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) |
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 |
Emerging growth company |
PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION |
DATED November 7, 2022 |
Per Share |
Per Related Twenty Five Warrants |
Total if Minimum Offering is Raised |
Total if Maximum Offering is Raised |
|||||||||||||
Public offering price |
$ | 24.75 | $ | 0.25 | $ | 15,000,000 | $ |
35,000,000 |
| |||||||
Placement agent fees (1) |
$ | 1.7325 | $ | 0.0175 | $ | 1,050,000 | $ | 2,450,000 | ||||||||
Proceeds, before expenses, to us |
$ | 23.0175 | $ | 0.2325 | $ | 13,950,000 | $ | 32,550,000 |
(1) | See “Plan of Distribution” on page 129 of this prospectus for a description of all placement agent compensation payable in connection with this offering. |
1 | ||||
13 | ||||
33 | ||||
34 | ||||
34 | ||||
34 | ||||
35 | ||||
37 | ||||
42 | ||||
89 | ||||
101 | ||||
117 | ||||
118 | ||||
118 | ||||
124 | ||||
128 | ||||
128 | ||||
128 | ||||
133 | ||||
133 | ||||
133 | ||||
F-1 |
• | 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. |
• | 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. |
• | 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. |
• | Quorum Requirement |
• | Shareholder Approval Requirements |
• | 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. |
Series A Preferred Shares |
1,400,000 Series A Preferred Shares on a best efforts basis | |
Offering Price |
$25.00 per Series A Preferred Share and Warrant on a combined basis | |
Warrants |
Warrants to purchase up to 35,000,000 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. | |
Minimum and Maximum Offering Amount; Offering Period |
We do not intend to close this offering unless we sell at least a minimum number of Series A Preferred Shares and Warrants to result in gross proceeds equal to or greater than $15,000,000 (the “Minimum Amount”). Because this is a best efforts offering, the placement agent does not have an obligation to purchase any securities, and, as a result, there is a possibility that we may not be able to sell the minimum offering amount. We expect that the offering will end on the first to occur of (i) the sale of the maximum number of Series A Preferred Shares and Warrants resulting in gross proceeds of $35,000,000 and (ii) the conclusion of the 60 day offering period. Accordingly, we and the placement agent have made arrangements to place investor funds in a separate bank account to be held until the closing. Unless the Minimum Amount is subscribed for and accepted by the Company by the conclusion of the offering period, or waived by the Company, the offering will be terminated and all subscription proceeds will be returned to investors without interest or deduction. | |
Number of Series A Preferred Shares issued and outstanding before this offering |
0 | |
Number of Series A Preferred Shares outstanding after this offering |
1,400,000 shares, if the maximum number of Series A Preferred Shares are sold in this offering. | |
Number of Common Shares outstanding prior to offering |
16,224,788 shares. |
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. | |
Conversion |
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) $1.00 (subject to adjustment for certain dilutive issuances). Therefore, each Series A Preferred Share is initially convertible into 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 per Common Share equal to the then current conversion price. | |
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 increase 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. | |
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. | |
No Maturity Date |
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. | |
Preemptive Rights |
Holders of Series A Preferred Shares will have no preemptive rights. |
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 Corporation’s 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 Company’s 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 Company’s preferred stock ranking equally with the Series A Preferred Shares as to dividends (whether cumulative or non-cumulative) and the distribution of the Company’s 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. | |
Use of Proceeds |
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. |
Restrictions on Dividends, Redemption 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 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). |
Optional Redemption |
The Series A Preferred Shares are not redeemable prior to [ ], which is the first anniversary of the initial 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. | |
Special Optional Redemption |
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 Company’s 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 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. | ||
Redemption Upon Request of Holder in Connection with Change of Control: |
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 Company’s option to redeem the Series A Preferred Shares as set forth above). | |
Anti-Dilution Adjustment |
If, at any time while the Series A Preferred Shares are outstanding, we sell or grant (or announce any offer, sale or grant) of any Common Shares or Common Share equivalents entitling any person to acquire our Common Shares at an effective price per share that is lower than the original $1.00 conversion price, then the conversion price will be reduced to equal such lower price (though not less than $0.20 or, for so long as the Common Shares are listed on the TSX Venture Exchange, not less than the “Market Price” as that term is defined in the policies of the TSX Venture Exchange). However, no conversion price adjustment will be made in respect of certain identified exempt issuances. | |
Segregated Dividend 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 dividends declared on the Series A Preferred Shares, when legally permitted, and may not be used for other corporate purposes. | |
Listing |
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”. | |
Best Efforts |
We have agreed to issue and sell the Series A Preferred Shares and Warrants offered hereby to the public through the placement agent, and the placement agent has agreed to offer and sell such securities on a “best efforts” basis. The placement agent is not required to sell any specific number or dollar amount of the securities offered hereby, but will use their best efforts to sell such securities. See “Plan of Distribution” on page 129. | |
Risk Factors |
Investing in these securities involves a high degree of risk. |
Six months ended June 30, 2022 |
2021 Recast (1) |
Year ended December 31, 2020 Recast (1) |
2019 Recast (1) |
|||||||||||||
Revenue |
$ | 6,698,629 | $ | 25,596,972 | $ | 26,928,439 | $ | 18,340,249 | ||||||||
Cost of sales |
(3,865,798 | ) | (9,683,748 | ) | (10,281,922 | ) | (7,583,127 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
$ | 2,832,831 | $ | 15,913,224 | $ | 16,646,517 | $ | 10,757,122 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses |
||||||||||||||||
Salaries, wages and benefits |
10,373,584 | 21,691,774 | 20,885,044 | 10,313,803 | ||||||||||||
Sales and marketing |
1,902,215 | 1,377,255 | 1,536,420 | 3,166,788 | ||||||||||||
Research and development |
1,100,284 | 3,179,353 | 1,078,164 | 498,099 | ||||||||||||
General and administration |
4,617,456 | 8,538,854 | 5,741,872 | 3,294,550 | ||||||||||||
Professional and consulting fees |
6,736,389 | 9,085,436 | 8,886,341 | 4,351,812 | ||||||||||||
Share-based compensation |
444,461 | 1,867,915 | 1,454,235 | 1,468,361 | ||||||||||||
Depreciation and amortization |
3,769,628 | 8,924,812 | 6,778,100 | 4,044,143 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
$ | 28,944,017 | $ | 54,665,399 | $ | 46,360,176 | $ | 27,137,556 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss |
$ | 26,111,186 | $ | 38,752,175 | $ | 29,713,659 | $ | 16,380,434 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other expenses (income) |
||||||||||||||||
Finance costs |
4,088,630 | 8,618,794 | 6,033,510 | 3,217,500 | ||||||||||||
Foreign exchange (gain) loss |
(493,543 | ) | (267,294 | ) | 1,198,372 | 494,404 | ||||||||||
Business acquisition costs and other expenses |
— | 346,420 | 1,811,682 | 9,880,170 | ||||||||||||
Impairment |
— | — | — | 600,657 | ||||||||||||
Fair value (gain) loss on derivatives |
(5,031,599 | ) | 6,040,121 | — | — | |||||||||||
Other income |
(662,292 | ) | (7,126,097 | ) | (2,932,342 | ) | (167,913 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before tax |
$ | 24,012,382 | $ | 46,364,119 | $ | 35,824,881 | $ | 30,405,252 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Current tax expense (recovery) |
104,682 | 157,303 | (295,709 | ) | 181,895 | |||||||||||
Deferred tax (recovery) |
(1,482,234 | ) | (1,822,109 | ) | (668,209 | ) | (2,692,313 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss for the period |
22,634,830 |
$ |
44,699,313 |
$ |
34,860,963 |
$ |
27,894,834 |
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive (income) loss |
||||||||||||||||
Foreign subsidiary translation differences |
882,069 | 69,460 | (1,209,006 | ) | (607,302 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss for the period |
$ |
23,516,899 |
$ |
44,768,773 |
$ |
33,651,957 |
$ |
27,287,532 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. shareholders |
17,829,232 | 44,762,700 | 36,447,551 | 28,484,890 | ||||||||||||
Non-controlling interest |
4,805,598 | (63,387 | ) | (1,586,588 | ) | (590,056 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
$22,634,830 |
$44,699,313 |
$ 34,860,963 |
$27,894,834 |
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. shareholders |
18,764,690 | 44,970,815 | 35,398,294 | 28,054,299 | ||||||||||||
Non-controlling interest |
4,752,209 | (202,042 | ) | (1,746,337 | ) | (766,767 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
$23,516,899 |
$44,768,773 |
$ 33,651,957 |
$27,287,532 |
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss per share attributable to mCloud shareholders – basic and diluted |
$ |
1.10 |
$ |
3.76 |
$ |
5.01 |
$ |
6.97 |
||||||||
Weighted average number of common shares outstanding basic and diluted |
16,151,197 |
11,898,183 |
7,272,464 |
4,085,322 |
||||||||||||
|
|
|
|
|
|
|
|
(1) | See Note 2 of the Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019. |
June 30, 2022 |
December 31, 2021 |
December 31, 2020 |
December 31, 2019 |
|||||||||||||
Recast (1) |
Recast (1) |
Recast (1) |
||||||||||||||
ASSETS |
||||||||||||||||
Current assets |
||||||||||||||||
Cash and cash equivalents |
$ | 4,405,948 | $ | 4,588,057 | $ | 1,110,889 | 529,190 | |||||||||
Trade and other receivables |
12,134,992 | 14,566,975 | 12,312,814 | 9,091,654 | ||||||||||||
Current portion of prepaid expenses and other assets |
|
2,679,472 |
|
|
2,355,350 |
|
|
1,326,319 |
|
|
839,012 |
| ||||
Current portion of long-term receivables |
|
390,398 |
|
|
397,060 |
|
|
445,213 |
|
|
378,221 |
| ||||
|
|
|
|
|
|
|
|
|||||||||
Total current assets |
$ | 19,610,810 | $ | 21,907,442 | $ | 15,195,235 | $ | 10,838,077 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-current assets |
||||||||||||||||
Prepaid expenses and other assets |
402,838 | 622,577 | 1,011,847 | 86,913 | ||||||||||||
Long-term receivables |
318,360 | 343,371 | 2,091,059 | 1,586,429 | ||||||||||||
Right-of-use assets |
7,298,424 | 916,028 | 3,660,717 | 4,206,808 | ||||||||||||
Property and equipment |
518,185 | 649,403 | 506,387 | 710,552 | ||||||||||||
Intangible assets |
17,429,695 | 20,585,833 | 27,766,839 | 23,671,089 | ||||||||||||
Goodwill |
27,119,177 | 27,081,795 | 27,086,727 | 18,758,975 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-current assets |
53,086,679 | $ | 50,199,007 | $ | 62,123,576 | 49,020,766 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
72,697,489 |
$ |
72,106,449 |
$ |
77,318,811 |
59,858,843 |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
LIABILITIES |
||||||||||||||||
Current liabilities |
||||||||||||||||
Bank indebtedness |
3,679,631 | $ | 3,460,109 | $ | 976,779 | 1,471,805 | ||||||||||
Trade payables and accrued liabilities |
16,343,347 | 12,421,309 | 12,924,256 | 9,636,405 | ||||||||||||
Deferred revenue |
4,813,199 | 2,811,408 | 1,771,120 | 1,138,281 | ||||||||||||
Current portion of loans and borrowings |
|
10,399,574 |
|
|
12,447,939 |
|
|
3,431,251 |
|
|
3,004,717 |
| ||||
Current portion of convertible debentures |
|
23,457,500 |
|
|
22,185,170 |
|
|
— |
|
|
— |
| ||||
Warrant liabilities |
3,017,643 | 8,880,038 | 710,924 | 725,086 | ||||||||||||
Current portion of lease liabilities |
554,895 | 410,674 | 835,472 | 720,457 | ||||||||||||
Current portion of other liabilities |
— | — | 6,003,838 | |||||||||||||
Current portion of business |
||||||||||||||||
acquisition payable |
1,399,580 | 1,398,972 | 1,594,297 | 1,043,314 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total current liabilities |
63,665,369 |
$ |
64,015,619 |
$ |
28,247,937 |
17,740,065 |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-current liabilities |
||||||||||||||||
Convertible debentures |
85,901 | 110,540 | 19,534,988 | 17,535,946 | ||||||||||||
Lease liabilities |
7,123,723 | 634,798 | 3,109,604 | 3,641,627 | ||||||||||||
Loans and borrowings |
19,586,233 | 767,662 | 9,721,049 | 10,968,338 | ||||||||||||
Deferred income tax liabilities |
827,672 | 2,291,057 | 4,168,905 | 3,854,614 | ||||||||||||
Other liabilities |
— | — | 232,577 | |||||||||||||
Business acquisition payable |
— | — | 845,232 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
91,288,088 |
$ |
67,819,676 |
$ |
65,860,292 |
53,740,590 |
||||||||||
|
|
|
|
|
|
|
|
|||||||||
EQUITY |
||||||||||||||||
Share capital |
118,327,722 | 118,195,363 | 83,120,611 | 45,368,745 | ||||||||||||
Contributed surplus |
11,547,919 | 11,040,751 | 8,518,476 | 7,278,119 | ||||||||||||
Accumulative other comprehensive income |
|
291,811 |
|
|
1,227,269 |
|
|
1,435,384 |
|
|
386,127 |
| ||||
Deficit |
(146,501,130 | ) | (128,671,898 | ) | (83,909,198 | ) | (47,461,647 | ) | ||||||||
Total shareholders’ equity (deficit) |
(16,333,678 | ) | $ | 1,791,485 | $ | 9,165,273 | 5,571,344 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-controlling interest |
(2,256,921 | ) | 2,495,288 | 2,293,246 | 546,909 | |||||||||||
Total equity (deficit) |
$ |
(18,590,599 |
) |
$ |
4,286,773 |
$ |
11,458,519 |
6,118,253 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities and equity |
$ |
72,697,489 |
$ |
72,106,449 |
$ |
77,318,811 |
59,858,843 |
|||||||||
|
|
|
|
|
|
|
|
1) | See Note 2 of the Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019. |
• | 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 mCloud’s operations, and they and investment transactions could disrupt mCloud’s business, dilute stockholder value or impair mCloud’s financial results. |
• | The loss of one or more of mCloud’s 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 mCloud’s operating results. |
• | Acquisitions, investments, joint ventures and other business ventures may negatively affect mCloud’s 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, mCloud’s ability to expand its base of users may be impaired, which could adversely affect mCloud’s 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. |
• | 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 management’s attention from normal business operations; |
• | potential loss of key employees of the acquired company; |
• | 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. |
• | the usefulness, ease of use, performance, and reliability of mCloud’s products compared to its competitors; |
• | the size and composition of mCloud’s user base; |
• | the engagement of mCloud’s users with its products; |
• | the timing and market acceptance of mCloud’s products, including developments and enhancements, or similar improvements by its competitors; |
• | mCloud’s ability to monetize its products, including its ability to successfully monetize AssetCare; |
• | customer service and support efforts; |
• | marketing and selling efforts; |
• | mCloud’s 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 mCloud’s industry, which may result in more formidable competitors; |
• | mCloud’s ability to attract, retain, and motivate talented employees, particularly computer engineers; |
• | mCloud’s ability to cost-effectively manage and grow its operations; and |
• | the mCloud reputation and brand strength relative to competitors. |
• | 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 mCloud’s 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 mCloud’s competitors; |
• | future sales of mCloud’s equity or equity-related securities; |
• | proposed or adopted regulatory changes or developments; |
• | domestic and international economic factors unrelated to mCloud’s performance; and |
• | general market conditions and, in particular, developments related to market conditions for the remote asset management industry. |
• | 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. |
Year Ended |
Period End |
|||
December 31, 2019 |
$ | 1.2988 | ||
December 31, 2020 |
$ | 1.2732 | ||
December 31, 2021 |
$ | 1.2678 | ||
June 30, 2022 |
$ | 1.2871 |
• | On an actual basis, as determined in accordance with IFRS; and |
• | On an as adjusted basis to give effect to (i) the issuance and sale of 600,000 Series A Preferred Shares and accompanying 15,000,000 Warrants at the Minimum Offering Amount, (ii) 1,400,000 Series A Preferred Shares and accompanying 35,000,000 Warrants at the Maximum Offering Amount, and (iii) total expenses of each offering amount, which include registration, filing and listing fees, printing fees and legal and accounting expenses amounting to $673,460 and the Placement Agent fee of 7% of the aggregate gross cash proceeds at each offering amount, assuming no exercise of the Warrants. |
June 30, 2022 (unaudited) |
Pro Forma As of June 30 2022 (unaudited) |
As adjusted (unaudited minimum offering) |
As adjusted (unaudited maximum offering) |
|||||||||||||
Cash and cash equivalents |
$ | 4,405,948 | $ | 12,029,256 | $ | 12,029,256 | $ | 19,648,352 | ||||||||
Current portion of loans and borrowings |
10,399,574 | 6,991,524 | 6,991,524 | 6,991,524 | ||||||||||||
Current portion of convertible debentures |
23,457,500 | 23,457,500 | 10,980,904 | — | ||||||||||||
Warrant liabilities |
3,017,643 | 2,866,753 | 2,866,753 | 2,866,753 | ||||||||||||
Long term convertible debentures |
85,091 | 85,091 | 85,091 | 85,091 | ||||||||||||
Loans and borrowings |
19,586,233 | 19,387,228 | 19,387,228 | 19,387,228 | ||||||||||||
Equity |
||||||||||||||||
Common shares, no par value; unlimited number of shares authorized shares issued and outstanding, actual unlimited number of shares authorized, 16,151,500 |
||||||||||||||||
9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value; 1,400,000 shares issued and outstanding |
||||||||||||||||
Equity share capital |
118,327,722 | 118,327,722 | 131,604,262 | 150,204,262 | ||||||||||||
Contributed surplus |
11,547,919 | 11,547,919 | 11,547,919 | 11,547,919 | ||||||||||||
Accumulated other comprehensive income |
291,811 | 461,504 | 461,504 | 461,504 | ||||||||||||
Deficit |
(146,501,130 | ) | (143,126,641 | ) | (143,926,585 | ) | (143,926,585 | ) | ||||||||
Total Shareholders (Deficit)/Equity |
(16,333,678 | ) | (12,789,496 | ) | (312,900 | ) | 18,287,100 | |||||||||
Non-controlling interest |
(2,256,921 | ) | — | — | — | |||||||||||
Total (Deficit /Equity |
(18,590,599 | ) | (12,789,496 | ) | (312,900 | ) | 18,287,100 |
(1) | 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 June 30, 2022. |
(2) | The amount to be attributed to the warrants has not yet been determined and has been included in the amount attributed to Share capital. Upon issuance of the Series A Preferred Shares and Warrants, the total net proceeds will be allocated to Share Capital and Warrant Liabilities. |
(3) | Assumes adoption of the Rights and Restrictions for 9.0% Cumulative Series A Preferred Shares, which was adopted prior to June 30, 2022. |
The above discussion and table is based on 16,155,654 Common Shares outstanding as of June 30, 2022, and do not include, as of that date: |
• | 3,551,132 Common Shares issuable upon exercise of Listed Warrants; |
• | 5,094,965 Common Shares issuable upon exercise of Non-Listed Warrants; |
• | 856,314 Common Shares issuable upon exercise of Options |
• | 253,613 Common Shares issuable upon exercise of Restricted Share Units; |
• | 15,750 Common Shares issuable upon exercise of Convertible Debt; and |
• | a one-time payment of $5.68 million equal to the fair value of mCloud’s consideration receivable under the termination provisions of the Amended and Restated Royalty Agreement with Agnity, and |
• | the settlement of $0.27 million in other net receivables due from Agnity. |
i. | The accompanying notes to the unaudited pro forma condensed consolidated financial statements |
ii. | The audited consolidated financial statements of the Company and its subsidiaries and the accompanying notes included in the Company’s Annual Report on Form 20-F/A filed with the SEC on August 22, 2022. |
iii. | The unaudited condensed consolidated interim financial statements of the Company for the six months ended June 30, 2022, included in Form 6-K furnished with the SEC on August 16, 2022. |
• | The loss of control of Agnity’s and associated derecognition of Agnity’s assets and liabilities. |
• | Impact of the cash proceeds received in connection with the Transaction. |
• | The elimination of Agnity’s royalty payment obligations to mCloud under the extinguished Amended and Restated Royalty Agreement and the inclusion of license payments from mCloud to Agnity in accordance with the Technology Continuation Agreement. |
• | The recognition of transactions between mCloud and Agnity related to other intercompany sales activities, which were previously eliminated on consolidation for each period presented. |
Historical Financial Statements as Reported |
Deconsolidation (a) |
Transaction (b) | Pro Forma | |||||||||||||
Assets |
||||||||||||||||
Current Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 4,406 | $ | (16 | ) | $ | 7,640 | $ | 12,030 | |||||||
Trade and other receivables |
12,135 | (8,602 | ) | — | 3,533 | |||||||||||
Other current assets |
3,070 | (306 | ) | — | 2,764 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Current Assets |
$ | 19,611 | $ | (8,924 | ) | $ | 7,640 | $ | 18,327 | |||||||
Intangible assets |
17,430 | (3,709 | ) | — | 13,721 | |||||||||||
Goodwill |
27,119 | — | — | 27,119 | ||||||||||||
Other assets |
8,853 | 3,724 | (4,266 | ) | 7,996 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ |
72,698 |
$ |
(8,909 |
) |
$ |
3,374 |
$ |
67,163 |
|||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Current Liabilities: |
||||||||||||||||
Trade payables and accrued liabilities |
$ | 16,343 | $ | (5,319 | ) | 11,024 | ||||||||||
Deferred revenue |
4,813 | (2,264 | ) | — | 2,549 | |||||||||||
Loans and borrowings |
10,400 | (3,408 | ) | — | 6,992 | |||||||||||
Warrant Liabilities |
3,018 | (151 | ) | — | 2,867 | |||||||||||
Convertible debentures |
23,458 | — | — | 23,458 | ||||||||||||
Other current liabilities |
5,633 | — | 5,633 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total current liabilities |
$ | 63,665 | $ | (11,142 | ) | $ | $ | 52,523 | ||||||||
Non-current liabilities: |
||||||||||||||||
Lease liabilities |
7,124 | — | — | 7,124 | ||||||||||||
Loans and borrowings |
19,586 | (199 | ) | — | 19,387 | |||||||||||
Other liabilities |
913 | 5 | — | 918 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | 91,288 | $ | (11,336 | ) | $ | $ | 79,952 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Equity (Deficit) |
||||||||||||||||
Share capital |
$ | 118,328 | $ | — | $ | — | $ | 118,328 | ||||||||
Contributed surplus |
11,548 | — | — | 11,548 | ||||||||||||
Accumulated other comprehensive income |
292 | 170 | — | 462 | ||||||||||||
Deficit |
(146,501 | ) | — | 3,374 | (143,127 | ) | ||||||||||
Non-controlling interest |
(2,257 | ) | 2,257 | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total shareholders’ equity |
$ | (18,590 | ) | $ | 2,427 | $ | 3,374 | $ | (12,789 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities and equity |
$ |
72,698 |
$ |
(8,909 |
) |
$ |
3,374 |
$ |
67,163 |
|||||||
|
|
|
|
|
|
|
|
Historical Financial Statements as Reported |
Deconsolidation (c) | Transaction (c) (d) | Pro Forma | |||||||||||||
Revenue |
$ | 6,699 | $ | (1,685 | ) | $ | — | 5,013 | ||||||||
Cost of sales |
3,866 | (1,218 | ) | 336 | 2,984 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross Profit |
$ | 2,833 | $ | (468 | ) | $ | (336 | ) | 2,029 | |||||||
Expenses |
||||||||||||||||
Salaries, wages and benefits |
$ | 10,374 | $ | (1,344 | ) | $ | — | 9,030 | ||||||||
General and administration |
4,617 | (141 | ) | — | 4,477 | |||||||||||
Professional and consulting fees |
6,736 | (2,903 | ) | — | 3,833 | |||||||||||
Depreciation and amortization |
3,770 | (1,039 | ) | — | 2,731 | |||||||||||
Other |
3,447 | (106 | ) | — | 3,341 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
28,944 | (5,532 | ) | — | 23,412 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Loss |
$ | (26,111 | ) | $ | 5,064 | $ | — | (21,135 | ) | |||||||
Other expense (income) |
||||||||||||||||
Finance costs (income) |
$ | 4,089 | $ | (368 | ) | $ | — | 3,721 | ||||||||
FV loss on derivatives |
(5,032 | ) | — | — | (5,032 | ) | ||||||||||
Other income |
(1,156 | ) | 0 | (295 | ) | (1,451 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Gain (Loss) before tax |
$ | (24,012 | ) | $ | 5,432 | $ | (40 | ) | $ | (18,621 | ) | |||||
Current tax expense |
105 | — | — | 105 | ||||||||||||
Deferred tax (recovery) expense |
(1,482 | ) | 626 | — | (856 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss for the period |
$ | (22,635 | ) | $ | 4,806 | $ | (40 | ) | (17,869 | ) | ||||||
Foreign subsidiary translation differences |
882 | (54 | ) | — | 828 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss for the period |
$ | (23,517 | ) | $ | 4,752 | $ | (40 | ) | (18,697 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. Shareholders |
(17,829 | ) | — | (40 | ) | (17,869 | ) | |||||||||
Non-controlling interest |
(4,806 | ) | 4,806 | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (22,635 | ) | $ | 4,806 | $ | (40 | ) | (17,869 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. Shareholders |
(18,765 | ) | — | (40 | ) | (18,805 | ) | |||||||||
Non-controlling interest |
(4,752 | ) | 4,752 | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (23,517 | ) | 4,752 | (40 | ) | (18,805 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Loss per common and potential common share: |
||||||||||||||||
Loss per share attributed to mCloud shareholders - basic and diluted |
$ | (1.10 | ) | $ | (1.11 | ) | ||||||||||
Weighted average number of common shares outstanding - basic and diluted |
16,151,197 | 16,151,197 |
Historical Financial Statements as Reported |
Deconsolidation (a) |
Transaction (c)(d) |
Pro Forma | |||||||||||||
Revenue |
$ | 25,597 | $ | (11,816 | ) | $ | — | $ | 13,781 | |||||||
Cost of sales |
9,684 | (2,611 | ) | 550 | 7,623 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross Profit |
$ | 15,913 | $ | (9,205 | ) | $ | (550 | ) | $ | 6,158 | ||||||
Expenses |
||||||||||||||||
Salaries, wages and benefits |
$ | 21,692 | $ | (2,050 | ) | $ | 19,642 | |||||||||
General and administration |
8,539 | (810 | ) | 7,729 | ||||||||||||
Professional and consulting fees |
9,085 | (4,175 | ) | 4,910 | ||||||||||||
Depreciation and amortization |
8,925 | (2,172 | ) | 6,753 | ||||||||||||
Other |
6,424 | (133 | ) | 6,291 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total expenses |
$ | 54,665 | $ | (9,340 | ) | $ | — | $ | 45,325 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Loss |
$ | (38,752 | ) | $ | 135 | $ | (550 | ) | $ | (39,167 | ) | |||||
Other expense (income) |
||||||||||||||||
Finance costs (income) |
$ | 8,619 | $ | (337 | ) | $ | — | $ | 8,281 | |||||||
FV loss on derivatives |
6,040 | — | — | 6,040 | ||||||||||||
Other (income)/loss |
(7,126 | ) | 402 | (150 | ) | (6,874 | ) | |||||||||
Other expenses (income) |
79 | (116 | ) | — | (37 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before tax |
$ | (46,364 | ) | $ | 186 | $ | (400 | ) | $ | (46,578 | ) | |||||
Current tax expense |
157 | (372 | ) | — | (215 | ) | ||||||||||
Deferred tax expense (recovery) |
(1,822 | ) | 621 | — | (1,201 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss for the period |
$ | (44,699 | ) | $ | (63 | ) | $ | (400 | ) | $ | (45,162 | ) | ||||
Foreign subsidiary translation differences |
69 | 139 | 208 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss for the period |
$ | (44,768 | ) | $ | (202 | ) | $ | (400 | ) | $ | (45,370 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Net loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. Shareholders |
(44,762 | ) | — | (400 | ) | (45,162 | ) | |||||||||
Non-controlling interest |
63 | (63 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
(44,699 |
) |
$ |
(63 |
) |
$ |
(400 |
) |
$ |
(45,162 |
) | |||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss (income) for the period attributable to: |
||||||||||||||||
mCloud Technologies Corp. Shareholders |
(44,970 | ) | (400 | ) | (45,370 | ) | ||||||||||
Non-controlling interest |
202 | (202 | ) | — | 0 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ |
(44,768 |
) |
$ |
(202 |
) |
$ |
(400 |
) |
$ |
(45,370 |
) | |||||
|
|
|
|
|
|
|
|
|||||||||
Net Loss per common and potential common share: |
||||||||||||||||
Loss per share attributed to mCloud shareholders - basic and diluted |
$ | (3.76 | ) | $ | (3.80 | ) | ||||||||||
Weighted average number of common shares outstanding - basic and diluted |
11,898,183 | 11,898,183 |
a. | To recognize the loss of control of Agnity and associated deconsolidation of Agnity’s assets and liabilities. |
b. | To recognize the receipt of $5.95 million (CAD$7.7 million) of cash as a result of the Transaction, the resulting extinguishment of the amounts receivable from and payable to Agnity and the $3.451 million gain from the changes to the carrying amounts of the receivable balances. |
c. | To recognize the loss of control of Agnity and associated removal of Agnity’s operating results from the Statement of Loss and Comprehensive Loss, together with the recognition of intercompany revenue and expenses previously eliminated on consolidation. |
d. | To eliminate income previously recognized by mCloud under the Amended Royalty Agreement and to recognize the license payments from mCloud to Agnity for ongoing access to CAS under the terms of the Technology Continuation Agreement. |
• | 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 Company’s 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. |
• | Identifying key positions necessary to support the Company’s 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. |
Years ended December 31 |
2021 |
2020 |
2019 |
|||||||||
Revenues |
$ | 25.597 | $ | 26.928 | $ | 18.340 | ||||||
Gross profit |
15.913 | 16.647 | $ | 10.757 | ||||||||
Total expenses |
54.665 | 46.360 | $ | 27.138 | ||||||||
Other expenses (income) |
5.947 | 5.148 | $ | 11.514 | ||||||||
Net loss |
44.699 | 34.861 | $ | 27.895 | ||||||||
Loss per share attributable to mCloud shareholders – basic and diluted (1) |
3.76 | $ | 5.01 | $ | 6.97 | |||||||
Total assets |
72.106 | $ | 77.319 | $ | 59.859 | |||||||
Total non-current financial liabilities |
1.513 | $ | 33.443 | $ | 32.146 |
(1) |
The Company has corrected loss per share attributable to mCloud shareholders basic and diluted. See Basis of Presentation in Note 2 to the Annual 2021 Financial Statements for further information. |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 Change % |
2020 vs 2019 Change $ |
2020 vs 2019 Change % |
||||||||||||||||||||||
Revenue |
$ | 25.597 | $ | 26.928 | $ | 18.340 | $ | (1.331 | ) | (5 | )% | $ | 8.588 | 47 | % | |||||||||||||
Cost of Sales |
(9.684 | ) | (10.282 | ) | (7.583 | ) | 0.598 | (6 | )% | (2.699 | ) | 36 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Gross Profit |
$ |
15.913 |
$ |
16.647 |
$ |
10.757 |
$ |
(0.733 |
) |
(4 |
) % |
$ |
5.890 |
55 |
% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Expenses |
||||||||||||||||||||||||||||
Salaries, wages and benefits |
$ | 21.692 | $ | 20.885 | $ | 10.314 | $ | 0.807 | 4 | % | $ | 10.571 | 102 | % | ||||||||||||||
Sales and marketing |
1.377 | 1.536 | 3.167 | (0.159 | ) | (10 | )% | (1.631 | ) | (51 | )% | |||||||||||||||||
Research and development |
3.179 | 1.078 | 0.498 | 2.101 | 195 | % | 0.580 | 116 | % | |||||||||||||||||||
General and administrative |
8.539 | 5.742 | 3.295 | 2.797 | 49 | % | 2.447 | 74 | % | |||||||||||||||||||
Professional and consulting fees |
9.085 | 8.886 | 4.352 | 0.199 | 2 | % | 4.534 | 104 | % | |||||||||||||||||||
Share-based compensation |
1.868 | 1.454 | 1.468 | 0.414 | 28 | % | (0.014 | ) | (1 | )% | ||||||||||||||||||
Depreciation and amortization |
8.925 | 6.778 | 4.044 | 2.147 | 32 | % | 2.734 | 68 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total expenses |
$ | 54.665 | $ | 46.360 | $ | 27.138 | $ | 8.305 | 18 | % | $ | 19.222 | 71 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating loss |
$ |
38.752 |
$ |
29.714 |
$ |
16.380 |
$ |
9.039 |
30 |
% |
$ |
13.334 |
81 |
% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Other Expenses (income) |
||||||||||||||||||||||||||||
Finance costs |
$ | 8.619 | $ | 6.034 | $ | 3.218 | $ | 2.585 | 43 | % | $ | 2.816 | 88 | % | ||||||||||||||
Foreign exchange loss (gain) |
(0.267 | ) | 1.198 | 0.494 | (1.466 | ) | (122 | )% | 0.704 | 143 | % | |||||||||||||||||
Impairment |
— | — | 0.601 | (0.601 | ) | (100 | )% | |||||||||||||||||||||
Business acquisition costs and other expenses |
0.346 | 1.812 | 9.880 | (1.465 | ) | (81 | )% | (8.068 | ) | (82 | )% | |||||||||||||||||
Fair value loss on derivatives |
6.040 | — | — | 6.040 | 100 | % | — | — | % | |||||||||||||||||||
Other income |
(7.126 | ) | (2.932 | ) | (0.168 | ) | (4.194 | ) | 143 | % | (2.764 | ) | 1645 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Loss before tax |
$ |
46.364 |
$ |
35.825 |
$ |
30.405 |
$ |
10.539 |
29 |
% |
$ |
5.420 |
18 |
% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Current tax expense (recovery) |
$ | 0.157 | $ | (0.296 | ) | $ | (0.182 | ) | $ | 0.453 | (153 | )% | $ | (0.114 | ) | 63 | % | |||||||||||
Deferred tax (recovery) expense |
(1.822 | ) | (0.668 | ) | 2.692 | (1.154 | ) | 173 | % | (3.360 | ) | (125 | )% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net loss for the period |
$ |
44.699 |
$ |
34.861 |
$ |
27.895 |
$ |
9.838 |
28 |
% |
$ |
6.966 |
25 |
% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Service Line |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
|||||||||||||||||||||
AssetCare Initialization |
$ | 1.250 | $ | 7.689 | $ | 5.965 | $ | (6.439 | ) | (84 | )% | $ | 1.724 | 29 | % | |||||||||||||
AssetCare Solutions |
23.462 | 12.809 | 2.940 | 10.653 | 83 | % | 9.869 | 336 | % | |||||||||||||||||||
Engineering Services |
0.885 | 6.430 | 9.436 | (5.545 | ) | (86 | )% | (3.005 | ) | (32 | )% | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ |
25.597 |
$ |
26.928 |
$ |
18.340 |
$ |
(1.331 |
) |
(5 |
)% |
$ |
8.588 |
47 |
% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
|||||||||||||||||||||
Revenue recognized over time |
$ | 24.423 | $ | 18.551 | $ | 12.375 | $ | 5.872 | 32 | % | $ | 6.176 | 50 | % | ||||||||||||||
Revenue recognized at point in time upon completion |
1.174 | 8.377 | 5.965 | (7.202 | ) | (86 | )% | 2.412 | 40 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ |
25.597 |
$ |
26.928 |
$ |
18.340 |
$ |
(1.331 |
) |
(5 |
)% |
$ |
8.588 |
47 |
% | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, | ||||||||||||
2021 |
2020 |
2019 |
||||||||||
Canada |
$ | 10.734 | $ | 13.833 | $ | 10.890 | ||||||
United States |
6.564 | 5.691 | 7.451 | |||||||||
Japan |
5.850 | 6.447 | — | |||||||||
Australia |
0.994 | 0.152 | — | |||||||||
Other |
1.455 | 0.805 | — | |||||||||
|
|
|
|
|
|
|||||||
Total revenue |
$ |
25.597 |
$ |
26.928 |
$ |
18.341 |
||||||
|
|
|
|
|
|
2021 |
2020 |
2019 |
||||||||||
Customer A |
Less than 10 | % | 13.6 | % | n/a | |||||||
Customer B |
Less than 10 | % | 13.1 | % | 11.0 | % | ||||||
Customer C |
11.3 | % | Less than 10 | % | 20.0 | % | ||||||
Customer D |
10.7 | % | Less than 10 | % | n/a |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
||||||||||||||||||||||
Cost of Sales |
$ | 9.684 | $ | 10.282 | $ | 7.583 | $ | (0.598 | ) | (6 | )% | $ | 2.699 | 36 | % | |||||||||||||
Gross Profit |
15.913 | 16.647 | 10.757 | (0.733 | ) | (4 | )% | 5.890 | 55 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Gross Margin % |
62.2 |
% |
61.8 |
% |
58.6 |
% |
1 |
% |
3 |
% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Expenses |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
|||||||||||||||||||||
Salaries, wages and benefits |
$ | 21.692 | $ | 20.885 | $ | 10.314 | $ | 0.807 | 4 | % | $ | 10.571 | 102 | % | ||||||||||||||
Sales and marketing |
1.377 | 1.536 | 3.167 | (0.159 | ) | (10 | )% | (1.631 | ) | (51 | )% | |||||||||||||||||
Research and development |
3.179 | 1.078 | 0.498 | 2.101 | 195 | % | 0.580 | 116 | % | |||||||||||||||||||
General and administration |
8.539 | 5.742 | 3.295 | 2.797 | 49 | % | 2.447 | 74 | % | |||||||||||||||||||
Professional and consulting fees |
9.085 | 8.886 | 4.352 | 0.199 | 2 | % | 4.534 | 104 | % | |||||||||||||||||||
Share-based compensation |
1.868 | 1.454 | 1.468 | 0.414 | 28 | % | (0.014 | ) | — | % | ||||||||||||||||||
Depreciation and amortization |
8.925 | 6.778 | 4.044 | 2.147 | 32 | % | 2.734 | 68 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ |
54.665 |
$ |
46.360 |
$ |
27.138 |
$ |
8.305 |
18 |
% |
$ |
19.222 |
71 |
% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• | 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 Company’s NASDAQ listing, combined with costs associated with a full year of the Company’s 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 Company’s 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 Company’s 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 Company’s 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. |
Other expenses (income) |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
|||||||||||||||||||||
Finance costs |
$ | 8.619 | $ | 6.034 | $ | 3.218 | $ | 2.585 | 43 | % | $ | 2.816 | 88 | % | ||||||||||||||
Foreign exchange loss (gain) |
(0.267 | ) | 1.198 | 0.494 | (1.465 | ) | (122 | )% | $ | 0.704 | 143 | % | ||||||||||||||||
Impairment of intangible asset |
— | — | 0.601 | — | — | % | $ | (0.601 | ) | (100 | )% | |||||||||||||||||
Business acquisition costs and other expenses |
0.346 | 1.812 | 9.880 | (1.466 | ) | (81 | )% | $ | (8.068 | ) | (82 | )% | ||||||||||||||||
Fair value loss on derivatives |
6.040 | — | — | 6.040 | — | % | $ | — | — | % | ||||||||||||||||||
Other income |
(7.126 | ) | (2.932 | ) | (0.168 | ) | (4.194 | ) | 143 | % | $ | (2.764 | ) | 1645 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 7.612 | $ | 6.111 | $ | 14.025 | $ | 1.500 | 25 | % | $ | (7.914 | ) | 4713 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• | 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 management’s 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. |
• | 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. |
Expenses |
2021 |
2020 |
2019 |
2021 vs 2020 Change $ |
2021 vs 2020 % |
2020 vs 2019 Change $ |
2020 vs 2019 % |
|||||||||||||||||||||
Current tax expense (recovery) |
$ | 0.157 | $ | (0.296 | ) | $ | 0.182 | $ | 0.453 | (153 | )% | $ | (0.478 | ) | (262 | )% | ||||||||||||
Deferred tax expense (recovery) |
$ | (1.822 | ) | $ | (0.668 | ) | $ | (2.692 | ) | $ | (1.154 | ) | 173 | % | $ | 2.024 | (75 | )% |
Major Service Line |
2021 |
2020 |
Change $ |
Change % |
||||||||||||
AssetCare Initialization |
$ | 0.173 | $ | 2.672 | $ | (2.499 | ) | (94 | )% | |||||||
AssetCare Solutions |
3.886 | 5.546 | (1.660 | ) | (30 | )% | ||||||||||
Engineering Services |
0.111 | 1.005 | (0.894 | ) | (89 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
4.170 |
$ |
9.223 |
$ |
(5.053 |
) |
(55 |
)% | |||||||
|
|
|
|
|
|
|
|
Timing of revenue recognition |
2021 |
2020 |
Change $ |
Change % |
||||||||||||
Revenue recognized over time |
$ | 4.073 | $ | 4.757 | $ | (0.684 | ) | (14 | )% | |||||||
Revenue recognized at point in time upon completion |
0.097 | 4.466 | (4.369 | ) | (98 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
4.170 |
$ |
9.223 |
$ |
(5.053 |
) |
(55 |
)% | |||||||
|
|
|
|
|
|
|
|
2021 |
2020 |
Change $ |
Change % |
|||||||||||||
Cost of Sales |
$ | 1.507 | $ | 3.579 | $ | (2.072 | ) | (58 | )% | |||||||
Gross Profit |
2.664 | 5.644 | (2.981 | ) | (53 | )% | ||||||||||
|
|
|
|
|
|
|||||||||||
Gross margin % |
63.9 |
% |
61.2 |
% |
4 |
% | ||||||||||
|
|
|
|
|
|
Expenses |
2021 |
2020 |
Change $ |
Change % |
||||||||||||
Salaries, wages and benefits |
$ | 5.608 | $ | 4.486 | $ | 1.122 | 25 | % | ||||||||
Sales and marketing |
0.400 | 0.304 | 0.096 | 32 | % | |||||||||||
Research and development |
1.105 | 0.323 | 0.782 | 242 | % | |||||||||||
General and administration |
4.187 | 1.924 | 2.263 | 118 | % | |||||||||||
Professional and consulting fees |
2.446 | 2.090 | 0.356 | 17 | % | |||||||||||
Share-based compensation |
0.684 | 0.427 | 0.257 | 60 | % | |||||||||||
Depreciation and amortization |
2.146 | 1.917 | 0.229 | 12 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
16.576 |
$ |
11.471 |
$ |
5.105 |
45 |
% | ||||||||
|
|
|
|
|
|
|
|
• | General and administration expenses increased by 118% or $2.263 million primarily as the result of costs associated with the Company’s 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 Company’s 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 Company’s 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 Company’s 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. |
Other expenses (income) |
2021 |
2020 |
Change $ |
Change % |
||||||||||||
Finance costs |
$ | 2.724 | $ | 1.694 | $ | 1.030 | 61 | % | ||||||||
Foreign exchange loss (gain) |
(0.041 | ) | 1.583 | (1.624 | ) | (103 | )% | |||||||||
Business acquisition costs and other expenses |
0.023 | 0.501 | (0.478 | ) | (95 | )% | ||||||||||
Fair value gain on derivatives |
(3.075 | ) | — | (3.075 | ) | — | % | |||||||||
Other income |
(1.654 | ) | (0.971 | ) | (0.683 | ) | 70 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
(2.023 |
) |
$ |
2.807 |
$ |
(4.830 |
) |
(172 |
)% | ||||||
|
|
|
|
|
|
|
|
• | 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. |
Expenses |
2021 |
2020 |
Change $ |
Change % |
||||||||||||
Current tax expense (recovery) |
$ | (0.704 | ) | $ | (0.397 | ) | $ | (0.307 | ) | 77 | % | |||||
Deferred tax expense (recovery) |
$ | (0.854 | ) | $ | 0.682 | $ | (1.535 | ) | (225 | )% |
For the quarter ended: |
Q4 2021 (2) |
Q3 2021 (1) |
Q2 2021 (1) |
Q1 2021 (1) |
Q4 2020 (2) |
Q3 2020 |
Q2 2020 |
Q1 2020 |
||||||||||||||||||||||||
Total revenue |
$ | 4.171 | $ | 7.434 | $ | 6.556 | $ | 7.436 | $ | 9.223 | $ | 6.137 | $ | 5.010 | $ | 6.558 | ||||||||||||||||
Net loss |
10.331 | 15.616 | 9.000 | 9.752 | 8.918 | 8.713 | 9.353 | 7.878 | ||||||||||||||||||||||||
Net loss - mCloud shareholders |
10.095 | 15.466 | 8.930 | 10.271 | 9.302 | 9.417 | 9.707 | 8.021 | ||||||||||||||||||||||||
Basic and diluted loss per share |
$ | 0.73 | $ | 1.22 | $ | 0.88 | $ | 1.12 | $ | 1.02 | $ | 1.15 | $ | 1.53 | $ | 1.47 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total assets |
$ |
72.106 |
$ |
73.818 |
$ |
79.868 |
$ |
75.803 |
$ |
77.319 |
$ |
68.113 |
$ |
64.349 |
$ |
67.869 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total non- current financial liabilities |
$ |
1.513 |
$ |
12.978 |
$ |
24.565 |
$ |
43.440 |
$ |
33.443 |
$ |
33.319 |
$ |
37.223 |
$ |
32.795 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• | 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). |
• | December 31, 2020, net loss attributable to mCloud shareholders increased by $0.423 million, net income attributable to noncontrolling interest increased by $0.423 million, and loss per share attributable to mCloud shareholders - basic and diluted increased by $0.05 per share. |
• | December 31, 2021, net loss attributable to mCloud shareholders increased by $0.433 million, net loss attributable to non-controlling interest decreased by $0.433 million and loss per share attributable to mCloud shareholders - basic and diluted increased by $0.03 per share. |
Cash provided by (used in): |
2021 |
2020 |
2019 |
|||||||||
Operating activities |
$ | (28.330 | ) | $ | (24.856 | ) | $ | (14.516 | ) | |||
Investing activities |
(1.064 | ) | (6.395 | ) | (20.732 | ) | ||||||
Financing activities |
32.927 | 31.857 | 34.465 | |||||||||
|
|
|
|
|
|
|||||||
Increase in cash, before effect of exchange rate fluctuation |
$ |
3.533 |
$ |
0.606 |
$ |
(0.784 |
) | |||||
|
|
|
|
|
|
• | the plan for the repayment of the 2019 Convertible Debentures; |
• | the repayment of the term loan 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; |
• | the likelihood of payments required under contingent consideration arrangements; |
• | 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. |
At December 31, 2021 |
Undiscounted Contractual Cash Flows |
|||||||||||||||
Contractual Obligations |
< 1 year |
1 – 2 years |
> 2 years |
Total |
||||||||||||
Bank indebtedness 1 |
$ | 3.460 | $ | — | $ | — | $ | 3.460 | ||||||||
Trade payables and accrued liabilities |
12.421 | — | — | 12.421 | ||||||||||||
Loans and borrowings 2 |
11.764 | 0.786 | — | 12.550 | ||||||||||||
Lease liabilities 3 |
0.522 | 0.534 | 0.179 | 1.235 | ||||||||||||
2019 Convertible Debentures |
24.630 | — | — | 24.630 | ||||||||||||
2021 Convertible Debentures |
0.008 | 0.103 | — | 0.111 | ||||||||||||
Warrant liabilities 4 |
0.710 | — | — | 0.710 | ||||||||||||
Business acquisition payable |
1.399 | — | — | 1.399 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Contractual obligations |
$ |
54.913 |
$ |
1.423 |
$ |
0.179 |
$ |
56.516 |
||||||||
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2021 |
Undiscounted Contractual Cash Flows |
|||||||||||||||||||
Commitments |
< 1 year |
2 – 3 years |
4 – 5 years |
More than 5 years |
Total |
|||||||||||||||
Variable lease payments 5 |
0.397 | 0.478 | 0.125 | 0.013 | 1.013 | |||||||||||||||
Lease payments related to leases which have not yet commenced 6 |
0.105 | 2.589 | 2.763 | 12.636 | 18.093 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commitments |
$ |
0.501 |
$ |
3.067 |
$ |
2.888 |
$ |
12.649 |
$ |
19.106 |
||||||||||
|
|
|
|
|
|
|
|
|
|
1 |
No contractual maturity, due on demand. Excludes interest charged on facility. |
2 |
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. |
3 |
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. |
4 |
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. |
5 |
Variable lease payments associated with lease liabilities. |
6 |
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. |
Three months ended December 31 |
Year ended December 31 |
|||||||||||||||||||
2021 |
2020 |
2021 |
2020 |
2019 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Salaries, fees and short-term benefits |
$ | 0.564 | $ | 0.404 | $ | 1.614 | $ | 1.683 | $ | 1.460 | ||||||||||
Share-based compensation |
0.181 | 0.096 | 0.432 | 0.628 | 0.388 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ |
0.745 |
$ |
0.500 |
$ |
2.046 |
$ |
2.311 |
$ |
1.849 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
For the quarter ended: |
Q2 2022 |
Q1 2022 |
Q4 2021 (2) |
Q3 2021 (1) |
Q2 2021 (1) |
Q1 2021 (1) |
Q4 2020 (2) |
Q3 2020 |
||||||||||||||||||||||||
Total Revenue |
2.269 | 4.430 | 4.171 | 7.434 | 6.556 | 7.436 | 9.223 | 6.137 | ||||||||||||||||||||||||
Net loss |
11.612 | 11.023 | 10.331 | 15.616 | 9.000 | 9.752 | 8.918 | 8.713 | ||||||||||||||||||||||||
Net Loss - mCloud shareholders |
8.052 | 9.778 | 10.095 | 15.466 | 8.930 | 10.271 | 9.302 | 9.417 | ||||||||||||||||||||||||
Basic and diluted loss per share |
$ | 0.50 | $ | 0.61 | $ | 0.73 | $ | 1.22 | $ | 0.88 | $ | 1.12 | $ | 1.02 | $ | 1.15 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total assets |
72.697 |
73.091 |
72.106 |
73.818 |
79.868 |
75.803 |
77.319 |
68.113 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total non-current financial liabilities |
26.795 |
7.532 |
1.513 |
12.978 |
24.565 |
43.440 |
33.443 |
33.319 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The results for each of the quarters ended March 31, June 30 and September 30, 2021 have been corrected, 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). |
(2) |
The Company has corrected net loss and other comprehensive loss attributable to mCloud shareholders and non-controlling interest for the years ended, 2020 and 2021. This resulted in a reclassification between net loss attributable to mCloud shareholders and non-controlling interest, other comprehensive loss attributable to mCloud shareholders and non-controlling interest and impacted basic and diluted loss per share for the quarters ended December 31, 2020 and December 31, 2021. During the quarters ended: |
• |
December 31, 2020, net loss attributable to mCloud shareholders decreased by $0.423 million, net loss attributable to non-controlling interest increased by $0.423 million, and loss per share attributable to mCloud shareholders - basic and diluted decreased by $0.05 per share. |
• |
December 31, 2021, net loss attributable to mCloud shareholders increased by $0.433 million, net loss attributable to non-controlling interest decreased by $0.433 million and loss per share attributable to mCloud shareholders - basic and diluted increased by $0.03 per share. |
Three months ended June 30, |
Six months ended June 30, |
Q2 to Q2 |
Q2 to Q2 |
YTD |
YTD |
|||||||||||||||||||||||||||
2022 |
2021 |
2022 |
2021 |
Change $ |
Change % |
Change $ |
Change % |
|||||||||||||||||||||||||
Revenue |
$ | 2.269 | $ | 6.556 | $ | 6.699 | $ | 13.992 | $ | (4.287 | ) | (65 | )% | $ | (7.293 | ) | (52 | )% | ||||||||||||||
Cost of Sales |
(1.933 | ) | (2.061 | ) | (3.866 | ) | (5.320 | ) | 0.128 | (6 | )% | 1.454 | (27 | )% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Gross Profit |
$ |
0.336 |
$ |
4.496 |
$ |
2.833 |
$ |
8.672 |
$ |
(4.160 |
) |
(93 |
)% |
$ |
(5.839 |
) |
(67 |
)% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Expenses |
||||||||||||||||||||||||||||||||
Salaries, wages and benefits |
$ | 5.059 | $ | 6.333 | $ | 10.374 | $ | 11.204 | $ | (1.274 | ) | (20 | )% | $ | (0.830 | ) | (7 | )% | ||||||||||||||
Sales and marketing |
1.140 | 0.328 | 1.902 | 0.513 | 0.812 | 248 | % | 1.389 | 271 | % | ||||||||||||||||||||||
Research and development |
0.568 | 0.712 | 1.100 | 1.461 | (0.144 | ) | (20 | )% | (0.361 | ) | (25 | )% | ||||||||||||||||||||
General and administrative |
2.065 | 1.556 | 4.617 | 2.893 | 0.509 | 33 | % | 1.724 | 60 | % | ||||||||||||||||||||||
Professional and consulting fees |
3.560 | 2.491 | 6.736 | 4.230 | 1.069 | 43 | % | 2.506 | 59 | % | ||||||||||||||||||||||
Share-based compensation |
0.192 | 0.361 | 0.444 | 0.736 | (0.169 | ) | (47 | )% | (0.292 | ) | (40 | )% | ||||||||||||||||||||
Depreciation and amortization |
1.826 | 1.993 | 3.770 | 3.964 | (0.167 | ) | (8 | )% | (0.194 | ) | (5 | )% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total expenses |
$ | 14.410 | $ | 13.774 | $ | 28.943 | $ | 25.001 | $ | 0.636 | 5 | % | $ | 3.942 | 16 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating loss |
$ |
(14.074 |
) |
$ |
(9.278 |
) |
$ |
(26.110 |
) |
$ |
(16.329 |
) |
$ |
(4.796 |
) |
52 |
% |
$ |
(9.781 |
) |
60 |
% | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Other Expenses (income) |
||||||||||||||||||||||||||||||||
Finance costs |
$ | 2.230 | $ | 1.947 | $ | 4.089 | $ | 4.183 | $ | 0.283 | 15 | % | $ | (0.094 | ) | (2 | )% | |||||||||||||||
Foreign exchange loss (gain) |
(1.116 | ) | 0.164 | (0.494 | ) | 0.532 | (1.280 | ) | (780 | )% | (1.026 | ) | (193 | )% | ||||||||||||||||||
Business acquisition costs and other expenses |
— | 0.012 | — | 0.336 | (0.012 | ) | (100 | )% | (0.336 | ) | (100 | )% | ||||||||||||||||||||
Fair value (gain) loss on derivatives |
(2.538 | ) | (1.113 | ) | (5.032 | ) | 0.451 | (1.425 | ) | 128 | % | (5.483 | ) | (1216 | )% | |||||||||||||||||
Other income |
(0.264 | ) | (1.155 | ) | (0.662 | ) | (3.065 | ) | 0.891 | (77 | )% | 2.403 | (78 | )% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Loss before tax |
$ |
(12.386 |
) |
$ |
(9.133 |
) |
$ |
(24.011 |
) |
$ |
(18.766 |
) |
$ |
(3.253 |
) |
36 |
% |
$ |
(5.245 |
) |
28 |
% | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Current tax expense |
$ | (0.184 | ) | $ | 0.241 | $ | 0.105 | $ | 0.479 | $ | (0.425 | ) | (176 | )% | $ | (0.374 | ) | (78 | )% | |||||||||||||
Deferred tax recovery |
(0.591 | ) | (0.373 | ) | (1.482 | ) | (0.492 | ) | (0.218 | ) | 58 | % | (0.990 | ) | 201 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net loss for the period |
$ |
(11.611 |
) |
$ |
(9.001 |
) |
$ |
(22.634 |
) |
$ |
(18.753 |
) |
$ |
(2.610 |
) |
29 |
% |
$ |
(3.881 |
) |
21 |
% | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Service Line |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
AssetCare Initialization |
$ | 0.443 | $ | 0.819 | $ | (0.375 | ) | (46 | )% | |||||||
AssetCare Solutions |
8.684 | 12.514 | (3.830 | ) | (31 | )% | ||||||||||
Engineering Services |
0.143 | 0.659 | (0.516 | ) | (78 | )% | ||||||||||
Contract modification revenue reversal |
(2.572 | ) | — | (2.572 | ) | (100 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
6.699 |
$ |
13.992 |
$ |
(7.293 |
) |
(52 |
)% | |||||||
|
|
|
|
|
|
|
|
Timing of Revenue Recognition |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Revenue recognized over time |
$ | 7.646 | $ | 11.702 | $ | (4.056 | ) | (35 | )% | |||||||
Revenue recognized at point in time upon completion |
$ | (0.947 | ) | $ | 2.290 | (3.237 | ) | (141 | )% | |||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
6.699 |
$ |
13.992 |
$ |
(7.293 |
) |
(52 |
)% | |||||||
|
|
|
|
|
|
|
|
2022 |
2021 |
Change $ |
Change % |
|||||||||||||
Cost of Sales |
$ | 3.866 | $ | 5.320 | $ | (1.454 | ) | (27 | )% | |||||||
Gross Profit |
$ | 2.833 | $ | 8.672 | $ | (5.839 | ) | (67 | )% | |||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
42.3 |
% |
62.0 |
% |
(19.7 |
)% |
(32 |
)% | ||||||||
|
|
|
|
|
|
|
|
Expenses |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Salaries, wages and benefits |
$ | 10.374 | $ | 11.204 | $ | (0.830 | ) | (7 | )% | |||||||
Sales and marketing |
1.902 | 0.513 | 1.389 | 271 | % | |||||||||||
Research and development |
1.100 | 1.461 | (0.361 | ) | (25 | )% | ||||||||||
General and administration |
4.617 | 2.893 | 1.724 | 60 | % | |||||||||||
Professional and consulting fees |
6.736 | 4.230 | 2.506 | 59 | % | |||||||||||
Share-based compensation |
0.444 | 0.736 | (0.292 | ) | (40 | )% | ||||||||||
Depreciation and amortization |
3.770 | 3.964 | (0.194 | ) | (5 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
28.943 |
$ |
25.001 |
$ |
3.942 |
16 |
% | ||||||||
|
|
|
|
|
|
|
|
• | Professional and consulting expenses increased by 59% or $2.506 million, primarily related to increased costs for professional services in the six months ended June 30, 2022, associated with Company’s NASDAQ listing and financing activities undertaken during the period. |
• | General and administration expenses increased by 60% or $1.724 million due to increased insurance premiums following the Company’s NASDAQ listing in Q4 2021, increased IT subscription costs as the Company ramps up to return its resources to pre-COVID-19 |
• | Sales and marketing costs increased by 271% or $1.389 million, due to the execution of a strategic marketing plan with an increase in marketing activities, including travel and mCloud’s participation in conferences, high-visibility activities and hosting customer events specific to advancing the Company’s presence in Houston and growing customer engagement with mCloud’s Digital Oil & Gas offerings in the six months ended June 30, 2022. |
• | Salaries, wages and benefits costs decreased by 7% or $0.830 million, primarily attributed to a level-setting of overall headcount. |
• | Research and development expenses decreased by $0.361 million in the first six months of 2022 compared with the same period in 2021, the result of careful management and targeted deployment of these activities in 2022. Research and development relates to the ongoing development of technologies across the AssetCare portfolio. |
• | Depreciation and amortization non-cash costs decreased by 5% or $0.194 million for the six months ended June 30, 2022, due to fewer additions of property and equipment assets, combined with fully depreciated assets at or nearing the end of their useful life. |
Other expenses (income) |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Finance costs |
$ | 4.089 | $ | 4.183 | $ | (0.094 | ) | (2 | )% | |||||||
Foreign exchange loss (gain) |
(0.494 | ) | 0.532 | (1.026 | ) | (193 | )% | |||||||||
Business acquisition costs and other expenses |
— | 0.336 | (0.336 | ) | (100 | )% | ||||||||||
Fair value (gain) loss on derivatives |
(5.032 | ) | 0.451 | (5.483 | ) | (1216 | )% | |||||||||
Other income |
(0.662 | ) | (3.065 | ) | 2.403 | (78 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
(2.099 |
) |
$ |
2.436 |
$ |
(4.536 |
) |
(186 |
)% | ||||||
|
|
|
|
|
|
|
|
• | Finance costs decreased by $0.094 million during the six months ended June 30, 2022, compared to the same period in 2021, primarily due to transaction costs on the issuance of convertible debentures expensed in the six months ended June 30, 2021, partially offset by the increased loans and borrowings. |
• | Foreign exchange was a gain of $0.494 million for the six months ended June 30, 2022, compared to a loss of $0.532 million for the same period in 2021, due to a weakening Canadian dollar. |
• | Fair value changes on derivatives were a gain of $5.032 million for the six months ended June 30, 2022. These are non-cash gains resulting from the remeasurement of the warrant liabilities at June 30, 2022. These liabilities include the warrants issued on conversion of the convertible unsecured subordinated debentures issued between December 7, 2020 and May 25, 2021 (“2021 Convertible Debentures”) and the warrants issued in November 2021. |
• | Other income decreased by $2.403 million for the six months ended June 30, 2022, to $0.662 million from $3.065 million for the same period in 2021. Other income consists primarily of 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. |
Major Service Line |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
AssetCare Initialization |
$ | 0.029 | $ | 0.303 | $ | (0.274 | ) | (90 | )% | |||||||
AssetCare Solutions |
4.695 | 6.080 | (1.385 | ) | (23 | )% | ||||||||||
Engineering Services |
0.117 | 0.173 | (0.056 | ) | (32 | )% | ||||||||||
Contract modification revenue reversal |
(2.572 | ) | — | (2.572 | ) | (100 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
2.269 |
$ |
6.556 |
$ |
(4.287 |
) |
(65 |
)% | |||||||
|
|
|
|
|
|
|
|
Timing of Revenue Recognition |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Revenue recognized over time |
$ | 3.783 | $ | 6.253 | $ | (2.470 | ) | (39 | )% | |||||||
Revenue recognized at point in time upon completion |
$ | (1.514 | ) | 0.303 | (1.817 | ) | (599 | )% | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
2.269 |
$ |
6.556 |
$ |
(4.287 |
) |
(65 |
)% | |||||||
|
|
|
|
|
|
|
|
2022 |
2021 |
Change $ |
Change % |
|||||||||||||
Cost of Sales |
$ | 1.933 | $ | 2.061 | $ | (0.127 | ) | (6 | )% | |||||||
Gross Profit |
0.336 | 4.496 | (4.160 | ) | (93 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross margin % |
14.8 |
% |
68.6 |
% |
(78 |
)% | ||||||||||
|
|
|
|
|
|
|
|
Expenses |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Salaries, wages and benefits |
$ | 5.059 | $ | 6.333 | $ | (1.274 | ) | (20 | )% | |||||||
Sales and marketing |
1.140 | 0.328 | 0.812 | 248 | % | |||||||||||
Research and development |
0.568 | 0.712 | (0.144 | ) | (20 | )% | ||||||||||
General and administration |
2.065 | 1.556 | 0.509 | 33 | % | |||||||||||
Professional and consulting fees |
3.560 | 2.491 | 1.069 | 43 | % | |||||||||||
Share-based compensation |
0.192 | 0.361 | (0.169 | ) | (47 | )% | ||||||||||
Depreciation and amortization |
1.826 | 1.993 | (0.167 | ) | (8 | )% | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
14.411 |
$ |
13.774 |
$ |
0.636 |
5 |
% | ||||||||
|
|
|
|
|
|
|
|
• | General and administration expenses increased by 33% or $0.509 million due to increased insurance premiums following the Company’s NASDAQ listing in Q4 2021, and increased IT subscriptions as the Company ramps up to return its resources to pre-COVID-19 |
• | Professional and consulting expenses increased by 43% or $1.069 million, primarily related to increased costs for professional services in Q2 2022 associated with the financing activities undertaken in 2022, as well as the ongoing costs associated with the Company’s NASDAQ listing. Additionally, consultants also filled positions in Q2 2022 that were previously held by employees, correlating with a 20% decrease in salaries, wages and benefits costs described below. |
• | Sales and marketing costs increased by 248% or $0.812 million, due to the execution of increased marketing to build awareness and pipeline growth, along with initiatives to drive AssetCare sales and business development in Q2 2022. |
• | Salaries, wages and benefits costs decreased by 20% or $1.274 million, as a number of roles that were previously held by employees were filled by consultants. |
• | Research and development expenses decreased by $0.144 million in Q2 2022 compared with the same period in 2021, resulting from careful and targeted management of these activities. Research and development relates to the ongoing development of technologies across the AssetCare portfolio. |
• | Depreciation and amortization non-cash costs decreased by 8% or $0.167 million for Q2 2022, due to fewer additions of property and equipment assets, combined with fully depreciated assets at or nearing the end of their useful life. |
Other expenses (income) |
2022 |
2021 |
Change $ |
Change % |
||||||||||||
Finance costs |
$ | 2.230 | $ | 1.947 | $ | 0.283 | 15 | % | ||||||||
Foreign exchange loss (gain) |
(1.116 | ) | 0.164 | (1.280 | ) | (780 | )% | |||||||||
Business acquisition costs and other expenses |
— | 0.012 | (0.012 | ) | (100 | )% | ||||||||||
Fair value (gain) loss on derivatives |
(2.538 | ) | (1.113 | ) | (1.425 | ) | 128 | % | ||||||||
Other income |
(0.264 | ) | (1.155 | ) | 0.891 | (77 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
(1.688 |
) |
$ |
(0.146 |
) |
$ |
(1.543 |
) |
1057 |
% | |||||
|
|
|
|
|
|
|
|
• | Finance costs increased by $0.283 million during the three months ended June 30, 2022, compared to the same period in 2021, primarily due to a $0.162 million loss on debt modification recorded on the term loan as a result of the Accommodation Agreement signed with Fiera in Q2 2022, as well as increased loans and borrowings. |
• | Foreign exchange was a gain of $1.116 million for the three months ended June 30, 2022, compared to a loss of $0.164 million for the same period in 2021, due to a weakening Canadian dollar. |
• | Fair value changes in derivatives were a gain of $2.538 million for the three months ended June 30, 2022, which was an increase of $1.425 million compared to the same period in 2021. These are non-cash gains resulting from the remeasurement of the warrant liabilities at June 30, 2022. |
• | Other income decreased by $0.891 million for the three months ended June 30, 2022, to $0.264 million from $1.155 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. These programs have now ended. |
Cash provided by (used in): |
2022 |
2021 |
||||||
Operating activities |
$ | (16.150 | ) | $ | (12.955 | ) | ||
Investing activities |
(0.036 | ) | (0.774 | ) | ||||
Financing activities |
16.027 | 19.169 | ||||||
|
|
|
|
|||||
Net increase (decrease) in cash, before effect of exchange rate fluctuation |
$ |
(0.159 |
) |
$ |
5.440 |
|||
|
|
|
|
• | the plan for the repayment of the 2019 Convertible Debentures; |
• | the repayment of the term loan 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; |
• | the likelihood of payments required under contingent consideration arrangements; |
• | 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. |
2022 |
2021 |
Change % |
||||||||||
Salaries, fees and short-term benefits |
$ | 0.950 | $ | 0.791 | 20 | % | ||||||
Share-based compensation |
$ | 0.279 | $ | 0.155 | 80 | % | ||||||
|
|
|
|
|
|
|||||||
$ |
1.229 |
$ |
0.946 |
30 |
% | |||||||
|
|
|
|
|
|
• | 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 Company’s 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. |
• | Identifying key positions necessary to support the Company’s 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 Enterprise Resource Planning implementation to streamline the number of applications used for financial reporting activities. |
Securities Outstanding |
||||
Shares issued and outstanding |
16,224,788 |
|||
Share purchase warrants (1) |
8,120,708 |
|||
Stock options |
851,234 |
|||
Restricted share units |
410,737 |
|||
2021 Convertible Debentures (2) |
15,750 |
|||
|
|
|||
Total |
25,623,217 |
|||
|
|
(1) |
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. |
(2) |
Debentures are convertible at the option of the holder and have a conversion price of $6.02 which has been converted to Canadian dollars at August 31, 2022. The Debentures have a remaining life to maturity of 1.3 years. |
* | Despite owning no shares, or having any voting right, the Company determined that it exercised control over Agnity Global, Inc. (“Agnity”) as the Company had the right to nominate a majority of the members of Agnity’s 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 were consolidated into the Company’s financial statements. On July 29, 2022, the Company entered into a technology continuation agreement with Agnity which replaced the royalty agreement between the parties. As a result of this new arrangement, the Company will no longer consolidate the financial results of Agnity as of July 29, 2022. |
• | 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. |
• | 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. |
1) | Connected Buildings |
2) | Connected Workers AI-powered “digital assistant”; |
3) | Connected Energy AI-powered computer vision and the deployment of analytics to improve wind farm energy production yield and availability; |
4) | Connected Industry |
5) | Connected Health in-person visits, including at elder care facilities, age-in-place |
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 |
6,658,373 | US Patent | 12/2/2003 | Live | Field Diagnostic Services, Inc. | |||||
Estimating operating parameters of vapor compression cycle equipment |
6,701,725 | US Patent | 3/9/2004 | Live | Field Diagnostic Services, Inc. | |||||
Estimating evaporator airflow in vapor compression cycle cooling equipment |
6,973,793 | US Patent | 12/13/2005 | Live | Field Diagnostic Services, Inc. | |||||
Apparatus and method for detecting faults and providing diagnostics in vapor compression cycle equipment |
7,079,967 | US Patent | 7/18/2006 | Live | Field Diagnostic Services, Inc. | |||||
Method for Determining Evaporator Airflow Verification |
8,024,938 | US Patent | 9/27/2011 | Live | Field Diagnostic Services, Inc. | |||||
Method and Apparatus for Transforming Polygon Data to Voxel Data for General Purpose Applications |
6,867,774 | US Patent | 3/15/2005 | Live | NGRAIN (Canada) Corporation | |||||
Method and System for Rendering Voxel Data while Addressing Multiple Voxel Set Interpenetration |
7,218,323 | US Patent | 5/15/2007 | Live | NGRAIN (Canada) Corporation | |||||
Method and Apparatus for Transforming Point Cloud Data to Volumetric Data |
7,317,456 | US Patent | 1/8/2008 | Live | NGRAIN (Canada) Corporation | |||||
Method, System and Data Structure for Progressive Loading and Processing of a 3D Dataset |
7,965,290 | US Patent | 6/21/2011 | Live | NGRAIN (Canada) Corporation |
Method and System for Calculating Visually Improved Edge Voxel Normals when Converting Polygon Data to Voxel Data |
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 | |||||
System, Method and Computer-Readable Medium for Organizing and Rendering 3D Voxel Models in a Tree Structure |
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 | 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 |
7/9/2019 | Live | mCloud Corp. |
Trademark |
App. Serial No. / Reg. No. |
Date Issued / Date Filed |
Status |
Registered Owner | ||||
ACRx | 75281276/ 2492872 |
9/25/2001 |
Live | Field Diagnostic Services, Inc. | ||||
MCLOUD CORP (standard mark) | 87327278/ 5333557 |
14/11/2017 |
Live | mCloud Corp. | ||||
mCloud Corp (design mark) |
87327435/ 5333558 |
14/11/2017 |
Live | mCloud Corp. | ||||
Asset Circle of Care (standard mark) | 87327483/ 5333559 |
14/11/2017 |
Live | mCloud Corp. | ||||
AssetCare (standard mark) | 87327512/ 5333560 |
11/14/2017 |
Live | mCloud Corp. | ||||
3KO | 77398780/ 3796217 |
11/11/2008 |
Live | NGRAIN (Canada) Corporation | ||||
NGRAIN (design mark) |
77912373/ 3840652 |
6/15/2010 |
Live | NGRAIN (Canada) Corporation | ||||
NGRAIN (design mark) |
009245101 (EU) | 12/27/2010 |
Live | NGRAIN (Canada) Corporation | ||||
PRODUCER | 009327412 (EU) | 2/3/2011 |
Live | NGRAIN (Canada) Corporation | ||||
NGRAIN (standard mark) | 78199527/ 2881383 |
9/7/2004 |
Live | NGRAIN (Canada) Corporation | ||||
mCloud Connect (standard mark) |
5756945 | 5/21/2019 |
Live | mCloud Corp. | ||||
mCloud (design mark) |
88/907693 | In Application (Approved) | ||||||
mCloud (design mark) |
88/907606 | In Application (Approved) | ||||||
AssetCare (design mark) | 88/907679 | In Application (Approved) | ||||||
PanoMap (standard mark) | 88/916707 6,444,185 |
8/10/2021 |
Live | mCloud Corp. | ||||
Newton Engine (standard mark) | 88/907682 | In Application (Approved) | ||||||
Kanepi | 40201608870Y / SG | June 1 2016 | Live | Kanepi Pte Ltd | ||||
40201608871T / SG | June 1 2016 | Live | Kanepi Pte Ltd | |||||
SEE YOUR BUSINESS | 2024268 / AUS | March 11 2020 | Live | Kanepi Pte Ltd | ||||
MY LDAR (standard mark) | 97264404 | February 11, 2020 |
In Application | mCloud Corp. | ||||
97264407 | February 11, 2020 |
In Application | mCloud Corp. |
Name |
Age |
Position |
Appointed | |||||
Russel H. McMeekin |
57 | Chief Executive Officer, President, Director | October 2017 | |||||
Michael Allman |
61 | Director | October 2017 | |||||
Costantino Lanza |
68 | Chief Growth Officer, Corporate Secretary, Director | October 2017 | |||||
Elizabeth MacLean |
57 | Director | October 2018 | |||||
Ian Russell |
73 | Director | September 2019 | |||||
Chantal Schutz |
49 | Chief Financial Officer | May 2019 |
• | an understanding of the accounting principles used by the Company to prepare the Company’s 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 Company’s financial statements, or experience actively supervising individuals engaged in such activities; and |
• | an understanding of internal controls and procedures for financial reporting. |
Fees billed for the fiscal year ended December 31, |
||||||||
Service Retained |
2021 |
2020 |
||||||
Audit fees (1) |
CAD$ | 1,799,383 | CAD$ | 769,826 | ||||
Audit-related fees (2) |
CAD$ | 6,420 | CAD$ | — | ||||
Tax fees (3) |
CAD$ | 339,624 | CAD$ | 321,050 | ||||
All other fees (4) |
CAD$ | 102,720 | CAD$ | 38,873 | ||||
|
|
|
|
|||||
Total |
CAD$ | 2,248,147 | CAD$ | 1,129,749 |
1. | 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. |
2. | Includes other audit related services that are performed by the auditor. |
3. | Includes fees for tax compliance, tax planning and tax advice. These services include preparing tax returns and corresponding with government tax authorities. |
4. | Includes French translation services related to prospectus filings and historical financial statements and management’s discussion and analysis. |
• | to attract, retain and motivate talented executives who create and sustain the Corporation’s continued success; |
• | to align the interests of the Corporation’s executives with the interests of the Corporation’s 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. |
(a) | base salaries; |
(b) | performance bonuses; and |
(b) | equity incentive grants. |
• | 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 Board’s 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. |
• | 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 |
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Committee or meeting fees ($) |
Value of perquisites ($) |
All other compensation ($) |
Total compensation ($) |
|||||||||||||||||||||
Russel H. McMeekin (1) Director, President and Chief Executive Officer |
2021 | $ | 249,999.84 USD | Nil | Nil | Nil | $ | 93,500 USD | $ | 343,499.84 USD | ||||||||||||||||||
Costantino Lanza (2) Director and Chief Growth Officer |
2021 | $ | 249,999.84 USD | Nil | Nil | Nil | $ | 42,358 USD | $ | 292,357 USD | ||||||||||||||||||
Chantal Schutz Chief Financial Officer |
2021 | $ | 262,000 CAD | Nil | Nil | Nil | Nil | $ | 262,000 CAD | |||||||||||||||||||
Michael Allman Director |
2021 | Nil | Nil | $ | 48,000 USD | Nil | Nil | $ | 48,000 USD | |||||||||||||||||||
Elizabeth MacLean Director |
2021 | Nil | Nil | $ | 48,000 USD | Nil | Nil | $ | 48,000 USD | |||||||||||||||||||
Ian Russell Director |
2021 | Nil | Nil | $ | 48,000 USD | Nil | Nil | $ | 48,000 USD | |||||||||||||||||||
Michael A. Sicuro (3) |
2021 | Nil | Nil | $ | 20,000 USD | Nil | Nil | $ | 20,000 USD |
(1) | Inclusive of the total compensation, Mr. McMeekin received no compensation for his role as director of the Company. |
(2) | Inclusive of the total compensation, Mr. Lanza received no compensation for his role as director of the Company. |
(3) | Mr. Sicuro resigned effective as of May 31, 2021. |
Name and Principal Position |
Type of Security |
Number of Compensation Securities, Number of Underlying Securities, and Percentage of Class(1) |
Date of Issue or Grant |
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 ($) |
Expiry Date | |||||||||||||
Russel H. McMeekin |
Stock Options | 25,000 | October 24, 2019 | Exercise price $12.90 |
$ | 12.30 CAD | $ | 6.10 CAD | October 24, 2029 | |||||||||||
Russel H. McMeekin |
RSU’s | 50,000 | April 12, 2018 | $9.75 CAD | $ | 9.75 CAD | $ | 6.10 CAD | No expiry | |||||||||||
Russel H. McMeekin |
RSU’s | 25,000 | October 24, 2019 | $12.30 CAD | $ | 12.30 CAD | $ | 6.10 CAD | No expiry | |||||||||||
Costantino Lanza |
Stock Option | 12,500 | October 24, 2019 | Exercise price $12.90 |
$ | 12.30 CAD | $ | 6.10 CAD | October 24, 2029 | |||||||||||
Costantino Lanza |
RSU’s | 3,333 | April 12, 2018 | $9.75 CAD | $ | 9.75 CAD | $ | 6.10 CAD | No expiry | |||||||||||
Costantino Lanza |
RSU’s | 12,500 | October 24, 2019 | $12.30 CAD | $ | 12.30 CAD | $ | 6.10 CAD | No expiry | |||||||||||
Michael A. Sicuro |
RSU’s | 6,667 | April 12, 2018 | $9.75 CAD | $ | 9.75 CAD | $ | 6.10 CAD | No expiry | |||||||||||
Ian Russel |
Stock Option | 5,000 | October 24, 2019 | Exercise price $11.85 |
$ | 12.30 CAD | $ | 6.10 CAD | October 24, 2029 | |||||||||||
Chantal Schutz |
Stock Option | 8,333 | October 24, 2019 | Exercise Price $11.70 |
$ | 12.30 CAD | $ | 6.10 CAD | October 24, 2029 | |||||||||||
Chantal Schutz |
Stock Option | 8,333 | July 31, 2021 | Exercise Price $7.65 |
$ | 7.65 CAD | $ | 6.10 CAD | July 31, 2031 | |||||||||||
Chantal Schutz |
Stock Option | 28,800 | October 22, 2021 | Exercise Price $6.99 |
$ | 6.99 CAD | $ | 6.10 CAD | October 22, 2031 | |||||||||||
Chantal Schutz |
Stock Option | 733 | Jan 1, 2022 | Exercise Price $6.99 |
$ | 6.32 CAD | $ | 6.10 CAD | Jan 1, 2032 | |||||||||||
Chantal Schutz |
RSU’s | 8,333 | October 24, 2019 | $12.30 CAD | $ | 12.30 CAD | $ | 6.10 CAD | No Expiry | |||||||||||
Chantal Schutz |
RSU’s | 8,333 | July 31, 2021 | $7.65 CAD | $ | 7.65 CAD | $ | 6.10 CAD | No Expiry |
• | 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. |
a) | base salaries; |
b) | performance bonuses; and |
c) | equity incentive grants. |
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 |
• | 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. |
Beneficial Ownership |
||||||||||||||||
Prior to Offering |
Following Offering(1) |
|||||||||||||||
Name of Beneficial Owner |
Common Shares |
Percentage |
Common Shares |
Percentage |
||||||||||||
Russel H. McMeekin |
229,538 | 1.42 | % | 229,538 | * | % | ||||||||||
Michael Allman |
135,157 | * | % | 135,157 | * | % | ||||||||||
Costantino Lanza |
182,845 | 1.13 | % | 182,845 | * | % | ||||||||||
Elizabeth MacLean |
0 | 0 | % | 0 | 0 | % | ||||||||||
Ian Russell |
18,702 | * | % | 18,702 | * | % | ||||||||||
Chantal Schutz |
8,808 | * | % | 8.808 | * | % | ||||||||||
All officers and directors as a group |
|
|
|
|
|
|
|
|
|
|
|
|
* | Less than 1% |
(1) | Calculated assuming full conversion of all Series A Preferred Shares into Common Shares |
Underwriter |
Per Series A Preferred Share |
Per Related 25 Warrants |
||||||
Public offering price: |
$ | 24.75 | $ | 0.25 | ||||
|
|
|
|
|||||
Placement Agent fees payable by us: |
$ | 1.7325 | $ | 0.175 | ||||
Proceeds, before expenses, to us: |
$ | 23.0175 | $ | 0.2325 | ||||
|
|
|
|
U.S. Securities and Exchange Commission registration fee |
$ | 20,555.5 | ||
FINRA filing fee |
13,905 | |||
Nasdaq listing fee |
5,000 | |||
Legal fees and expenses |
239,000 | |||
Accounting fees and expenses |
250,000 | |||
Transfer agent fees and expenses |
5,000 | |||
Printing fees and expenses |
90,000 | |||
Miscellaneous |
50,000 | |||
|
|
|||
Total |
$ | 673,460 | ||
|
|
Notes |
December 31, 2021 |
December 31, 2020 |
||||||||||
Recast (Note 2) |
Recast (Note 2) |
|||||||||||
ASSETS |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
||||||||||||
Cash and cash equivalents |
$ | $ | ||||||||||
Trade and other receivables |
6 | |||||||||||
Current portion of prepaid expenses and other assets |
7 | |||||||||||
Current portion of long-term receivables |
6 | |||||||||||
Total current assets |
$ | $ | ||||||||||
Non-current assets |
||||||||||||
Prepaid expenses and other assets |
7 | |||||||||||
Long-term receivables |
6 | |||||||||||
Right-of-use assets |
8 | |||||||||||
Property and equipment |
9 | |||||||||||
Intangible assets |
10 | |||||||||||
Goodwill |
10 | |||||||||||
Total non-current assets |
$ | $ | ||||||||||
Total assets |
$ |
$ |
||||||||||
LIABILITIES |
||||||||||||
Current liabilities |
||||||||||||
Bank indebtedness |
13 | $ | $ | |||||||||
Trade payables and accrued liabilities |
11 | |||||||||||
Deferred revenue |
5 | |||||||||||
Current portion of loans and borrowings |
12 | |||||||||||
Current portion of convertible debentures |
14 | |||||||||||
Warrant liabilities |
15 | |||||||||||
Current portion of lease liabilities |
8 | |||||||||||
Current portion of other liabilities |
16 | |||||||||||
Current portion of business acquisition payable |
18 | |||||||||||
Total current liabilities |
$ | $ | ||||||||||
Non-current liabilities |
||||||||||||
Convertible debentures |
14 | |||||||||||
Lease liabilities |
8 | |||||||||||
Loans and borrowings |
12 | |||||||||||
Deferred income tax liabilities |
25 | |||||||||||
Other liabilities |
16 | |||||||||||
Business acquisition payable |
18 | |||||||||||
Total liabilities |
$ |
$ |
||||||||||
EQUITY |
||||||||||||
Share capital |
19 | |||||||||||
Contributed surplus |
||||||||||||
Accumulated other comprehensive income |
||||||||||||
Deficit |
( |
) | ( |
) | ||||||||
Total shareholders’ equity |
$ | $ | ||||||||||
Non-controlling interest |
21 | |||||||||||
Total equity |
$ |
$ |
||||||||||
Total liabilities and equity |
$ |
$ |
“Russ McMeekin” |
“Michael Allman” |
| ||||
Director |
Director |
Year ended December 31, |
||||||||||||||||
Notes |
2021 |
2020 |
2019 |
|||||||||||||
Recast (Note 2) |
Recast (Note 2) |
Recast (Note 2) |
||||||||||||||
|
|
|||||||||||||||
Revenue |
|
4, 5 | |
|
$ | |
$ | |
$ | |
||||||
|
|
|
||||||||||||||
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 |
|
20 | |
|
||||||||||||
|
|
|
||||||||||||||
Depreciation and amortization |
|
8-10 | |
|
||||||||||||
|
|
|
||||||||||||||
Total expenses |
|
|
|
$ | $ | $ | ||||||||||
Operating loss |
|
|
|
$ | $ | $ | ||||||||||
|
|
|
||||||||||||||
Other expenses (income) |
|
|
|
|||||||||||||
|
|
|
||||||||||||||
Finance costs |
|
22 | |
|
||||||||||||
|
|
|
||||||||||||||
Foreign exchange loss (gain) |
|
|
|
( |
) | |||||||||||
|
|
|
||||||||||||||
Business acquisition costs and other expenses |
|
17 | |
|
||||||||||||
|
|
|
||||||||||||||
Impairment |
|
9,10(a) | |
|
– | – | ||||||||||
|
|
|
||||||||||||||
Fair value loss on derivatives |
|
23 | |
|
– | – | ||||||||||
|
|
|
||||||||||||||
Other income |
|
24 | |
|
( |
) | ( |
) | ( |
) | ||||||
|
|
|
||||||||||||||
Loss before tax |
|
|
|
$ | $ | $ | ||||||||||
|
|
|
||||||||||||||
Current tax expense (recovery) |
|
25 | |
|
( |
) | ||||||||||
|
|
|
||||||||||||||
Deferred tax (recovery) expense |
|
25 | |
|
( |
) | ( |
) | ( |
) | ||||||
|
|
|
||||||||||||||
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 |
|
|
|
Notes |
Number of Shares |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Deficit |
Total Shareholder’s Equity |
Non- controlling Interest |
Total Equity |
||||||||||||||||||||||||||||
Balance, December 31, 2020 – Recast (Note 2) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
Share-based payments |
20 | – | – | – | – | – | ||||||||||||||||||||||||||||||
RSUs exercised |
20 | ( |
) | – | – | ( |
) | – | ( |
|||||||||||||||||||||||||||
Broker warrants issued |
19(b) | – | – | – | – | – | ||||||||||||||||||||||||||||||
Shares issued in public offering, net of costs |
19(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Warrants issued in public offering, net of costs |
19(a) | – | – | – | – | – | ||||||||||||||||||||||||||||||
Shares issued in private placement |
19(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued on 2021 Debentures conversion, net |
19(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued in USD public offering, net of costs |
19(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Underwriter warrants issued in USD public offering |
19(a) | – | – | – | – | – | ||||||||||||||||||||||||||||||
Net ( loss) i for the yearncome |
– | – | – | – | ( |
) | ( |
) | ( |
|||||||||||||||||||||||||||
Other comprehensive (loss) income for the year |
– | – | – | ( |
) | – | ( |
) | ( |
|||||||||||||||||||||||||||
Balance, December 31, 2021 – Recast (Note 2) |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
Notes |
Number of Shares |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Deficit |
Total Shareholder’s Equity |
Non- controlling Interest |
Total Equity |
||||||||||||||||||||||||||||
Balance, December 31, 2019 – Recast (Note 2) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
Share-based payments |
20 | – | – | – | – | – | ||||||||||||||||||||||||||||||
RSUs exercised |
20(b) | ( |
) | – | – | ( |
) | – | ( |
|||||||||||||||||||||||||||
Stock options exercised |
20(a) | ( |
) | – | – | – | ||||||||||||||||||||||||||||||
Warrants exercised |
( |
) | – | – | – | |||||||||||||||||||||||||||||||
Shares issued in business combination - CSA |
17(d) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued in business combination - kanepi |
17(e) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued for transaction costs - kanepi |
17(e) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued for asset acquisition - AirFusion |
– | – | – | – | ||||||||||||||||||||||||||||||||
Shares issued on conversion of 2019 debentures |
19(b) | – | – | – | ||||||||||||||||||||||||||||||||
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 income for the year |
– | – | – | – | ||||||||||||||||||||||||||||||||
Balance, December 31, 2020 – Recast (Note 2) |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
Notes |
Number of Shares |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income |
Deficit |
Total Shareholder’s Equity |
Non- controlling Interest |
Total Equity |
||||||||||||||||||||||||||||
Balance, December 31, 2018 |
$ | |
$ | |
$ ( |
) | $ ( |
) | $ | $ | – | $ | ||||||||||||||||||||||||
Share-based payments |
20 | – | – | – | – | – | ||||||||||||||||||||||||||||||
RSUs exercised |
20(b) | ( |
) | – | – | – | – | – | ||||||||||||||||||||||||||||
Stock options exercised |
20(a) | ( |
) | – | – | – | ||||||||||||||||||||||||||||||
Share purchase warrants exercised |
18(b) | ( |
) | – | – | – | ||||||||||||||||||||||||||||||
Shares issued on business combination |
17(c) | – | – | – | – | |||||||||||||||||||||||||||||||
Transaction costs on business combination |
17(c) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued to extinguish the loan from Flow Capital |
17(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Shares issued to settle liabilities |
19(a) | – | – | – | – | |||||||||||||||||||||||||||||||
Share issuance costs |
– | ( |
) | – | – | ( |
) | – | ( |
|||||||||||||||||||||||||||
Warrants issued |
– | – | – | – | – | |||||||||||||||||||||||||||||||
Equity component of convertible debentures |
– | – | – | – | – | |||||||||||||||||||||||||||||||
Contingent shares issuable to Flow Capital |
17(a) | – | – | – | – | – | ||||||||||||||||||||||||||||||
Non-controlling interest recognized in business combination |
– | – | – | – | – | – | ( |
) | ( |
|||||||||||||||||||||||||||
Net (loss) income for the year |
– | – | – | – | ( |
) | ( |
) | ( |
|||||||||||||||||||||||||||
Other comprehensive income for the year |
– | – | – | – | ||||||||||||||||||||||||||||||||
Balance, December 31, 2019 - Recast (Note 2) |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Year ended December 31, |
||||||||||||||||
Notes |
2021 |
2020 |
2019 |
|||||||||||||
Operating activities |
||||||||||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
Items not affecting cash: |
||||||||||||||||
Depreciation and amortization |
8-10 | |||||||||||||||
Share-based compensation |
20 | |||||||||||||||
Finance costs |
22 | |||||||||||||||
Fair value loss on derivatives |
23 | – | – | |||||||||||||
Impairment |
– | – | ||||||||||||||
Other income |
24 | ( |
) | ( |
) | ( |
) | |||||||||
Provision for expected credit loss |
26 | |||||||||||||||
Unrealized foreign currency exchange gain |
( |
) | ||||||||||||||
Business acquisition costs |
– | |||||||||||||||
Current tax expense (recovery) |
25 | ( |
) | |||||||||||||
Deferred income tax recovery |
25 | ( |
) | ( |
) | ( |
) | |||||||||
Gain on settlement of lease liability |
– | – | ( |
) | ||||||||||||
Decrease in working capital |
30 | ( |
) | ( |
) | ( |
) | |||||||||
Interest paid |
( |
) | ( |
) | ( |
) | ||||||||||
Taxes paid |
– | ( |
) | ( |
) | |||||||||||
Net cash used in operating activities |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
Investing activities |
||||||||||||||||
Acquisition of property and equipment |
9 | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
Acquisition of and expenditure on intangible assets |
10 | ( |
) | ( |
) | – | ||||||||||
Acquisition of royalty agreement |
17(a) | – | – | ( |
) | |||||||||||
Acquisition of assets of AirFusion |
– | ( |
) | – | ||||||||||||
Acquisition of business, net of cash acquired |
17 | – | ( |
) | ( |
) | ||||||||||
Net cash used in investing activities |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||
Financing activities |
||||||||||||||||
Payment of lease liabilities |
8 | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
Repayment of loans |
12 | ( |
) | ( |
) | ( |
) | |||||||||
Proceeds from loans and bank indebtedness, net of transaction costs |
12, 13 | |
|
|||||||||||||
Net (repayments) advances of bank indebtedness |
13 | ( |
) | ( |
) | |||||||||||
Proceeds from issuance of shares, net of issuance costs |
19(a) | |
– | |||||||||||||
Proceeds from issuance of convertible debentures, net of costs |
14 | |||||||||||||||
Proceeds from issuance of warrants, net of issuance costs |
19(a) | |||||||||||||||
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 |
$ |
$ |
$ |
• |
December 31, 2019, net loss attributable to mCloud shareholders decreased by $ , net income attributable to noncontrolling interest decreased by $ , and loss per share attributable to mCloud shareholders - basic and diluted decreased by $ per share. |
• |
December 31, 2020, net loss attributable to mCloud shareholders increased by $ income attributable to noncontrolling interest decreased by $ increased by $ per share. |
• |
December 31, 2021, net loss attributable to mCloud shareholders increased by $ , net loss attributable to non-controlling interest decreased by $ and loss per share attributable to mCloud shareholders - basic and diluted increased by $ per share. |
• |
the plan for the repayment of the 2019 Convertible Debentures; |
• |
the repayment of the term loan in full on or before October 31, 2022 (Note 31); |
• |
the likelihood that undrawn funds under the revolving operating facility will be available and will not be required to be repaid (Note 13); |
• |
the required cash principal and interest payments on indebtedness; |
• |
the likelihood of payments required under contingent consideration arrangements; |
• |
cash inflows from current operations 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. |
(a) |
Critical judgements in applying accounting policies |
(b) |
Key sources of estimation uncertainty |
(b) |
Key sources of estimation uncertainty (continued) |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Canada |
$ | $ | $ | |||||||||
United States |
||||||||||||
Japan |
– | |||||||||||
Australia |
– | |||||||||||
Other |
– | |||||||||||
Total revenue |
$ |
$ |
$ |
For the years ended December 31, |
2021 |
2020 |
2019 | |||
Customer A |
Less than |
n/a | ||||
Customer B |
Less than |
|||||
Customer C |
Less than |
|||||
Customer D |
Less than |
n/a |
December 31, 2021 |
December 31, 2020 |
|||||||
Canada |
$ | $ | ||||||
Australia |
||||||||
United States |
||||||||
Total non-current assets |
$ |
$ |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
AssetCare I nitialization 1 |
$ | $ | $ | |||||||||
AssetCare Solutions 2 |
||||||||||||
Engineering S ervices 3 |
||||||||||||
$ |
$ |
$ |
1 |
Revenues from initial implementation and activation of AssetCare projects, including the sale of hardware. |
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. |
Year ended December 31, |
||||||||||||
Timing of revenue recognition | 2021 |
2020 |
2019 |
|||||||||
Over time |
$ | $ | $ | |||||||||
At a point in time upon completion |
||||||||||||
$ |
$ |
$ |
Unbilled revenue |
Deferred revenue |
|||||||||
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 |
$ |
$ |
1 |
Unbilled revenue is included in trade and other receivables (Note 6) and relates to the Company’s 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. |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
$ |
$ |
1 |
At December 31, 2021, the total contract assets were $ with the non-current portion of $ included in other assets (December 31, 2020 - $ total and $ 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. |
December 31, 2021 |
December 31, 2020 |
|||||||
Current portion of long-term receivables 1 |
$ | $ | ||||||
Non-current portion of long-term receivables 2 |
||||||||
Total long-term receivables |
$ |
$ |
1 |
Net of expected credit loss allowance of $ $ |
2 |
Net of expected credit loss allowance of $ |
December 31, 2021 |
December 31, 2020 |
|||||||
Prepaid insurance |
$ | $ | ||||||
Advances |
||||||||
Deposits |
||||||||
Prepaid licenses |
||||||||
Prepaid services |
||||||||
Other prepaid costs |
||||||||
Other assets |
||||||||
Prepaid expenses and other assets |
$ |
$ |
||||||
Current portion |
$ |
$ |
||||||
Non-current portion |
||||||||
$ |
$ |
Office |
Equipment and Vehicles |
Total |
||||||||||
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 |
$ |
$ |
$ |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
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 |
– | – | ||||||||||
$ |
$ |
$ |
1 |
Included in depreciation and amortization expense. |
2 |
Included in rent expense within general and administrative expense. |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Total cash outflows included in operating activities |
$ | $ | $ | |||||||||
Total cash outflows included in financing activities |
$ | |
$ | |
$ | |
Office Furniture and Equipment |
Leasehold Improvements |
Computer Equipment |
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 |
$ |
$ |
$ |
$ |
Patents and trademarks |
Customer relationships |
Technology |
Total |
|||||||||||||
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 |
$ | $ | $ | $ |
1 |
Amortization charges are included in depreciation and amortization in the consolidated statements of loss and comprehensive loss. |
December 31, 2021 |
December 31, 2020 |
|||||||
Opening balance |
$ | |
$ | |||||
Acquisitions, business combinations (Note 18) |
– | |||||||
Effect of movements in exchange rates |
( |
( |
||||||
Total goodwill |
$ |
$ |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
$ |
$ |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
||||||||
$ |
$ |
1 |
Loan assumed as part of CSA Acquisition (Note 17(d)) which bears interest at |
2 |
Financing arrangements provided by Oracle Credit Corporation (“Oracle”) bearing interest between |
3 |
Note 30(b) includes the reconciliation of movements of liabilities to cash flows arising from financing activities. |
December 31, 2021 |
December 31, 2020 |
|||||||
ATB Financial revolving operating facility |
$ | |
$ | – | ||||
Operating loan facility 1 |
– | |||||||
Bank overdraft 1 |
– | |||||||
Total |
$ |
$ |
1 |
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, $ |
December 31, 2021 |
December 31, 2020 |
|||||||
2019 Convertible debentures liability (a) |
$ | $ | |
|||||
2021 Convertible debentures liability (b) |
– | |||||||
2021 Convertible debentures embedded derivative (b) |
– | |||||||
Total |
$ |
$ |
Current debentures |
$ | |
$ | – | ||||
Non-current debentures |
||||||||
$ |
$ |
a) |
2019 Convertible debentures |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
$ |
$ |
a) |
2019 Convertible debentures (continued) |
b) |
2021 Convertible debentures |
b) |
2021 Convertible debentures (continued) |
December 31, 2021 |
||||
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 |
$ |
1 |
Total transaction costs were $ |
2 |
Convertible debt in the principal amount of US$ |
December 31, 2021 |
||||
Fair value of embedded derivative at inception |
$ | |
||
Fair value decrease 1 |
( |
) | ||
Derecognition of embedded derivative on conversion |
( |
) | ||
Foreign exchange adjustments |
( |
) | ||
Balance, embedded derivative |
$ |
1 |
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). |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
$ |
$ |
December 31, 2021 |
August 13, 2021 |
|||||||
Share price at date of valuation |
$ | |
$ | |
||||
Exercise price |
$ | $ | ||||||
Risk free rate |
||||||||
Expected life (years) |
||||||||
Expected volatility 1 |
||||||||
Fair value per warrant 2 |
$ | $ |
1 |
Expected volatility at December 31, 2021 measured at implied volatility of traded warrants. |
2 |
Considers a liquidity discount of |
December 31, 2021 |
November 29, 2021 |
|||||||
Share price at date of valuation |
$ | |
$ | |
||||
Exercise price |
$ | $ | ||||||
Risk free rate |
||||||||
Expected life (years) |
||||||||
Expected volatility 1 |
||||||||
Fair value per warrant |
$ | $ |
1 |
Expected volatility at represents implied volatility of the Company’s traded warrants. |
c) |
Other warrant liabilities |
December 31, 2021 |
December 31, 2020 |
|||||||
US Government loans |
$ | – | $ | |||||
2021 Debentures subscriptions payable (Note 14(b)) |
– | |||||||
Total |
$ |
– |
$ |
|||||
Current portion 1 |
$ | – | ||||||
Non-current portion |
– | |||||||
$ |
– |
$ |
1 |
Includes US Government loans of $ |
a) |
Acquisition of Royalty interests |
i. | a receivable owing by Agnity to Flow of USD $ |
ii. | a monthly royalty payment stream until October 31, 2020 equal to the greater of: |
• | A monthly amount of USD $ |
• | |
iii. | commencing November 1, 2020, a monthly royalty payment stream equal to 4.25% of Agnity’s revenue for each calendar month in perpetuity. |
(i) | A secured loan agreement for USD $ |
• | Cash of USD $ |
• | Issue |
Share price |
$ | |
Risk free rate |
||
Expected life |
||
Expected volatility |
||
Expected dividends |
a) |
Acquisition of Royalty interests (continued) |
(i) | 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 Company’s common shares equals or exceeds: |
• | $ |
• | $ |
• | $ |
Barrier share price |
$ | |
Risk free rate |
||
Expected life |
||
Expected volatility |
||
Expected dividends |
b) |
Acquisition of Agnity |
b) |
Acquisition of Agnity (continued) |
Consideration transferred: |
Final |
|||
Change in fair-value of interest in Royalty Agreement (i) |
$ | |||
Assumption of Agnity’s liabilities |
||||
Total consideration transferred |
$ |
(i) |
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 |
Fair value of assets and liabilities recognized: |
Final |
|||
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 |
$ |
(i) | A warrant was issued by Agnity in 2015 which entitles the warrant holder to acquire |
b) |
Acquisition of Agnity (continued) |
c) |
Acquisition of mCloud Technologies Services Inc. |
Consideration transferred: |
Final |
|||
Cash consideration |
$ | |||
Fair value of demand promissory notes issued (1) |
||||
Fair value of common shares transferred (2) |
||||
Total consideration transferred |
$ |
c) |
Acquisition of mCloud Technologies Services Inc. (continued) |
Fair value of assets and liabilities recognized: |
Final |
|||
Cash and cash equivalents |
$ | |||
Trade and other receivables (includes Unbilled revenue of $ |
||||
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 |
$ |
|||
$ |
d) |
Acquisition of Construction Systems Associates, Inc. USA |
Final |
||||
Consideration transferred: |
||||
Cash consideration |
$ | |||
Fair value of common share consideration |
||||
Fair value of contingent consideration payable |
||||
Total consideration |
$ |
Fair value of assets and liabilities recognized: |
||||
Cash |
$ | |||
Trade and other receivables |
||||
Prepaid expenses and other deposits |
||||
Property and equipment |
||||
Right of use assets |
||||
Intangible - technology |
||||
Intangible - customer relationships |
||||
Accounts payable and accrued liabilities |
( |
) | ||
Short-term loan |
( |
) | ||
Lease liabilities |
( |
) | ||
Deferred tax liabilities |
||||
Fair value of net assets acquired |
$ |
|||
Goodwill |
$ |
e) |
Acquisition of kanepi |
Final |
||||
Consideration transferred: |
||||
Cash consideration |
$ | |||
Fair value of common share consideration |
||||
Fair value of contingent consideration payable |
||||
Total consideration |
$ |
Fair value of assets and liabilities recognized: |
||||
Cash |
$ | |||
Trade and other receivables |
||||
Other current assets |
||||
Property and equipment |
||||
Right of use assets |
||||
Intangible - technology |
||||
Intangible - customer relationships |
||||
Accounts payable and accrued liabilities |
( |
) | ||
Lease liabilities |
( |
) | ||
Deferred tax liabilities |
( |
) | ||
Fair value of net assets acquired |
$ |
|||
Goodwill |
$ |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
||||||||
$ |
$ |
a) |
Common shares |
b) Warrants |
|
Number of Warrants |
Weighted Average Exercise Price $ | |||||
December 31, 2018 |
$ | |||||
Issued |
$ | |||||
Exercised |
( |
$ | ||||
Expired |
( |
|||||
December 31, 2019 |
$ | |||||
Issued |
||||||
Exercised |
( |
|||||
Expired |
( |
|||||
December 31, 2020 |
$ | |||||
Issued |
||||||
Expired |
( |
|||||
December 31, 2021 |
$ |
• | |
• | |
• | |
• | |
• | |
• | |
Expiry Date |
Exercise Price $ |
Outstanding Warrants | ||||
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 |
||||||
$ |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Stock options (a) |
$ | $ | $ | |||||||||
Restricted share units (b) |
||||||||||||
Total |
$ |
$ |
$ |
a) |
Stock Options |
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 |
|||||||||||||||||||
Opening balance |
$ | $ | $ | |||||||||||||||||||||
Granted |
||||||||||||||||||||||||
Exercised |
– | – | ( |
) | ( |
) | ||||||||||||||||||
Forfeited |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Expired |
( |
) | ( |
) | – | – | ||||||||||||||||||
Cancelled |
– | – | ( |
) | – | – | ||||||||||||||||||
Outstanding at December 31 |
$ |
$ |
$ |
|||||||||||||||||||||
Exercisable at December 31 |
$ |
$ |
$ |
a) |
Stock Options (continued) |
Options Outstanding |
Options exercisable |
|||||||||||||||||||||||
Range of prices |
Number |
Weighted average exercise price |
Weighted average life (years) |
Number |
Weighted average exercise price |
|||||||||||||||||||
$ |
$ | $ | ||||||||||||||||||||||
$ |
$ | |
$ | |||||||||||||||||||||
$ |
$ | $ | |
|||||||||||||||||||||
$ |
$ | $ | ||||||||||||||||||||||
$ |
$ |
2021 |
2020 |
2019 | ||||
Grant date share price |
$ |
$ |
$ | |||
Exercise price |
$ |
$ |
$ | |||
Risk-free rate |
||||||
Expected life, years |
||||||
Expected volatility |
||||||
Expected dividends |
– % | – % | – % | |||
Forfeiture rate |
– % |
b) |
Restricted Share Units (“RSUs”) |
b) |
Restricted Share Units (“RSUs”) (continued) |
Number of RSUs |
2021 |
2020 |
2019 |
|||||||||
Outstanding at January 1 |
||||||||||||
Granted |
||||||||||||
Exercised 1 |
( |
( |
( |
|||||||||
Forfeited |
( |
( |
( |
|||||||||
Withheld 1 |
( |
( |
– | |||||||||
Outstanding at December 31 |
||||||||||||
Exercisable at December 31 |
1 |
|
December 31, 2021 |
December 31, 2020 |
|||||||||||||||
NCI percentage |
||||||||||||||||
Recast (Note 2 ) |
Recast (Note 2 ) | |||||||||||||||
|
|
|
| |||||||||||||
Current assets |
$ | $ | ||||||||||||||
Non-current assets |
||||||||||||||||
Current liabilities |
( |
( |
||||||||||||||
Non-current liabilities |
( |
( |
||||||||||||||
Net assets attributable to NCI |
$ | $ | ||||||||||||||
For the years ended |
December 31, 2021 |
December 31, 2020 |
December 31, 20 19 |
|||||||||||||
|
Recast (Note 2) |
Recast (Note 2) |
Recast (Note 2) |
|||||||||||||
Revenue |
$ | $ | $ | |||||||||||||
Income (loss) allocated to NCI |
||||||||||||||||
Other comprehensive income allocated to NCI |
||||||||||||||||
Total comprehensive 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 |
$ | ( |
$ | $ |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
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 |
$ |
$ |
$ |
1 |
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). See N ote 31 (a) and (b) for subsequent changes to Fiera loan. |
Year Ended December 31, |
2021 |
||||
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 |
$ |
1 |
Associated with the 2021 Debentures (Note 14(b)) of which the majority is realized at December 31, 2021. |
2 |
Change in fair value unrealized (Note 26). |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Government assistance 1 |
$ | ( |
$ | ( |
$ | – | ||||||
US Government loan forgiveness 2 (Note 16) |
( |
( |
– | |||||||||
Derecognition of contingent consideration (Note 18) |
( |
– | – | |||||||||
Other |
( |
( |
( |
|||||||||
Total other income |
$ |
( |
$ |
( |
$ |
( |
1 |
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 Company’s eligibility for these programs. |
2 |
Includes other income recognized as below market interest rate benefit. |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
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) |
$ |
( |
$ |
( |
$ |
( |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
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) |
$ |
( |
$ |
( |
$ |
( |
1 |
Comprised of the Canadian Federal effective corporate tax rate of |
At December 31, 2020 |
Recovery/ (expense) through earnings |
Recovery/ (expense) through equity |
Recovery/ (expense) through OCI |
At December 31, 2021 |
||||||||||||||||||
Property and equipment |
$ | $ | ( |
$ | – | $ | $ | |||||||||||||||
Intangible assets |
( |
– | ( |
|||||||||||||||||||
Loans and accrued liabilities |
( |
– | ( |
( |
||||||||||||||||||
Share issuance costs |
– | – | ||||||||||||||||||||
Foreign exchange |
– | ( |
– | ( |
||||||||||||||||||
Non-capital losses/net operating losses |
( |
– | ( |
|||||||||||||||||||
Total |
$ |
( |
$ |
$ |
– |
$ |
$ |
( |
At December 31, 2019 |
Acquired in business combinations |
Recovery/ (expense) through earnings |
Recovery/ (expense) through equity |
Recovery/ (expense) through OCI |
At December 31, 2020 |
|||||||||||||||||||
Property and equipment |
$ | – | $ | ( |
$ | $ | – | $ | ( |
$ | ||||||||||||||
Intangible assets |
( |
( |
– | ( |
||||||||||||||||||||
Loans and accrued liabilities |
( |
– | ( |
( |
( |
|||||||||||||||||||
Share issuance costs |
– | – | – | – | ||||||||||||||||||||
Foreign exchange |
( |
– | – | – | ||||||||||||||||||||
Non-capital losses/net operating losses |
– | ( |
– | ( |
||||||||||||||||||||
Total |
$ |
( |
$ |
( |
$ |
$ |
$ |
$ |
( |
d) |
Deferred tax assets not recognized and tax losses carried forward |
Year Ended December 31, |
||||||||
2021 |
2020 |
|||||||
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 |
||||||||
$ |
$ |
a) |
Classification and measurement of financial assets and liabilities by category |
Financial assets |
Measurement basis |
December 31, 2021 |
December 31, 2020 |
|||||||
Cash and cash equivalents |
Amortized cost | $ | $ | |||||||
Trade and other receivables 1 |
Amortized cost | |||||||||
Long-term receivables |
Amortized cost | |||||||||
Derivative asset |
FVTPL | |||||||||
$ |
$ |
|||||||||
Financial liabilities |
||||||||||
Bank indebtedness |
Amortized cost | $ | $ | |||||||
Trade payables and accrued liabilities 1 |
Amortized cost | |||||||||
Loans and borrowings |
Amortized cost | |||||||||
Lease liabilities 2 |
Amortized cost | |||||||||
2019 Debentures - host liability 3 |
Amortized cost | |||||||||
2021 Debentures - host liability 3 |
Amortized cost | |||||||||
2021 Debentures embedded derivative |
FVTPL | |||||||||
Warrant liability - business acquisition |
FVTPL | |||||||||
Warrant liabilities - derivatives (Note 15) |
FVTPL | |||||||||
Business acquisition payable |
Amortized cost | |||||||||
Other liabilities |
Amortized cost | |||||||||
$ |
$ |
1 |
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. |
2 |
Lease liabilities are not subject to classification in the fair value hierarchy. |
3 |
2019 Debentures (Note 14(a)) and 2021 Debentures host liability (Note 14(b)). |
b) |
Measurement of fair value |
b) |
Measurement of fair value (continued) |
b) |
Measurement of fair value (continued) |
a) |
Liquidity risk (continued) |
At December 31, 2021 |
Undiscounted Contractual Cash Flows |
|||||||||||||||||||
Carrying Amount |
< 1 year |
1 – 2 years |
> 2 years |
Total |
||||||||||||||||
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 |
– | – | ||||||||||||||||||
$ |
$ |
$ |
$ |
$ |
1 |
No contractual maturity. Excludes interest charged on facility as detailed in Note 13. |
2 |
Includes term loan with a carrying value of $ |
3 |
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. |
4 |
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). |
As at December 31, 2020 |
Undiscounted Contractual Cash Flows |
|||||||||||||||||||
Carrying Amount |
< 1 year |
1 – 2 years |
> 2 years |
Total |
||||||||||||||||
Bank indebtedness |
$ | $ | $ | – | $ | – | $ | |||||||||||||
Trade payables and accrued liabilities |
– | – | ||||||||||||||||||
Loans and borrowings |
||||||||||||||||||||
Lease liabilities |
||||||||||||||||||||
2019 Debentures |
– | |||||||||||||||||||
Warrant liabilities |
– | – | ||||||||||||||||||
Business acquisition payable |
– | |||||||||||||||||||
Other liabilities |
– | |||||||||||||||||||
$ |
$ |
$ |
$ |
$ |
b) |
Credit risk |
b) |
Credit risk (continued) |
December 31, 2021 |
December 31, 2020 |
|||||||
Beginning balance |
$ | $ | ||||||
Increase in loss allowance |
||||||||
Amounts written off during the year as uncollectible |
( |
) | ( |
) | ||||
Effects of movement in exchange rates |
– | |||||||
Total |
$ |
$ |
c) |
Market risk |
For the years ended December 31, |
2021 |
2020 |
2019 |
|||||||||
Salaries, management and directors’ fees |
$ | $ | $ | |||||||||
Share-based payments |
||||||||||||
Total |
$ |
$ |
$ |
December 31, 2021 |
December 31, 2020 |
|||||||
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 |
$ |
$ |
1 |
Unless otherwise noted, all amounts due are unsecured, non-interest bearing and due on demand. |
2 |
Included in trade accounts payable and accrued liabilities on the consolidated statements of financial position. |
3 |
Associated with consulting services paid to a company partially owned by the principal owner of Agnity. Consulting services were $ ; December 31, 2019 - $ Balance due included in trade accounts payable and accrued liabilities on the consolidated statements of financial position. |
4 |
Included in loans and borrowings (Note 12) on the consolidated statements of financial position. |
Undiscounted Contractual Cash Flows |
||||||||||||||||||||
< 1 year |
2 - 3 years |
4 - 5 years |
More than 5 years |
Total |
||||||||||||||||
Variable lease payments 1 |
$ | $ | $ | $ | $ | |||||||||||||||
Lease payments related to leases which have not yet commenced 2 |
||||||||||||||||||||
$ | |
$ | |
$ | |
$ | |
$ | |
1 |
Variable lease payments associated lease liabilities (Note 8). |
2 |
In October 2021, the Company executed a |
2021 |
2020 |
2019 |
||||||||||
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 |
$ ( |
$ ( |
$ ( |
2021 |
2020 |
2019 |
||||||||||
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 |
$ |
$ |
$ |
For the years ended December 31, |
2021 |
2020 |
2019 |
|||||||||||||
Value of shares issued in business combination |
$ | – | $ | |
$ | |
||||||||||
Value of shares issued on conversion of 2021 Debentures |
14(b) | $ | |
$ | – | $ | – | |||||||||
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 |
19 (b) |
$ | $ | – | $ | – | ||||||||||
Non-cash underwriter warrants compensation |
1 9 (b) |
$ | $ | – | $ | – | ||||||||||
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 |
$ | – | $ | $ |
Principle activity |
Place of business and operations |
Functional currency |
||||||
|
||||||||
|
||||||||
|
||||||||
(“FDSI”) |
||||||||
(“CSA”) |
||||||||
(“MTS”) |
||||||||
(“NGRAIN”) |
||||||||
. |
||||||||
|
||||||||
|
||||||||
|
||||||||
(Saudi Arabia) |
||||||||
. (“Agnity”) |
||||||||
. (“ACI”) |
||||||||
(“AHI”) |
A. |
Basis of Consolidation (continued) |
B. |
Foreign currency |
C. |
Revenue recognition |
D. |
Financial Instruments |
i. |
Recognition and initial measurement |
ii. |
Classification and subsequent measurement |
• | 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. |
• | 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. |
iii. |
Derecognition of financial assets and liabilities |
iv. |
Impairment of non-derivative financial assets |
iv. |
Impairment of non-derivative financial assets (continued) |
E. |
Property and equipment |
Life | ||
Computer equipment |
||
Office furniture and equipment |
||
Leasehold improvements |
F. |
Intangible assets and goodwill |
Life | ||
Patents and trademarks |
||
Customer relationships |
||
Technology |
F. |
Intangible assets and goodwill (continued) |
• | 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. |
G. |
Impairment of non-financial assets |
G. |
Impairment of non-financial assets (continued) |
H. |
Leases |
i. |
Recognition and initial measurement as a lessee |
• | 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. |
ii. |
Classification and subsequent measurement as a lessee |
H. |
Leases (continued) |
I. |
Government grants |
J. |
Provisions |
K. |
Share related items |
K. |
Share related items (continued) |
L. |
Fair value measurement |
• | 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. |
M. |
Convertible debentures |
M. |
Convertible debentures (continued) |
N. |
Warrant liabilities |
O. |
Income taxes and deferred taxation |
P. |
Accounting standards development |
Notes |
June 30, 2022 |
December 31, 2021 |
||||||||
Recast (Note 2) |
||||||||||
ASSETS |
||||||||||
Current assets |
||||||||||
Cash and cash equivalents |
$ | $ | ||||||||
Trade and other receivables |
5 | |||||||||
Current portion of prepaid expenses and other assets |
||||||||||
Current portion of long-term receivables |
5 | |||||||||
Total current assets |
$ | $ | ||||||||
Non-current assets |
||||||||||
Prepaid expenses and other assets |
$ | $ | ||||||||
Long-term receivables |
5 | |||||||||
Right-of-use |
6 | |||||||||
Property and equipment |
||||||||||
Intangible assets |
||||||||||
Goodwill |
||||||||||
Total non-current assets |
$ | $ | ||||||||
Total assets |
$ |
$ |
||||||||
LIABILITIES |
||||||||||
Current liabilities |
||||||||||
Bank indebtedness |
9 | $ | $ | |||||||
Trade payables and accrued liabilities |
7 | |||||||||
Deferred revenue |
4 | |||||||||
Current portion of loans and borrowings |
8 | |||||||||
Current portion of convertible debentures |
10 | |||||||||
Warrant liabilities |
11 | |||||||||
Current portion of lease liabilities |
6 | |||||||||
Business acquisition payable |
||||||||||
Total current liabilities |
$ | $ | ||||||||
Non-current liabilities |
||||||||||
Convertible debentures |
$ | $ | ||||||||
Lease liabilities |
6 | |||||||||
Loans and borrowings |
8 | |||||||||
Deferred income tax liabilities |
||||||||||
Total liabilities |
$ |
$ |
||||||||
EQUITY (DEFICIT) |
||||||||||
Share capital |
||||||||||
Contributed surplus |
||||||||||
Accumulative other comprehensive income |
||||||||||
Deficit |
( |
) | ( |
) | ||||||
Total shareholders’ equity (deficit) |
$ | ( |
) | $ | ||||||
Non-controlling interest |
( |
) | ||||||||
Total equity (deficit) |
$ |
( |
) |
$ |
||||||
Total liabilities and equity |
$ |
$ |
“Russ McMeekin” |
“Michael Allman” | |
Director |
Director |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||||||
Notes |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||
Recast (Note 2) |
Recast (Note 2) |
|||||||||||||||||||
Revenue |
4 | $ | $ | $ | $ | |||||||||||||||
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 |
13 | |||||||||||||||||||
Depreciation and amortization |
||||||||||||||||||||
Total expenses |
$ | $ | $ | $ | ||||||||||||||||
Operating loss |
$ | $ | $ | $ | ||||||||||||||||
Other expenses (income) |
||||||||||||||||||||
Finance costs |
16(a) | $ | $ | $ | $ | |||||||||||||||
Foreign exchange (gain) loss |
( |
) | ( |
) | ||||||||||||||||
Business acquisition costs and other expenses |
— | — | ||||||||||||||||||
Fair value (gain) loss on derivatives |
16(b) | ( |
) | ( |
) | ( |
) | |||||||||||||
Other income |
16(c) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Loss before tax |
$ | $ | $ | $ | ||||||||||||||||
Current tax expense (recovery) |
( |
) | ||||||||||||||||||
Deferred tax (recovery) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net loss for the period |
$ | $ | $ | $ | ||||||||||||||||
Other comprehensive (income) loss |
||||||||||||||||||||
Foreign subsidiary translation differences |
( |
) | ( |
) | ||||||||||||||||
Comprehensive loss for the period |
$ |
$ |
$ |
$ |
||||||||||||||||
Net loss (income) for the period attributable to: |
||||||||||||||||||||
mCloud Technologies Corp. shareholders |
$ | $ | $ | $ | ||||||||||||||||
Non-controlling interest |
( |
) | ||||||||||||||||||
|
$ |
$ |
$ |
$ |
||||||||||||||||
Comprehensive loss (income) for the period 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 |
Notes |
Number of Shares |
Share Capital |
Contributed Surplus |
Accumulated Other Comprehensive Income (Loss) |
Deficit |
Total Shareholders’ Equity (Deficit) |
Non- controlling Interest |
Total Equity (Deficit) |
||||||||||||||||||||||||||
Balance, December 31, 2021 - Recast (Note 2) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||
Share-based payments |
13 | — | — | — | — | — | ||||||||||||||||||||||||||||
RSUs exercised |
12(a) | ( |
) | — | — | — | — | — | ||||||||||||||||||||||||||
Warrants issued in financing |
12(b) | — | — | — | — | — | ||||||||||||||||||||||||||||
Net loss for the period |
— | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Other comprehensive (loss) income for the period |
— | — | — | ( |
) | — | ( |
) | ( |
) | ||||||||||||||||||||||||
Balance, June 30, 2022 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | |||||||||||||||||||
Balance, December 31, 2020 - Recast (Note 2) |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||
Share-based payment s |
— | — | — | — | — | |||||||||||||||||||||||||||||
RSUs exercised |
( |
) | — | — | — | — | — | |||||||||||||||||||||||||||
Broker warrants issued |
— | — | — | — | — | |||||||||||||||||||||||||||||
Shares issued in public offering, net of costs |
— | — | — | |||||||||||||||||||||||||||||||
Investor warrants issued, net of costs |
— | — | — | — | — | |||||||||||||||||||||||||||||
Net (loss) income for the period |
— | — | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Other comprehensive income for the period |
— | — | — | — | ||||||||||||||||||||||||||||||
Balance, June 30, 2021 - Recast (Note 2) |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
Six months ended June 30, |
||||||||||
Notes |
2022 |
2021 |
||||||||
Operating activities |
Recast (Note 2) |
|||||||||
Net loss for the period |
$ | ( |
) | $ | ( |
) | ||||
Items not affecting cash: |
||||||||||
Depreciation and amortization |
||||||||||
Share-based compensation |
13 | |||||||||
Finance costs |
16(a) | |||||||||
Fair value (gain) loss on derivatives |
16(b) | ( |
) | |||||||
Other income |
( |
) | ( |
) | ||||||
Provision for expected credit loss |
( |
) | — | |||||||
Unrealized foreign currency exchange (gain) loss |
||||||||||
Current tax expense |
||||||||||
Deferred income tax recovery |
( |
) | ( |
) | ||||||
Increase (decrease) in working capital |
17(a) | ( |
) | |||||||
Interest paid |
( |
) | ( |
) | ||||||
Net cash used in operating activities |
$ | ( |
) | $ | ( |
) | ||||
Investing activities |
||||||||||
Acquisition of property and equipment |
$ | ( |
) | $ | ( |
) | ||||
Expenditure on intangible assets |
— | ( |
) | |||||||
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 |
||||||||||
Repayments of bank indebtednes s |
( |
) | ( |
) | ||||||
Proceeds from issuance of shares, net of issuance costs |
— | |||||||||
Proceeds from issuance of convertible debentures, net of costs |
— | |||||||||
Advance from subscription of units |
— | |||||||||
Proceeds from exercise of warrants, net |
— | |||||||||
Net cash provided by financing activities |
$ | $ | ||||||||
Net (decrease) increase in cash and cash equivalents |
$ | ( |
) | $ | ||||||
Effect of exchange rate fluctuations on cash held |
( |
) | ( |
) | ||||||
Cash and cash equivalents, beginning of period |
||||||||||
Cash and cash equivalents, end of period |
$ |
$ |
• | the plan for the repayment of the 2019 Convertible Debentures; |
• | |
• | 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; |
• | cash inflows from current operations 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. |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
AssetCare Initialization 1 |
$ | $ | $ | $ | ||||||||||||
AssetCare Solutions 2 |
|
|
|
|
||||||||||||
Engineering Services 3 |
||||||||||||||||
Contract modification revenue reversal 4 |
( |
) | — | ( |
) | — | ||||||||||
$ |
$ |
$ |
$ |
1 |
Revenues from initial implementation and activation of AssetCare projects, including the sale of hardware. |
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. |
4 |
During the three months ended June 30, 2022, the Company cancelled a multi-year customer contract for which services had been performed in prior periods, resulting in a contract modification. As a result, revenue from AssetCare Initialization of $ |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
Revenue recognized |
2022 |
2021 |
2022 |
2021 |
||||||||||||
Over time 1 |
$ |
$ |
$ |
$ |
||||||||||||
At a point in time upon completion 1 |
( |
) |
( |
) |
||||||||||||
$ |
$ |
$ |
$ |
1 |
See table above and related footnote 4. The three and six months ended June 30, 2022 reflects the reversal of $ |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Canada 1 |
$ | ( |
) | $ | $ | $ | ||||||||||
Americas |
||||||||||||||||
Asia Pacific |
|
|
|
|
||||||||||||
Other |
||||||||||||||||
Total revenue |
$ |
$ | $ |
$ |
1 |
Impact of previously recognized revenue for contract modification as explained in tables above. |
Unbilled revenue |
Deferred revenue |
|||||||||||
Balance at December 31, 2021 |
$ |
$ |
||||||||||
Additions |
||||||||||||
Less: transferred to trade and other receivables |
( |
) | — | |||||||||
Less: recognized in revenue |
— | ( |
) | |||||||||
Effect of movements in exchange rates |
— | |||||||||||
Balance at June 30, 2022 |
$ |
$ |
June 30, 2022 |
December 31, 2021 |
|||||||
Trade receivables from contracts with customers |
$ | |
$ | |
||||
Unbilled revenue (Note 4) |
||||||||
Indirect taxes receivable |
||||||||
Income taxes receivable |
||||||||
Other receivables |
||||||||
Contract asset |
||||||||
Loss allowance |
( |
) | ( |
) | ||||
Total trade and other receivables - current |
$ |
$ |
June 30, 2022 |
December 31, 2021 |
|||||||
Current portion of long-term receivables 1 |
$ | $ | ||||||
Non-current portion of long-term receivables 2 |
||||||||
Total long-term receivables |
$ |
$ |
1 |
Net of expected credit loss allowance of $ |
2 |
Net of expected credit loss allowance of $ |
June 30, 2022 |
December 31, 2021 |
|||||||
Trade payables |
$ |
$ |
||||||
Accrued liabilities |
||||||||
Interest payable |
||||||||
Mastercard facility |
||||||||
Due to related parties |
||||||||
Income taxes payable |
||||||||
Indirect taxes payable |
||||||||
Other 1 |
||||||||
Total trade payables and accrued liabilities |
$ |
$ |
1 |
At June 30, 2022, includes $ |
June 30, 2022 |
December 31, 2021 |
|||||||
Term loan (a) |
$ |
$ |
||||||
Promissory notes (b) |
||||||||
Nations Interbanc facility 1 |
||||||||
Debenture payable to Industry Canada |
||||||||
Loan payable to related party 2 |
||||||||
Oracle financing |
||||||||
Other loans and financing |
||||||||
Total |
$ |
$ |
||||||
Current |
$ |
$ |
||||||
Non-current |
$ |
$ |
||||||
Total |
$ |
$ |
1 |
Nations advanced $ |
2 |
Loan which originally matured in January 2023 was repaid in full in August 2022. |
June 30, 2022 |
December 31, 2021 |
|||||||
ATB Financial revolving operating facility |
$ |
$ |
June 30, 2022 |
December 31, 2021 |
|||||||
Opening balance |
$ | $ | ||||||
Interest paid |
( |
( |
||||||
Accreted interest at effective interest rate |
||||||||
Carrying amount of liability component |
$ | $ | ||||||
Less: interest payable |
( |
( |
||||||
Total - current |
$ |
$ |
June 30, 2022 |
December 31, 2021 |
|||||||
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 |
$ |
$ |
Number of Warrants |
Weighted Average Exercise Price |
|||||||||||
Balance, December 31, 2021 |
$ | |||||||||||
Issued |
||||||||||||
Expired |
( |
) | ||||||||||
Balance, June 30, 2022 |
$ |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Stock options (a) |
$ | |
$ | |
$ | |
$ | |
||||||||
Restricted share units (b) |
||||||||||||||||
Total |
$ |
$ |
$ |
$ |
Number of Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (years) |
||||||||||
Outstanding, December 31, 2021 |
$ |
|||||||||||
Granted |
$ | |||||||||||
Forfeited |
( |
) | $ | |||||||||
Expired |
( |
) | $ | |||||||||
Outstanding, June 30, 2022 |
$ |
Number of RSUs |
||||
Outstanding, December 31, 2021 |
||||
Granted |
||||
Exercised |
( |
) | ||
Forfeited |
( |
) | ||
Outstanding, June 30, 2022 |
||||
Exercisable at June 30, 2022 |
June 30, 2022 |
December 31, 2021 |
|||||||
Recast (Note 2) |
||||||||
NCI percentage |
% |
% |
||||||
Current assets |
$ |
$ |
||||||
Non-current assets |
||||||||
Current liabilities |
( |
) |
( |
) | ||||
Non-current liabilities |
( |
) |
( |
) | ||||
Net assets (liabilities) attributable to NCI |
$ |
( |
) |
$ |
||||
|
||||||||
For the six months ended |
June 30, 2022 |
June 30, 2021 |
||||||
Recast (Note 2) |
||||||||
Revenue |
$ |
$ |
||||||
|
||||||||
(Loss) income 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 provided by (used in) financing activities |
( |
) | ||||||
Foreign exchange impact on cash held in USD |
||||||||
Net (decrease) increase in cash and cash equivalents |
$ |
( |
) |
$ |
Financial assets |
Measurement basis |
June 30, 2022 |
December 31, 2021 |
|||||||
Cash and cash equivalents |
Amortized cost |
$ |
$ |
|||||||
Trade and other receivables 1 |
Amortized cost |
|||||||||
Long-term receivables |
Amortized cost |
|||||||||
$ |
$ |
|||||||||
Financial liabilities |
||||||||||
Bank indebtedness |
Amortized cost |
$ |
$ |
|||||||
Trade payables and accrued liabilities 1 |
Amortized cost |
|||||||||
Loans and borrowings |
Amortized cost |
|||||||||
Lease liabilities |
Amortized cost |
|||||||||
2019 Debentures - host liability |
Amortized cost |
|||||||||
2021 Debentures - host liability |
Amortized cost |
|||||||||
2021 Debentures embedded derivative |
FVTPL |
|||||||||
Warrant liability - business acquisition |
FVTPL |
– |
||||||||
Warrant liabilities - derivatives (Note 11) |
FVTPL |
|||||||||
Business acquisition payable |
FVTPL |
|||||||||
$ |
$ |
1 |
Excludes amounts for indirect taxes, income taxes and contract assets, where applicable. |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Interest on loans and borrowings |
$ |
$ |
$ |
$ |
||||||||||||
Interest on convertible debentures |
||||||||||||||||
Interest on lease liabilities |
||||||||||||||||
Transaction costs expensed |
||||||||||||||||
Other finance costs |
( |
) |
( |
) | ||||||||||||
Total finance costs |
$ |
$ |
$ |
$ |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Gain on warrant liability remeasurement 1 |
$ |
( |
) |
$ |
— |
$ |
( |
) |
$ |
— |
||||||
Gain on embedded derivatives 2 |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Deferred charge loss 2 |
— |
( |
) |
— |
||||||||||||
Total fair value (gain) loss on derivatives |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Government assistance 1 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Government loan forgiveness |
— |
( |
) |
— |
( |
) | ||||||||||
Derecognition of contingent consideration |
— |
— |
( |
) | ||||||||||||
Other |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Total other income |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
1 |
Majority of government assistance are grants from the Canadian Government for wage and rental subsidies. |
Six months ended June 30, |
||||||||
2022 |
2021 |
|||||||
Trade and other receivables decrease (increase) |
$ |
$ |
( |
) | ||||
Long-term receivables decrease |
||||||||
Prepaid expenses and other assets (increase) |
( |
) |
( |
) | ||||
Trade payables and accrued liabilities increase (decrease) |
( |
) | ||||||
Deferred revenue increase |
||||||||
Increase (decrease) in working capital |
$ |
$ |
( |
) |
Six months ended June 30, |
||||||||
2022 |
2021 |
|||||||
Balance of loans, borrowings and PPP loans, beginning of period |
$ |
$ |
||||||
New advances |
||||||||
Repayments of principal |
( |
) |
( |
) | ||||
Repayments of interest |
( |
) |
( |
) | ||||
Liability related items |
||||||||
Forgiveness of PPP Loans 1 |
— |
( |
) | |||||
Finance fees paid |
( |
) |
— |
|||||
Non-cash related items |
||||||||
Accretion of interest and debt issuance costs |
||||||||
Loss on debt modification |
— |
|||||||
Benefit from below market interest rate |
— |
( |
) | |||||
Foreign exchange and other |
( |
) | ||||||
Balance of loans, borrowings and PPP loans, end of period |
$ |
$ |
1 |
Paycheck Protection Plan (“PPP”) loans as described in the 2021 Annual Financial Statements. |
Six months ended June 30, |
||||||||
2022 |
2021 |
|||||||
Non-cash accretion of interest included in finance costs 1 |
$ | |
$ | |
||||
Addition of right-of-use 2 |
— | |||||||
Addition to lease liabilities 2 |
— | |||||||
Non-cash broker warrants compensation |
— |
1 |
Associated mainly with convertible debentures. |
2 |
Associated mainly with Calgary lease described in Note 6 and one other new lease in the six months ended June 30, 2022. |
* | filed herewith |
(i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
(ii) | 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. |
(iii) | 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; |
(i) | 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); |
(ii) | 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; |
(iii) | 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 |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
mCloud Technologies Corp. | ||
By: | /s/ Russell H. McMeekin | |
Name: | Russell H. McMeekin | |
Title: | Chief Executive Officer (Principal Executive Officer) | |
Dated: | November 7, 2022 |
Signature |
Title |
Date | ||
/s/ Russell H. McMeekin |
Chief Executive Officer |
November 7, 2022 | ||
Russell H. McMeekin |
(Principal Executive Officer) |
|||
/s/ Chantal Schutz |
Chief Financial Officer |
November 7, 2022 | ||
Chantal Schutz |
(Principal Accounting and Financial Officer) |
|||
/s/ * |
Director |
November 7, 2022 | ||
Michael Allman |
||||
/s/ * |
Director |
November 7, 2022 | ||
Constantino Lanza |
||||
/s/ * |
Director |
November 7, 2022 | ||
Elizabeth MacLean |
||||
/s/ * |
Director |
November 7, 2022 | ||
Ian C. W. Russell |
*By: |
/s/ Russell H. McMeekin |
Attorney-in-fact |
November 7, 2022 | |||
Russell H. McMeekin |
Authorized U.S. Representative | ||
By: |
/s/ Russell H. McMeekin | |
Name: Russell H. McMeekin | ||
Title: Chief Executive Officer |
Exhibit 1.1
PLACEMENT AGENCY AGREEMENT
[], 2022
Maxim Group LLC
300 Park Avenue, 16th Floor
New York, NY 10022
Ladies and Gentlemen:
Introduction. Subject to the terms and conditions herein (this Agreement), mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (collectively with its subsidiaries, the Company), hereby agrees to sell a minimum of an aggregate of $15,000,000 (the Minimum Amount) of registered securities and up to maximum of an aggregate of $35,000,000 (the Maximum Amount) of registered securities of the Company, including, but not limited to, up to 1,400,000 Units, with each Unit consisting of one 9.0% Series A Cumulative Perpetual Preferred Share (the Series A Shares) and 25 warrants to purchase one Common Share of the Company each (the Warrants, and the Common Shares underlying the Warrants, the Warrant Shares, and the Units, Series A Shares, the Warrants and the Warrant Shares, the Securities) directly to various investors (each, an Investor and, collectively, the Investors) through Maxim Group LLC (the Placement Agent) as placement agent. The documents executed and delivered by the Company and the Investors in connection with the Offering (as defined below), including, without limitation, a securities purchase agreement (the Purchase Agreement), shall be collectively referred to herein as the Transaction Documents. The purchase price to the Investors for each Unit is $25.00 and the exercise price to the Investors for each Common Share issuable upon exercise of the Warrants is $4.75. The Offering will terminate upon the earlier of (a) the date upon which the Company has accepted subscriptions for the Maximum Amount, and (b) the date that is 60 days after the date of this Agreement; unless extended by the mutual agreement of the Company and the Placement Agent for an additional 30-day period (such period, the Offering Period). The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the Offering.
The Company hereby confirms its agreement with the Placement Agent as follows:
Section 1. Agreement to Act as Placement Agent.
(a) On the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and conditions of this Agreement, the Placement Agent shall be the exclusive placement agent in connection with the offering and sale by the Company of the Securities pursuant to the Companys registration statement on Form F-1 (File No. 333-264859) (the Registration Statement), with the terms of such offering (the Offering) to be subject to market conditions and negotiations between the Company, the Placement Agent and the prospective Investors. The Placement Agent will act on a reasonable best efforts basis and the Company agrees and acknowledges that there is no guarantee of the successful placement of the Securities, or any portion thereof, in the prospective Offering. Under no circumstances will the Placement Agent or any of its Affiliates (as defined below) be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide any financing. The Placement Agent shall act solely as the Companys agent and not as principal. The Placement Agent shall have no authority to bind the Company with respect to any prospective offer to purchase Securities and the Company shall have the sole right to accept offers to purchase Securities and may reject any such offer, in whole or in part. Subject to the terms and conditions hereof, payment of the purchase price for, and delivery of, the Securities shall be made at one or more closings (each a Closing and the date on which each Closing occurs, a Closing Date).
(b) Unless the Minimum Amount is subscribed for and accepted by the Company by the conclusion of the Offering Period, or waived by the Company, the Offering will be terminated and all subscription proceeds will be returned to Investors without interest or deduction. If at least the Minimum Amount has been subscribed for and accepted by the Company at any time during the Offering Period, the Company will conduct an initial Closing at a time of its choosing (the Initial Closing). Thereafter, the Company may, in its sole and absolute discretion, conduct subsequent Closings until the first to occur of: (i) the full subscription for and acceptance by the Company of the Maximum Amount, (ii) the conclusion of the Offering Period, or (iii) the termination of the Offering and this Agreement.
(c) The Closing of the issuance of the Securities shall occur via Delivery Versus Payment, i.e., on the Closing Date, the Company shall issue the Securities directly to the account designated by the Placement Agent and, upon receipt of such Securities, the Placement Agent shall electronically deliver such Securities to the applicable Investor and payment shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company. As compensation for services rendered, on each Closing Date, the Company shall pay to the Placement Agent the fees and expenses set forth below:
(i) A cash fee equal to 8.0% of the gross proceeds received by the Company from the sale of the Securities at the closing of the Offering (the Closing).
(ii) The Company also agrees to reimburse Placement Agents expenses up to a maximum of $125,000 (inclusive of any advance paid by the Company to the Placement Agent), unless otherwise agreed by the Company and the Placement Agent, payable immediately upon and only in the event of the Closing of the Offering.
(d) The term of the Placement Agents exclusive engagement will be as set forth in the Engagement Agreement, dated April 27, 2022 (Engagement Agreement). Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification and contribution contained herein and the Companys obligations contained in the indemnification provisions will survive any expiration or termination of this Agreement, and the Companys obligation to pay fees actually earned and payable and to reimburse expenses actually incurred and reimbursable pursuant to Section 1 hereof and which are permitted to be reimbursed under FINRA Rule 5110(g)(4)(A), will survive any expiration or termination of this Agreement; provided, however, that if for any reason an Offering is not consummated, then the obligation of the Company to reimburse the Placement Agent for expenses shall not exceed $25,000 in the aggregate. Nothing in this Agreement shall be construed to limit the ability of the Placement Agent or its Affiliates to pursue, investigate, analyze, invest in, or engage in investment banking, financial advisory or any other business relationship with Persons (as defined below) other than the Company. As used herein (i) Persons 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 and (ii) 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 of 1933, as amended (the Securities Act).
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Section 2. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to the Placement Agent as of the date hereof, and as of each Closing Date, as follows:
(a) Securities Law Filings. The Company has filed with the Securities and Exchange Commission (the Commission) the Registration Statement under the Securities Act, which was filed on May 11, 2022 and declared effective on [], 2022 for the registration of the Securities under the Securities Act. Following the determination of pricing among the Company and the prospective Investors introduced to the Company by Placement Agent, the Company will file with the Commission pursuant to Rules 430A and 424(b) under the Securities Act, and the rules and regulations (the Rules and Regulations) of the Commission promulgated thereunder, a final prospectus relating to the placement of the Securities, their respective pricings and the plan of distribution thereof and will advise the Placement Agent of all further information (financial and other) with respect to the Company required to be set forth therein. Such registration statement, at any given time, including the exhibits thereto filed at such time, as amended at such time, is hereinafter called the Registration Statement; such prospectus in the form in which it appears in the Registration Statement at the time of effectiveness is hereinafter called the Preliminary Prospectus; and the final prospectus, in the form in which it will be filed with the Commission pursuant to Rules 430A and/or 424(b) (including the Preliminary Prospectus as it may be amended or supplemented) is hereinafter called the Final Prospectus. The Registration Statement at the time it originally became effective is hereinafter called the Original Registration Statement. Any reference in this Agreement to the Registration Statement, the Original Registration Statement, the Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein (the Incorporated Documents), if any, which were or are filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), at any given time, as the case may be; and any reference in this Agreement to the terms amend, amendment or supplement with respect to the Registration Statement, the Original Registration Statement, the Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the date of this Agreement, or the issue date of the Preliminary Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information which is contained, included, described, referenced, set forth or stated in the Registration Statement, the Preliminary Prospectus or the Final Prospectus (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, the Preliminary Prospectus or the Final Prospectus, as the case may be. As used in this paragraph and elsewhere in this Agreement, Time of Sale Disclosure Package means the Preliminary Prospectus, any subscription agreement between the Company and the Investors, the final terms of the Offering provided to the Investors (orally or in writing) and any issuer free writing prospectus as defined in Rule 433 of the Act (each, an Issuer Free Writing Prospectus), if any, that the parties hereto shall hereafter expressly agree in writing to treat as part of the Time of Sale Disclosure Package. The term any Prospectus shall mean, as the context requires, the Preliminary Prospectus, the Final Prospectus, and any supplement to either thereof. The Company has not received any notice that the Commission has issued or intends to issue a stop order suspending the effectiveness of the Registration Statement or the use of the Preliminary Prospectus or any prospectus supplement or intends to commence a proceeding for any such purpose.
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(b) Assurances. The Original Registration Statement, as amended (and any further documents to be filed with the Commission), contains all exhibits and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the Securities Act and the applicable Rules and Regulations and did not contain any 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. The Final Prospectus, as of its date, complied or will comply in all material respects with the Securities Act and the applicable Rules and Regulations. The Final Prospectus, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations promulgated thereunder, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents incorporated by reference in the Final Prospectus), in light of the circumstances under which they were made not misleading. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. Except for this Agreement and the Transaction Documents, there are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. Except for this Agreement and the Transaction Documents, there are no contracts or other documents required to be described in the Final Prospectus, or to be filed as exhibits or schedules to the Registration Statement, which have not been described or filed as required. The representations set forth in this Section 2(b) do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information furnished to the Company in writing by the Placement Agent expressly for use therein, it being understood and agreed that the only such information furnished by the Placement Agent consists of the disclosure under the Plan of Distribution section of the Final Prospectus (the Underwriter Information).
(c) Offering Materials. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to each Closing Date, any offering material in connection with the offering and sale of the Securities other than the Time of Sale Disclosure Package.
(d) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and the Time of Sale Disclosure Package and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of this Agreement 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 Companys Board of Directors (the Board of Directors) or the Companys shareholders in connection therewith other than in connection with the Required Approvals (as defined below). This Agreement has been duly executed by the Company and, when delivered in accordance with the terms hereof, 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. For purposes of this Agreement, the term Required Approvals shall mean: (i) the filings required pursuant to Section 4.4 of the Purchase Agreement, (ii) the filing with the Commission of the Prospectus, (iii) application(s) to the Nasdaq Capital Market and TSX Venture Exchange, as applicable (the Trading Market), for the listing of the Series A Shares, Warrants and Warrant Shares for trading thereon in the time and manner required thereby, and (iv) such filings as are required to be made under applicable state securities laws.
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(e) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the transactions contemplated pursuant to the Time of Sale Disclosure Package, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby to which it is a party 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 reasonably be expected to result in a Material Adverse Change.
(f) Certificates. Any certificate signed by an officer of the Company and delivered to the Placement Agent or to counsel for the Placement Agent shall be deemed to be a representation and warranty by the Company to the Placement Agent as to the matters set forth therein.
(g) Reliance. The Company acknowledges that the Placement Agent will rely upon the accuracy and truthfulness of the foregoing representations and warranties and hereby consents to such reliance.
(h) Forward-Looking Statements. No forward-looking statements (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Time of Sale Disclosure Package has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(i) Statistical or Market-Related Data. Any statistical, industry-related and market-related data included or incorporated by reference in the Time of Sale Disclosure Package, are based on or derived from sources that the Company reasonably and in good faith believes to be reliable and accurate, and such data agree with the sources from which they are derived.
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(j) Certain Fees; FINRA Affiliations. Except as set forth in the Registration Statement 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 shareholders that may affect the Placement Agents compensation, as determined by FINRA. Other than payments to the Placement Agent for this Offering, 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 participating in the offering as defined in FINRA Rule 5110 (a Participating Member); or (iii) any person or entity that has any direct or indirect affiliation or association with any Participating Member, within the 180-day period preceding the initial filing of the Registration Statement through the 60-day period after the Effective Date. None of the net proceeds of the Offering will be paid by the Company to any Participating Member or its affiliates, except as specifically authorized herein. To the Companys knowledge, no officer, director or any beneficial owner of 10% or more of the Companys Common Shares or Common Share Equivalents has any direct or indirect affiliation or association with any Participating Member in the Offering. Except for securities purchased on the open market, no Company Affiliate is an owner of stock or other securities of any Participating Member. No Company Affiliate has made a subordinated loan to any Participating Member. No proceeds from the sale of the Securities (excluding placement agent compensation as disclosed in the Registration Statement and the Prospectus) will be paid to any Participating Member, any persons associated with a Participating Member or an affiliate of a Participating 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 Placement Agent within the 180-day period prior to the initial filing date of the Prospectus. Except for securities issued to the Placement Agent as disclosed in the Prospectus, 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 Participating Member, is a person associated with a Participating Member or is an affiliate of a Participating Member. No Participating Member in the Offering has a conflict of interest with the Company. For this purpose, a conflict of interest exists when a Participating Member, the parent or affiliate of a Participating Member or any person associated with a Participating Member in the aggregate beneficially own 5% or more of the Companys outstanding subordinated debt or common equity, or 5% or more of the Companys preferred equity. FINRA member participating in the Offering includes any associated person of a Participating Member in the Offering, any member of such associated persons immediate family and any affiliate of a Participating Member in the Offering. When used in this Section 3.1(j) 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 Placement Agent Counsel if it learns that any officer, director or owner of 10% or more of the Companys outstanding Common Shares or Common Share Equivalents is or becomes an affiliate or associated person of a Participating Member.
(k) Board of Directors. The Board of Directors is comprised of the persons set forth under the heading of the Prospectus captioned Management. 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. 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.
(l) D&O Questionnaires. To the Companys knowledge, all information contained in the questionnaires most recently completed by each of the Companys directors and officers 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 become inaccurate and incorrect.
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(m) Representations and Warranties Incorporated by Reference. Each of the representations and warranties (together with any related disclosure schedules thereto) made to the Investors in the Purchase Agreement is hereby incorporated herein by reference (as though fully restated herein) and is hereby made to, and in favor of, the Placement Agent.
Section 3. Delivery and Payment. Each Closing shall occur at the offices of Fox Rothschild LLP, 222 South Ninth Street, Suite 2000, Minneapolis, Minnesota 55402 (Placement Agent Counsel) (or at such other place as shall be agreed upon by the Placement Agent and the Company). Subject to the terms and conditions hereof, at each Closing payment of the purchase price for the Securities sold on such Closing Date shall be made by Federal Funds wire transfer, against delivery of such Securities, and such Securities shall be registered in such name or names and shall be in such denominations, as the Placement Agent may request at least one business day before the time of purchase (as defined below).
Deliveries of the documents with respect to the purchase of the Securities, if any, shall be made at the offices of Placement Agent Counsel. All actions taken at a Closing shall be deemed to have occurred simultaneously.
Section 4. Covenants and Agreements of the Company. The Company further covenants and agrees with the Placement Agent as follows:
(a) Registration Statement Matters. The Company will advise the Placement Agent promptly after it receives notice thereof of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Final Prospectus has been filed and will furnish the Placement Agent with copies thereof. The Company will file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of any Prospectus and for so long as the delivery of a prospectus is required in connection with the Offering. The Company will advise the Placement Agent, promptly after it receives notice thereof (i) of any request by the Commission to amend the Registration Statement or to amend or supplement any Prospectus or for additional information, (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any order directed at any Incorporated Document, if any, or any amendment or supplement thereto or any order preventing or suspending the use of the Preliminary Prospectus or the Final Prospectus or any prospectus supplement or any amendment or supplement thereto or any post-effective amendment to the Registration Statement, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, of the institution or threatened institution of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or a Prospectus or for additional information, (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) of the mailing and delivery to the Commission for filing 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(a) that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company shall use its best efforts to prevent the issuance of any such stop order or prevention or suspension of such use. If the Commission shall enter any such stop order or order or notice of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment, or will file a new registration statement and use its best efforts to have such new registration statement declared effective as soon as practicable. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b), 430A, 430B and 430C, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder, and will use its reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) are received in a timely manner by the Commission.
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(b) Blue Sky Compliance. The Company will cooperate with the Placement Agent and the Investors in endeavoring to qualify the Securities for sale under the securities laws of such jurisdictions (United States and foreign) as the Placement Agent and the Investors may reasonably request and will make such applications, file such documents, and furnish such information as may be reasonably required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent, and provided further that the Company shall not be required to produce any new disclosure document. The Company will, from time to time, prepare and file such statements, reports and other documents as are or may be required to continue such qualifications in effect for so long a period as the Placement Agent may reasonably request for distribution of the Securities. The Company will advise the Placement Agent promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment.
(c) Amendments and Supplements to a Prospectus and Other Matters. The Company will comply with the Securities Act and the Exchange Act, and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the Incorporated Documents and any Prospectus. If during the period in which a prospectus is required by law to be delivered in connection with the distribution of Securities contemplated by the Incorporated Documents or any Prospectus (the Prospectus Delivery Period), any event shall occur as a result of which, in the judgment of the Company or in the opinion of the Placement Agent or counsel for the Placement Agent, it becomes necessary to amend or supplement the Incorporated Documents or any Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, as the case may be, not misleading, or if it is necessary at any time to amend or supplement the Incorporated Documents or any Prospectus or to file under the Exchange Act any Incorporated Document to comply with any law, the Company will promptly prepare and file with the Commission, and furnish at its own expense to the Placement Agent and to dealers, an appropriate amendment to the Registration Statement or supplement to the Registration Statement, the Incorporated Documents or any Prospectus that is necessary in order to make the statements in the Incorporated Documents and any Prospectus as so amended or supplemented, in the light of the circumstances under which they were made, as the case may be, not misleading, or so that the Registration Statement, the Incorporated Documents or any Prospectus, as so amended or supplemented, will comply with law. Before amending the Registration Statement or supplementing the Incorporated Documents or any Prospectus in connection with the Offering, the Company will furnish the Placement Agent with a copy of such proposed amendment or supplement and will not file any such amendment or supplement to which the Placement Agent reasonably objects.
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(d) Copies of any Amendments and Supplements to a Prospectus. The Company will furnish the Placement Agent, without charge, during the period beginning on the date hereof and ending on the later of the last Closing Date of the Offering, as many copies of any Prospectus or prospectus supplement and any amendments and supplements thereto, as the Placement Agent may reasonably request.
(e) Free Writing Prospectus. The Company covenants that it will not, unless it obtains the prior written consent of the Placement Agent, make any offer relating to the Securities that would constitute a Company Free Writing Prospectus or that would otherwise constitute a free writing prospectus (as defined in Rule 405 of the Securities Act) required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act. In the event that the Placement Agent expressly consents in writing to any such free writing prospectus (a Permitted Free Writing Prospectus), the Company covenants that it shall (i) treat each Permitted Free Writing Prospectus as an Company Free Writing Prospectus, and (ii) comply with the requirements of Rule 164 and 433 of the Securities Act applicable to such Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.
(f) Transfer Agent. The Company will maintain, at its expense, a registrar and transfer agent for the Series A Shares and Common Shares.
(g) Earnings Statement. As soon as practicable and in accordance with applicable requirements under the Securities Act, but in any event not later than 18 months after the last Closing Date, the Company will make generally available to its security holders and to the Placement Agent an earnings statement, covering a period of at least 12 consecutive months beginning after the last Closing Date, that satisfies the provisions of Section 11(a) and Rule 158 under the Securities Act.
(h) Periodic Reporting Obligations. During the Prospectus Delivery Period, the Company will duly file, on a timely basis, with the Commission and the Trading Market all reports and documents required to be filed under the Exchange Act within the time periods and in the manner required by the Exchange Act.
(i) Additional Documents. The Company will enter into any subscription, purchase or other customary agreements as the Placement Agent or the Investors deem necessary or appropriate to consummate the Offering, all of which will be in form and substance reasonably acceptable to the Placement Agent and the Investors. The Company agrees that the Placement Agent may rely upon, and each is a third party beneficiary of, the representations and warranties, and applicable covenants, set forth in any such purchase, subscription or other agreement with Investors in the Offering.
(j) No Manipulation of Price. Neither the Company, nor, to its knowledge, any of its employees, directors or shareholders, 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.
(k) Acknowledgment. The Company acknowledges that any advice given by the Placement Agent to the Company is solely for the benefit and use of the Board of Directors of the Company and may not be used, reproduced, disseminated, quoted or referred to, without the Placement Agents prior written consent.
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(l) Announcement of Offering. The Company acknowledges and agrees that the Placement Agent may, subsequent to the Closing, make public its involvement with the Offering.
(m) Reliance on Others. The Company confirms that it will rely on its own counsel and accountants for legal and accounting advice.
(n) Research Matters. By entering into this Agreement, the Placement Agent does not provide any promise, either explicitly or implicitly, of favorable or continued research coverage of the Company and the Company hereby acknowledges and agrees that the Placement Agents selection as a placement agent for the Offering was in no way conditioned, explicitly or implicitly, on the Placement Agent providing favorable or any research coverage of the Company. In accordance with FINRA Rule 2241(b)(2)(K), the parties acknowledge and agree that the Placement Agent has not directly or indirectly offered favorable research, a specific rating or a specific price target, or threatened to change research, a rating or a price target, to the Company or inducement for the receipt of business or compensation. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Placement Agent 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 the Placement Agents investment banking divisions. The Company acknowledges that the Placement Agent 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.
(o) Subsequent Equity Sales.
(i) From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any Common Shares or Common Share Equivalents or (ii) file any registration statement or amendment or supplement thereto, other than the Prospectus or otherwise with respect to the Securities or filing a registration statement on Form S-8 in connection with any employee benefit plan, in each case without prior written consent of the Placement Agent.
(ii) From the date hereof until ninety (90) days after the Closing Date, the Company shall be prohibited from effecting or entering into an agreement to effect any Variable Rate Transaction. Variable Rate Transaction means a transaction entered into after the date hereof in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional Common Shares either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Shares at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the trading prices of or quotations for the Common Shares; provided that, for the avoidance of doubt, such an issuance or sale shall not be deemed to constitute a Variable Rate Transaction solely because such securities provide for customary adjustments to the terms of conversion, exchange or exercise to account for stock dividends and splits, rights offerings, distributions, fundamental transactions and similar transactions or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an at-the-market offering, whereby the Company may issue securities at a future determined price that is based upon and/or varies with the trading prices of or quotations for the Common Shares. The Placement Agent shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
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(iii) Notwithstanding the foregoing, this Section 4(o) shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance other than as described in (d) of the definition of Exempt Transaction. An Exempt Issuance means the issuance of (a) Common Shares or equity awards to employees, officers or directors of the Company pursuant to the Companys Board approved equity incentive plan in effect as of the date hereof, (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 (other than in connection with stock splits or combinations) or to extend the term of such securities, (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(o) herein, and provided that any such issuance shall only be to a Person (or to the equityholders 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, and (d) for the avoidance of doubt, the issuance of the Securities in the Offering or the filing of any registration statement or amendment or supplement thereto in connection with the Offering.
(iv) If within twelve (12) months of the Closing, the Company completes any financing of equity or equity-linked capital-raising activity with, or receives proceeds from, any of the investors that were contacted or introduced by the Placement Agent to the Company during the Engagement Period (as defined in the Engagement Agreement), then the Company shall pay to the Placement Agent upon closing of such financing or receipt of such proceeds the compensation equivalent to that set forth in Section 1(a) herein, provided, that, within five (5) business days of a written request from the Company following the termination of the Engagement Period, the Placement Agent provides a list to the Company of such investors.
(p) Capital Changes. Until 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 the Placement Agent which shall not be unreasonably withheld.
(q) FINRA. The Company shall advise the Placement Agent (who shall make an appropriate filing with FINRA) if it is aware that any officer, director, 10% or greater shareholder 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 60-day period after the Effective Date.
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Section 5. Conditions of the Obligations of the Placement Agent. The obligations of the Placement Agent hereunder shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 2 hereof, in each case as of the date hereof and as of each Closing Date as though then made, to the timely performance by each of the Company of its covenants and other obligations hereunder on and as of such dates, and to each of the following additional conditions:
(a) Accountants Comfort Letter. On the date hereof, the Placement Agent shall have received, and the Company shall have caused to be delivered to the Placement Agent, a letter from KPMG LLP (the independent registered public accounting firm of the Company), addressed to the Placement Agent, dated as of the date hereof, in form and substance satisfactory to the Placement Agent. The letter shall not disclose any change in the condition (financial or other), earnings, operations, business or prospects of the Company from that set forth in the Incorporated Documents or the applicable Prospectus or prospectus supplement, which, in the Placement Agents sole judgment, is material and adverse and that makes it, in the Placement Agents sole judgment, impracticable or inadvisable to proceed with the Offering of the Securities as contemplated by such Prospectus.
(b) Compliance with Registration Requirements; No Stop Order; No Objection from the FINRA. Each Prospectus (in accordance with Rule 424(b)) and free writing prospectus (as defined in Rule 405 of the Securities Act), if any, shall have been duly filed with the Commission, as appropriate; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no order preventing or suspending the use of any Prospectus shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities of the Company shall have been issued by any securities commission, securities regulatory authority or stock exchange and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange; all requests for additional information on the part of the Commission shall have been complied with; and the FINRA shall have raised no objection to the fairness and reasonableness of the placement terms and arrangements.
(c) Corporate Proceedings. All corporate proceedings and other legal matters in connection with this Agreement, the Registration Statement and each Prospectus, and the registration, sale and delivery of the Securities, shall have been completed or resolved in a manner reasonably satisfactory to the Placement Agents counsel, and such counsel shall have been furnished with such papers and information as it may reasonably have requested to enable such counsel to pass upon the matters referred to in this Section 5.
(d) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement and prior to each Closing Date, in the Placement Agents sole judgment after consultation with the Company, there shall not have occurred any material adverse effect or any material adverse change or development involving a prospective material adverse change in the condition or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement and Prospectus (Material Adverse Change).
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(e) Opinion of Counsel for the Company. The Placement Agent shall have received on each Closing Date the favorable opinion of Sichenzia Ross Ference LLP, U.S. legal counsel to the Company, and Morton Law LLP, Canadian counsel to the Company, each dated as of such Closing Date, including, without limitation, a negative assurance letter addressed to the Placement Agent and in form and substance satisfactory to the Placement Agent.
(f) Officers Certificate. The Placement Agent shall have received on each Closing Date a certificate of the Company, dated as of such Closing Date, signed by the Chief Executive Officer and Chief Financial Officer of the Company, to the effect that, and the Placement Agent shall be satisfied that, the signers of such certificate have reviewed the Registration Statement, the Incorporated Documents, the Prospectus, and this Agreement and to the further effect that:
(i) The representations and warranties of the Company in this Agreement are true and correct, as if made on and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date;
(ii) No stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus has been issued and no proceedings for that purpose have been instituted or are pending or, to the Companys knowledge, threatened under the Securities Act; no order having the effect of ceasing or suspending the distribution of the Securities or any other securities of the Company has been issued by any securities commission, securities regulatory authority or stock exchange in the United States and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange in the United States;
(iii) When the Registration Statement became effective, at the time of sale, and at all times subsequent thereto up to the delivery of such certificate, the Registration Statement and the Incorporated Documents, if any, when such documents became effective or were filed with the Commission, and any Prospectus, contained all material information required to be included therein by the Securities Act and the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and in all material respects conformed to the requirements of the Securities Act and the Exchange Act and the applicable rules and regulations of the Commission thereunder, as the case may be, and the Registration Statement and the Incorporated Documents, if any, and any Prospectus, did not and do not include any 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, in the light of the circumstances under which they were made, not misleading (provided, however, that the preceding representations and warranties contained in this paragraph (iii) shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Placement Agent expressly for use therein) and, since the effective date of the Registration Statement, there has occurred no event required by the Securities Act and the rules and regulations of the Commission thereunder to be set forth in the Incorporated Documents which has not been so set forth; and
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(iv) Subsequent to the respective dates as of which information is given in the Registration Statement, the Incorporated Documents and any Prospectus, there has not been: (a) any Material Adverse Change; (b) any transaction that is material to the Company and the Subsidiaries taken as a whole, except transactions entered into in the ordinary course of business; (c) any obligation, direct or contingent, that is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except obligations incurred in the ordinary course of business; (d) any material change in the capital stock (except changes thereto resulting from the exercise of outstanding stock options or warrants) or outstanding indebtedness of the Company or any Subsidiary; (e) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company; or (f) any loss or damage (whether or not insured) to the property of the Company or any Subsidiary which has been sustained or will have been sustained which has a Material Adverse Change.
(g) Bring-down Comfort Letter. On each Closing Date, the Placement Agent shall have received from KPMG LLP, or such other independent registered public accounting firm of the Company, a letter dated as of such Closing Date, in form and substance satisfactory to the Placement Agent, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to such Closing Date.
(h) Lock-Up Agreements. On the date hereof, the Placement Agent shall have received the executed lock-up agreement, in the form attached hereto as Exhibit A (the Lock-Up Agreements), from each of the Companys directors and officers 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.
(i) Stock Exchange Listing. The Series A Shares, Common Shares and Warrants shall be registered under the Exchange Act and shall be listed on the Trading Market, and the Company shall not have taken any action designed to terminate, or likely to have the effect of terminating, the registration of the Series A Shares under the Exchange Act or delisting or suspending from trading the Series A Shares, Common Shares or Warrants from the Trading Market, nor shall the Company have received any information suggesting that the Commission or the Trading Market is contemplating terminating such registration or listing.
(j) Warrant Agency Agreement. On the Closing Date, the duly executed warrant agency agreement executed by and between the Company and the transfer agent.
(k) Additional Documents. On or before each Closing Date, the Placement Agent and counsel for the Placement Agent shall have received such information and documents as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent by notice to the Company at any time on or prior to a Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification and Contribution) and Section 8 (Representations and Indemnities to Survive Delivery) shall at all times be effective and shall survive such termination.
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Section 6. Payment of Expenses. Subject to the limitations set forth in Section 1(a)(ii) and Section 1(b) above, the Company agrees to pay all costs, fees and expenses incurred by the Company in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including, without limitation: (i) all expenses incident to the issuance, delivery and qualification of the Securities (including all printing and engraving costs); (ii) all fees and expenses of the registrar and transfer agent of the Common Shares and of any escrow agent; (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities; (iv) all fees and expenses of the Companys counsel, independent public or certified public accountants and other advisors; (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), the Preliminary Prospectus, the Final Prospectus and each prospectus supplement, if any, and all amendments and supplements thereto, and this Agreement; (vi) all filing fees, reasonable attorneys fees and expenses incurred by the Company or the Placement Agent in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the state securities or blue sky laws or the securities laws of any other country, and, if requested by the Placement Agent, preparing and printing a Blue Sky Survey, an International Blue Sky Survey or other memorandum, and any supplements thereto, advising the Placement Agent of such qualifications, registrations and exemptions; (vii) if applicable, the filing fees incident to the review and approval by the FINRA of the Placement Agents participation in the offering and distribution of the Securities; (viii) the fees and expenses associated with including the Series A Shares and Warrant Shares on the Trading Market; (ix) all costs and expenses incident to the travel and accommodation of the Companys and the Placement Agents employees on the roadshow, if any; (x) all fees, expenses and disbursements relating to background checks of the Companys officers and directors, not to exceed $5,000; and (x) all other fees, costs and expenses referred to in Part II of the Registration Statement.
Section 7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Placement Agent, and each dealer selected by the Placement Agent that participates in the offer and sale of the Securities (each a Selected Dealer) and each of their respective directors, officers and employees and each Person, if any, who controls the Placement Agent or any Selected Dealer (Controlling Person) within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between the Placement Agent and the Company or between the Placement Agent and any third party or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) any Preliminary Prospectus, if any, the Registration Statement or the Final Prospectus (as from time to time each may be amended and supplemented); (ii) 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 road show or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 7, collectively called application) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, Trading Market or any securities exchange; or the omission or alleged omission therefrom of a 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, unless such statement or omission was made in reliance upon and in conformity with written information furnished to the Company with respect to the Placement Agent by or on behalf of the Placement Agent expressly for use in any Preliminary Prospectus, if any, the Registration Statement or Final Prospectus, or any amendment or supplement thereto, or in any application, as the case may be. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Preliminary Prospectus, if any, the indemnity agreement contained in this Section 7 shall not inure to the benefit of the Placement Agent to the extent that any loss, liability, claim, damage or expense of the Placement Agent results from the fact that a copy of the Final Prospectus was not given or sent to the Person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Securities to such Person as required by the Securities Act and the rules and regulations thereunder, and if the untrue statement or omission has been corrected in the Final Prospectus, unless such failure to deliver the Final Prospectus was a result of non-compliance by the Company with its obligations under this Agreement. The Company agrees promptly to notify the Placement Agent of the commencement of any litigation or proceedings against the Company or any of its officers, directors or Controlling Persons in connection with the issue and sale of the Securities or in connection with the Registration Statement or the Final Prospectus.
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(b) If any action is brought against the Placement Agent, a Selected Dealer or a Controlling Person in respect of which indemnity may be sought against the Company pursuant to Section 7(a), the Placement Agent, such Selected Dealer or Controlling Person, as the case may be, shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of the Placement Agent or such Selected Dealer, as the case may be) and payment of actual expenses. The Placement Agent, such Selected Dealer or Controlling Person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Placement Agent, such Selected Dealer or Controlling Person unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Placement Agent (in addition to local counsel), Selected Dealer and/or Controlling Person shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if the Placement Agent, Selected Dealer or Controlling Person shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action which approval shall not be unreasonably withheld.
(c) The Placement Agent agrees to indemnify and hold harmless the Company, its directors, officers and employees and agents who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the Placement Agent, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in any Preliminary Prospectus, if any, the Registration Statement or Final Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, written information furnished to the Company with respect to the Placement Agent by or on behalf of the Placement Agent expressly for use in such Preliminary Prospectus, if any, the Registration Statement or Final Prospectus or any amendment or supplement thereto or in any such application. In case any action shall be brought against the Company or any other Person so indemnified based on any Preliminary Prospectus, if any, the Registration Statement or Final Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against the Placement Agent, the Placement Agent shall have the rights and duties given to the Company, and the Company and each other Person so indemnified shall have the rights and duties given to the Placement Agent by the provisions of this Section 7. Notwithstanding the provisions of this Section 7(c), the Placement Agent shall not be required to indemnify the Company for any amount in excess of the placement agent commissions applicable to the Securities purchased pursuant to the transactions contemplated pursuant to the Registration Statement and Purchase Agreement.
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(d) In order to provide for just and equitable contribution under the Securities Act in any case in which (i) any Person entitled to indemnification under this Section 7 makes a claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7 provides for indemnification in such case, or (ii) contribution under the Securities Act, the Exchange Act or otherwise may be required on the part of any such Person in circumstances for which indemnification is provided under this Section 7, then, and in each such case, the Company and the Placement Agent, severally and not jointly, shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and the Placement Agent, as incurred, in such proportions that the Placement Agent is responsible for that portion represented by the percentage that the placement agent commission appearing on the cover page of the Final Prospectus bears to the initial offering price appearing thereon and the Company is responsible for the balance; provided, that, no Person guilty of a 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, each director, officer and employee of the Placement Agent or the Company, as applicable, and each Person, if any, who controls the Placement Agent or the Company, as applicable, within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Placement Agent or the Company, as applicable. Notwithstanding the provisions of this Section 7(d), the Placement Agent shall not be required to contribute any amount in excess of the placement agent commissions applicable to the Securities purchased pursuant to the transactions contemplated pursuant to the Registration Statement and Purchase Agreement.
(e) Within fifteen days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (contributing party), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid fifteen days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 7 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available.
(f) The reimbursement, indemnity and contribution obligations of the Company set forth herein shall apply to any modification of this Agreement and shall remain in full force and effect regardless of any termination of, or the completion of any Indemnified Persons services under or in connection with, this Agreement.
Section 8. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company or any person controlling the Company, of its officers, and of the Placement Agent set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent, the Company, or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement. A successor to a Placement Agent, or to the Company, its directors or officers or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Agreement.
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Section 9. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or e-mailed and confirmed to the parties hereto as follows:
If to the Placement Agent to the address set forth above, attention: James Siegel, General Counsel, email: jsiegel@maximgrp.com
With a copy to:
Fox Rothschild LLP
222 South Ninth Street, Suite 2000
Minneapolis, MN 55402
E-mail: bhanson@foxrothschild.com
Attention: Brett Hanson
If to the Company:
mCloud Technologies Corp.
550-510 Burrard Street
Vancouver, BC V6C 3A8
E-mail: russmcmeekin@mcloudcorp.com
Attention: Russel H. McMeekin, Chief Executive Officer
With a copy to:
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036
E-mail: mross@srf.law
Attention: Marc J. Ross
Any party hereto may change the address for receipt of communications by giving written notice to the others.
Section 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 7 hereof, and to their respective successors, and personal representative, and no other person will have any right or obligation hereunder.
Section 11. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
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Section 12. Governing Law; Agent for Service of Process. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely in such State, without regard to the conflicts of laws principles thereof. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived. Any dispute arising under this Agreement may be brought into the courts of the State of New York or into the Federal Court located in New York, New York and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering a copy thereof via 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 manner permitted by law. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment. If either party to this Agreement shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. In addition to and without limiting the foregoing, the Company has confirmed that it has appointed Sichenzia Ross Ference LLP, as its authorized agent (the Authorized Agent) upon whom process may be served in any suit, action or proceeding arising out of or based upon the this Agreement or the Transaction Documents or the transactions contemplated herein which may be instituted in any New York federal or state court, by the Representative, the directors, officers, partners, employees and agents of the Representative and each affiliate of the Representative, and expressly accept the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. The Company hereby authorizes and directs the Authorized Agent to accept such service. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. If the Authorized Agent shall cease to act as agent for service of process, the Company shall appoint, without unreasonable delay, another such agent in the United States, and notify you of such appointment. This paragraph shall survive any termination of this Agreement, in whole or in part.
Section 13. General Provisions.
(a) This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.
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(b) The Company acknowledges that in connection with the offering of the Securities: (i) the Placement Agents responsibility to the Company is solely contractual and commercial in nature, (ii) the Placement Agent has acted at arms length, are not agents of, and owe no fiduciary duties to the Company or any other person, (iii) the Placement Agent owes the Company only those duties and obligations set forth in this Agreement and (iv) the Placement Agent may have interests that differ from those of the Company. The Company waives to the fullest extent permitted by applicable law any claims it may have against the Placement Agent arising from any breach or alleged breach of fiduciary duty in connection with the offering of the Securities
[The remainder of this page has been intentionally left blank.]
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If the foregoing is in accordance with your understanding of our agreement, please sign below whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.
Very truly yours, | ||
MCLOUD TECHNOLOGIES CORP. | ||
By: |
| |
Name: Russel H. McMeekin | ||
Title: Chief Executive Officer |
The foregoing Placement Agency Agreement is hereby confirmed and accepted as of the date first above written.
MAXIM GROUP LLC | ||
By: |
| |
Name: Clifford A. Teller | ||
Title: Executive Managing Director, Investment Banking |
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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) $1.00 (the denominator of such conversion ratio, the Conversion Price). 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 equal to the Conversion Price then in effect. |
(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. |
(5) | If, at any time while the Series A Preferred Shares are outstanding, the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition), any Common Shares (or any securities of the Company which would entitle the holder thereof to acquire at any time Common Shares, including any debt, preferred stock, rights, options, warrants 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 (Common Share Equivalents)) entitling any party to acquire Common Shares at an effective price per share that is lower than the Conversion Price then in effect (such lower price, the Base Conversion Price and such issuances, collectively, a Dilutive Issuance) (it being understood and agreed that if the holder of the Common Shares or Common Share Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive Common Shares at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Conversion Price shall be reduced so as to be to equal the Base Conversion Price, provided that (i) the Base Conversion Price shall not be less than $0.20 (subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions following the Original Issue Date) and (ii) and (ii) for so long as the Common Shares are listed on the TSX Venture Exchange (A) any reduction to the Conversion Price pursuant to this provision will be subject to the prior approval of the TSX Venture Exchange, and (B) the Base Conversion Price shall not be less than the Market Price (as that term is defined in the policies of the TSX Venture Exchange). The Conversion Price shall also be subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions following the Original Issue Date. Notwithstanding the foregoing, no adjustment will be made under this Article 27.3.9(5) in respect of an Exempt Issuance (as defined below). The Company shall notify the holders of Series A Preferred Shares in writing, no later than the business day following the issuance or deemed issuance of any Common Shares or Common Share Equivalents subject to this Article 27.3.9(5), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, exercise price and other pricing terms (such notice, the Dilutive Issuance Notice). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Article 27.3.9(5), upon the occurrence of any Dilutive Issuance, the holders of Series A Preferred Shares are entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the holder accurately refers to the Base Conversion Price in the notice of conversion. The adjustment under this Article 27.3.9(5) may be waived with respect to a particular Dilutive Issuance on behalf of all holders of Series A Preferred Shares by the affirmative written consent or vote of the holders of at least a majority of the Series A Preferred Shares then outstanding. |
Exempt Issuance means the sale or issuance of (i) Common Shares or options or other equity awards issued to employees or directors of the Company pursuant to a plan, agreement or arrangement approved by the Board of Directors; (ii) securities exercisable or exchangeable for or convertible into Common Shares issued and outstanding on the Original Issue Date, provided that such securities have not been amended since the Original Issue Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities; (iii) Common Shares, options or convertible securities issued as acquisition consideration pursuant to the acquisition of another entity by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors 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 until the 180th day after the Original Issue Date, and provided that any such issuance shall only be to a party (or to the equity holders of a party) 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; (iv) Common Shares, options or convertible securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors 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 until the 180th day after Original Issue Date, and provided that any such issuance 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; and (v) Common Shares issued in connection with the issuance of bona fide commercial bank debt or equipment lease transactions, provided that such issuances are approved by the Board of Directors 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 until the 180th day after the Original Issue Date.
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 5.1
Our File No.: 4609.103
November 7, 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 by the Company of up to (i) $35,000,000 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 25 accompanying Warrants, in connection with a best efforts 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 Placement Agency Agreement between the Company and Maxim Group LLC, the form of Securities Purchase Agreement between the Company and the purchasers signatory thereto, 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, dated July 14, 2022, August 8, 2022, August 22, 2022, and November 4, 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 Placement Agency Agreement, Securities Purchase 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,
/s/ Morton Law LLP |
Morton Law LLP |
Exhibit 5.2
November 7, 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 best efforts public offering of up to $35,000,000 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 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 25 Warrants. The Company has engaged Maxim Group LLC, to act as its placement agent 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 Placement Agency Agreement (the Placement Agency Agreement) and form of Securities Purchase Agreement (the Securities Purchase Agreement), copies of which have been filed as Exhibit 1.1 and Exhibit 10.17, respectively, to the Registration Statement.
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 Placement Agency Agreement and Securities Purchase 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 Placement Agency Agreement or Securities Purchase 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 10.17
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this Agreement) is dated as of [], 2022, between mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a Purchaser and collectively the Purchasers).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act (as defined below), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
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:
Action shall have the meaning ascribed to such term in Section 3.1(j).
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.
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, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to stay at home, shelter-in-place, non-essential employee or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally open for use by customers on such day.
Closing means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
Closing Date means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers obligations to pay the Subscription Amount and (ii) the Companys obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the second (2nd) Trading Day following the date hereof.
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 shares, 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 Counsel means Sichenzia Ross Ference LLP, with offices located at 1185 Avenue of Americas, 31st Floor, New York, NY 10036.
Company Canadian Counsel means Morton Law LLP, with offices located at 1200-750 W. Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
Disclosure Time means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof, unless otherwise instructed as to an earlier time by the Placement Agent.
Evaluation Date shall have the meaning ascribed to such term in Section 3.1(s).
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
FCPA means the Foreign Corrupt Practices Act of 1977, as amended.
IFRS shall have the meaning ascribed to such term in Section 3.1(h).
Indebtedness shall have the meaning ascribed to such term in Section 3.1(aa).
Intellectual Property Rights shall have the meaning ascribed to such term in Section 3.1(p).
Liens means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
Material Adverse Effect shall have the meaning assigned to such term in Section 3.1(b).
Material Permits shall have the meaning ascribed to such term in Section 3.1(n).
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.
Placement Agent means Maxim Group LLC.
Placement Agent Counsel means Fox Rothschild LLP, with offices located at 222 South Ninth Street, Suite 2000, Minneapolis, Minnesota 55402.
Preliminary Prospectus means any preliminary prospectus included in the Registration Statement, as originally filed or as part of any amendment thereto, or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Securities Act.
Pricing Prospectus means (i) the Preliminary Prospectus relating to the Securities that was included in the Registration Statement immediately prior to 9:15 a.m. (New York City time) on the date hereof and (ii) any free writing prospectus (as defined in the Securities Act) identified on Schedule A hereto, taken together.
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 means the final prospectus filed for the Registration Statement.
Purchaser Party shall have the meaning ascribed to such term in Section 4.7.
Registration Statement means the effective registration statement with Commission File No. 333-264859 which registers the sale of the Series A Shares, the Warrants and the Warrant Shares to the Purchasers, and includes any Rule 462(b) Registration Statement.
Required Approvals shall have the meaning ascribed to such term in Section 3.1(e).
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.
Rule 462(b) Registration Statement means any registration statement prepared by the Company registering additional Securities, which was filed with the Commission on or prior to the date hereof and became automatically effective pursuant to Rule 462(b) promulgated by the Commission pursuant to the Securities Act.
SEC Reports shall have the meaning ascribed to such term in Section 3.1(h).
Securities means the Units, Series A Shares, the Warrants and the Warrant Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Series A Shares means the 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value, issued or issuable to each Purchaser pursuant to this Agreement.
Short Sales means all short sales as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing Common Shares).
Subscription Amount means, as to each Purchaser, the Unit Subscription Amount in accordance with Section 2.1 herein.
Subsidiary means any subsidiary of the Company as disclosed in the SEC Reports, 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 Series A Shares and 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).
Transaction Documents means this Agreement, the Warrant Agency Agreement, the Warrants, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
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 and an email address of reorg_warrants@astfinancial.com, and any successor transfer agent of the Company.
Units means a unit consisting of (a) one Series A Share and (b) 25 Warrants to purchase one Common Share.
Unit Purchase Price equals $25.00 per each Unit, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Series A Shares or Common Shares that occur after the date of this Agreement.
Unit Subscription Amount means, as to each Purchaser, the aggregate amount to be paid for the Units hereunder as specified below such Purchasers name on the signature page of this Agreement and next to the heading Unit Subscription Amount, in United States dollars and in immediately available funds.
Warrants means the Common Share purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, in the form of Exhibit A attached hereto.
Warrant Shares means the Common Shares issuable upon exercise of the Warrants.
Warrant Agency Agreement means the warrant agency agreement dated on or about the Closing Date, between the Company and the Transfer Agent.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $[] of Units as determined pursuant to Section 2.2(a). Unless otherwise directed by the Placement Agent, each Purchasers Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for Delivery Versus Payment settlement with the Company or its designee. The Company shall deliver to each Purchaser its respective Series A Shares and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of the Placement Agent Counsel or such other location as the parties shall mutually agree. Each Purchaser acknowledges that, concurrently with the Closing and pursuant to the Prospectus, the Company may sell up to $35,000,000 of additional Units to purchasers not party to this Agreement, less the aggregate Subscription Amount pursuant to this Agreement, and will issue to such purchasers such Series A Shares and Warrants in the same form and at the same Unit Purchase Price. Unless otherwise directed by the Placement Agent, settlement of the Series A Shares shall occur via Delivery Versus Payment (DVP) (i.e., on the Closing Date, the Company shall issue the Series A Shares registered in the Purchasers names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Series A Shares, the Placement Agent shall promptly electronically deliver such Series A Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company). Notwithstanding anything to the contrary herein and a Purchasers Subscription Amount set forth on the signature pages attached hereto, the number of Series A Shares purchased by a Purchaser (and its Affiliates) hereunder shall not, when aggregated with all other Common Shares owned by such Purchaser (and its Affiliates) at such time, result in such Purchaser beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act) in excess of 9.99% of the then issued and outstanding Common Shares outstanding at the Closing (the Beneficial Ownership Maximum), and such Purchasers Subscription Amount, to the extent it would otherwise exceed the Beneficial Ownership Maximum immediately prior to the Closing, shall be conditioned upon the issuance of Shares at the Closing to the other Purchasers signatory hereto. To the extent that a Purchasers beneficial ownership of the Series A Shares would otherwise be deemed to exceed the Beneficial Ownership Maximum, such Purchasers Subscription Amount shall automatically be reduced as necessary in order to comply with this paragraph.
2.2 Deliveries.
(a) On or prior to the Closing Date (except as indicated below), the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a legal opinion of Company Counsel and Company Canadian Counsel, each substantially in the form and substance reasonably acceptable to the Placement Agent;
(iii) subject to the sixth sentence of Section 2.1, the Company shall have provided each Purchaser with the Companys wire instructions, on Company letterhead and executed by the Chief Executive Officer and Chief Financial Officer;
(iv) subject to the sixth sentence of Section 2.1, a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (DWAC) Shares equal to such Purchasers Unit Subscription Amount divided by the Unit Purchase Price, registered in the name of such Purchaser;
(v) 25 Warrants registered in the name of such Purchaser, each to purchase up to a number of Common Shares equal to 100% of such Purchasers Series A Shares, with an exercise price equal to $4.75, subject to adjustment therein, via The Depository Trust Company Deposit or Withdrawal at Custodian system; and
(vi) the Preliminary Prospectus and Prospectus (which may be delivered in accordance with Rule 172 under the Securities Act).
(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser; and
(ii) such Purchasers Subscription Amount, which shall be made available for Delivery Versus Payment settlement with the Company or its designee.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) as of such date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from the date hereof to the Closing Date, trading in the Series A Shares or Common Shares shall not have been suspended by the Commission or the Companys principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens (except for those arising under any credit facility as is disclosed in the Registration Statement, the Preliminary Prospectus and the Prospectus). 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.
(b) 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 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) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) 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 shareholders 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.
(d) 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, anti-dilution or similar adjustments (except as disclosed in the SEC Reports), 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 Applicable Law 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 reasonably be expected to result in a Material Adverse Effect.
(e) 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 filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby, and (iv) such filings as are required to be made under applicable state securities laws (collectively, the Required Approvals).
(f) Issuance of the Securities; Registration. 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 Series A Shares and Common Shares issuable pursuant to this Agreement and 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 and the Prospectus. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on [], 2022 (the Effective Date), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Preliminary Prospectus or the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not 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 not misleading; and the Pricing Prospectus and the Prospectus and any amendments or supplements thereto, at the time the Pricing Prospectus or the Prospectus, as applicable, or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an 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.
(g) Capitalization. The capitalization of the Company is as disclosed in the SEC Reports as of the date thereof. The Company has not issued any capital stock except as disclosed or contemplated in the SEC Reports. No Person 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 as a result of the purchase and sale of the Securities and as disclosed in the SEC Reports, 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 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 Purchasers). Except as disclosed in the SEC Reports, there are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary. Except disclosed in the SEC Reports, 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 laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. The authorized shares of the Company conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Prospectus and the Prospectus. The offers and sales of the Companys securities were at all relevant times either registered under 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 shareholder, the Board of Directors or others is required for the issuance and sale of the Securities. Except as disclosed in the SEC Reports, there are no shareholders 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 shareholders.
(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Pricing Prospectus and the Prospectus, being collectively referred to herein as the SEC Reports) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission 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 Pricing Prospectus, the Prospectus, and the SEC Reports conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the rules and regulations thereunder to be described in the Registration Statement, the Pricing Prospectus, the Prospectus or the SEC Reports or to be filed with the Commission 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 Pricing Prospectus, the Prospectus or the SEC Reports, 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 best of the Companys knowledge, any other party is in default thereunder and, to the best of 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 best of 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 or order or decree of any Governmental Authority 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.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in the SEC Reports, (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 shareholders 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. 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.
(j) 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 Authority (federal, state, county, local or foreign) (collectively, an Action). There are no Actions that (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, 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. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by 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 Exchange Act or the Securities Act.
(k) 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 its 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 its Subsidiaries is a party to a collective bargaining agreement, and the Company and its 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 its 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 its 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.
(l) Compliance. Neither the Company nor any Subsidiary 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, except as could not reasonably be expected to result in a Material Adverse Effect.
(m) Environmental Laws. Neither the Company nor any of its Subsidiaries is in violation of any applicable international, national, state or local convention, law, regulation, order, governmental license, convention, treaty or other requirement relating to pollution or protection of human health or safety (as they relate to exposure to Materials of Environmental Concern (as defined below)) or protection of the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or protection of natural resources, including without limitation, conventions, laws or regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum, petroleum products or other hydrocarbons (collectively, Materials of Environmental Concern), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, Environmental Laws), nor has the Company or any Subsidiary received any written communication, whether from a Governmental Authority, citizens group, employee or otherwise, that alleges that the Company or any such Subsidiary is in violation of any Environmental Law or governmental license required pursuant to Environmental Law; except, in each case, as would not, individually or in the aggregate, have a Material Adverse Effect; (b) there is no claim, action or cause of action filed with a court or Governmental Authority and no investigation, or other action with respect to which the Company or any Subsidiary has received written notice alleging potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, attorneys fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any Subsidiary, now or in the past, or from any vessel owned, leased or operated by the Company or any Subsidiary, now or in the past (collectively, Environmental Claim), pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary or any person or entity whose liability for any Environmental Claim the Company or any Subsidiary has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect; (c) to the knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably would be expected to result in a violation of any Environmental Law, require expenditures to be incurred pursuant to Environmental Law, or form the basis of an Environmental Claim against the Company, any Subsidiary or against any person or entity whose liability for any Environmental Claim the Company or any Subsidiary has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, have a Material Adverse Effect (for the avoidance of doubt, the operation of vessels in the ordinary course of business shall not be deemed, by itself, an action, activity, circumstance or condition set forth in this clause (c)); and (d) none of the Company or any Subsidiary is subject to any pending proceeding under Environmental Law to which a Governmental Authority is a party and which the Company reasonably believes is likely to result in monetary sanctions of US$100,000 or more. The Company has reasonably concluded that any existing compliance and remediation costs and liabilities arising under Environmental Laws and resulting from the business, operations or properties of the Company or any Subsidiary would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set forth in or contemplated in the Registration Statement, Pricing Prospectus and the Prospectus. In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and the Subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any Authorizations, any related constraints on operating activities and any potential liabilities to third parties). No facts or circumstances have come to the Companys attention that could result in costs or liabilities that could be expected, individually or in the aggregate, to have a Material Adverse Effect.
(n) Law and Permits. Except as described in the Registration Statement or the Pricing Prospectus or the Prospectus, the Company and each of the Subsidiaries: (i) is and at all times since January 1, 2019 has been in material compliance with all United States (federal, state and local) and foreign statutes, rules, regulations, codes, treaties, or guidance applicable to the Company or the Subsidiaries (Applicable Laws); (B) since January 1, 2019 has not received any notice of adverse finding, warning letter, untitled letter or other correspondence or notice from any Governmental Authority (as defined below) alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (Authorizations); (C) since January 1, 2019 has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Authority or third party intends to assert any such claim, litigation, arbitration, action, suit, investigation or proceeding; (D) since January 1, 2019 has not received notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and the Company has no knowledge that any such Governmental Authority is considering such action; and (E) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission), except in the case of (A) through (E) above, as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Governmental Authority means any federal, provincial, state, local, foreign or other governmental, quasi-governmental or administrative agency, court or body or any other type of regulatory authority or body, including, without limitation, the Nasdaq Capital Market. The aggregate of all pending legal or governmental proceedings to which the Company or any Subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, Pricing Prospectus and the Prospectus, including ordinary routine litigation incidental to the business, would not result in a Material Adverse Effect.
(o) Title to Assets. 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 arising under any credit facility or loan agreement to which the Company or any of its Subsidiaries is a party or their assets are bound as disclosed in the Registration Statement and the Prospectus, (ii) 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 (iii) Liens for the payment of foreign, 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.
(p) Intellectual Property. The Company and each of its Subsidiaries owns, possesses, or can acquire on reasonable terms, all Intellectual Property (as defined below) necessary for the conduct of their respective businesses as now conducted or as described in the Registration Statement, the Pricing Prospectus and the Prospectus to be conducted. Except as would not result in a Material Adverse Effect, (A) there are no rights of third parties to any such Intellectual Property owned by the Company; (B) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any such Intellectual Property; (C) there is no pending or, to the knowledge of the Company, threatened, action, suit, proceeding or claim by others challenging the Companys or any Subsidiarys rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (D) the Intellectual Property owned by the Company and each of the Subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company, each of the Subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (E) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company or any of its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property or other proprietary rights of others, and neither the Company nor any of the Subsidiaries has received any written notice of such claim; and (F) to the Companys knowledge, no employee of the Company or any of its Subsidiaries is in or has ever been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employees employment with the Company or any of its Subsidiaries or actions undertaken by the employee while employed with the Company or any of its Subsidiaries. Intellectual Property shall mean all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, domain names, technology, know-how and other intellectual property.
(q) 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 at least equal to the aggregate Subscription Amount. 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.
(r) Transactions With Affiliates and Employees. Except as disclosed in the SEC Reports, 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.
(s) Sarbanes-Oxley; Internal Accounting Controls. Except as described in the Registration Statement 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) that comply with the requirements of the Exchange Act; 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.
(t) Certain Fees. Except for fees payable by the Company to the Placement Agent and as set forth in the Pricing Prospectus or the 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. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(u) 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.
(v) Registration Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(w) Listing and Maintenance Requirements. The Series A Shares and Common Shares are registered pursuant to Section 12(b) or 12(g) of 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 Series A Shares or Common Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Series A Shares or Common Shares 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 Series A Shares and Common Shares 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 to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.
(x) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Pricing Prospectus or Prospectus. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The SEC Reports, when they were filed with the Commission, conformed in all material respects to the requirements of the Securities Act and the Exchange Act, as applicable, and the applicable rules and regulations, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to the SEC Reports incorporated by reference in the Prospectus), in light of the circumstances under which they were made not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the applicable rules and regulations, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. There are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. There are no contracts or other documents required to be described in the Preliminary Prospectus or Prospectus, or to be filed as exhibits or schedules to the Registration Statement, which have not been described or filed as required.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers representations and warranties set forth in Section 3.2, 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 shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(z) 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 as such matters are described in the Registration Statement, 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. For the purposes of this Agreement, Indebtedness means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) 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 (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with IFRS. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States 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. The Company did not qualify as a passive foreign investment company within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended, for its most recently completed taxable year.
(bb) 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 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 Applicable Law, or (iv) violated in any material respect any provision of FCPA or any foreign equivalent. 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 or any foreign equivalent.
(cc) Accountants. The Companys accounting firm is KPMG LLP. To the knowledge and belief of the Company, such accounting firm (i) is an independent registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Companys Annual Report for the fiscal year ending December 31, 2022.
(dd) Acknowledgment Regarding Purchasers Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arms length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers purchase of the Securities. The Company further represents to each Purchaser that the Companys decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ee) Acknowledgment Regarding Purchasers Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.12 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or derivative securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or derivative transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Companys publicly-traded securities; (iii) any Purchaser, and counter-parties in derivative transactions to which any such Purchaser is a party, directly or indirectly, presently may have a short position in the Common Shares, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arms length counter-party in any derivative transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
(ff) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the Securities.
(gg) Cybersecurity. (i)(x) To the Companys knowledge, there has been no security breach or other compromise of or relating to any of the Companys or any Subsidiarys information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, IT Systems and Data) and (y) the Company and the Subsidiaries have not been notified of, and has no knowledge of any event or condition that would reasonably be expected to result in, any security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.
(hh) 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.
(ii) 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 (OFAC).
(jj) 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, and the Company shall so certify upon Purchasers request.
(kk) Bank Holding Company Act. Neither the Company nor any of its 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 its 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 its 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.
(ll) Money Laundering. The operations of the Company and its 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 or Proceeding by or before any court or Governmental 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.
(mm) Foreign Private Issuer. The Company is a foreign private issuer as defined in Rule 405 promulgated under the Securities Act.
(nn) Jurisdiction. The Company has the power to submit, and has legally, validly, effectively and irrevocably submitted, to the jurisdiction of any federal or state court in the State of New York, County of New York, and has the power to designate, appoint and empower, and has legally, validly and effectively designated, appointed and empowered, an agent for service of process in any suit or proceeding based on or arising under this Agreement in any federal or state court in the State of New York.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it 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.
(b) Understandings or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchasers right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(d) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Securities nor is such information or advice necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.
(e) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material pricing terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchasers assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchasers assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchasers representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchasers right to rely on the Companys representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 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 or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any such exercise shall be issued free of all 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 or resale of the Warrant Shares, the Company shall immediately notify the holders 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 or resale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws). The Company shall use best efforts to keep a registration statement (including the Registration Statement) registering the issuance or resale of the Warrant Shares effective during the term of the Warrants.
4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 6-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents, including, without limitation, the Placement Agent, in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees, Affiliates or agents, including, without limitation, the Placement Agent, on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate and be of no further force or effect. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release 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. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b) and reasonably cooperate with such Purchaser regarding such disclosure.
4.5 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented in writing to the receipt of such information and agreed in writing with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates delivers any material, non-public information to a Purchaser without such Purchasers consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents, including, without limitation, the Placement Agent, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, Affiliates or agents, including, without limitation, the Placement Agent, not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to Applicable Law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously with the delivery of such notice file such notice with the Commission pursuant to a Current Report on Form 6-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder as disclosed in the Prospectus and shall not use such proceeds for the settlement of any outstanding litigation or in violation of FCPA or OFAC regulations.
4.7 Indemnification of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a Purchaser Party) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Partys representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Companys prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Partys breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
4.8 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, free of preemptive rights, a sufficient number of Common Shares for the purpose of enabling the Company to issue Series A Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.
4.9 Listing of Common Shares. The Company hereby agrees to use commercially reasonable best efforts to maintain the listing or quotation of the Series A Shares, Common Shares and Warrants on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Series A Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Series A Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Shares traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the listing and trading of its Series A Shares and Common Shares on a Trading Market and will comply in all respects with the Companys reporting, filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Series A Shares and Common Shares for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.
4.10 Board Composition and Board Designations; Internal Controls. The Company shall ensure that: (i) 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 and with the listing requirements of the Trading Market and (ii) if applicable, 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. 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.
4.11 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Companys securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction (other than as disclosed to its legal and other representatives). Notwithstanding the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates, or agent, including, without limitation, the Placement Agent, after the issuance of the initial press release as described in Section 4.4. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchasers assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchasers assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.12 Exercise Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants. Without limiting the preceding sentences, 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 form be required in order to exercise the Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.13 Accountants. For a period of three (3) years from the Effective Date, the Company shall continue to retain the Auditor or another nationally recognize independent registered public accounting firm.
4.14 Transfer Agent. For a period of two (2) years from the Closing Date, the Company shall retain the Transfer Agent or a nationally recognized transfer and registrar agent.
4.15 Review of Financial Statements. For a period of three (3) years from the Closing Date or until such earlier time as no Warrants remain outstanding, the Company, at its expense, shall cause its regularly engaged independent registered public accountants to review (but not audit) the Companys financial information for its semi-annual report covering the six-month period ended June 30.
4.16 Exchange Act Registration. For a period of three years from the Closing Date, the Company will use its best efforts to maintain the registration of the Common Shares under the Exchange Act. The Company will not voluntarily deregister the Common Shares under the Exchange Act without the prior written consent of the Placement Agent.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchasers obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).
5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Pricing 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.
5.4 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 time of transmission, if such notice or communication is delivered via email attachment at the email address as 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 time of transmission, if such notice or communication is delivered via email attachment at the email 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. To the extent that any notice provided pursuant to any Transaction Document 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 Current Report on Form 6-K.
5.5 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 Purchasers which purchased at least 50.1% in interest of the Shares based on the initial Subscription Amounts hereunder (or, prior to the Closing, the Company and each Purchaser) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. 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. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.
5.6 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.
5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchasers.
5.8 No Third-Party Beneficiaries. The Placement Agent shall be the third party beneficiary of the representations and warranties of the Company in Section 3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 and this Section 5.8.
5.9 Governing Law; Venue; Agent for Process. 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, 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 (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and, to the extent permitted by law, consents to process being served in any such 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. In addition to and without limiting the foregoing, the Company has appointed Watson Farley & Williams LLP, 250 West 55th Street, 31st Floor, New York, New York 10019, as its authorized agent (the Authorized Agent) upon whom process may be served in any suit, action or proceeding arising out of or based upon the Transaction Documents or the transactions contemplated herein which may be instituted in any New York Court, and expressly accept the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding. The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid. The Company hereby authorizes and directs the Authorized Agent to accept such service. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon the Company. If the Authorized Agent shall cease to act as agent for service of process, the Company shall appoint, without unreasonable delay, another such agent in the United States, and notify you of such appointment. This paragraph shall survive any termination of this Agreement, in whole or in part. The Company agrees that a final judgment in any such action, proceeding or counterclaim brought in any such court shall be conclusive and binding upon the Company and may be enforced in any other courts to the jurisdiction of which the Company is or may be subject, by suit upon such judgment.
5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
5.11 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 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 .pdf signature page were an original thereof.
5.12 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.
5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any Common Shares subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchasers right to acquire such shares pursuant to such Purchasers Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers 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.
5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.17 Independent Nature of Purchasers Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through the Placement Agent Counsel. The Placement Agent Counsel does not represent any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
5.18 Liquidated Damages. The Companys obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.19 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.
5.20 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. All references herein to matters disclosed within filings made by the Company with the Commission shall be construed to include documents incorporated by reference into such filings.
5.21 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
MCLOUD TECHNOLOGIES CORP. | ||
By: |
| |
Name: Russel H. McMeekin Title: Chief Executive Officer |
Address for Notice: mCloud Technologies Corp. 550-510 Burrard Street Vancouver, BC V6C 3A8 Attention: Russel H. McMeekin, Chief Executive Officer With a copy to (which shall not constitute notice): |
Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31st Floor New York, NY 10036 E-mail: mross@srf.law Attention: Marc J. Ross |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO MCLD SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser: _________________________________
Name of Authorized Signatory: _______________________________________________
Title of Authorized Signatory: ________________________________________________
Email Address of Authorized Signatory: _________________________________________
Address for Notice to Purchaser:
Address for Delivery of Securities to Purchaser (if not same as address for notice):
DWAC for Delivery of Shares:
Unit Subscription Amount: $_________________
Units: _________________
Series A Shares: _________________
Common Warrant Shares: _________________ Beneficial Ownership Blocker ☐ 4.99% or ☐ 9.99%
EIN Number: ____________________
☐ Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the second (2nd) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
Schedule A
Free Writing Prospectus
None.
Exhibit 10.18
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the Agreement), dated as of October 28, 2022, is by and between mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the Company), and (the Investor).
RECITALS
A. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 903 of Regulation S (Regulation S) as promulgated by the United States Securities and Exchange Commission (the SEC) under the Securities Act of 1933, as amended (the 1933 Act).
B. The Company has authorized the issuance of [ ] Common Shares (as defined below) (the Shares) at a price $ of per share to the Investor.
C. The Investor wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, the Shares.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. |
PURCHASE AND SALE OF SHARES. |
(a) Shares. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company on the Closing Date (as defined below), the Shares.
(b) Closing. The closing (the Closing) of the purchase of the Shares by the Investor shall occur at the offices of Sichenzia Ross Ference LLP, 1185 Avenue of the Americas, New York, NY 10036. The date and time of the Closing (the Closing Date) shall be 10:00 a.m., New York time, on the first (1st) Business Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such later date as is mutually agreed to by the Company and the Investor). As used herein Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to remain closed.
(c) Purchase Price. The aggregate purchase price for the Shares to be purchased by the Investor (the Purchase Price) shall be the product of (i) the number of Shares multiplied by (ii) the sum of the closing price of the Common Shares on the Nasdaq Capital Market on October 28, 2022 plus $0.01.
(d) Payment of Purchase Price; Delivery of the Shares. On the Closing Date, (i) the Investor shall pay the Purchase Price to the Company for the Shares by wire transfer of immediately available funds in accordance with the Companys written wire instructions attached hereto as Exhibit A and (ii) the Company shall deliver to the Investor the Shares on behalf of the Company and registered in the name of the Investor or its designee.
2. |
INVESTORS REPRESENTATIONS AND WARRANTIES. |
The Investor represents and warrant to the Company that:
(a) Organization; Authority. The Investor is an individual with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder.
(b) No Public Sale or Distribution. The Investor is acquiring the Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares in violation of applicable securities laws.
(c) Regulation S Representations. The Investor hereby acknowledges and agrees that:
(i) |
it is not in the United States and is not a U.S. Person as defined in Rule 902 of Regulation S promulgated under the 1933 Act (a U.S. Person); |
(ii) |
the Shares were not offered to the Investor in the United States and at the time its buy order was made, it was outside the United States; |
(iii) |
this Agreement was delivered to, completed, executed and delivered by, the Investor (or its authorized signatory) outside the United States; |
(iv) |
the Investor is not a distributor of securities, as that term is defined in Regulation S under the 1933 Act, nor a dealer in securities, and is not purchasing the Shares for the account or benefit of, directly or indirectly, any U.S. Person; |
(v) |
the current structure of this transaction and all transactions and activities contemplated hereunder is not a scheme to evade the registration requirements of the 1933 Act; and |
(vi) |
it has not purchased the Shares as a result of any form of directed selling efforts (as such term is used in Regulation S under the 1933 Act) or general solicitation or general advertising (as such terms are used under Rule 502(c) of Regulation D promulgated under the 1933 Act), including, but not limited to, any advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or on the Internet or broadcast over radio, television or the Internet, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising. |
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(d) Reliance on Exemptions. The Investor understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws, that the offer and sale of the Shares are intended to be exempt from the registration requirements of the 1933 Act pursuant to Rule 903 of Regulation S under the 1933 Act, and that the Company is relying in part upon the truth and accuracy of, and the Investors compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Shares.
(e) Information. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Investor. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Investor understands that its investment in the Shares involves a high degree of risk. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.
(f) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.
(g) Transfer or Resale. The Investor acknowledges and agrees that, pursuant to the provisions of Regulation S, the Shares cannot be sold, assigned, transferred, conveyed, pledged or otherwise disposed of to any U.S. Person or within the United States of America or its territories or possessions, unless such Shares are registered for sale in the United States pursuant to an effective registration statement under the 1933 Act or another exemption from such registration is available. Without limiting the foregoing, the Investor understands that: (i) the Shares have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned, transferred, conveyed or pledged, unless (A) subsequently registered under the 1933 Act and applicable states securities laws, (B) the sale, assignment or transfer is made outside the United States to a non-U.S. Person in accordance with the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations, (C) the sale, assignment or transfer is made in the United States or to a U.S. Person and the applicable 40-day distribution compliance period under Rule 903 of Regulation S has been satisfied, (D) such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to any other exemption from registration under the 1933 Act and applicable state securities laws, or (E) the Investor provides the Company with reasonable assurance that such Shares can be sold, assigned or transferred pursuant to Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, Rule 144A); (ii) any sale of the Shares made in reliance on Rule 144A may be made only in accordance with the terms of Rule 144A, and further, if Rule 144A is not applicable, any resale of the Shares under circumstances in which the seller (or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
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(h) Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and constitutes the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors rights and remedies.
(i) No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor is a party or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Investor to perform its obligations hereunder.
(j) Residency. The Investor is a resident of Saudi Arabia.
(k) Certain Trading Activities. The Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Investor, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving the Companys securities) during the period commencing as of the time that the Investor was first contacted regarding the specific investment in the Company contemplated by this Agreement and ending immediately prior to the execution of this Agreement by the Investor (it being understood and agreed that for all purposes of this Agreement, and, without implication that the contrary would otherwise be true, that neither transactions nor purchases nor sales shall include the location and/or reservation of borrowable common shares). Short Sales means all short sales as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the 1934 Act).
(l) Experience of the Investor. The Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.
(m) Not a 10% Owner. The Investor is not a beneficial owner of more than 10% of the Common Shares (as defined for purposes of Rule 13d-3 of the 1934 Act).
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3. |
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. |
The Company represents and warrants to the Investor that:
(a) Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. Material Adverse Effect means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole or (ii) the transactions contemplated hereby. Other than the Persons (as defined below) set forth on Schedule 3(a), the Company has no Subsidiaries. Subsidiaries means any Person in which the Company, directly or indirectly, (I) owns a majority of the outstanding capital stock or holds a majority of equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a Subsidiary.
(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and to issue the Shares in accordance with the terms hereof. The execution and delivery of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby have been duly authorized by the Companys board of directors, and no further filing, consent or authorization is required by the Company. This Agreement has been duly executed and delivered by the Company, and constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law and public policy, and the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(c) Issuance of Shares. The issuance of the Shares is duly authorized and, the Shares are validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. Subject to the accuracy of the representations and warranties of the Investor in this Agreement, the offer and issuance by the Company of the Shares is exempt from registration under the 1933 Act. Common Shares means the Companys common shares, no par value per share.
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4. |
COVENANTS. |
(a) Reasonable Best Efforts. The Investor shall use its reasonable best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Section 6 of this Agreement. The Company shall use its reasonable best efforts to timely satisfy each of the conditions to be satisfied by it as provided in Section 7 of this Agreement.
(b) Conduct of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.
(c) No Hedging or Short Sales During Distribution Compliance Period. The Investor shall not directly or indirectly, nor shall any Person acting on behalf of or pursuant to any understanding with the Investor, engage in any Short Sales or hedging transactions involving any securities of the Company or any other transaction which would transfer some or all of the economic or other risk of ownership of securities of the Company, including any forward contract, equity swap, put or call, put or call equivalent position, collar, non-recourse loan, or similar transaction, during the applicable distribution compliance period under Rule 903 of Regulation S, and thereafter may engage in such transactions only in compliance with the 1933 Act.
5. |
LEGEND. |
(a) Legends. The Investor understands that the Shares have been issued pursuant to an exemption from registration or qualification under the 1933 Act and applicable state securities laws, and except as set forth in Section 5(b) below, the Shares shall bear any legend as required by the blue sky laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates and the Company shall be required to refuse to register any transfer of the Shares not made in accordance with applicable U.S. securities laws):
THESE SHARES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATIONS UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT). ACCORDINGLY, NONE OF THE SHARES TO WHICH THIS CERTIFICATE RELATES, HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED HEREIN OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SHARES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT. UNITED STATES AND U.S. PERSON ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.
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(b) Removal of Legends. Certificates evidencing Shares shall not be required to contain the legend set forth in Section 5(a) above or any other legend (i) while a registration statement covering the resale of such Shares is effective under the 1933 Act, (ii) if such Shares are sold, assigned or transferred outside the United States to a non-U.S. Person in accordance with the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations, (iii) if such Shares are eligible to be sold, assigned or transferred under Rule 144A (provided that the Investor provides the Company with reasonable assurances that such Shares are eligible for sale, assignment or transfer under Rule 144A which shall not include an opinion of counsel), (iv) in connection with any other sale, assignment or other transfer of such Shares, provided that such sale, assignment or transfer of such Shares may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is otherwise not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than three (3) Trading Days following the delivery by the Investor to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), as directed by such Investor, either: (A) provided that the Companys transfer agent is participating in the DTC Fast Automated Securities Transfer Program, credit the aggregate number of Common Shares to which such Investor shall be entitled to such Investors or its designees balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Companys transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver at the Companys expense (via reputable overnight courier) to such Investor, a certificate representing such Shares that is free from all restrictive and other legends, registered in the name of such Investor or its designee.
6. |
CONDITIONS TO THE COMPANYS OBLIGATION TO SELL. |
(a) The obligation of the Company hereunder to issue and sell the Shares to the Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Companys sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof:
(i) The Investor shall have executed this Agreement and delivered the same to the Company.
(ii) The Investor shall have delivered to the Company the Purchase Price for the Shares being purchased by the Investor at the Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company.
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(iii) The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and the Investor shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by such Investor at or prior to the Closing Date.
7. |
CONDITIONS TO THE INVESTORS OBLIGATION TO PURCHASE. |
(a) The obligation of the Investor hereunder to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Investors sole benefit and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have duly executed and delivered to the Investor this Agreement.
(ii) Each and every representation and warranty of the Company shall be true and correct as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date) and the Company shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Investor shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Investor in the form acceptable to the Investor.
(iii) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by this Agreement.
(iv) Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect.
Trading in the Common Shares shall not have been suspended by the SEC, TSXV or the Nasdaq Capital Market, the Company shall not have received any final and non-appealable notice that the listing or quotation of the Common Shares on the Nasdaq Capital Market or TSXV shall be terminated on a date certain, there shall not have been imposed any suspension of electronic trading or settlement services by DTC with respect to the Common Shares that is continuing, and the Company shall not have received any notice from DTC to the effect that a suspension of electronic trading or settlement services by DTC with respect to the Common Shares is being imposed or is contemplated.
8. |
TERMINATION. |
In the event that the Closing shall not have occurred within five (5) days after the date hereof, then the Investor shall have the right to terminate its obligations under this Agreement at any time on or after the close of business on such date without liability of the Investor to any other party; provided, however, the right to terminate its obligations under this Agreement pursuant to this Section 8 shall not be available to the Investor if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of the Investors breach of this Agreement; Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement.
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9. |
MISCELLANEOUS. |
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State 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 thereby or discussed herein or therein, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. By the execution and delivery of this Agreement, the Company acknowledges that it has, by separate written instrument, irrevocably designated and appointed Sichenzia Ross Ference LLP, at 1185 Avenue of the Americas, New York, NY 10036 (together with any successor, the Agent for Service) as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement or the Shares that may be instituted in any state or federal court sitting in The City of New York, Borough of Manhattan, or brought under federal or state securities laws, and acknowledges that the Agent for Service has accepted such designation. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of the Agent for Service in full force and effect. Service upon such Agent for Service in accordance with this Section 9(a) shall be deemed completed whether or not forwarded to or received by the Company. If such Agent for Service ceases to be able to act as such, resigns as such Agent for Service or to have an address in New York, New York, the Company agrees to irrevocably appoint a new agent acceptable to the Investor to receive on behalf of the Company service of any legal process and to deliver to the Investor within 14 days a copy of a written acceptance of appointment by such agent. 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 to such party at the address for such 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 (i) limit, or be deemed to limit, in any way any right to serve process in any manner permitted by law, or (ii) operate, or shall be deemed to operate, to preclude the Investor from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Companys obligations to such Investor or to enforce a judgment or other court ruling in favor of such Investor. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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(b) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page 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 signature page were an original thereof.
(c) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms including, includes, include and words of like import shall be construed broadly as if followed by the words without limitation. The terms herein, hereunder, hereof and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(d) Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(e) Entire Agreement; Amendments. This Agreement and the schedules and exhibits attached hereto and thereto and the instruments referenced herein supersede all other prior oral or written agreements between the Investor, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the matters contained herein and therein, and this Agreement, the schedules and exhibits attached hereto contain the entire understanding of the parties solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement shall (or shall be deemed to) (i) have any effect on any agreements the Investor has entered into with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by the Investor in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its Subsidiaries, or any rights of or benefits to the Investor or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its Subsidiaries and the Investor, and all such agreements shall continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, discretion).
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(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipients e-mail server that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses, facsimile numbers and/or e-mail addresses for such communications are as follows:
If to the Company:
mCloud technologies Corp.
550-510 Burrard Street,
Vancouver, British Columbia, V6C 3A8
Telephone: +1-(284)-494-2810
E-mail address: russmcmeekin@mcloudcorp.com
Attention: Chief Executive Officer
With a copy (for informational purposes only) to:
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036
Facsimile: (212) 930-9700
E-mail address: mross@srf.law
Attention: Marc J. Ross, Esq.
If to the Investor:
or to such other address, facsimile number or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the senders facsimile machine containing the time, date and recipient facsimile number or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.
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(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including, as contemplated below, any assignee or transferee of any of the Shares. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor (which may be granted or withheld in the sole discretion of the Investor). The Investor may assign some or all of its rights hereunder in connection with any assignment or transfer of any of its Shares without the consent of the Company, in which event such assignee or transferee (as the case may be) shall be deemed to be an Investor hereunder with respect to such assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(i) Survival. The representations, warranties, agreements and covenants shall survive the Closing.
(j) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k) Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, Common Shares and any other numbers in this Agreement that relate to the Common Shares shall be automatically adjusted for stock splits, stock dividends, stock combinations and other similar transactions that occur with respect to the Common Shares after the date of this Agreement.
(l) Currency(m) Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement are in United States Dollars (U.S. Dollars). All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. Exchange Rate means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
[signature pages follow]
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IN WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
COMPANY: | ||
MCLOUD TECHNOLOGIES CORP. | ||
By: |
| |
Name: Russel H. McMeekin | ||
Title: Chief Executive Officer |
IN WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first written above.
INVESTOR: | ||
| ||
By: |
| |
Name: |
SCHEDULE 3(A)
LIST OF SUBSIDIARIES
The following chart identifies each of the Companys wholly owned subsidiaries as of the date:
* |
Ownership of the above noted entities is 100% unless otherwise indicated. |
EXHIBIT A
WIRING INSTRUCTIONS
Wire instruction:
mCloud Technologies Corp.
510-550 Burrard Street, Vancouver, BC, V6C 3A8
Swift Code: |
HKBCCATT | |
Bank Account Number: |
270-679626-070 | |
Transit Number: |
10270 | |
Institution Number: |
016 |
Exhibit 10.19
Contract ID: 925719
Google Cloud Marketplace Vendor Agreement
This Google Cloud Marketplace Vendor Agreement (Agreement) is effective as of the Effective Date and is entered into by Google and Vendor.
Vendor | Full legal name: | mCloud Technologies (USA) Inc. | ||
Place of formation: | Delaware | |||
Postal address: | 580 California St | |||
San Francisco, California 94104-1000 | ||||
United States | ||||
Notification Email Address: |
tino.lanza@mcloudcorp.com | |||
Google | Full legal name:
Place of formation:
Postal address: |
Google LLC
Delaware
1600 Amphitheatre Parkway Mountain View, California 94043 Attn: Legal Department | ||
Effective Date | The date of the last signature. | |||
Term | Commencing on the Effective Date and continuing until terminated. |
1. Definitions
1.1 Affiliate means an entity that directly or indirectly Controls, is Controlled by, or is under common Control with a party.
1.2 Applicable Laws means all applicable laws, rules, regulations or orders of any jurisdiction, including those relating to data privacy, data transfer, international communications or the export of technical or personal data.
1.3 Brand Features means the trade names, trademarks, service marks, logos, domain names, and other distinctive brand features of each party, respectively, as owned (or licensed) by such party from time to time.
1.4 Control means control of greater than 50% of the voting rights or equity interests of a party.
1.5 Customer(s) means any person or entity who purchases, acquires, or deploys Products from the Store. All references to Customer(s) in the Agreement will be deemed to include Resold Customer(s), where the context dictates.
1.6 Customer Charges means the charges for Customers purchase and use of Products from the Store, which may be subscription based or based on metrics determined by Google, for example usage.
1.7 EULA means Vendors end user license agreement applicable to a Product.
1.8 Excluded Charges means the charges (a) that arise through any fraudulent or invalid means (as determined by Google in its reasonable discretion), including the fraudulent use of credit cards or other means of payment; (b) that are subject to chargebacks, reversals, adjustments or rejections, whether by a bank, Customer action or otherwise, including related fees; (c) for Customers use of GCP; or (d) for Googles or its Affiliates use of the Products in (i) its operation of the Store, including for developing and testing the Store and addressing and assessing Customer issues; or (ii) in connection with marketing, including, demonstrating Products to prospective customers and use by sales personnel for education regarding the Product.
1.9 GCP means the services that comprise the Google Cloud Platform at https://cloud.google.com/cloud/services or such other URL as Google may determine (including any associated APIs).
1.10 GCP Reseller(s) means an authorized reseller and/or supplier of GCP, including resellers and/or suppliers purchasing GCP via a Google authorized distributor for onward resale.
1.11 Google means the entity specified in the information table above.
1.12 Google-Provided Data means information relating to a Customer that Google provides or makes available to Vendor.
1.13 including means including but not limited to.
1.14 Marketplace Data means, collectively, Google-Provided Data and Vendor-Collected Data.
1.15 Open Source Material(s) means any materials that are available under an open source license, including those licenses identified by the Open Source Initiative at https://opensource.org/licenses/alphabetical, that are included or used in any of the Products.
1.16 Payment Account means the Vendor-owned payment account approved by Google and set up by Vendor through the Google vendor management system located at the following URL: https://console.cloud.google.com/partner/payments or such other URL as Google may determine.
1.17 Product(s) means the Vendor software or services identified by Vendor and approved by Google for listing in the Store (and any related Brand Features).
1.18 Reseller Agreement means the written agreement under which Google has appointed GCP Reseller as a reseller and/or supplier of GCP under the Google channel partner program.
1.19 Resold Customer(s) means an entity to whom a GCP Reseller is permitted to resell GCP under the Reseller Agreement.
1.20 Rev Split Base means the Customer Charges collected by Google minus any Taxes, foreign exchange costs, and Excluded Charges.
1.21 Revenue Split means 97% of the Rev Split Base.
1.22 Store means GCP Marketplace, Google Cloud Launcher, Google Cloud Marketplace, or other GCP online marketplace operated by Google, which allows the procurement or deployment by customers of software or services.
1.23 Tax(es) means all applicable taxes, except for taxes based on either partys net income, net worth, employment, or assets (including personal and real property).
1.24 Third Party Material(s) means any materials not owned solely by Vendor or Google that are included, incorporated or used in any of the Products.
1.25 UBB Products has the meaning described in Attachment B.
1.26 Vendor means the person or entity specified in the information table above who is registered with and approved by Google for listing of software or services via the Store in accordance with the terms of this Agreement.
1.27 Vendor Account means an account issued by Google to Vendor that enables the listing of Products via the Store.
1.28 Vendor-Collected Data means any information, content or data that Vendor obtains directly from Customer in connection with providing a Product.
1.29 Vendor Console means the console or other online tool that may be provided by Google to Vendor to manage administrative functions related to the Store.
1.30 Vendor GCP Agreement means the agreement under which Google or its Affiliate has agreed to provide GCP to Vendor.
2. Provision of Products
2.1 Listing Requirements. Google will display and make Products available for procurement, purchase, deployment, and use (as applicable) by Customers. In order for Products to be available via the Store, Vendor will: (a) accept this Agreement and the Vendor GCP Agreement; (b) have a Vendor Account and Payment Account in good standing; (c) comply with Section 7.5.4 (Third Party Materials and Open Source), and (d) provide complete and accurate information to Google in the Vendor Console (or otherwise requested by Google). Vendor will (i) ensure that all non-container-based Products run or are deployed on, as applicable, GCP infrastructure and (ii) upon Googles request, verify to Google, through the provision of supporting documentation, that all such Products purchased by Customers run on GCP.
2.2 Merchant of Record. The parties agree that Google is the merchant of record relative to the business contemplated by this Agreement. If Google is not deemed to be the merchant of record, seller of record, or other equivalent for the sale of any Product in any jurisdiction, then Vendor will be merchant of record for that jurisdiction and Product, and Vendor agrees that Google is assisting Vendor as Vendors authorized and disclosed agent and is acting on Vendors behalf under this Agreement with Vendor as merchant of record.
2.3 Marketing. The parties will work together on a marketing plan.
3. Payments and Pricing.
3.1 Payment Terms.
3.1.1 Payments. Subject to Section 3.1.2 (Minimum Payment), Google will, on or before the last business day of each calendar month during the Term of this Agreement, pay Vendor the Revenue Split for the previous calendar month. All payments of the Revenue Split will be made directly to the Payment Account. Payments will be transferred by the ACH Network (or by other means determined by Google).
3.1.2 Minimum Payment. Google will not be obligated to make a payment to Vendor under Section 3.1.1 (Payments) if the Revenue Split at the time to be paid is less than $100.00 USD or foreign currency equivalent. Such unpaid Revenue Split will carry over and be included in the Revenue Split for the following calendar month.
3.1.3 Conditions. Upon the termination of this Agreement and any applicable Wind Down Period that follows, Google will pay any remaining Revenue Split to Vendor within 90 days after termination. In no event will Google be obligated to make payments for any balance less than $1.00 USD or foreign currency equivalent. Google is not responsible for any delay, inaccuracy or non-payment caused by incorrect or incomplete information provided by Vendor or a bank, or for failure of a bank to credit Vendors account for the correct amount.
3.2 Pricing. Google will set the price for Products based on a Google defined billing structure.
3.3 Reports. On a monthly basis during the Term, Google will provide Vendor with reports of Customer Charges in the form generally made available to other Store vendors. Googles measurement of the usage metrics is final.
3.4 Refunds to Customers. Google may provide Customers a partial or full refund of Customer Charges if the Customer requests the refund and Google determines that the refund should be given. Customer refunds may be exclusive of taxes previously included in Customer Charges.
3.5 Right to Offset Payment. Google may withhold payments for, offset against payments due, or require Vendor to pay to Google within 60 days of receipt of a related invoice from Google for, any amounts that are or were (a) subject to billing disputes for Products, except in cases when Google reasonably determines that the Customer initiating the dispute has an abnormal dispute history, (b) an Excluded Charge under Section 1.8(a) or (b); (c) based on Customer Charges for Products that are not delivered to the Customer, for example due to termination of the Agreement or take down or modification of the Products; (d) refunded in accordance with Section 3.4; or (e) overpaid by Google to Vendor in prior periods whether as a result of miscalculation by Google or Vendor or otherwise.
3.6 Fraud. Vendor will not, and will not authorize or encourage any third party to directly or indirectly purchase or otherwise obtain access to the Store through (a) any automated, deceptive, fraudulent or other invalid means, (b) the use of robots or other automated query tools or computer-generated search requests, or (c) the fraudulent use of software or credit cards. Vendor will cooperate with Google in any investigation of any of the above circumstances, regardless of whether encouraged, authorized, or perpetrated by Vendor or not.
3.7 Taxes. If Vendor is legally obligated to collect transaction Taxes, Vendor will notify Google of this requirement and state each Tax as a separate line item on an invoice to Google. Google will be required to pay transaction Tax only on receipt of a tax invoice that meets all of the relevant tax authoritys requirements (to allow Google to obtain relief from such Tax if available). Google will pay Taxes separately on the Revenue Split, unless Google provides Vendor with a valid tax exemption certificate. If Google is obligated to withhold any Taxes from the Revenue Split, Google will pay the Revenue Split net of the withheld amounts. Google will provide Vendor with sufficient evidence of such Tax payments withheld on behalf of Vendor to allow Vendor to apply for a refund of the withheld Tax if available.
4. Support
4.1 Vendor Support of Customers. Vendor will provide and maintain complete and up to date information in the Vendor Console. Such information, including Vendor contact information, may be made available to Customers and other users of the Store. Customers will be instructed to contact Vendor concerning any defects or performance issues related to Products. Vendor will be solely responsible for, and Google will have no responsibility for handling support and maintenance of Products or any complaints about Products. Vendors response to Customer support inquiries should be no less urgent, inclusive or responsive than the response Vendor offers or provides to similarly situated customers outside of the Store. Google may direct Customers to Vendor to complete setup of Products. If Vendor offers direct management of its Products through Vendors own systems, Vendor will support such system and make it available to Customers on substantially similar terms and with substantially similar capabilities as it does for customers outside of the Store. Google will support Customer issues related to GCP.
4.2 Product Updates and Patches.
4.2.1 Vendor will update, or will provide Google with updates to, as applicable, Products in the Store within five days of release of those updates to the public (or through any other online marketplace) and within 24 hours if those updates include critical security patches, as determined by Google.
4.2.2 If Google requests a critical security matter be patched, Vendor will respond to Google within 24 hours of such request with either a resolution or a written resolution plan, contact information for person(s) managing the resolution, and the estimated time for delivery of a resolution. Google may choose to hide or prohibit access to any Product until Vendor provides any security patch determined necessary by Google.
4.2.3 Failure to provide the information, support, or updates for Products described in this Section 4.2 (Product Updates and Patches) may result in consequences including less prominent Product exposure or placement in the Store, removal of the Product from the Store, or Googles termination of this Agreement.
4.3 Redeployments. So long as Customers pay the applicable, required Customer Charges, Customers are allowed unlimited deployments of each deployable Product.
5. Vendor Responsibilities
5.1 Authorized Purpose. Vendor will use the Store only for purposes that are permitted by (a) this Agreement, and (b) any Applicable Law.
5.2 Prohibited Actions. Vendor will not engage in any activity with the Store that interferes with, disrupts, damages, or accesses in an unauthorized manner the devices, servers, networks, or other properties or services of Google; Googles Affiliates; or any third party, including GCP users, Store users, or any network operator.
5.3 Vendor Responsibility for Products. Vendor is solely responsible for (and Google has no responsibility to Vendor or any third party for) (a) any Products, including their interaction with the Store, Store APIs, or GCP; or (b) the consequences of any Vendor actions (including any loss or damage which Google may suffer) related to the Products, including with respect to Vendors use of the Store, Store APIs, or GCP, except to the extent resulting solely from an unforeseeable malfunction (e.g., a bug) of the Store, Store APIs, or GCP. Except as described in this Agreement, Vendor has no responsibility for the Store.
5.4 Vendor Responsibility for Breach. Vendor is solely responsible for (and Google has no responsibility to Vendor or any third party for) any breach by Vendor of its obligations under this Agreement, any applicable third-party contract or terms of service between Vendor and its Customer(s), or any Applicable Law.
5.5 Product Display. Google may use and publish performance measurements for Products, such as uninstall or refund rates. Google may display Products to Customers in a manner determined by Google.
5.6 Product Information. Vendor will be responsible for providing Google with all information and materials necessary to sell and deploy the Products via the Store, including accurate and complete Product information and support information for Customer. Google may immediately hide, prohibit access to, or remove any Products from the Store if Vendor fails to comply with this Section 5.6 (Product Information).
5.7 Restricted Content and Store Use. Google may upon 30 days prior notice impose generally applicable Vendor Use Policies (VUP) related to Product content and Vendors use of the Store. Google will email Vendor if it imposes any VUP, and the VUP will be binding on Vendor on the date stated in the email notice to Vendor.
5.8 Public Storage. Vendor understands that container based Products may be available from a public location, and as such, a third party who is not a Customer may be able to access, including download, and use such Product. Vendor acknowledges that Google and its Affiliates are not responsible for any access, including download, or use of the Product by such third party.
5.9 Security and Privacy.
5.9.1 Marketplace Data. Vendor will Process (as defined in Attachment D) any Marketplace Data solely in accordance with (a) the applicable EULA, (b) a clear, conspicuous and legally compliant privacy policy and, where applicable, consents from Customers end users; and (c) Applicable Laws. Without limiting the foregoing, Vendor may Process (as defined in Attachment D) Marketplace Data as necessary to provide the Product to Customer and for other purposes for which the Customer has provided express authorization. The terms of the EULA and privacy policy will not limit Vendors obligations under this Agreement.
5.9.2 Google-Provided Data. Without limiting Section 5.9.1 (Marketplace Data), Vendor will comply with Attachment D (Data Protection Addendum) in its Processing (as defined in Attachment D) of any personal information contained in the Google-Provided Data.
5.9.3 Security. Vendor will use industry-standard technical, administrative and physical security measures to protect the security and privacy of all Marketplace Data.
5.9.4 Security Incidents. Without limiting any breach or incident reporting obligations in Attachment D (Data Processing Addendum), Vendor will immediately notify Google of any Security Incident and provide necessary information and documentation about the Security Incident and Vendors compliance with this Section 5.9 (Security and Privacy). Vendor will use all reasonable efforts to assist Google in investigating and remediating the Security Incident and mitigating its effects. Vendor must obtain Googles approval for any Security Incident notifications to Customers that refer directly or indirectly to Google. As used in this Section 5.9.4, Security Incident means an actual or reasonable degree of certainty of unauthorized use, destruction, loss, control, alteration, acquisition, exfiltration, theft, retention, disclosure of, or access to, Marketplace Data for which Vendor is responsible. Security Incidents do not include unsuccessful access attempts or attacks that do not compromise the confidentiality, integrity, or availability of Marketplace Data, including unsuccessful log-in attempts, pings, port scans, denial of service attacks, and other network attacks on firewalls or networked systems.
6. License Grants
6.1 Products.
6.1.1 Grant to Google. Vendor grants to Google a non-exclusive, worldwide, and royalty-free (except for payment of Revenue Split by Google) license to distribute, deploy, reproduce, perform, display, configure, and use the Products in connection with (a) a Customers use and deployment of the Product, (b) the operation and marketing of the Store, and (c) the marketing of GCP products and services that interact with the Products.
6.1.2 Limitations. Except for the license rights granted by Vendor in Section 6 (License Grants) Google obtains no right, title or interest from Vendor (or its licensors) under this Agreement to any of the Products.
6.1.3 Customer License. Vendor will grant Customers a non-exclusive, worldwide, royalty-free, license to use the Product. Vendor will provide Google (in a manner and format specified by Google) with theEULA for the Product. If Vendor provides the EULA via a URL link, Vendor will ensure that the link is functional and points to the EULA. In no event will Vendors EULA limit Googles or Customers rights under, or described in, this Agreement or any Customer facing terms of service for the Store. Vendor will comply with its obligations in the EULA.
6.1.4 Reseller Grant to Google. Vendor grants to Google a non-exclusive, worldwide, and royalty-free (except for payment of Revenue Split by Google) license to sell the Products to GCP Resellers in connection with GCP Resellers resale of the Products to Resold Customers. The license granted herein includes the right to grant a limited, non-exclusive, worldwide, royalty-free sublicense to GCP Resellers to use and display Vendor Brand Features in connection with GCP Resellers marketing, distribution and resale of the Products to Resold Customers.
6.2 Brand Features.
6.2.1 Ownership. Google and Vendor each owns all right, title and interest, including all intellectual property rights, in its own Brand Features. Except as expressly provided in this Section 6.2 (Brand Features) neither party grants any right, title or interest in any Brand Features of the other party. Except as expressly stated in Section 6.2.3 (Store Brand Features) nothing in this Agreement gives Vendor a right to use any of Googles Brand Features. Any use of a partys Brand Features will inure to the benefit of the party holding intellectual property rights to those Brand Features.
6.2.2 Vendor Brand Features. Vendor grants to Google a limited, non- exclusive, worldwide, royalty-free license to use and display Vendor Brand Features (a) in connection with the marketing, distribution and sale of the Product through the Store and its availability for use on GCP, including by including Vendors name or Brand Features in online or in promotional materials for the Store and verbally referencing Vendor as a provider of the Products, or (b) as otherwise necessary to exercise Googles or its Affiliates rights under this Agreement. If a Product is removed from the Store, Google and its Affiliates will stop using the Brand Features associated solely with the discontinued Products, except as necessary to allow Google to effectuate the Wind Down Period.
6.2.3 Store Brand Features. Google grants to Vendor a limited, non-exclusive, worldwide, royalty-free license to use the Store Brand Features for the Term of this Agreement solely for marketing purposes specifically related to the Store with the prior approval of Google and in accordance with Googles trademark guidelines located at http://www.google.com/permissions/guidelines.html.
7. Vendor Representations & Warranties
7.1 Anti-Bribery. Vendor represents and warrants that it will comply with all applicable commercial and public anti-bribery laws, including the U.S. Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010, which prohibit corrupt offers of anything of value, either directly or indirectly to anyone, including Government Officials, to obtain or keep business or to secure any other improper commercial advantage. Government Officials include any government employee; candidate for public office; and employee of government-owned or government-controlled companies, public international organizations, and political parties. Furthermore, Vendor will not make any facilitation payments, which are payments to induce officials to perform routine functions they are otherwise obligated to perform. Vendor will use commercially reasonable and good faith efforts to comply with Googles due diligence process, including providing requested information.
7.2 Discrimination. Vendor represents and warrants that it is an equal-opportunity employer and does not discriminate on the basis of age, race, creed, color, religion, sex, sexual orientation, gender identity, national origin, disability, marital or veteran status, or any other basis that is prohibited by Applicable Law.
7.3 Equal Employment Opportunities. Because Google is an equal employment opportunity employer and a U.S. federal contractor or subcontractor, Vendor warrants that it will, to the extent applicable, comply with the requirements of 41 CFR 60-1.4(a), 41 CFR 60-300.5(a), and 41 CFR 60-741.5(a), all of which are incorporated into this Agreement by reference. These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, sexual orientation, gender identity or national origin. As applicable, Vendor will also abide by the requirements of Executive Order 13496 (29 CFR Part 471, Appendix A to Subpart A), relating to the notice of employee rights under federal labor laws.
7.4 Employment; Occupational Health and Safety. Vendor represents and warrants that it will comply with all other applicable employment and occupational health and safety laws and regulations.
7.5 Product Representations and Warranties.
7.5.1 Applicable Law. In connection with the Agreement, Vendor represents and warrants that Vendor and the Products comply and will comply with Applicable Laws.
7.5.2 Rights and Infringement. Vendor represents and warrants that Vendor owns or has valid and enforceable licenses to the intellectual property, including patent, trademark, trade secret, copyright and other proprietary rights, in and to the Products to allow their sale and distribution in the Store and use by Customer. Vendor represents and warrants that the Product does not violate any persons rights, including intellectual property, privacy, and security rights. If Vendor reasonably determines, or becomes aware of any allegation that any Product, its use, sale or distribution, infringes the intellectual property of any individual or entity, Vendor will notify Google immediately.
7.5.3 Viruses. Vendor also represents and warrants that Products do not include any viruses, spyware, Trojan horses, or other malicious code of any kind.
7.5.4 Third Party Materials and Open Source.
a. If Vendor makes use of Third Party Materials or Open Source Materials, Vendor represents and warrants that Vendor has the right to distribute the Third Party Material or Open Source Material. Vendor further represents and warrants that, as of each Products listing via the Store, Vendor has provided in writing to Google the names and license information for all Open Source Materials.
b. Vendor will comply with, and will cooperate in any manner necessary (as determined by Google) to assist Google in complying with, any obligations contained in any licenses related to Third Party Material or Open Source Material. Vendor will not include or use any material licensed under AGPL or SSPL. To the extent required by the applicable license and/or for Open Source Material licensed under GPL, LGPL, or MPL, Vendor will include a .zip file within the Product of the full source code and license terms for such Open Source Material and any third party component or library to which such is linked or with which it is distributed.
c. Vendor will notify Google by email to external-opensource-licensing@google.com, with a copy to cloud-partners@google.com, of any Open Source Materials. Vendor will make such notification before or when Vendor submits or identifies potential Products to Google for consideration, and in all cases before Products are made available through the Store. Vendor will not cause to be listed on the Store any software or service that is not a Product. Google retains the right to reject a Product because of Open Source Material or Third Party Material on any grounds.
8. DISCLAIMER OF WARRANTIES
8.1 STORE. VENDORS USE OF THE STORE IS AT VENDORS SOLE RISK. THE STORE IS PROVIDED AS IS AND AS AVAILABLE WITHOUT WARRANTY OF ANY KIND.
8.2 MATERIALS. VENDORS USE OF ANY MATERIAL DOWNLOADED OR OTHERWISE OBTAINED THROUGH THE STORE IS AT VENDORS OWN RISK, AND VENDOR IS SOLELY RESPONSIBLE FOR ANY DAMAGE TO VENDORS COMPUTER SYSTEMS, SOFTWARE, NETWORK OR OTHER PROPERTY, OR LOSS OF ANY DATA THAT RESULTS FROM SUCH USE.
8.3 DISCLAIMER. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, GOOGLE AND ITS AFFILIATES FURTHER DISCLAIM ALL WARRANTIES AND CONDITIONS OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
9. Confidential Information
9.1 Confidential Information means information that one party (or an Affiliate) discloses to the other party under this Agreement, and that is marked as confidential or would normally be considered confidential information under the circumstances. It does not include information that was independently developed by the recipient, is or becomes public through no fault of the recipient, or is rightfully known by the recipient without confidentiality obligations. The terms of this Agreement are Confidential Information.
9.2 Duty. The recipient will not disclose the disclosers Confidential Information, except to employees, Affiliates, contractors, agents, or professional advisors (Delegates) who need to know it and who have a legal obligation to keep it confidential. The recipient will use the disclosers Confidential Information only to exercise rights and fulfill obligations under this Agreement, and will ensure that such people and entities use the disclosers Confidential Information only to exercise rights and fulfill obligations under this Agreement while using reasonable care to protect the Confidential Information. The recipient will ensure that its Delegates are also subject to the same non-disclosure and use obligations. The recipient may disclose Confidential Information when required by Applicable Law after giving reasonable notice to the discloser, if permitted by Applicable Law.
9.3 Return. Upon termination of this Agreement, and if requested by a party, the other party will use commercially reasonable efforts to return or destroy all Confidential Information of such requesting party.
10. Product Takedowns.
10.1 Removal by Vendor. Vendor may remove any Product from the Store at any time by providing Google with (a) at least 30 days prior notice and (b) a transition or migration plan for Customers. All such removed Products are subject to the obligations in Section 12.5 (Wind Down).
10.2 Removal by Google. While Google is not obligated to monitor the Products or their content, if Google is notified by Vendor, becomes aware, or determines that a Product or Vendor Brand Feature: (a) violates the intellectual property rights or any other rights of Google or any third party; (b) violates any Applicable Law or is subject to an injunction; (c) is pornographic, obscene or otherwise violates Store policies or other terms of service as may be updated by Google from time to time; (d) may create liability for Google; (e) is deemed by Google to have a virus or to be malware, spyware or other malicious code; (f) violates this Agreement (g) is impacting the integrity of Googles or Customers network or servers (e.g., Customers are unable to access the Product or otherwise experience difficulty); (h) is not meeting acceptable standards, including based on performance measurements such as uninstall and/or refund rates, as determined solely by Google; or (i) in the case of UBB Products, is the subject of repeated errors in Metrics calculation or measurement, Google may immediately hide, prohibit access to, or remove the Product from the Store. Google may hide, prohibit access to, or remove any Product from or bar any vendor from the Store at any time.
10.3 Cure. Google will use commercially reasonable efforts to provide 7 days notice to Vendor instructing Vendor to cure its failures before Google removes a Product from the Store unless the agreement is terminated or in Googles opinion the provision of such notice is restricted by Applicable Law or would otherwise harm Google, or such failure is not reasonably capable of cure.
11. Vendor Account Credentials
Vendor is responsible for maintaining the confidentiality of any Vendor Account credentials. Vendor will be solely responsible for all actions related to its credentials, including all Products that are distributed through the Store. Google may limit the number of Vendor Accounts issued to Vendor.
12. Term and Termination
12.1 Term. This Agreement will start on the Effective Date and continue for the Term.
12.2 Termination for Convenience. Either party may terminate this Agreement on 30 days prior notice.
12.3 Termination by Google. Under the following circumstances Google may immediately terminate this Agreement if, in Googles opinion, the provision of notice under Section 12.2 (Termination for Convenience) is restricted by Applicable Law; would otherwise harm Google, Vendor or Customers; or such circumstance is not reasonably capable of cure:
12.3.1 Vendor has breached any provision of this Agreement or another agreement with Google;
12.3.2 Google is required to do so by Applicable Law;
12.3.3 Vendor has a Product that violates any Applicable Law;
12.3.4 Vendor ceases to have a Vendor Account and Payment Account in good standing; or
12.3.5 Google no longer provides the Store.
12.4 Effects of Termination.
12.4.1 Subject to Section 12.5 (Wind Down) as applicable, upon termination of this Agreement: (a) all Products will be removed from the Store; and (b) Vendor must cease Vendors use of any Vendor Account credentials except as needed to fulfill Vendors obligations during the Wind Down Period.
12.4.2 Survival. All terms of this Agreement will remain valid and enforceable, as applicable with respect to the removed Product, during any Wind Down Period. The obligations in Sections 3.4 (Refunds to Customers), 3.5 (Right to Offset Payment), 5.9 (Security and Privacy), 8 (Disclaimer of Warranties), 9 (Confidential Information), 12.5 (Wind Down), 13 (Limitations of Liability), 14 (Indemnification) and 16 (General Legal Terms), and any remaining payment obligations under this Agreement will survive any expiration or termination of this Agreement.
12.5 Wind Down.
12.5.1 Except where prohibited by law and unless otherwise requested by Google, when a Product is removed from the Store (due to termination of the Agreement or otherwise), a wind down period will apply as to any such Products that were purchased by Customers prior to the date of removal (Wind Down Products), starting from the date the Product was removed and ending on the later of (a) six months after such date and (b) the date that the last Customer subscription term for such Wind Down Product expires or terminates (the Wind Down Period). Notwithstanding the preceding sentence, (i) the Wind Down Period will not apply if Google terminates the Agreement pursuant to Section 12.3, (ii) Google may terminate the Wind Down Period if any of the circumstances set forth in Section 12.3 occurs during the Wind Down Period, (iii) Google may terminate an individual Customers subscription for a Wind Down Product upon the Customers request, and (iv) the parties may mutually agree to terminate the Wind Down Period prior to its expiration. If the Wind Down Period is terminated early pursuant to this Section 12.5.1, Google may provide a full or partial refund to Customers who prepaid fees for the affected Wind Down Products pursuant to Section 3.4.
12.5.2 Subject to Section 12.5.3, during the Wind Down Period, the terms of the Agreement will continue to apply as to all Wind Down Products, including the following: (a) Vendor will continue to allow the procurement and deployment of Wind Down Products via the Store by existing Customers for such Products and will continue to support any such Products, in each case in accordance with the terms of this Agreement; and (b) all licenses granted under this Agreement with respect to any Wind Down Products will continue in full force and effect.
12.5.3 During the Wind Down Period, the listing for the removed Product will be removed from the Store, and users of the Store who have not already acquired the Product may not acquire or deploy the removed Product through the Store.
12.5.4 After the Wind Down Period expires, no user of the Store may acquire or deploy the removed Product through the Store. Google will have no responsibility or liability to Customer or Vendor for any Customers use of the Product after the end of the Wind Down Period.
13. LIABILITY
13.1 Definition. LIABILITY MEANS ANY LIABILITY, WHETHER UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, REGARDLESS OF WHETHER FORESEEABLE OR CONTEMPLATED BY THE PARTIES.
13.2 Limited Liabilities.
13.2.1 TO THE EXTENT PERMITTED BY APPLICABLE LAW AND SUBJECT TO SECTION 13.3 (UNLIMITED LIABILITIES), NEITHER PARTY WILL HAVE ANY LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT FOR ANY
(A) INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES; OR
(B) LOST REVENUES, PROFITS, SAVINGS, OR GOODWILL.
13.2.2 EACH PARTYS TOTAL LIABILITY FOR DAMAGES PER INCIDENT ARISING OUT OF OR RELATING TO THIS AGREEMENT IS LIMITED TO THE GREATER OF $15 THOUSAND OR THE TOTAL CUSTOMER CHARGES FOR THE 12 MONTH PERIOD BEFORE THE INCIDENT GIVING RISE TO LIABILITY.
13.3 Unlimited Liabilities. NOTHING IN THIS AGREEMENT EXCLUDES OR LIMITS EITHER PARTYS LIABILITY FOR:
(A) DEATH, PERSONAL INJURY, OR TANGIBLE PERSONAL PROPERTY DAMAGE RESULTING FROM ITS NEGLIGENCE OR THE NEGLIGENCE OF ITS EMPLOYEES OR AGENTS;
(B) ITS FRAUD OR FRAUDULENT MISREPRESENTATION;
(C) ITS BREACH OF SECTIONS 5.9 (SECURITY AND PRIVACY), 7.5 (PRODUCT REPRESENTATIONS AND WARRANTIES), OR 9, (CONFIDENTIAL INFORMATION);
(D) ITS OBLIGATIONS UNDER SECTION 14 (INDEMNIFICATION);
(E) ITS INFRINGEMENT OF THE OTHER PARTYS INTELLECTUAL PROPERTY RIGHTS; OR
(F) MATTERS FOR WHICH LIABILITY CANNOT BE EXCLUDED OR LIMITED UNDER APPLICABLE LAW.
14. Indemnification
14.1 Indemnity. To the maximum extent permitted by Applicable Law, Vendor will defend and indemnify Google, its Affiliates and their respective directors, officers, employees, agents and Customers against any and all losses, liabilities, damages, costs, fees (including legal fees) and expenses relating to any third-party allegation or third-party legal proceeding arising from or related to: (a) the procurement and deployment of Product via the Store, including any claims of violation of Applicable Law or the violation of the privacy or security rights of any Customers or other third parties, but not including anything to the extent arising out of or accruing solely from the Store and its design, (b) Vendors use of the Store or any Marketplace Data, (c) any Product infringing any copyright, trademark, trade secret, trade dress, patent or other intellectual property right of any person or defames any person or violates a persons rights of publicity or privacy, or (d) Vendors breach of any Vendor warranty under this Agreement.
14.2 Remedies. If an injunction preventing continued use of Products is threatened or granted, Vendor will do the following at its sole expense: (a) procure the right to continue providing the Products in compliance with this Agreement; (b) modify the Products to make them non-infringing; or (c) remove the affected Product under Section 10.1 (Removal by Vendor).
14.3 Exclusions. The indemnity provided by Vendor under this Agreement does not extend to claims to the extent arising solely from breach by Google of its material obligations hereunder.
15. Modifications to the Agreement
Google may make changes to this Agreement from time to time. Google will provide at least 30 days advance notice before the change becomes effective. If Vendor does not agree to the revised Agreement, Vendor should within 30 days of the notice (a) notify Google of its rejection of the modifications in total, (b) terminate this Agreement under Section 12.2 (Termination for Convenience), and (c) stop using the Store. So long as Vendor timely and properly rejects the modifications in total and terminates the Agreement, then the terms of the Agreement before the notified modification will continue to apply, including during any Wind Down Period.
16. General Legal Terms
16.1 Notices. Google will provide notices under the Agreement to the Vendor by sending an email to the Notification Email Address. Vendor will provide notices under the Agreement to Google by sending an email to legal-notices@google.com. Notice will be treated as received when the email is sent. Vendor is responsible for keeping its Notification Email Address current throughout the term.
16.2 Emails. The parties may use emails to satisfy written approval and consent requirements under the Agreement.
16.3 Assignment. Neither party may assign the Agreement without the written consent of the other, except to an Affiliate where (a) the assignee has agreed in writing to be bound by the terms of this Agreement, (b) the assigning party has notified the other party of the assignment, and (c) if the Vendor is the assigning party, the assignee is established in the same country as Vendor. Any other attempt to assign is void.
16.4 Change of Control. If a party experiences a change of Control other than an internal restructuring or reorganization, then (a) that party will give written notice to the other party within 30 days after the change of Control (such notice to include the identity of the acquiring or successor party) and (b) the other party may immediately terminate this Agreement any time within 30 days after it receives that written notice.
16.5 Other User Rights & Subcontracting. Google may use Affiliates, consultants, and other contractors in connection with its performance of obligations and exercise of rights under this Agreement. These Affiliates, consultants, and contractors will be subject to the same obligations as Google. Either party may subcontract any of its obligations under this Agreement, but will remain liable for all subcontracted obligations and its subcontractors acts or omissions.
16.6 Force Majeure. Neither party will be liable for failure or delay in performance of its obligations to the extent caused by circumstances beyond its reasonable control, including acts of God, natural disasters, terrorism, riots, or war.
16.7 No Agency. The Agreement does not create any agency, partnership, or joint venture between the parties.
16.8 No Waiver. Neither party will be treated as having waived any rights by not exercising (or delaying the exercise of) any rights under this Agreement.
16.9 No Third-Party Beneficiaries. This Agreement does not confer any benefits on any third party unless it expressly states that it does.
16.10 Counterparts. The parties may execute this Agreement in counterparts, including facsimile, PDF, and other electronic copies, which taken together will constitute one instrument.
16.11 Amendments. Any amendment must be in writing. Except for amendments made under Section 15 (Modifications to the Agreement), any amendment must also be signed by both parties and expressly state that it is amending this Agreement.
16.12 Independent Development. Nothing in the Agreement will be construed to limit or restrict either party from independently developing, providing, or acquiring any materials, services, products, programs, or technology that are similar to the subject of the Agreement, provided that the party does not breach its obligations under the Agreement in doing so.
16.13 Entire Agreement. This Agreement states all terms agreed between the parties relating to its subject matter, and completely replaces any prior agreements between Vendor and Google in relation to the subject matter of the Agreement. If any Products have been listed in the Store before the Effective Date, then, as of the Effective Date, such Products will be governed by this Agreement. In entering into this Agreement, neither party has relied on, and neither party will have any right or remedy based on, any statement, representation or warranty (whether made negligently or innocently), except those expressly stated in this Agreement.
16.14 Severability. If any term (or part of a term) of this Agreement is invalid, illegal or unenforceable, the rest of this Agreement will remain in effect.
16.15 Equitable Relief. Nothing in the Agreement will limit either partys ability to seek equitable relief.
16.16 EXPORT RESTRICTIONS. PRODUCTS MAY BE SUBJECT TO UNITED STATES EXPORT LAWS AND REGULATIONS. VENDOR WILL COMPLY WITH ALL APPLICABLE EXPORT AND RE-EXPORT LAWS AND REGULATIONS, INCLUDING (a) THE EXPORT ADMINISTRATION REGULATIONS (EAR) MAINTAINED BY THE U.S. DEPARTMENT OF COMMERCE, (b) TRADE AND ECONOMIC SANCTIONS MAINTAINED BY THE U.S. TREASURY DEPARTMENTS OFFICE OF FOREIGN ASSETS CONTROL, AND (c) THE INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR) MAINTAINED BY THE U.S. DEPARTMENT OF STATE. VENDOR WILL PROVIDE GOOGLE WITH ALL ACCURATE INFORMATION NEEDED TO COMPLY WITH ALL APPLICABLE EXPORT CONTROL LAWS RELATED TO THE DISTRIBUTION OF PRODUCTS IN THE STORE.
16.17 Conflicting Languages. If this Agreement is translated into any other language, and there is a discrepancy between the English text and the translated text, the English text will govern.
16.18 Governing Law. All claims arising out of or relating to the Agreement will be governed by California law, excluding that states conflict of laws rules, and will be litigated exclusively in the federal or state courts of Santa Clara County, California; the parties consent to personal jurisdiction in those courts.
16.19 Electronic Signatures. The parties consent to electronic signature.
16.20 Headers. Headings and captions used in the Agreement are for reference purposes only and will not have any effect on the interpretation of the Agreement.
Signed by the parties authorized representatives on the dates below.
Vendor | ||
By: | /s/ Costantino Lanza | |
Name: | Costantino Lanza | |
Title: | Chief Growth Officer | |
Date: | 12-Oct-2022 |
Google LLC | ||
By: | /s/ Philipp Schindler | |
Name: | Philipp Schindler | |
Title: | Authorized Signatory | |
Date: | 12-Oct-2022 | |
MVA v2.7 |
Attachment A
BYOL RIDER
This BYOL Rider (Attachment A) applies to all BYOL Products offered as Products.
1. Order of Precedence. This Attachment A is part of the Agreement. The terms of Attachment A apply to BYOL Products only. For BYOL Products, the terms of this Attachment A prevail over any other, conflicting terms in the remainder of the Agreement.
2. Definitions.
a. BYOL Products means a bring-your-own-license Product(s) (also known as BYOL) for which a Customer obtains the right to deploy and enable in the Store using a Product license key that is separately provisioned or purchased outside of the Store.
3. Updated Terms.
a. Vendor will describe all BYOL Products as BYOL in the Store and to Google. Vendor will not make a BYOL Product available through the Store unless Vendor has made a non-BYOL Product available through the Store.
b. All BYOL Products are offered without a charge to Customer through the Store and without any revenue sharing with Google. Google has no obligation to track usage or collect payments from Customers with respect to BYOL Products.
c. For all BYOL Products, the following terms in the Agreement do not apply:
i. All of Section 1.6 (Customer Charges);
ii. All of Section 1.16 (Payment Account), as well as the phrase and Payment Account from Sections 2.1(b) and 12.3.4;
iii. All of Section 1.21 (Revenue Split), as well as the phrase (except for payment of Revenue Split by Google) from Section 6.1.1;
iv. All of Section 2.2 (Merchant of Record);
v. All of Section 3 (Pricing and Payments), other than Section 3.6 (Fraud); and
vi. The phrase So long as Customers pay the applicable, required Customer Charges in the first sentence of Section 4.3 (Redeployments).
d. Any calculations using Customer Charges or Revenue Split in the remainder of the Agreement will use $0 as the Customer Charge for purposes of all BYOL Product-related obligations or liabilities.
4. Vendor is responsible for all BYOL Product related activities, including, provisioning a temporary or free trial Product license, requiring a redirection to purchase a BYOL Product license, and all BYOL Product error handling.
5. To offer BYOL Products, Vendor will ensure that all related BYOL functionality is operational for Customers.
6. Vendor specifically acknowledges and agrees for all BYOL Products that Google will not provide Vendor with any Customer information or any analytics.
Attachment B
USAGE BASED BILLING RIDER
This Usage Based Billing Rider (Attachment B) applies to all UBB Products offered as Products.
1. Order of Precedence. This Attachment B is part of the Agreement. The terms of Attachment B apply to UBB Products only. For UBB Products, the terms of this Attachment B prevail over any other, conflicting terms in the remainder of the Agreement.
2. Definitions.
a. Metric Unit(s) means one or more of the following: (i) for time, seconds, (ii) for data, bytes, (iii) for storage, byte-seconds, or (iv) for count, integers.
b. Metrics means the measure of the consumption of a Resource in Metric Unit(s).
c. Reporting Cycle means the period of time and frequency for which the Metrics of a UBB Product are reported to Google. The Reporting Cycle must be no less frequent than once per hour.
d. Resource means one or more of the following: (i) time, (ii) data, (iii) storage, or (iv) count.
e. UBB Order means each individual order for a UBB Product.
f. UBB Product means a consumption Product offered by Vendor in the Store and under a usage based pricing model for which a Customer obtains the right from Google to deploy and enable, with such Products usage metrics tracked by the Product, Vendor, or Vendors agent(s) rather than Google.
3. Usage.
a. Product-Specific Metrics and Reporting Cycle. Prior to Vendor listing a UBB Product in the Store, Google and Vendor will determine which Metric Units and Reporting Cycle to apply to that UBB Product.
b. Reporting. For each Reporting Cycle during the Term plus any applicable Wind Down Period, and for one Reporting Cycle that follows, Vendor will provide to Google accurate and complete Metrics of each UBB Product for the previous Reporting Cycle, broken down by Customer and, if applicable, UBB Order. Vendor will provide Metrics in a format chosen by Google, and using the service control system and protocols established by Google, in each case as Google communicates to Vendor and which may be updated from time to time by Google at its discretion. Vendor acknowledges that reported Metrics will be used by Google for billing Customers, making it critical that Vendor provide Metrics free of errors or omissions.
c. Error Correction.
i. Vendor Discovered. During the Term plus any applicable Wind Down Period, and for 90 days thereafter, Vendor will monitor its Metrics collection, calculation and reporting system and if Vendor discovers any tampering of or errors in such Metrics system, or has reason to believe that a Metric may have been unreported to Google or that a Metric previously reported to Google may have been inaccurate, Vendor will promptly notify Google of this circumstance, including all relevant details, and keep Google fully apprised of Vendors findings as to the root cause of the issue, the correction, and any recalculation made necessary as a result of this circumstance. As necessary, Vendor will issue a new report with revised Metrics.
ii. Google or Customer Discovered. If at any time Google or a Customer reasonably believes that a Metric reported to Google by Vendor or to Customer by Google may have been inaccurate, Google will notify Vendor of this circumstance, including all relevant details. Once Google disputes any Metrics, the parties will confer and determine what adjustments, if any, are necessary.
iii. Googles determination in the case of disputed Metrics is final.
d. Credit. Vendor will not issue credits directly to Customers for use of UBB Products in the Store. Subject to the obligations of Section 3(c) (Error Correction) of this Attachment B, if Vendor believes that any Customers qualify for a usage credit or other credits for overcharges as determined in good faith by Vendor, Vendor will share this with Google so that Google may directly apply any valid credit. Vendor will not modify the Metrics to account for such credit or report Metrics to Google that are negative. The minimum reportable Metric is ZERO.
4. Applicability.
a. Customer Charges. Customer Charges do not include, and no Revenue Split will be due on, any payments due or made for (i) any UBB Product usage which has not been properly and timely reported under Section 3(b) (Reporting) of this Attachment B or (ii) Metrics for which Google has required a correction (e.g., faulty or broken reporting).
Attachment C
INDIRECT LISTINGS RIDER
1. | Application; Order of Precedence. This Indirect Listings Rider is part of the Agreement and governs all Indirect Listings and Indirect Products. The terms of Indirect Listings Rider apply to Indirect Listings and Indirect Products only. For Indirect Listings and Indirect Products, the terms of this Indirect Listings Rider prevail over any conflicting terms in the remainder of the Agreement. |
2. | Definitions. |
a. | Indirect Customer means a customer who purchases or licenses an Indirect Product after being directed to the Vendors website or other online property from an Indirect Listing. |
b. | Indirect Listing means a listing for a Product in the Store, which listing directs potential customers for such Products to a website or other online property operated by Vendor where such potential customers can complete the purchase or license of the Product directly from the Vendor. |
c. | Indirect Product means a Product featured in an Indirect Listing. |
3. | Updated Terms. |
a. | Procurement from the Vendor. Notwithstanding anything to the contrary in the Agreement, Indirect Customers purchase or license Indirect Products directly from the Vendor, and Google will have no contractual relationship with Indirect Customers with respect to their purchase or license of an Indirect Product. |
b. | Updated Terms. |
i. | Clause (a) of Section 14.1 is amended to read as follows: (a) the Product; |
c. | Inapplicable Terms. The following clauses and sections of the Agreement do not apply to Indirect Listings or Indirect Products: clause (c) of 2.1; 2.2; 3; 4.2; 4.3; 5.5; 6.1; 7.5.4; clause (b) of 10.1; and 12.5. |
d. | Applicability of Remainder of Agreement. Any terms of the Agreement not referenced in clause (b) or (c) of this Section 3 (Updated Terms) (Applicable Terms), will apply to Indirect Listings and Indirect Products. Any references to Products or Customers in the Applicable Terms will be deemed to mean Indirect Products and Indirect Customers, respectively, as they apply to this Indirect Listings Rider. |
Attachment D
Data Protection Addendum
1) | General. |
a) Agreement. This Data Protection Addendum (the DPA) forms part of the Agreement and incorporates the mandatory terms in the DPA and the Applicable Standard Contractual Clauses (as defined below) to the extent applicable.
b) End Controller. Where Google is not the Google Controller, Google will ensure the Google Controller complies with the representations, warranties, and obligations under the DPA applicable to Google.
c) Order of Precedence. To the extent the DPA conflicts with the Agreement, the DPA will govern.
d) Interpretation. The Agreements defined terms apply unless the DPA expressly states otherwise. Capitalized terms used but not defined will have the meanings given to them in the Agreement.
2) | Defined Terms. In this DPA: |
a) Alternative Transfer Solution means a mechanism other than the Applicable Standard Contract Clauses that enables the lawful transfer of Personal Information from the EEA, UK, or Switzerland to a third country in accordance with Applicable Data Protection Law, including as applicable, the Swiss-U.S. or UK-U.S. Privacy Shield self-certification programs approved and operated by the U.S. Department of Commerce (the Privacy Shield).
b) Applicable Data Protection Laws means privacy, data security, and data protection laws, directives, and regulations in any jurisdiction applicable to the Personal Information Processed for the Services including the GDPR, CCPA, and LGPD.
c) Applicable Standard Contractual Clauses means the European Commissions standard contractual clauses which are standard data protection terms for the transfer of personal data to controllers established in third countries that do not ensure an adequate level of data protection, as described in Article 46 of the EU GDPR including (i) the Controller-Controller SCCs, or (ii) the UK Controller-Controller SCCs, each as defined in this DPA.
d) Applicable Standards mean government standards, industry standards, codes of practice, guidance from Regulators, and best practices applicable to the parties Processing of Personal Information for the Services, including Alternative Transfer Solutions and the Payment Card Industry Data Security Standards (PCI DSS).
e) CCPA means, as applicable: (i) the California Consumer Privacy Act of 2018, California Civil Code 1798.100 et seq. (2018); (ii) the California Privacy Rights Act of 2020, and (iii) Applicable Data Protection Laws modeled on either of the foregoing.
f) Controller-Controller SCCs means the terms at https://business.safety.google/gdprcontrollerterms/sccs/eu-c2c/.
g) Data Controller means the legal entity or party to the Agreement that determines the purposes and means of Processing Personal Information. Data Controller also means controller as defined by Applicable Data Protection Laws.
h) GDPR means (i) the European Union General Data Protection Regulation (EU) 2016/679 (the General Data Protection Regulation) on data protection and privacy for all individuals within the European Union (EU) and the European Economic Area (EEA); (ii) the General Data Protection Regulation as incorporated into United Kingdom (UK) law by the Data Protection Act 2018 and amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (UK GDPR); and (iii) the Federal Data Protection Act of 19 June 1992 (Switzerland) (each as amended, superseded, or replaced).
i) Google Controller means the Google Entity that Processes Personal Information as a Data Controller as specified in Googles applicable privacy policy at https://policies.google.com/privacy, or as otherwise notified to You.
j) Google Entity means Google LLC (formerly known as Google Inc.), Google Ireland Limited, or another affiliate of Google LLC.
k) includes or including means including but not limited to.
l) individual or individuals mean natural persons who can be readily identified, directly or indirectly, or data subjects as defined by Applicable Data Protection Laws.
m) LGPD means Brazilian Law no. 13,709 for the protection of personal data.
n) Personal Information means (i) any information about an individual; or (ii) information that is not specifically about an individual but, when combined with other information, may identify an individual. Personal Information includes names, email addresses, postal addresses, telephone numbers, government identification numbers, financial account numbers, payment card information, credit report information, biometric information, online identifiers (including IP addresses and cookie identifiers), network and hardware identifiers, and geolocation information, and any information that constitutes personal data or personal information within the meaning of Applicable Data Protection Laws.
o) Process or Processing means to access, handle, create, collect, acquire, receive, record, combine, consult, use, process, alter, store, retain, maintain, retrieve, disclose, or dispose of. Process also includes processing within the meaning of Applicable Data Protection Laws.
p) reasonable means reasonable and appropriate to (i) the size, scope, and complexity of Your business; (ii) the nature of Personal Information being Processed; and (iii) the need for privacy, confidentiality, and security of Personal Information.
q) Regulator or Regulatory means an entity with supervisory or regulatory authority over Google under Applicable Data Protection Laws.
r) Secondary Use means any Processing of Personal Information for purposes other than as necessary to fulfill Your obligations set forth in the Agreement, including: (i) Processing Personal Information for purposes other than specified in the Services; (ii) Processing Personal Information in combination with any Personal Information that You Process outside of the Services; or (iii) Processing Personal Information in a manner that would constitute a sale, targeted advertising, or cross-context behavioral advertising of Personal Information as defined by Applicable Data Protection Laws.
s) Services means any goods, services, operations, or activities for which You Process Personal Information under the Agreement.
t) Third-Party Provider means an agent or other entity that You authorize to act on Your behalf in connection with the Services. Third Party Provider includes processor within the meaning of the Applicable Standard Contractual Clauses.
u) UK Controller-Controller SCCs means the terms at https://business.safety.google/gdprcontrollerterms/scc/uk-c2c.
v) You or Your means the Vendor (including any personnel, contractor, or agent acting on behalf of that party).
3) Representations and Warranties. You represent and warrant to Google that You:
a) are an independent Data Controller with respect to the Personal Information and will not Process the Personal Information as a joint Data Controller with Google; and
b) will determine the purposes and means of Your Processing of Personal Information received from Google as described in the Agreement.
4) Data Protection Obligations. In fulfilling Your obligations under the Agreement, You will comply with Applicable Data Protection Laws, including to the extent applicable:
a) Processing Personal Information only where You maintain a lawful basis of Processing;
b) providing all required notices or obtaining all required consents from individuals before Processing the Personal Information;
c) providing individuals with rights in connection with Personal Information in a timely manner, including the ability of individuals to: (i) access or receive their Personal Information in an agreed upon format; and (ii) correct, amend, or delete Personal Information where it is inaccurate, or has been Processed in violation of Applicable Data Protection Laws;
d) responding to individual requests or a Regulator concerning Your Processing of Personal Information; and
e) maintaining appropriate age verification mechanisms in compliance with Applicable Standards and Applicable Data Protection Laws where You Process Personal Information related to individuals under the age of 18.
5) Additional Obligations.
a) Limitation on Secondary Use. As required by Applicable Data Protection Laws, You will (i) provide explicit notice to individuals in writing of the Secondary Use and maintain a mechanism enabling individuals to opt out of the Secondary Use at any time; (ii) obtain lawful consent from the individuals prior to Processing Personal Information for a Secondary Use; or (iii) not Process Personal Information for a Secondary Use.
b) Safeguards. You will have in place reasonable technical and organizational measures to protect Personal Information against accidental, unauthorized, or unlawful destruction, loss, alteration, disclosure, or access. You will ensure that such measures provide a level of security reasonable to the risk represented by the processing and the nature of the data to be protected including:
i) maintaining reasonable controls to ensure that access to Personal Information will be limited to personnel or Third-Party Providers who have a legitimate need to Process Personal Information under the Agreement;
ii) promptly terminating personnel and Third-Party Provider access to Personal Information when such access is no longer required for performance under the Agreement;
iii) using reasonable and secure data transfer methods to transfer any Personal Information across any network other than an internal company network owned and managed by You;
iv) assuming responsibility for any unauthorized access to Personal Information under Your custody or control (or Third-Party Provider(s) custody or control);
v) providing reasonable ongoing privacy and information protection training and supervision for all personnel (including Third-Party Providers) who Process Personal Information; and
vi) maintaining a reasonable incident response program to respond to security incidents, publish a point of contact for security reports on Your website, and monitor security reports.
c) Security Incident Response; Statements. You will promptly inform Google if a security incident requires notice to end users. Except as required by law, You will not make (or permit any Third-Party Provider under Your control to make) any statement concerning the security incident that directly or indirectly references Google unless Google provides its written authorization.
d) Third-Party Providers. You will contractually require each ThirdParty Provider that Processes Personal Information to protect the privacy, confidentiality, and security of Personal Information using all reasonable measures as required by this DPA and Applicable Data Protection Laws. You will regularly assess Your ThirdParty Providers compliance with these contractual requirements.
e) Owned or Managed Systems. To the extent You access Googles owned or managed networks, systems, or devices (including APIs, corporate email accounts, equipment, or facilities) to Process Googles Personal Information, You will comply with Googles written instructions.
f) Assessments of Compliance with this DPA. Within 15 days of Googles written request to assess Your compliance with the DPA, You will, as relevant, provide certification, audit reports, or other reports regarding Your compliance with this DPA and Applicable Standards as defined by the International Organization for Standardization (ISO), International Electrotechnical Commission (IEC), or Statement on Standards for Attestation Engagements (SSAE) and International Standard on Assurance Engagements (ISAE) as published by the American Institute of Certified Public Accountants (AICPA), Payment Card Industry Data Security Standards, and International Auditing and Assurance Standards Board (IAASB), respectively. Examples of acceptable reports include: (1) SOC 1 Type II (based on SSAE 16, 18 or ISAE 3402); (2) SOC 2 Type II (based on SSAE 16, 18 or ISAE 3402); (3) ISO/IEC 27001:2013 certification; and (4) PCI DSS certification.
6) Legal Process. If a court or other government authority legally compels You to disclose Personal Information, then to the extent permitted by law, You will promptly inform Google of the request and reasonably cooperate with its efforts to challenge the disclosure or seek an appropriate protective order.
7) Data Transfers. Each party may transfer Personal Information if it complies with applicable provisions on the transfer of Personal Information required by Applicable Data Protection Laws.
a) To the extent You or a Google Controller transfers Personal Information relating to individuals within the UK, EEA, or Switzerland to Google or You (as applicable) and the receiving party is not: (i) subject to the binding obligations of a valid Alternative Transfer Mechanism, or (ii) located in a jurisdiction that is subject to a valid adequacy decision (as determined by the Applicable Data Protection Laws regarding the individuals about whom the Personal Information is Processed), You and Google expressly agree to the Applicable Standard Contractual Clauses including the warranties and undertakings contained therein as the data exporter and data importer as applicable to the transfer contemplated by the parties.
b) To the extent Section 7(a) applies: (i) if Google or You transfer Personal Information relating to individuals within the EEA or Switzerland to the other party, You and Google (on its own behalf or on behalf of the Google Controller) agree to the Controller-Controller SCCs; and (ii) if Google or You transfer Personal Information relating to individuals within the UK to the other party, then You and Google (on its own behalf or on behalf of the Google Controller) agree to the UK Controller-Controller SCCs.
c) To the extent You or a Google Controller transfers Personal Information to Google or You (as applicable) in accordance with an Alternative Transfer Solution, the receiving party will: (i) provide at least the same level of protection for the Personal Information as is required by the Agreement and the applicable Alternative Transfer Solution; (ii) promptly notify the disclosing party in writing if the receiving party determines that it can no longer provide at least the same level of protection for the Personal Information as is required by the Agreement and applicable Alternative Transfer Solution; and (iii) upon making such a determination, cease Processing Personal Information until the receiving party is able to continue providing at least the same level of protection as required by the Agreement and the applicable Alternative Transfer Solution.
d) Google LLC has certified under the Privacy Shield on behalf of itself and certain wholly-owned US subsidiaries. Googles certification and status are available at https://www.commerce.gov/page/eu-us-privacy-shield.
e) Where Google is not the Google Controller, Google will ensure that it is authorized by the Google Controller to (i) enter into the Applicable Standard Contractual Clauses on behalf of the Google Controller, and (ii) exercise all rights and obligations on behalf of the Google Controller, each as if it were the Data Controller.
8) Termination. In addition to the suspension and termination rights in the Agreement, Google may terminate the Agreement if it reasonably determines that (a) You have failed to cure material noncompliance with the DPA within a reasonable time; or (b) it needs to do so to comply with Applicable Data Protection Laws.
9) Survival. This DPA will survive expiration or termination of the Agreement as long as You continue to Process Personal Information.
Exhibit 10.20
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES DELIVERABLE UPON EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT) OR U.S. STATE SECURTIES LAWS. BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, THE HOLDER AGREES FOR THE BENEFIT OF mCLOUD TECHNOLOGIES CORP. (THE CORPORATION) THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE CORPORATION; OR (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS; OR (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY (I) RULE 144 OR (II) RULE 144A THEREUNDER, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS; OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS; OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C) OR (D) ABOVE, THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS THESE SECURITIES AND THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. UNITED STATES AND U.S. PERSON ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE FEBRUARY , 2023.
WARRANTS TO PURCHASE COMMON SHARES OF
mCLOUD TECHNOLOGIES CORP.
(a company existing pursuant to the laws of British Columbia)
Warrant Certificate Number: W-2022-10-01 |
Representing Warrants to purchase Common Shares |
THIS IS TO CERTIFY THAT for value received [insert name of registered holder] (the Warrantholder) has the right to purchase in respect of each whole warrant (individually a Warrant and collectively the Warrants) represented by this certificate or by a replacement certificate (in either case this Warrant Certificate), one fully paid and non-assessable common share (individually, a Common Share and collectively, the Common Shares and which terms shall include any shares or other securities to be issued in addition thereto or in substitution or replacement therefor as provided herein) of mCloud Technologies Corp. (the Corporation), a corporation existing under the Business Corporations Act (British Columbia), as constituted on the date hereof at a purchase price (the purchase price in effect from time to time being called the Exercise Price) of USD$ per Common Share, subject to adjustment as provided herein. Subject to the terms and conditions of this Warrant, this Warrant may be exercised at any time, in whole or in part, up to 5:00 p.m. Vancouver time, on .
The Corporation agrees that the Common Shares purchased pursuant to the exercise of the Warrants shall be and be deemed to be issued to the Warrantholder as of the close of business on the date on which this Warrant Certificate shall have been surrendered and payment made for such Common Shares as aforesaid.
Nothing contained herein shall confer any right upon the Warrantholder to subscribe for or purchase any Common Shares at any time after the Expiry Time and from and after the Expiry Time the Warrants and all rights under this Warrant Certificate shall be void and of no value.
The above provisions are subject to the following:
1. |
Exercise: In the event that the Warrantholder desires to exercise the right to purchase Common Shares conferred hereby, the Warrantholder shall (a) complete to the extent possible in the manner indicated and execute a subscription form in the form attached as Schedule A to this Warrant Certificate, (b) surrender this Warrant Certificate to the Corporation in accordance with Section 9 of this Warrant Certificate, and (c) pay the amount payable upon the exercise of such Warrants in respect of the Common Shares subscribed for by bank draft, money order or wire transfer in lawful money of the United States payable to the Corporation or by transmitting same day funds in lawful money of the United States by wire to such account as the Corporation shall direct the Warrantholder. Upon such surrender and payment as aforesaid, the Warrantholder shall be deemed for all purposes to be the holder of record of the number of Common Shares to be so issued and the Warrantholder shall be entitled to delivery of a certificate or certificates representing such Common Shares and the Corporation shall cause such certificate or certificates to be delivered to the Warrantholder at the address specified in the subscription form within three business days after such surrender and payment as aforesaid. No fractional Common Shares will be issuable upon any exercise of the Warrants and the Warrantholder will not be entitled to any cash payment or compensation in lieu of a fractional Common Share. |
2. |
Partial Exercise: The Warrantholder may from time to time subscribe for and purchase any lesser number of Common Shares than the number of Common Shares expressed in this Warrant Certificate. In the event that the Warrantholder subscribes for and purchases any such lesser number of Common Shares prior to the Expiry Time, the Warrantholder shall be entitled to receive a replacement certificate representing the unexercised balance of the Warrants. |
3. |
Not a Shareholder: The holding of the Warrants shall not constitute the Warrantholder as a shareholder of the Corporation nor entitle the Warrantholder to any right or interest in respect thereof except as expressly provided in this Warrant Certificate; provided, however, that upon the issuance of Common Shares upon the exercise of the Warrants in accordance with the terms hereof, the Warrantholder shall be a holder of Common Shares in all respects. |
4. |
Covenants, Representations and Warranties: The Corporation hereby represents and warrants that it is authorized to create and issue the Warrants, which are valid and enforceable against the Corporation, and covenants and agrees that it will cause the Common Shares from time to time subscribed for and purchased in the manner provided in this Warrant Certificate and the certificate or certificates representing such Common Shares to be issued and that, at all times prior to the Expiry Time, it will reserve and there will remain unissued a sufficient number of Common Shares to satisfy the right of purchase provided for in this Warrant Certificate. The Corporation hereby further covenants and agrees that, while any of the Warrants shall be outstanding, the Corporation shall (a) comply in all material respects with the securities legislation applicable to it; and (b) use commercially reasonable efforts to do or cause to be done all things necessary to preserve and maintain its corporate existence. All Common Shares which are issued upon the exercise of the right of purchase provided in this Warrant Certificate, upon payment therefor of the amount at which such Common Shares may be purchased pursuant to the provisions of this Warrant Certificate, shall be deemed to be fully paid and non-assessable shares and free from all taxes, liens and charges with respect to the issue thereof. The Corporation hereby represents and warrants that this Warrant Certificate is a valid and enforceable obligation of the Corporation, enforceable in accordance with the provisions of this Warrant Certificate. |
5. |
Anti-Dilution Protection: |
(1) |
Definitions: For the purposes of this Section 4, unless there is something in the subject matter or context inconsistent therewith, the words and terms defined below shall have the respective meanings specified therefor in this Section 4(1): |
(i) |
Adjustment Period means the period commencing on the date of issue of the Warrants and ending at the Expiry Time; |
(ii) |
Auditors means such firm of chartered accountants duly appointed as auditors of the Corporation; |
(iii) |
Current Market Price of the Common Shares at any date means the weighted average of the trading price per Common Share for such Common Shares for each day there was a closing price for the twenty consecutive Trading Days ending immediately prior to such date on the TSX Venture Exchange or if on such date the Common Shares are not listed on the TSX Venture Exchange, on such stock exchange upon which such Common Shares are listed, or, if such Common Shares are not listed on any stock exchange then on such over-the-counter market as may be selected for such purpose by the directors; |
(iv) |
Exchange Rate means the number of Common Shares subject to the right of purchase under each Warrant; |
(v) |
director or director of the Corporation means a director of the Corporation for the time being and, unless otherwise specified herein, a reference to action by the directors means action by the directors of the Corporation as a board or, whenever empowered, action by any committee of the directors of the Corporation; and |
(vi) |
Trading Day means, with respect to a stock exchange, a day on which such exchange is open for the transaction of business and with respect to the over-the-counter market means a day on which the TSX Venture Exchange is open for the transaction of business. |
(2) |
Adjustments: The Exercise Price and the number of Common Shares issuable to the Warrantholder pursuant to this Warrant Certificate shall be subject to adjustment from time to time in the events and in the manner provided as follows: |
(i) |
if, at any time during the Adjustment Period, the Corporation shall: |
(A) |
subdivide, re-divide or change its outstanding Common Shares into a greater number of Common Shares; |
(B) |
reduce, combine or consolidate its outstanding Common Shares into a smaller number of Common Shares; or |
(C) |
issue Common Shares or securities exchangeable for, or convertible into, Common Shares to all or substantially all of the holders of Common Shares by way of distribution (other than a distribution of Common Shares upon the exercise of Warrants); |
the Exercise Price in effect on the effective date of such subdivision, re-division, change, reduction, combination, consolidation or on the record date of such distribution, as the case may be, shall in the case of the events referred to in Sections 5(2)(i)A or 5(2)(i)C be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, re-division, change or distribution, or shall, in the case of the events referred to in Section 5(2)(i)B, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation. Such adjustment shall be made successively whenever any event referred to in this Section 5(2)(i) shall occur. Upon any adjustment of the Exercise Price pursuant to Section 5(2)(i), the Exchange Rate shall be contemporaneously adjusted by multiplying the number of Common Shares theretofore obtainable on the exercise thereof by a fraction of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment;
(ii) |
if and whenever at any time during the Adjustment Period, the Corporation shall fix a record date for the issuance of rights, options or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible or exchangeable into Common Shares) at a price per Common Share (or having a conversion or exchange price per Common Share) less than 95% of the Current Market Price on such record date (a Rights Offering), the Exercise Price shall be adjusted immediately after such record date so that it shall equal the amount determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase or into which the convertible or exchangeable securities so offered are convertible or exchangeable; any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that no such rights or warrants are exercised prior to the expiration thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or, if any such rights or warrants are exercised, to the Exercise Price which would then be in effect based upon the number of Common Shares (or securities convertible or exchangeable into Common Shares) actually issued upon the exercise of such rights or warrants, as the case may be. Upon any adjustment of the Exercise Price pursuant to this Section 5(2)(ii), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 5(2)(ii) are fixed within a period of 25 Trading Days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates; |
(iii) |
if and whenever at any time during the Adjustment Period the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) securities of any class, whether of the Corporation or of any other entity (other than Common Shares), (ii) rights, options or warrants to subscribe for or purchase Common Shares (or other securities convertible into or exchangeable for Common Shares), other than pursuant to a Rights Offering; (iii) evidences of its indebtedness or (iv) any property or other assets then, in each such case, the Exercise Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, less the excess, if any, of the fair market value on such record date, as determined by the Corporation (whose determination shall be conclusive), of such securities or other assets so issued or distributed over the fair market value of any consideration received therefor by the Corporation from the holders of the Common Shares, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price; and Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that such distribution is not so made, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed. Upon any adjustment of the Exercise Price pursuant to this Section 5(2)(iii), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment; |
(iv) |
if and whenever at any time during the Adjustment Period, there is a reclassification of the Common Shares or a capital reorganization of the Corporation other than as described in Section 5(2)(i) or a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other body corporate, trust, partnership or other entity, or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity, any Warrantholder who has not exercised its right of acquisition prior to the effective date of such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, upon the exercise of such right thereafter, shall be entitled to receive upon payment of the Exercise Price and shall accept, in lieu of the number of Common Shares that prior to such effective date the Warrantholder would have been entitled to receive, the number of shares or other securities or property of the Corporation or of the body corporate, trust, partnership or other entity resulting from such merger, amalgamation or consolidation, or to which such sale or conveyance may be made, as the case may be, that such Warrantholder would have been entitled to receive on such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, if, on the effective date thereof, as the case may be, the Warrantholder had been the registered holder of the number of Common Shares to which prior to such effective date it was entitled to acquire upon the exercise of the Warrants. If determined appropriate by the directors of the Corporation, relying on advice of counsel, to give effect to or to evidence the provisions of this Section 5(2)(iv), the Corporation, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance, enter into a certificate which shall provide, to the extent possible, for the application of the provisions set forth in this Warrant Certificate with respect to the rights and interests thereafter of the Warrantholder to the end that the provisions set forth in this Warrant Certificate shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Warrantholder is entitled on the exercise of its acquisition rights thereafter. Any certificate entered into between the Corporation, any successor to the Corporation or such purchasing body corporate, partnership, trust or other entity and the Warrantholder shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 5(2)(iv) and which shall apply to successive reclassifications, capital reorganizations, amalgamations, consolidations, mergers, sales or conveyances; |
(v) |
in any case in which this Section 5(2) shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Warrantholder of any Warrant exercised after such event the additional Common Shares issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such Warrantholder an appropriate instrument evidencing such Warrantholders right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the relevant date of exercise or such later date as such Warrantholder would, but for the provisions of this Section 5(2)(v), have become the holder of record of such additional Common Shares pursuant to Section 5(2); |
(vi) |
in any case in which Section 5(2)(i)C, Section 5(2)(ii) or Section 5(2)(iii) require that an adjustment be made to the Exercise Price, no such adjustment shall be made if the Warrantholder receives, subject to the approval of the TSX Venture Exchange if required, the rights or warrants referred to in Section 5(2)(i)C, Section 5(2)(ii) or the shares, rights, options, warrants, evidences of indebtedness or assets referred to in Section 5(2)(iii), as the case may be, in such kind and number as they would have received if they had been holders of Common Shares on the applicable record date or effective date, as the case may be, by virtue of their outstanding Warrant having then been exercised into Common Shares at the Exercise Price in effect on the applicable record date or effective date, as the case may be; |
(vii) |
the adjustments provided for in this Section 5(2) are cumulative, and shall, in the case of adjustments to the Exercise Price be computed to the nearest whole cent and shall apply to successive subdivisions, re-divisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section 5(2), provided that, notwithstanding any other provision of this Section, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments which by reason of this Section 5(2)(vii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and |
(viii) |
after any adjustment pursuant to this Section 5(2), the term Common Shares where used in this Warrant Certificate shall be interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section 5(2), the Warrantholder is entitled to receive upon the exercise of his Warrant, and the number of Common Shares indicated by any exercise made pursuant to a Warrant shall be interpreted to mean the number of Common Shares or other property or securities a Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 5(2), upon the full exercise of a Warrant. |
(3) |
Entitlement to Common Shares on Exercise of Warrant: All Common Shares or shares of any class or other securities, which a Warrantholder is at the time in question entitled to receive on the exercise of its Warrant, whether or not as a result of adjustments made pursuant to this Section 4, shall, for the purposes of the interpretation of this Warrant Certificate, be deemed to be Common Shares which such Warrantholder is entitled to acquire pursuant to such Warrant. |
(4) |
No Adjustment for Certain Transactions: Notwithstanding anything in this Section 4, no adjustment shall be made in the acquisition rights attached to the Warrants if the issue of Common Shares is being made pursuant to this Warrant Certificate or in connection with (a) any equity incentive plan, share purchase plan or similar plan in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation; (b) the satisfaction of existing convertible instruments outstanding as at the date hereof; or (c) payment of dividends in the ordinary course. |
(5) |
Determination by Auditors: In the event of any question arising with respect to the adjustments provided for in this Section 4 such question shall be conclusively determined by an independent firm of chartered accountants which may be the Auditors, who shall have access to all necessary records of the Corporation, and such determination shall be binding upon the Corporation, the directors of the Corporation, all holders and all other persons interested therein. |
(6) |
Proceedings Prior to any Action Requiring Adjustment: As a condition precedent to the taking of any action which would require an adjustment in any of the acquisition rights pursuant to any of the Warrants, including the number of Common Shares which are to be received upon the exercise thereof, the Corporation shall take any action which may, in the opinion of counsel, be necessary in order that the Corporation has unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the Common Shares which the holders of such Warrants are entitled to receive on the full exercise thereof in accordance with the provisions hereof. |
(7) |
Certificate of Adjustment: The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 4, deliver a certificate of the Corporation to the Warrantholder specifying the nature of the event requiring the same and the amount of the adjustment or readjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate shall be supported by a certificate of the Corporations Auditors verifying such calculation. |
(8) |
Notice of Special Matters: The Corporation covenants with the Warrantholder that, so long as any Warrant remains outstanding, it will give notice to the Warrantholder of its intention to fix a record date that is prior to the Expiry Time for any matter for which an adjustment may be required pursuant to Section 5(2). Such notice shall specify the particulars of such event and the record date for such event, provided that the Corporation shall only be required to specify in the notice such particulars of the event as shall have been fixed and determined on the date on which the notice is given. The notice shall be given in each case not less than 14 days prior to such applicable record date. If notice has been given and the adjustment is not then determinable, the Corporation shall promptly, after the adjustment is determinable give notice to the Warrantholder of such adjustment computation. |
(9) |
No Action after Notice: The Corporation covenants that it will not close its transfer books or take any other corporate action which might deprive the Warrantholder of the opportunity to exercise its right of acquisition pursuant thereto during the period of 14 days after the giving of the certificate or notices set forth in Section 5(7) and Section 5(8). |
(10) |
Other Adjustments: If the Corporation after the date hereof shall take any action affecting the Common Shares, other than an action described in this Section 4 which, in the opinion of the directors, would have a material adverse effect on the rights of Warrantholder, the Exercise Price or the Exchange Rate, there shall be an adjustment in such manner, if any, and at such time, by action of the directors, acting reasonably and in good faith, as they may reasonably determine to be equitable to the Warrantholder in such circumstances, provided that no such adjustment will be made unless prior approval of any stock exchange on which the Common Shares are listed for trading has been obtained. |
(11) |
Participation by Warrantholder: No adjustments shall be made pursuant to this Section 4 if the Warrantholder is entitled to participate in any event described in this Section 4 on the same terms, mutatis mutandis, as if the Warrantholder had exercised its Warrants prior to, or on the effective date or record date of, such event. |
6. |
Further Assurances: The Corporation hereby covenants and agrees that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all and every such other act, deed and assurance as the Warrantholder shall reasonably require for the better accomplishing and effectuating of the intentions and provisions of this Warrant Certificate. |
7. |
Time of Essence: Time shall be of the essence of this Warrant Certificate. |
8. |
Governing Laws: This Warrant Certificate shall be construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein. |
9. |
Notices: All notices or other communications to be given under this Warrant Certificate shall be delivered by hand or by email and, if delivered by hand, shall be deemed to have been given on the delivery date and, if sent by email, on the date of transmission if sent before 5:00 p.m., Vancouver time, on a business day or, if sent after 5:00 p.m., Vancouver time, or such day is not a business day, on the first business day following the date of transmission. |
10. |
Lost Certificate: If this Warrant Certificate or any replacement hereof becomes stolen, lost, mutilated or destroyed, the Corporation shall, on such terms as it may in its discretion impose, acting reasonably, issue and deliver a new certificate, in form identical hereto but with appropriate changes, representing any unexercised portion of the subscription rights represented hereby to replace the certificate so stolen, lost, mutilated or destroyed. |
11. |
Transfer: The Warrants are non-transferable. |
12. |
Successors and Assigns: This Warrant Certificate shall enure to the benefit of the Warrantholder and the successors and permitted assignees thereof and shall be binding upon the Corporation and the successors thereof. |
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by an authorized officer as of the ___ day of _____________, 2022.
mCLOUD TECHNOLOGIES CORP. | ||
By: |
| |
Authorized Signing Officer |
SCHEDULE A
TO: MCLOUD TECHNOLOGIES CORP.
SUBSCRIPTION FORM
The undersigned hereby subscribes for _______________ common shares (Common Shares) of mCloud Technologies Corp. (the Corporation) (or such other number of Common Shares or other securities to which such subscription entitles the undersigned in lieu thereof or in addition thereto pursuant to the provisions of the warrant certificate (the Warrant Certificate) dated ________________, 2022 issued by the Corporation) at the purchase price of US$_________ per Common Share (or at such other purchase price as may be in effect under the provisions of the Warrant Certificate) and on and subject to the other terms and conditions specified in the Warrant Certificate and hereunder and encloses herewith a bank draft or money order in lawful money of the United States payable to the Corporation or has transmitted same day funds by wire to such account as the Corporation directed the undersigned in payment of the subscription price.
In connection with the exercise of these Warrants, the undersigned represents, warrants and certifies to the Corporation as follows (check one):
☐ 1. The undersigned (i) is not a U.S. person, (ii) is not exercising the Warrants within the United States or for the account or benefit of a U.S. person or a person in the United States, (iii) is not executing this warrant with the intent to distribute either directly or indirectly any of the Common Shares acquired hereunder in the United States, and (iv) has in all other respects complied with the terms of Regulation S promulgated by the United States Securities and Exchange Commission under the United States Securities Act of 1933, as amended (the U.S. Securities Act)); or
☐ 2. The undersigned (a) is the original U.S. purchaser who purchased unsecured debentures directly from the Corporation on ____________, 2022, and who executed and delivered a U.S. accredited investor certificate in the form annexed to the subscription agreement in connection with the purchase of convertible debentures, (b) is exercising the Warrants for its own account or for the account of a disclosed principal, (c) is, and such disclosed principal, if any, is a U.S. accredited investor within the meaning of Rule 501(a) of Regulation D under the U.S. Securities Act at the time of exercise of these Warrants, (d) confirms the representations and warranties of the holder in the U.S. accredited investor certificate remain true and correct as of the date of exercise of these Warrants and re-affirms the representations and warranties thereto; or
☐ 3. The undersigned holder is (i) a holder in the United States, (ii) a U.S. Person, (iii) a person exercising for the account or benefit of a U.S. Person, (iv) executing or delivering this exercise form in the United States, or (v) requesting delivery of the underlying Common Shares in the United States, the undersigned holder has delivered to the Corporation and the Corporations transfer agent (1) a completed and executed U.S. Purchaser Letter in substantially the form attached to the Warrant Certificate as Schedule C, or (2) an opinion of counsel (which will not be sufficient unless it is in form and substance reasonably satisfactory to the Corporation) or such other evidence reasonably satisfactory to the Corporation to the effect that with respect to the Common Shares to be delivered upon exercise of the Warrants, the issuance of such securities has been registered under the U.S. Securities Act and applicable state securities laws, or an exemption from such registration requirements is available..
The terms U.S. person and United States are as defined in Regulation S under the U.S. Securities Act.
The undersigned holder understands that unless Box 1 above is checked, the certificate representing the Common Shares issued upon exercise of this Warrant will bear a legend set forth below:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT) OR U.S. STATE SECURTIES LAWS. BY PURCHASING OR OTHERWISE HOLDING SUCH SECURITIES, THE HOLDER AGREES FOR THE BENEFIT OF mCLOUD TECHNOLOGIES CORP. (THE CORPORATION) THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO CORPORATION; OR (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS; OR (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT PROVIDED BY (I) RULE 144 OR (II) RULE 144A THEREUNDER, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS; OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS; OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C) OR (D) ABOVE, THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
In addition, the undersigned holder understands that the certificates representing the Common Shares issued on the exercise of this Warrant may bear the following legend:
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE FEBRUARY , 2023.
The undersigned hereby directs that the Common Shares subscribed for be registered and delivered as follows:
Name in Full | Address | Number of Common Shares |
DATED this ___ day of _____________, 20____.
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Exhibit 10.21
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS FOUR MONTHS PLUS ONE DAY FROM THE CLOSING DATE].
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE U.S. SECURITIES ACT), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF mCLOUD TECHNOLOGIES CORP. (THE COMPANY) THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S (REGULATION S) UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE COMPANY MUST FIRST BE PROVIDED TO THE COMPANYS TRANSFER AGENT.
THESE SECURITIES MAY NOT CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON CANADIAN STOCK EXCHANGES. IF THE COMPANY IS A FOREIGN ISSUER WITHIN THE MEANING OF REGULATION S AT THE TIME OF TRANSFER PURSUANT TO RULE 904 OF REGULATION S, A NEW CERTIFICATE, BEARING NO LEGEND, MAY BE OBTAINED FROM THE COMPANYS TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE COMPANYS TRANSFER AGENT AND THE COMPANY AND, IF SO REQUIRED BY THE COMPANYS TRANSFER AGENT, AN OPINION OF COUNSEL TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT.
mCLOUD TECHNOLOGIES CORP.
15% UNSECURED DEBENTURE DUE
DEBENTURE CERTIFICATE NUMBER: CD-2022- |
PRINCIPAL AMOUNT: USD$[] |
mCLOUD TECHNOLOGIES CORP., a corporation incorporated under the laws of British Columbia (the Company), for value received, hereby acknowledges itself indebted and promises to pay to or to the order of [] (the Holder), the principal amount of $[] (the Principal Amount) in lawful money of the United States of America in the manner hereinafter provided at the address of the Holder on record with the Company, or at such other place or places as the Holder may designate by notice in writing to the Company, on , or such earlier date as the Principal Amount may become due and payable (the Maturity Date), and to pay interest to the Holder on the Principal Amount outstanding from time to time owing hereunder to the date of payment as hereinafter provided, both before and after maturity or demand, default and judgment.
The Principal Amount owing, together with all accrued and unpaid interest owing thereon and all other amounts now or hereafter payable hereunder (collectively, the Obligations), shall be due and payable on the Maturity Date in accordance with the terms hereof. This Debenture is issued subject to the terms and conditions attached hereto as Schedule A.
(See terms and conditions attached hereto)
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed by a duly authorized officer of the Company.
DATED for reference this _____ day of ________________, 2022.
mCLOUD TECHNOLOGIES CORP. | ||
Per: |
| |
Authorized Signatory |
Schedule A Terms and Conditions for 15% Unsecured Debenture
ARTICLE 1 INTERPRETATION
Section 1.1 Definitions
In this Debenture, the following terms shall have the following meanings:
(1) Blockage Event means the giving of written notice by the Company or any holder of Senior Indebtedness to the Holder specifying: (a) the occurrence of a default or event of default under any of the terms of any agreement relating to, or instrument evidencing, any Senior Indebtedness; or (ii) the payment proposed to be made with respect to any amount owing under this Debenture which, if made, would give rise to the occurrence of any default or event of default under any of the terms of any agreement relating to, or instrument evidencing, any Senior Indebtedness;
(2) Business Day means a day other than a Saturday, Sunday or other day on which commercial banks in Vancouver, British Columbia are authorized by law to close;
(3) Canadian Securities Laws means the Securities Act (Ontario) and the securities laws of any other province or territory of Canada, if applicable, and the rules, regulations and policies of any Canadian securities regulatory authority administering such securities laws, as the same shall be in effect from time to time;
(4) Change of Control means:
(a) |
any transaction (whether by purchase, merger or otherwise) whereby a Person or Persons acting jointly or in concert directly or indirectly acquires the right to cast, at a general meeting of shareholders of the Company, more than 50% of the votes attached to the Common Shares that may be ordinarily cast at such meeting; |
(b) |
the Companys arrangement, amalgamation, consolidation or merger with or into any other Person, any merger of another Person into the Company, unless the holders of voting securities of the Company immediately prior to such arrangement, amalgamation, consolidation or merger hold securities representing 50% or more of the voting control or direction in the Company or the successor entity upon completion of the arrangement, amalgamation, consolidation or merger; or |
(c) |
any conveyance, transfer, sale lease or other disposition of all or substantially all of the Companys and the Companys subsidiaries assets and properties, taken as a whole, to a Person acting at arms length to the Company; |
(5) Closing Date means , 2022;
(6) Common Shares means the common shares in the capital of the Company, or the common shares of the continuing corporation or other resulting issuer formed as a result of a Merger;
(7) Debentures means this 15% unsecured debenture and any other 2022 15% Debenture;
(8) Interest Payment Date means the last day of March, June, September and December in each year commencing on December 31, 2022, as well as the Maturity Date;
(9) Majority Holders means, at any time, the holders of more than 50% of the principal amount of all 2022 15% Debentures which are then outstanding;
(10) Merger means any transaction (whether by way of arrangement, amalgamation, merger, transfer, sale or lease) whereby all or substantially all of the Companys assets would become the property of any other Person, or, in the case of any such arrangement, amalgamation or merger, of the continuing corporation or other entity resulting therefrom;
(11) Offering means the offering of 2022 15% Debentures to be issued by the Company;
(12) Person means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof; and
(13) Senior Indebtedness means, unless expressly subordinated to or made on a parity with the amounts due under this Debenture and each other 2022 15% Debenture, all amounts due in connection with: (a) indebtedness of the Company or any subsidiary thereof to banks or other lending institutions regularly engaged in the business of lending money; and (b) any such indebtedness or any debentures, notes or other evidence of indebtedness issued in exchange for such Senior Indebtedness, or any indebtedness arising from the satisfaction of such Senior Indebtedness by a guarantor.
Section 1.2 Headings
The inclusion of headings in this Debenture is for convenience of reference only and shall not affect the construction or interpretation hereof.
Section 1.3 Currency and bank information
Unless otherwise indicated, all amounts in this Debenture are stated, and shall be paid, in currency of the United States of America.
Wires to be sent to:
Bank name: HSBC BANK CANADA
Beneficiary Name: mCloud Technologies Corp.
Beneficiary Address: #550510 Burrard Street, Vancouver, BC V6C 3A8
Account number: 270-679626-070
Swift code: HKBCCATT
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Section 1.4 Number, Gender and Persons
Unless the context otherwise requires, words importing the singular in number only shall include the plural and vice versa, words importing the use of gender shall include the masculine, feminine and neuter genders and words importing Persons shall include individuals, corporations, partnerships, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities.
Section 1.5 Severability
If any provision of this Debenture is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the validity, legality or enforceability of the remaining provisions hereof, and each such provision shall be interpreted in such a manner as to render them valid, legal and enforceable to the greatest extent permitted by applicable law. Each provision of this Debenture is declared to be separate, severable and distinct.
Section 1.6 Entire Agreement
This Debenture, including any schedules attached hereto, constitutes the entire agreement between the Company and the Holder relating to the subject matter hereof, and supersedes all prior agreements, representations, warranties, statements, promises, information, arrangements, understandings, conditions or collateral agreements, whether oral or written, express or implied, with respect to the subject matter hereof.
Section 1.7 2022 15% Debentures
This Debenture is one of a series of duly authorized and validly issued unsecured debentures of the Company, ranking pari passu with each other and differing only as to principal amount, issued by the Company under the Offering (collectively, the 2022 15% Debentures).
ARTICLE 2 PAYMENT OF PRINCIPAL AND INTEREST
Section 2.1 Repayment of Principal
Subject to the terms and conditions hereof, the Principal Amount outstanding under this Debenture, together with any accrued and unpaid interest owing thereon, shall be repaid by the Company to the Holder on the Maturity Date.
Section 2.2 Interest Payable
Interest on the Principal Amount outstanding under this Debenture shall be at the simple rate of 15% per annum, calculated and payable quarterly, not in advance, on the last day of March, June, September and December in each year, accrued from and including the Closing Date, and shall be first payable on December 31, 2022. The December 31, 2023 interest payment will represent accrued interest from the Closing Date to December 31, 2023. For greater certainty, such interest shall be payable before, during or after the occurrence of an Event of Default.
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Section 2.3 Method of Paying of Interest
The Company shall satisfy its obligation to pay interest on the Debenture in cash on each applicable Interest Payment Date. For greater certainty, if the Principal Amount is repaid in full within 180 days following the Closing Date (such date being an Early Repayment Date), the Company will, contemporaneously with the payment of the Principal Amount, pay to the Holder such amount as would result in the aggregate interest paid to the Holder under this Debenture (inclusive of all interest paid up to the Early Repayment Date) being equal to 6 months of interest on the Principal Amount.
Section 2.4 Rank
(1) The 2022 15% Debentures will constitute direct unsecured obligations of the Company. Each 2022 15% Debenture will rank pari passu with each other 2022 15% Debenture in right of payment of principal and interest (regardless of their actual date or terms of issue). Notwithstanding anything in this Debenture to the contrary, the indebtedness evidenced by this Debenture and each other 2022 15% Debenture is subordinated in right of payment to the prior payment in full of any Senior Indebtedness in existence on the Closing Date or hereafter incurred.
(2) While this Debenture remains issued and outstanding, the Holder shall at the request of the Company, in respect of the Obligations, enter into a postponement and subordination agreement with any lender to the Company in connection with the incurrence by the Company of any Senior Indebtedness, provided such postponement and subordination agreement is on customary terms and conditions.
(3) Except as set forth in Section 2.4(4), until all Senior Indebtedness has been indefeasibly paid in full in cash and all financing arrangements between the Company and any holder of Senior Indebtedness have been terminated, the Holder (whether individually or through any action by the Majority Holders) will not accelerate, ask, demand, sue for, participate with others in any suit, action or proceeding against the Company for, take or receive from the Company, by set-off or in any other manner, the whole or any part of the Obligations, including, without limitation, the taking or foreclosure upon or selling of any negotiable instruments evidencing such amounts, or any security for any of the Obligations.
(4) Notwithstanding Section 2.4(3), until the occurrence of a Blockage Event the Company shall pay to the Holder all payments owing under this Debenture as and when such amounts become due and owing.
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ARTICLE 3. REDEMPTION OR PURCHASE OF DEBENTURE
Section 3.1 Redemption on Change of Control
The Company shall notify the Holder of a pending Change of Control or Merger in accordance with Section 3.2, and the Holder shall, in its sole discretion, have the right to require the Company to either: (a) purchase this Debenture at 100% of the then outstanding Principal Amount thereof plus all accrued but unpaid interest thereon to and including the Maturity Date; or (b) if the Change of Control results in a new issuer, convert the Debenture into a replacement debenture of the new issuer in the aggregate principal amount of 101% of the Principal Amount of the Debenture then outstanding on substantially equivalent terms to the terms contained in this Debenture.
Section 3.2 Notice of Change of Control
Upon the occurrence of an event constituting or reasonably likely to constitute a Change of Control or Merger, the Company shall give written notice to the Holder of such Change of Control or Merger at least 30 days, or as soon as reasonably possible, prior to the effective date of any such Change of Control or Merger and another written notice on or immediately after the effective date of such Change of Control or Merger.
Section 3.3 Purchases for Cancellation
The Company will have the right at any time and from time to time to purchase the Debentures in the market, by tender, or by private contract.
ARTICLE 4 RIGHTS OF HOLDER
Section 4.1 Distribution on Dissolution, Etc.
Subject to applicable law and the rights of any holders of any Senior Indebtedness ranking rateably or in priority to the Holder, upon any sale, in one transaction or a series of transactions, of all, or substantially all, of the assets of the Company or distribution of the assets of the Company upon any dissolution or winding-up or total liquidation of the Company, whether in bankruptcy, liquidation, re-organization, insolvency, receivership or other similar proceedings or upon an assignment to or for the benefit of creditors of the Company or otherwise any payment or distribution of assets of the Company, whether in cash, property or security, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee of or for the benefit of creditors or other liquidating agent of the Company making such payment or distribution, directly to the holder of this Debenture or its representatives, to the extent necessary, to pay all Obligations pursuant to this Debenture in full.
Section 4.2 Certificate Regarding Creditors
Upon any payment or distribution of assets of the Company referred to in this Section 4.2, the Holder shall be entitled to rely upon a certificate of the trustee in bankruptcy, receiver, assignee of or for the benefit of creditors or other liquidating agent of the Company making such payment or distribution, delivered to the Holder, for the purpose of ascertaining the Persons entitled to participate in such distribution, and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 4.2.
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Section 4.3 Rights of Holder Reserved
Nothing contained in this Article 4 or elsewhere in this Debenture is intended to or shall impair, as between the Company and the Holder, the obligation of the Company, which is absolute and unconditional, to pay to the Holder the Principal Amount and all interest thereon, as and when the same shall become due and payable in accordance with the terms of this Debenture, nor shall anything herein prevent the Holder from exercising all remedies otherwise permitted by applicable law in the event of a default by the Company under this Debenture.
ARTICLE 5 COVENANTS OF THE COMPANY
Section 5.1 Covenants
The Company covenants and agrees, for as long this Debenture remains outstanding, that:
(1) Maintain Corporate Existence. Each of the Company and its Subsidiaries shall maintain its corporate existence, and preserve its rights, powers, licenses and privileges which are necessary or material to the conduct of its business, and not materially change the nature of its business;
(2) Compliance with Laws. The Company shall, and shall cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, governmental restrictions and regulations;
(3) Maintain Books and Records. The Company shall, and shall cause each of its Subsidiaries to, keep adequate and accurate records and books of account;
(4) Payment of Obligations. The Company shall pay the Obligations owing to the Holder hereunder promptly when due; and
(5) Performance of Covenants. The Company shall promptly perform and satisfy all covenants and obligations to be performed by it under this Debenture.
ARTICLE 6 EVENTS OF DEFAULT
Section 6.1 Events of Default
(1) Any of the following shall constitute an Event of Default under this Debenture (each an Event of Default):
(a) |
if the Company fails to pay when due any portion of the Principal Amount or any interest thereon, or any other amount owing by the Company to the Holder hereunder, and such breach or default continues for a period of 10 Business Days following the date on which such payment became due; |
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(b) |
if the Company fails to observe, perform or comply with any material term, covenant, condition or obligation of the Company contained herein or is otherwise in default of any of the material provisions contained herein (other than a payment default referred in Section 6.1(1)(a)) and such default, if capable of being remedied, is not remedied within 30 days after the Company receives written notice of such default from the Majority Holders; |
(c) |
if a decree or order of a court having jurisdiction is entered adjudging the Company a bankrupt or insolvent; |
(d) |
if the Company shall apply for, consent to or acquiesce in the appointment of a trustee, receiver, or other custodian for the Company or for a substantial part of the property thereof, or make a general assignment for the benefit of creditors; |
(e) |
if the Company shall in the absence of such application, consent or acquiescence, become subject to the appointment of a trustee, receiver, or other custodian for the Company or for a substantial part of the property thereof, or have a distress, execution, attachment, sequestration or other legal process levied or enforced on or against a substantial part of the property of the Company; or |
(f) |
if the Company shall permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company and, if any such case or proceeding is not commenced by the Company, such case or proceeding, if contested by the Company is not dismissed within 30 days. |
(2) If an Event of Default described in Section 6.1(1)(e) or Section 6.1(1)(f) shall occur, the entire unpaid Principal Amount and all accrued but unpaid interest thereon shall become immediately due and payable without any declaration or other act on the part of the Holder.
(3) If any other Event of Default shall occur for any reason, whether voluntary or involuntary, and be continuing, the Majority Holders may by notice to the Company declare all or any portion of the outstanding Principal Amount of this Debenture to be due and payable, whereupon the outstanding Principal Amount, and all accrued but unpaid interest thereon, shall become immediately due and payable without further notice, demand or presentment.
ARTICLE 7 MUTILATION, LOSS, THEFT OR DESTRUCTION OF DEBENTURE CERTIFICATE
In case this Debenture certificate shall become mutilated or be lost, stolen or destroyed, the Company, shall issue and deliver, a new replacement debenture certificate upon surrender and cancellation of the mutilated Debenture certificate or, in the case of a lost, stolen or destroyed Debenture certificate, in lieu of and in substitution for the same. In the case of loss, theft or destruction, the applicant for a substituted debenture certificate shall furnish to the Company such evidence of the loss, theft or destruction of the Debenture certificate as shall be satisfactory to the Company in its discretion and shall also furnish an indemnity and surety bond satisfactory to the Company in its discretion. The applicant shall pay all reasonable expenses incidental to the issuance of any substituted debenture certificate.
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ARTICLE 8 GENERAL
Section 8.1 Change of Control of Company
By its acceptance hereof, each of the Company and the Holder acknowledges and agrees that if a Change of Control or a Merger occurs, then all references herein to the Company shall extend to and include the entity resulting therefrom or which thereafter will carry on the business of the Company.
Section 8.2 Amendments
Any provision of this Debenture may be amended, waived or modified upon the written consent of the Company and the Majority Holders. Any such amendment, waiver or modification effected in accordance with this paragraph shall be binding upon the Company, the Holder and each other holder of 2022 15% Debentures, it being understood and agreed that such written consent will affect all 2022 15% Debentures and be binding on all holders thereof regardless of whether any particular holder executed such consent.
Section 8.3 Waivers
The Holder shall not, by any act, delay, omission or otherwise, be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and executed by the Majority Holders. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by the Majority Holders of any right, power and/or remedy contained herein shall be binding upon the Holder and each other holder of 2022 15% Debentures, it being understood and agreed that such waiver will affect all 2022 15% Debentures and be binding on all holders thereof regardless of whether any particular holder executed such waiver.
Section 8.4 Registration of Debentures
The Company shall cause to be kept at the head office of the Company, or at such other location as may be determined by the Company in accordance with applicable law, a register in which shall be entered the name and latest known address of the Holder and any other holder of 2022 15% Debentures. Such register shall at all reasonable times during regular business hours of the Company be open for inspection by the Holder and any other of 2022 15% Debentures. The Company shall not be charged with notice of or be bound to see to the performance of any trust, whether express, implied, or constructive, in respect of this Debenture and may act on the direction of the Holder, whether named as trustee or otherwise, as though the Holder were the beneficial owner of this Debenture.
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Section 8.5 Transfer of Debenture
No transfer of this Debenture shall be valid unless made in accordance with applicable laws, including all applicable Canadian Securities Laws. If the Holder intends to transfer this Debenture or any portion thereof, it shall deliver to the Company the transfer form attached to this Debenture as Schedule B, duly executed by the Holder. Upon compliance with the foregoing conditions and the surrender by the Holder of this Debenture, the Company shall execute and deliver to the applicable transferee a new Debenture registered in the name of the transferee. If less than the full Principal Amount of this Debenture is transferred, the Holder shall be entitled to receive, in the same manner, a new Debenture registered in its name evidencing the portion of the Principal Amount of this Debenture not so transferred. Prior to registration of any transfer of this Debenture, the Holder and the applicable transferee shall be required to provide the Company with necessary information and documents, including certificates and statutory declarations, as may be required to be filed under applicable laws.
Section 8.6 Release and Discharge
If the Company pays all of the Obligations in full to the Holder, the Holder shall release this Debenture and the Company shall be, and shall be deemed to have, discharged of all its obligations under this Debenture.
Section 8.7 Successors and Assigns
This Debenture shall enure to the benefit of the Holder and its successors and assigns, and shall be binding upon the Company and its successors and permitted assigns.
Section 8.8 Time
Time shall be of the essence of this Debenture.
Section 8.9 Governing Law
This Debenture shall be governed by and interpreted in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein. The Company and, by its acceptance hereof, the Holder each hereby irrevocably submit and attorn to the nonexclusive jurisdiction of the courts of the Province of British Columbia in connection with this Debenture.
Section 8.10 Further Assurances
The Company shall forthwith, at its own expense and from time to time, do or file, or cause to be done or filed, all such things and shall execute and deliver all such documents, agreements, opinions, certificates and instruments reasonably requested by the Holder or its counsel as may be necessary or desirable to complete the transactions contemplated by this Debenture and carry out its provisions and intention.
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Schedule B Form of Transfer
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:
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(Name) |
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(Address) |
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(the Transferee), of $_______________ principal amount of 15% Unsecured Debenture of mCloud Technologies Corp. issued on _____________________, 2022 registered in the name of the undersigned on the register of Debentures represented by the attached Debenture, and irrevocably appoints _________________________ as the attorney of the undersigned to transfer to the Transferee the said principal amount of the Debenture on the books or register of transfer, with full power of substitution.
DATED the ________ day of _____________________, __________.
By: |
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Name: | ||
Title: |
Note to Holder: In order to transfer the Debenture, this transfer form must be delivered to mCloud Technologies Corp.
B-1
Exhibit 23.3
Consent of Independent Registered Public Accounting Firm
The Board of Directors of mCloud Technologies Corp.
We consent to the use of our report dated August 22, 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. 8 to Form F-1 dated November 7, 2022 of mCloud Technologies Corp.
/s/ KPMG LLP
Chartered Professional Accountants
November 7, 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 |
Rule 457(o) | | $5,000,000 | $0.00011020 | $551 | |||||||
Fees Previously Paid | Equity | Series A Preferred Shares, no par value per share | Rule 457(o) | | $30,000,000 | $0.0000927 | $2,781 | |||||||
Equity | Warrants to purchase Common Shares (2) |
Rule 457(g) | | | | | ||||||||
Equity | Common Shares, no par value per share, underlying the Series A Preferred Shares (3) (4) | Rule 457(i) | | | | | ||||||||
Fees to Be Paid | Equity | Common Shares, no par value per share, underlying the Warrants (4) (5) | Rule 457(i) | | $103,550,000 | $0.00011020 | $11,411.21 | |||||||
Fees Previously Paid | Equity | Common Shares, no par value per share, underlying the Warrants (4) (5) |
Rule 457(i) | | $62,700,000 | $0.0000927 | $5,812.29 | |||||||
Total Offering Amount: | $201,250,000 | $20,555.5 | ||||||||||||
Total Fees Previously Paid | $8,593.29 | |||||||||||||
Total Fee Offsets | | |||||||||||||
Net Fees Due: | $11,962.21 |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. |
(2) | No fee required in accordance with Rule 457(g) under the Securities Act. |
(3) | No registration fee required pursuant to Rule 457(i) under the Securities Act. |
(4) | 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. |
(5) | Estimated solely for purpose of calculating the registration fee pursuant to Rule 457(i) under the Securities Act. There will be issued 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. |
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