the Registration Statement or the Prospectuses required by this Agreement will be so prepared and filed by the Company and, as applicable, the Company will use commercially reasonable efforts to cause it to become effective as soon as reasonably practicable. No stop order suspending the effectiveness of the Registration Statement is in effect and no proceedings for such for that purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission. No order preventing or suspending the use of the Base Prospectuses, the Prospectus Supplements, the Prospectuses or any Permitted Free Writing Prospectus (as defined herein) has been issued by the Commission or any Canadian Securities Authority. The Company has delivered to the Underwriter one complete copy of the Registration Statement and a copy of each consent of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and the Prospectuses, as amended or supplemented, in such quantities and at such places as the Underwriter has reasonably requested. At the time of filing the Registration Statement and at the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Securities, the Company was not and, as of the date of this Agreement, is not, an Ineligible Issuer (as defined in Rule 405 under the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer. Time of Sale means [8:00 a.m.] New York City time on the date of this Agreement.
(c) Accuracy. Each part of the Registration Statement, when such part became or becomes effective, at any deemed effective date pursuant to Form F-1 and the Rules and Regulations on the date of filing thereof with the Commission and at the Time of Sale and Closing Date, and the Prospectus, on the date of filing thereof with the Commission and at the Time of Sale and Closing Date, conformed in all material respects or will conform in all material respects with the requirements of the Rules and Regulations; each part of the Registration Statement, when such part became or becomes effective, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, on the date of filing thereof with the Commission, and the Prospectus and the applicable Permitted Free Writing Prospectus(es), if any, issued at or prior to such Time of Sale, taken together (collectively, and with respect to the Securities, together with the public offering price of such Securities, the General Disclosure Package) and at the Time of Sale and Closing Date, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements or omissions in any such document made in reliance upon and in conformity with information relating to the Underwriter furnished in writing to the Company by the Underwriter specifically for inclusion in the Registration Statement, the Prospectus or any Permitted Free Writing Prospectus, or any amendment or supplement thereto, it being understood and agreed that the only such information furnished by the Underwriter consists of the information described as such herein.
(d) Subsidiaries. All of the Subsidiaries of the Company are set forth on Schedule 3.1(d). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
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(e) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Companys ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a Material Adverse Effect).
(f) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Companys stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(g) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Companys or any Subsidiarys certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
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(h) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filing with the Commission of the Prospectus, (ii) such filings as are required to be made under applicable state securities laws and (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrants for trading thereon in the time and manner required thereby (collectively, the Required Approvals).
(i) Issuance of Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Warrant Shares are duly authorized and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of Common Shares issuable pursuant to this Agreement and issuable upon exercise of the Warrants. The Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. All corporate action required to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. The Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus.
(j) Capitalization. The capitalization of the Company as of the date hereof is as set forth under the heading Capitalization in the Prospectus. No Person other than the Representative has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents, except such rights which have been waived prior to the date hereof. Except as a result of the purchase and sale of the Securities or as set forth on Schedule 3.1(j), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Shares or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional Common Shares or Common Share Equivalents or the capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue Common Shares or other securities to any Person (other than the Underwriters). There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or phantom stock plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities and other laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. All of the securities of the Company have been duly authorized and validly issued in accordance with all requisite laws. The authorized shares of the Company conform in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus. The offers and sales of the Companys securities were at all relevant times either registered under the Canadian Securities Laws, the Securities Act and the applicable state securities or Blue Sky laws or, based in part on the representations and warranties of the purchasers, exempt from such registration requirements. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Companys capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Companys stockholders.
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(k) Canadian Reporting Issuer; Financial Statements. The Company (i) is a reporting issuer (within the meaning of Canadian Securities Laws) or the equivalent in the province of British Columbia, and (ii) is not in default of any of the requirements of the Canadian Securities Laws. The financial statements of the Company included in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, and the Prospectus comply in all material respects with applicable accounting and legal requirements with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with International Financial Reporting Standards applied on a consistent basis during the periods involved (IFRS), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by IFRS, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. The agreements and documents described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package and the Prospectus conform in all material aspects to the descriptions thereof contained therein and there are no agreements or other documents required by the Canadian Securities Laws, the Securities Act and the rules and regulations thereunder to be described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the General Disclosure Package or the Prospectus, or (ii) is material to the Companys business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Companys knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Companys knowledge, any other party is in default thereunder and, to the Companys knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the Companys knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations. There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement, the General Disclosure Package and the Prospectus which have not been included as so required. The pro forma and pro forma as adjusted financial information, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus has been properly compiled and prepared in accordance with the applicable legal and accounting requirements and include all adjustments necessary to present fairly in accordance with IFRS the pro forma and as adjusted financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified. The assumptions used in preparing the pro forma and pro forma as adjusted financial information, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein. The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions; and the pro forma and pro forma as adjusted financial information reflect the proper application of those adjustments to the corresponding historical financial statement amounts.
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(l) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the Registration Statement, except as specifically disclosed in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package and the Prospectus, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Companys financial statements pursuant to IFRS or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans and the issuance of Common Share Equivalents as disclosed in the Registration Statement. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made. Unless otherwise disclosed in the Registration Statement, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
(m) Litigation. There has not been, and to the knowledge of the Company there is not pending or contemplated, any action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an Action) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Companys knowledge, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. To the knowledge of the Company, there has not been, and there is not pending or contemplated, any investigation by the Canadian Securities Authorities or the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Canadian Securities Laws, the Exchange Act or the Securities Act.
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(n) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Companys or the Subsidiaries employees is a member of a union that relates to such employees relationship with the Company or such Subsidiary, and neither the Company nor any of the Subsidiaries is a party to a collective bargaining agreement, and the Company and the Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of the Subsidiaries to any liability with respect to any of the foregoing matters that would reasonably be expected to have a Material Adverse Effect. The Company and the Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(o) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(p) Environmental Laws. The Company and the Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, Hazardous Materials) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (Environmental Laws); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in the case of (i), (ii) and (iii), the failure to do so could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
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(q) Privacy and Data Security Laws and Regulations. The Company and the Subsidiaries have (i) operated and currently operate their respective businesses in a manner compliant with all applicable foreign, federal, state and local laws and regulations, all contractual obligations and all Company policies (internal and posted) related to privacy and data security applicable to the Companys and the Subsidiaries collection, use, handling, transfer, transmission, storage, disclosure and/or disposal of the data of their respective customers, employees and other third parties (the Privacy and Data Security Laws), and (ii) implemented, monitored and have been and are in compliance with, applicable administrative, technical and physical safeguards and policies and procedures designed to ensure compliance with Privacy and Data Security Laws, except as would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, or as disclosed to the Representative, there has been no loss or unauthorized access, use, modification or breach of security of customer, employee or third party data maintained by or on behalf of the Company and the Subsidiaries, and neither the Company nor any of the Subsidiaries has notified, nor has the current intention to notify, any customer, governmental entity or the media of any such event with regard to any material data breach.
(r) Title to Assets. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, the Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with IFRS and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.
(s) Intellectual Property. The Company and the Subsidiaries have, or have rights to use or own or possess, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights it believes are necessary or required for use in connection with their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus and which the failure to so have could have a Material Adverse Effect (collectively, the Intellectual Property Rights). To the knowledge of the Company, the Company is not now infringing, and upon further development or commercialization of any product or service described in the Registration Statement, the General Disclosure Package or the Prospectus, will not infringe on, any valid claim of any issued patents, copyrights or trademarks of others. The Company has not conducted a freedom to operate study. None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement, except where such action would not reasonably be expected to have a Material Adverse Effect. Other than as specifically described in the Registration Statement, the General Disclosure Package or the Prospectus, neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the Registration Statement, the General Disclosure Package or the Prospectus, a written notice of a claim or otherwise has any knowledge that the Companys products or planned products as described in the Registration Statement, the General Disclosure Package or the Prospectus violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights either currently are or ultimately shall be enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and the Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(t) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(u) Transactions With Affiliates and Employees. Except as set forth in the Registration Statement, General Disclosure Package or Prospectus, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from, any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(v) Sarbanes-Oxley; Internal Accounting Controls. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, the Companys disclosure controls and procedures and internal controls are effective. The Company and the Subsidiaries are in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability, (iii) access to assets is permitted only in accordance with managements general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act and Canadian Securities Laws) that comply with the requirements of the Exchange Act and Canadian Securities Laws; such disclosure controls and procedures have been designed to ensure that material information relating to the Company is made known to the Companys principal executive officer and principal financial officer by others within those entities; such disclosure controls and procedures are effective.
(w) Certain Fees. Except as set forth in the Registration Statement, the General Disclosure Package and Prospectus, no brokerage or finders fees or commissions are or will be payable by the Company, any Subsidiary or Affiliate of the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. There are no other arrangements, agreements or understandings of the Company or, to the Companys knowledge, any of its stockholders that may affect the Underwriters compensation, as determined by FINRA. Other than payments to the Underwriters for this Offering or as disclosed in the Registration Statement, the Company has not made and has no agreements, arrangements or understanding to make any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finders fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the 180-day period preceding the initial filing of the Registration Statement through the 90-day period after the Effective Date. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
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(x) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities will not be or be an Affiliate of, an investment company within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an investment company subject to registration under the Investment Company Act of 1940, as amended.
(y) Registration Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Canadian Securities Law or the Securities Act of any securities of the Company or any Subsidiary, other than those rights that have been disclosed in the Registration Statement, General Disclosure Package, or Prospectus or that have been waived or satisfied.
(z) Compliance with Exchange Act. The Common Shares and Series A Preferred Shares are registered pursuant to Section 12(b) of the Exchange Act and the Company has filed with the Commission a 8-A on the date hereof providing for the registration of the Series A Preferred Shares pursuant to Section 12(b) under the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Shares or Series A Preferred Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has taken all actions necessary to register the Warrants pursuant to Section 12(b) of the Exchange Act by filing with the Commission a Form 8-A. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Shares, Series A Preferred Shares or Warrants are or have been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Shares, Series A Preferred Shares and Warrants are currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees of the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. The (i) Series A Preferred Shares, including the Closing Shares and the Option Shares, and (ii) Warrants and the Warrant Shares have been approved for listing on the Nasdaq Capital Market, subject to official notice of issuance.
(aa) Compliance with Listing Requirements. The Company has taken all necessary actions to ensure that, upon such time as the Nasdaq Capital Market shall have approved the Series A Preferred Shares and Warrants for listing, it is in compliance with all applicable corporate governance requirements set forth in the rules of the Nasdaq Capital Market that are in effect. Without limiting the generality of the foregoing: (i) all members of the Companys board of directors who are required to be independent (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Companys board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the audit committee of the Companys Board of Directors has at least one member who is an audit committee financial expert (as that term is defined under applicable laws, rules and regulations).
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(bb) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Companys articles of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable as a result of the Underwriters and the Company fulfilling their obligations or exercising their rights under the Transaction Documents.
(cc) Statistical, Industry-Related and Market-Related Data. The statistical, industry-related and market-related data included in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.
(dd) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this Offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(ee) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Companys assets exceeds the amount that will be required to be paid on or in respect of the Companys existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Companys assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(ff) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and the Subsidiaries each (i) has made or filed all federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. The term taxes mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term returns means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.
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(gg) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the FCPA.
(hh) Accountants. To the knowledge and belief of the Company, the Company Auditor (i) is an independent registered public accounting firm and (ii) shall express its opinion with respect to the financial statements to be included in the Companys annual information form for the fiscal year ending December 31, 2022.
(ii) Regulatory; Compliance with Laws. (A) The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (each, a Material Permit), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. The disclosures in the Registration Statement concerning the effects of federal, state, local and all foreign regulation on the Companys business as currently contemplated are correct in all material respects. The Company has not failed to file with the applicable regulatory authorities any filing, declaration, listing, registration, report or submission that is required to be so filed for the Companys business operation as currently conducted. All such filings were in material compliance with applicable laws when filed and no deficiencies have been asserted in writing by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions.
(jj) Stock Option Plans. Each stock option granted by the Company under the Companys stock option plan was granted (i) in accordance with the terms of the Companys stock option plan and (ii) with an exercise price at least equal to the fair market value of the Common Shares on the date such stock option would be considered granted under IFRS and applicable law. No stock option granted under the Companys stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or the Subsidiaries or their financial results or prospects.
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(kk) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Companys knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.
(ll) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended (the Code), and the Company shall so certify upon the Representatives request.
(mm) Bank Holding Company Act. Neither the Company nor any of the Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the BHCA) and to regulation by the Board of Governors of the Federal Reserve System (the Federal Reserve). Neither the Company nor any of the Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of the Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(nn) Money Laundering. The operations of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the Money Laundering Laws), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
(oo) D&O Questionnaires. To the Companys knowledge, all information contained in the questionnaires completed by each of the Companys directors and officers immediately prior to the Offering is true and correct in all respects and the Company has not become aware of any information which would cause the information disclosed in such questionnaires to become inaccurate and incorrect.
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(pp) FINRA Affiliation. No officer, director or any beneficial owner of five percent (5%) or more of the Companys Common Shares or Common Share Equivalents has any direct or indirect affiliation or association with any FINRA member (as determined in accordance with the rules and regulations of FINRA) that is participating in the Offering. Except for securities purchased on the open market, no Company Affiliate is an owner of stock or other securities of any member of FINRA. No Company Affiliate has made a subordinated loan to any member of FINRA. No proceeds from the sale of the Securities (excluding underwriting compensation as disclosed in the Registration Statement and the Prospectus) will be paid to any FINRA member, any persons associated with a FINRA member or an affiliate of a FINRA member. Except as disclosed in the Prospectus, the Company has not issued any warrants or other securities or granted any options, directly or indirectly, to the Representative or any of the Underwriters named on Schedule I hereto within the 180-day period prior to the initial filing date of the Prospectus. Except as disclosed in the Registration Statement and except for securities issued to the Representative as disclosed in the Prospectus and securities sold by the Representative on behalf of the Company, no person to whom securities of the Company have been privately issued within the 180-day period prior to the initial filing date of the Prospectus is a FINRA member, is a person associated with a FINRA member or is an affiliate of a FINRA member. No FINRA member participating in the Offering has a conflict of interest with the Company. For this purpose, a conflict of interest exists when a FINRA member, the parent or affiliate of a FINRA member or any person associated with a FINRA member in the aggregate beneficially own five percent (5%) or more of the Companys outstanding subordinated debt or common equity, or five percent (5%) or more of the Companys preferred equity. FINRA member participating in the Offering includes any associated person of a FINRA member that is participating in the Offering, any member of such associated persons immediate family and any affiliate of a FINRA member that is participating in the Offering. Any person associated with a FINRA member means (1) a natural person who is registered or has applied for registration under the rules of FINRA and (2) a sole proprietor, partner, officer, director, or branch manager of a FINRA member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a FINRA member. When used in this Section 3.1(pp) the term affiliate of a FINRA member or affiliated with a FINRA member means an entity that controls, is controlled by or is under common control with a FINRA member. The Company will advise the Representative and Fox Rothschild if it learns that any officer, director or owner of five percent (5%) or more of the Companys outstanding Common Shares or Common Share Equivalents is or becomes an affiliate or associated person of a FINRA member firm.
(qq) Officers Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to Fox Rothschild on behalf of the Representative shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
(rr) Board of Directors. The qualifications of the persons serving as board members and the overall composition of the Board of Directors comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder applicable to the Company and the rules of the Trading Market. At least one member of the Board of Directors qualifies as a financial expert as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of the Trading Market. In addition, at least a majority of the persons serving on the Board of Directors qualify as independent as defined under the rules of the Trading Market.
(ss) Employee Plans. The Registration Statement, Preliminary Prospectus and the Prospectus identify each employment, severance or other similar agreement, arrangement or policy and each material plan or arrangement required to be disclosed pursuant to the rules and regulations providing for insurance coverage (including any self-insured arrangements), workers compensation, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, or deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation, or post-retirement insurance, compensation or benefits, which: (i) is not an Employee Plan; (ii) is entered into, maintained or contributed to, as the case may be, by the Company or any of its Subsidiaries; and (iii) covers any officer or director or former officer or director of the Company or any of its Subsidiaries. These agreements, arrangements, policies or plans are referred to collectively as Benefit Arrangements. Each Benefit Arrangement has been maintained in material compliance with its terms and with the requirements of applicable law. Except as disclosed in the Registration Statement, Preliminary Prospectus and the Prospectus, there is no liability in respect of post-retirement health and medical benefits for retired employees of the Company or any of its Subsidiaries, other than medical benefits required to be continued under applicable law.
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(tt) IT Systems. Except as would not, individually or in the aggregate, have a Material Adverse Effect, the Company reasonably believes that (i) the Company and the Subsidiaries own or have a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and the Subsidiaries (the Company IT Systems), (ii) the Company IT Systems are adequate for, and operate and perform as required in connection with, the operation of the business of the Company and the Subsidiaries as currently conducted and (iii) the Company and the Subsidiaries have implemented reasonable backup, security and disaster recovery technology consistent with applicable regulatory standards.
(uu) No Relationships with Customers and Suppliers. No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of the Companys affiliates, on the other hand, which is required to be described in the Registration Statement, the General Disclosure Package and the Prospectus or a document incorporated by reference therein and which is not so described.
(vv) No Transfer Taxes. There are no transfer taxes or other similar fees or charges under Canadian or U.S. federal law or the laws of any state, province or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Securities. No stamp duty, registration or documentary taxes, duties or similar charges are payable under the federal laws of Canada or the laws of any province in connection with: (i) the execution and delivery of this Agreement; or (ii) the enforcement or admissibility in evidence of this Agreement; or (iii) the issuance, sale and delivery to the Underwriter of the Units; or (iv) the sale of the Units through the Underwriter to U.S. residents.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
4.1 Amendments to Registration Statement. The Company has delivered, or will as promptly as practicable deliver, to the Underwriters complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and conformed copies of the Registration Statement (without exhibits), the Prospectus, as amended or supplemented, and the General Disclosure Package in such quantities and at such places as an Underwriter reasonably requests. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Securities other than the Prospectus, the General Disclosure Package and the Registration Statement. The Company shall not file any such amendment or supplement to which the Representative shall reasonably object in writing.
4.2 Federal Securities Laws.
(a) Compliance. During the time when a Prospectus is required to be delivered under the Securities Act, the Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities in accordance with the provisions hereof and the Prospectus. If at any time when a Prospectus relating to the Securities is required to be delivered under the Canadian Securities Laws or the Securities Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Representative, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company will notify the Underwriters promptly and prepare and file with the Commission, subject to Section 4.1 hereof, an appropriate amendment or supplement in accordance with the Securities Act.
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(b) Exchange Act Registration. For a period of three years from the Execution Date, the Company will use its best efforts to maintain the registration of the Common Shares, Series A Preferred Shares and the Warrants under the Exchange Act; provided, that such provision shall not prevent a sale, merger or similar transaction involving the Company. The Company will not deregister the Common Shares, Series A Preferred Shares or the Warrants under the Exchange Act without the prior written consent of the Representative, which consent shall not be unreasonably withheld and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
(c) Free Writing Prospectuses. The Company represents and agrees that it has not made and will not make any offer relating to the Securities that would constitute an issuer free writing prospectus, as defined in Rule 433 of the rules and regulations under the Securities Act, without the prior written consent of the Representative. Any such free writing prospectus consented to by the Representative is herein referred to as a Permitted Free Writing Prospectus. The Company represents that it will treat each Permitted Free Writing Prospectus as an issuer free writing prospectus as defined in the rules and regulations under the Securities Act, and has complied and will comply with the applicable requirements of Rule 433 of the Securities Act, including timely Commission filing where required, legending and record keeping.
4.3 Delivery to the Underwriters of Prospectuses. The Company will deliver to the Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the the Securities Act or the Exchange Act such number of copies of each Prospectus as the Underwriters may reasonably request.
4.4 Effectiveness and Events Requiring Notice to the Underwriters. The Company will use its best efforts to cause the Registration Statement to remain effective with a current prospectus until the later of nine (9) months from the Execution Date and the date on which the Warrants are no longer outstanding and will notify the Underwriters and the holders of the Warrants promptly and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) the electronic filing with the Commission of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 4.4 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the General Disclosure Package or the Prospectus untrue or that requires the making of any changes in the Registration Statement, the General Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Canadian Securities Authorities, the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.
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4.5 Review of Financial Statements. For a period of three (3) years from the Execution Date, the Company shall file with the SEC all reports required to be filed pursuant to the Exchange Act and, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Companys financial statements included in such reports, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
4.6 Reports to the Underwriters; Expenses of the Offering.
(a) Periodic Reports, etc. For a period of three (3) years from the Execution Date, the Company will furnish or make available to the Underwriters copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish or make available to the Underwriters: (i) a copy of each periodic report the Company shall be required to file with the Canadian Securities Authorities or the Commission; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each registration statement filed by the Company under the Canadian Securities Laws or the Securities Act; (iv) such additional documents and information with respect to the Company and the affairs of any future Subsidiaries of the Company as the Representative may from time to time reasonably request; provided that the Underwriters shall each sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative in connection with such Underwriters receipt of such information. Documents filed with the SEDAR or EDGAR system shall be deemed to have been delivered to the Underwriters pursuant to this Section.
(b) Transfer Sheets. For a period of one (1) year from the Execution Date, the Company shall retain the Transfer Agent or a transfer and registrar agent acceptable to the Representative and will furnish to the Underwriters at the Companys sole cost and expense such transfer sheets of the Companys securities as an Underwriter may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and the Depository Trust Company, provided, however, that such requests cannot be made more than once monthly; and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
(c) Reserved.
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(d) General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and each Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Securities to be sold in the Offering (including the Option Securities) with the Commission; (b) all FINRA Public Offering Filing System fees associated with the review of the Offering by FINRA; all fees and expenses relating to the listing of such Securities on the Trading Market and such other stock exchanges as the Company and the Representative together determine; (c) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, and any blue sky surveys and, if appropriate, any agreement among underwriters, any agreements with selected dealers, underwriters questionnaire and power of attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (d) the costs of preparing, printing and delivering the Securities; (e) fees and expenses of the Transfer Agent for the Securities (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company); (f) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (g) the fees and expenses of the Companys accountants; (h) the fees and expenses of the Companys legal counsel and other agents and representatives; (i) the Underwriters costs of mailing prospectuses to prospective investors; (j) all fees, expenses and disbursements relating to background checks of the Companys officers and directors; (k) the fees and expenses associated with the Underwriters use of i-Deals book-building, prospectus tracking and compliance software (or other similar software) for the Offering; (l) the fees and expenses of the Underwriters legal counsel and (m) the Companys actual road show expenses for the Offering. The Underwriters may also deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or each Option Closing Date, if any, all out-of-pocket fees, expenses and disbursements (including legal fees and expenses) of the Underwriters incurred as a result of providing services related to the Offering to be paid by the Company to the Underwriters; provided, however, that all such costs and expenses pursuant to clauses (j), (k) and (l) of this Section 4.6(d), which are incurred by the Underwriters and for which the Company shall be responsible shall not exceed $125,000 in the aggregate in the event of a Closing of the Offering ($25,000 of which has been paid as an advance (the Advance) prior to the Execution Date) and a maximum of $25,000 (inclusive of the Advance) in the event there is not a Closing. In the event the offering is terminated, the Advance received against reasonable out-of-pocket expenses incurred in connection with the offering will be returned to the Company to the extent not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).
4.7 Application of Net Proceeds. The Company will apply the net proceeds from the Offering received by it in a manner consistent with the application described under the caption Use of Proceeds in the Prospectus.
4.8 Delivery of Earnings Statements to Security Holders. The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the Execution Date, an earnings statement (which need not be certified by independent public or independent certified public accountants unless required by the Securities Act or the rules and regulations under the Securities Act, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve consecutive months beginning after the Execution Date.
4.9 Stabilization. Neither the Company, nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
4.10 Internal Controls. The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with managements general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with IFRS and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with managements general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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4.11 Accountants. For a period of three (3) years from the Effective Date, the Company shall continue to retain a nationally recognized, independent PCAOB registered public accounting firm. The Underwriters acknowledge that the Company Auditor is acceptable to the Underwriters.
4.12 FINRA. The Company shall advise the Underwriters (who shall make an appropriate filing with FINRA) if it is aware that any officer, director, five percent (5%) or greater stockholder of the Company or Person that received the Companys unregistered equity securities in the past 180 days is or becomes an affiliate or associated person of a FINRA member firm prior to the earlier of the termination of this Agreement or the conclusion of the distribution of the Offering.
4.13 No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters responsibility to the Company is solely contractual and commercial in nature, based on arms-length negotiations and that neither the Underwriters nor their affiliates or any selected dealer shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement. Notwithstanding anything in this Agreement to the contrary, the Company acknowledges that the Underwriters may have financial interests in the success of the Offering that are not limited to the difference between the price to the public and the purchase price paid to the Company by the Underwriters for the Securities and the Underwriters have no obligation to disclose, or account to the Company for, any of such additional financial interests. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of fiduciary duty by the Underwriters.
4.14 Warrant Shares. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance of the Warrant Shares, or if the Warrant is exercised via cashless exercise at a time when such Warrant Shares would be eligible for resale under Rule 144 by a non-affiliate of the Company, the Warrant Shares issued pursuant to any such exercise shall be issued free of all restrictive legends. If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise available for the sale of the Warrant Shares, the Company shall immediately notify the holders that have provided it an address of the Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any holder thereof to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).
4.15 Board Composition and Board Designations. The qualifications of the persons serving as board members of the Company and the overall composition of the Board of Directors shall comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and with the listing requirements of the Nasdaq Capital Market and, if applicable, at least one member of the Board of Directors must qualify as a financial expert as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.
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4.16 Securities Laws Disclosure; Publicity. At the request of the Representative, by 9:00 a.m. (New York City time) on the date hereof or, if this Agreement is executed after 9:00 a.m. (New York City time) by the time reasonably requested by the Representative, the Company shall issue a press release disclosing the material terms of the Offering. The Company and the Representative shall consult with each other in issuing any press releases with respect to the Offering, and neither the Company nor any Underwriter shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. The Company will not issue press releases or engage in any other publicity, without the Representatives prior written consent, which consent will not be unreasonably withheld, for a period ending at 5:00 p.m. (New York City time) on the first business day following the 45th day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Companys business.
4.17 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Underwriter of the Securities is an Acquiring Person under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Underwriter of Shares could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Shares.
4.18 Reservation of Common Shares. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times while any of the Series A Preferred Shares or Warrants are outstanding, free of preemptive rights, a sufficient number of Common Shares for the purpose of enabling the Company to issue Option Shares pursuant to the Over-Allotment Option, Common Shares upon conversion of the Series A Preferred Shares and Warrant Shares pursuant to any exercise of the Warrants.
4.19 Listing of Series A Preferred Shares and Warrants. The Series A Preferred Shares and Warrants have been approved for trading on the Nasdaq Capital Market. The Company agrees to use its best efforts to effect and maintain the trading of the Common Shares, Series A Preferred Shares and Warrants on the Nasdaq Capital Market for at least three (3) years after the Closing Date; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.
4.20 Right of First Refusal. Upon the Closing of the Offering, for a period of nine (9) months from such Closing, the Company grants Maxim the right of first refusal (the Right of First Refusal) to act as lead managing underwriter and book-runner for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by the Company, any Subsidiary, or any successor to the Company (each, a Subject Transaction), at Maxims sole and exclusive discretion, on terms and conditions customary to Maxim for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction without the express written consent of Maxim.
The Company shall notify Maxim of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by email, registered mail or overnight courier service addressed to Maxim. If Maxim fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the delivery of such written notice, then Maxim shall have no further claim or right with respect to the Subject Transaction. Maxim may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by Maxim shall not adversely affect its Right of First Refusal with respect to any other Subject Transaction during the nine (9) month period agreed to above.
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4.21 Subsequent Equity Sales.
(a) From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any Common Shares, Series A Preferred Shares or Common Share Equivalents.
Notwithstanding the foregoing, this Section 4.21 shall not apply in respect of an Exempt Issuance.
4.22 Capital Changes. Until ninety (90) days after the Closing Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Shares without the prior written consent of Maxim.
4.23 Research Independence. The Company acknowledges that each Underwriters research analysts and research departments, if any, are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriters research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the Offering that differ from the views of its investment bankers. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Underwriter with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriters investment banking divisions. The Company acknowledges that each Representative is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short position in debt or equity securities of the Company.
ARTICLE 5
DEFAULT BY UNDERWRITERS
If on the Closing Date or any Option Closing Date, if any, any Underwriter shall fail to purchase and pay for the portion of the Closing Securities or Option Securities, as the case may be, which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company), the Representative, or if the Representative is the defaulting Underwriter, the non-defaulting Underwriters, shall use their reasonable efforts to procure within thirty-six (36) hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Closing Securities or Option Securities, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such thirty-six (36) hours the Representative shall not have procured such other Underwriters, or any others, to purchase the Closing Securities or Option Securities, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur does not exceed ten percent (10%) of the Closing Securities or Option Securities, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Closing Securities or Option Securities, as the case may be, which they are obligated to purchase hereunder, to purchase the Closing Securities or Option Securities, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur exceeds ten percent (10%) of the Closing Securities or Option Securities, as the case may be, covered hereby, the Company or the Representative will have the right to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Article 6 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Article 5, the applicable Closing Date may be postponed for such period, not exceeding seven days, as the Representative, or if the Representative is the defaulting Underwriter, the non-defaulting Underwriters, may determine in order that the required changes in the Prospectus or in any other documents or arrangements may be effected. The term Underwriter includes any person substituted for a defaulting Underwriter. Any action taken under this Article 5 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
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ARTICLE 6
INDEMNIFICATION
6.1 Indemnification of the Underwriters. The Company shall indemnify and hold harmless each Underwriter, its affiliates, the directors, officers, employees and agents of such Underwriter and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, as applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, any preliminary prospectus supplement, any Permitted Free Writing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) any untrue statement or alleged untrue statement of a material fact contained in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering of the Securities, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) (collectively, Marketing Materials) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iv) in whole or in part any inaccuracy in any material respect in the representations and warranties of the Company contained herein; provided, however, that the Company shall not be liable to the extent that such loss, claim, liability, expense or damage is based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with Underwriters Information. This indemnity agreement will be in addition to any liability that the Company might otherwise have. For all purposes of this Agreement, the information set forth in the Prospectus in the Discretionary Accounts, Price Stabilization, Short Positions and Penalty Bids and Electronic Distribution sections under the caption Underwriting constitutes the only information (the Underwriters Information) relating to the Underwriters furnished in writing to the Company by the Underwriters through the Representative specifically for inclusion in the preliminary prospectus, the Registration Statement or the Prospectus.
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6.2 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its affiliates, the directors, officers, employees and agents of the Company and each other person or entity, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever, as incurred (including but not limited to reasonable attorneys fees and any and all reasonable expenses whatsoever, incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, any Preliminary Prospectus, the Prospectus, or any amendment or supplement to any of them, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense (or action in respect thereof) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon the Underwriters Information; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount and commissions applicable to the Securities purchased by such Underwriter hereunder.
6.3 Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Article 6 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Article 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Article 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable out-of-pocket costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) the indemnified party has reasonably concluded that a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party), (iv) the indemnifying party does not diligently defend the action after assumption of the defense, or (v) the indemnifying party has not in fact employed counsel satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel shall be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld or delayed). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Article 6 (whether or not any indemnified party is a party thereto), unless (x) such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment. Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Article 6 effected without its written consent if (A) such settlement is entered into more than forty-five (45) days after receipt by such indemnifying party of the aforesaid request, (B) such indemnifying party shall have received notice of the terms of such settlement at least thirty (30) days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
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6.4 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Article 6 is applicable in accordance with its terms but for any reason is held to be unavailable, the Company and the Underwriters shall contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Underwriters, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who may also be liable for contribution), to which the Company and the Underwriter may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the Offering of the Securities pursuant to this Agreement. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discount and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6.4 were to be determined by pro rata allocation or by any other method of allocation (even if the Underwriters were treated as one entity for such purpose) which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6.4 shall be deemed to include, for purpose of this Section 6.4, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6.4, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by it. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6.4, any person who controls a party to this Agreement within the meaning of the Securities Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, and each director, officer, employee, counsel or agent of an Underwriter will have the same rights to contribution as such Underwriter, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6.4, will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6.4. The obligations of the Underwriters to contribute pursuant to this Section 6.4 are several in proportion to the respective number of Securities to be purchased by each of the Underwriters hereunder and not joint. No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld).
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6.5 Survival. The indemnity and contribution agreements contained in this Article 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or any controlling Person thereof, (ii) acceptance of any of the Securities and payment therefor or (iii) any termination of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 Termination.
(a) Termination Right. The Representative shall have the right to terminate this Agreement by notifying the Company at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in their opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on any Trading Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or an increase in major hostilities, or (iv) if a banking moratorium has been declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representatives opinion, make it inadvisable to proceed with the delivery of the Securities, or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representatives judgment would make it impracticable to proceed with the Offering, sale and/or delivery of the Securities or to enforce contracts made by the Underwriters for the sale of the Securities.
35
(b) Expenses. In the event this Agreement shall be terminated pursuant to Section 7.1(a), within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to Maxim its actual and accountable out of pocket expenses related to the transactions contemplated herein then due and payable up to $25,000 (all of which has been paid as an Advance prior to the Execution Date) (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Notwithstanding the foregoing, any Advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
(c) Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Article 6 shall not be in any way effected by such election or termination or failure to carry out the terms of this Agreement or any part hereof.
7.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, any Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. Notwithstanding anything herein to the contrary, the Engagement Agreement, dated April 27, 2022 (Engagement Agreement), by and between the Company and Maxim, shall continue to be effective and the terms therein, including, without limitation, Section 14 with respect to any future offerings, shall continue to survive and be enforceable by Maxim in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail.
7.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number (if any) or e-mail attachment at the email address set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail attachment at the e-mail address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
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7.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Maxim. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
7.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.
7.7 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any action, suit or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Article 6, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
7.8 Survival. The representations and warranties contained herein shall survive the Closing and the Option Closing, if any, and the delivery of the Securities.
7.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a .pdf format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof.
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7.10 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
7.11 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Underwriters and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
7.12 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
7.13 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and Common Shares in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Shares that occur after the date of this Agreement.
7.14 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE FOREVER ANY RIGHT TO TRIAL BY JURY.
7.15 No Third Party Beneficiaries. The provisions of this Agreement shall be binding upon and shall inure solely to the benefit of the parties hereto, are not intended to confer upon any Person other than the parties hereto and the Underwriters where so indicated any rights, benefits, remedies, obligations or liabilities hereunder.
(Signature Pages Follow)
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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Company and the several Underwriters in accordance with its terms.
SCHEDULE II
Pricing Information
Number of Closing Units: [●]
Number of Closing Shares: [●]
Number of Closing Warrants: [●]
Number of Option Shares: [●]
Number of Option Warrants: [●]
Public Offering Price per Closing Unit: $[●]
Public Offering Price per Option Share: $[●]
Public Offering Price per Option Warrant: $0.01
Underwriting Discount per Closing Unit: $[●]
Underwriting Discount per Option Share: $[●]
Underwriting Discount per Option Warrant: $0.008
Proceeds to Company per Closing Unit (before expenses): $[●]
Proceeds to Company per Option Share (before expenses): $[●]
Proceeds to Company per Option Warrant: $0.0092
Schedule II-1
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
[ ], 2022
Maxim Group LLC
300 Park Avenue, 16th Floor
New York, New York 10022
Re: mCloud Technologies Corp. - Public Offering
Ladies and Gentlemen:
The undersigned, a holder of common shares, without par value (the Common Shares), or rights to acquire Common Shares, of mCloud Technologies Corp. (the Company), understands that you are the representative (the Representative) of the several underwriters (collectively, the Underwriters) named or to be named in the final form of Schedule I to the underwriting agreement (the Underwriting Agreement) to be entered into among the Underwriters and the Company, providing for the public offering (the Public Offering) of 9.0% Series A Cumulative Perpetual Preferred Shares (the Shares) and warrants to purchase Common Shares (collectively, the Securities) pursuant to a registration statement filed or to be filed with the U.S. Securities and Exchange Commission (the SEC). Capitalized terms used herein and not otherwise defined shall have the meanings set forth for them in the Underwriting Agreement.
In consideration of the Underwriters agreement to enter into the Underwriting Agreement and to proceed with the Public Offering of the Securities, and for other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned hereby agrees, for the benefit of the Company, the Representative and the other Underwriters that, without the prior written consent of the Representative, the undersigned will not, during the period specified in the following paragraph (the Lock-Up Period), directly or indirectly, unless otherwise provided herein, (a) offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, encumber, assign, borrow or otherwise dispose of (each a Transfer) any Relevant Security (as defined below) or otherwise publicly disclose the intention to do so, or (b) establish or increase any put equivalent position or liquidate or decrease any call equivalent position with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations thereunder) with respect to any Relevant Security or otherwise enter into any swap, derivative or other transaction or arrangement that Transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by the delivery of Relevant Securities, other securities, cash or other consideration, or otherwise publicly disclose the intention to do so. As used herein, the term Relevant Security means any Common Shares, any warrant to purchase Common Shares or any other security of the Company or any other entity that is convertible into, or exercisable or exchangeable for, Common Shares or any other equity security of the Company, in each case owned beneficially or otherwise by the undersigned on the date of closing of the Public Offering or acquired by the undersigned during the Lock-Up Period.
The restrictions in the foregoing paragraph shall not apply to any exercise (including a cashless exercise or broker-assisted exercise and payment of tax obligations) of options or warrants to purchase Common Shares; provided that any Common Shares received upon such exercise, conversion or exchange will be subject to this Lock-Up Period. The Lock-Up Period will commence on the date of this Lock-up Agreement and continue and include the date that is one-hundred and eighty (180) days after the closing of the Public Offering.
Exhibit A-1
In addition, the undersigned further agrees that, except for the registration statement filed or to be filed in connection with the Public Offering, during the Lock-Up Period the undersigned will not, without the prior written consent of the Representative: (a) file or participate in the filing with the SEC of any registration statement or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document, in each case with respect to any proposed offering or sale of a Relevant Security, or (b) exercise any rights the undersigned may have to require registration with the SEC of any proposed offering or sale of a Relevant Security.
In furtherance of the undersigneds obligations hereunder, the undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record owner and the transfer of which would be a violation of this Lock-Up Agreement and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record owner, agrees that during the Lock-Up Period it will cause the record owner to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities to the extent such transfer would be a violation of this Lock-Up Agreement.
Notwithstanding the foregoing, the undersigned may transfer the undersigneds Relevant Securities:
(i) as a bona fide gift or gifts,
(ii) to any trust, partnership, limited liability company or other legal entity commonly used for estate planning purposes which is established for the direct or indirect benefit of the undersigned or a member of members of the immediate family of the undersigned,
(iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of the undersigned, (2) to limited partners, limited liability company members or stockholders of the undersigned, or (3) in connection with a sale, merger or transfer of all or substantially all of the assets of the undersigned or any other change of control of the undersigned, not undertaken for the purpose of avoiding the restrictions imposed by this Lock-Up Agreement,
(iv) if the undersigned is a trust, to the beneficiary of such trust,
(v) by testate or intestate succession, or
(vi) by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement,
provided, that (A) such transfer shall not involve a disposition for value, (B) the transferee agrees in writing with the Underwriters and the Company to be bound by the terms of this Lock-Up Agreement, and (C) such transfer would not require any filing under Section 16(a) of the Exchange Act and no such filing is voluntarily made.
Exhibit A-2
For purposes of this Lock-Up Agreement, immediate family shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement and that this Lock-Up Agreement has been duly authorized (if the undersigned is not a natural person) and constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date of this Lock-Up Agreement.
The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Securities to be sold thereunder, the undersigned shall be released from all obligations under this Lock-Up Agreement.
The undersigned, whether or not participating in the Public Offering, understands that the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Lock-Up Agreement.
This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. Delivery of a signed copy of this Lock-Up Agreement by facsimile or e-mail/.pdf transmission shall be effective as the delivery of the original hereof.
Very truly yours, |
Signature: | ||||
Name (printed): | ||||
Title (if applicable): | ||||
Entity (if applicable): |
Exhibit A-3
EXHIBIT B
OFFICERS CERTIFICATE
MCLOUD TECHNOLOGIES CORP.
The undersigned, Russel H. McMeekin and Chantal Schutz, the duly elected and duly qualified Chief Executive Officer and Chief Financial Officer, respectively, of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), hereby certify the following on behalf of the Company, in connection with the transactions contemplated by the Underwriting Agreement (the Underwriting Agreement), dated [●], 2022, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto:
1. The undersigned officers have carefully examined the Registration Statement, the General Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of time it became effective and as of the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the General Disclosure Package, as of its date and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date and the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading.
2. Since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the General Disclosure Package or the Prospectus.
3. To the best of their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in the Underwriting Agreement are true and correct and the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.
4. There has not been, subsequent to June 30, 2021, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Effect.
5. All correspondence between the Company or its counsel and the Commission are accurate and complete in all material respects.
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Underwriting Agreement.
This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Public Shares pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Fox Rothschild LLP, Sichenzia Ross & Ference LLP and Morton Law LLP is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.
Exhibit B-1
IN WITNESS WHEREOF, the undersigned have executed this Officers Certificate on behalf of the Company as of this [ ] day of [ ], 2022.
| ||
Name: |
Russel H. McMeekin | |
Title: |
Chief Executive Officer | |
| ||
Name: |
Chantal Schutz | |
Title: |
Chief Financial Officer |
[SIGNATURE PAGE TO OFFICERS CERTIFICATE]
Exhibit B-2
EXHIBIT C
SECRETARYS CERTIFICATE
MCLOUD TECHNOLOGIES CORP.
[ ], 2022
The undersigned, acting solely in his/her capacity as the duly elected, qualified and acting Secretary of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), and not in his/her individual capacity, hereby gives this certificate pursuant to Section 2.3 of that certain underwriting agreement, dated [●], 2022, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto (the Underwriting Agreement). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.
The undersigned, [ ], Secretary of the Company, hereby certifies as of the date hereof as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of the Companys memorandum of articles, as amended, in effect on the date hereof (the Articles). The Articles are in full force and effect on the date hereof, and no further amendments or modifications to the Articles have been authorized or filed.
2. Attached hereto as Exhibit B is a true, correct and complete copies of resolutions duly adopted by the Companys board of directors or a committee thereof at meetings held on [ ], 2022 and [ ], 2022, in which the transactions contemplated by the Registration Statement, the Prospectus and the Transaction Documents were authorized and approved. Such resolutions are in full force and effect, have not been amended, modified or rescinded and are the only resolutions related to the subject matter thereof.
3. Each person who, as a director or officer of the Company, signed, and delivered by facsimile, portable document file (.pdf) or otherwise (a) the Underwriting Agreement, (b) the Transaction Documents and (c) any and all other documents or instruments executed and delivered to the Representative in connection with the transactions contemplated by the Underwriting Agreement, was duly elected or appointed, qualified and acting as such director or officer, and was duly authorized to execute and deliver such documents or other instruments at the respective times of such execution and delivery.
4. All persons who, as officers or directors of the Company or attorneys-in-fact of such officers or directors, signed, and delivered by facsimile, portable document file (.pdf) or otherwise: (a) the Registration Statement on Form F-1, as amended (File No. 333-264859), that the Company filed with the Commission on May 11, 2022, which was subsequently declared effective by the Commission on [●], 2022, and (b) any and all other documents or instruments executed and delivered to the Commission in connection with such Registration Statement were, at the respective times of such signing, delivery or filing, duly elected or appointed, qualified and acting as such director, officer or duly appointed and acting as such attorney-in-fact, and the signatures of such persons appearing on such documents are their genuine signatures or true facsimiles or portable document thereof.
Exhibit C-1
5. Attached hereto as Exhibit C are true, correct and complete copies of a good standing (or equivalent) certificate as of a recent date for the Company and each Subsidiary by the relevant authority of its jurisdiction of incorporation or organization, and such certificates attached thereto have not been amended (except as attached thereto) since the date reflected thereon.
6. Russel H. McMeekin, the Companys Chief Executive Officer, has executed and delivered on behalf of the Company the Underwriting Agreement and the other Transaction Documents in accordance with their respective terms thereof.
This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Public Shares pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Fox Rothschild LLP, Sichenzia Ross & Ference LLP and Morton Law LLP is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.
This certificate may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of an executed signature page of this certificate by electronic or facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.
[Signature page follows]
Exhibit C-2
IN WITNESS WHEREOF, I have hereunder signed my name on this [ ] day of [ ], 2022.
| ||
Name: |
[ ] | |
Title: |
Secretary |
The undersigned as Chief Executive Officer of the Company hereby certifies that [ ] is the duly elected, appointed, qualified and acting Secretary of the Company, and that the signature appearing above is his genuine signature.
|
Russel H. McMeekin, Chief Executive Officer |
[Signature page to mCloud Technologies Corp. Secretarys Certificate]
Exhibit C-3
Secretarys Certificate
Exhibit A
Memorandum of Articles
Exhibit C-4
Secretarys Certificate
Exhibit B
Board Resolutions
Exhibit C-5
Secretarys Certificate
Exhibit C
Good Standing Certificates
Exhibit C-6
EXHIBIT D
CHIEF FINANCIAL OFFICERS CERTIFICATE
MCLOUD TECHNOLOGIES CORP.
[ ], 2022
I, Chantal Schutz, do hereby certify that I am the Chief Financial Officer, of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), and, in my capacity as such and not in any individual capacity, and based upon a diligent examination of the financial records of the Company, the scope and nature of such examination being designed to identify information relevant to the subjects addressed below, do hereby certify to the Representative (as defined below) that:
1. I am providing this certificate in connection with the offering (the Offering) by the Company of an aggregate of [ ] 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value (the Series A Shares), and warrants to purchase Common Shares, pursuant to Section 2.3 of that certain underwriting agreement, dated [●], 2022 (the Underwriting Agreement), by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto. The Offering is being made pursuant to the registration statement on Form F-1, as amended (File No. 333-264859) (the Registration Statement) that was initially filed with the Securities and Exchange Commission (the SEC) under the Securities Act of 1933, as amended, on May 11, 2022 and that was subsequently declared effective by the SEC on [●], 2022. Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.
2. I am familiar with the accounting, operations and records systems of the Company and its subsidiaries and I have responsibility for the Companys financial and accounting matters. I have (i) read the Registration Statement and the Prospectus; and (ii) supervised the compilation of and reviewed the financial information set forth in the Registration Statement and the Prospectus (collectively, the Financial Information). Such Financial Information has been derived from the applicable accounting or financial records of the Company or its subsidiaries, which I believe, to the best of my knowledge, are accurate, complete and reliable.
3. There were no significant decreases in the Companys cash and cash equivalents, total current liabilities and operating expenses during the Companys fiscal quarter ended March 31, 2022 as compared with amounts shown on the Companys unaudited interim financial statements for the fiscal quarter ended December 31, 2021, except as disclosed in the Registration Statement or the Prospectus.
4. [I have prepared or reviewed the amounts and information identified in the pages of the Registration Statement and the Prospectus, attached as Annex A hereto (collectively, the Financial and Numerical Information). To the best of my knowledge, such Financial and Numerical Information, as of the date hereof, matches or is accurately derived from the applicable accounting or financial records of the Company or its subsidiaries.]
This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Public Shares pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Fox Rothschild LLP, Sichenzia Ross & Ference LLP and Morton Law LLP is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.
Exhibit D-1
IN WITNESS WHEREOF, the undersigned has executed and delivered this Chief Financial Officer Certificate on behalf of the Company as of the date first written above.
MCLOUD TECHNOLOGIES CORP. | ||
By: |
| |
Name: |
Chantal Schutz | |
Title: |
Chief Financial Officer |
[Signature page to Chief Financial Officer Certificate mCloud Technologies Corp.]
EXHIBIT E
FORM OF WARRANT
[Attached hereto]
Exhibit E-1
EXHIBIT F
FORM OF WARRANT AGENT AGREEMENT
[Attached hereto]
Exhibit F-1
Exhibit 4.1
27.3 | 9.0 % Series A Cumulative Perpetual Preferred Shares |
27.3.1 | Designation and Number of Shares. |
There shall hereby be created and established a series of preferred shares of the Company designated as Series A Cumulative Perpetual Preferred Shares (the Series A Preferred Shares). The authorized number of Series A Preferred Shares shall be 2,300,000. The Company shall have the authority to issue fractional shares of the Series A Preferred Shares. Each Series A Preferred Share shall be identical in all respects to every other Series A Preferred Share, except that Series A Preferred Shares issued after the date of the first issuance of Series A Preferred Shares (the Original Issue Date) shall accrue dividends from the later of the Original Issue Date and the Dividend Payment Date (as defined hereafter) immediately prior to the original issue date of such additional shares for which full cumulative dividends have been paid. As used in this Article 27.3, accrual (or similar terms) used with respect to a dividend or dividend period refers only to the determination of the amount of such dividend and does not imply that any right to a dividend in any dividend period that arises prior to the date on which such dividend is declared.
27.3.2 | Ranking. |
(1) | The Series A Preferred Shares will, as to dividend rights and rights as to the distribution of assets upon the Companys liquidation, dissolution or winding up, rank: |
(a) | senior to all classes or series of the Common Shares and to all other shares issued by the Company expressly designated as ranking junior to the Series A Preferred Shares, |
(b) | on parity with any future class or series of the Companys shares expressly designated as ranking on parity with the Series A Preferred Shares; |
(c) | junior to any future class or series of the Companys shares expressly designated as ranking senior to the Series A Preferred Shares; and |
(d) | junior to all the Companys existing and future indebtedness (including subordinated indebtedness and any indebtedness convertible into Common Shares or preferred shares) and other liabilities with respect to assets available to satisfy claims against the Company and structurally subordinated to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) existing or future subsidiaries of the Company. |
(2) | The Company may issue junior shares described in Article 27.3.2(1)(a) above and parity shares described in Article 27.3.2(b) above at any time and from time to time in one or more series without the consent of the holders of the Series A Preferred Shares. The Companys ability to issue any senior shares described in Article 27.3.2(c) above is limited as described in Article 27.3.10(4)(a). |
27.3.3 | Dividends. |
(1) | Subject to the preferential rights, if any, of the holders of any class or series of shares of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of Series A Preferred Shares will be entitled to receive, when, as and if declared by the board of directors (or a duly authorized committee of the board of directors), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year); provided, however, that (a) on the fifth annual anniversary of the Original Issue Date, the dividend rate will increase to 13.0% of the $25.00 liquidation preference per year (equivalent to $3.25 per year) and (b) the dividend rate will increase on the dates that are three, six and nine months after the fifth annual anniversary of the Original Issue Date, respectively, to 17.0% (equivalent to $4.25 per year), 21.0% (equivalent to $5.25 per year) and 25.0% (equivalent to $6.25 per year) of the $25.00 liquidation preference per year. A dividend period is the period from and including a dividend payment date (as defined herein) (except that the initial dividend period shall commence on and include the Original Issue Date) and continuing to, but excluding, the next succeeding dividend payment date. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the Original Issue Date; except that Series A Preferred Shares issued after the Original Issue Date shall accrue dividends from the later of the Original Issue Date and the dividend payment date (as defined herein) immediately prior to the Original Issue Date of such additional shares for which full cumulative dividends have been paid. The Company will be entitled to defer the payment of any declared dividends on the Series A Preferred Stock until the occurrence of a liquidation or Change of Control Event (as defined herein) approved by the Board of Directors of the Company. |
(2) | Dividends, when, as and if declared by the board of directors (or a duly authorized committee of the board of directors), will be payable monthly in arrears on the same day of the month as the Original Issue Date, each of which is a dividend payment date; provided that if any dividend payment date is not a business day (as defined below), then such date will nevertheless be a dividend payment date but the dividend which would otherwise have been payable on that dividend payment date, when, as and if declared, will be paid on the next succeeding business day and no interest, additional dividends or other sums will accumulate on the amounts so payable for the period from and after that dividend payment date to that next succeeding business day. As used in this Article 27.3, business day means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close. |
(3) | Any dividend, including any dividend payable on the Series A Preferred Shares for any dividend period (or portion thereof) will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends are payable to holders of record of Series A Preferred Shares as they appear on the central securities register for the Series A Preferred Shares or, where a transfer agent is appointed to maintain the register for the Series A Preferred Shares, in the records of the Companys transfer agent (the Transfer Agent) at the close of business on the applicable record date, which will be the date designated by the board of directors (or a duly authorized committee of the board of directors) for the payment of a dividend that is not more than thirty (30) nor less than ten (10) days prior to the applicable dividend payment date. |
(4) | The board of directors (or a duly authorized committee of the board of directors) will not authorize, pay or set apart for payment by the Company any dividend on the Series A Preferred Shares at any time that: |
(a) | the terms and provisions of any of the Companys agreements, including any agreement relating to the Companys indebtedness, prohibits such authorization, payment or setting apart for payment; |
(b) | the terms and provisions of any of the Companys agreements, including any agreement relating to the Companys indebtedness, provides that such authorization, payment or setting apart for payment thereof would constitute a breach of, or a default under, such agreement; or |
(c) | the law, including the Business Corporations Act, restricts or prohibits the authorization or payment of dividends on the Series A Preferred Shares. |
Notwithstanding the foregoing, dividends on the Series A Preferred Shares will accumulate whether or not (i) the terms and provisions of any of the Companys agreements relating to its indebtedness prohibit such authorization payment or setting apart for payment, (ii) the Company has earnings, (iii) there are funds legally available for the payment of the dividends, (iv) or the dividends are authorized. Accordingly, if the board of directors (or a duly authorized committee of the board of directors) does not declare a dividend on the Series A Preferred Shares payable in respect of any dividend period before the related dividend payment date, such dividend shall accumulate and an amount equal to such accumulated dividend shall become payable out of funds legally available therefor upon the liquidation, dissolution or winding up of the Companys affairs (or earlier redemption of such Series A Preferred Shares), to the extent not paid prior to such liquidation, dissolution or winding up or earlier redemption, as the case may be. No interest, or sums in lieu of interest, will be payable in respect of any dividend payment or payments on the Series A Preferred Shares, which may be in arrears, and holders of Series A Preferred Shares will not be entitled to any dividends in excess of the full cumulative dividends described above. Any dividend payment made on the Series A Preferred Shares shall first be credited against the earliest accumulated but unpaid dividends due with respect to those shares.
27.3.4 | Restrictions on Dividends, Redemption and Repurchases. |
(1) | So long as any Series A Preferred Shares remain outstanding, unless the Company also has either paid or declared and set apart for payment full cumulative dividends on the Series A Preferred Shares for all past completed dividend periods, the Company will not during any dividend period: |
(a) | pay or declare and set apart for payment any dividends or declare or make any distribution of cash or other property on Common Shares or other shares that rank junior to or on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up (other than, in each case, (i) a dividend paid in Common Shares or other shares ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up or (ii) any declaration of a Common Share dividend in connection with any shareholders rights plan, or the issuance of rights, shares or other property under any shareholders rights plan, or the redemption or repurchase of rights pursuant to the plan); |
(b) | redeem, purchase or otherwise acquire Common Shares or other shares that rank junior to or on parity with the Series A Preferred Shares (other than the Series A Preferred Shares) with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up (other than (i) by conversion into or exchange for Common Shares or other shares ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, (ii) the redemption of shares pursuant to the provisions of these Articles relating to the restrictions upon ownership and transfer of shares, (iii) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares and any other shares that rank on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, (iv) purchases, redemptions or other acquisitions of shares of the Company ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up pursuant to any employment contract, dividend reinvestment and share purchase plan, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors, consultants or advisors, (v) through the use of the proceeds of a substantially contemporaneous sale of shares ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, or (vi) purchases or other acquisitions of shares of the Company pursuant to a contractually binding share repurchase plan existing prior to the preceding dividend payment date on which dividends were not paid in full); or |
(c) | redeem, purchase or otherwise acquire Series A Preferred Shares (other than (i) by conversion into or exchange for Common Shares or other shares ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, (ii) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares or (iii) with respect to redemptions, a redemption pursuant to which all Series A Preferred Shares are redeemed). |
(2) | Notwithstanding the foregoing, if the board of directors (or a duly authorized committee of the board of directors) elects to declare only partial instead of full dividends for a dividend payment date and related dividend period on the Series A Preferred Shares or any class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends, then, to the extent permitted by the terms of the Series A Preferred Shares and each outstanding class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends, such partial dividends shall be declared on Series A Preferred Shares and class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends, and dividends so declared shall be paid, as to any such dividend payment date and related dividend period, in amounts such that the ratio of the partial dividends declared and paid on each such series to full dividends on each such series is the same. As used in this paragraph, full dividends means, as to any class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends that bear dividends on a cumulative basis, the amount of dividends that would need to be declared and paid to bring such class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends current in dividends, including undeclared dividends for past dividend periods. To the extent a dividend period with respect to the Series A Preferred Shares or any class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends (in either case, the first series) coincides with more than one dividend period with respect to another series as applicable (in either case, a second series), then, for purposes of this paragraph, the board of directors (or a duly authorized committee of the board of directors) may, to the extent permitted by the terms of each affected series, treat such dividend period for the first series as two or more consecutive dividend periods, none of which coincides with more than one dividend period with respect to the second series, or may treat such dividend period(s) with respect to any class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends and dividend period(s) with respect to the Series A Preferred Shares for the purposes of this paragraph in any other manner that it deems to be fair and equitable in order to achieve ratable payments of dividends on such class or series of the Companys shares that rank on parity with the Series A Preferred Shares with respect to dividends and the Series A Preferred Shares. |
(3) | Subject to the foregoing, dividends (payable in cash, shares or otherwise) as may be determined by the board of directors (or a duly authorized committee of the board of directors) may be declared and paid on any Common Shares or other shares ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up from time to time out of any funds legally available therefor, and the Series A Preferred Shares shall not be entitled to participate in any such dividend. |
27.3.5 Liquidation Preference.
(1) | In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of Series A Preferred Shares will be entitled to be paid out of the assets of the Company legally available for distribution to its shareholders (i.e., after satisfaction of all the Companys liabilities to creditors, if any) and, subject to the rights of holders of any shares of each other class or series of shares ranking, as to rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, senior to the Series A Preferred Shares, a liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment may be made to holders of shares of Common Shares or any other class or series of the Companys shares ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, junior to the Series A Preferred Shares (the liquidation preference). |
(2) | If, upon such voluntary or involuntary liquidation, dissolution or winding up of the Companys affairs, the assets of the Company legally available for distribution to the Companys shareholders are insufficient to pay the full amount of the liquidation preference on all outstanding Series A Preferred Shares and the corresponding amounts payable on all shares of each other class or series of shares of the Company ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series A Preferred Shares, then the holders of Series A Preferred Shares and each such other class or series of shares of the Company ranking, as to rights to the distribution of assets upon the Companys voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series A Preferred Shares will share ratably in any distribution of assets in proportion to the full liquidation preference to which they would otherwise be respectively entitled. In any such distribution, the liquidation preference of any holder of the Companys shares other than the Series A Preferred Shares means the amount otherwise payable to such holder in such distribution (assuming no limitation on the Companys assets available for such distribution), including an amount equal to any declared but unpaid dividends in the case of any holder or Shares on which dividends accrue on a non-cumulative basis and, in the case of any holder of shares on which dividends accrue on a cumulative basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or not earned or declared, as applicable. |
(3) | Holders of Series A Preferred Shares will be entitled to written notice of any voluntary or involuntary liquidation, dissolution or winding up of the Company, no fewer than thirty (30) days and no more than sixty (60) days prior to the payment date. |
(4) | If the liquidation preference has been paid in full to all holders of Series A Preferred Shares and each such other class or series of shares ranking, as to rights to the distribution of assets any voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series A Preferred Shares, holders of Series A Preferred Shares and each such other class or series of shares ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series A Preferred Shares will have no right or claim to any of the Companys remaining assets and the holders of shares of Common Shares or any class or series of shares ranking, as to rights to the distribution of assets any voluntary or involuntary liquidation, dissolution or winding up, junior to the Series A Preferred Shares, will be entitled to receive all of the Companys remaining assets according to their respective rights and preferences. |
(5) | The consolidation, merger or other business combination of the Company with or into any other entity or the sale, lease, transfer or conveyance of all or substantially all of the assets, property or business of the Company will not be deemed to constitute a liquidation, dissolution or winding up of the Company. |
27.3.6 | Optional Redemption. |
(1) | The Series A Preferred Shares are perpetual and have no maturity date. The Series A Preferred Shares are not redeemable prior to the one-year anniversary of the Original Issue Date, except under the circumstances described in Article 27.3.8 hereof. |
(2) | On or after the one-year anniversary of the Original Issue Date, the Series A Preferred Shares may be redeemed at the Companys option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption (the Redemption Date), upon the giving of notice, as provided in Article 27.3.7 hereof. |
27.3.7 | Redemption Procedures. |
(1) | In the event the Company elects to redeem Series A Preferred Shares, notice of redemption will be mailed to each holder of record of Series A Preferred Shares called for redemption at such holders address as it appears on the Companys share transfer records, not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date. Any notice mailed as provided in this paragraph shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of Series A Preferred Shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other Series A Preferred Shares. Notwithstanding the foregoing, if the Series A Preferred Shares are issued in book-entry form through The Depository Trust Company (DTC) or any other similar facility, notice of redemption may be given to the holders of Series A Preferred Shares at such time and in any manner permitted by such facility. |
(2) | The notice will notify the holder of the election to redeem the shares and will state at least the following: |
(a) | the Redemption Date; |
(b) | the redemption price; |
(c) | the number of Series A Preferred Shares to be redeemed (and, if fewer than all the shares are to be redeemed, the number of shares to be redeemed from such holder or the method for determining such number); |
(d) | the place(s) where holders may surrender certificates, if any, evidencing the Series A Preferred Shares for payment; |
(e) | if applicable, that the Series A Preferred Shares are being redeemed pursuant to the Companys special optional redemption right in connection with the occurrence of a Delisting Event, Change of Control or $8 VWAP Event (each as defined hereafter), as applicable, and a brief description of the transaction or transactions or circumstances constituting such Delisting Event, Change of Control or $8 VWAP Event, as applicable; and |
(f) | that dividends on such Series A Preferred Shares will cease to accumulate on the date prior to the Redemption Date. |
(3) | If fewer than all of the outstanding Series A Preferred Shares are to be redeemed, the shares to be redeemed will be determined pro rata (as nearly as practicable without creating fractional shares) or by lot. So long as all Series A Preferred Shares are held of record by the nominee of DTC, the Company will give notice, or cause notice to be given, to DTC of the number of Series A Preferred Shares to be redeemed, and DTC will determine the number of Series A Preferred Shares to be redeemed from the account of each of its participants holding such shares in its participant account. Thereafter, each participant will select the number of shares to be redeemed from each beneficial owner for whom it acts (including the participant, to the extent it holds Series A Preferred Shares for its own account). A participant may determine to redeem Series A Preferred Shares from some beneficial owners (including the participant itself) without redeeming Series A Preferred Shares from the accounts of other beneficial owners. Subject to the provisions hereof, the board of directors (or a duly authorized committee of the board of directors) shall have full power and authority to prescribe the terms and conditions on which Series A Preferred Shares shall be redeemed from time to time. If the Company shall have issued certificates for the Series A Preferred Shares and fewer than all shares represented by any certificates are redeemed, new certificates shall be issued representing the unredeemed shares without charge to the holders thereof. |
(4) | On or after the Redemption Date, each holder of Series A Preferred Shares to be redeemed that holds a certificate other than through DTC book entry must present and surrender the certificates evidencing the Series A Preferred Shares at the place designated in the notice of redemption and shall be entitled to the redemption price and any accumulated and unpaid dividends payable upon the redemption following the surrender. |
(5) | From and after the Redemption Date or, if notice of redemption has been duly given, and if on or before the Redemption Date specified in the notice, all funds necessary for the redemption have been set aside by the Company, separate and apart from the Companys other funds, in trust for the pro rata benefit of the holders of the shares called for redemption, so as to be and continue to be available for that purpose, then, in each case unless the Company defaults in payment of the redemption price: (i) all dividends on the shares designated for redemption in the notice will cease to accumulate on or after the Redemption Date; (ii) all rights of the holders of the shares, except the right to receive the redemption price thereof (including all accumulated and unpaid dividends up to the date prior to the Redemption Date), will cease and terminate; and (iii) the shares designated for redemption in the notice will be deemed to not be outstanding for any purpose whatsoever. |
(6) | Any funds held in trust and unclaimed at the end of two years from the Redemption Date, to the extent permitted by law, shall be released from the trust so established and may be commingled with the Companys other funds, and after that time the holders of the shares so called for redemption shall look only to the Company for payment of the redemption price of such shares. |
(7) | Notwithstanding any other provision herein, any declared but unpaid dividends payable on a Redemption Date that occurs subsequent to the applicable record date for a dividend period shall not be paid to the holder entitled to receive the redemption price on the Redemption Date, but rather shall be paid to the holder of record of the redeemed shares on such record date relating to the applicable dividend payment date. |
27.3.8 | Special Optional Redemption. |
(1) | During any period of time (whether before or after the one-year anniversary of the Original Issue Date) that both (i) the Series A Preferred Shares are no longer (a) listed on The Nasdaq Stock Market LLC (Nasdaq), the New York Stock Exchange LLC (the NYSE), or the NYSE American LLC (the (NYSE AMER) or (b) listed or quoted on an exchange or quotation system that is a successor to Nasdaq, the NYSE or the NYSE AMER, and (ii) the Company is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), but any Series A Preferred Shares are still outstanding (collectively, a Delisting Event), the Company may, at its option, redeem the Series A Preferred Shares, in whole or in part and within ninety (90) days after the date of the Delisting Event, by paying $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the Redemption Date. |
(2) | During any period of time (whether before or after one-year anniversary of the Original Issue Date), upon the occurrence of a Change of Control (as defined hereafter), the Company may, at its option, redeem the Series A Preferred Shares, in whole or in part and within ninety(90) days after the first date on which such Change of Control occurred, by paying $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption. |
(3) | During any period of time (whether before or after one-year anniversary of the Original Issue Date) upon the occurrence of an $8 VWAP Event (as defined hereafter), the Company may at its option redeem the Series A Preferred Shares, in whole or in part and within ninety (90) days after the date of the Delisting Event, by paying $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the Redemption Date. |
(4) | As used in this Certificate, a Change of Control is when, after the Original Issue Date, the following have occurred and are continuing: |
(a) | any person or persons acting together which would constitute a group for purposes of Section 13(d) of the Exchange Act (other than the Company or any subsidiary of the Company) shall beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of the board of directors; |
(b) | Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members of the board of directors (for this purpose, a Current Director shall mean any member of the Board as of the date hereof and any successor of a Current Director whose election, or nomination for election by the Companys shareholders, was approved by at least a majority of the Current Directors then on the board of directors); |
(c) | (i) the complete liquidation of the Company or (ii) the merger or consolidation of the Company, other than a merger or consolidation in which (x) the holders of the common shares of the Company immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the common shares of the continuing or surviving corporation immediately after such consolidation or merger or (y) the board of directors immediately prior to the merger or consolidation would, immediately after the merger or consolidation, constitute a majority of the board of directors of the continuing or surviving corporation, which liquidation, merger or consolidation has been approved by the shareholders of the Company; or |
(d) | the sale or other disposition (in one transaction or a series of transactions) of all or substantially all of the assets of the Company pursuant to an agreement (or agreements) which has (have) been approved by the shareholders of the Company. |
(5) | As used in this Certificate, an $8 VWAP Event is when, after the Original Issue Date, the volume weighted average price of the Common Shares on the Nasdaq Capital Market for five consecutive trading days (as reported by Bloomberg L.P. based on a trading day from 9:30 a.m. to 4:02 p.m. (New York City time)) is at least $8.00. |
(6) | The redemption procedures set forth in Article 27.3.7 will apply to any redemption under this Article 27.3.8. |
27.3.9 | Conversion. |
(1) | The Series A Preferred Shares are convertible into Common Shares at a conversion ratio of (a) the $25.00 per share liquidation preference divided by (b) $4.00. Any declared but unpaid dividends shall be paid upon such a conversion to the holder of Series A Preferred Stock in cash. Notwithstanding the foregoing, the Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company or any other entity, except as provided for in this Article 27.3.9. |
(2) | The Company will not issue fractional Common Shares upon the conversion of Series A Preferred Shares. In the event that the conversion would result in the issuance of fractional shares of Common Shares, the Company will pay the holder of Series A Preferred Shares the cash value of such fractional shares in lieu of such fractional shares based on a value per full Common Share of $4.00. |
(3) | To exercise the conversion right, each holder of Series A Preferred Shares will be required to notify the Company of the number of Series A Preferred Shares to be converted and otherwise to comply with any applicable procedures required by the Transfer Agent or DTC for effecting the conversion. |
(4) | Series A Preferred Shares as to which the conversion right has been properly exercised will be converted into the applicable number of Common Shares (the Conversion Shares). The Company will take commercially reasonable efforts to deliver the applicable Conversion Shares no later than the third business day following receipt of the conversion notice from the holder of Series A Preferred Shares. |
27.3.10 | Voting Rights. |
(1) | Holders of Series A Preferred Shares shall not have any voting rights, except as set forth in this Article 27.3.10 or as otherwise required by law. |
(2) | In any matter in which the Series A Preferred Shares may vote (as expressly provided herein or as may be required by law), each Series A Preferred Share shall be entitled to one vote per $25.00 of liquidation preference; provided that if the Series A Preferred Shares and any other Shares ranking on parity to the Series A Preferred Shares as to dividend rights and rights as to the distribution of assets upon the Companys liquidation, dissolution or winding up are entitled to vote together as a single class on any matter, the holders of each will vote in proportion to their respective liquidation preferences. |
(3) | As used in this Article 27.3, voting preferred shares means any other class or series of the Companys preferred shares ranking equally with the Series A Preferred Shares as to dividends (whether cumulative or non-cumulative) and the distribution of the Companys assets upon liquidation, dissolution or winding up and upon which like voting rights to the Series A Preferred Shares have been conferred and are exercisable. |
(4) | So long as any Series A Preferred Shares remain outstanding, the Company will not, without the consent or the affirmative vote of the holders of at least two-thirds of the outstanding Series A Preferred Shares and each other class or series of preferred shares entitled to vote thereon (voting together as a single class), given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose: |
(a) | authorize, create or issue, or increase the number of authorized or issued number of shares of, any class or series of shares ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon the liquidation, dissolution or winding up of the Company or reclassify any authorized shares of the Company into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or |
(b) | amend, alter or repeal the provisions of these Articles or the Companys Notice of Articles, insofar as the Notice of Articles relates to the Companys authorized capital, including the terms of the Series A Preferred Shares, whether by merger, consolidation, transfer or conveyance of all or substantially all of the Companys assets or otherwise, so as to materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Shares, taken as a whole. |
(5) | If any event described in Article 27.3.10(4)(b) would materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred Shares, taken as a whole, disproportionately relative to any other class or series of voting preferred Shares, the affirmative vote of the holders of at least two-thirds of the outstanding Series A Preferred Shares, voting as a separate class, will also be required. Furthermore, if holders of Series A Preferred Shares receive the $25.00 per share of the Series A Preferred Shares liquidation preference plus all accrued and unpaid dividends thereon or greater amounts pursuant to the occurrence of any of the event described in 27.3.10(4)(b), then such holders shall not have any voting rights with respect to the event described in 27.3.10(4)(b). |
(6) | The following actions are not deemed to materially and adversely affect the rights, preferences, powers or privileges of the Series A Preferred Shares: |
(a) | any increase in the number of authorized Common Shares or preferred shares or the creation or issuance of shares or any class or series ranking, as to dividends (whether cumulative or not) or the distribution of assets upon the Companys liquidation, dissolution or winding up, on parity with, or junior to, the Series A Preferred Shares; or |
(b) | the amendment, alteration or repeal or change of any provision of the Articles or the Companys Notice of Articles, insofar as the Notice of Articles relates to the Companys authorized capital, as a result of a merger, consolidation, reorganization or other business combination, if (x) the Series A Preferred Shares remain outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, the Series A Preferred Shares are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and restrictions and limitations thereof, of the Series A Preferred Shares, taken as a whole, immediately prior to such consummation. |
(7) | Without the consent of the holders of Series A Preferred Shares, the Company may amend, alter, supplement or repeal any terms of the Series A Preferred Shares: |
(a) | to cure any ambiguity, or to cure, correct or supplement any provision contained in this Article 27.3 for the Series A Preferred Shares that may be defective or inconsistent, so long as such action does not materially and adversely affect the rights, preferences, privileges and voting powers of the Series A Preferred Shares, taken as a whole; |
(b) | to conform this Article 27.3 to the description of the Series A Preferred Shares set forth in the Companys final prospectus filed with the U.S. Securities and Exchange Commission related to the initial issuance of Series A Preferred Shares in connection with the Companys Registration Statement on Form F-1 (Registration No. 333-264859); or |
(c) | to make any provision with respect to matters or questions arising with respect to the Series A Preferred Shares that is not inconsistent with the provisions of this Article 27.3. |
(8) | The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required shall be effected, all outstanding Series A Preferred Shares have been redeemed or called for redemption on proper notice and sufficient funds have been set aside by the Company for the benefit of the holders of Series A Preferred Shares to effect the redemption within ninety (90) days unless all or a part of the outstanding Series A Preferred Shares are being redeemed with the proceeds from the sale of shares of, any class or series of shares ranking senior to the Series A Preferred Shares with respect to payment of dividends or the distribution of assets upon the Companys liquidation, dissolution or winding up. |
(9) | The rules and procedures for calling and conducting any meeting of the holders of Series A Preferred Shares (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules the board of directors (or a duly authorized committee of the board of directors), in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of these Articles, applicable law (including the Business Corporations Act) and any national securities exchange or other trading facility on which the Series A Preferred Shares may be listed or traded at the time. |
(10) | Holders of Series A Preferred Shares will not have any voting rights with respect to, and the consent of the holders of Series A Preferred Shares is not required for, the taking of any corporate action, including any merger or consolidation involving the Company or a sale of all or substantially all of the Companys assets, regardless of the effect that such merger, consolidation or sale may have upon the powers, preferences, voting power or other rights or privileges of the Series A Preferred Shares, except as set forth above. |
27.3.11 | Redemption Upon Request of Holder in Connection with Change of Control. |
(1) | Upon the occurrence of a Change of Control that is approved by the Board of Directors, each holder of Series A Preferred Shares may require the Company to redeem all or a portion of such holders Series A Preferred Shares at a per share redemption price of $25.00, plus declared and unpaid dividends to, but excluding, the effective date of the Change of Control). |
(2) | Upon not less than 30 nor more than 60 days following the occurrence of a Change of Control, the Company will provide to holders of Series A Preferred Shares a written notice (in a manner prescribed by this Article 27.3) of occurrence of the Change of Control that describes the procedure for delivering a redemption request pursuant to this Article 27.3.11 (a Change of Control Redemption Request). Holders will be required to tender such Series A Preferred Shares in connection with the delivery of a Change of Control Redemption Request and will receive payment for the redemption of such Series A Preferred Shares no later than the third business day following the delivery of the Change of Control Redemption Request. |
(3) | In addition to the procedures set forth in this Article 27.3.11, the redemption procedures set forth in Article 27.3.7(4) and (7) will apply to any redemption under this Article 27.3.11. |
27.3.12 | No Preemptive Rights. |
Holders of Series A Preferred Shares do not have any preemptive rights.
27.3.13 | No Maturity, Sinking Fund or Mandatory Redemption. |
The Series A Preferred Shares have no maturity date and the Company is not required to redeem the Series A Preferred Shares at any time. Accordingly, the Series A Preferred Shares will remain outstanding indefinitely, unless the Company decides, at its option, to exercise its redemption right or, under circumstances where the holders of Series A Preferred Shares have a conversion right, such holders convert the Series A Preferred Shares into the Companys common Shares. The Series A Preferred Shares are not subject to any sinking fund.
27.3.14 | Exclusion of Other Rights. |
The Series A Preferred Shares do not have any voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth in this Article 27.3.
27.3.15 | Headings of Subdivisions. |
The headings of the various subdivisions of this Article 27.3 are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
27.3.16 | Severability of Provisions. |
If any preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Shares set forth in this Article 27.3 are invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of Series A Preferred Shares set forth in this Article 27.3 which can be given effect without the invalid, unlawful or unenforceable provision thereof shall, nevertheless, remain in full force and effect and no preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Shares herein set forth shall be deemed dependent upon any other provision thereof unless so expressed therein.
27.3.17 | Record Holders. |
To the fullest extent permitted by applicable law, the Company and the Transfer Agent may deem and treat the record holder of any share of the Series A Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.
27.3.18 | Notices. |
All notices or communications in respect of the Series A Preferred Shares will be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Article 27.3 or in these Articles or by applicable law.
27.3.19 | Certificates. |
The Company may at its option issue Series A Preferred Shares without certificates. If DTC or its nominee is the registered owner of the Series A Preferred Shares, the following provisions of this Article 27.3.19 shall apply. If and as long as DTC or its nominee is the registered owner of the Series A Preferred Shares, DTC or its nominee, as the case may be, shall be considered the sole owner and holder of all such Series A Preferred Shares of which DTC or its nominee is the registered owner for all purposes under the instruments governing the rights and obligations of holders of Series A Preferred Shares. If DTC discontinues providing its services as securities depositary with respect to the Series A Preferred Shares, or if DTC ceases to be registered as a clearing agency under applicable securities laws, in the event that a successor securities depositary is not obtained within ninety (90) days, the Company shall either print and deliver certificates for the Series A Preferred Shares or provide for the direct registration of the Series A Preferred Shares with the Transfer Agent. If the Company decides to discontinue the use of the system of book-entry-only transfers through DTC (or a successor securities depositary), the Company shall print certificates representing the Series A Preferred Shares and deliver such certificates to DTC or shall provide for the direct registration of the Series A Preferred Shares with the Transfer Agent. Except in the limited circumstances referred to above, owners of beneficial interests in the Series A Preferred Shares of which DTC or its nominee is the registered owner:
(a) | shall not be entitled to have such Series A Preferred Shares registered in their names; |
(b) | shall not receive or be entitled to receive physical delivery of securities certificates in exchange for beneficial interests in the Series A Preferred Shares; and |
(c) | shall not be considered to be owners or holders of Series A Preferred Shares for any purpose under the instruments governing the rights and obligations of holders of Series A Preferred Shares. |
27.3.20 | Restatement of Articles. |
On any restatement of these Articles, Article 27.3.1 through Article 27.3.19 of this Article 27.3 shall be included in the Articles under the heading 9.0% Series A Cumulative Perpetual Preferred Shares and this Article 27.3.20 may be omitted. If the board of directors so determines, the numbering of Article 27.3.1 through Article 27.3.19 may be changed for convenience of reference or for any other proper purpose.
Exhibit 4.2
COMMON SHARE PURCHASE WARRANT
MCLOUD TECHNOLOGIES CORP.
Warrant Shares: [●] |
Original Issuance Date: [●], 2022 |
THIS COMMON SHARE PURCHASE WARRANT (this Warrant) certifies that, for value received, CEDE & CO. or its assigns (the Holder) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the Original Issuance Date) and on or prior to 5:00 p.m. (New York City time) on November 29, 2026 (the Termination Date) but not thereafter, to subscribe for and purchase from mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), up to [●] Common Shares (as subject to adjustment hereunder, the Warrant Shares). The purchase price of one Common Share under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall initially be issued in certificated form, though, if eligible, may subsequently be maintained in the form of a security held in book-entry form and the Depository Trust Company or its nominee (DTC) may then be the sole registered holder of this Warrant, subject to the Holders right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agent Agreement.
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
Affiliate means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
Business Day means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided that banks shall not be deemed to be authorized or obligated to be closed due to a shelter in place, non-essential employee or similar closure of physical branch locations at the direction of any governmental authority if such banks electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.
Commission means the United States Securities and Exchange Commission.
Common Shares means the common shares of the Company, without par value, and any other class of securities into which such securities may hereafter be reclassified or changed.
Common Share Equivalents means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Person means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
Registration Statement means the Companys registration statement on Form F-1, as amended (File No. 333-264859).
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Trading Day means a day on which the Common Shares are traded on a Trading Market.
Trading Market means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
Transfer Agent means American Stock Transfer & Trust Company, LLC, the current transfer agent of the Company with a mailing address of 6201 15th Avenue, Brooklyn, New York 11219, a phone number of (800) 937-5449 and an email address of jbaker@astfinancial.com, and any successor transfer agent of the Company.
VWAP means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (d) in all other cases, the fair market value of one Common Share as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Warrant Agent Agreement means that certain warrant agent agreement to be entered into between the Company and the Warrant Agent if and when the Warrants are eligible to held in book-entry form by DTC.
Warrant Agent means the Transfer Agent and any successor warrant agent of the Company.
Warrants means this Warrant and other Common Share purchase warrants issued by the Company and delivered to the purchasers thereof pursuant to the Registration Statement or pursuant to any prospectus under the Registration Statement.
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Section 2. Exercise.
a) Exercise of Warrant. Subject to the provisions of Section 2(e) herein, exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Original Issuance Date and on or before close of business on the Termination Date by delivery to the Company or Warrant Agent (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the Notice of Exercise). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashiers check drawn on a United States bank. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company or the Warrant Agent until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company or Warrant Agent for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company or Warrant Agent shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
Notwithstanding the foregoing in this Section 2(a), a Holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable), subject to a Holders right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agent Agreement, in which case this sentence shall not apply.
b) Exercise Price. The exercise price per Common Share under this Warrant shall be $4.75, subject to adjustment hereunder (the Exercise Price).
c) Reserved.
d) Mechanics of Exercise.
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i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holders or its designees balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (DWAC) if the Company is then a participant in such system and there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder, and otherwise by physical delivery of a certificate, registered in the Companys share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earlier of: (i) two (2) Trading Days after the delivery to the Company or the Warrant Agent of the Notice of Exercise, and (ii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company or the Warrant Agent of the Notice of Exercise, all subject to receipt of any cash payments required by the Holder (such date, the Warrant Share Delivery Date). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Shares on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th)Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. Notwithstanding the forgoing, the Warrant Agent shall not, in any event, be subject to, or responsible for, liquidated damages as contemplated by this Section 2(d)(i). The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, Standard Settlement Period means the standard settlement period, expressed in a number of Trading Days, on the Companys primary Trading Market with respect to the Common Shares as in effect on the date of delivery of the Notice of Exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares
pursuant to
Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holders brokerage firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a Buy-In), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holders total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of Common Shares that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Common Shares with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holders right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Companys failure to timely deliver Common Shares upon exercise of the Warrant as required pursuant to the terms hereof. Notwithstanding the forgoing, the Warrant Agent shall not, in any event, be subject to, or responsible for, Buy-In penalties contemplated by this Section 2(d)(iv).
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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall round up to the nearest whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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e) Holders Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holders Affiliates, and any other Persons acting as a group together with the Holder or any of the Holders Affiliates (such Persons, Attribution Parties)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of Common Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Share Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holders determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Common Shares, a Holder may rely on the number of outstanding Common Shares as reflected in (A) the Companys most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding Common Shares was reported. The Beneficial Ownership Limitation shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares issuable upon exercise of this Warrant. The Holder may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on its Common Shares or any other equity or equity equivalent securities payable in Common Shares (which, for avoidance of doubt, shall not include any Common Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by reclassification of Common Shares any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Common Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time after the issuance of this Warrant the Company grants, issues or sells any Common Share Equivalents or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of Common Shares (the Purchase Rights), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holders right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to all of holders of Common Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a Distribution), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Common Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the participation in such Distribution (provided, however, to the extent that the Holders right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Common Shares as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Shares (not including any Common Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a Fundamental Transaction), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of Common Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the Alternate Consideration) receivable as a result of such Fundamental Transaction by a holder of the number of Common Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Common Share in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the Successor Entity) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the Common Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Common Shares pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the Company shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein. For the avoidance of doubt, if, at any time while this Warrant is outstanding, a Fundamental Transaction occurs, pursuant to the terms of this Section 3(d), the Holder shall not be entitled to receive more than one of (i) the consideration receivable as a result of such Fundamental Transaction by a holder of the number of Common Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction, or (ii) the assumption by the Successor Entity of all of the obligations of the Company under this Warrant and the option to receive a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant.
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e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company shall authorize the granting to all holders of the Common Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Shares, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Shares are converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice (unless such information is filed with the Commission, in which case a notice shall not be required) stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Shares of record shall be entitled to exchange their Common Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a report on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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Section 4. Transfer of Warrant.
a) Transferability. This Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant Agent may require a medallion guarantee (or other type of guarantee or notarization) to effectuate an assignment or transfer of this Warrant. In order to effectuate a transfer (in whole or in part) of this Warrant, the Holder shall surrender this Warrant to the Company or the Warrant Agent within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. If this Warrant is not held in global form through DTC (or any successor depository), this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Warrant Agent shall register this Warrant, upon records to be maintained by the Warrant Agent for that purpose (the Warrant Register), in the name of the record Holder hereof from time to time. The Company and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting the rights of a Holder to receive the cash payments contemplated pursuant to Sections 2(d)(i) and 2(d)(iv), in no event, including if the Company is for any reason unable to issue and deliver Warrant Shares upon exercise of this Warrant as required pursuant to the terms hereof, shall the Company be required to net cash settle an exercise of this Warrant or cash settle in any other form.
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b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. The Company agrees to secure a bond on behalf of the Holder in connection with the replacement of such Warrant Certificates, if requested by the Warrant Agent.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holders rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
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h) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at 550-510 Burrard Street, Vancouver, BC V6C 3A8, Attention: Chantal Schutz, Chief Financial Officer, E-mail: cschutz@mcloudcorp.com, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, e-mail address or address of such Holder appearing on the books of the Warrant Agent. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Notwithstanding any other provision of this Warrant, where this Warrant provides for notice of any event to the Holder, if this Warrant is held in global form by DTC (or any successor depositary), such notice shall be sufficiently given if given to DTC (or any successor depositary) pursuant to the procedures of DTC (or such successor depositary), subject to a Holders right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agent Agreement, in which case this sentence shall not apply. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a report on Form 6-K.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and either: (i) the Holder or the beneficial owner of this Warrant, on the other hand, or (ii) the vote or written consent of the Holders of at least 50.1% of the then outstanding Warrants, on the other hand, provided that adjustments may be made to the Warrant terms and rights of this Warrant in accordance with Section 3 of this Warrant without the consent of any Holder or beneficial owner of the Warrants.
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m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
o) Warrant Agent Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject to the Warrant Agent Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agent Agreement, the provisions of this Warrant shall govern and be controlling.
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(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
MCLOUD TECHNOLOGIES CORP. | ||
By: |
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Name: | ||
Title: |
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NOTICE OF EXERCISE
TO: | MCLOUD TECHNOLOGIES CORP. |
(1) The undersigned hereby elects to purchase Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of lawful money of the United States.
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
[SIGNATURE OF HOLDER]
Name of Investing Entity: |
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Signature of Authorized Signatory of Investing Entity: |
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Name of Authorized Signatory: |
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Title of Authorized Signatory: |
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Date: |
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ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | ||
(Please Print) | ||
Address: | ||
(Please Print) | ||
Phone Number: |
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Email Address: |
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Dated: , | ||
Holders Signature: | ||
Holders Address: | ||
[Signature Guarantee] |
Signatures must be guaranteed by an eligible guarantor institution meeting the requirements of the Warrant Agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program (STAMP) or such other signature guarantee program as may be determined by the Warrant Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
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Exhibit 5.1
Our File No.: 4609.103
July 15, 2022
MCLOUD TECHNOLOGIES CORP.
550-510 Burrard Street
Vancouver, British Columbia Canada, V6C 3A8
Ladies and Gentlemen:
Re: MCLOUD TECHNOLOGIES CORP. - Registration Statement on Form F-1
We have acted as British Columbia counsel to mCloud Technologies Corp. (the Company), a British Columbia company, in connection with the registration (including in connection with an over-allotment option granted to the representative of the underwriters) by the Company of (i) $28,750,000 9.0% Series A Cumulative Perpetual Preferred Shares (the Preferred Shares) and accompanying (ii) warrants to purchase common shares (the Warrants), with each Preferred Share to be sold with 6.25 accompanying Warrants, in connection with an underwritten public offering of the Company (the Offering).
In connection with this opinion, we have reviewed and relied upon originals, photocopies or copies, certified or otherwise identified to our satisfaction, of the Registration Statement on Form F-1 (Registration Statement No. 333-264859) (the Registration Statement) filed by the Company with the Securities and Exchange Commission and as to which this opinion is filed as an exhibit, the exhibits to the Registration Statement including the form of Underwriting Agreement between the Company and Maxim Group LLC., as representative of the underwriters listed therein, the Companys Notice of Articles, the Companys Articles, records of the Companys corporate proceedings in connection with the Offering, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. With respect to the foregoing documents, we have assumed, without independent investigation: (i) the authenticity of all records, documents, and instruments submitted to us as originals; (ii) the genuineness of all signatures on all agreements, instruments and other documents submitted to us; (iii) the legal capacity and authority of all persons or entities (other than the Company) executing all agreements, instruments or other documents submitted to us; (iv) the authenticity and the conformity to the originals of all records, documents, and instruments submitted to us as copies; (v) that the statements contained in the certificates and comparable documents of public officials, officers and representatives of the Company and other persons on which we have relied for purposes of this opinion are true and correct; (vi) that the Registration Statement has been declared effective pursuant to the Securities Act of 1933, as amended (the Securities Act); and (vii) That the resolutions of the Companys directors approving the Offering and the creation of the Preferred Shares, both dated July 15, 2022, are true and complete copies of the proceedings of the Board related to the approval of the Offering and the creation of the Preferred Shares and that the resolutions have not been altered, amended or rescinded as at the date of this opinion. We have also obtained from officers of the Company certificates as to certain factual matters and, insofar as this opinion is based on matters of fact, we have relied on such certificates without independent investigation. With respect to the Underwriting Agreement and the Warrants, all of which are governed by and construed in accordance with the laws of the State of New York, we have assumed that these agreements comply with and do not violate the laws of the State of New York.
Our opinion is limited to laws of the Province of British Columbia. We have not considered, and have not expressed any opinion with regard to, or as to the effect of, any other law, rule, or regulation, state or federal, applicable to the Company. In particular, we express no opinion as to United States federal securities laws.
Based upon and subject to the foregoing, we are of the opinion that (i) upon payment to the Company of the consideration in such amount and form as shall be determined by its Board of Directors (the Board) or by an authorized committee thereof, the Preferred Shares, when issued and sold in the Offering as described in the Registration Statement, will be duly and validly issued, fully paid and non-assessable; (ii) the common shares underlying the Preferred Shares, when issued and sold by the Company and delivered by the Company in accordance with and in the manner described in the Registration Statement and the Rights and Restrictions for 9.0% Cumulative Series A Preferred Shares , will be validly issued, fully paid and non-assessable, and (iii) the common shares underlying the Warrants, when issued and sold by the Company and delivered by the Company against receipt of the exercise price therefor as shall be determined by the Board or an authorized committee thereof, in accordance with and in the manner described in the Registration Statement and the Warrants, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Companys Registration Statement and to the use of our name wherever it appears in the Registration Statement. In giving such consent, we do not believe that we are experts within the meaning of such term as used in the Securities Act, or the rules and regulations of the Securities and Exchange Commission issued thereunder with respect to any part of the Registration Statement, including this opinion as an exhibit or otherwise.
We further consent to the incorporation by reference of this letter and consent into any registration statement filed pursuant to Rule 462(b) under the Securities Act with respect to the Securities.
Very truly yours, |
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/s/ Morton Law LLP | ||||
Morton Law LLP |
Exhibit 5.2
July 15, 2022
mCloud Technologies Corp.
550-510 Burrard Street
Vancouver, British Columbia
Canada, V6C 3A8
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration Statement on Form F-1 (Registration No. 333-264859) (as amended to date, the Registration Statement) filed by mCloud Technologies Corp., a British Columbia company (the Company), with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Securities Act), relating to the registration in connection with a proposed public offering (including in connection with an over-allotment option granted to the representative of the underwriters) of up to $28,750,000 9.0% Series A Cumulative Perpetual Preferred Shares, no par value per share, with a $25.00 liquidation preference per share (the Series A Preferred Shares) and accompanying 6.25 warrants to purchase one common share, no par value per share (the Warrants and, together with the Series A Preferred Shares, and the common shares underlying the Warrants, the Securities). Each Series A Preferred Share will be issued together with 6.25 Warrant. The Company has engaged Maxim Group LLC, to act as the representative of the underwriters in connection with the proposed public offering of the Company.
We are acting as U.S. securities counsel for the Company in connection with the Registration Statement. In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates and statements of public officials, certificates of officers or representatives of the Company, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of all originals of such latter documents. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others, including those set forth in the Form of Underwriting Agreement, copy of which has been filed as Exhibit 1.1 to the Registration Statement (the Underwriting Agreement).
We are admitted to the Bar in the State of New York. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York.
You are separately receiving an opinion from Morton Law LLP with respect to the corporate proceedings relating to the issuance of the Securities.
Based upon the foregoing and subject to the assumptions and qualifications set forth herein, we are of the opinion that the Warrants, when issued and sold by the Company and delivered by the Company in accordance with and in the manner described in the Registration Statement and Underwriting Agreement, when executed and delivered by the Company, will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium and similar laws affecting creditors rights generally and equitable principles of general applicability and comply with and do not violate the laws of the State of New York.
We express no opinion as to the enforceability of any rights to indemnification or contribution provided for in the Underwriting Agreement that are violative of the public policy underlying any law, rule or regulation.
We consent to the filing of this opinion as an exhibit to the Registration Statement and we further consent to the use of our name under the caption Legal Matters in the Registration Statement and the prospectus that forms a part thereof. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. This opinion letter is given as of the date hereof and we do not undertake any liability or responsibility to inform you of any change in circumstances occurring, or additional information becoming available to us, after the date hereof which might alter the opinions contained herein.
Very truly yours, |
/s/ Sichenzia Ross Ference LLP |
Sichenzia Ross Ference LLP |
Exhibit 10.15
TRANSFER AGENCY AND REGISTRAR SERVICES AGREEMENT
THIS TRANSFER AGENCY AND REGISTRAR SERVICES AGREEMENT (this Agreement), dated as of July 15, 2022 (the Effective Date), is entered into by and between mCloud Technologies Corp., a British Columbia corporation (the Company), and AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, a New York limited liability trust company (AST; together with the Company, the Parties; each, the Party).
1. Appointment of AST as Transfer Agent and Registrar.
(a) The Company hereby appoints AST, and AST hereby accepts such appointment, to act as sole transfer agent and registrar (the Transfer Agent) for the common stock of the Company and for any other securities of the Company as requested in writing by the Company from time to time (the Shares). AST shall perform only those duties and obligations that are specifically set forth in this Agreement, and no implied duties and obligations shall be read into this Agreement against AST.
(b) On or immediately after the Effective Date, the Company shall deliver to AST the following: (i) forms of outstanding stock certificates of the Company (the Stock Certificates) approved and authorized by the board of directors of the Company (the Board) and certified by the corporate secretary or similar authorized officers of the Company; (ii) incumbency certificates of the officers of the Company who are authorized to (x) execute Stock Certificates and/or (y) deliver written instructions and requests on behalf of the Company to AST; (iii) copies of the organizational documents of the Company, certified by the corporate secretary or similar authorized officers of the Company; (iv) a sufficient supply of blank Stock Certificates executed by (or bearing the facsimile signature of) the officers of the Company who are authorized to execute Stock Certificates and, if required, bearing the Companys corporate seal; (v) a schedule that lists the class of the Shares, the par value of the Shares, and the number of authorized Shares; and (vi) all documentation or information reasonably requested by AST that is required by bank regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including without limitation the United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended. The Company authorizes AST to use Stock Certificates bearing the signature of an authorized officer of the Company who at the time of use is no longer an officer.
(c) The Company shall promptly advise AST in writing of any change in the capital structure of the Company, and the Company shall promptly provide AST with resolutions of the Board authorizing any recapitalization of the Shares or change in the number of issued or authorized Shares. Further, the Company shall advise AST reasonably promptly of any amendment or supplement to any information or materials provided by the Company to AST and shall provide such amendment or supplement to AST as soon as practicable.
(d) The Company hereby authorizes AST to establish a program (the DRS Sale Program) through which a holder of one or more Shares (each, a Shareholder) may elect to sell any Shares held in book-entry form through the Direct Registration System. The Company shall not be charged by AST for establishing or administering the DRS Sale Program, and AST shall be entitled to charge a transaction fee as set forth on Schedule 2 to any Shareholder that elects to sell Shares through the DRS Sale Program. The Company hereby appoints AST, and AST hereby accepts such appointment, to act as the administrator of the DRS Sale Program.
2. Term. The initial term of this Agreement shall be five (5) years from the date hereof, and this Agreement shall automatically renew for additional five-year successive terms (each, a Term) without further action of the Parties, unless written notice is provided by either Party at least ninety (90) days prior to the end of the initial or any subsequent five-year period. The Term shall be governed by this Section, notwithstanding the cessation of active trading of the Shares.
3. Fees; Expenses.
(a) As consideration for the services listed on Schedule 1 (the Services), the Company shall pay to AST the fees set forth on Schedule 2 (the Fees). If the Company requests that AST provide additional services not contemplated hereby, the Company shall pay to AST fees for such services at ASTs reasonable and customary rates, such fees to be governed by the terms of a separate agreement to be mutually agreed to and entered into by the Parties at such time (the Additional Service Fee; together with the Fees, the Service Fees).
(b) The Company shall reimburse AST for all reasonable and documented expenses incurred by AST (including, without limitation, reasonable and documented fees and disbursements of counsel) in connection with the Services (the Expenses); provided, however, that AST reserves the right to request advance payment for any out-of-pocket expenses. The Company agrees to pay all Service Fees and Expenses within thirty (30) days following receipt of an invoice from AST.
(c) The Company agrees and acknowledges that AST may adjust the Service Fees annually, on or about each anniversary date of this Agreement, by the annual percentage of change in the latest Consumer Price Index of All Urban Consumers United States City Average, as published by the U.S. Department of Labor, Bureau of Labor Statistics, plus three percent (3%).
(d) Upon termination of this Agreement for any reason, AST shall assist the Company with the transfer of records of the Company held by AST. AST shall be entitled to reasonable additional compensation and reimbursement of any Expenses for the preparation and delivery of such records to the successor agent or to the Company, and for maintaining records and/or Stock Certificates that are received after the termination of this Agreement (the Record Transfer Services).
4. Representations and Warranties.
(a) The Company represents and warrants to AST that (i) it is duly organized and validly existing and in good standing under the laws of the state of its organization; (ii) it has all requisite power and authority to enter into this Agreement and to perform the transactions contemplated hereby; (iii) the execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company; and (iv) this Agreement has been duly executed and delivered and is the legally valid and binding obligation of the Company, enforceable against the Company in accordance with the Agreements terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors rights generally or by equitable principles (whether enforcement is sought by proceeding in equity or at law).
(b) All Shares issued and outstanding as of the date hereof, or to be issued during the Term, are or shall be duly authorized, validly issued, fully paid and non-assessable. All such Shares are or shall be duly registered under the Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934, as amended (the Exchange Act).
(c) Any Shares that are not registered under the Securities Act and the Exchange Act are or shall be issued or transferred in a transaction that is, or a series of transactions that are, exempt from the registration provisions under the Securities Act and the Exchange Act, and such Shares bear or shall bear the applicable restrictive legends. Upon any issuance or transfer of such Shares, the Company shall deliver to AST a legal opinion in form and substance reasonably satisfactory to AST.
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5. Reliance.
(a) AST shall be entitled to assume the validity of the issuance, presentation or transfer of a Stock Certificate, the genuineness of any endorsement(s), the authority of its presenter(s), or the collection or payment of charges or taxes incident to the issuance or transfer of such Stock Certificate; provided, however, that AST may delay or decline to issue or transfer a Stock Certificate if it determines in good faith and in its sole discretion that it is in the Companys and/or ASTs best interests to receive evidence or written assurance of the validity of the issuance, presentation or transfer of the Stock Certificate, the authority of its presenter(s) or the collection or payment of any charges or taxes relating to the issuance or transfer.
(b) For the avoidance of doubt, AST shall not be responsible for any transfer or issuance of Shares that has not been effected by AST.
(c) AST may rely on, and shall be protected and incur no liability in acting or refraining from acting in reliance upon: (i) any writing or other instruction, including, but not limited to, oral instruction, certificate, instrument, opinion, notice, letter, stock power, affidavit or other document or security, received from any Person (as defined below) it believes in good faith to be an authorized officer, agent or employee of the Company, unless the Company has advised AST in writing that AST must act and rely only on written instructions of certain authorized officers of the Company; (ii) any statement of fact contained in any such writing or instruction which AST in good faith believes to be accurate; (iii) other authenticity and genuineness of any signature (manual, facsimile or electronic) appearing on any writing, including, but not limited to, any certificate, instrument, opinion, notice, letter, stock power, affidavit or other document or security; and (iv) the conformity to original of any copy. AST may act and rely on the advice, opinions or instructions received from the Companys legal counsel. In the event that the Company or its legal counsel is unavailable or does not respond to ASTs requests for legal advice, AST may seek the advice of ASTs own legal counsel (including its internal legal counsel), and AST shall be entitled to act and rely on the advice, opinion or instruction of such counsel, which shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by AST pursuant to such advice, opinion or instruction. Without limiting the foregoing, AST shall be entitled to use and rely upon any instructions of the Company without responsibility for independent verification thereof and shall not assume responsibility for the accuracy or completeness of such instructions.
(d) AST may rely on, and shall be protected and incur no liability in acting or refraining from acting in reliance upon: (i) any writing or other instruction believed by AST in good faith to have been furnished by or on behalf of a Shareholder, including, but not limited to, any oral instruction, certificate, instrument, opinion, notice, letter, stock power, affidavit or other document or security; (ii) any statement of fact contained in any such writing or instruction which AST in good faith believes to be accurate; (iii) the apparent authority of any Person to act on behalf of a Shareholder as having actual authority to the extent of such apparent authority; (iv) the authenticity and genuineness of any signature (manual, facsimile or electronic) appearing on any writing, including, but not limited to, any certificate, instrument, opinion, notice, letter, stock power, affidavit or other document or security; and (v) on the conformity to original of any copy. AST is authorized to reject any transfer request that fails to satisfy ASTs internal procedures relating to the transfer of Shares. Without limiting the foregoing, AST shall be entitled to use and rely upon any instructions of a Shareholder or its representatives without responsibility for independent verification thereof and shall not assume responsibility for the accuracy or completeness of such instructions.
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(e) AST may rely on, and shall be protected and incur no liability in acting or refraining from acting in reliance upon: (i) any information, records, documents and communication provided to AST by any former transfer agent or former registrar of the Company; (ii) any guaranty of signature by an eligible guarantor institution that is a member or participant in the Securities Transfer Agents Medallion Program or other comparable signature guarantee program or insurance program; or (iii) any instructions received through the Depository Trust Companys Direct Registration System/Profile service.
(f) AST shall promptly notify the Company upon receipt of a Stock Certificate that is not reflected in ASTs records. If the Company and AST are unable to account for such Stock Certificate, within sixty (60) days of such determination, the Company shall in its sole discretion (a) increase the number of issued Shares or (b) acquire and cancel a number of Shares to account for such Stock Certificate.
6. Lost, Stolen or Destroyed Certificates. AST shall not be obligated to issue a replacement certificate for any Stock Certificate reported to have been lost, stolen or destroyed, unless AST shall have received from the applicable Shareholder: (a) an affidavit of loss; (b) an indemnity bond in form and substance reasonably satisfactory to AST; and (c) payment of all applicable processing fees; provided that, upon the Companys written request, AST may, in its sole discretion, accept an indemnification letter from the Company in lieu of an indemnity bond.
7. Unclaimed Property.
(a) To the extent required by applicable unclaimed property laws or if requested by the Company, AST will provide, or cause to be provided, unclaimed property reporting services for unclaimed property that may be deemed abandoned or otherwise subject to unclaimed property law. Such services may include (without limitation) (i) identification of unclaimed or abandoned property, (ii) preparation of unclaimed or abandoned property reports, (iii) delivery of unclaimed or abandoned property to the applicable state unclaimed property departments, (iv) completion of required due diligence notifications, (v) responses to inquiries from Shareholders relating to unclaimed or abandoned property, and (vi) such other services as may reasonably be necessary to comply with unclaimed property laws or regulations. The Company shall assist and cooperate with AST as reasonably necessary in connection with the performance of the services described in this Section. AST shall assist the Company in responding to (x) inquiries from state unclaimed property departments regarding reports filed by or on behalf of the Company or (y) requests for the confirmation of names of owners of unclaimed or abandoned property.
(b) The Company acknowledges and agrees that AST may use a shareholder locating service provider (the Locating Service Provider) to locate and contact Shareholders (or their surviving relatives, joint tenants or heirs, as applicable) to assist them in preventing the escheatment of applicable Shares and related unclaimed or abandoned property. The Company shall not be charged by AST or the Locating Service Provider for such services. The Locating Service Provider shall inform the Shareholders that they may elect (x) to contact AST at no charge other than at ASTs applicable fees or (y) to utilize the services of the Locating Service Provider for a fee, which shall not exceed the maximum fee allowed under the applicable states unclaimed property rules.
8. Confidentiality.
(a) Confidential Information means, as to the Disclosing Party (as defined below) and, if applicable, its Affiliates: (i) information concerning the business of the Disclosing Party and, if applicable, its Affiliates (including, without limitation, business, financial, technical, and other information marked or designated by such Party as confidential or proprietary, historical financial statements, financial projections and budgets, audits, tax returns and accountants materials, historical, current and projected sales, capital spending budgets and plans, business plans, strategic plans, marketing and advertising plans, publications, and customer agreements); (ii) information that, by the nature of the circumstances surrounding the disclosure, ought in good faith to be treated as confidential; (iii) information, including account information, relating to the shareholders of the Disclosing Party; and (iv) all notes, analyses, compilations, studies, summaries and other material prepared by the Receiving Party (as defined below), its Affiliates, employees, agents, and representatives containing or based, in whole or in part, on any or all of the foregoing; provided that Confidential Information shall not include any information that (x) is or becomes (through no improper action or inaction of the Receiving Party) generally available to the public; (y) was rightfully disclosed to the Receiving Party by a third party without a breach of any confidentiality obligations hereunder; or (z) was independently developed by the Receiving Party without reference to or use of any Confidential Information.
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(b) Affiliates means, as to a specified Person, another Person that directly, or indirectly, controls or is controlled or is under common control with the specified Person; Person means any corporation, limited liability company, partnership or other legal entity; and control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and controlled shall have corresponding meanings.
(c) Each Party (the Receiving Party) acknowledges that it may acquire or have access to Confidential Information of the other Party (the Disclosing Party) in connection with the Services or this Agreement. The Receiving Party shall not disclose Confidential Information to any other Person, and shall not use Confidential Information for any purposes other than in connection with the performance of its obligations under this Agreement; provided that the Receiving Party shall be permitted to disclose Confidential Information (i) pursuant to the order of any court or administrative agency or in any pending legal, judicial or administrative proceeding, or otherwise as required by applicable law or compulsory legal process based on the advice of counsel (in which case the Receiving Party agrees, to the extent practicable and not prohibited by applicable law, to inform the Disclosing Party promptly thereof prior to disclosure; provided, however, that this clause shall not require AST to notify the Company of its receipt of any subpoena, summons, or other legal process relating to wage garnishment, tax levy or domestic matter proceedings filed against or by a Shareholder); or (ii) upon the request or demand of any regulatory authority having jurisdiction over the Receiving Party (in which case the Receiving Party agrees, to the extent practicable and not prohibited by applicable law, to inform the Disclosing Party promptly thereof prior to disclosure). The Receiving Party shall safeguard the Confidential Information to the same extent that it safeguards its own confidential information of a like nature and in any event with not less than a reasonable degree of care.
(d) Upon the termination of this Agreement or upon the Disclosing Partys written request, the Receiving Party shall, at the Disclosing Partys option, either destroy or return to the Disclosing Party any and all of the Confidential Information, written or other materials derived from the Confidential Information, and copies thereof, and shall delete and purge permanently all copies and traces of the same from any storage location and/or media to the extent reasonably or technically possible. The Receiving Party shall, within fifteen (15) days from the termination of this Agreement or such request, provide the Disclosing Party with a certificate signed by an authorized officer of the Receiving Party confirming that the Receiving Party has fulfilled its obligations under this clause. Notwithstanding the foregoing, upon notice to the Disclosing Party, the Receiving Party may keep a copy of the Confidential Information after termination of this Agreement to the extent necessary for audit and/or regulatory purposes or to the extent required under applicable law.
9. Termination.
(a) Either Party may terminate this Agreement if the other Party breaches any material provision herein and either the breach cannot be cured or, if the breach can be cured, it is not cured by the breaching Party within 45 days after the breaching Partys receipt of written notice of such breach (the Cure Period). If the Company is the breaching Party, then, during the Cure Period, upon written notice to the Company, AST may suspend the Services without terminating the Agreement. During the period of suspension of Services, AST shall have no obligation to act as Transfer Agent, it being understood that such suspension shall not affect ASTs rights and remedies hereunder.
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(b) Either Party may terminate this Agreement, effective upon written notice to the other Party, if the other Party (i) becomes insolvent or admits its inability to pay its debts generally as they become due; (ii) becomes subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency law, which is not fully stayed within seven (7) business days or is not dismissed or vacated within forty-five (45) business days after filing; (iii) is dissolved or liquidated or takes any corporate action for such purpose; (iv) makes a general assignment for the benefit of creditors; or (v) has a receiver, trustee, custodian or similar agent appointed by order of any court of competent jurisdiction to take charge of or sell any material portion of its property or business.
(c) The expiration or termination of this Agreement, for any reason, shall not release either Party from any obligation or liability to the other Party, including any payment and delivery obligation, that (i) has already accrued hereunder; (ii) comes into effect due to the expiration or termination of the Agreement; or (iii) otherwise survives the expiration or termination of this Agreement. Following the termination of this Agreement, AST shall promptly invoice the Company for any outstanding Service Fees and Expenses due and owing under this Agreement, and the Company shall pay all such Service Fees and Expenses to AST in accordance with the payment terms set forth in this Agreement.
(d) If the Company terminates this Agreement pursuant to Sections 2 or 9(a), then the Company shall pay to AST (i) all amounts outstanding under this Agreement as of the date of such termination and (ii) ASTs then-customary fees for Record Transfer Services. If the Company terminates this Agreement for any reason other than pursuant to Sections 2 or 9(a), then the Company shall pay to AST (x) all outstanding Service Fees and Expenses as of the date of such termination, (y) the Service Fees that would otherwise have accrued during the remainder of the then-current Term, and (z) ASTs then-customary fees for Record Transfer Services.
10. Limitations on Liability.
(a) To the fullest extent permitted by applicable law, no Party shall be liable to any other Party on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings).
(b) ASTs liability arising out of or in connection with the Services shall not exceed the aggregate amount of all Service Fees paid under this Agreement during the twelve-month period immediately prior to the date of occurrence of the circumstances giving rise to such liability.
11. Indemnity.
(a) The Company hereby agrees to indemnify and hold harmless AST and its Affiliates and its and their officers, directors, employees, advisors, agents, other representatives and controlling persons (each, an Indemnified Person) from and against any and all losses, claims, damages, liabilities and expenses, joint or several, to which any such Indemnified Person may become subject arising out of or in connection with this Agreement and the Services or any claim, litigation, investigation or proceeding relating to any of the foregoing (each, a Proceeding), regardless of whether any such Indemnified Person is a party thereto or whether a Proceeding is brought by a third party or by the Company or any of its Affiliates, and to reimburse each such Indemnified Person upon demand for any reasonable, documented legal or other out-of-pocket expenses incurred in connection with investigating or defending any of the foregoing by one counsel to the Indemnified Persons taken as a whole and, in the case of a conflict of interest, one additional counsel to the affected Indemnified Persons taken as a whole; provided that the foregoing indemnity shall not, as to any Indemnified Person, apply to losses, claims, damages, liabilities or related expenses to the extent they have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision).
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(b) AST agrees to notify the Company promptly of the assertion of any Proceeding against any Indemnified Person; and the Company agrees to notify AST promptly of the assertion of any Proceeding against the Company, or any of its officers, directors, employees, advisors, agents, other representatives and controlling persons in connection with the Services, in which event AST agrees to assume sole responsibility of promptly notifying any of the relevant Indemnified Persons of any such assertion. At the Companys election, unless there is a conflict of interest, the defense of the Indemnified Persons shall be conducted by the Companys counsel. Notwithstanding the foregoing, AST may employ separate counsel to represent it or defend AST or an Indemnified Person in such Proceeding, and the Company will pay any reasonable, documented legal or other out-of-pocket expenses of counsel if AST or such Indemnified Person reasonably determines, based on the advice of its legal counsel, that there are defenses available to AST or such Indemnified Person that are different from, or in addition to, those available to the Company, or if an actual or potential conflict of interest between AST or the Indemnified Person and the Company makes representation by the Companys counsel not advisable; provided that, unless there is an actual or potential conflict of interest, the Company will not be required to pay the fees and expenses of more than one separate counsel for all Indemnified Persons in any jurisdiction in any single Proceeding. In any Proceeding the defense of which the Company assumes, the Indemnified Persons shall be entitled to participate in such Proceeding and retain its own counsel at such Indemnified Persons own expense.
(c) The Company shall not be liable for any settlement of any Proceedings effected without its consent (which consent shall not be unreasonably withheld, conditioned or delayed), but if settled with the Companys written consent or if there is a final judgment for the plaintiff in any such Proceedings, the Company agrees to indemnify and hold harmless each Indemnified Person from and against any and all losses, claims, damages, liabilities and expenses by reason of such settlement or judgment in accordance with clause (a) above. The Company shall not, without the prior written consent of an Indemnified Person (which consent shall not be unreasonably withheld, conditioned or delayed), effect any settlement or consent to the entry of any judgment of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by such Indemnified Person, unless (i) such settlement includes an unconditional release of such Indemnified Person in form and substance satisfactory to such Indemnified Person from all liability on claims that are the subject matter of such Proceedings and (ii) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.
12. Force Majeure. AST shall not be liable for failure or delay in the performance of the Services if such failure or delay is due to causes beyond its reasonable control, including but not limited to Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), pandemic, epidemic, state of emergency, war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service or any other force majeure event.
13. Notices. Any notice, report or payment required or permitted to be given or made under this Agreement by one Party to the other shall be in writing and addressed to the other Party at the following address (or at such other address as shall be given in writing by one Party to the other):
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If to the Company:
mCloud Technologies Corp.
550-510 Burrard Street
Vancouver, British Columbia
Canada, V6C 3A8
Attention: Finance
Email: Chantal.schutz@mcloudcorp.com
With a copy to:
mCloud mCloud Technologies (USA) Inc
580 California Street, 12th Floor
San Francisco, CA 94101
Attention: Legal Department
Email: legal@mcloudcorp.com
If to AST:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: Relationship Management
With a copy to:
American Stock Transfer & Trust Company, LLC
48 Wall Street, 22nd Floor
New York, New York 10005
Attention: Legal Department
Email: legalteamAST@astfinancial.com
14. Miscellaneous.
(a) The Company acknowledges and agrees that (i) nothing herein shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment or fiduciary relationship between the Parties, and (ii) the Company waives, to the fullest extent permitted by law, any claims that it may have against AST for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that AST shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim.
(b) This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without reference to its conflicts of law rules. It is agreed that any action, suit or proceeding arising out of or based upon this Agreement shall be brought in the United States District Court for the Southern District of New York or any court of the State of New York of competent jurisdiction located in such District. Service of any process by registered mail addressed to each party at the respective address above shall be effective service of process against such party for any suit, action or proceeding brought in any such court. Each Party (i) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Services in any New York State court or in any such Federal court; (ii) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court; and (iii) agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. EACH PARTY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF ANY SERVICE HEREUNDER.
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(c) The compensation, reimbursement, confidentiality, indemnification, jurisdiction, governing law, and waiver of jury trial provisions contained herein shall remain in full force and effect regardless of the termination of this Agreement. No amendment or waiver of any provision hereof shall be effective unless in writing and signed by the Parties and then only in the specific instance and for the specific purpose for which given. This Agreement is the only agreement between the Parties with respect to the matters contemplated hereby and sets forth the entire understanding of the Parties with respect thereto. This Agreement and the obligations hereunder of each Party shall not be assignable by such Party without the prior written consent of the other Party (such consent not to be unreasonably withheld, delayed or conditioned); provided that AST may assign this Agreement or any rights granted hereunder, in whole or in part, to (i) its Affiliates in connection with a reorganization or (ii) a Person that acquires all or substantially all of the business or assets of AST whether by merger, acquisition, or otherwise.
(d) This Agreement may be executed in any number of counterparts and by different Parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or in .pdf or .tif form shall be effective as delivery of a manually executed counterpart of this Agreement. If any provision of this Agreement shall be held illegal or invalid by any court, this Agreement shall be construed and enforced as if such provision had not been contained herein and shall be deemed an agreement between the Parties to the fullest extent permitted by law.
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Schedule 1
Services
Capitalized terms used herein and not defined have the meaning ascribed to such terms in the Agreement. Unless otherwise noted, AST will provide the following services:
ACCOUNT MAINTENANCE AND RECORDKEEPING
| Open new accounts, consolidate and close Shareholder accounts |
| Annual record storage services (subject to additional fee) |
| Maintain all Shareholder accounts |
| Process address changes, including seasonal addresses |
| Place, maintain and remove stop transfers |
| Post all debit and credit certificate transactions |
| Perform social security solicitation |
| Handle shareholder and broker inquiries, including internet correspondence |
| Respond to requests for audit confirmations |
| Monthly report for all classes of securities in Microsoft Word and HTML formats (Excel format is subject to an additional fee) |
STOCK AUDIT / CONTROL BOOK FUNCTIONS
| Maintain accurate records of outstanding Shares |
| Respond to requests for audit confirmations |
| Provide web access to the total outstanding Share balances |
CERTIFICATE AND SECURITY ISSUANCE FUNCTIONS
| Process all routine transfers |
| Post all debit and credit certificate transactions |
| Issue Stock Certificates |
| Create book entry Direct Registration System (DRS) positions |
| Participate in the DRS profile system, allowing broker sweeps of registered positions |
| Interface electronically with DTC/CEDE & CO. |
| Mail newly-issued certificates/DRS advices to Shareholders |
| Replace lost or stolen Stock Certificates upon Shareholder request |
| Issue and register all Stock Certificates |
| Issue shares upon exercise of stock options. |
| Process legal transfers and transactions requiring special handling |
| Provide, upon request, access to daily reports of processed transfers |
REPORTING
| Furnish, upon request, unlimited Shareholder list, sorted by Company-designated criteria |
LISTS AND MAILINGS
| Enclose multiple proxy cards to same household in one envelope, if applicable (subject to additional fee) |
| Monitor and suppress undeliverable mail until correct address is located |
| Furnish shareholder lists, in any sequence |
| Provide geographical detail reports of all stocks issued/surrendered over a specific period |
| Provide mailing labels |
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WEB-BASED ORIGINAL ISSUANCE (OI) / DWAC SYSTEM1
| Facilitate Deposit/Withdrawal At Custodian (DWAC) and original issuances initiated from the Companys desktop via Internet |
| Accept files for original issuances |
| Allow multiple requests to be submitted on the same form at the same time |
| Notify the Company via email when matching broker instructions have not been received |
| Provide designated brokers the ability for brokers to log into the system and track the status of Company-submitted items |
| Report daily and monthly transactions via e-mail |
| Enforce built-in security procedures |
TECHNOLOGY AND INTERNET ACCESS
| Retrieve account information (including outstanding Stock Certificates and checks) 24 hours a day, 7 days per week |
| Review frequently asked questions, including transfer requirements and corporate actions data |
| Download forms (e.g., affidavit of domicile, form W8/W9, letters of transmittal and stock power) |
| Change account addresses |
| Replace lost, stolen or uncashed checks |
| Replace lost, stolen or non-received Stock Certificates |
| Obtain a duplicate Form 1099 |
| Sign up for electronic delivery (e.g., for proxy materials) |
| Request a certificate for shares held in book-entry or plan form |
| Enroll to have dividends directed toward purchase of additional Shares |
| Send e-mail inquiries concerning Shareholders account, or conduct an online chat session with one of ASTs customer service representatives |
SHAREHOLDERS VIA THE INTERACTIVE VOICE RESPONSE (IVR)
| Obtain account-specific information, including account balance |
| Execute plan transactions, including sales and certification requests |
| Request a duplicate Form 1099, with delivery via mail or fax |
| Request a transfer package via mail or fax |
| Request forms to effect address changes, check replacements, Stock Certificate replacements and direct deposit enrollments |
| Obtain information pertaining to current corporate actions or other significant Company events |
SHAREHOLDER (INQUIRIES)
| Distribute welcome material to new Shareholders (may incur reimbursable expenses) |
| Provide assistance to Shareholders related to their securities holdings as they initiate account inquiries or perform transactions, including guidance through common transactions and explanations for transaction rejections and the corrective steps required to complete their request |
| Provide 24/7 account access via the internet and IVR telephonic system |
| Provide toll-free number for Shareholder-initiated telephone inquiries to ASTs call center |
| Oversee the fulfillment process for potential investors (if applicable) |
1 | Please note that AST does not charge a fee for DWAC processing but that the broker may charge fees incurred from receipt of Shares. |
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CLIENT-DESIGNATED PERSONNEL VIA THE INTERNET
| View and download detailed Shareholder data, including: name, address of record, account number(s), number of Shares held in certificate and book-entry form, historical dividend-related information and cost basis reporting information |
| Obtain total outstanding Share balances |
| Utilize ASTs reporting tool to generate comprehensive reports in a real-time environment, with immediate e-mail delivery |
| Issue stock options and effect delivery through the DWAC system |
| Update company profile and corporate information |
CONTROL BOOKS TRACKING
| Receive daily emails of control books information |
| Review current transactions affecting the number of outstanding Shares in a Company-specified date range |
PROXY CENTRAL
| Proxy reports (either summarized or detailed) by proposal |
| Voting status on the 50 largest accounts |
| Shareholders attending the Company annual meeting |
| DTC position listing |
| Broker voting detail |
ANNUAL SHAREHOLDER MEETING
| Process proxy votes for routine/non-routine meetings of the Company |
| Imprint Shareholders name on proxy cards |
| 2Mail material to Shareholders |
| Prepare and transmit daily proxy tabulation reports to the Company by email |
| Provide certified Shareholder list in hard copy if requested |
| Facilitate proxy distribution mailing |
DIVIDEND DISBURSEMENT
| Confirm in writing that the dividend notice was received |
| Prepare and calculate dividend payments |
| Coordinate dividend checks and enclosures (if applicable) mailing to the Shareholders |
| Furnish one copy of the dividend register, hard copy or CD-ROM (if requested) |
| Place stop payment orders on reported lost dividend checks |
| Issue replacement dividend checks/sales checks |
| Provide copies of paid dividend checks upon request (subject to additional fee) |
| Report annual dividend income to Shareholders on applicable Form 1099 |
| File annual tax information electronically to the Internal Revenue Service |
| Withhold and remit backup withholding taxes as required by the Internal Revenue Service |
| Withhold foreign tax and file foreign tax reports as required by the Internal Revenue Service |
| Maintain custody and control of all undeliverable checks and forward returned items to Shareholders upon confirmation of a current address |
2 | Please note that postage and processing fees will apply. |
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UNCLAIMED PROPERTY
| Analyze and identify unclaimed or abandoned property across each class of security (if applicable) |
| Prepare and distribute due diligence notices (may incur reimbursable expenses) |
| Prepare unclaimed or abandoned property reports (including null or negative reports, if applicable) |
| Deliver all unclaimed property and reports to the applicable jurisdictions |
| Respond to shareholder and state inquiries relating to unclaimed property filings |
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Schedule 2
Fees
TRANSFER AGENT AND REGISTRAR SERVICES | ||||
*Monthly Administration Fee |
$ | [] | ||
*Upon Implementation of Quarterly Dividend |
$ | [] | ||
Unclaimed Property Reporting |
$ | [] | ||
*Up to 750 registered shareholders (each additional class of security $250 per month) |
| |||
Account Maintenance per Account |
Included | |||
Issuance and Registration of Stock Certificates |
Included | |||
Each Stock Certificate cancelled |
Included | |||
Restricted/Preferred Accounts |
Included | |||
General Written Correspondence |
Included | |||
Shareholder Address Changes |
Included | |||
Customer Service Telephone |
Included | |||
Research and Responding to Shareholder Inquiries |
Included | |||
Issuance of Restricted Transfers |
Included | |||
Issuance of Stock Option |
Included | |||
3DWAC Transfers (broker fees may apply) |
Included | |||
Non-Routine Transfers (including removal of legends and transfer of applicable Shares) |
Included | |||
Shareholder Internet Access |
Included | |||
Client Internet Access |
Included | |||
4DRS Sale Program Transaction Fee (to be paid by the Shareholder) |
Per transaction | |||
SHARE CONVERSION PORTAL | $ | 5,000 | ||
ANNUAL MEETING ADMINISTRATION SERVICES | ||||
Prepare Full Shareholder List as of Record Date |
Included | |||
Complete Reporting for Proxy Program |
Included | |||
Enclose and Mail Proxy Materials (mailing costs applied as out-of-pocket) |
Included | |||
Receive and Scan Returned Proxies |
Included | |||
Tabulate Proxies (Registered and Beneficial Holders per vote fee applicable) |
Included | |||
Prepare and Verify Final Vote List |
Included | |||
Online access for Company to monitor voting |
Included | |||
Omnibus Download of Proxy from DTC |
Included | |||
Inspector of Election (travel fees will be applied as out-of-pocket expenses) |
Available | |||
Online & Telephonic Voting for Registered Shareholders |
Available | |||
MANAGEMENT REPORTING | ||||
Standard Reporting Suite |
Included | |||
Online Access to Management Reports |
Included | |||
Report Requirements determined at Conversion |
Included |
3 | Please note that AST does not charge a fee for DWAC processing but that the broker may charge fees incurred from receipt of Shares. |
4 | A transaction fee of $15.00 plus $0.12 per Share sold will be charged to the Shareholder. |
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SPECIAL SERVICES
Services not included herein (including, without limitation, trustee and custodial services, exchange/tender offer services, stock dividend disbursement services, voluntary disclosure agreements and audit administration services relating to abandoned or unclaimed property) but requested by the Company may be subject to additional charges.
OUT-OF-POCKET EXPENSES
All customary out-of-pocket expenses will be billed in addition to the foregoing fees. These charges include, but are not limited to items such as:
| Printing, stationary, postage and handling for all activities such as: |
| Dividend payments & statement mailings |
| Proxy mailings |
| Advices and confirmations |
| Tax form mailings |
| W8/W9 solicitations |
| Freight and materials delivery |
| Due diligence activities associated with escheatment |
The foregoing fees apply to services ordinarily rendered by AST and are subject to reasonable adjustment based on final review of documents.
-16-
Exhibit 23.3
KPMG LLP
205 5th Avenue SW
Suite 3100
Calgary AB T2P 4B9
Tel (403) 691-8000
Fax (403) 691-8008
www.kpmg.ca
Consent of Independent Registered Public Accounting Firm
The Board of Directors of mCloud Technologies Corp.
We consent to the use of our report dated April 29, 2022, on the consolidated financial statements of mCloud Technologies Corp., which comprise the consolidated statements of financial position as of December 31, 2021 and December 31, 2020, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes, which is included herein and to the reference to our firm under the heading Experts in the prospectus included in the registration statement on Amendment No. 3 to Form F-1 dated July 15, 2022 of mCloud Technologies Corp.
/s/ KPMG LLP
Chartered Professional Accountants
July 15, 2022
Calgary, Canada
Exhibit 107
Calculation of Filing Fee Tables
FORM F-1
(Form Type)
mCloud Technologies Corp.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
CALCULATION OF REGISTRATION FEE
Security Type |
Security Class Title |
Fee or Carry Forward Rule |
Amount Registered |
Proposed Maximum Offering Price Per Unit |
Maximum Aggregate Offering Price (1) |
Fee Rate |
Amount of Registration Fee | |||||||
Newly Registered Securities | ||||||||||||||
Fees to Be Paid | Equity | Series A Preferred Shares, no par value per share (2) |
Rule 457(o) | | $28,750,000 | $0.0000927 | $2,665.13 | |||||||
Equity | Warrants to purchase Common Shares (3) |
Rule 457(g) | | | | | ||||||||
Equity | Common Shares, no par value per share, underlying the Series A Preferred Shares (4) (5) | Rule 457(i) | | | | | ||||||||
Equity | Common Shares, no par value per share, underlying the Warrants (5)(6) |
Rule 457(i) | | $34,140,625 | $0.0000927 | $3,164.84 | ||||||||
Total Offering Amount: | $62,890,625 | $5,829.97 | ||||||||||||
Total Fees Previously Paid | $3,559.01 | |||||||||||||
Total Fee Offsets | | |||||||||||||
Net Fees Due: | $2,270.96 |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. |
(2) | Includes additional Series A Preferred Shares and/or Warrants to purchase Common Shares (and the Common Shares issuable thereunder) representing 15% of the number of Series A Preferred Shares and the number of Warrants to purchase Common Shares which may be offered to the public, that the underwriter has the option to purchase. |
(3) | No fee required in accordance with Rule 457(g) under the Securities Act. |
(4) | No registration fee required pursuant to Rule 457(i) under the Securities Act. |
(5) | Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions. |
(6) | Estimated solely for purpose of calculating the registration fee pursuant to Rule 457(i) under the Securities Act. There will be issued 6.25 Warrants to purchase one Common Share for every one Series A Preferred Share offered. The Warrants are exercisable at a per-share price equal to $4.75. Includes 15% of the Warrants to purchase Common Shares which may be offered to the public, that the underwriter has the option to purchase. |