F-1/A

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As filed with the Securities and Exchange Commission on August 9, 2022

Registration No. 333-264859

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 5

FORM

F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

MCLOUD TECHNOLOGIES CORP.

(Exact Name of Registrant as Specified in its Charter)


British Columbia, Canada	7372	Not applicable
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

550-510

Burrard Street,

Vancouver, British Columbia

Canada, V6C 3A8

Tel:

(284)494-2810

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Russell H. McMeekin

Chief Executive Officer

550-510

Burrard Street

Vancouver, British Columbia

Canada, V6C 3A8

Tel:

(284)494-2810

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:


Marc J. Ross Avital Perlman Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31st Floor New York, NY 10036 Tel: (212) 930-9700		Brett Hanson Emily Humbert Fox Rothschild LLP 222 South Ninth Street, Suite 2000 Minneapolis, MN 55402 Tel: (612) 607-7000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.


PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION		DATED AUGUST 9, 2022

mCLOUD TECHNOLOGIES CORP.

1,000,000 9.0% Series A Cumulative Perpetual Preferred Shares

Warrants to purchase 9,000,000 Common Shares

We are offering for sale 9.0% Series A Cumulative Perpetual Preferred Shares, no par value, with a $25.00 liquidation preference per share (the “Series A Preferred Shares”). Each Series A Preferred Share is being sold with nine warrants (each, a “Warrant”, and together, the “Warrants”) to purchase one common share, no par value per share (each, a “Common Share”, and together, the “Common Shares”), at an assumed combined public offering price of $25.00 per Series A Preferred Share and related Warrant, representing a public offering price of $24.91 per Series A Preferred Share and $0.01 per related Warrant. The Warrants are exercisable on the date of issuance and expire on November 29, 2026, at an exercise price per Common Share equal to $4.75. The Series A Preferred Shares and Warrants can only be purchased together in this offering but the Series A Preferred Shares and Warrants are immediately separable and will be issued separately.

We are in the process of applying to have the Series A Preferred Shares sold in this offering listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MCLDP”. There is no assurance that our listing application will be approved. We will not consummate this offering unless the Series A Preferred Shares will be listed on the Nasdaq Capital Market. The Warrants will be listed on Nasdaq along with the Listed Warrants (as defined below) under the symbol (“MCLDW”).

The liquidation preference of each Series A Preferred Share is $25.00. Upon liquidation, holders of Series A Preferred Shares will be entitled to receive the liquidation preference with respect to their Series A Preferred Shares plus an amount equal to accumulated but unpaid dividends with respect to such shares.

The Series A Preferred Shares have no voting rights with respect to matters that generally require the approval of voting shareholders. The Series A Preferred Shares are convertible into Common Shares of the Company following the issuance date based on a conversion ratio of (i) the $25.00 per share liquidation preference divided by (ii) $2.75. Therefore, each Series A Preferred Share is convertible into nine Common Shares. Upon such a conversion, any declared but unpaid dividends on the converted Series A Preferred Shares would be paid in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a price of $2.75 per Common Share.

The Series A Preferred Shares are not redeemable prior to [ ], which is the first anniversary of the closing date of this offering, except for the circumstances described below.

On or after [ ], the Series A Preferred Shares may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption, upon the giving of notice.

Upon the occurrence of any Delisting Event, Change of Control, or $8 VWAP Event (each as defined in the Prospectus Summary), whether before or after the twelve (12) month anniversary of the date of issuance of the Series A Preferred Shares, we may, at our option, redeem the Series A Preferred Shares, in whole or in part and within 90 days after the date of the Delisting Event, Change of Control or $8 VWAP Event, by paying $25.00 per share of Series A Preferred Shares, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Stock up to, but not including, the date of such redemption.

Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year following the issuance of the Series A Preferred Shares, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. For example, the initial increase in the dividend rate from 9.0% to 13.0% will result in an increase in the dividend amount, on an annual basis, from $2.25 to $3.25. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. The Company can at its discretion, defer payment of all cumulative dividends under all circumstances until liquidation.

Our Common Shares and our warrants issued in November 2021 (the “Listed Warrants”) are currently listed on Nasdaq under the symbols “MCLD” and “MCLDW”, respectively. On August 5, 2022, the last reported sale price of our Common Shares was $3.00 per share and the last reported sale price of our Listed Warrants was $0.515 per Listed Warrant. Our Common Shares are also listed on the TSXV under the symbol “MCLD”. On August 5, 2022 the last reported sale price of our Common Shares on the TSXV was CAD$3.61 per share.

An investment in our securities is highly speculative, involves a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See “Risk Factors” beginning on page 13 of this prospectus.


	Per Share		Per Related Nine Warrants		Total Without Over-Allotment Option		Total With Over-Allotment Option
Public offering price	$	24.91	$	0.09	$	25,000,000	$	28,750,000
Underwriting discounts (1)	$	1.9928	$	0.0072	$	2,000,000	$	2,300,000
Proceeds, before expenses, to us	$	22.9172	$	0.0828	$	23,000,000	$	26,450,000

(1)	See “Underwriting” on page 113 of this prospectus for a description of all underwriting compensation payable in connection with this offering.

(2)	The amount of offering proceeds to us presented in this table does not give effect to any exercise of the over-allotment option we have granted to the underwriter as described below.

We have granted the underwriters an option to purchase an additional 150,000 Series A Preferred Shares and/or Warrants to purchase 1,350,000 additional Common Shares from us (being up to 15% of the Series A Preferred Shares, and/or up to 15% of the Warrants sold in this offering), in any combination thereof, at the public offering price per Series A Preferred Share and public offering price per Warrant, respectively, less the underwriting discounts and commissions, for 45 days from the date of this prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is , 2022

Maxim Group LLC

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TABLE OF CONTENTS


Prospectus Summary			1
Risk Factors			13
Forward-Looking Statements			33
Use of Proceeds			34
Dividend Policy			34
Currency and Exchange Rates			34
Capitalization			35
Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Our Business			74
Management			86
Related Party Transactions			102
Principal Shareholders			103
Description of Share Capital			103
Certain Income Tax Considerations			109
Enforceability of Civil Liabilities			113
Determination of Offering Price			113
Underwriting			113
Legal Matters			118
Experts			118
Where You Can Find More Information			118
Financial Statements			F-1

You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we, nor the underwriters have authorized anyone to provide you with different information. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus, or any free writing prospectus, as the case may be, or any sale of Series A Preferred Shares and Warrants in our company.

For investors outside the United

States:

Neither we, nor the underwriters, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Series A Preferred Shares and Warrants and the distribution of this prospectus outside the United States.

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PROSPECTUS SUMMARY

This summary highlights information that we present more fully in the rest of this prospectus. This summary does not contain all of the information you should consider before buying Series A Preferred Shares and Warrants in this offering. This summary contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could,” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. You should read the entire prospectus carefully, including the “Risk Factors” section and the financial statements and the notes to those statements.

Corporate Information

We are a Canadian corporation and our principal executive offices are located at

550-510 Burrard

St., Vancouver, British Columbia, V6C 3A8 and the registered office is located at 2686 Point Grey Rd., Vancouver, BC, V6K 1A5, Canada and our phone number is (604)

669-9973.

Our Company

Overview

The Company delivers solutions combining Internet of Things (IoT), artificial intelligence (AI), and the cloud to unlock the untapped potential of energy- intensive assets such as:

•

HVAC units and refrigerators in commercial buildings;

•

control systems, heat exchangers, and compressors at process industry facilities; and

•

wind turbines generating renewable energy at onshore wind farms.

IoT enables inexpensive, readily scalable connectivity to these and other under-served assets. Data from these IoT sensors are taken into the cloud, where digital twins of these assets are created, and AI is applied to identify opportunities to optimize asset performance. Asset operators and maintainers who manage these assets in the field are guided through a portfolio of mobile, connected applications that enable these teams to take asset management actions that ensure optimal performance.

Through the Company’s proprietary AssetCare platform, AI is used to identify opportunities to improve asset performance and enable asset operators and maintainers to take direct action creating these measurable improvements. Some key applications of the Company’s AssetCare technology at work include:

•

curbing wasted energy while improving occupant comfort in commercial facilities through

AI-powered

adaptive control;

•

maximizing asset availability and production yields of renewable energy sources through continuous performance assessment and predictive maintenance; and

•

optimizing the uptime and manage the operational risk of industrial process plants, including oil and gas facilities, through continuous

AI-powered

advisory and assistance to process operators in the field.

In all markets, the Company uses a commercial

Software-as-a-Service

(“

SaaS

”) business model to distribute its AssetCare solution. Customers pay a simple, subscription-based price that is determined by number of assets, asset size or complexity, and the expected efficiency gains to be created using AI and analytics. Set up as multi-year, recurring subscriptions, customers pay no fees upfront to onboard an AssetCare solution; any upfront costs are leveraged across the lifetime of the initial subscription period. Certain software and technologies used in AssetCare solutions are also offered to some customers on a perpetual basis.

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Marketing Channels

The Company maintains a robust presence in seven countries: Canada, the United States, the United Kingdom, the Kingdom of Bahrain as the gateway to markets in the Middle East, China, Singapore and Australia, supplemented by a growing international network of channel and delivery partners around the world.

The Company employs sales team members in these countries charged with direct sales efforts of AssetCare solutions. Global marketing efforts to support these sales efforts include virtual campaigns and events to attract new customers, strengthen relationships with existing customers, and building brand presence and visibility. The Company also hosts an annual user conference called mCloud Connect, which includes head-liners from well-known industry leaders, panels, and interactive sessions to gather “voice of the customer” feedback, which is used to improve the Company’s portfolio of AssetCare offerings.

The Company has conducted extensive research to size the markets and opportunities it can access through its AssetCare platform. The Company estimates it has the capability of serving over 7.3 million commercial buildings and over 34,000 industrial sites in 20 different locales worldwide, with each building or site representing multiple potential connectable assets, workers, or 3D digital twins.

Serviceable commercial buildings include restaurants,

mid-size

retail (including retail finance sites such as bank branches), and long-term care facilities. In these buildings, the Company connects to assets such as HVAC, lighting, and refrigeration units. Connectable workers include people involved in the

day-to-day

operation or maintenance of these commercial buildings, including mechanical service workers and facility managers.

Industrial sites include oil and gas, liquefied natural gas, and floating production storage and offloading facilities, as well as wind farms, mining processing plants, and pulp and paper facilities. In these locations, connectable assets include process control systems, heat exchangers, pumps, and gas compressors. Connectable workers include field operators, maintainers, engineers, asset managers, and plant managers. The Company’s experience in delivering digital 3D models from entire multi-billion-dollar assets the size of a floating production storage and offloading (FPSO) vessel down to asset subcomponents such as wind turbine blades creates large obtainable market opportunities.

Based on the average monthly fee currently generated per connection or 3D digital twin, the Company estimates the current obtainable market opportunity to be approximately $24 billion in recurring revenue per annum including all potential targeted assets, workers, and 3D digital twins that the Company can currently address.

Intangible Properties

mCloud’s success depends in part on its ability to create unique intellectual property that improves the Company’s ability to create and deliver customer value in the principal markets where it does business. The Company relies on the use of intellectual property rights, including patents, copyrights, registered trademarks, and trade secrets in Canada, the United States and the European Union.

The Company retains a portfolio of 15 technology patents in the areas of HVAC energy efficiency, 3D, and asset management, a global customer base in industries including retail, healthcare, heavy industry, oil and gas, nuclear power generation, and renewable energy, and a portfolio of 12 registered trademarks, including marks related to mCloud and AssetCare. Please see “

Our Business – Intellectual Property

.”

The Company also uses key domain names, including acrx.com, fdsi.site, fdsi.us, fielddiagnostics.com, fmdiagnosticscoe.com, mysamobile.com, peatanalytics.com, mcloudcorp.com, assetcare.io, assetcare.net, myldar.com, ngrain.com, ngrain.ca, ngrain.net, ngrain.org and i3dimensions.com.

The Company further protects its proprietary source code and algorithms as trade secrets, limiting access to these to employees who have a need to know such information.

Environmental Protection

The Company does not see any financial or operational effects from environmental protection requirements on capital expenditures, profit or loss, and competitive position in this financial year. In the future, the Company may see enhanced demand for AssetCare in businesses who have a mandate to become more energy efficient or demonstrate they have instituted effective methane emission reduction and mitigation programs in response to new government regulations.

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Employees

As of the date of this prospectus, the Company and its subsidiaries have 216 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2021, the Company and its subsidiaries had 216 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2020, the Company and its subsidiaries had 227 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. As of the year ended December 31, 2019, the Company and its subsidiaries had over 216 employees employed in twelve offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. The fluctuation in the Company’s number of employees is not significant, and none of the Company’s employees belong to any labour unions. Furthermore, all of the Company’s employees are employed on a full-time basis.

Incentive stock options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock awards other than incentive stock options (including

non-statutory

stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively “

Stock Awards

”) may be granted to employees, directors and consultants;

provided, however

, that Stock Awards may not be granted to employees, directors and consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, subject to certain exceptions set out in the Company’s Incentive Stock Option Plan.

Foreign Operations

The Company operates in multiple geographies around the world, including North America (the United States and Canada), Europe (the United Kingdom and continental Europe), Southeast Asia (primarily Greater China), the Middle East (primarily Saudi Arabia), and Australia with most of its business taking place outside of Canada. mCloud is not dependent on business in any one region for its success.

Research and Development

The 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. Consequently, while the Company has not implemented a formal research and development policy for the past three years, the Company is and has been (including, but not limited to, the past three years) engaged with a number of research and development initiatives as a part of its ongoing effort to continually update its software and develop new products.

Fixed Assets

On September 27, 2021, the Company executed a

12-year

lease for its office in Calgary, Alberta located at 8 Avenue SW, Stephen Avenue Place, Calgary, Alberta, Canada. In total, the Company has leased 33,000 square feet of the property, situated on the 3

and 33

floor of the building located at the aforementioned address. The lease term commences on December 1, 2022, preceded by a fixturing period which the Company will use to build out the office space to their specifications. The Company is currently in the design and scoping stage, and has not yet finalized its plans for the precise use of the property, and does not yet have any plans to construct, expand, or improve the facilities. No environmental issues have currently been identified that will affect the Company’s utilization of the asset.

Material Effects

Certain government regulations have a material impact on the Company’s business. The Company has implemented certain measures to address and conform to all the frameworks noted below, and others as required, and conducts an annual review to ensure compliance with such frameworks and regulations.

The Company is required to adhere to such frameworks as the EU’s General Data Protection Regulations, the EU’s ePrivacy Regulation, Brazil’s General Data Protection Law, the California Consumer Privacy Act, the California Online Privacy Protection Act, and various other regulations in effect in other U.S. states, which require the Company, among other things, to have a valid privacy policy, block cookies before the user provides consent, allow users to

opt-in

opt-out

of receiving communications from the Company, show a notice of collection, and keep records of consent and processing. While the Company does not yet do business in Brazil, and has not reached the required number of users in California for the applicable regulations noted above to have effect, the Company has implemented measures to ensure that it remains compliant with these frameworks in advance of such compliance being legally required.

Data security practices are monitored and regulated by the Federal Trade Commission in the U.S., the Office of the Privacy Commissioner in Canada, and the European Data Protection Board of the EU. Canada, in particular, has several privacy law statutes that the Company is required to adhere to, such as the Personal Information Protection and Electronic Documents Act, the Personal Information Protection Act (Alberta), the Personal Information Protection Act (British Columbia), and An Act Respecting the Protection of Personal Information in the Private Sector (Quebec).

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Generally speaking, the Company is also required to comply with and respect the competition, consumer protection, and taxation laws, and intellectual property laws and regulations handed down by standard copyright and trademark laws in each of the jurisdictions it operates in. For confidential government contracts that require specific approvals to examine, possess, or transfer intellectual property, the Company is required to adhere to the International Traffic in Arms Regulations in the US, and the Canadian Controlled Goods Program in Canada. Additionally, the Company also follows and adheres to the best practices set out in the various National Institute of Standards and Technology frameworks, the Information Technology Infrastructure Library framework, and the Certified Information Systems Security Professional framework.

Emerging Growth Company Status

As a company with less than $1.07 billion in revenue during our last two fiscal periods (the years ended December 31, 2020 and 2021), we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

•

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,

•

reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements, and

•

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”). However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.07 billion or we issue more than $1.00 billion of

non-convertible

debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

Foreign Private Issuer Status

We are a “foreign private issuer,” as defined in Rule 405 under the Securities Act and

Rule 3b-4(c)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

As an exempted Canadian company listed on the Nasdaq Capital Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Canada, which is our home country, may differ significantly from the Nasdaq Stock Market corporate governance listing standards.

A description of the significant ways in which our governance practices currently differ from those followed by domestic companies pursuant to the Rule 5600 series of the Nasdaq Stock Market Rules is set out below:

•

Quorum Requirement

—Nasdaq Listing Rule 5620(c) provides that the minimum quorum requirement for a meeting of shareholders is 331/3% of the outstanding common voting shares. We do not follow this Nasdaq Listing Rule. Instead, we follow our articles which provide that the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares.

•

Shareholder Approval Requirements

—In certain instances, Nasdaq Listing Rule 5635 requires each issuer to obtain shareholder approval before an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; and (iii) transactions other than public offerings. We do not follow this Nasdaq Listing Rule. Instead, we comply with the laws, rules and regulations of Canada and the Province of British Columbia and the policies of the TSX Venture Exchange, which have different requirements for shareholder approval (including, in certain instances, not requiring any shareholder approval) in connection with issuances of securities in the circumstances listed above.

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Notes on Prospectus Presentation

Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them. Certain market data and other statistical information contained in this prospectus is based on information from independent industry organizations, publications, surveys and forecasts. Some market data and statistical information contained in this prospectus are also based on management’s estimates and calculations, which are derived from our review and interpretation of the independent sources listed above, our internal research and our knowledge of the global bitters and spirits industry. While we believe such information is reliable, we have not independently verified any third-party information and our internal data has not been verified by any independent source.

Except where the context otherwise requires and for purposes of this prospectus only:

•

Depending on the context, the terms “we,” “us,” “our company,” and “our” refer to mCloud Technologies Corp., and its consolidated subsidiaries:

•

“preferred shares” refer to our Series A Preferred Shares, no par value.

•

all references to “CAD”, “CAD$” and “Canadian dollar” are to the legal currency of Canada, and all references to “USD,” “$”, “US$” and “U.S. dollars” are to the legal currency of the United States.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars. The financial statements of the Company included herein are reported in Canadian dollars and are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We make no representation that the Canadian dollar amounts or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollar amounts, as the case may be, at any particular rate or at all. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

The Offering


Series A Preferred Shares		1,000,000 Series A Preferred Shares on a firm commitment basis

Offering Price basis		$25.00 per Series A Preferred Share and Warrant on a combined basis

Warrants		Warrants to purchase up to 9,000,000 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.

Over-allotment Option to purchase additional Common Shares from us		We have granted the underwriters an option to purchase an additional 150,000 Series A Preferred Shares and/or 1,350,000 Warrants to purchase additional Common Shares from us (being up to 15% of the Series A Preferred Shares, and/or up to 15% of the Warrants sold in this offering), in any combination thereof, at the public offering price per Series A Preferred Share and public offering price per Warrant, respectively, less the underwriting discounts and commissions, for 45 days from the date of this prospectus.

Number of Series A Preferred Shares issued and outstanding before this offering		0

Number of Series A Preferred Shares outstanding after this offering		1,000,000 shares.

Number of Common Shares outstanding prior to offering		16,155,654 shares.

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Liquidation Preference		The liquidation preference of each Series A Preferred Share is $25.00 per share. Upon liquidation, holders of Series A Preferred Shares will be entitled to receive the liquidation preference with respect to their Series A Preferred Shares plus an amount equal to accumulated but unpaid dividends with respect to such shares.

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) $2.75. Therefore, each Series A Preferred Share is convertible into nine Common Shares. Upon such a conversion, any declared but unpaid dividends shall be paid to the holder of Series A Preferred Shares in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a price of $2.75 per Common Share.

Dividends		Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. However, the Company will be entitled to defer the payment of any declared dividends on the Series A Preferred Shares until the occurrence of a liquidation or Board approved Change of Control of the Company.

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.

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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.

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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).

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Optional Redemption		The Series A Preferred Shares are not redeemable prior to [ ], which is the first anniversary of the closing date of this offering, except for the circumstances described under “Special Optional Redemption.” On or after [ ], the Series A Preferred Shares may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption, upon the giving of notice.
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.

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		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).

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”.

Risk Factors		Investing in these securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus before deciding to invest in our Series A Preferred Shares and Warrants.

Summary Financial Data

The following tables summarize our historical financial data. The summary consolidated statements of operation for the years ended December 31, 2019, 2020 and 2021 and the summary consolidated Statements of Financial Position as of December 31, 2019, 2020 and 2021 have been derived from our consolidated financial statements included elsewhere in this prospectus. The following summary financial data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of the results to be expected for a full fiscal year.

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The following table presents our summary consolidated statements of operation for the three months ended March 31, 2022 and the years ended December 31, 2021 2020, and 2019 (unless indicated otherwise, and converted amounts in the following table are expressed in Canadian dollars as set out in “Currency and Exchange Rates.”):


				Year ended December 31,
	Three months ended March 31, 2022			2021			2020			2019
Revenue	$	4,429,603		$	25,596,972		$	26,928,439		$	18,340,249
Cost of sales		(1,932,356	)		(9,683,748	)		(10,281,922	)		(7,583,127	)

Gross profit	$	2,497,247		$	15,913,224		$	16,646,517		$	10,757,122

Expenses
Salaries, wages and benefits		5,314,330			21,691,774			20,885,044			10,313,803
Sales and marketing		762,231			1,377,255			1,536,420			3,166,788
Research and development		531,950			3,179,353			1,078,164			498,099
General and administration		2,552,013			8,538,854			5,741,872			3,294,550
Professional and consulting fees		3,176,043			9,085,436			8,886,341			4,351,812
Share-based compensation		252,933			1,867,915			1,454,235			1,468,361
Depreciation and amortization		1,943,213			8,924,812			6,778,100			4,044,143

Total expenses	$	14,532,713		$	54,665,399		$	46,360,176		$	27,137,556

Operating loss	$	12,035,466		$	38,752,175		$	29,713,659		$	16,380,434

Other expenses (income)
Finance costs		1,858,637			8,618,794			6,033,510			3,217,500
Foreign exchange loss (gain)		622,509			(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 loss on derivatives		(2,493,270	)		6,040,121			—			—
Other income		(398,268	)		(7,126,097	)		(2,932,342	)		(167,913	)

Loss before tax	$	11,625,074		$	46,364,119		$	35,824,881		$	30,405,252

Current tax expense (recovery)		288,863			157,303			(295,709	)		181,895
Deferred tax (recovery) expense		(890,816	)		(1,822,109	)		(668,209	)		(2,692,313	)

Net loss for the year		11,023,121		$	44,699,313		$	34,860,963		$	27,894,834

Other comprehensive (income) loss
Foreign subsidiary translation differences		(649,089	)		69,460			(1,209,006	)		(607,302	)

Comprehensive loss for the year	$	10,374,032		$	44,768,773		$	33,651,957		$	27,287,532

Net loss (income) for the year attributable to:
mCloud Technologies Corp. shareholders		9,777,570			44,329,707			36,870,267			29,839,342
Non-controlling interest		1,245,551			369,606			(2,009,304	)		(1,944,508	)

	$11,023,121			$44,699,313			$ 34,860,963			$27,894,834

Comprehensive loss (income) for the year attributable to:
mCloud Technologies Corp. shareholders		9,147,568			44,427,305			35,563,921			29,431,628
Non-controlling interest		1,226,464			341,468			(1,911,964	)		(2,144,096	)

	$10,374,032			$44,768,773			$ 33,651,957			$27,287,532

Loss per share attributable to mCloud shareholders – basic and diluted	$	0.61		$	3.73		$	5.07		$	7.30
Weighted average number of common shares outstanding basic and diluted		16,147,560			11,898,183			7,272,464			4,085,322

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The following table presents our summary consolidated balance sheets data as of March 31, 2022, December 31, 2021, 2020 and 2019 (Unless indicated otherwise, and converted amounts in the following table are expressed in Canadian dollars as set out in “Currency and Exchange Rates.”):


	March 31, 2022			December 31, 2021			December 31, 2020			December 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	1,873,021		$	4,588,057		$	1,110,889			529,190
Trade and other receivables		13,736,106			14,566,975			12,312,814			9,091,654
Current portion of prepaid expenses and other assets		2,287,443			2,355,350			1,326,319			839,012
Current portion of long-term receivables		471,909			397,060			445,213			378,221

Total current assets	$	18,368,479		$	21,907,442		$	15,195,235		$	10,838,077

Non-current assets
Prepaid expenses and other assets		165,698			622,577			1,011,847			86,913
Long-term receivables		992,732			343,371			2,091,059			1,586,429
Right-of-use assets		7,033,377			916,028			3,660,717			4,206,808
Property and equipment		564,253			649,403			506,387			710,552
Intangible assets		18,923,489			20,585,833			27,766,839			23,671,089
Goodwill		27,042,823			27,081,795			27,086,727			18,758,975

Total non-current assets		54,722,372		$	50,199,007		$	62,123,576			49,020,766

Total assets		73,090,851		$	72,106,449		$	77,318,811			59,858,843

LIABILITIES
Current liabilities
Bank indebtedness		4,710,549		$	3,460,109		$	976,779			1,471,805
Trade payables and accrued liabilities		17,079,919			12,421,309			12,924,256			9,636,405
Deferred revenue		4,694,450			2,811,408			1,771,120			1,138,281
Current portion of loans and borrowings		12,480,038			12,447,939			3,431,251			3,004,717
Current portion of convertible debentures		22,922,383			22,185,170			—			—
Warrant liabilities		6,060,782			8,880,038			710,924			725,086
Current portion of lease liabilities		453,855			410,674			835,472			720,457
Current portion of other liabilities		—			—			6,003,838
Current portion of business acquisition payable		1,389,094			1,398,972			1,594,297			1,043,314

Total current liabilities		69,791,070		$	64,015,619		$	28,247,937			17,740,065

Non-current liabilities
Convertible debentures		111,411			110,540			19,534,988			17,535,946
Lease liabilities		6,773,990			634,798			3,109,604			3,641,627
Loans and borrowings		646,137			767,662			9,721,049			10,968,338
Deferred income tax liabilities		1,407,503			2,291,057			4,168,905			3,854,614
Other liabilities		—			—			232,577
Business acquisition payable		—			—			845,232			—

Total liabilities		78,730,111		$	67,819,676		$	65,860,292			53,740,590

EQUITY
Share capital		118,275,850			118,195,363			83,120,611			45,368,745
Contributed surplus		11,408,263			11,040,751			8,518,476			7,278,119
Accumulative other comprehensive income		2,202,000			1,571,998			1,669,596			363,250
Deficit		(139,793,643	)		(130,016,073	)		(85,686,366	)		(48,816,099	)

Total shareholders’ equity		(7,907,530	)	$	792,039		$	7,622,317			4,194,015

Non-controlling interest		2,268,270			3,494,734			3,836,202			1,924,238

Total equity	$	(5,639,260	)	$	4,286,773		$	11,458,519			6,118,253

Total liabilities and equity	$	73,090,851		$	72,106,449		$	77,318,811			59,858,843

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RISK FACTORS

Investing in our securities is speculative and involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information in this prospectus, including our consolidated financial statements and notes thereto, before you decide to purchase our securities. If any of the following risks actually occur, our business, financial condition, results of operations and prospects could be materially adversely affected, the value of our securities could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Cautionary Note Regarding Forward-Looking Statements.”

Summary Risk Factors

•

As a company primarily based outside of the United States, our business is subject to economic, political, regulatory and other risks associated with international operations.

•

mCloud may be unable to identify and complete suitable platform acquisitions and acquisitions in its existing vertical markets.

•

Potential acquisitions could be difficult to consummate and integrate into 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.

Factors Influencing Serviceable Obtainable Market.

The Company’s statements regarding serviceable obtainable market reflect the Company’s estimate of the entire market available to the Company and its competitors. The markets for the Company’s AssetCare offering are subject to substantial competition and mCloud may not capture as much market share as it currently expects to capture. mCloud has direct competitors in these markets who may have credible advantages over the Company in areas such as financial strength, regional presence, and human resources, which could influence the Company’s ability to capture market share. Certain prospective customers in these markets may also have the means to develop and deploy their own solutions. Furthermore, current mCloud customers in these markets may decide not to renew or reduce the scope of their AssetCare subscriptions following the completion of their subscription term based on business need or changes in their strategy. The Company partners with third-parties such as mechanical contractors and engineering service providers to deliver AssetCare, and in the event mCloud captures greater market share, the Company’s ability to successfully deliver to customers depends on either these partnerships or mCloud’s ability to scale its local presence to meet demand. The Company believes that statements about its serviceable obtainable market are reasonable. However, there is no guarantee that mCloud will be able to capture or service any portion of the market, which could adversely affect mCloud’s business and financial results.

Force Majeure Events – COVID-19.

Major health issues and pandemics, such as

COVID-19,

may adversely affect trade, global and local economies, and the trading prices of our securities. Outbreaks may affect the supply chain of the Company and may restrict the level of economic activity in affected areas, which may adversely affect the price and demand for the Company’s products and services, as well as the Company’s ability to collect outstanding receivables from its customers. Given the ongoing and dynamic nature of the circumstances surrounding

COVID-19,

the extent to which the coronavirus will impact the Company’s financial results and operations is uncertain. It is possible, however, that the Company’s business operations and financial performance in 2022 and beyond may be materially adversely affected by

COVID-19.

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Going Concern Assumption.

The financial statements of mCloud have been prepared in accordance with International Financial Reporting Standards (IFRS) on a going concern basis, which presumes that mCloud will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. mCloud’s continuation as a “going concern” is uncertain and is dependent upon, amongst other things, attaining a satisfactory revenue level, the support of its customers, its ability to continue profitable operations, the generation of cash from operations, and its ability to obtain financing arrangements and capital in the future. These material uncertainties represent risk to mCloud’s ability to continue as a going concern and realize its assets and pay its liabilities as they become due. If the “going concern” assumption was not appropriate for the financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.

mCloud may be unable to identify and complete suitable platform acquisitions and acquisitions in its existing vertical markets.

mCloud cannot be certain that it will be able to identify suitable new acquisition candidates that are available for purchase at reasonable prices. Even if mCloud is able to identify such candidates, it may be unable to consummate an acquisition on suitable terms. When evaluating an acquisition opportunity, mCloud cannot assure investors that it will correctly identify the risks and costs inherent in the business that it is acquiring. If mCloud is to proceed with one or more significant future acquisitions in which the consideration consists of cash, a substantial portion of its available cash resources may be used, or it may have to seek additional financing to complete such acquisitions.

As part of mCloud’s business strategy, it may continue, from time to time, to seek to grow its business through acquisitions of or investments in new or complementary businesses, technologies or products that it believes can improve its ability to compete in its existing customer markets or allow it to enter new markets. The potential risks associated with acquisitions and investment transactions include, but are not limited to:

•

failure to realize anticipated returns on investment, cost savings and synergies;

•

difficulty in assimilating the operations, policies, and personnel of the acquired company;

•

unanticipated costs associated with acquisitions;

•

challenges in combining product offerings and entering into new markets in which we may not have experience;

•

distraction of management’s attention from normal business operations;

•

potential loss of key employees of the acquired company;

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•

difficulty implementing effective internal controls over financial reporting and disclosure controls and procedures;

•

impairment of relationships with customers or suppliers;

•

possibility of incurring impairment losses related to goodwill and intangible assets; and

•

other issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.

Acquisitions and/or investments may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on mCloud’s operating results or financial condition. Investments in immature businesses with unproven track records and technologies have an especially high degree of risk, with the possibility that mCloud may lose its entire investment or incur unexpected liabilities. mCloud may experience risks relating to the challenges and costs of closing a business combination or investment transaction and the risk that an announced business combination or investment transaction may not close. There can be no assurance that mCloud will be successful in making additional acquisitions in the future or in integrating or executing on its business plan for existing or future acquisitions.

mCloud may acquire contingent liabilities through acquisitions that could adversely affect mCloud’s operating results.

mCloud may acquire contingent liabilities in connection with acquisitions it has completed, which may be material. Although management uses its best efforts to estimate the risks associated with these contingent liabilities and the likelihood that they will materialize, their estimates could differ materially from the liabilities actually incurred.

Acquisitions, investments, joint ventures, and other business initiatives may negatively affect mCloud’s operating results.

The growth of mCloud through the successful acquisition and integration of complementary businesses is a critical component of its corporate strategy. mCloud continually evaluates acquisition opportunities within its respective marketplace and may be in various stages of discussions with respect to such opportunities. mCloud plans to continue to pursue acquisitions that complement its existing business, represent a strong strategic fit, and are consistent with its overall growth strategy and disciplined financial management. mCloud may also target future acquisitions to expand or add functionality and capabilities to its existing portfolio of solutions, as well as add new solutions to its portfolio. mCloud may also consider opportunities to engage in joint ventures or other business collaborations with third parties to address market segments. These activities create risks such as: (i) the need to integrate and manage the businesses and products acquired with mCloud’s own business and products; (ii) additional demands on its resources, systems, procedures and controls; (iii) disruption of its ongoing business; and (iv) diversion of management’s attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or equity or equity-related securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of product lines or businesses.

Also, such activities could result in charges and expenses and have the potential to either dilute the interests of existing shareholders or result in the issuance or assumption of debt. This could have a negative impact on the credit ratings of mCloud’s outstanding debt securities.

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Such acquisitions, investments, joint ventures, or other business collaborations may involve significant commitments of financial and other resources of mCloud. Any such activity may not be successful in generating revenues, income, or other returns to mCloud, and the resources committed to such activities will not be available to it for other purposes. Moreover, if mCloud is unable to access capital markets on acceptable terms or at all, it may not be able to consummate a specific acquisition, or a series of acquisitions. Alternatively, mCloud may have to complete a transaction on the basis of a less than optimal capital structure. mCloud’s potential inability (i) to take advantage of growth opportunities for its business or for its products and services, or (ii) to address risks associated with acquisitions or investments in businesses, may negatively affect its operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges associated with any acquisition or investment activity, may materially impact mCloud’s results of operations which, in turn, may have an adverse material effect on the market price of Shares or credit ratings of its outstanding debt securities.

The loss of one or more of mCloud’s key personnel, or its failure to attract and retain other highly qualified personnel in the future, could harm its business.

mCloud currently depends on the continued services and performance of its key personnel, including its executive officers. The loss of key personnel could disrupt mCloud’s operations and have an adverse effect on its business and financial results.

As mCloud continues to grow, it cannot guarantee that it will continue to attract the personnel it needs to maintain its competitive position. As mCloud scales, the total cash and equity compensation structure necessary to retain and attract key personnel may have to change to be in line with market rates for the verticals in which mCloud competes. If mCloud fails in attracting, hiring, and integrating key personnel with industry-specific experience, or retaining and motivating existing personnel, it may be unable to grow effectively.

mCloud cannot be certain that additional financing will be available on reasonable terms when required, or at all.

From time to time, mCloud may need additional financing, including to fund potential acquisitions. Its ability to obtain additional financing, if and when required, will depend on investor demand, mCloud’s operating performance, the condition of the capital markets, and other factors. To the extent mCloud draws on its credit facilities, if any, to fund certain obligations, it may need to raise additional funds, and mCloud cannot provide assurance that additional financing will be available to it on favorable terms when required, or at all. If mCloud raises additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of mCloud’s Common Shares or Series A Preferred Shares, and existing shareholders may experience dilution.

mCloud may not be able to protect its intellectual property rights, which could make it less competitive and cause it to lose market share.

mCloud’s software is proprietary. mCloud’s strategy is to rely on a combination of copyright, patent, trademark and trade secret laws in the United States, Canada, and other jurisdictions, and to rely on license and confidentiality agreements and software security measures to further protect its proprietary technology and brand. mCloud has obtained or applied for patent protection with respect to some of its intellectual property, but generally does not rely on patents as a principal means of protecting its intellectual property. mCloud has registered or applied to register some of its trademarks in the United States and in selected other countries. mCloud generally enters into

non-disclosure

agreements with its employees and customers, and historically has restricted third-party access to its software and source code, which it regards as proprietary information.

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The steps mCloud has taken to protect its proprietary rights may not be adequate to avoid the misappropriation of its technology or independent development by others of technologies that may be considered a competitor. mCloud’s intellectual property rights may expire or be challenged, invalidated, or infringed upon by third parties or it may be unable to maintain, renew or enter into new licenses on commercially reasonable terms. Any misappropriation of mCloud’s technology or development of competitive technologies could harm its business and could diminish or cause it to lose the competitive advantages associated with its proprietary technology and could subject it to substantial costs in protecting and enforcing its intellectual property rights, and/or temporarily or permanently disrupt its sales and marketing of the affected products or services. The laws of some countries in which mCloud’s products are licensed do not protect its intellectual property rights to the same extent as the laws of the United States. Moreover, in some

non-U.S.

countries, laws affecting intellectual property rights are uncertain in their application, which can affect the scope of enforceability of mCloud’s intellectual property rights.

mCloud’s software research and development initiatives and its customer relationships could be compromised if the security of its information technology is breached as a result of a cyberattack. This could have a material adverse effect on mCloud’s business, operating results, and financial condition, and could harm its competitive position.

mCloud devotes significant resources to continually updating its software and developing new products, and its financial performance is dependent in part upon its ability to bring new products and services to market. mCloud’s customers use its software to monitor their assets and rely on mCloud to provide updates and releases as part of its software maintenance and support services. The security of mCloud’s information technology environment is therefore important to its research and development initiatives, and an important consideration in its customers’ purchasing decisions. If the security of mCloud’s systems is impaired, its development initiatives might be disrupted, and it might be unable to provide service. mCloud’s customer relationships might deteriorate, its reputation in the industry could be harmed, and it could be subject to liability claims. This could reduce mCloud’s revenues, and expose it to significant costs to detect, correct and avoid any breach of security and to defend any claims against it.

The loss of mCloud’s rights to use technology currently licensed by third parties could increase operating expenses by forcing mCloud to seek alternative technology and adversely affect mCloud’s ability to compete.

mCloud occasionally licenses technology, including software and related intellectual property, from third parties for use in its products and may be required to license additional intellectual property. There are no assurances that mCloud will be able to maintain its third-party licenses or obtain new licenses when required on commercially reasonable terms, or at all.

For each of the last three fiscal years, mCloud has had two customers that each comprise greater than 10% of annual revenues.

mCloud may have customers which comprise greater than 10% of annual revenues. There are risks whenever a large percentage of total revenues are concentrated with a limited number of customers. It is not possible for us to predict the level of demand for our products that will be generated by any of these customers in the future. In addition, revenues from these larger customers may fluctuate from time to time based on these customers’ business needs and customer experience, the timing of which may be affected by market conditions or other factors outside of our control.

Information technology systems.

mCloud’s operations depend in part upon IT systems. mCloud’s IT systems are subject to disruption, damage, or failure from many sources, including computer viruses, security breaches, natural disasters, power loss, and defects in design. To date, mCloud has not experienced any material losses relating to IT system disruptions, damage, or failure, but there are no assurances that it will not incur such losses in the future. Any of these and other events could result in IT systems failures, operational delays, production downtimes, destruction or corruption of data, security breaches, or other manipulation or improper use of mCloud’s systems and networks.

mCloud’s products are highly technical, and if they contain undetected errors mCloud’s business and financial results could be adversely affected.

mCloud’s products are highly technical and complex. mCloud’s products may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in mCloud’s products may only be discovered after they have been released. Any errors, bugs, or vulnerabilities discovered in mCloud’s products after release could result in damage to mCloud’s reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely affect mCloud’s business and financial results.

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If mCloud’s products are unable to work with devices, platforms, or interfaces to deliver targeted user experiences, this could adversely affect mCloud’s business and financial results.

mCloud is dependent on the interoperability of AssetCare with popular cloud systems that it does not control, such as Google. Any changes in such systems that degrade the functionality of mCloud’s products or give preferential treatment to competitive products could adversely affect mCloud’s business and financial results.

Reliance on third party networks.

mCloud is dependent on third party mobile networks such as those provided by major telecommunications companies to provide services. These third-party networks are controlled by third parties and are subject to compromise or failure. Extended disruptions of such networks could adversely affect mCloud’s business and financial results.

mCloud believes that the AssetCare brand will significantly contribute to the success of its business. mCloud also believes that maintaining and enhancing its own brands, the AssetCare brand, is critical to expanding its base of users. Many of its new users are referred by existing users, and therefore mCloud strives to ensure that users remain favorably inclined towards AssetCare. Maintaining and enhancing the AssetCare brand will depend largely on mCloud’s ability to continue to provide useful, reliable, trustworthy, and innovative products, which it may not do successfully. mCloud may introduce new products or terms of service that users do not like, which could adversely affect mCloud’s business and financial results.

If mCloud fails to increase market awareness of AssetCare and expand sales and marketing operations, mCloud’s business and financial results could be adversely affected.

mCloud believes that the AssetCare brand will continue to significantly contribute to the success of its business. mCloud intends to spend significant resources on increasing the market awareness of the AssetCare brand and expanding its sales and marketing operations. There is no guarantee that mCloud will be successful in its efforts to increase market awareness. Failure to increase market awareness of the AssetCare brand or the failure of customers to adopt the AssetCare brand could adversely affect mCloud’s business and financial results.

If mCloud does not continue to develop technologically advanced products that successfully integrate with the software products and enhancements used by its customers, future revenues and its operating results may be negatively affected.

mCloud’s success depends upon its ability to design, develop, test, market, license and support new software products, services, and enhancements of current products and services on a timely basis in response to both competitive threats and marketplace demands. The software industry is increasingly focused on cloud computing, mobility, social media, and SaaS among other continually evolving shifts. In addition, mCloud’s software products, services, and enhancements must remain compatible with standard platforms and file formats. Often, mCloud must integrate software licensed or acquired from third parties with its proprietary software to create or improve its products. If mCloud is unable to achieve a successful integration with third party software, it may not be successful in developing and marketing its new software products, services, and enhancements. If mCloud is unable to successfully integrate third party software to develop new software products, services, and enhancements to existing software products and services, or to complete the development of new software products and services which it licenses or acquires from third parties, its operating results will materially suffer. In addition, if the integrated or new products or enhancements do not achieve acceptance by the marketplace, mCloud’s operating results will materially suffer. Moreover, if new industry standards emerge that mCloud does not anticipate or adapt to, or with rapid technological change occurring, if alternatives to its services and solutions are developed by its competitors, its software products and services could be rendered obsolete, causing it to lose market share and, as a result, harm its business and operating results and its ability to compete in the marketplace.

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mCloud’s new products and changes to existing products could fail to attract or retain users or generate revenue.

mCloud’s ability to retain, increase, and engage its user base and to increase its revenue will depend heavily on mCloud’s ability to create or acquire successful new products, both independently and in conjunction with software and platform developers or other third parties.

mCloud may introduce significant changes to its existing products or develop and introduce new and unproven products, including using technologies with which it has little or no prior development or operating experience. If new or enhanced products fail to engage users, mCloud may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify certain investments, and the business may be adversely affected. In the future, mCloud may invest in new products and initiatives to generate revenue. There is no guarantee these approaches will be successful. If mCloud is not successful with new approaches to monetization, it may not be able to maintain or grow its revenue as anticipated or recover any associated development costs, which could adversely affect mCloud’s business and financial results.

mCloud may be unable to meet its

ESG-related

targets and objectives.

As environmental, social and governance (ESG) forms a significant part of mCloud’s overall value proposition, mCloud may, especially in its public disclosure, voluntary or otherwise, set certain targets and goals with respect to its own ESG performance and its efforts to help existing and future users meet their

ESG-related

goals. Investors may choose to invest in mCloud in partial or total reliance on these ESG targets and goals. In spite of mCloud’s commitment and allocation of resources accordingly, there is no guarantee that such goals will be met.

mCloud may incur liability as a result of information retrieved from or transmitted over or through mCloud products or network.

mCloud may face claims relating to information that is retrieved from or transmitted over the Internet or through mCloud and claims related to mCloud’s products. In particular, the nature of mCloud’s business exposes it to claims related to intellectual property rights, rights of privacy, and personal injury torts.

Changes in worldwide capital spending and continued economic growth may have a material adverse effect on mCloud.

One factor that significantly affects mCloud’s financial results is the impact of economic conditions on the willingness of mCloud’s current and potential customers to make capital investments. Changes in economic growth or the global economy could lead customers to be cautious about capital spending, which places additional pressure on departments to demonstrate acceptable return on investment. Uncertain worldwide economic and political environments, and uncertain policy directives, would make it difficult for mCloud, its customers and suppliers to accurately predict future product demand, which could result in an inability to satisfy demand for mCloud’s products and a loss of market share. mCloud’s revenues may decline in such circumstances and profit margins could be eroded, or mCloud could incur significant losses.

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Moreover, economic conditions worldwide may contribute to slowdowns in the markets in which mCloud operates, resulting in reduced demand for mCloud’s solutions as a result of customers choosing to refrain from capital investments.

Turmoil in the geopolitical environment in many parts of the world, including terrorist activities and military actions, as well as political and economic issues in many regions, may put pressure on global economic conditions. mCloud’s business and financial results and its ability to expand into other international markets may also be affected by changing economic conditions particularly germane to that sector or to particular customer markets within that sector.

mCloud is exposed to fluctuations in currency exchange rates that could negatively impact mCloud’s business and financial result.

Because a portion of mCloud’s business is conducted outside of North America, mCloud faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, which could adversely affect mCloud’s business and financial results.

Any changes to existing accounting pronouncements or taxation rules or practices may affect how mCloud conducts business.

New accounting pronouncements, taxation rules and varying interpretations of accounting pronouncements or taxation rules have occurred in the past and may occur in the future. The change to existing rules, future changes, if any, or the need for mCloud to modify a current tax position may adversely affect the way mCloud conducts business.

mCloud’s business is subject to complex and evolving domestic and foreign laws and regulations. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to mCloud’s business practices, increased cost of operations, or declines in user growth or engagement, or otherwise harm mCloud’s business.

mCloud is subject to a variety of laws and regulations in the United States and abroad that involve matters central to its business, including user privacy, data protection, intellectual property, distribution, contracts and other communications, competition, consumer protection, and taxation. Foreign laws and regulations are often more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which mCloud operates. Existing and proposed laws and regulations may be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase mCloud’s operating costs, require significant management time and attention, and subject mCloud to claims or other remedies, including fines or demands that mCloud modify or cease existing business practices.

mCloud’s business is highly competitive. Competition presents an ongoing threat to the success of its business. If mCloud fails to compete successfully against industry peers, mCloud’s ability to increase revenues and achieve profitability will be impaired.

In North American and international markets, mCloud faces competition from various types of technology and remote asset management businesses. mCloud directly competes with global asset care management companies, including: IBM Corporation, AT&T Intellectual Property, Hitachi, Ltd., Verizon Communications, Inc., PTC Inc., SAP GE, Rockwell Automation, Inc., Schneider Electric SE, Infosys Limited, Honeywell International Inc., Siemens AG, and General Electric Company, among others.

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As mCloud introduces new products and as its existing products evolve, or as other companies introduce new products and services, mCloud may become subject to additional competition.

Some of mCloud’s current and potential competitors have significantly greater resources and hold advantageous competitive positions in certain market segments than mCloud currently holds. These factors may allow mCloud’s competitors to respond more effectively than mCloud to new or emerging technologies and changes in market requirements. mCloud’s competitors may develop products that are similar to mCloud’s or that achieve greater market acceptance, may undertake more

far-reaching

and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. Certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against mCloud. As a result, mCloud’s competitors may acquire and engage users of mCloud’s current products at the expense of the growth or engagement of its user base, which could adversely affect mCloud’s business and financial results.

mCloud believes that its ability to compete effectively depends upon many factors both within and beyond mCloud’s control, including:

•

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.

If mCloud is not able to effectively compete, its user base and level of user engagement may decrease, which could adversely affect mCloud’s business and financial results.

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mCloud’s compensation structure may hinder its efforts to attract and retain vital employees.

A portion of mCloud’s total compensation program for its executive officers and key personnel includes the award of options or restricted stock units to buy Common Shares. If the market price of the Common Shares performs poorly, such performance may adversely affect mCloud’s ability to retain or attract critical personnel. In addition, any changes made to mCloud’s equity incentive award policies, or to any other of its compensation practices, which are made necessary by governmental regulations or competitive pressures, could adversely affect its ability to retain and motivate existing personnel and recruit new personnel. For example, any limit to total compensation which may be prescribed by the government or applicable regulatory authorities or any significant increases in personal income tax levels levied in countries where mCloud has a significant operational presence may hurt its ability to attract or retain its executive officers or other employees whose efforts are vital to its success. Additionally, payments under mCloud’s long-term incentive plan are dependent to a significant extent upon the future performance of mCloud both in absolute terms and in comparison, to similarly situated companies. Any failure to achieve the targets set under mCloud’s long-term incentive plan could significantly reduce or eliminate payments made under this plan, which may, in turn, materially and adversely affect its ability to retain the key personnel who are subject to this plan.

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The price of the securities of mCloud may fluctuate significantly, which may make it difficult for holders of securities of mCloud to sell its securities at a time or price they find attractive.

mCloud’s stock price may fluctuate significantly as a result of a variety of factors, many of which are beyond its control. In addition to those described under “

Forward-Looking Statements

”, these factors include:

•

actual or anticipated quarterly fluctuations in its financial results and financial condition;

•

changes in financial estimates or publication of research reports and recommendations by financial analysts with respect to it or other financial institutions;

•

reports in the press or investment community generally or relating to 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.

In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies, including for reasons unrelated to their operating performance. These broad market fluctuations may adversely affect mCloud’s stock price, notwithstanding mCloud’s financial results. mCloud expects that the market price of the Common Shares will fluctuate and there can be no assurances about the levels of the market prices for such Common Shares.

mCloud does not know whether an active, liquid and orderly trading market will develop for the securities of mCloud or what the market price of the securities of mCloud will be, and as a result it may be difficult for investors to sell its securities of mCloud.

An active trading market for securities of mCloud may not be sustained. The lack of an active market may impair an investor’s ability to sell its securities of mCloud at the time they wish to sell them or at a price that they consider reasonable. The lack of an active market may also reduce the fair market value of an investor’s securities of mCloud. Further, an inactive market may also impair mCloud’s ability to raise capital by selling securities of mCloud and may impair its ability to enter into collaborations or acquire companies or products by using securities of mCloud as consideration. The market price of securities of mCloud may be volatile, and an investor could lose all or part of their investment.

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mCloud does not intend to pay dividends on the Common Shares for the foreseeable future.

mCloud currently does not plan to declare dividends on the Common Shares in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the Board. Consequently, an investor’s only opportunity to achieve a return on the investment in mCloud will be if the market price of Common Shares appreciates and the investor sells shares at a profit. There is no guarantee that the trading price of mCloud’s Common Shares in the market will ever exceed the price that an investor paid.

If research analysts do not publish research about mCloud’s business or if they issue unfavorable commentary or downgrade mCloud’s securities, mCloud’s stock price and trading volume could decline.

The trading market for the securities of mCloud may depend in part on the research and reports that research and investment analysts publish about mCloud and its business. If mCloud does not maintain adequate research coverage, or if one or more analysts who covers mCloud downgrades its stock, or publishes inaccurate or unfavorable research about mCloud’s business, the price of mCloud’s securities could decline. If one or more of the research analysts ceases to cover mCloud or fails to publish reports on it regularly, demand for securities of mCloud could decrease, which could cause mCloud’s stock price or trading volume to decline.

The market price of mCloud’s securities may decline due to the large number of outstanding Shares eligible for future sale.

Sales of substantial amounts of mCloud securities in the public market, or the perception that these sales could occur, could cause the market price of the securities to decline. These sales could also make it more difficult for mCloud to sell equity or equity-related securities in the future at a time and price that it deems appropriate.

Certain shares, such as those shares subject to

lock-up

agreements, will have restrictions on trading.

mCloud may also issue Common Shares or securities convertible into Common Shares from time to time in connection with a financing, acquisition or otherwise. Any such issuance could result in substantial dilution to existing holders of securities and cause the trading price of mCloud’s securities to decline.

mCloud may issue additional equity securities or engage in other transactions that could dilute its book value or affect the priority of Common Shares or Series A Preferred Shares, which may adversely affect the market price of the Common Shares or Series A Preferred Shares.

The Board may determine from time to time that it needs to raise additional capital by issuing additional Common Shares or other securities in connection with its business and strategic plans, particularly with respect to its growing operations. Except as otherwise described in this prospectus, mCloud will not be restricted from issuing additional Common Shares, including securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares. Because mCloud’s decision to issue securities in any future offering will depend on market conditions and other factors beyond mCloud’s control, it cannot predict or estimate the amount, timing, or nature of any future offerings, or the prices at which such offerings may be affected. There is no assurance that the Company will be successful in obtaining required financing as and when needed on acceptable terms, if at all. Additional equity offerings may dilute the holdings of its existing shareholders thereby reducing the value of their investments, or reduce the market price of its common stock, or both. Holders of Common Shares are not entitled to

pre-emptive

rights or other protections against dilution. New investors also may have rights, preferences and privileges that are senior to, and that adversely affect, mCloud’s then-current holders of Common Shares. Additionally, if mCloud raises additional capital by making offerings of debt or preference shares, upon liquidation of mCloud, holders of its debt securities and preference shares, and lenders with respect to other borrowings, may receive distributions of its available assets before the holders of Common Shares.

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mCloud is a holding company.

mCloud is a holding company and may have no material

non-financial

assets other than its direct ownership of its subsidiaries. mCloud will have no independent means of generating revenue. To the extent that mCloud needs funds beyond its own financial resources to pay liabilities or to fund operations, and its subsidiaries are restricted from making distributions to it under applicable laws or regulations or agreements, or do not have sufficient earnings to make these distributions, mCloud may have to borrow or otherwise raise funds sufficient to meet these obligations and operate its business and, thus, its liquidity and financial condition could be materially adversely affected.

mCloud may suffer reduced profitability if it loses foreign private issuer status in the United States.

If, as of the last business day of mCloud’s second fiscal quarter for any year, more than 50% of mCloud’s outstanding voting securities (as defined in the United States

Securities Act of 1933

) are directly or indirectly held of record by residents of the United States, mCloud will no longer meet the definition of a “Foreign Private Issuer” under the rules of the U.S. Securities and Exchange Commission. If mCloud fails to qualify for Foreign Private Issuer status, it will remain unqualified unless it meets the test as of the last business day of its second fiscal quarter. This change in status could have a significant effect on the Company as it would significantly complicate the raising of capital through the offer and sales of securities and reporting requirements, resulting in increased audit, legal and administration costs. The ability of mCloud to be profitable could be significantly affected.

Asset Location and Legal Proceedings.

mCloud has assets located outside of Canada, and therefore it may be difficult to enforce judgments obtained by mCloud in foreign jurisdictions by Canadian courts. Similarly, to the extent that mCloud’s assets are located outside of Canada, investors may have difficulty collecting from mCloud any judgments obtained in Canadian courts and predicated on the civil liability provisions of applicable securities legislation. Furthermore, mCloud may be subject to legal proceedings and judgments in foreign jurisdictions and it may be difficult for U.S. stockholders to effect service of process against the officers of mCloud.

mCloud is exposed to credit risk.

Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract. Credit risk is limited to the following instruments and mCloud’s maximum exposure to credit risk is the carrying value of the financial assets.

mCloud is mainly exposed to credit risk from credit sales. Management monitors the creditworthiness of its customers by performing background checks on all new customers. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances. mCloud considers that there has been a significant increase in credit risk when contractual payments are more than 90 days past due.

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Provisions for outstanding balances are established based on forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as well as the frequency of payments received. Accounts receivable are completely written off once management determines the probability of collection to be remote.

Trade and other receivables, unbilled revenue and long-term receivables are from individual customers and are not assessed based on external credit rating agencies. mCloud uses a provision matrix to measure the lifetime expected credit loss of these balances. Receivables are grouped based on similar credit risk profiles and days past due. Loss rates are based on actual credit loss experience and reflect the forward-looking conditions over the expected life of the receivable.

If the debenture trustee elects or is instructed to enforce payment under the Indenture and mCloud is unable to pay all amounts owing thereunder, mCloud’s business and results of operations could be adversely affected

mCloud is currently in default under the convertible debenture indenture dated November 14, 2019 (the “Indenture”) governing its 10% convertible unsecured debentures (the “2019 Debentures”) as a result of its failure to pay the outstanding principal and interest owing under the 2019 Debentures, being $23,740,275 in the aggregate (the “Outstanding Amount”), on or before the maturity date of June 30, 2022 and the subsequent 10 business day cure period. As such, pursuant to the terms of the Indenture, the debenture trustee may at any time during the period of default, in its discretion, and shall, upon direction of the holders of not less than 25% in principal amount of the outstanding 2019 Debentures, declare the Outstanding Amount, and interest incurred thereon during the period of default, to be immediately due and payable. If mCloud were to fail to pay such amounts forthwith following such demand, the debenture trustee may, in its discretion, and shall, upon direction of the holders of not less than 25% of the 2019 Debentures (subject to the debenture trustee being funded and indemnified against the costs of such), proceed to obtain or enforce payment of such amounts. Although mCloud intends to repay the Outstanding Amount and all interest incurred thereon during the period of default using a portion of the proceeds of the Offering, there can be no assurance that sufficient proceeds will be raised in the Offering to fully or partially satisfy payment of such amounts. If the debenture trustee elects or is instructed to enforce payment under the Indenture and mCloud is unable to pay all amounts owing thereunder, mCloud’s business and results of operations could be adversely affected. The Indenture does not contain default penalty or interest rate terms.

mCloud is exposed to interest rate risk.

Interest rate risk is the risk that the fair value or future cash flows of mCloud’s financial instruments will fluctuate because of changes in market interest rates. mCloud is exposed to interest rate risk on its credit facility and factoring facility with Nations Interbanc as these instruments have variable rates. Management does not believe interest rate risk is currently material to its business.

Risks Related to Our Securities and this Offering

The Series A Preferred Shares represent perpetual equity interests.

The Series A Preferred Shares represent perpetual equity interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. As a result, holders of the Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time.

If the Series A Preferred Shares are delisted from Nasdaq, the ability to transfer or sell the Series A Preferred Shares may be limited and the market value of the Series A Preferred Shares will likely be materially adversely affected.

We plan to list the Series A Preferred Shares on Nasdaq and the Series A Preferred Shares do not contain provisions that are intended to protect investors if the Series A Preferred Shares are delisted from Nasdaq. In order to maintain that listing, we must satisfy all of the following continued listing requirements:

(1) Minimum bid price of at least $1 per share;

(2) At least 100 Public Holders;

(3) At least 100,000 Publicly Held Shares;

(4) Market Value of Publicly Held Shares of at least $1 million; and

(5) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid.

There can be no assurances that we will be able to comply with the applicable listing standards. If the Series A Preferred Shares are delisted from Nasdaq, investors’ ability to transfer or sell the Series A Preferred Shares will be limited and the market value of the Series A Preferred Shares will likely be materially adversely affected. Moreover, since the Series A Preferred Shares have no stated maturity date, investors may be forced to hold the Series A Preferred Shares indefinitely while receiving stated dividends thereon when, as and if authorized by the Board and paid by us with no assurance as to ever receiving the liquidation value thereof.

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We may incur additional indebtedness and obligations to pay dividends on preferred stock, some of which may be senior to the rights of the Series A Preferred Shares.

We and our subsidiaries may incur additional indebtedness and obligations to pay cumulative dividends on preferred stock, some of which may be senior to the rights of the Series A Preferred Shares. The terms of the Series A Preferred Shares do not prohibit us or our subsidiaries from incurring additional indebtedness or issuing additional series of preferred stock. Any such indebtedness will in all cases be senior to the rights of holders of Series A Preferred Shares. We may also issue additional series of preferred stock that contain dividend rights and liquidation preferences that are senior to the rights of holders of Series A Preferred Shares. Our subsidiaries may also incur indebtedness that is structurally senior to the Series A Preferred Shares, and we and our subsidiaries could incur indebtedness secured by a lien on our assets, entitling the holders of such indebtedness to be paid first from the proceeds of such assets. If we issue any additional preferred stock that ranks senior or pari passu with the Series A Preferred Shares, the holders of those shares will be entitled to a senior or ratable share with the holders of the Series A Preferred Shares in any proceeds distributed in connection with our insolvency, liquidation, reorganization or dissolution. This may have the effect of reducing the amount of proceeds paid to the holders of Series A Preferred Shares.

Market interest rates may adversely affect the value of the Series A Preferred Shares.

One of the factors that continues to influence the price of the Series A Preferred Shares will be the dividend yield on the Series A Preferred Shares (as a percentage of the price of the Series A Preferred Shares) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Shares to expect a higher dividend yield, and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividends. Accordingly, higher market interest rates could cause the market price of the Series A Preferred Shares to decrease.

The amount of the liquidation preference on the Series A Preferred Shares is fixed and investors in this Offering that receive Series A Preferred Shares will have no right to receive any greater payment.

The payment due upon liquidation on the Series A Preferred Shares is fixed at the liquidation preference of $25.00 per share, plus an amount equal to all accumulated and unpaid dividends thereon to the date of liquidation, whether or not declared. If, in the case of our liquidation, there are remaining assets to be distributed after payment of this amount, you will have no right to receive or to participate in these amounts. In addition, if the market price of a holder’s Series A Preferred Shares is greater than the liquidation preference, such holder will have no right to receive the market price from us upon our liquidation.

There may be future sales of Series A Preferred Shares or similar securities, which may adversely affect the market price of the Series A Preferred Shares.

Subject to the terms of the Certificate of Designations, our Articles of Incorporation and Canadian law, we are not restricted from issuing additional Series A Preferred Shares or securities similar to the Series A Preferred Shares, including any securities that are convertible into or exchangeable for, or that represent the right to receive, Series A Preferred Shares. Holders of the Series A Preferred Shares have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series. The market price of the Series A Preferred Shares could decline as a result of sales of Series A Preferred Shares, sales of other securities made after this Offering or the Registered Direct Offering, or as a result of the perception that such sales could occur. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future offerings. Thus, holders of the Series A Preferred Shares bear the risk of our future offerings reducing the market price of the Series A Preferred Shares and diluting their holdings in the Series A Preferred Shares.

The Series A Preferred Shares may not have an active trading market.

The Series A Preferred Shares are a recent issue of securities and do not have a long-established trading market. Although we plan to list the Series A Preferred Shares on Nasdaq, we cannot assure you that an active market for the Series A Preferred Shares will be sustained or that holders of the Series A Preferred Shares will be able to sell their Series A Preferred Shares at favorable prices or at all. The difference between bid and ask prices in any secondary market for the Series A Preferred Shares could be substantial. Accordingly, no assurance can be given as to the liquidity of, or trading market for, the Series A Preferred Shares, and holders of the Series A Preferred Shares may be required to bear the financial risks of an investment in the Series A Preferred Shares for an indefinite period of time.

The voting rights of holders of the Series A Preferred Shares are limited.

Holders of the Series A Preferred Shares have no voting rights with respect to matters that generally require the approval of voting shareholders. The limited voting rights of holders of the Series A Preferred Shares include the right to vote as a single class on certain matters that may affect the preference or special rights of the Series A Preferred Shares, as described under “Description of the Series A Preferred Shares—Limited Voting Rights”.

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Dividends or other payments with respect to the Series A Preferred Shares may be subject to withholding taxes in circumstances where we are not obliged to make gross up payments, and this could result in holders receiving less than expected in such circumstances.

In the event of certain changes to current tax law that require tax to be withheld from dividends or other payments on the Series A Preferred Shares, we are not required to make gross up payments in respect of such taxes. This would result in holders of Series A Preferred Shares receiving less than expected and could materially adversely affect the return on your investment.

The Warrants are speculative in nature.

The Warrants will be exercisable until November 29, 2026 at an initial exercise price equal of $4.75. There can be no assurance that the market price of the Common Shares will ever equal or exceed the exercise price of the Warrants. In the event that our common share price does not exceed the exercise price of the Warrants during the period when the Warrants are exercisable, a holder of Warrants may be unable to profit from exercising such Warrants before they expire.

Except as otherwise provided in the Warrants, holders of Warrants purchased in this offering will have no rights as shareholders until such holders exercise their Warrants and acquire our common stock.

Except as otherwise provided in the Warrants, until holders of Warrants acquire our Common Shares upon exercise of the Warrants, holders of Warrants will have no rights with respect to our Common Shares underlying such Warrants. Upon exercise of the Warrants, the holders will be entitled to exercise the rights of a holder of our Common Shares only as to matters for which the record date occurs after the exercise date.

Additional stock offerings in the future may dilute then-existing shareholders’ percentage ownership of the Company.

Given our plans and expectations that we will need additional capital and personnel, we anticipate that we will need to issue additional Common Shares or securities convertible or exercisable for Common Shares, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of then current stockholders.

The requirements of being a public company may strain mCloud’s resources, divert management’s attention and affect its ability to attract and retain executive management and qualified board members.

As a reporting issuer, mCloud is subject to the reporting requirements of applicable securities legislation of the jurisdiction in which it is a reporting issuer, the listing requirements of Nasdaq and the TSXV and other applicable securities rules and regulations. Compliance with these rules and regulations will increase mCloud’s legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on its systems and resources. Applicable securities laws will require mCloud to, among other things, file certain annual and quarterly reports with respect to its business and results of operations. In addition, applicable securities laws require mCloud to, among other things, maintain effective disclosure controls and procedures and internal control over financial reporting.

In order to maintain and, if required, improve its disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight are required. Specifically, due to the increasing complexity of its transactions, it is anticipated that mCloud will improve its disclosure controls and procedures and internal control over financial reporting primarily through the continued development and implementation of formal policies, improved processes and documentation procedures, as well as the continued sourcing of additional finance resources. As a result, management’s attention may be diverted from other business concerns, which could harm mCloud’s business and results of operations. To comply with these requirements, mCloud may need to hire more employees in the future or engage outside consultants, which will increase its costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. mCloud intends to continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If its efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against mCloud, which could adversely affect mCloud’s business and financial results.

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As a public company subject to these rules and regulations, mCloud may find it more expensive for it to obtain director and officer liability insurance, and it may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for mCloud to attract and retain qualified members of its Board, particularly to serve on its Audit Committee and Compensation Committee, and qualified executive officers.

As a result of disclosure of information in filings required of a public company, mCloud’s business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, mCloud’s business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in its favor, these claims, and the time and resources necessary to resolve them, could divert the resources of mCloud’s management and harm its business and results of operations.

We are a “foreign private issuer” and may have disclosure obligations that are different from those of U.S. domestic reporting companies. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which could limit the information publicly available to our shareholders.

As a “foreign private issuer,” we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders are exempt from the insider reporting and short-swing profit recovery requirements in Section 16 of the Exchange Act. Accordingly, our shareholders may not know on as timely a basis when our officers, directors and principal shareholders purchase or sell their Common Shares, as the reporting deadlines under the corresponding Canadian insider reporting requirements are not applicable. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. As a result of such varied reporting obligations, shareholders should not expect to receive the same information at the same time as information provided by U.S. domestic companies.

In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices rather than those of the United States, except to the extent that such laws would be contrary to U.S. securities laws, provided that we disclose the requirements we are not following and describe the Canadian practices we follow instead. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all domestic U.S. corporate governance requirements.

We may lose our “foreign private issuer” status in the future, which could result in additional costs and expenses to us.

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. We may in the future lose foreign private issuer status if a majority of our Common Shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if: (i) a majority of our directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer would be significantly more than the costs incurred as an Canadian foreign private issuer. If we are not a foreign private issuer, we would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers.

We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our Common Shares less attractive to investors.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act. For as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” until the fifth anniversary of the fiscal year end date following the completion of this offering, however, our status would change more quickly if we have more than US$1.07 billion in annual revenue, if the market value of our Common Shares held by

non-affiliates

equals or exceeds US$700 million as of June 30 of any year, or we issue more than US$1.0 billion of

non-convertible

debt over a three-year period before the end of that period. We have not opted in to the extended transition period for emerging growth companies under the JOBS Act for complying with new or revised accounting standards.

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Investors could find our Common Shares less attractive if we choose to rely on these exemptions. If some investors find our Common Shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Common Shares and our share price may be more volatile.

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If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our securities.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities.

For as long as we are an “emerging growth company”, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” until the fifth anniversary of the fiscal year end date following the completion of this offering. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

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Our management team will have broad discretion to use the net proceeds from this offering and its investment of these proceeds may not yield a favorable return. They may invest the proceeds of this offering in ways with which investors disagree.

Our management team will have broad discretion in the application of the net proceeds from this offering and could spend or invest the proceeds in ways with which our shareholders disagree. Accordingly, investors will need to rely on our management team’s judgment with respect to the use of these proceeds. We intend to use the proceeds from this offering in the manner described in the section entitled “Use of Proceeds.” The failure by management to apply these funds effectively could negatively affect our ability to operate and grow our business.

We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering. In addition, the amount, allocation and timing of our actual expenditures will depend upon numerous factors. Accordingly, we will have broad discretion in using these proceeds. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

The market price of shares may be subject to wide price fluctuations.

The market price of our securities may be subject to wide fluctuations in response to many factors, including variations in the financial results of mCloud and its subsidiaries, divergence in financial results from analysts’ expectations, changes in earnings estimates by stock market analysts, changes in the business prospects for mCloud and its subsidiaries, general economic conditions, legislative changes, and other events and factors outside of mCloud’s control. In addition, stock markets have from

time-to-time

experienced extreme price and volume fluctuations, including general economic and political conditions, which could adversely affect the market price for our securities.

If the Company fails to maintain compliance with Nasdaq Listing Rules, the Company may be delisted from Nasdaq, which would result in a limited public market for trading the Company’s Common Shares and make obtaining future debt or equity financing more difficult for the Company.

The issued and outstanding Common Shares of the Company are listed and posted for trading on the TSXV and on the Nasdaq under the symbol “MCLD.” The Listed Warrants of the Company are listed on the Nasdaq under the symbol “MCLDW” and the Warrants will also be traded on the Nasdaq under the symbol “MCLDW”. We are in the process of applying to have the Series A Preferred Shares sold in this offering listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MCLDP”. However, there is no assurance that we will be able to continue to maintain our compliance with the Nasdaq continued listing requirements. If we fail to do so, our securities may lose their status on Nasdaq Capital Market and they would likely be traded on the

over-the-counter

markets, including the Pink Sheets market. As a result, selling our securities could be more difficult because smaller quantities of shares or warrants would likely be bought and sold, transactions could be delayed, and security analysts’ coverage of us may be reduced. In addition, in the event our securities are delisted, broker dealers would bear certain regulatory burdens which may discourage broker dealers from effecting transactions in the securities and further limit the liquidity of the securities. These factors could result in lower prices and larger spreads in the bid and ask prices for the securities. Such delisting from Nasdaq and continued or further declines in the share price of the securities could also greatly impair our ability to raise additional necessary capital through equity or debt financing and could significantly increase the ownership dilution to shareholders caused by our issuing equity in financing or other transactions.

If the Company was delisted from Nasdaq, it may become subject to the trading complications experienced by “Penny Stocks” in the

over-the-counter

market.

Delisting from Nasdaq may cause the securities of the Company to become subject to the SEC’s “penny stock” rules. The SEC generally defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. One such exemption is to be listed on Nasdaq. Therefore, if we were to be delisted from Nasdaq, the securities of the Company could become subject to the SEC’s “penny stock” rules. These rules require, among other things, that any broker engaging in a purchase or sale of our securities provide its customers with: (i) a risk disclosure document, (ii) disclosure of market quotations, if any, (iii) disclosure of the compensation of the broker and its salespersons in the transaction, and (iv) monthly account statements showing the market values of our securities held in the customer’s accounts. A broker would be required to provide the bid and offer quotations and compensation information before effecting the transaction. This information must be contained on the customer’s confirmation. Generally, brokers are less willing to effect transactions in penny stocks due to these additional delivery requirements. These requirements may make it more difficult for shareholders to purchase or sell the Shares of the Company. Since the broker, not us, prepares this information, we would not be able to assure that such information is accurate, complete or current.

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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our shares will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our securities, our share price would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

FORWARD-LOOKING STATEMENTS

We have made statements in this prospectus, including under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and elsewhere that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

Examples of forward-looking statements include:

•

the timing of the development of future services,

•

projections of revenue, earnings, capital structure and other financial items,

•

statements regarding the capabilities of our business operations,

•

statements of expected future economic performance,

•

statements regarding competition in our market, and

•

assumptions underlying statements regarding us or our business.

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under the heading “Risk Factors” above. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately $22,296,067 USD ($25,746,067 if the underwriters exercise their option to purchase additional securities in full), assuming a combined public offering price per Series A Preferred Share and related Warrants of $25.00, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the Warrants are exercised in full for cash, the estimated net proceeds will increase to $51,983,567 (or $55,433,567 if the underwriters’ option to purchase additional securities is exercised in full.

We intend to use the proceeds from this offering for working capital and general corporate purposes, including paying off convertible debenture debt in the amount of CAD$23,457,500 with an interest rate of 10% per annum due June 30, 2022. The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, and the rate of growth, if any, of our business, and our plans and business conditions.

The foregoing represents our intentions as of the date of this prospectus based upon our current plans and business conditions to use and allocate the net proceeds of the offering. However, our management will have significant flexibility and discretion in the timing and application of the net proceeds of the Offerings. Unforeseen events or changed business conditions may result in application of the proceeds of the Offerings in a manner other than as described in this prospectus.

To the extent that the net proceeds we receive from the offering are not immediately applied for the above purposes, we plan to invest the net proceeds in short-term, interest-bearing debt instruments or bank deposits.

Management believes that the proceeds from the offering will be sufficient to satisfy the Company’s cash needs for at least the next 12 months.

DIVIDEND POLICY

Our Board has never declared a dividend on our Common Shares and does not anticipate declaring a dividend in the foreseeable future.

The holders of our Series A Preferred Shares are entitled to dividends out of funds legally available when and as declared by our Board of Directors subject to the BCBCA. Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares are entitled to receive, when, as and if declared by the Board of Directors (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%.

Our ability, as a holding company, to pay dividends in the future and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiary and other holdings and investments. In addition, our operating company may, from time to time, be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions.

CURRENCY AND EXCHANGE RATES

All dollar amounts in this prospectus are expressed in U.S. dollars unless otherwise indicated. The Company’s accounts are maintained in Canadian dollars and the Company’s financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All references to “Canadian dollars”, “CAD”, or “CAD$” are to Canadian dollars.

The following table sets forth, for each period indicated, exchange rate for U.S. dollars expressed in Canadian dollars. These rates are based on the noon buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our consolidated financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.


Year Ended	Period End
December 31, 2019	$	1.2988
December 31, 2020	$	1.2732
December 31, 2021	$	1.2678
March 31, 2022	$	1.2482

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We make no representation that any Canadian dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars., as the case may be, at any particular rate, or at all. We do not currently engage in currency hedging transactions.

CAPITALIZATION

The following table sets forth our cash and our capitalization as of March 31, 2022:

•

On an actual basis, as determined in accordance with IFRS; and

•

On an as adjusted basis to reflect the issuance and sale by us of 1,000,000 Series A Preferred Shares and warrants to purchase up to 9,000,000 Common Shares at an assumed combined public offering price of $25.00 per Series A Preferred Share and related Warrants, assuming no exercise of the Warrants and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the combined public offering price of our Series A Preferred Shares and Warrants and other terms of this offering determined at pricing. You should read this capitalization table together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information included elsewhere in this prospectus. The table and footnotes below reflect an assumed raise of $25,000,000 and an assumed share price of $25.00 per share net of transaction related fees and converted into Canadian dollars as set out in “Currency and Exchange Rates”.


As of March 31, 2022
	Actual			Pro forma Adjustments			Pro Forma As Adjusted
Cash and Cash Equivalents	$	1,873,021			5,000,525	(1)	$	6,873,546
Current portion of loans and borrowings		12,480,038			—			12,480,038
Current portion of convertible debentures		22,922,383			(22,922,383	)		—
Warrant Liabilities		6,060,782			—	(2)		6,060,782
Long term convertible debentures		111,411			—			111,411
Loans and borrowings		646,137			—			646,137
Equity
Common shares, no par value; unlimited number of shares authorized, shares issued and outstanding, actual; unlimited number of shares authorized, 16,151,500 shares issued and outstanding, 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value; 1,000,000 shares issued and outstanding (3)
Equity Share Capital	$	118,275,850			28,740,800	(2)		147,016,650
Contributed Surplus	$	11,408,263			—			11,408,263
Accumulated Other Comprehensive Income	$	2,202,000			—			2,202,000

Deficit	$	(139,793,643	)		(535,117	)		(140,328,760	)
Total Shareholders Deficit	$	(7,907,530	)	$	28,205,683		$	20,298,153

Total Deficit	$	(5,639,260	)	$	28,205,683		$	22,566,423

(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 March 31, 2022.

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(2)	The amount to be attributed to the warrants has not yet been determined, and has been included in the amount attributed to Equity Share Capital. Upon issuance of the Series A Preferred Shares and Warrants, the total net proceeds will be allocated to Equity Share Capital and Warrant Liabilities.

(3)	Assumes adoption of the Rights and Restrictions for 9.0% Cumulative Series A Preferred Shares, which was adopted subsequent to March 31, 2022.

The above discussion and table is based on 16,150,100 Common Shares outstanding as of March 31, 2022, and do not include, as of that date:

•

1,136,141 Common Shares issuable upon exercise of Listed Warrants;

•

7,529,274 Common Shares issuable upon exercise of Non-Listed Warrants;

•

806,734 Common Shares issuable upon exercise of Options

•

213,293 Common Shares issuable upon exercise of Restricted Share Units;

•

1,579,583 Common Shares issuable upon exercise of Convertible Debt; and

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an

on-going

basis, we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates or other forward-looking statements under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our actual results may differ materially as a result of many factors, including those set forth under the headings entitled “Forward-Looking Statements” and “Risk Factors”.

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Recent Developments

Significant Business Contracts and Partnerships

On February 2, 2021, the Company announced it had signed a memorandum of understanding with Invest Alberta Corporation (“Invest Alberta”), an Alberta crown corporation. The goal of the memorandum was for the Company to leverage its technology to help Canadian and global energy companies reduce carbon emissions and act on ESG issues. The Company believes the move may accelerate the development and adoption of its offerings through increased engagement with key customers and local industry in Alberta.

On February 16, 2021, the Company announced that it had signed a memorandum of understanding with Fidus Global, LLC (“Fidus”) to commence sales, implementation, and ongoing field services for the Company’s AssetCare segment for connected buildings in the United States.

On April 21, 2021, the Company announced that it would be offering its AssetCare solutions for HVAC and IAQ to small business customers of three major North American energy utility providers, two in the continental United States and one in Canada. Based on information provided by the three utilities, the Company estimated that these utility partnerships will make AssetCare HVAC and IAQ solutions available to approximately one million commercial buildings in the United States and Canada.

On May 18, 2021, the Company announced that it had successfully implemented AssetCare to customers associated with these utility program partnerships. Among these customers are two prominent car dealership properties in the State of New York.

On May 3, 2021, the Company announced that it had equipped the head office of Cadence Financial Group, located in Vancouver, Canada, with a combination of

IoT-enabled

24/7 air quality monitoring and

AI-driven

connected air purification capable of outperforming standard HEPA filtration by continuously eliminating up to 95% of harmful particulates and contaminants smaller than one micron in size.

On June 15, 2021, the Company announced that pursuant to its partnership with Fidus, the Company’s AssetCare solution was now being offered at various government buildings operated by the State of Arkansas, as the state seeks to improve indoor air safety across government properties, including office buildings, schools, and other

state-run

facilities in the wake of

COVID-19.

On June 23, 2021, the Company announced its partnership with Prosaris Solutions Ltd., through which the Company began its rollout of a new AssetCare solution targeting fugitive gas emissions for operators in the oil and gas sector in Alberta, and enabling such operators to continuously inspect and correct such gas leaks at their facilities.

On July 13, 2021, mCloud announced it had signed a memorandum of understanding to partner with URBSOFT, a strategic provider of advanced ground and aerial inspection technology solutions in the Kingdom of Saudi Arabia. This partnership paved the way for mCloud to take AssetCare to support the digitalization and ESG objectives of Saudi Vision 2030, the Kingdom of Saudi Arabia’s national economic plan.

On July 20, 2021, mCloud announced it had begun to offer its AssetCare solutions for HVAC and IAQ to small business customers of Con Edison, the energy company that serves New York City and Westchester County, N.Y. The Company is a solutions provider in Con Edison’s Business Energy Pro program, which offers energy saving incentives to businesses located on Staten Island and in Westchester County. Business Energy Pro is one of the first

“pay-for-performance”

incentive programs in the country. Small businesses that participate earn payments for measured energy savings over a multi-year period. Through mCloud’s partnership with Con Edison, AssetCare customers in New York state can earn payments for measured energy savings achieved through AssetCare over a multi-year period.

On October 13, 2021, mCloud announced it received approval and a license to conduct business activities from the Ministry of Investment of Saudi Arabia (“MISA”). The MISA license marks a major milestone in mCloud’s activities in the Middle East and North Africa (“MENA”) region, enabling mCloud to provide AssetCare solutions to the Kingdom of Saudi Arabia and other countries in the MENA region.

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On September 27, 2021, the Company executed a

12-year

lease for its office in Calgary, Alberta. The lease term commences on December 1, 2022, preceded by a fixturing period which the Company will use to build out the office space to their specifications.

On November 9, 2021, the Company announced it had equipped two initial locations in Saudi Arabia—Casa Pasta and CHICK “N” DIP restaurants—with its AssetCare solution for HVAC and IAQ, to optimize the indoor air quality and energy efficiency in the restaurants. This was facilitated through the Company’s partnership with URBSOFT, previously announced on July 13, 2021.

On November 30, 2021, the Company announced a three-year agreement with Colliers Macaulay Nicolls Inc., an appointed agent of Slate Asset Management, to deploy mCloud’s AssetCare solution for HVAC and IAQ at Life Plaza, one of Slate Asset Management’s premier office towers in downtown Calgary, Alberta, and the Company’s largest IAQ deployment to date. The initial subscription term for this agreement would become effective at the completion of AssetCare installation and is set to renew in November 2025.

On December 15, 2021, the Company announced it had signed an agreement with Virtual Vision (the “V2 Agreement”), a local provider of cloud computing services within Saudi Arabia, to host the Company’s AssetCare solutions on the V2 Public Cloud for use in the Kingdom. The V2 Agreement enables mCloud to complete the onboarding of several new Saudi customers and immediately take these customers live with AssetCare. The V2 Agreement also ensures mCloud is ready for scalable deployment within Saudi Arabia and in a manner compliant with Saudi legal requirements by

geo-locating

AssetCare data within the Kingdom.

On January 20, 2022, the Company announced a partnership with the

Mercedes-EQ

Formula E Team as an official team partner, through which the use of mCloud’s AssetCare portfolio of solutions to drive the ESG performance of the Formula E business would be explored. This announcement was made just ahead of the official opening of Season 8 of the ABB FIA Formula E World Championship – the world’s only

all-

electric FIA World Championship and the only sport certified net zero carbon since inception. The

Mercedes-EQ

Formula E Team is collaborating with the Company to explore the use of the Company’s AssetCare portfolio of solutions to drive the ESG performance of their business, including technologies to reduce harmful emissions, the carbon footprint of their facilities, and further enhancing the safety and comfort of the work environment.

On January 25, 2022, the Company announced it had signed a memorandum of understanding with Saudi Arabian Oil Company (“Aramco”) to explore the

co-development

of a digital technology hub for delivering ESG solutions in the Kingdom of Saudi Arabia. The hub would enable the Company and Aramco to jointly develop new

AI-powered

innovations to facilitate the carbon reduction of complex energy-intensive assets throughout the Kingdom and abroad. Additionally, the Company announced that it planned to develop a center of excellence that will serve as a home base for a dedicated team of ESG and digital transformation experts based in Saudi Arabia, particularly to leverage Virtual Vision’s high-performance infrastructure in accordance with the V2 Agreement.

On January 26, 2022, the Company announced the creation of a new

“ESG-Digital

Hub” based in Houston Texas, to serve as an additional focal point for local mCloud teams driving the ongoing technological development and customer delivery of AssetCare solutions. The new Houston-based location joins other Company hubs in Calgary, Alberta, established in collaboration with Invest Alberta, and the hub based in Saudi Arabia, in collaboration with Aramco.

On March 21, 2022, the Company announced it had signed an agreement on March 17, 2022 to deliver its AssetCare for Connected Buildings solution to manage the energy efficiency of the Vail Buick Dealership in Bedford Hills, New York, the first of 15 planned installations for auto dealerships in New York state to help control rising energy costs in the electric vehicle (“EV”) era. mCloud will deploy an innovative combination of AI in the cloud, solar power generation, and battery storage to continuously manage the energy cost and carbon footprint of the entire dealership, including the substantial increased energy consumption from EV charging now being implemented onsite. The Vail Buick Dealership agreement covers a

17-year

term commencing on or before June 2022.

On March 30, 2022, the Company announced it had signed an agreement on March 28, 2022 with Carbon Royalty Corp to proceed with closing and funding the first 30 AssetCare solutions to optimize Electric Vehicle (“EV”) charging efficiency at auto dealerships in the states of New York and California. The agreement partners mCloud with Carbon Royalty Corp, enabling the implementation of these AssetCare contracts to be fully funded via Carbon Royalty Corp. As a benefit of this partnership, Carbon Royalty Corp receives 50% of the tax incentives, carbon credits, and other accretive financial benefits mCloud would be eligible to receive in the United States resulting from the implementation of these solutions. These benefits would be split between mCloud and Carbon Royalty Corp over the expected

20-year

contract terms of AssetCare arrangements.

On July 29, 2022, the Company entered into a technology continuation agreement with Agnity Global, Inc. (“Agnity”), which replaced the royalty agreement between the parties. Agnity will pay the Company a one-time royalty payment of approximately US$6.0 million as a result of the termination of the royalty agreement, pursuant to the terms of the royalty agreement, and under the terms of the technology continuation agreement, the parties will continue delivering and supporting Agnity’s technology and build on the Company’s existing license and use of Agnity technology across all of the Company’s AssetCare offerings going forward. As a result of this new arrangement, the Company will no longer consolidate the financial results of Agnity as of July 29, 2022.

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Financing

The Company completed the issuance of six tranches of a convertible debenture financing pursuant to which it has issued an aggregate of US$7.043 million convertible debentures (“2021 Convertible Debentures”). On July 12, 2021, the Company entered into debt conversion and exchange agreements with the holders of more than 99.2% of the outstanding principal amount of the 2021 Convertible Debentures, pursuant to which the Company issued an aggregate of 2,107,787 common shares and 2,107,787 warrants in consideration for the extinguishment of 99.2% of the principal and accrued interest owing under the 2021 Convertible Debentures.

On April 15, 2021, the Company issued a total of 2,300,000 units of the Company at an issue price of $6.30 per unit for aggregate gross proceeds of CAD$14.490 million (the “Brokered Offering”). Each unit consisted of one common share and one warrant of the Company. Each warrant is exercisable for one common share at an exercise price of $8.55 per common share, subject to adjustment in certain events. The Brokered Offering was led by ATB Capital Markets Inc. (the “Agent”). The Agent was paid a cash fee equal to 7% of the gross proceeds raised under the Brokered Offering.

On May 17, 2021, the Company announced it had entered into a secured credit facility with ATB, which is a $5 million margined, demand operating loan facility (the “ATB Facility”). The proceeds of the ATB Facility were used in part, to repay in full all indebtedness and liability owing by the Company to HSBC Bank of Canada and for general corporate purposes. The ATB Facility is a demand operating line bearing interest at a floating rate equal to the prime rate per annum established by ATB from time to time for commercial loans denominated in Canadian dollars made by ATB in Canada, plus an applicable margin rate based on the senior debt to EBITDA ratio of the Company at the time of determination. Repayments under the ATB Facility will be made on a monthly interest-only basis until demand. The ATB Facility is secured against certain assets of the Company and its principal subsidiaries.

On June 24, 2021, $2.5 million was drawn from the ATB Facility, in accordance with the maximum amount permitted under the Company’s intercreditor agreement with Fiera Private Debt Fund VI LP (“Fiera”).

On November 8, 2021, the ATB Facility was amended. As part of the amendment, ATB provided an additional $5 million in available funding to the Company via an accordion, subject to lender consent. In consideration of ATB making available to the Company additional advances under the ATB Facility, the Company granted to ATB

non-transferable

warrants to acquire up to 183,486 common shares at an exercise price of $5.45 per common share for a term not exceeding one year.

On November 9, 2021, the Company amended its term loan and amended the associated intercreditor agreement between Fiera, ATB and the Company. The intercreditor agreement determines the priority of security interests in the case of default, with Fiera having first priority on all assets other than accounts receivable. The amendments to the term loan include: increase in interest rate from 6.85% to 7.5% per annum; certain changes to financial covenants which are applicable for the period from July 1, 2021 to December 31, 2022; and, the addition of two mCloud subsidiaries as additional guarantors.

On August 13, 2021, the Company completed a

non-brokered

private placement, pursuant to a subscription agreement dated July 12, 2021, offering of 75,676 units of the Company at a unit price of $5.55 for gross proceeds of $0.420 million. Each unit consists of one common share and one share purchase warrant at an exercise price of $8.55 per common share with warrants expiring April 2024.

On November 24, 2021, the Company announced that its common shares had begun trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MCLD” in connection with the completion of a 3:1 share consolidation (the “2021 Share Consolidation”). On November 29, 2021, the Company announced the completion of an underwritten public offering of 2,100,000 units at a price to the public of US$4.50 per unit. Each unit issued in the offering consisted of one common share and one warrant to purchase one common share at an exercise price of USD$4.75. The common shares began trading on the NASDAQ on November 24, 2021 under the symbol “MCLD”. The Company received gross proceeds of approximately US$9.5 million, before deducting underwriting discounts and commissions and other estimated offering expenses.

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The Company had also granted the underwriters, Maxim Group LLC, to purchase up to an additional 315,000 common shares and an additional 315,000 warrants (each on a post-consolidation basis) at the public offering price to cover over-allotments. On November 29, 2021, the Company announced that Maxim Group LLC had purchased the 315,000 warrants in accordance with the over-allotment option, and on December 6, 2021 announced that Maxim Group LLC had exercised the over-allotment option in full to purchase an additional 315,000 common shares at the Offering Price. The proceeds from the over- allotment option were US$1.417 million. The aggregate gross proceeds of the offering, including the over- allotment option, were US$10.867 million. In conjunction with the USD equity offering described above, the Company agreed to list the warrants issued as part of the unit offering on the Nasdaq. On February 15, 2022, these warrants commenced trading in USD under the symbol “MCLDW”. The Warrants will be trading under the symbol “MCLDW” along with the Listed Warrants.

In conjunction with the Company’s agreements to provide AssetCare solutions to optimize Electric Vehicle (“EV”) charging efficiency at auto dealerships in the states of New York and California (the “EV Dealership Projects”), on March 28, 2022, a subsidiary of the Company executed a promissory note in the aggregate principal amount of US$15,000,000 (the “Note”) with Carbon Royalty Corp. (“Carbon”). EV Dealership Projects are the design, installation and operation of integrated power systems consisting of solar panels, batteries and EV charging power stations for auto dealerships.

The initial principal amount under the Note of US$5,000,000 was funded on April 1, 2022 and an additional US$10,000,000 was funded on May 5, 2022 (the “Loans”). The Loans mature on March 31, 2025, with 10% per annum interest payable monthly in arrears in USD. In addition to the interest payments, the Note requires certain income-based payments, including tax incentives, be made from the borrower to the lender based on income resulting from the EV dealership projects over their 20-year term. The Loan may not be prepaid unless authorized by the lender. The Loans contain representations, warranties and covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst other implications. Subsequent to March 31, 2022, the Company, Carbon and Fiera executed an agreement specifying the security held by Carbon.

Subsequent to quarter end, on May 5, 2022, the Company, Carbon and Fiera Private Debt Fund VI LP (“Fiera”) executed a Subordination and Postponement Agreement (the “Subordination Agreement”), whereby the parties agreed that the security previously held by Fiera would be subordinate to the security to be granted to Carbon commencing on the date of the agreement. The security granted to Carbon means the EV Dealership Projects and to the extent related to the EV Dealership projects, all accounts receivable, equipment and machinery, contracts and contract rights, including contracts with auto dealerships, inventory, cash and proceeds, rent and profits for each of the preceding. Execution of the Subordination Agreement was required for the additional funding under the Note to be released. A total of US$15,000,000 was funded subsequent to March 31, 2022.

Since the beginning of 2020, governments around the world have been forced to enact emergency measures in response to the World Health Organization’s declaration of the

COVID-19

pandemic. Businesses around the world have suffered material disruption resulting in economic slowdown and uncertainty and significant volatility in the financial markets. To date, the impacts to the Company’s operations and financial matters associated with

COVID-19

have included (i) a slow-down in technical services due to the

in-person

nature of these activities and the restrictions placed such as lock-downs and social distancing by governments around the world with many of the most restrictive measures in the most recent quarter being in our core geographic markets, (ii) a delay in the collection of receivables closely associated with business who were most widely impacted by shut-downs and restrictions, and (iii) a delay in certain projects. The long-term impact on the Company’s financial results and cash flows is unknown. While the Company has been negatively impacted by

COVID-19,

given the nature of the Company’s operations,

COVID-19

has increased customer demand and created new opportunities for mCloud to engage with new and existing customers using the remote connectivity offered by AssetCare

™

ANNUAL RESULTS FOR THE THREE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019

COVID Government Support

The Company received government assistance in both Canada the United States and Australia to help temper the financial impact of the crisis. During the three and twelve months ended December 31, 2021, government assistance of $0.472 million and $4.202 million, respectively, was recorded in Other Income on the consolidated Statements of Loss and Comprehensive Loss (three months and year ended December 31, 2020, $0.821 and $2.776 million, respectively).

Impact on Strategic Plan and Growth

The Company continues to assess the economic impacts of

COVID-19

pandemic on its future operations, including the liquidity forecast and valuation of the Company’s intangible and goodwill assets related to recent acquisitions. As at December 31, 2021, the Company’s senior management team has determined that the value of the Company’s assets is not materially impacted. In making this judgment, management has assessed various criteria including, but not limited to, existing laws, regulations, orders, disruptions, and potential disruptions in commodity prices and capital markets.

Overview

Critical Accounting Policies and Estimates

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The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

Determination of control of subsidiaries

Judgement is required to determine when the Company has control of subsidiaries. This requires an assessment of the relevant activities of the investee, being those activities that significantly affect the investee’s returns. Despite owning no shares, or having any voting rights, the Company determined that it exercises control over Agnity as the Company has 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. The Company has the right to receive royalty collectability from Agnity on a monthly basis in perpetuity and the Company has credit risk with respect to the collectibility of these royalty payments.

Assessment of indicators of impairment of goodwill, long-lived assets and intangible assets

Management reviews, goodwill, depreciable long-lived assets and intangible assets for impairment triggers to determine if any events or changes in circumstances exist that would indicate that the carrying amount of an asset may not be recoverable over time. If impairment indicators exist, impairment assessments are conducted as the asset level or level of cash generating units (“CGUs”) as appropriate.

Leases

right-of-use

asset to be recognized by the Company and future changes in this lease term will result in modifications. In addition, estimates and assumptions are required to determine the incremental borrowing rate used to measure lease liabilities on adoption and at inception of a lease.

Contingent consideration

Management uses judgement to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgement to assess the likelihood of the occurrence of one or more future events which impacts the fair value of the contingent consideration at the end for the Reporting Period.

Value of components for convertible debt and equity offerings

Management makes judgements related to the measurement of the fair value of the convertible debentures and equity offerings issued in the period, including the determination of the allocation of the proceeds between the components of the instrument. At inception of an instrument, the Company determines the value of each piece of the instrument and judgement is required in determining the inputs used in the fair value calculations and in determining the probability of certain outcomes.

Determination of stand-alone selling price

The total transaction price of certain revenue contacts is allocated to each performance obligation on a relative stand-alone selling price (“SSP”) basis, representing the selling price as if it was sold separately. This is a formal process involving judgement which could impact the timing of recognized revenue. In most cases, the SSP is based on observable data. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for perpetual software licenses is highly variable and therefore the Company applies the residual approach.

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Expected credit loss allowance and provision

The Company recognizes an amount equal to the lifetime expected credit loss (“ECL”) on trade and long term receivables, other receivables, unbilled revenue and amounts due from related parties for which there has been a significant increase in credit risk since initial recognition. Loss allowances are measured based on historical experience and forecasted economic conditions. The amount of ECL is sensitive to changes in circumstances of forecast economic conditions.

Impairment of goodwill and other

non-financial

assets

Goodwill is reviewed annually on December 31 of each financial year, or more frequently if changes in circumstances indicate that the carrying value may be impaired. The Company completed its annual impairment testing as at December 31, 2021 and determined there was no impairment. Determining whether an impairment has occurred requires the valuation of the respective assets or CGUs, which the Company estimate the recoverable amount using a discounted cash flow method. The key estimates and assumptions used are revenue growth, gross margin, and discount rate. These estimates are based on past experience and management’s expectations of future changes in the market and forecasted growth initiatives.

Share-based payments

The Company uses the Black-Scholes option -pricing model to determine the fair value of stock options and other equity instruments where the goods and services cannot be valued. In estimating the fair value, management is required to make certain assumptions and estimates such as the expected life of options, volatility of the Company’s future share price, risk-free rate, future dividend yields and estimated forfeitures at the initial grant measurement date. Changes in assumptions used to estimate fair value could result in different outcomes.

Business combinations—purchase price allocation

The consideration transferred and acquired assets and assumed liabilities are recognized at fair value on the date the Company effectively obtains control. The measurement of each business combination is based on the information available on the acquisition date. The estimate of fair value of the consideration transferred and acquired intangible assets (including goodwill), property and equipment, other assets and the liabilities assumed are based on estimates and assumptions. The measurement is largely based on projected cash flows, discount rates and market conditions at the date of acquisition. See “Fair Market Value” in this MD&A for further discussion.

Taxation

Calculations for current and deferred taxes require management’s interpretation of tax regulations and legislation in the various tax jurisdictions in which the Company operates, which are subject to change. The measurement of deferred tax assets and liabilities requires estimates of the timing of the reversal of temporary differences identified and management’s assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire, which involves estimating future taxable income.

The Company is subject to assessments by various taxation authorities in the tax jurisdictions in which it operates, and these taxation authorities may interpret the tax legislation and regulations differently. In addition, the calculation of income taxes involves many complex factors. As such, income taxes are subject to measurement uncertainty and actual amounts of taxes may vary from the estimates made by management.

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CONTROLS AND PROCEDURES

Prior to 2022, the Company was not required to establish and maintain DC&P and ICFR pursuant to National Instrument (“NI”)

52-107.

The Company is listed on the

TSX-V

and on November 24, 2021 also listed and commenced trading its shares on NASDAQ. As a result of the NASDAQ listing, the Company is no longer a venture issuer. Accordingly, commencing in 2022, mCloud is required to establish and maintain DC&P and ICFR.

In light of these new requirements for 2022, the following discussion provides preliminary commentary about the Company’s D&CP and ICFR.

Disclosures Controls and Procedures

The Company’s disclosure controls and procedures (“DC&P”), as defined in National Instrument

52-109

Certification of Disclosure in Issuer’s Annual Filings (“NI

52-109”)

are designed to provide reasonable assurance that information required to be disclosed in our filings under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also designed to provide reasonable assurance that all information required to be disclosed in these filings is accounted for, accumulated and communicated to the Company’s senior management team including the CEO and Chief Financial Officer (“CFO”) as appropriate. This is meant to allow for timely decisions regarding public disclosure.

The Company cannot provide absolute assurance that all information required to be disclosed in its filings is reported within the time periods specified in securities legislation because of the limitations in control systems to prevent or detect all misstatements due to error or fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.

Internal Controls over Financial Reporting

The Company’s senior management team is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICFR”), as defined in NI

52-109.

ICFR means a process designed by or under the supervision of the CEO and CFO, and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Commencing the first quarter of 2022, the Company will be required to report any material weaknesses in the design of ICFR. Any such material weaknesses would also impact DC&P. Although we have not completed a full evaluation as of this date, we are aware of material weaknesses.

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Management has identified the following material weaknesses:

•

An ineffective control environment resulting from an insufficient number of trained financial reporting and accounting, information technology (IT) and operational personnel with the appropriate skills and knowledge and with assigned responsibility and accountability related to the design, implementation and operating effectiveness of internal control over financial reporting.

•

The insufficient number of personnel described above contributed to an ineffective risk assessment process necessary to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting.

•

An ineffective information and communication process resulting from (i) insufficient communication of internal control information, including objectives and responsibilities, such as delegation of authority; and (ii) ineffective general IT controls and ineffective controls related to spreadsheets, resulting in insufficient controls to ensure the relevance, timeliness and quality of information used in control activities.

•

As a consequence of the above and as a result of inadequate segregation of duties and secondary review, the Company had ineffective control activities related to the design, implementation and operating effectiveness of process level and financial reporting controls which had a pervasive impact on the 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.

These material weaknesses resulted in material misstatements, which were corrected prior to the release of the consolidated financial statements as of and for the year ended December 31, 2021, and also in immaterial misstatements, some of which were corrected prior to the release of the consolidated financial statements as of and for the year ended December 31, 2021. These material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.

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Remediation

The Company is still considering the full extent of the procedures to implement in order to remediate the material weaknesses described above, however the current remediation plan includes:

•

Identifying key positions necessary to support the 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.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

A description of the Company’s financial instruments and the financial risks that the Company is exposed to and management of these risks can be found in Notes 26 and 27, respectively, of the Company’s 2021 Financial Statements.

Fair Values

The carrying values of cash and cash equivalents, trades and other receivables, bank indebtedness, trade payables and accrued liabilities, other liabilities, business acquisition payable, and due to related parties approximate their fair values due to the immediate or short-term nature of these instruments. The fair values of long-term receivables, loans and borrowings, and convertible debentures approximate their carrying values as they were either recently issued by the Company or fair valued as part of the acquisition purchase price allocations or their interest rate approximates market rate. There has been no significant change in credit and market interest rates since the date of their issuance. The derivative asset is carried at fair value and revalued at each reporting date.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Risk Management

The Company’s board of directors has overall responsibility for determining the Company’s capital and risk management objectives and policies, while retaining ultimate responsibility for ensuring the successful execution of such objectives and policies. The Company’s overall capital and risk management program has not changed throughout the year. This program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the Company’s finance department under policies approved by the Company’s board of directors. The finance department identifies and evaluates financial risks in close cooperation with the Company’s senior management team.

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Credit Risk

Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial contract. Credit risk is limited to the following instruments and the Company’s maximum exposure to credit risk is the carrying value of the financial assets.

The Company is mainly exposed to credit risk from credit sales. Management of the Company monitors the creditworthiness of its customers by performing background checks on all new customers. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances. The Company considers that there has been a significant increase in credit risk when contractual payments are more than 90 days past due.

Market risk

This is the risk that changes in market prices such as interest rates or foreign exchange rates will affect the Company’s results or value as a result of holding these financial instruments. The object of market risk management is to manage and control market risk exposures within acceptable parameters given the nature of the business.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its credit facility. Management does not believe interest rate risk is currently material to its business.

Foreign Currency Risk

Currency risk is the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because of changes in foreign currency rates and the degree of volatility of these rates. The Company conducts its business in Canada, Asia-Pacific, the United States and Europe, the Middle East and Africa, which gives rise to exposure to markets from changes in foreign currency rates. Currently, the Company does not use derivative instruments or other measures to reduce its exposure to foreign currency risk.

At December 31, 2021, the C$ equivalent carrying amount of the Company’s US$ denominated monetary assets and liabilities was C$14.554 million (December 31, 2020 - C$8.291 million) and C$11.685 million (December 31, 2020 - C$16.399 million), respectively. Assuming all other variables remain constant, a fluctuation of +/- 5.0% in the exchange rate between C$ and US$ would impact the net loss for the period by approximately C$0.143 million (December 31, 2020 - C$0.405 million).

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SELECTED ANNUAL FINANCIAL INFORMATION

The information in the tables below is derived from the Company’s audited consolidated financial statements for each of the three most recently completed financial years. These have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and are presented in Canadian dollars which is the functional and presentation currency of the Company. All figures reported in the MD&A are reported in millions, except for per share, stock option, common share, percentages and unit amounts. The information below is not necessarily indicative of results for any future financial year.


Years ended December 31	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		3.73	$	5.07	$	2.43
Total assets		72.106	$	77.319	$	59.859
Total non-current financial liabilities		1.513	$	33.443	$	32.146

Review of Annual Financial Results

The table below provides key financial performance metrics of the Company for the years ended December 31, 2021, December 31, 2020 and December 31, 2019. This information should be read in conjunction with the Annual 2021 and 2020 Financial Statements.

Years ended December 31,


	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	%

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Revenue

In the following tables, revenue is disaggregated by nature and timing of revenue recognition. See Segment Reporting Information in Note 4 to the Annual 2021 and 2020 Financial Statements for further information on revenue by location.

Years ended December 31,


Major Service Line	2021		2020		2019		2021 vs 2020 Chabrnge $			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 Over Time		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	%

The material factors driving the Company’s 83% increase in AssetCare Over Time revenues from 2020 to 2021 are the increase in subscription and post-contract support and maintenance revenues related to AssetCare solutions that were initialized in 2019 and 2020 and new customer contracts to provide engineering services involving the use of AssetCare. These solutions contributed to AssetCare Over Time revenues as the Company provided ongoing service in 2021.

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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	%

Revenues for the year ended December 31, 2021 were $25.597 million, compared to $26.928 million for the same period in 2020, a decrease of $1.331 million, or 5%, primarily due to $6.439 million lower AssetCare Initialization and $5.545 million lower engineering services, partially offset by $10.653 million higher sales from AssetCare Over Time. Restrictions associated with COVID-19 prevented the delivery of the planned AssetCare Initialization at commercial sites and a reduction in Engineering Services. In particular, restrictions in the province of Alberta where the Company has significant business precluded in-person access to sites where assets were expected to be connected, and reduced operations at some commercial sites meant AssetCare benefits were not fully realized while restrictions were in place.

For the year ended December 31, 2020, revenues increased by $8.588 million, to $26.928 million from $18.340 million for the same period in 2019. The increase was due to an increase of $9.869 million in AssetCare Over Time, and higher AssetCare Initialization of $1.724 million due to an increase of customers onboarded during 2020, partially offset by lower Engineering Services of $3.005 million attributable to

COVID-19

delays performing

in-person

engineering services.

The Company operates in one operating segment. For the purpose of segment reporting, the Company’s Chief Executive Officer (“CEO”) is the Chief Operating Decision Maker. The determination of the Company’s operating segment is based on its organizational structure and how the information is reported to the CEO on a regular basis. The Company’s revenue is generated from its customers in Canada, the United States of America, Asia-Pacific, Europe, and the Middle East and Africa. The Company’s assets primarily reside in North America and Australia. See

“Risk Factors”

in the Company’s Annual Information Form for further discussion on the risks and uncertainties that the Company believes may materially affect the Company’s future performance, including total revenue.

The Company’s revenue by location of the ultimate customer or consumer of product solution are as follows:


	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

The change in revenues in Canada was due to the impacts of the COVID-19 pandemic. Restrictions associated with COVID-19 prevented the delivery of the planned AssetCare Initialization at commercial sites and a reduction in the associated Engineering Services required to prepare commercial sites for the delivery of services in Canada. In particular, restrictions in the province of Alberta where the Company has significant business precluded in-person access to sites where assets were expected to be connected, and reduced operations at some commercial sites meant AssetCare benefits were not fully realized while restrictions were in place. We do not believe that the changes in year over year revenue in the other countries had significant impact other than the timing associated with certain contracts.

Modest changes in revenue in countries outside of Canada were driven largely by timing of certain renewals and new contracts signed with customers located in Japan during 2020.

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The table below presents significant customers who accounted for greater than 10% of total revenues for the years ended December 31, 2021, 2020 and 2019:


	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

Cost of Sales, Gross Profit, Gross Margin %

Years ended December 31,


	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	%

Cost of sales for the year ended December 31, 2021 were $9.684 million, a decrease of 6% from the same period in 2020 of $10.282 million, in line with the overall decrease in revenue of 5%. Gross margin % was relatively flat year over year.

Cost of sales for the year ended December 31, 2020 increased to $10.282 million from $7.583 million for the year ended December 31, 2019. Gross profit for the year ended December 31, 2020 increased to

$16.647 million from $10.757 million for the year ended December 31, 2019 due to a change in revenue types and significantly higher revenues.

Expenses

Years ended December 31,


Expenses	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	%

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Total expenses for the year ended December 31, 2021 increased by 18% or $8.305 million compared with the same period in 2020. For the year ended December 31, 2020, total expenses increased 71% or $19.222 million, compared to the same period in 2019. The most significant changes for the periods presented are as follows:

•

General and administration expenses, which typically consist of public company fees, bad debt expense, rent expense, and recruitment costs, increased by 49% or $2.797 million in 2021 compared to 2020, primarily due to an increase in the loss allowance of $1.162 million related to uncollectible receivables, and $1.000 million associated with the 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.

Expenses

Years ended December 31,


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	%

•

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.

•

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Other Expenses (Income)

Years ended December 31,


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	%

Other expenses (income) increased by $1.500 million during the year ended December 31, 2021, compared to the same period in 2020. For the year ended December 31, 2020, Other expenses (income) decreased $7.914 million, compared to the same period in 2019. The primary driver for these changes are as follows:

•

Finance costs increased by $2.585 million during the year ended December 31, 2021, compared to the same period in 2020, due to increased interest and transaction costs associated with the 2021 Convertible Debentures, which were converted in Q3 2021, along with interest and fees on new borrowings, partially offset by lower interest on repaid borrowings. Finance costs increased by $2.816 million for the year ended December 31, 2020, compared with the same period in 2019, due to higher interest expense on the 2019 Convertible Debentures, with the funds used for business acquisitions.

•

Foreign exchange was a gain of $0.267 million for the year ended December 31, 2021, compared to a loss of $1.198 million for the same period in 2020, due to an increase in US denominated financings in 2021. For the year ended December 31, 2020, the foreign exchange loss increased by $0.704 million to $1.198 million from $0.494 million for the same period in 2019, as a result of the timing of cash receipts and payments.

•

During the year ended December 31, 2021, the Company determined that the amount of the contingent consideration recognized at the date of acquisition of CSA would not be payable as the operational performance metrics were not achieved. In addition, the fair value of the contingent consideration recognized at the date of acquisition for kanepi remeasured based on 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.

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•

Other Income increased by $4.194 million for the year ended December 31, 2021, to $7.126 million from $2.932 million for the same period in 2020. The majority of Other Income includes wage and rent subsidies received from the Canadian government and

low-interest

loans from the US government, which were partially forgiven in 2021 and 2020. Also during the year ended December 31, 2021, contingent consideration associated with the acquisition of CSA and kanepi was determined not to be payable and as such, $1.010 million was recognized in Other Income. For the year ended December 31, 2020, Other Income increase by $2.764 million compared to the same period in 2019, primarily due to wage subsidies and benefits from

low-interest

loans received from US and Canadian government

COVID-19

relief programs.

Current and Deferred Income Taxes

Years ended December 31,


Expenses	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	)%

For the year ended December 31, 2021, current tax expense was $0.157 million compared to a current tax recovery of $0.296 million, compared to the same period in 2020. The increase in current tax expense of $0.453 million was due to taxes owing attributable to taxable income in the US operations. For the year ended December 31, 2020, current taxes decreased by $0.478 million from a current tax expense of $0.182 million for the same period in 2019, attributable to the carry back of 2020 tax losses for refunds of past taxes paid.

For the year ended December 31, 2021, the Company recorded a deferred tax recovery of $1.822 million compared with a deferred tax recovery of $0.668 million, for the same period in 2020. The increase in the deferred tax recovery was primarily due to foreign tax rate and other foreign tax differences. For the year ended December 31, 2020, the deferred tax recovery decreased by $2.024 million, to $2.692 million for the same period in 2019. The decrease was due to the recognition of deferred tax assets, recognized through profit and loss to offset deferred tax liabilities recognized in equity on the issuance of convertible debentures.

The Company has net operating losses of approximately USD$60.9 million and

non-capital

losses of C$70.2 million (December 31, 2020 – USD$44.1 million and C$49.6 million) which are available to reduce future year’s taxable income in the United States and Canada, respectively. The net operating losses will commence to expire in 2029 while the

non-capital

losses will commence to expire in 2027 if not utilized.

The Company has foreign tax losses in various jurisdictions of C$2.3 million (December 31, 2020—C$1.2 million) which are available to reduce future year’s taxable income in their respective countries. The losses vary in expiry from five years to indefinite life.

The investment tax credit balance is C$0.5 million (December 31, 2020 – C$0.5 million) which is available to reduce future year’s taxes payable in Canada. The investment tax credits begin to expire in 2022 if not utilized.

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REVIEW OF QUARTER FINANCIAL RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020

Revenue

In the following tables, revenue is disaggregated by nature and timing of revenue recognition.

Three months ended December 31,


Major Service Line	2021		2020		Change $			Change %
AssetCare Initialization	$	0.173	$	2.672	$	(2.499	)		(94	)%
AssetCare Over Time		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	)%

For the three months ended December 31, 2021, total revenue was $4.170 million, a decrease of $5.053 million, compared to $9.223 million for the same period in 2020. This decrease is attributable the resurgence of the “Omicron”

COVID-19

variant and the return of stricter

COVID-19

restrictions, which led to a decrease of $2.499 million and $1.660 million, respectively, in revenues generated from the AssetCare Initialization and AssetCare Over Time categories, combined with a decrease of $0.894 million in revenues generated from Engineering Services. These revenue streams are dependent on performing

in-person

services and have been impacted by the

COVID-19

restrictions.

Cost of Sales, Gross Profit, Gross Margin %

Three months ended December 31,


	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	%

Cost of sales for the three months ended December 31, 2021 were $1.507 million, a decrease of 58% from $3.579 million for the same period in 2020, primarily due to a decrease of

in-person

services related to tighter

COVID-19

restrictions in the last quarter of the year. For the three months ended December 31, 2021, gross profit decreased by $2.981 million to $2.664 million from $5.644 million for the same period in 2020, primarily due to a decrease in revenues of $5.053 million, partially offset by a decrease in cost of sales by $2.072 for the reasons noted above.

Expenses

Three months ended December 31,


Expenses	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	%

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Total expenses for the three months ended December 31, 2021 increased by 45% or $5.105 million compared with the same period in 2020. The most significant changes between 2021 and 2020 are as follows:

•

General and administration expenses increased by 118% or $2.263 million primarily as the result of costs associated with the 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.

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Other Expenses (Income)

Three months ended December 31,


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	)%

Total other expenses (income) decreased by $4.830 million in the three months ended December 31, 2021. The primary drivers are as follows:

•

Finance costs increased by $1.030 million for the three months ended December 31, 2021, due to higher interest and fees on new borrowings.

•

Foreign exchange changed from a loss of $1.583 million for the comparative period in 2020 to a gain of $0.041 million in Q4 2021. These movements were the result of the timing of cash receipts and payments, combined with the USD public offering that closed in the last quarter of 2021.

•

Fair value changes in derivatives constituted a gain of $3.075 million for the three months ended December 31, 2021. These

non-cash

changes relate to the fair value adjustment for the warrants and was partially offset by the remeasurement of warrant liabilities, issued in November 2021, being revalued at December 31, 2021.

•

Other Income increased by $0.683 million for the three months ended December 31, 2021. The majority of Other Income includes wage and rent subsidies received from the Canadian government and

low-interest

loans from the US government which have been partially forgiven in the periods.

Current and Deferred Income Taxes

Three months ended December 31,


Expenses	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 three months ended December 31, 2021, the Company recorded a current tax recovery of $0.704 million, an increase of $0.307 million, compared to $0.397 million for the same period in 2020.

Deferred tax recovery was $0.854 million for the three months ended December 31, 2020, a decrease of $1.535 million from a deferred tax expense $0.682 million, for the same period in 2019.

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SUMMARY OF QUARTERLY RESULTS

The Company’s selected financial information for the eight completed fiscal quarters ending December 31, 2021 is shown in the table below. Accounting policies under IFRS were consistently applied across all periods. Unless indicated otherwise, and converted amounts in this section are expressed in Canadian dollars as set out in “Currency and Exchange Rates.”


For the quarter ended:	Q4 2021		Q3 2021 (1)		Q2 2021 (1)		Q1 2021 (1)		Q4 2020		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		9.662		15.466		8.930		10.271		9.725		9.417		9.707		8.021
Basic and diluted loss per share	$	0.70	$	1.22	$	0.88	$	1.12	$	1.07	$	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

(1) The results for each of the quarters ended March 31, June 30 and September 30, 2021 have been adjusted for an immaterial error correction which: impacted revenue, current and

non-current

long-term accounts receivables; deferred revenue, and correspondingly, impacted net loss and net loss attributable to mCloud shareholders and related loss per share attributable to mCloud shareholders - basic and diluted. During the quarters ended:

•

March 31, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders and loss per share attributable to mCloud shareholders - basic and diluted by $0.945 million ($0.10 per share);

•

June 30, 2021, decreased revenue and increased net loss, net loss attributable to mCloud shareholders and loss per share attributable to mCloud shareholders - basic and diluted by $0.652 million ($0.13 per share);

•

September 30, 2021, increased revenue and decreased net loss, net loss attributable to mCloud shareholders and loss per share attributable to mCloud shareholders - basic and diluted by $0.098 million ($0.01 per share).

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Total revenue was $4.171 million in Q4 2021, a decrease of $5.053 million, compared to $9.223 million in Q4 2020. This decrease is attributable to lower revenues as a result of

COVID-19

restrictions.

Net losses in Q4 2021 increased to $10.331 million compared to a net loss of $8.918 million in Q4 2020, resulting in a change of $1.413 million quarter over quarter, primarily attributable to a decrease of $5.053 million of revenue due to

COVID-19

restrictions and delays. These were partially offset by a change in other expenses (income) of $4.830 million primarily related to fair value gain on derivatives. Net losses in Q4 2021 decreased to $10.331 million compared to a net loss of $15.616 million in Q3 2021, primarily due to a

non-cash

derivative loss on the 2021 Convertible Debentures, partially offset by higher revenues in Q3 2021.

Basic and diluted net loss per share of $0.70/share in Q4 2021, was a decrease of $0.37/share, from $1.07/share in Q4 2020. This decrease was primarily attributable to the lower net loss as described above, combined with the increase in share count as a result of the conversion of the 2021 Convertible Debentures in Q3 2021. See

“Year in Review – Financing”

for further discussion on the 2021 Convertible Debentures and the Company’s listing and public offering on the NASDAQ.

CAPITAL RESOURCES

The Company’s objective and polices for managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages its capital structure and makes changes based on economic conditions including the impact of the ongoing pandemic, risks that impact the consolidated operations and future significant capital investment opportunities. In order to maintain or adjust its capital structure, the Company may issue new equity instruments or raise additional debt financing.

Analysis of Cash Flows

On December 31, 2021, the Company had $4.588 million in cash ($1.111 million as at December 31, 2020; $0.529 million as at December 31, 2019). All cash was held in bank accounts, primarily with Canadian and US banks.

The following table summarizes cash inflows and outflows for the periods shown.


Cash provided by (used in):	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	)

Cash flows used in operating activities increased to $28.330 million in 2021 compared with $24.856 million in 2020, primarily as a result of a higher net loss in 2021. This was partially offset by increased Other Income and more

non-cash

charges in 2021 compared with 2020. Cash flow from operations can vary significantly from period to period as a result of the Company’s working capital requirements which are dependent on operations and increased spending to grow the Company and expand its presence in the market. Cash flows used in operating activities for the year ended December 31, 2020 increased to $24.856 million, from $14.516 million for the same period in 2019, due to increased spending to expand the Company’s presence in markets.

Cash flows used in investing activities decreased in 2021 to $1.064 million compared with $6.395 million in 2020, as there were no acquisitions in 2021 compared to 2020, during which time kanepi was acquired along with assets from AirFusion. This was partially offset by higher spending in 2021 on the acquisition of property and equipment and the development of intangible assets compared with 2020. This spending was focused on furthering development of new AssetCare products. Cash used in investing activities was $6.395 million for the year ended December 31, 2020 as compared $20.732 million for the same period in 2019, a net decrease of $14.337 million, due to the acquisitions of CSA, AirFusion, kanepi and ongoing development of the Company’s technology. For the same period in 2019, the cash used in investing activities primarily related to the acquisition of MTS.

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Cash flows provided by financing activities increased to $32.927 million for the year ended December 31, 2021 compared with $31.857 million for the year ended December 31, 2020. The net increase was primarily attributable to the brokered public offering of $12.281 million, net of transaction costs, in conjunction with the Company’s NASDAQ listing, combined with an increase in net proceeds received from bank indebtedness, partially offset by net proceeds received, after transaction costs, for warrants issued in 2020. For the year ended December 31, 2020, the Company had net cash received of $31.857 million compared with net cash received of $34.465 million for the same period in 2019, a net decrease of $2.608 million. The decrease is primarily due to the issuance of the 2019 Convertible Debentures, partially offset by cash flows received from public offerings, debentures and special warrants during the year ended December 31, 2020.

Factoring and Security Agreement with Nations Interbanc

Under a factoring and security agreement with Nations Interbanc (“Nations”), Agnity Communications Inc. (“Agnity”), an entity controlled by the Company, receives advances up to a maximum of US$2 million from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing agreement and the accounts receivables factored still carry credit risk, are not sold, and are not derecognized from Agnity’s statement of financial position. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the first 30 days and a daily proration of 0.06% per day thereafter. The amount of funds advanced varies and is dependent on the cash requirements of Agnity.

The MasterCard Facility

The Company’s credit facility with MasterCard (the “MasterCard Facility”) with a total limit of $0.425 million provides cash security to MasterCard held on deposit for expenses outstanding on the Company issued credit cards. As at December 31, 2021, the MasterCard Facility was drawn to $0.297 million (December 31, 2020—$0.601 million).

Short-Form Base Shelf Prospectus

On April 28, 2020, the Company filed a final short form base shelf prospectus which allows the Company to offer, from time to time, over a

25-month

period, common shares, preferred shares of any series, senior or subordinated secured or unsecured debt securities, subscription receipts, warrants, and units comprised of one or more of the aforementioned securities, with an aggregate value of up to $200 million. Securities may be offered separately or together, in amounts, at prices, and on terms to be determined based on market conditions at the time of sale and set forth in an accompanying prospectus supplement. This final short form base shelf prospectus was updated and refiled with the British Columbia Securities Commission on November 18, 2021 and with the US Securities and Exchange Commission on Form

F-10/

A on November 19, 2021 in connection with the Company’s listing to the NASDAQ.

On November 26, 2021, a supplement was filed in connection with the November 18, 2021 prospectus through which the Company offered 2,100,000 units at a price of US$4.50 per unit. Each unit consisted of one common share in the capital of the Company and one transferable common share purchase warrant. Each warrant is exercisable to purchase one common share at a price of US$4.75 per share up to November 29, 2026, being five years after the closing date of November 29, 2021.

LIQUIDITY

The principal liquidity needs of the Company are for working capital requirements, debt servicing and repayment obligations, and costs associated with the growth of the business. The Company is exposed to liquidity risk which is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal course of business. The Company manages its liquidity risk by monitoring its operating requirements, reducing costs were possible given the status of the

COVID-19

pandemic, and applying for any available government funding to support its business. The Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to meet budgeted operating requirements. The Company assesses its liquidity on an ongoing basis based on current market factors and cannot make any statements regarding any known trends or fluctuations likely to affect the Company’s liquidity beyond standard market conditions. See Note 26 of the Financial Statements for further discussion on the Company’s liquidity risk.

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The Company’s ability to fund current and future operations is dependent on its ability to generate sources of cash through positive cash flows from operations combined with equity and/or debt financing as needed, including, but not limited to the ATB Facility.

Based on its current business plan and the impacts of

COVID-19,

the Company has identified near-term capital needs. The Company’s near-term cash requirements relate primarily to the repayment of the 2019 Convertible Debentures, operations, working capital and general corporate purposes. The Company updates its forecast regularly and considers additional financial resources as appropriate. Additionally, the shares in the capital of the Company became dually listed and began trading on the NASDAQ on November 24, 2021. See

“Year in Review – Financing”

for further discussion on the Company’s NASDAQ listing. The Company has created aggressive marketing and sales plans and increased headcount related to sales and business development, while balancing this with the

re-opening

from pandemic restrictions, which is expected to increase revenues and operating cash flows.

To date, the Company received wage subsidies totaling $5.817 million and rent subsidies of $1.120 from the Canadian Government. During the year ended December 31, 2021, wage and rental subsidies of $4.202 million were included in Other Income in the 2021 Financial Statements. To date, the Company received

low-interest

government loans totaling $1.961 million under the Paycheck Protection Program (the “PPP”) with the US Government, which ceased on May 31, 2021, to help alleviate the negative economic impacts on

COVID-19

to its business. During the year ended December 31, 2021, other income of $1.825 million was recognized associated with these loans as they represent government grants.

The outbreak of the

COVID-19

pandemic and the measures adopted by governments in countries worldwide to mitigate the pandemic’s spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the

in-person

nature of these activities and delay the start of certain projects for a duration of the year. This negatively impacted the Company’s financial performance and liquidity position.

During the year ended December 31, 2021, the Company generated a net loss of $44.699 million and negative cash flows from operating activities of $28.330 million. At December 31, 2021, the Company had a working capital deficiency of $42.108 million. Working capital deficiency is a

non-IFRS

measure which is calculated as current assets less current liabilities.

Current liquidity levels and available sources of capital are not adequate to fund the working capital deficiency. The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of $23.458 million if not converted on or before May 31, 2022; loans and borrowings of $11.764 million including principal and interest payments; payment of trade and other payables of $12.421 million and payments associated with leases of approximately $1 million.

While restrictions started to ease in the three months ended December 31, 2021, there is still uncertainly over how

COVID-19

will impact the Company’s business and the timing of future revenues. Based on the Company’s liquidity position at the date of authorization of these consolidated financial statements and considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet is financial obligations. The Company is currently working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with expand its operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of December 31, 2021 and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing further financings in the future or obtaining waivers of the covenant breaches.

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As a result, these factors are indicators that material uncertainties exist that raises significant doubt about the Company’s ability to continue as a going concern and, therefore, its ability to realize assets and discharge liabilities in the normal course of business.

COVID-19

related restrictions. Future debt and equity raises have been considered in determining that the going concern assumption remains appropriate.

Contractual Obligations and Commitments

Below is a summary of the Company’s contractual obligations and commitments as at December 31, 2021.


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 5		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

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1	No contractual maturity, due on demand. Excludes interest charged on facility.

Includes term loan with a carrying value of $9.276 classified as current due to covenant breach. Assuming term loan is repaid in accordance with agreement to maturity, the undiscounted contractual cash flows for loans and borrowings would be $2.934 million, $5.472 million, and $4.144 million, respectively for the periods presented above.

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.

In October 2021, the Company executed a

12-year

lease for office space in Calgary, Alberta. Base rent and estimated common expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. The Company will receive a tenant improvement allowance which is expected to cover the majority of the costs.

REVIEW OF QUARTER FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2022, 2021

The Company’s selected financial information for the last eight completed fiscal quarters is shown in the table below. Accounting policies under IFRS were consistently applied across all periods.


For the quarter ended:	Q1 2022		Q4 2021		Q3 2021 (1)		Q2 2021 (1)		Q1 2021 (1)		Q4 2020		Q3 2020		Q2 2020
Total Revenue		4.430		4.171		7.434		6.556		7.436		9.223		6.137		5.010
Net loss		11.023		10.331		15.616		9.000		9.752		8.918		8.713		9.353
Net Loss - mCloud shareholders		9.778		9.662		15.466		8.930		10.271		9.725		9.417		9.707
Basic and diluted loss per share	$	0.61	$	0.70	$	1.22	$	0.88	$	1.12	$	1.07	$	1.15	$	1.53

Total assets		73.091		72.106		73.818		79.868		75.803		77.319		68.113		64.349

Total non- current financial liabilities		7.532		1.513		12.978		24.565		43.440		33.443		33.319		37.223

(1)

The results for each of the quarters ended March 31, June 30 and September 30, 2021 have been adjusted for an immaterial error correction which impacted revenue, current and

non-current

•

Total revenue was $4.430 million in Q1 2022, compared to $7.436 million in Q1 2021, a decrease of $3.006 million, due to challenges remaining from

COVID-19

restrictions effecting the Company carrying out work. During Q1 2022, the Company executed on marketing strategies and expects to see a gradual return to

pre-pandemic

levels. Net losses in Q1 2022 increased to $11.023 million compared to a net loss of $9.752 million in Q1 2021, resulting in a change of $1.272 million, primarily attributable to a fair value gain on derivatives of $4.057 million, partially offset by decrease of $1.512 million of other income, attributable to the wind down of government

COVID-19

programs and grants. In addition, as the Company ramped up to resume to normal activity levels increased expenses of $3.305 million quarter over quarter with higher costs related to professional fees and general and administrative costs, due to an increased number of consultants performing tasks formerly done by employees in Q1 2021. Net losses in Q1 2022 increased to $11.023 million compared to a net loss of $10.331 million in Q4 2021, primarily due to the decrease in the fair value gain on derivatives and other income. Basic and diluted net loss per share of $0.61/share in Q1 2022, was an increase of $0.51/share, from $1.12/share in Q1 2021 due to higher net loss as described above, combined with a change in the number of shares.

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The table below provides key financial performance metrics of the Company for Q1 2022, compared with Q1 2021. This information should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2021.

Three months ended March 31


	2022			2021			Change $			Change %
Revenue Cost of Sales	$	4.430 (1.932	)	$	7.436 (3.259	)	$	(3.006 1.327	)		(40 (41	)% )%

Gross Profit	$	2.497		$	4.177		$	(1.680	)		(40	)%

Expenses
Salaries, wages and benefits	$	5.314		$	4.870		$	0.444			9	%
Sales and marketing		0.762			0.185			0.577			312	%
Research and development		0.532			0.749			(0.217	)		(29	)%
General and administrative		2.552			1.337			1.215			91	%
Professional and consulting fees		3.176			1.739			1.437			83	%
Share-based compensation		0.253			0.375			(0.122	)		(33	)%
Depreciation and amortization		1.943			1.971			(0.028	)		(1	)%

Total expenses	$	14.533		$	11.227		$	3.306			29	%

Operating loss	$	12.035		$	7.050		$	4.985			71	%

Other Expenses (income)
Finance costs	$	1.859		$	2.236		$	(0.377	)		(17	)%
Foreign exchange loss		0.623			0.367			0.256			70	%
Business acquisition costs and other expenses		—			0.324			(0.324	)		(100	)%
Fair value (gain) loss on derivatives		(2.493	)		1.564			(4.057	)		(259	)%
Other income		(0.398	)		(1.910	)		1.512			(79	)%

Loss before tax	$	11.625		$	9.632		$	1.993			21	%

Current tax expense	$	0.289		$	0.239		$	0.050			21	%
Deferred tax recovery		(0.891	)		(0.119	)		(0.772	)		647	%

Net loss for the period	$	11.023		$	9.752		$	1.271			13	%

Revenue

In the following tables, revenue is disaggregated by nature and timing of revenue recognition.

Three months ended March 31,


Major Service Line	2022		2021		Change $			Change %
AssetCare initialization	$	0.415	$	0.515	$	(0.100	)		(20	)%
AssetCare over time		3.989		6.435		(2.446	)		(38	)%
Engineering services		0.026		0.486		(0.460	)		(95	)%

Total	$	4.430	$	7.436	$	(3.006	)		(40	)%

Regarding the 38% decline in AssetCare Over Time for the three months ended March 31, 2022, the Company experienced challenges in delivering AssetCare services and benefits to certain customers during that period. This stemmed from restricted access to certain customer sites related to the

COVID-19

pandemic, which prevented the Company from providing ongoing service and drove lower-than-usual end-customer use of AssetCare solutions. These impacts were uniquely limited to this time period as these certain customers did not have similar restrictions in place during previous periods that affected the Company’s ability to deliver AssetCare.

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Timing of revenue recognition	2022		2021		Change $			Change %
Revenue recognized over time	$	3.862	$	5.449	$	(1.587	)		(29	)%
Revenue recognized at point in time upon completion	$	0.568		1.987		(1.419	)		(71	)%

Total	$	4.430	$	7.436	$	(3.006	)		(40	)%

For the three months ended March 31, 2022, total revenue was $4.430 million, a decrease of $3.006 million, compared to $7.436 million for the same period in 2021, primarily due to lingering challenges with the Company’s ability to carry out substantive areas of work until

mid-March

2022, largely driven by

COVID-19

restrictions. By the end of Q1 2022, the Company began to see patterns emerging that point to a gradual return to

pre-pandemic

levels. This has also been reflected in the Company’s ability to execute on key marketing strategies in many of its geographic regions, as collaborated by the increased sales marketing expenditures in Q1 2022 as discussed below.

Cost of Sales, Gross Profit, Gross Margin %

Three months ended March 31,


	2022			2021			Change $			Change %
Cost of Sales	$	1.932		$	3.259		$	(1.326	)		(41	)%
Gross Profit		2.497			4.177			(1.680	)		(40	)%

Gross margin %		56.4	%		56.2	%					—	%

Cost of sales for the three months ended March 31, 2022 were $1.932 million, a decrease of 41% from $3.259 million for the same period in 2021. This decrease is primarily attributable to effects on projects’ connectivity and installation of assets up until

mid-March

2022 when

COVID-19

restrictions were fully lifted, partially offset by costs incurred on the “IAQ” project. For the three months ended March 31, 2022, gross profit decreased by $1.680 million to $2.497 million from $4.177 million for the same period in 2021, primarily due to a decrease in revenues of $3.006 million, partially offset by a decrease in cost of sales by $1.326 million for the reasons noted above.

Expenses

Three months ended March 31,


Expenses	2022		2021		Change $			Change %
Salaries, wages and benefits	$	5.314	$	4.870	$	0.444			9	%
Sales and marketing		0.762		0.185		0.577			312	%
Research and development		0.532		0.749		(0.217	)		(29	)%
General and administration		2.552		1.337		1.215			91	%
Professional and consulting fees		3.176		1.739		1.437			83	%
Share-based compensation		0.253		0.375		(0.122	)		(33	)%
Depreciation and amortization		1.943		1.971		(0.028	)		(1	)%

Total	$	14.533	$	11.227	$	3.306			29	%

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Total expenses for the three months ended March 31, 2022 increased by 29% or $3.306 million compared with the same period in 2021. The most significant changes between 2022 and 2021 are as follows:

•

Professional and consulting expenses increased by 83% or $1.437 million, primarily related to increased costs for professional services in Q1 2022. Consultants also filled positions in Q2 2021 that were previously held by employees.

•

General and administration expenses increased by 91% or $1.215 million primarily due to increased insurance premiums following the Company’s NASDAQ listing in Q4 2021, combined with increased IT subscriptions as the Company ramps up to return its resources to

pre-COVID

19 levels.

•

Sales and marketing costs increased by 312% or $0.577 million, due to sponsorships with the

Mercedes-Benz

Formula E Limited racing team and increased marketing initiatives in Q1 2022.

•

Salaries, wages and benefits costs increased by 9% or $0.444 million, primarily attributable to increased headcount related to the Company’s post

COVID-19

expansion, ramping up for expected growth later in 2022.

•

Research and development expenses decreased by $0.217 million in Q1 2022 compared with the same period in 2021, as a means of conserving cash in Q1 2022. Research and development specifically relates to the ongoing development of AssetCare Mobile, “IAQ” Badge and 3D technologies.

•

Depreciation and amortization

non-cash

costs decreased by 1% or $0.028 million for Q1 2022, due to a decrease in new assets for property and equipment, combined with fully depreciated assets at or nearing the end of their useful life.

Other Expenses (Income)

Three months ended March 31,


Other expenses (income)	2022			2021			Change $			Change %
Finance costs	$	1.859		$	2.236		$	(0.377	)		(17	)%
Foreign exchange loss (gain)		0.623			0.367			0.256			70	%
Business acquisition costs and other expenses		—			0.324			(0.324	)		(100	)%
Fair value (gain) loss on derivatives		(2.493	)		1.564			(4.057	)		(259	)%
Other income		(0.398	)		(1.910	)		1.512			(79	)%

Total	$	(0.410	)	$	2.582		$	(2.990	)		(116	)%

Other expenses (income) decreased by $2.990 million during the three months ended March 31, 2022, compared to the same period in 2021.

•

Fair value changes in derivatives were a gain of $2.493 million for the three months ended March 31, 2022. These are

non-cash

gains as a result of the remeasurement of the warrant liabilities at March 31, 2022. The warrant liabilities include the warrants issued on conversion of the 2021 Convertible Debenture and the warrant liabilities issued in November 2021.

•

Finance costs decreased by $0.377 million during the three months ended March 31, 2022, compared to the same period in 2021, primarily due to transaction costs on the issuance of convertible debentures expensed in Q1 2021.

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•

There were no business acquisition costs in either Q1 2022 or Q1 2021. Other expenses vary depending on activity.

•

Other Income decreased by $1.512 million for the three months ended March 31, 2022, to $0.398 million from $1.910 million for the same period in 2021. The majority of Other Income includes wage and rent subsidies for

COVID-19

programs received from the Canadian government and

low-interest

loans from the US government. The majority of these programs have now ended.

•

Foreign exchange was a loss of $0.623 million for the three months ended March 31, 2022, compared to a loss of $0.367 million for the same period in 2021, due to a stronger Canadian dollar.

CAPITAL RESOURCES

The Company assesses its capital resources on an ongoing basis based on current market factors, and has not identified any trends or fluctuations likely to affect the Company’s capital resources beyond standard market conditions.

Analysis of Cash Flows

As at March 31, 2022, the Company had $1.873 million in cash (December 31, 2021 - $4.588 million). All cash was held in bank accounts, primarily with Canadian and US banks. The following table summarizes cash inflows and outflows.

Three months ended March 31,


Cash provided by (used in):	2022			2021
Operating activities	$	(3.771	)	$	(4.930	)
Investing activities		(0.011	)		(0.461	)
Financing activities		1.090			4.608

Increase in cash, before effect of exchange rate fluctuation	$	(2.692	)	$	(0.783	)

Cash flows used in operating activities increased to $3.771 million in 2021 compared with $4.930 million in 2020, primarily as a result of a higher net loss in Q1 2022, offset by an increase in working capital in 2022 compared with 2021. Cash flow from operations can vary significantly from period to period as a result of the Company’s working capital requirements which are dependent on operations and increased spending to grow the Company and expand its presence in the market.

Cash flows used in investing activities decreased in Q1 2022 to $0.011 million compared with $0.461 million in Q1 2021, as a means of conserving cash with lower spending in the acquisition of property and equipment.

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Cash flows provided by financing activities decreased to $1.090 million for the three months ended March 31, 2022 compared with $4.608 million for the same period in 2021, primarily due to the issuance of convertible debentures in Q1 2021.

Financing Arrangements and Credit Facilities

Factoring and Security Agreement with Nations Interbanc

Under a factoring and security agreement with Nations Interbanc (“Nations”), Agnity receives advances up to a maximum of US$2 million from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing agreement and the accounts receivables factored still carry credit risk, are not sold, and are not derecognized from Agnity’s statement of financial position. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the first 30 days and a daily proration of 0.06% per day thereafter. The amount of funds advanced varies and is dependent on the cash requirements of Agnity.

ATB Financial Facility

The Company’s secured revolving operating facility (“ATB Facility”) with ATB Financial (“ATB”) is described in Note 13 to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, additional draws of $1.077 million were made. Subsequent to quarter end, $0.670 million was repaid in accordance with the agreement.

The ATB Facility is subject to certain reporting and financial covenants. The Company was in compliance with these covenants at March 31, 2022. At March 31, 2022, ATB had the ability to restrict further advances under the ATB Facility as a result of the Fiera covenant breach.

Fiera Loan

On May 5, 2022, the Company and Fiera executed an Accommodation Agreement (the “Accommodation Agreement”) and the parties agreed that a portion of the outstanding principal amount under the term loan would be paid in addition to a prepayment penalty and accommodation fee. The Company paid a total of $2.044 million on May 6, 2022. The parties also agreed that the remainder of the principal and interest due under the loan would be paid on or before October 31, 2022 (the “Repayment Date”). The term loan was amended to increase the interest rate charged from 6.85% to 9.5% effectively immediately and clarified that the Company is not required to maintain the financial covenants set out in the November 9, 2021 amending agreement. The Company may be required to repay the loan before the Repayment Date if the Company is in default or breach of the Accommodation Agreement. As part of the Accommodation Agreement, Fiera signed an agreement, whereby Fiera’s security is subordinate to the security granted to Carbon.

The MasterCard Facility

The Company’s credit facility with MasterCard (the “MasterCard Facility”) with a total limit of $0.750 million provides cash security to MasterCard held on deposit for expenses outstanding on the Company issued credit cards. As at March 31, 2022, the MasterCard Facility was drawn to $0.397 million (December 31, 2021 - $0.297 million).

LIQUIDITY

COVID-19

pandemic, and applying for any available government funding to support its business. The

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Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to meet budgeted operating requirements. The Company assesses its liquidity on an ongoing basis based on current market factors, and has not identified any trends or fluctuations likely to affect the Company’s liquidity beyond standard market conditions. See Note 26 of the 2021 Annual Financial Statements for further discussion on the Company’s liquidity risk.

The outbreak of the

COVID-19

in-person

nature of these activities and delayed the start of certain projects throughout 2021 and into 2022. This negatively impacted the Company’s financial performance and liquidity position. While restrictions continue to ease there have been increased cases of

COVID-19

and there is still uncertainty over how

COVID-19

will impact the Company’s business and the timing of future revenues.

During the three months ended March 31, 2022, the Company generated a net loss of $11.023 million and negative cash flows from operating activities of $3.771 million. At March 31, 2022, the Company had a working capital deficiency of $51.423 million. Working capital deficiency is a

non-IFRS

measure which is calculated as current assets less current liabilities. Current liquidity levels and available sources of capital are not adequate to fund the working capital deficiency.

The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of $24.044 million if not converted on or before June 30, 2022; loans and borrowings of $14.087 million including principal and interest payments; payment of trade and other payables of $17.080 million; and payments associated with leases of approximately $1.350 million.

Based on the Company’s liquidity position at the date of authorization of these condensed consolidated interim financial statements and considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet its financial obligations. The Company is currently working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of March 31, 2022, and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing further financings in the future or obtaining waivers of the covenant breaches.

•

the plans for the repayment of the 2019 Convertible Debentures;

•

the repayment of a portion of the term loan on May 6, 2022 and the agreement executed whereby the term loan will be repaid in full on or before October 31, 2022;

•

the likelihood that undrawn funds under the revolving operating facility will be available and will not be required to be repaid;

•

the required cash principal and interest payments on indebtedness;

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•

the likelihood of payments required under contingent consideration arrangements;

•

the available funding of US$15 million under a promissory note executed on March 28, 2022;

•

cash inflows from current operations, expected government assistance in the form of wage and rent subsidies, and expected increases in revenues and cash flows resulting from new revenue contracts expected over the next 12 months due to the anticipated reduction of

COVID-19

related restrictions; and

•

future debt and equity raises.

In the preparation of the condensed consolidated interim financial statements and the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized in the period in which the estimates are revised and in any future period.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

A description of the Company’s financial instruments and financial risks that the Company is exposed to and management of these risks can be found in Notes 25 and 26, respectively, of the Company’s 2021 Financial Statements. Except for those noted below, there were no significant changes to the Company’s exposures to those risks during Q1 2022.

Contractual Obligations

Information regarding the Company’s undiscounted contractual cash flows payable and the Company’s commitments at December 31, 2021 are disclosed in Note 26(a) and Note 30, respectively, to the 2021 Annual Financial Statements.

During the three months ended March 31, 2022, the most significant changes in contractual obligations were: (a) the addition of a new

12-year

lease obligation of $9.529 million for Calgary office space and variable lease payments associated with the Calgary office space of approximately $8.564 million; and (b) an additional $1.077 million drawn under the ATB Facility, a portion of which was repaid in April 2022. Contractual obligations at December 31, 2021, have been reduced by normal course payments made during the period to March 31, 2022 and have changed as trade payables and accrued liabilities continue to fluctuate.

Transactions Between Related Parties

The Company’s related parties include its subsidiaries, its

non-controlling

interest and key management personnel. The related party transactions are in the normal course of operations and have been valued at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Key Management Personnel Compensation

Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company defines key management personnel as key officers and executives of the Company and directors. For the three months ended March 31, 2022, the contractual and discretionary compensation awarded to key management personnel including director fees is as follows:


Three months ended March 31,	2022		2021		Change %
Salaries, fees and short-term benefits	$	0.399	$	0.374		7	%
Share-based compensation		0.121		0.057		112	%

	$	0.520	$	0.431		21	%

As at March 31, 2022, the Company had $0.174 million (December 31, 2021 - $0.234 million) due to an entity controlled by the principal owner of Agnity for the purchase of assets. The amount is unsecured,

non-interest

bearing and due on demand.

The Company engaged an entity partially owned by the principal owner of Agnity to perform consulting services in the amount of $1.239 million during the three months ended March 31, 2022, (three months ended March 31, 2021 - $0.589 million). As at March 31, 2022, the Company owed the entity $1.316 million (December 31, 2021 - $1.112 million).

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ACCOUNTING MATTERS

Basis of Presentation and Accounting Policies

The condensed consolidated interim financial statements include the accounts of mCloud, the ultimate parent company of the consolidated group, and its subsidiaries and are prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). Certain disclosures included in the Company’s annual financial statements prepared under IFRS as issued by the IASB have been condensed or omitted. Accordingly, the Company’s condensed consolidated interim financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2021.

The accounting policies applied in the preparation of the Q1 2022 Financial Statements are consistent with those applied and disclosed in Note 33 of the Company’s Annual Financial Statements.

Critical Accounting Estimates and Judgements

Management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

The Company applied critical judgements and estimates, including significant areas of estimation uncertainty in applying policies, as described in Note 3 of the 2021 Annual Financial Statements.

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Off-Balance

Sheet Arrangements

Various forms of security have been granted by the Company and certain of its subsidiaries in favour of arm’s length lenders. The security granted gives the lenders a comprehensive level of protection against a default by the borrower in the performance of its obligations including the repayment of the indebtedness and interest thereon.

CONTROLS AND PROCEDURES

Prior to 2022, the Company was not required to establish and maintain DC&P and ICFR pursuant to National Instrument (“NI”)

52-107.

The Company is listed on the

TSX-V

In light of these new requirements for 2022, the following discussion provides commentary about the Company’s D&CP and ICFR.

Disclosures Controls and Procedures

The Company’s disclosure controls and procedures (“DC&P”), as defined in National Instrument

52-109

Certification of Disclosure in Issuer’s Annual and Interim Filings (“NI

52-109”)

are designed to provide reasonable assurance that information required to be disclosed in the Company’s filings under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also designed to provide reasonable assurance that all information required to be disclosed in these filings is accounted for, accumulated and communicated to the Company’s senior management team including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate. This is meant to allow for timely decisions regarding public disclosure.

Internal Controls over Financial Reporting

The Company’s senior management team is responsible for establishing and maintaining adequate internal controls over financial reporting (“ICFR”), as defined in NI

52-109.

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Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

Management’s Evaluation of Disclosure Controls and Procedures and Internal Controls over Financial Reporting

The Company’s management, under the supervision and with the participation of its CEO and CFO, will conduct an evaluation of the effectiveness of the Company’s ICFR as of December 31, 2022, using the criteria set forth by the COSO 2013 Framework. Commencing the first quarter of 2022, the Company is required to report any material weaknesses in the design of ICFR. Any such material weaknesses would also impact DC&P. Although we have not completed a full evaluation as of March 31, 2022, we are aware of material weaknesses in the design of ICFR at March 31, 2022 as described below. Management have concluded that the Company’s ICFR were not designed effectively as of March 31, 2022.

•

An ineffective monitoring process resulting from the evaluation and communication of internal control deficiencies, including monitoring corrective actions, not being performed in a timely manner.

Remediation

During Q1 2022, the Company continued to consider the full extent of the procedures to implement in order to remediate the material weaknesses described above. As at the date of this MD&A, the current remediation plan includes:

•

Identifying key positions necessary to support the Company’s initiatives related to internal controls over financial reporting, and expanding its hiring efforts accordingly.

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•

Hiring consultants to assist with process improvements and control remediation efforts in targeted accounting, IT and operations processes.

•

Further simplify and streamline its spreadsheet models to reduce the risk of errors in mathematical formulas and improve the ability to verify the logic of spreadsheets.

•

Hiring a consultant to assist management with process improvements and control remediation for general IT controls.

•

Continuing to perform scoping exercises and planning for an ERP implementation to streamline the number of applications used for financial reporting activities.

Material Changes to the Control Environment

There have been no changes to the Company’s ICFR during the three months ended March 31, 2022 that have materially affected, or are likely to materially affect, the Company’s ICFR.

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The Company’s authorized capital includes an unlimited number of common shares. As at June 6, 2022, the following common shares, share purchase warrants, stock options, restricted share units and convertible debt conversion options were outstanding:


	Securities Outstanding
Shares issued and outstanding		16,155,654
Share purchase warrants (1)		8,665,406
Stock options		870,146
Restricted share units		251,265
2019 Convertible Debentures (2)		1,563,833
2021 Convertible Debentures (3)		15,750

Total		27,522,054

(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 $15.00 and mature June 30, 2022.

(3)	Debentures are convertible at the option of the holder and have a conversion price of $5.98 which has been converted to Canadian dollars at May 12, 2022. The Debentures have a remaining life to maturity of 1.6 years.

OUR BUSINESS

Name and Address

The Company is a publicly-traded technology solutions provider that combines the Internet of Things (“IoT”), the cloud, and AI to create new efficiencies for energy assets including heating, ventilation, and air conditioning (“HVAC”) units, wind turbines, and oil and gas controls. The Company’s head office is located at

550-510

Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8. The Company also has technology and operations centers in Edmonton, Alberta; San Francisco, California; Atlanta, Georgia; Houston, Texas; Perth, Australia; Singapore; Beijing, China; London, United Kingdom; and Trnava, Slovakia. The Company’s telephone number is (604)

669-

9973.

Incorporation

The Company (formerly UVI) was incorporated on December 21, 2010 pursuant to the

Business Corporations Act

(British Columbia) (“

BCBCA

”). The Company’s British Columbia incorporation number is BC0898477. The Articles do not contain a description of the Company’s objects and purposes.

On April 21, 2017, UVI entered into a merger agreement (“

Merger Agreement

”) with its wholly-owned subsidiary, UVI Subco, a corporation incorporated pursuant to the Delaware

General Corporation Law

(“

DGCL

”), and mCloud Corp., a corporation incorporated pursuant to the DGCL. Pursuant to the Merger Agreement, UVI acquired all of the issued and outstanding securities of mCloud Corp. by way of a reverse triangular merger of UVI Subco into mCloud Corp. (“

Merger

”). The amalgamated company, a new private company named “Universal mCloud USA Corp.”, continued as a wholly-owned subsidiary of the Company.

On October 13, 2017, the Company changed its name from “Universal Ventures Inc.” to “Universal mCloud Corp.”, and on October 18, 2017, the Company began trading on the TSXV as a Tier 2 Technology Issuer (as defined in TSXV Policy 2.1 –

Initial Listing Requirements

) under the new symbol “MCLD”. On May 18, 2018, the Company also began trading on the OTCQB under the symbol “MCLDF”. The Company subsequently changed its name in October of 2019 to “mCloud Technologies Corp.”. On December 13, 2019, the Company announced a change in the trading symbol of its Shares on the OTCQB from “MCLDF” to “MCLDD”. On November 24, 2021, the Shares began trading on the NASDAQ under the symbol “MCLD”.

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Directors

Under the Articles, a director or senior officer who holds a disclosable interest (as such term is defined in the BCBCA) in a contract or a transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only and if to the extent provided under the BCBCA.

A director with a disclosable interest in a contract or a transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution approving the contract or transaction, unless all directors have a disclosable interest in the contract or transaction, in which case any or all of those directors may vote on such a resolution.

A director with a disclosable interest in a contract or a transaction into which the Company has entered or proposes to enter and who is present at the meeting of the directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

A director or senior officer who holds any office or possesses any property, right, or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the BCBCA.

The Articles,

by-laws,

or charter documents of the Company do not specify a retirement age for directors. Directors are not required to hold a Share of the Company as qualification for his or her office but must be qualified as required by the BCBCA to become, act or continue to act as a director.

Shareholders’ Meetings

The Company’s Articles provide that (a) the Company must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors; (b) the directors may, at any time, call a meeting of shareholders to be held at such time and place as may be determined by the directors; (c) the quorum for the transaction of business at any meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting; and (d) in addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company, any other persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the BCBCA or the Articles to be present at the meeting.

Limitations on Ownership of Securities

Except as provided in the Investment Canada Act, there are no limitations specific to the rights of

non-Canadians

to hold or vote the Shares under the laws of Canada or British Columbia or in the Company’s Articles,

by-laws,

or charter documents.

Change in Control

There are no provisions in the Articles, charter documents, or

by-laws

that would have the effect of delaying, deferring or preventing a change in the control of the Company, or that would operate with respect to any proposed merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries.

Ownership Threshold

The Articles do not require disclosure of Share ownership. Securities legislation in Canada, however, requires that shareholder ownership (as well as ownership of an interest in, or right or obligation associated with, a related financial instrument of a security of the Company) must be disclosed once a person beneficially owns or has control or direction over, directly or indirectly, securities of a reporting issuer carrying more than 10% of the voting rights attached to all the reporting issuer’s outstanding voting securities. Share ownership of director nominees must also be reported annually in proxy materials sent to the Company’s shareholders. Additionally, as the Company is listed on the NASDAQ, it must comply with United States federal securities laws, which requires it to disclose in its annual report, or Form

20-F,

holders who own 5% or more of its issued and outstanding shares.

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Intercorporate Relationships

The Company has four material, wholly-owned subsidiaries in which it has a direct or indirect material interest: mCloud USA, a corporation incorporated pursuant to the DGCL; mCloud Services, a corporation incorporated pursuant to the

Business Corporations Act

(Alberta) (“

ABBCA

”); NGRAIN, a corporation incorporated pursuant to the

Canada Business Corporations Act

; and kanepi, a corporation incorporated pursuant to the laws of Australia.

mCloud Technologies (USA) Inc., (“M-USA”)

M-USA

is an operating company that carries on its business and operations in the United States. mCloud USA has three wholly owned subsidiaries: mCloud Technologies (Canada) Inc., a corporation incorporated pursuant to the BCBCA; FDSI, a corporation organized pursuant to the DGCL; and CSA, a corporation organized pursuant to the laws of the State of Georgia. mCloud Technologies (Canada) Inc., is an operating company with business and operations in Canada. FDSI provides advanced enterprise software, handheld energy efficiency diagnostic tools and related training, and project management services that enable more rapid and accurate servicing of HVAC equipment, which decreases energy and operational costs. FDSI provides expertise in HVAC diagnostics and building data energy analytics and testing tools, analysis outcomes and programmatic solutions for national and restaurant chains. FDSI’s diagnostics technology is embedded in energy management systems and HVAC units. CSA, which was acquired by the Company on January 27, 2020, is an Atlanta-based 3D technology company. Its operatings were immediately amalgamated with

M-USA

and the legal entity was formally wound- up effective December 31, 2021.

mCloud Technolgies (Canada) Holdings, Inc., (“MTCH”)

MTCH is a holding company with one direct subsidiary, mCloud Technologies Services Inc., (“MTS”) a professional engineering and integration firm specializing in the design and implementation of high-value industrial automation solutions to the oil and gas industry in Alberta, Canada. On July 11, 2019, the Company indirectly acquired MTCH, a corporation incorporated pursuant to the ABBCA, by way of an amalgamation between one of the Company’s subsidiaries, 2199027, and Fulcrum, which had acquired MTCH and its subsidiary immediately prior to its acquisition by the Company. The acquisition of MTCH, by Fulcrum, was pursuant to a share purchase agreement dated June 12, 2019 between Mike Lane, Bob Beattie, Fulcrum, MTCH and the Company. The amalgamation of 2199027 and Fulcrum was completed pursuant to the terms of an amalgamation agreement dated June 12, 2019 between the Company, Fulcrum and 2199027 (“

Amalgamation Agreement

”). The amalgamated company, renamed “Autopro Automation Ltd.”, continued as a wholly-owned subsidiary of the Company, and was later renamed mCloud Technologies (Canada) Holdings, Inc., with MTS being a wholly-owned subsidiary.

NGRAIN (Canada) Corp.

NGRAIN is an operating company carrying on business and operations in Canada. NGRAIN contributes its AI and 3D technology to the Company’s AssetCare solutions. The Company acquired NGRAIN pursuant to the terms of a share purchase agreement dated January 2, 2018. NGRAIN owns all of the issued and outstanding shares of NGrain (US) Corp., a corporation incorporated pursuant to the laws of the State of Nevada.

mCloud Technologies Australia Holdings Pty Ltd.

On October 8, 2020, the company acquired, via its wholly-owned subsidiary mCloud Technologies Australia Pty Ltd., kanepi Group Pty. Ltd. Both kanepi Services Pty Ltd., and mCloud Technologies Singapore (previously kanepi PTE Ltd) are operating companies carrying on operations in Australia and Singapore. kanpei contributes advanced visual analytics solutions and its technologies are incorporated into the AssetCare platform. The Company also provides the Company with a strategic base in which the Company can increase its product offerings in the southern hemisphere.

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The following chart identifies each of the Company’s wholly owned subsidiaries as of the date of this prospectus (including jurisdiction of formation, incorporation or continuance of the various entities)*:

Despite owning no shares, or having any voting rights, the Company determined that it exercises control over Agnity Global, Inc. (“Agnity”) as the Company has the right to nominate a majority of the members of 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 have been consolidated into the Company’s financial statements.

Ownership of the above noted entities is 100% unless otherwise indicated.

The Company delivers solutions combining IoT, AI, and the cloud to unlock the untapped potential of energy- intensive assets such as:

•

HVAC units and refrigerators in commercial buildings;

•

control systems, heat exchangers, and compressors at process industry facilities; and

•

wind turbines generating renewable energy at onshore wind farms.

•

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.

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In all markets, the Company uses a commercial

Software-as-a-Service

(“

SaaS

”) business model to distribute its AssetCare solution. Customers pay a simple, subscription-based price that is determined by number of assets, asset size or complexity, and the expected efficiency gains to be created using AI and analytics. Set up as multi- year, recurring subscriptions, customers pay no fees upfront to onboard an AssetCare solution; any upfront costs are leveraged across the lifetime of the initial subscription period. Certain software and technologies used in AssetCare solutions are also offered to some customers on a perpetual basis.

The Company serves five key market segments:

Connected Buildings

, which includes AI and analytics to automate and remotely manage commercial buildings, driving improvements in energy efficiency, occupant health and safety through IAQ optimization and food safety and inventory protection;

Connected Workers

, which includes cloud software connected to third party hands-free, head- mounted “smart glasses” combined with AI capabilities to help workers in the field stay connected to experts remotely, facilitate repairs, and provide workers with an

AI-powered

“digital assistant”;

Connected Energy

, which includes inspection of wind turbine blades using

AI-powered

computer vision and the deployment of analytics to improve wind farm energy production yield and availability;

Connected Industry

, which includes process assets and control endpoint monitoring, equipment health, and asset inventory management capabilities, driving lower cost of operation for field assets and access to high-precision 3D digital twins enabling remote management of change operations across distributed teams; and

Connected Health

, which includes remote health monitoring and connectivity to caregivers using mobile apps and wireless sensors that enable 24/7 care without the need for

in-person

visits, including at elder care facilities,

age-in-place

situations and medical clinics which also have strict requirements for IAQ and greenhouse gas standards.

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All of the target market segments are powered by common technology unique to the Company, enabling it to create and scale asset energy solutions using IoT, AI and cloud capabilities, with real-time information contextualized to each asset, and secure communications and 3D digital twin technologies.

The Company serves customers globally with a local presence in North America, the United Kingdom and Continental Europe, the Middle East, Southeast Asia, and Greater China. As of March 31, 2022, December 31, 2021 and December 31, 2020, we had an aggregate of , 111, 144, and 119 customers globally.

Production and Services

The Company’s principal method of production is software development associated with the evolution of the AssetCare platform. Actual delivery and ongoing asset management is provided using AI and analytics supported by an internal team of asset management experts, with experience in all of the defined asset classes that mCloud serves in market. Certain aspects of AssetCare onboarding, such as the installation of IoT hardware, may involve third party service providers who partner with mCloud in all of the markets where mCloud does business.

Specialized Skill and Knowledge

The Company retains specialized skills and knowledge within each of its lines of business. In its “Connected Buildings” business, mCloud possesses talent and experience in building energy management, specifically energy efficient management of HVAC units and lighting. Within its “Connected Energy” business, mCloud has a team of experts in wind turbine engineering and turbine operations and maintenance. In its Connected Industry segment, the Company possesses talent and experience related to the management of process assets used in the refinement of oil and gas products.

From a core technology perspective, the team also retains specialized skills and expertise in specific areas of software development, namely the development of artificial intelligence capabilities, such as neural networks and deep learning. Team members also possess backgrounds in data science and statistics. To support the delivery of AssetCare capabilities that support mobile workers, the mCloud team has special knowledge and experience in the development of advanced mobile applications, and 3D capabilities including augmented and virtual reality (collectively known as “

mixed reality

”).

Competitive Conditions

In the principal markets that mCloud operates, there are numerous incumbent solution providers including Honeywell International Inc., Siemens AG, and General Electric Company, which also operate commercial offerings that overlap or compete with AssetCare. mCloud’s competitive advantage lies in its combined use of IoT, AI, and the cloud to make enterprise-grade asset management capabilities available to an entire underserved market of assets that have traditionally gone unmanaged because conventional solutions have been too expensive to be economical.

The Company also competes with emerging technology ventures that overlap with target market segments for AssetCare solutions. These include ventures such as C3.ai and Cognite who offer technologies to heavy industries and BrainBox and Airthings, who provide connected HVAC energy efficiency and IAQ technologies to commercial buildings.

The Company observes that in the principal markets it serves, most incumbent asset management solutions place a heavy focus on acquiring data, storing it, then reporting it to make it available to end customers. mCloud differentiates itself from the competition by using AI and analytics to create actionable insight that help customers decide what actions are the best ones to take to get the most out of their assets — instead of simply reporting on data, mCloud’s AssetCare platform helps customers take action based on data, which ultimately creates customer benefit.

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Marketing Channels

The Company employs sales team members in these countries charged with direct sales efforts of AssetCare solutions. Global marketing efforts to support these sales efforts include virtual campaigns and events to attract new customers, strengthen relationships with existing customers, and build brand presence and visibility. The Company also hosts an annual user conference called mCloud Connect, which includes head-liners from well- known industry leaders, panels, and interactive sessions to gather “voice of the customer” feedback, which is used to improve the Company’s portfolio of AssetCare offerings.

The Company has conducted extensive research to size the markets and opportunities it can access through its AssetCare platform. The Company estimates that, with its current capabilities, it has the capability of serving over 7.3 million commercial buildings and over 34,000 industrial sites in 20 different locales worldwide, with each building or site representing multiple potential connectable assets, workers, or 3D digital twins. These statements refer to the serviceable obtainable market, that is, the market the Company believes it can address with its current capabilities. This estimate assumes and considers only asset types that can currently be connected and served by the Company’s AssetCare offering, namely commercial building types with standalone rooftop HVAC units, onshore wind turbines, and industrial facilities that depend on the use of process control systems. The estimate also only considers assets that can be found in key geographies where the Company currently has the ability to deliver AssetCare, namely the United States, Canada, the United Kingdom, China, Germany, Italy, Singapore, Australia, and Saudi Arabia.

Serviceable commercial buildings include restaurants,

mid-size

day-to-day

operation or maintenance of these commercial buildings, including mechanical service workers and facility managers.

Industrial sites include oil and gas, liquefied natural gas, and floating production storage and offloading facilities, as well as wind farms, mining processing plants, and pulp and paper facilities. In these locations, connectable assets include process control systems, heat exchangers, pumps, and gas compressors. Connectable workers include field operators, maintainers, engineers, asset managers, and plant managers. The Company’s experience in delivering digital 3D models from entire multi-billion-dollar assets the size of a FPSO vessel down to asset subcomponents such as wind turbine blades creates large obtainable market opportunities.

Intangible Properties

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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

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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.

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(ii) Trademarks


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.

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The Company further protects its proprietary source code and algorithms as trade secrets, limiting access to these to employees who have a need to know such information.

Environmental Protection

Employees

As of the year ended December 31, 2021 and as of the date of this prospectus, the Company and its subsidiaries have 216 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, Southeast Asia, and Australia. As of the year ended December 31, 2020, the Company and its subsidiaries had 227 employees employed in 14 offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. As of the year ended December 31, 2019, the Company and its subsidiaries had over 216 employees employed in twelve offices in Canada, the United States, Greater China, the Middle East, and Southeast Asia. The fluctuation in the Company’s number of employees is not significant, and none of the Company’s employees belong to any labour unions. Furthermore, all of the Company’s employees are employed on a full-time basis.

non-statutory

stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards, collectively “

Stock Awards

”) may be granted to employees, directors and consultants;

provided, however

, that Stock Awards may not be granted to employees, directors and consultants who are providing Continuous Service only to any “parent” of the

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Company, as such term is defined in Rule 405, subject to certain exceptions set out in the Company’s Incentive Stock Option Plan.

Foreign Operations

Research and Development

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. Consequently, while the Company has not implemented a formal research and development policy for the past three years, the Company is and has been (including, but not limited to, the past three years) engaged with a number of research and development initiatives as a part of its ongoing effort to continually update its software and develop new products.

Fixed Assets

On September 27, 2021, the Company executed a

12-year

lease for its office in Calgary, Alberta located at 8 Avenue SW, Stephen Avenue Place, Calgary, Alberta, Canada. In total, the Company has leased 33,000 square feet of the property, situated on the 3

and 33

Material Effects

opt-in

opt-out

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MANAGEMENT

The following table sets forth our executive officers and directors, their ages and the positions held by them:


Name	Age		Position	Appointed
Russel H. McMeekin		56	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		48	Chief Financial Officer	May 2019

MANAGEMENT BIOGRAPHIES

Russel H. McMeekin:

Director, President and Chief Executive Officer

Mr. McMeekin was previously a founding partner of Energy Knowledge, Inc., which was acquired by Yokogawa Electric Corporation. Mr. McMeekin went on to serve as Executive Chairman of Yokogawa Venture Group, leading the acquisitions of Industrial Evolution and KBC Advanced Technologies, an energy software and consulting company publicly listed in the United Kingdom. Mr. McMeekin was the founding Chief Executive Officer of SCI Energy Inc., a Silicon Valley cloud-based energy-efficiency company now based in Dallas, Texas. Previously, Mr. McMeekin was the President and Chief Executive Officer of Nasdaq-listed Progressive Gaming International for six years, a company that led the use of RFID technologies for critical item tracking., Mr. McMeekin spent more than 10 years at Honeywell International Inc., including serving as President of Honeywell International Inc.’s Digital and Software Business Units. At Honeywell International Inc., he led joint ventures with Microsoft Corporation, United Technologies Corporation and i2 Technologies. Mr. McMeekin started his career at SACDA Inc., a University of Western Ontario Computer Aided Design Venture which was later acquired by Honeywell International Inc. Mr. McMeekin graduated in Engineering Technology from Sault College of Applied Technology, continued his studies at the University of Waterloo. and he completed a Honeywell International Inc. Sponsored Executive Leadership Program through the Harvard Business School. He also completed the Stanford School of Law Executive Director Program. Mr. McMeekin is also a director of GoodGamer Inc. a TSXV listed company Ticker (GOOD).

Michael Allman:

Director

Mr. Allman is a highly accomplished Chief Executive Officer and Chairman, with extensive experience in growing, restructuring and optimizing business strategies and operations for Fortune 300 companies and

top-tier

consulting firms around the world. He recently was the Chief Operating Officer of Bitstew, Inc. a leading IoT cloud company acquired by GE Digital. Mr. Allman previously served as President and Chief Executive Officer of Southern California Gas Company. Mr. Allman has a master’s degree in business administration from the University of Chicago Graduate School of Business and a bachelor’s degree in chemical engineering from Michigan State University. He is a Certified Management Accountant and a Certified Internal Auditor.

Costantino Lanza:

Director, Chief Growth Officer, and Corporate Secretary

Mr. Lanza, a former partner of Energy Knowledge, Inc., is versed in applying advanced technologies to traditional asset intensive industries with many years of direct experience, most recently with Yokogawa Venture Group, where he led the integration of KBC Advanced Technologies, Yokogawa’s largest ever acquisition. Mr. Lanza has served in leadership roles at Honeywell International Inc. and ExxonMobil Corporation before becoming Chief Executive Officer of INOVx Solutions, Inc. from 2006 to 2015, where 3D technologies were used to improve asset performance management. Mr. Lanza holds a BS and MS degree in Chemical Engineering from Columbia University.

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Elizabeth MacLean:

Director

Ms. MacLean is Chief Financial Officer for Newgioco Group, Inc. (OTCQB:NWGI), a vertically integrated leisure- gaming technology company headquartered in Toronto, Canada. Ms. MacLean has more than 20 years of experience leading finance teams in various industries in both the United States and the United Kingdom. Since September 2016, Ms. MacLean has served as the Treasurer of H. MacLean Realty Company, Inc. Since August 2018, Ms. MacLean has served as an adjunct faculty member at Ottawa University. Ms. MacLean received an MBA in global finance from Stanford University’s Graduate School of Business and a Bachelor of Arts in biology from the University of Chicago.

Ian Russell:

Director

Mr. Russell has long held prominent positions in the investment industry, both on a domestic and global level. He is the President and Chief Executive Officer of IIAC, a position he has held since the inauguration of the IIAC in April 2006. Prior to his appointment at the IIAC, Mr. Russell was Senior Vice-President with the Investment Dealers Association of Canada, a national self-regulatory organization. Mr. Russell worked as an executive at the highly respected international publication, “The Bank Credit Analyst”, and spent nearly a decade at the Bank of Canada. His experience has given him a unique and deep knowledge of the investment business, including underwriting, debt and equity trading and financial advice, as well as an understanding of the market and economic trends that drive the decisions of investors and issuers. He is active in the international investment community: Chair of the International Council of Securities Associations from 2014 to 2017; designated leader of the Canadian mission to the Asia Financial Forum; and invited guest and regular participant at Cumberland Lodge Financial Summit in the U.K., a roundtable of European and international leaders to discuss future policy and regulation in European capital markets. Mr. Russell is a prolific writer and columnist, both in industry publications and newspapers. He is also a frequent commentator in the media, and a sought-after presenter and speaker. Mr. Russell has a postgraduate degree (MSc Economics) from the London School of Economics and Political Science, and an Honours degree in Economics and Business from the University of Western Ontario. He has completed the Partners, Directors and Seniors Officers Qualifying Examination and is a Fellow of the Canadian Securities Institute.

Chantal Schutz:

Chief Financial Officer

Ms. Schutz is a Chartered Professional Accountant (CPA,CA) with over 20 years of experience as a financial leader and entrepreneur. Prior to joining mCloud, Ms. Schutz was the Chief Executive Officer of NYCE Sensors. Ms. Schutz has extensive expertise in both private and publicly traded markets, having held Chief Financial Officer roles in businesses of varying size prior to joining NYCE Sensors Inc. As the Chief Financial Officer and member of the Executive Team at Back In Motion Rehab, Inc., she helped secure financing and developed and implemented systems and procedures which saw the doubling of revenue and headcount, as well as a corporate restructuring. Formerly, Ms. Schutz worked as an independent, contracted Chief Financial Officer for small and medium sized, owner-managed businesses, assisting in the development and implementation of strategic plans and financial reorganizations, as well as implementation of Sarbanes-Oxley and Bill 198. Ms. Schutz has also been an instructor of Financial Management at the B.C. Institute of Technology and facilitated for over 10 years in the Chartered Accountant School of Business. Ms. Schutz articled with both KPMG and PwC and earned her Bachelor of Commerce in Entrepreneurial Management from Royal Roads University. Ms. Schutz is passionate about ensuring that business owners, teens and young adults understand the need for strong financial literacy, and she is a sought-after speaker and advisor at business events and conferences around North America.

Board of Directors and Board Committees

Corporate Governance

We intend to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may in the future decide to use other foreign private issuer exemptions with respect to some of the other Nasdaq listing requirements. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on the Nasdaq, may provide less protection than is accorded to investors under the Nasdaq Rules applicable to U.S. domestic issuers.

The Canadian securities regulatory authorities have issued corporate governance guidelines pursuant to National Policy

58-201—

Corporate Governance Guidelines

, or the Corporate Governance Guidelines, together with certain related disclosure requirements pursuant to NI

58-101.

The Corporate Governance Guidelines are recommended as “best practices” for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we have adopted, or in connection with the closing of this offering will adopt, certain corporate governance policies and practices which reflect our consideration of the recommended Corporate Governance Guidelines.

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The disclosure set out below includes disclosure required by NI

58-101

describing our approach to corporate governance in relation to the Corporate Governance Guidelines.

Board Composition and Election of Directors

Our board of directors currently consists of five directors. Our board of directors will facilitate its exercise of independent supervision over management by ensuring that a majority of its members are “independent” following this offering. Under our organizational documents, at each annual general meeting

one-third

of the directors, other than the Managing Director, or if their number is not a multiple of three, then the number nearest to

one-third

(rounded upwards in case of doubt) of the directors must retire. The term of office for each director of the Company expires immediately before each annual meeting of the shareholders of the Company.

Notwithstanding the above, no director, other than the Managing Director, shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself for

re-election.

A retiring director remains in office until the relevant shareholder meeting and will be eligible for

re-election

at that meeting.

A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to remove himself or herself from the meeting while discussions and voting with respect to the matter are taking place.

Meetings of Directors

Our board of directors will hold regularly-scheduled quarterly meetings as well as

ad hoc

meetings from time to time. The independent members of our board of directors will also meet, as required, without the

non-independent

directors and members of management before or after each regularly scheduled board meeting.

A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the BCBCA regarding conflicts of interest.

Remuneration and Borrowing

The directors may receive such remuneration as our Board of Directors may determine from time to time. Each director is entitled to be repaid or prepaid for all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our Board of Directors or committees of our Board of Directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors. Our Board of Directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.

Foreign Private Issuer Status

We are a “foreign private issuer” under SEC and Nasdaq rules, which also exempts us, as well as our directors, executive officers and 10% shareholders, from certain requirements that apply to U.S. public companies and their directors, executive officers and 10% shareholders. See “Risk Factors — We are a “foreign private issuer” and may have disclosure obligations that are different from those of U.S. domestic reporting companies. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which could limit the information publicly available to our shareholders.”

Board Committees

We currently have an audit committee, a compensation committee, a nominating and corporate governance committee and a technology oversight committee, with each committee having a written charter.

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Audit Committee

The members of the Audit Committee are Ms. MacLean, as Chairperson, Mr. Allman and Mr. Russell. Each of the members of the Audit Committee are “independent” for the purposes of NI

52-110.

All members of the Audit Committee are “financially literate” for the purposes of NI

52-110.

All three members of the Audit Committee have been senior officers and/or directors of publicly traded companies or have been business executives, in each case with the responsibility of performing financial functions, for a number of years. In these positions, each such director has been responsible for receiving financial information relating to the entities of which they were directors, officers or executives. They have, or have developed, an understanding of financial statements generally and of how statements are used to assess the financial position of a company and its operating results. Each member of the Audit Committee also has a significant understanding of the business in which the Company is engaged and has an appreciation for the relevant accounting principles used in the Company`s business.

Further, each member has the requisite education and experience that has provided the member with:

•

an understanding of the accounting principles used by the Company to prepare the 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.

The Audit Committee’s primary responsibility is to assist the Board in discharging its oversight responsibilities with respect to financial matters and compliance with laws and regulations. The Audit Committee’s specific responsibilities with respect to its oversight of financial matters include, among other things: to select, evaluate, monitor the independence of, and recommend an auditor to the Board for appointment or reappointment, as the case may be, by the Company`s shareholders and make recommendations with respect to the auditor’s compensation; to review and determine the auditor’s fee and the terms of the auditor’s engagement and inform the Board thereof; where the Audit Committee may deem it appropriate, to recommend to the Board that the auditor be terminated; to meet with senior management without the auditor present to discuss the performance of the auditor; to

pre-approve

any audit services, and any

non-audit

services permitted under applicable law, to be performed by the auditor; to review and approve the audit plan; to review with senior management and the auditor the annual audited consolidated financial statements, together with the auditor’s report thereon and the interim financial statements, before recommending them to the Board, and review with senior management and the auditor the relevant management’s discussion and analysis relating thereto; to review other financial reporting and disclosures, including earnings press releases and other press releases disclosing financial information and all other financial statements of the Company that require approval by the Board before they are released to the public; to oversee the integrity of the Company`s financial reporting processes and disclosures, including its internal controls, disclosure controls and procedures and compliance with legal and regulatory requirements, and to report regularly to the Board on such matters; to oversee the Company’s risk management function; to review with senior management the status of taxation matters; and to review and oversee the Company`s investment strategies and policies.

The Audit Committee reviews and

pre-approves

all audit and

non-audit

services to be provided to the Company by its external auditors on an annual basis. Before the appointment of the external auditor for any

non-audit

service, the Audit Committee considers the compatibility of the service with the auditor’s independence.

Audit Committee Charter

The responsibilities and duties of the Audit Committee are set out in the committee’s charter.

Audit Committee Oversight

At no time has a recommendation of the Audit Committee to nominate or compensate an external auditor not been adopted by the Board.

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Principal Accountant’s Fees

Aggregate fees billed by KPMG LLP, our independent auditor, in the fiscal years ended December 31, 2021 and 2020 were approximately CAD$2,249,147 and CAD$1,129,749, respectively, as detailed below.


	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.

Compensation Committee

The administration of the Corporation’s compensation practices is handled by the Compensation Committee.

Among other things, the Compensation Committee’s role is to ensure that the total compensation paid to the Corporation’s executive officers, including the Named Executive Officers, is fair, reasonable and competitive. In the course of reviewing and recommending to the Board the compensation of executive officers other than the Chief Executive Officer, the Compensation Committee annually reviews the performance of the executive officers with the Chief Executive Officer, and the Chief Executive Officer makes recommendations to the Compensation Committee regarding their compensation.

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The Compensation Committee will evaluate the performance of the Chief Executive Officer, based on its evaluation, review and make recommendations to the Board with respect to all direct and indirect compensation, benefits and perquisites (cash and

non-cash)

for the Chief Executive Officer based on such evaluation. The Compensation Committee will also review and make recommendations to the Board with respect to compensation, benefits and perquisites for all other senior executive officers of the Corporation, incentive-compensation plans and equity-based plans, and policies regarding management benefits and perquisites.

Neither the Board nor any committee of the Board has formally established a mechanism to consider the implications of the risks associated with the Corporation’s compensation policies and practices. However, the Board and the Compensation Committee inherently consider these risks. The Compensation Committee reviews and manages the policies and practices of the Corporation and ensures that they are aligned with the interests of the shareholders. The Compensation Committee reviews, among other things, the overall compensation and the annual salary increases of the executive officers of the Corporation while keeping as a reference both the financial performance of the Corporation and the turnover risk for the Corporation. The Board also addresses risk related to compensation policies in the context of compensation mechanisms that are linked to the achievement of certain goals or targets (e.g. short term and long-term objectives), both financial and otherwise. The Board is involved in the supervision of key projects and initiatives of the Corporation and the manner in which they are being carried out. Consequently, the Board is in a position where it can control significant risks that may be taken by the Corporation’s management and ensures that those risks remain appropriate and that members of management do not expose the Corporation to excessive risks.

Each member of the Compensation Committee has direct experience relevant to compensation matters resulting from their respective current and past backgrounds and/or roles. The members of the Compensation Committee have experience dealing with compensation matters in large and small organizations, including public companies. The Corporation does not have a policy in place that limits the ability for directors or Named Executive Officers to hedge the shares of the Corporation that they own. However, none of the current directors or Named Executive Officers of the Corporation are hedging any of the shares of the Corporation that they own.

Compensation Process

The Corporation has no formal or informal policy or target for allocating compensation between long-term and short-term compensation, between cash and

non-cash

compensation, or among the different forms of

non-cash

compensation. Instead, the Board determines subjectively what it believes to be the appropriate level and mix of the various compensation components based on the recommendations of the Compensation Committee.

Compensation Objectives

The Corporation’s compensation philosophy for Named Executive Officers is designed to attract well-qualified individuals by paying modest base salaries plus short and long-term incentive compensation in the form of equity-based or other suitable long-term incentives. In making its determinations regarding the various elements of executive compensation, the Board has utilized published studies of compensation paid in comparable businesses, specifically the 2016 study conducted by Culpepper and Associates. These studies have been used to ensure that the compensation received by the Board will be in line with industry standards.

The duties and responsibilities of the Chief Executive Officer are typical of those of a business entity of the Corporation’s size in a similar business and include direct reporting responsibility to the Chairman of the Board, overseeing the activities of all other executives of the Corporation, representing the Corporation, providing leadership and responsibility for achieving corporate goals and implementing corporate policies and initiatives.

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The objectives of the Corporation’s executive compensation program are as follows:

•

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.

The Corporation believes that its current compensation programs are structured to support the achievement of the foregoing strategic objectives. Overall, the executive compensation program aims to design executive compensation packages that meet executive compensation packages for executives with similar talents, qualifications and responsibilities at companies with similar financial, operating and industrial characteristics. The Corporation expects to undergo significant growth and is committed to retaining its key executives for the next several critical years, but at the same time ensuring that executive compensation is tied to specific corporate goals and objectives. The Corporation’s executive compensation program has been designed to reward executives for reinforcing the Corporation’s business objectives and values, for achieving the Corporation’s performance objectives and for their individual performances.

Elements of Compensation

The Company seeks to achieve the compensation objectives described earlier through different elements of compensation, including salary and both short-term and long-term incentive plans, with the incentives having both equity and

non-equity

components. The Company believes that these various elements are important to effectively achieve the objectives of its executive compensation philosophy.

The elements of the Named Executive Officers’ compensation are:

(a)

base salaries;

(b)

performance bonuses; and

(b)

equity incentive grants.

There is no regulatory oversight of the Company’s compensation process for the Named Executive Officers.

Base Salary

The Company pays its executive officers a base salary to compensate them for services rendered during a fiscal year. Base salaries are determined for each executive officer based on an evaluation of such officer’s experience, skills, knowledge, scope of responsibility and performance. Base salary levels are reviewed and considered annually, and from time to time adjustments may be made to base salary levels based upon promotions or other changes in job responsibility or merit-based increases based on assessments of individual performance.

The base salary review of any executive officer will take into consideration the current competitive market conditions, experience, proven or expected performance, and the particular skills of the executive officer. Base salary is not evaluated against a formal “peer group”.

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Performance Bonuses

In addition to a base salary, the Named Executive Officers are eligible to receive performance-based bonuses meant to motivate the Named Executive Officers to achieve shorter-term goals. The

pre-established,

quantitative target(s) used to determine performance bonuses will be set by the Board or a committee thereof each fiscal year. Awards under the plan will be made by way of cash payments only, which payments will be made at the end of the relevant fiscal year. Each Named Executive Officer will be measured against the financial targets within his or her control and, while overall company performance is part of the plan, individual targets will represent the highest percentage of the plan payout. The cash bonuses are primarily designed to align the financial interests of the Corporation’s executives with the interests of the Corporation’s shareholders.

Equity-Based Compensation

The executive officers are eligible to receive option, restricted stock or other equity and equity-linked awards under the Equity Incentive Plan. The Company intends for equity awards to be an integral part of its overall compensation program as the Company believes that the long-term performance of the Company will be enhanced through the use of equity-based awards that reward executive officers for increasing long-term shareholder value. The Company also believes that such awards will promote an ownership perspective among its executive officers and encourage executive retention. Equity based compensation awarded to executive officers (including Named Executive Officers) will typically be subject to time-based vesting provisions. The Company does not have any formal policy regarding when equity-based compensation is to be granted or the size of any given grant. In determining the number of awards to be granted to executive officers, the Compensation Committee takes into account the individual’s position, scope of responsibility, ability to affect profits and shareholder value and the value of the awards in relation to other elements of the individual executive officer’s total compensation, including base salary and cash bonuses. When considering equity or equity-linked awards to an executive officer, consideration of the number of awards previously granted to the executive may be taken into account, however, the extent to which such prior awards remain subject to resale restrictions will generally not be a factor.

Broad-Based Benefits Programs

All full-time employees, including the Company’s Named Executive Officers, may participate in the Company’s health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance. The Company does not intend to provide perquisites or personal benefits to its Named Executive Officers that are not otherwise available to other employees generally.

Pension Plan Benefits

The Company does not have a defined benefits pension plan, a defined contribution plan or a deferred compensation plan.

Nominating and Corporate Governance Committee

Corporate governance and nominating committees are not mandatory in Canada. However, NP

58-201

recommends that a board appoint a corporate governance committee composed entirely of independent directors with responsibility for overseeing the process for nominating directors for election by shareholders. The members of the corporate governance committee are not required to be independent or to have any particular expertise.

Our corporate governance and nominating committee is appointed by the Board to assist in fulfilling its corporate governance responsibilities under applicable laws. Our corporate governance and nominating committee is responsible for, among other things, developing our approach to governance issues and establishing sound corporate governance practices that are in the interests of our shareholders and that contribute to effective and efficient decision-making.

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Our corporate governance and nominating committee is currently comprised of Mr. Russell, Mr. Allman and Ms. MacLean, and chaired by Mr. Allman.

The corporate governance and nominating committee’s principal responsibilities include:

•

developing and recommending to the Board criteria for selecting board and committee members;

•

establishing procedures for identifying and evaluating director candidates, including nominees recommended by shareholders;

•

identifying individuals qualified to become board members;

•

recommending to the Board the persons to be nominated for election as directors and to each of the 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.

The corporate governance and nominating committee regularly reviews the current profile of the Board, including the representation of various areas of expertise, experience and diversity, to ensure that the Board has a sufficient range of skills, expertise and experience to enable it to carry out its duties and responsibilities effectively.

Technology Oversight Committee

The members of the technology oversight committee are Mr. Lanza, as Chairperson, Mr. McMeekin and Ms. MacLean. Of the members of the technology oversight committee, only Ms. MacLean is independent.

The technology oversight committee will oversee our overall technology strategy. The technology oversight committee’s responsibilities shall include:

•

meeting with our technical management team at least once per calendar quarter;

•

assessing whether the product delivery schedule is being met and whether it needs to be adjusted;

•

ensuring that all third-party software we use is properly licensed;

•

making recommendations to the Board concerning our technology strategy, roadmap and investment plans;

•

assessing the health and oversight of the execution of our technology strategies; including architecture, use of open source software, development best practices and third-party dependencies;

•

ensuring that best practice Q&A policies and procedures are in place and are adhered to;

•

assessing the scope and quality of our intellectual property, including its support of our approved business plan;

•

providing guidance on technology as it may pertain to market entry and exit, investments, mergers, acquisitions and divestitures, research and development investments, and key competitor and partnership strategies;

•

performing such other duties and responsibilities as are enumerated in and consistent with its charter

Exculpation, Insurance and Indemnification of Directors and Officers

Under the BCBCA, a company may indemnify: (i) a current or former director or officer of that company; (ii) a current or former director or officer of another corporation if, at the time such individual held such office, the corporation was an affiliate of the company, or if such individual held such office at the company’s request; or (iii) an individual who, at the request of the company, held, or holds, an equivalent position in another entity (an “indemnifiable person”) against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal, administrative or other legal proceeding or investigative action (whether current, threatened, pending or completed) in which he or she is involved because of that person’s position as an indemnifiable person, unless: (i) the individual did not act honestly and in good faith with a view to the best interests of such company or the other entity, as the case may be; or (ii) in the case of a proceeding other than a civil proceeding, the individual did not have reasonable grounds for believing that the individual’s conduct was lawful. A company cannot indemnify an indemnifiable person if it is prohibited from doing so under its articles or by applicable law. A company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an indemnifiable person in respect of that proceeding only if the indemnifiable person has provided an undertaking that, if it is ultimately determined that the payment of expenses was prohibited, the indemnifiable person will repay any amounts advanced. Subject to the aforementioned prohibitions on indemnification, a company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an indemnifiable person in respect of such eligible proceeding if such indemnifiable person has not been reimbursed for such expenses, and was wholly successful, on the merits or otherwise, in the outcome of such eligible proceeding or was substantially successful on the merits in the outcome of such eligible proceeding. On application from an indemnifiable person, a court may make any order the court considers appropriate in respect of an eligible proceeding, including the indemnification of penalties imposed or expenses incurred in any such proceedings and the enforcement of an indemnification agreement. As permitted by the BCBCA, under Article 21.1, we are required to indemnify our directors and former directors (and such individual’s respective heirs and legal representatives) and permit us to indemnify any person to the extent permitted by the BCBCA.

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The BCBCA provides certain protections under Part 5 –

Management,

Division 5—

Indemnification of Directors and Officers and Payment of Expenses,

to our current and former directors and officers, as well as other eligible parties defined in Section 159 of the BCBCA (the “Eligible Parties”, each an “Eligible Party”). The Company will indemnify the Eligible Parties, to the fullest extent permitted by law and subject to certain limitations listed in Section 163 of the BCBCA, against any proceeding in which an Eligible Party or any of the heirs and personal or other legal representatives of the Eligible Party, by reason of the Eligible Party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company or an associated corporation (a) is or may be joined as a party, or (b) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related tom, the proceeding.

We maintain insurance policies relating to certain liabilities that our directors and officers may incur in such capacity.

Code of Conduct

We have adopted a Code of Conduct applicable to all of our directors, officers and employees. We post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code of Conduct. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of, this prospectus.

Monitoring Compliance with the Code of Business Conduct and Ethics

Our board of directors is responsible for reviewing and evaluating the Code of Conduct periodically and will make any necessary changes thereto. Our board of directors is also charged with the monitoring of compliance with the Code of Conduct and will be responsible for considering any waivers of the Code of Conduct.

Interests of Directors

In accordance with the BCBCA, each director and officer must disclose the nature and extent of any interest that he or she has in a material contract or material transaction whether made or proposed with us, if the director or officer is a party to the contract or transaction, is a director or an officer or an individual acting in a similar capacity of a party to the contract or transaction, or has a material interest in a party to the contract or transaction. Subject to certain limited exceptions under the BCBCA, no director may vote on a resolution to approve a material contract or material transaction which is subject to such disclosure requirement.

As of the date hereof, except as otherwise disclosed in this prospectus, to the knowledge of the Board or the management of the Company, there are no material interests, whether direct or indirect, of any informed person of the Company, any proposed director of the Company, or any associate or affiliate of any informed person or proposed director, in any transaction since the commencement of the Company’s most recently completed financial year or in any proposed transaction which has materially affected or would materially affect the Company of any of its subsidiaries.

Complaint Reporting and Whistleblower Policy

In order to foster a climate of openness and honesty in which any concern or complaint pertaining to a suspected violation of the law, our Code of Conduct or any of our policies or any unethical or questionable act or behavior, the board of directors will adopt a whistleblower policy that requires that our employees promptly report such violation or suspected violation. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, our whistleblower policy will contain procedures that are aimed to facilitate confidential, anonymous submissions by our employees.

Family Relationships

None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation

S-K.

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Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation

S-K.

EXECUTIVE COMPENSATION

As of December 31, 2021, the Corporation had three Named Executive Officers: Russel H. McMeekin, Chantal Schutz and Costantino Lanza.

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The following table sets out the compensation paid or payable to the Named Executive Officers of the Company for the fiscal year ended December 31, 2021:

Name and
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

93,500 USD

343,499.84 USD

Costantino Lanza

(2)

Director and Chief Growth Officer

2021

249,999.84 USD

Nil

42,358 USD

292,357 USD

Chantal Schutz

Chief Financial Officer

2021

262,000 CAD

Nil

262,000 CAD

Michael Allman

Director

2021

Nil

48,000 USD

Nil

48,000 USD

Elizabeth MacLean

Director

2021

Nil

48,000 USD

Nil

48,000 USD

Ian Russell

Director

2021

Nil

48,000 USD

Nil

48,000 USD

Michael A. Sicuro

(3)

2021

Nil

20,000 USD

Nil

20,000 USD

NOTES:

(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.

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Stock Options and Other Compensation Securities

On December 17, 2016, we established an equity incentive plan, or Equity Incentive Plan, which provides for the granting of incentive share options,

non-statutory

share options, share appreciation rights, restricted share awards, restricted share unit awards, and other share awards, collectively the Share Awards, to selected directors, employees and consultants for a period of 10 years from the establishment of the Equity Incentive Plan. The Equity Incentive Plan is intended to help us secure and retain the services and provide incentives for increased efforts for our success.

The Board of Directors grants Share Awards from time to time based on its assessment of the appropriateness of doing so in light of our long-term strategic objectives, our current stage of development, our need to retain or attract particular key personnel, the number of Share Awards already outstanding and overall market conditions.

The following table provides a summary of all compensation securities granted or issued to each director, officer and senior management as of December 31, 2021:

Name and

Principal

Position

Type of
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

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Oversight and Description of Compensation

Compensation Objectives

Our compensation philosophy for named executive officers is designed to attract well- qualified individuals by paying modest base salaries plus short and long-term incentive compensation in the form of equity-based or other suitable long-term incentives. In making its determinations regarding the various elements of executive compensation, the Board has utilized published studies of compensation paid in comparable businesses, specifically the 2016 study conducted by Culpepper and Associates. These studies have been used to ensure that the compensation received by the Board will be in line with industry standards.

The duties and responsibilities of our chief executive officer are typical of those of a business entity of our size in a similar business and include direct reporting responsibility to the chairman of the Board, overseeing the activities of all of our other executives, representing us, providing leadership and responsibility for achieving corporate goals and implementing corporate policies and initiatives.

The objectives of our executive compensation program are as follows:

•

to attract, retain and motivate talented executives who create and sustain our continued success;

•

to align our interests with the interests of our shareholders; and

•

to provide total compensation to executives that is competitive with that paid by other companies of comparable size engaged in similar businesses in appropriate regions.

We believe that our current compensation programs are structured to support the achievement of the foregoing strategic objectives.

Overall, the executive compensation program aims to design executive compensation packages that meet executive compensation packages for executives with similar talents, qualifications and responsibilities at companies with similar financial, operating and industrial characteristics. We expect to undergo significant growth and are committed to retaining our key executives for the next several critical years, but at the same time ensuring that executive compensation is tied to specific corporate goals and objectives. Our executive compensation program has been designed to reward executives for reinforcing our business objectives and values, for achieving our performance objectives and for their individual performances.

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Compensation Process

We have no formal or informal policy or target for allocating compensation between long-term and short-term compensation, between cash and

non-cash

compensation, or among the different forms of

non-cash

Elements of Compensation

We seek to achieve the compensation objectives described earlier through different elements of compensation, including salary and both short-term and long-term incentive plans, with the incentives having both equity and

non-equity

components. We believe that these various elements are important to effectively achieve the objectives of our executive compensation philosophy.

The elements of the named executive officers’ compensation are:

base salaries;

performance bonuses; and

equity incentive grants.

There is no regulatory oversight of our compensation process for our named executive officers.

Base Salary

We pay our executive officers a base salary to compensate them for services rendered during a fiscal year. Base salaries are determined for each executive officer based on an evaluation of such officer’s experience, skills, knowledge, scope of responsibility and performance. Base salary levels are reviewed and considered annually, and from time to time adjustments may be made to base salary levels based upon promotions or other changes in job responsibility or merit-based increases based on assessments of individual performance.

Performance Bonuses

In addition to a base salary, the named executive officers are eligible to receive performance-based bonuses meant to motivate the named executive officers to achieve shorter-term goals. The

pre-established,

quantitative target(s) used to determine performance bonuses will be set by the Board or a committee thereof each fiscal year. Awards will be made by way of cash payments only, which payments will be made at the end of the relevant fiscal year. Each named executive officer will be measured against the financial targets within his or her control and, while our overall performance is part of the plan, individual targets will represent the highest percentage of the plan payout. The cash bonuses are primarily designed to align our financial interests with the interests of our shareholders.

Equity Based Compensation

Our executive officers are eligible to receive option awards under the Equity Incentive Plan. We intend for equity awards to be an integral part of our overall compensation program as we believe that our long-term performance will be enhanced through the use of equity based awards that reward executive officers for increasing long-term shareholder value. We also believe that such awards will promote an ownership perspective among our executive officers and encourage executive retention. Equity based compensation awarded to executive officers (including named executive officers) will typically be subject to time-based vesting provisions. We do not have any formal policy regarding when equity based compensation is to be granted or the size of any given grant. In determining the number of awards to be granted to executive officers, our compensation committee takes into account the individual’s position, scope of responsibility, ability to affect profits and shareholder value and the value of the awards in relation to other elements of the individual executive officer’s total compensation, including base salary and cash bonuses. When considering equity or equity-linked awards to an executive officer, consideration of the number of awards previously granted to the executive may be taken into account, however, the extent to which such prior awards remain subject to resale restrictions will generally not be a factor.

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Broad-Based Benefits Programs

All full-time employees, including our named executive officers, may participate in our health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance. We do not intend to provide perquisites or personal benefits to our named executive officers that are not otherwise available to other employees generally.

Pension Plan Benefits

We do not have a defined benefits pension plan, a defined contribution plan or a deferred compensation plan.

Employment Agreements with Executive Officers and Significant Employees


Name		Position

Russel H. McMeekin		Chief Executive Officer, President, Director

Michael Allman		Director

Costantino Lanza		Chief Growth Officer, Corporate Secretary, Director

Elizabeth MacLean		Director

Ian Russell		Director

Chantal Schutz		Chief Financial Officer

Employment Agreement with Russel McMeekin

On May 1, 2017, we entered into an employment agreement, or the McMeekin Agreement, with Russel McMeekin, or McMeekin, to serve as our Chief Executive Officer. The base salary for McMeekin under the McMeekin Agreement is $250,000 per annum. The McMeekin Agreement had an initial term of two years and it automatically renews for successive one year terms unless either party delivers written notice not to renew at least 90 days prior to the end of the current term. Pursuant to the McMeekin Agreement, McMeekin received 3,167 common shares upon execution and is entitled to receive additional equity compensation in the discretion of the board of directors.

Pursuant to the McMeekin Agreement, if we terminate McMeekin’s employment without Cause (as defined in the McMeekin Agreement) or McMeekin resigns for Good Reason (as defined in the McMeekin Agreement), McMeekin is entitled to the following payments and benefits: (1) McMeekin fully earned but unpaid base salary through the date of termination at the rate then in effect; (2) a lump sum cash payment in an amount equal to 12 months of McMeekin base salary as in effect immediately prior to the date of termination; (3) monthly payment of health benefits for McMeekin and McMeekin eligible dependents for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards. In the event McMeekin is terminated in connection with a change of control event, then he is entitled to all the above benefits, except that the lump sum cash payment will be in an amount equal to 24 months of McMeekin base salary as in effect immediately prior to the date of termination.

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Employment Agreement with Chantal Schutz

On May 24, 2019, we entered into an employment agreement, as amended on October 1, 2019, the Schutz Agreement, with Chantal Schutz, or Schutz, to serve as our Chief Financial Officer. The base salary for Schutz under the Schutz Agreement is $250,000 per annum. The Schutz Agreement has an indefinite term, subject to termination by either party. Pursuant to the Schutz Agreement, Schutz received 8,333 shares of restricted stock and options to purchase 8,333 common shares and is entitled to receive additional equity compensation in the discretion of the board of directors.

Pursuant to the Schutz Agreement, if we terminate Schutz’s employment without Cause (as defined in the Schutz Agreement) or Schutz resigns for Good Reason (as defined in the Schutz Agreement), Schutz is entitled to the following payments and benefits: (1) Schutz’s fully earned but unpaid base salary and accrued vacation through the date of termination at the rate then in effect; (2) a lump sum cash payment in an amount equal to nine months of Schutz’s base salary as in effect immediately prior to the date of termination; and (3) continuation of benefits for Schutz for a period of nine months following the date of termination.

Employment Agreement with Constantino Lanza

On May 1, 2017, we entered into an employment agreement, or the Lanza Agreement, with Constantino Lanza, or Lanza, to serve as our Chief Growth Officer. The base salary for Lanza under the Lanza Agreement is $250,000 per annum. The Lanza Agreement had an initial term of two years and it automatically renews for successive one year terms unless either party delivers written notice not to renew at least 90 days prior to the end of the current term. Pursuant to the Lanza Agreement, Lanza received 3,167 common shares upon execution and is entitled to receive additional equity compensation in the discretion of the board of directors.

Pursuant to the Lanza Agreement, if we terminate Lanza’s employment without Cause (as defined in the Lanza Agreement) or Lanza resigns for Good Reason (as defined in the Lanza Agreement), Lanza is entitled to the following payments and benefits: (1) Lanza’s fully earned but unpaid base salary through the date of termination at the rate then in effect; (2) a lump sum cash payment in an amount equal to 12 months of Lanza’s base salary as in effect immediately prior to the date of termination; (3) monthly payment of health benefits for Lanza and Lanza’s eligible dependents for a period of 12 months following the date of termination; and (4) the automatic acceleration of the vesting and exercisability of outstanding unvested stock awards. In the event Lanza is terminated in connection with a change of control event, then he is entitled to all the above benefits, except that the lump sum cash payment will be in an amount equal to 24 months of Lanza’s base salary as in effect immediately prior to the date of termination.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

There have been no material transactions, or series of related material transactions to which we are a party and in which the other parties include our directors, executive officers, holders of more than 5% of our voting securities, or any member of the immediate family of any of the foregoing persons.

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PRINCIPAL SHAREHOLDERS

The following tables set forth certain information with respect to the beneficial ownership of our Common Shares for:

•

each shareholder known by us to be the beneficial owner of more than 5% of our outstanding Common Shares,

•

each of our directors,

•

each of our named executive officers, and

•

all of our directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the SEC. Under such rules, beneficial ownership includes any Common Shares over which the individual has sole or shared voting power or investment power as well as any Common Shares that the individual has the right to subscribe for within 60 days of August 8, 2022, through the exercise of any warrants or other rights. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the economic benefit with respect to all Common Shares that they beneficially own, subject to applicable community property laws. None of the shareholders listed in the table are a broker-dealer or an affiliate of a broker dealer.

Applicable percentage ownership prior to the offering is based on 16,155,654 Common Shares outstanding at August 8, 2022. Unless otherwise indicated, the address of each beneficial owner listed in the table below is C/O mCloud Technologies, Corp.,

550-510

Burrard Street, Vancouver, British Columbia, Canada, V6C 3A8.


	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

As of August 8, 2022, there were 213 holders of record entered in our share register. The number of individual holders of record is based exclusively upon our share register and does not address whether a common share or Common Shares may be held by the holder of record on behalf of more than one person or institution who may be deemed to be the beneficial owner of a common share or Common Shares in our company.

DESCRIPTION OF SECURITIES

Common Shares

The authorized capital of the Company consists of an unlimited number of Common Shares, no par value. As of August 8, 2022, there were 16,155,654 Common Shares outstanding. As of August 8, 2022, there were 171 U.S. shareholders holding 5,228,924 Common Shares, or approximately 32.70% of the total number of Common Shares issued and outstanding. The holders of Common Shares are entitled to one vote per Common Share at all meetings of the shareholders of the Company either in person or by proxy. The holders of Shares are also entitled to dividends, if and when declared by the directors of the Company, and the distribution of the residual assets of the Company in the event of a liquidation, dissolution or winding up of the Company.

All Common Shares rank equally as to all benefits which might accrue to the holders thereof, including the right to receive dividends, voting powers, and participation in assets and in all other respects, on liquidation, dissolution or

winding-up

of the Company, whether voluntary or involuntary, or any other disposition of the assets of the Company among its shareholders for the purpose of winding up its affairs after the Company has paid out its liabilities. The Shares are not subject to any call or assessment rights, any

pre-emptive

rights, any conversion or any exchange rights. The Common Shares are not subject to any redemption, retraction, purchase for cancellation, surrender, sinking or purchase fund provisions. Additionally, the Common Shares are not subject to any provisions permitting or restricting the issuance of additional securities and any other material restrictions or any provisions requiring a securityholder to contribute additional capital to the Company. Subject to the BCBCA, the Company may by special resolution make alterations to the authorized Common Share structure and special rights or restrictions to change the rights of the shareholders. The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is

two-thirds

of the votes cast on the resolution.

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Blank Check Preferred Stock

Under the terms of our Articles of Incorporation, our Board of Directors has authority, without any further vote or action by our shareholders, to issue an unlimited number of “blank check” preferred shares issuable in series, with such rights, privileges, restrictions and conditions as the Board may determine from time to time

Series A Preferred Shares

The following is a summary of some general terms and provisions of our Series A Preferred Shares. Because it is a summary, it does not contain all of the information that may be important to you. If you want more information, you should read our Articles of Incorporation and Bylaws, copies of which have been filed with the SEC. See “Where You Can Find More Information.”

Ranking.

The Series A Preferred Shares will rank, as to dividend rights and rights upon our liquidation, dissolution or winding up:

(1) Senior to all classes or series of our common shares and to all other equity securities issued by us other than any equity securities issued with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Shares;

(2) Junior to any future equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and

(3) Effectively junior to all our existing and future indebtedness (including indebtedness convertible into our common shares or preferred shares) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing or future subsidiaries.

Voting Rights

. In any matter in which the Series A Preferred Shares may vote, as described below, each Series A Preferred Share shall be entitled to one vote per $25.00 of liquidation preference; provided that if the Series A Preferred Shares and any other stock ranking on parity to the Series A Preferred Shares as to dividend rights and rights as to the distribution of assets upon the 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.

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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.

Dividends

. Subject to the preferential rights, if any, of the holders of any class or series of capital stock of the Company ranking senior to the Series A Preferred Shares as to dividends, the holders of the Series A Preferred Shares will be entitled to receive, when, as and if declared by the Board (or a duly authorized committee of the Board), only out of funds legally available for the payment of dividends, cumulative cash dividends at the annual rate of 9.0% of the $25.00 liquidation preference per year (equivalent to $2.25 per year) until the beginning of the fifth year, at which time the annual rate will increases 4.0% per calendar quarter until it reaches a maximum of 25.0%. Dividends on the Series A Preferred Shares will accumulate and be cumulative from, and including, the date of original issue by us of the Series A Preferred Shares. However, the Company will be entitled to defer the payment of any declared dividends on the Series A Preferred Shares until the occurrence of a liquidation or Board Approved Change of Control of the Company.

Segregated Payment Account.

The Company shall establish a segregated account that will be funded at closing of the offering with proceeds in an amount equal to nine (9) months of dividends on the maximum number of Series A Preferred Shares. The segregated account may only be used to pay declared dividends on the Series A Preferred Shares, when legally permitted, and may not be used for other corporate purposes. Excess funds are returned to Company treasury.

Liquidation

. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, holders of Series A Preferred Shares will be entitled to be paid out of the assets of the Company legally available for distribution to its stockholders (

i.e.

, after satisfaction of all the Company’s liabilities to creditors, if any) and, subject to the rights of holders of any shares of each other class or series of capital stock ranking, as to rights to the distribution of assets upon the Company’s voluntary or involuntary liquidation, dissolution or winding up, senior to the Series A Preferred Shares, a liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment may be made to holders of shares of the Common Shares or any other class or series of the Company’s capital stock ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, junior to the Series A Preferred Shares (the “liquidation preference”).

Preemptive Rights

. No holders of Series A Preferred Shares will, as holders of Series A Preferred Shares, have any preemptive rights to purchase or subscribe for the Common Shares or any other security.

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Optional Redemption.

The Series A Preferred Shares is not redeemable prior to the twelve (12) month anniversary of the effective date of this Offering, except for the circumstances described under “Special Optional Redemption.”

On or after the twelve (12) month anniversary of the date of issuance,, the Series A Preferred Shares may be redeemed at our option, in whole or in part, from time to time, at a redemption price of $25.00 per Series A Preferred Share, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Shares up to, but not including, the date of such redemption, upon the giving of notice.

Special Optional Redemption.

Upon the occurrence of any Delisting Event, Change of Control, or $8 VWAP Event, whether before or after the twelve (12) month anniversary of the date of issuance of the Series A Preferred Shares, we may, at our option, redeem the Series A Preferred Shares, in whole or in part and within 90 days after the date of the Delisting Event, Change of Control or $8 VWAP Event, by paying $25.00 per share of Series A Preferred Shares, plus all dividends accumulated and unpaid (whether or not declared) on the Series A Preferred Stock up to, but not including, the date of such redemption.

A “Delisting Event” occurs when, after the original issuance of Series A Preferred Shares, both (i) the shares of Series A Preferred Shares are no longer listed on Nasdaq, the New York Stock Exchange (the “NYSE”) or the NYSE American LLC (“NYSE AMER”), or listed or quoted on an exchange or quotation system that is a successor to Nasdaq, the NYSE or the NYSE AMER, and (ii) the Company not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), but any Series A Preferred Shares is still outstanding.

A “Change of Control” occurs when, after the original issuance of the Series A Preferred Shares, the following have occurred and are continuing: (a) any person or persons acting together which would constitute a “group” for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (other than the Company or any subsidiary of the Company) shall beneficially own (as defined in Rule

13d-3

of the Exchange Act), directly or indirectly, at least 25% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of the Board; (b) Current Directors (as herein defined) shall cease for any reason to constitute at least a majority of the members of the Board (for this purpose, a “Current Director” shall mean any member of the Board as of the date hereof and any successor of a Current Director whose election, or nomination for election by the 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 Shares, the volume weighted average price of the Common Shares on the Nasdaq Capital Market for five consecutive trading days (as reported by Bloomberg L.P. based on a trading day from 9:30 a.m. to 4:02 p.m. (New York City time)) is at least $8.00.

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Restrictions on Dividends, Redemptions and Repurchases.

So long as any Series A Preferred Share remains outstanding, unless we also have either paid or declared and set apart for payment full cumulative dividends on the Series A Preferred Shares for all past completed dividend periods, we will not during any dividend period:

(1) pay or declare and set apart for payment any dividends or declare or make any distribution of cash or other property on Common Shares or other capital stock that ranks junior to or on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up (other than, in each case, (a) a dividend paid in Common Shares or other stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up or (b) any declaration of a Common Share dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant to such plan);

(2) redeem, purchase or otherwise acquire Common Shares or other capital stock that ranks junior to or on parity with the Series A Preferred Shares (other than the Series A Preferred Shares) with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up (other than (a) by conversion into or exchange for Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (b) the redemption of shares of capital stock pursuant to the provisions of our memorandum of articles, as amended, relating to the restrictions upon ownership and transfer of our capital stock, (c) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares and any other capital stock that ranks on parity with the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (d) purchases, redemptions or other acquisitions of shares of our capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up pursuant to any employment contract, dividend reinvestment and stock purchase plan, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors, consultants or advisors, (e) through the use of the proceeds of a substantially contemporaneous sale of stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, or (f) purchases or other acquisitions of shares of our capital stock pursuant to a contractually binding stock repurchase plan existing prior to the preceding Dividend Payment Date on which dividends were not paid in full); or

(3) redeem, purchase or otherwise acquire Series A Preferred Shares (other than (a) by conversion into or exchange for Common Shares or other capital stock ranking junior to the Series A Preferred Shares with respect to dividend rights and rights to the distribution of assets upon our voluntary or involuntary liquidation, dissolution or winding up, (b) a purchase or exchange offer made on the same terms to holders of all outstanding Series A Preferred Shares or (c) with respect to redemptions, a redemption pursuant to which all Series A Preferred Shares are redeemed).

Conversion Rights

. The Series A Preferred Shares will be convertible into common Shares based on a conversion ratio of (i) the $25.00 per share liquidation preference divided by (ii) $2.75. Therefore, each Series A Preferred Share is convertible into approximately nine Common Shares. Upon such a conversion, any declared but unpaid dividends shall be paid to the holder of Series A Preferred Shares in cash. In the event that the conversion would result in the issuance of fractional Common Shares, we will pay the holder the cash value of such fractional shares in lieu of such fractional shares based on a price of $2.75 per Common Share.

Nonassessability

. All outstanding shares of our Series A Preferred Shares are fully paid and nonassessable.

Warrants

The following sets forth certain general terms and provisions of the Warrants.

Terms of the Warrants

Overview

. The Warrants offered hereby will be issued pursuant to a Warrant Agent Agreement, dated as of the effective date of this Offering (the “Warrant Agent Agreement”), between us and American Stock Transfer & Trust Company LLC, as the warrant agent (the “Warrant Agent”). Certain provisions of the Warrants are set forth herein but are only a summary and are qualified in their entirety by the relevant provisions of the Warrant Agent Agreement and the form of Warrant.

The Warrants issued in this Offering entitle the registered holder to purchase one Common Share at a price equal to $4.75 per share, subject to adjustment as discussed below, immediately following the issuance of such Warrant and terminating at 5:00 p.m., New York City time, on November 29, 2026.

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Exercisability

. The Warrants are exercisable at any time after their original issuance until November 29, 2026. The Warrants may be exercised by delivering a duly executed exercise notice on or prior to the expiration date at the offices of the Warrant Agent, accompanied by full payment of the exercise price, by certified or official bank check payable to the Warrant Agent, for the number of Warrants being exercised. Under the terms of the Warrant Agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to Common Shares issuable upon exercise of the Warrants until the expiration of the Warrants.

Exercise Limitation

. A holder may not exercise any portion of a Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding Common Shares after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant, except that the holder may waive such limitation up to a percentage not in excess of 9.99%.

Exercise Price

. The exercise price per Common Shares purchasable upon exercise of the Warrants is $4.75. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders. However, the Warrants will not be adjusted for issuances of Common Shares at prices below its exercise price.

Fractional Shares

. No fractional Common Shares Stock will be issued upon exercise of the Warrants. If, upon exercise of the Warrant, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the exercise price. If multiple Warrants are exercised by the holder at the same time, we shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.

Transferability

. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred, or assigned without our consent.

Exchange Listing

. The Warrants will be listed on a national securities exchange along with the Listed Warrants, which are listed on Nasdaq under the symbol “MCLDW.”

Warrant Agent; Global Certificate

. The Warrants will be issued in registered form under the Warrant Agent Agreement. The Warrants shall initially be represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

Fundamental Transactions

. In the event of a fundamental transaction, as described in the Warrants and generally including any reorganization, recapitalization or reclassification of our Common Shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Common Shares, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Shares, upon any subsequent exercise of the Warrants, the holders of the Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction.

Rights as a Stockholder

. The warrant holders do not have the rights or privileges of holders of Common Shares or any voting rights until they exercise their Warrants and receive Common Shares. After the issuance of shares of Common Shares upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

Governing Law

. The Warrants and the Warrant Agent Agreement are governed by New York law.

Warrant certificates, if issued in registered form, will be exchangeable for new warrant certificates of different denominations. No charge will be made to the holder for any such exchange or transfer except for any tax or government charge incidental thereto. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the Securities subject to the Warrants.

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Modifications

We may amend any warrant agreement and the Warrants without the consent of the holders of the Warrants in certain circumstances including to cure any ambiguity, to cure, correct or supplement any defective or inconsistent provision, or in any other manner that will not materially and adversely affect the interests of holders of outstanding Warrants.

Enforceability

The warrant agent will act solely as our agent. The warrant agent will not have any duty or responsibility if we default under the warrant agreements or the warrant certificates. A Warrant holder may, without the consent of the warrant agent, enforce, by appropriate legal action on its own behalf, the holder’s right to exercise the holder’s Warrants

Listing

The Company will apply to list the Series A Preferred Shares on Nasdaq under the symbol MCLDP. Our shares of Common Shares and Listed Warrants are listed on Nasdaq under the symbols “MCLD” and “MCLDW”, respectively. The Warrants will be listed Nasdaq along with the Listed Warrants under the symbol “MCLDW”. Our Common Shares are also listed on the TSXV under the symbol “MCLD”. On August 5, 2022 the last reported sale price of our Common Shares on the TSXV was CAD$3.61 per share.

Transfer Agent, Warrant Agent and Registrar

The transfer agent and registrar for our Common Shares and Series A Preferred Shares is American Stock Transfer & Trust Company (“Transfer Agent”). The Transfer Agent’s address is 6201 15th Ave, Brooklyn, NY 11219. The warrant agent for the Warrants is also American Stock Transfer & Trust Company.

CERTAIN INCOME TAX CONSIDERATIONS

Certain Material U.S. Federal Income Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition by U.S. Holders (as defined below) of the Series A Preferred Shares offered under this prospectus (the “Offered Shares”) and/or Warrants acquired pursuant to this prospectus. This summary does not address tax consequences to investors who are not U.S. Holders. This discussion does not address all potentially relevant U.S. federal income tax considerations applicable to the ownership or disposition by U.S. Holders of the Offered Shares and/or Warrants acquired pursuant to this Prospectus, and unless otherwise specifically provided, it does not address any state, local

or non-U.S. tax

considerations, or any aspect of U.S. federal tax law other than income taxation (e.g., alternative minimum tax, net investment income tax, estate tax or gift tax). Except as specifically set forth below, this summary does not discuss applicable income tax reporting requirements.

As used herein, the term “U.S. Holder” means a beneficial owner of Offered Shares and/or Warrants that, for U.S. federal income tax purposes, is: (1) a citizen or individual resident of the United States; (2) a corporation (or other entity classified as a corporation for U.S. federal tax purposes) organized under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate whose income is subject to U.S. federal income taxation regardless of its source, or (4) a trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (B) that has elected to be treated as a U.S. person under applicable U.S. Treasury regulations.

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If a partnership (or other entity or arrangement treated as a partnership for U.S. federal tax purposes) holds the Offered Shares and/or Warrants, the tax treatment of a partner in the partnership or other entity or arrangement will generally depend upon the status of the partner and the activities of the partnership. Prospective investors who are partners in partnerships (or other entities or arrangements treated as partnerships for U.S. federal tax purposes) that are beneficial owners of the Offered Shares and/or Warrants are urged to consult their tax advisors regarding the tax consequences of the ownership and disposition of the Offered Shares and/or Warrants acquired pursuant to this Prospectus.

No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (IRS) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of the Offered Shares and/or Warrants. This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and existing and proposed U.S. Treasury regulations, all of which are subject to differing interpretations and changes to any of which subsequent to the date of this Prospectus may affect the tax consequences described herein, possibly on a retroactive basis. This summary is not binding on the U.S. Internal Revenue Service (the “IRS”), and the IRS is not precluded from taking a position that is different from, and contrary to, the discussion set forth in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and U.S. courts could disagree with one or more of the positions taken in this summary.

This summary assumes that the Offered Shares and Warrants are held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment), in the hands of a U.S. Holder at all relevant times. This summary does not purport to address all U.S. federal income tax consequences that may be relevant to a U.S. Holder as a result of the ownership and disposition of the Offered Shares and/or Warrants acquired pursuant to this Prospectus, nor does it take into account the specific circumstances of any particular holder, some of which may be subject to special tax rules, including, but not limited

to, tax-exempt organizations,

partnerships and other pass through entities and their owners, banks or other financial institutions, insurance companies, qualified retirement plans, individual retirement accounts or

other tax-deferred accounts,

persons that hold the Offered Shares as part of a straddle, conversion transaction, constructive sale or other similar arrangements, dealers or traders subject

to mark-to-market taxation

for the Offered Shares, U.S. persons whose functional currency (as defined in the Code) is not the U.S. dollar, U.S. expatriates, persons that acquire their common shares as part of a compensation arrangement, persons that hold the Offered Shares and/or Warrants other than as a capital asset within the meaning of the Code, or persons that own directly, indirectly or by application of the constructive ownership rules of the Code 10% or more of our shares by voting power or by value.

THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE TAX ADVICE TO ANY PROSPECTIVE INVESTOR, AND NO REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR IS MADE. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL

AND NON-U.S. INCOME

AND OTHER TAX CONSIDERATIONS RELEVANT TO THEM, IN ORDER TO TAKE INTO ACCOUNT THEIR PARTICULAR FINANCIAL AND TAX CIRCUMSTANCES.

Treatment of the Company as a Domestic Corporation for U.S. Federal Income Tax Purposes

For U.S. federal income tax purposes, a corporation is generally considered to be a tax resident in the jurisdiction of its organization or incorporation. Accordingly, under the generally applicable U.S. federal income tax rules, the Company, which is incorporated under the laws of Canada, would be classified as

a non-U.S. corporation

(and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. However, Section 7874 of the Code, provides an exception to this general rule, under which

a non-U.S. incorporated

entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and there is limited guidance regarding their application. A number of significant and complicated U.S. federal income tax consequences may result from such classification, and this summary does not attempt to describe all such U.S. federal income tax consequences. Section 7874 of the Code and the Treasury Regulations promulgated thereunder do not address all the possible tax consequences that arise from the Company being treated as a U.S. domestic corporation for U.S. federal income tax purposes. Accordingly, there may be additional or unforeseen U.S. federal income tax consequences to the Company that are not discussed in this summary.

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Under such rules, even though the Company is organized as a Canadian corporation, it will be treated as a U.S. domestic corporation for U.S. federal income tax purposes as a result of the Company’s prior acquisition of a United States target corporation and application of

the so-called “inversion”

rules under Section 7874 of the Code. As such, the Company will be subject to U.S. federal income tax as if it were organized under the laws of the United States or a state thereof. Generally, the Company will be required to file a U.S. federal income tax return annually with the IRS. The Company is also subject to tax in Canada. It is unclear how the foreign tax credit rules under the Code will operate in certain circumstances, given the treatment of the Company as a U.S. domestic corporation for U.S. federal income tax purposes and the taxation of the Company in Canada. Accordingly, it is possible that the Company will be subject to double taxation with respect to all or part of its taxable income. It is anticipated that such U.S. and Canadian tax treatment will continue indefinitely and that the Offered Shares will be treated indefinitely as shares in a U.S. domestic corporation for U.S. federal income tax purposes. The Company’s status as a domestic corporation for U.S. federal income tax purposes has implications for all shareholders, although only the application to U.S. Holders is discussed in this summary. The remaining discussion contained in this “Certain Material U.S. Federal Income Tax Considerations” assumes that the Company will be treated as a domestic corporation pursuant to Section 7874 of the Code.

Allocation of Purchase Price

U.S. Holders will generally allocate the amount paid for Offered Shares and Warrants based on their respective relative fair market values when computing the holder’s basis in the Offered Shares and Warrants for U.S. federal income tax purposes.

Distributions

The Company may pay a dividend on the Series A Preferred Shares. A U.S. Holder that receives a distribution with respect to the securities of the Company generally will be required to include the gross amount of such distribution (before reduction for any Canadian withholding taxes) in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as

a tax-free return

of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s Offered Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s Offered Shares, the remainder will be taxed as capital gain. However, we cannot provide any assurance that we will maintain or provide earnings and profits determinations in accordance with U.S. federal income tax principles. Therefore, U.S. Holders should expect that a distribution will generally be treated as a dividend even if that distribution would otherwise be treated as

a non-taxable return

of capital or as capital gain under the rules described above.

The U.S. dollar value of any distribution on securities of the Company made in Canadian dollars generally should be calculated by reference to the exchange rate between the U.S. dollar and the Canadian dollar in effect on the date of receipt (or deemed receipt) of such distribution by the U.S. Holder regardless of whether the Canadian dollars so received are in fact converted into U.S. dollars at that time. If the Canadian dollars received are converted into U.S. dollars on the date of receipt (or deemed receipt), a U.S. Holder generally should not recognize currency gain or loss on such conversion. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt (or deemed receipt), a U.S. Holder generally will have a basis in such Canadian dollars equal to the U.S. dollar value of such Canadian dollars on the date of receipt (or deemed receipt). Any gain or loss on a subsequent conversion or other disposition of such Canadian dollars by such U.S. Holder generally will be treated as ordinary income or loss and generally will be income or loss from sources within the United States for U.S. foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Distributions made by the Company in respect of its securities to U.S. Holders will be treated as U.S.-source dividends includible in the gross income of a U.S. Holder as ordinary income to the extent of the Company’s current and accumulated earnings and profits, as described above. Subject to applicable limitations and requirements, dividends received on the securities generally should be eligible for the “dividends received deduction” available to corporate shareholders. A dividend paid by the Company to

a non-corporate U.S.

Holder generally will be eligible for preferential rates if certain holding period requirements are met. If a U.S. Holder is subject to Canadian withholding tax on dividends paid on the holder’s securities to the U.S. Holder, the dividends will be considered U.S. source income, which could limit the ability of a U.S. Holder to claim a foreign tax credit for the Canadian withholding taxes imposed in respect of such a dividend. See

“Foreign Tax Credit Limitations”

below.

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Sale, Exchange or Other Disposition of Offered Share and/or Warrants

Upon a sale, exchange or other taxable disposition of a security, a U.S. Holder will generally recognize a capital gain or loss equal to the difference between the amount realized (

i.e

., the amount of cash plus the fair market value of any property received) on such sale, exchange or other taxable disposition (or, if the amount realized is denominated in Canadian dollars, its U.S. dollar equivalent, determined by reference to the spot rate of exchange on the date of the sale, exchange or disposition) and the U.S. Holder’s adjusted tax basis of such security. Such gain or loss will be a long-term capital gain or loss if the U.S. Holder’s holding period in such security exceeds one year. Such gain or loss generally will be considered U.S. source gain or loss for U.S. foreign tax credit purposes, except as otherwise provided in an applicable income tax treaty and if an election is properly made under the Code. Long-term capital gains of

certain non-corporate taxpayers

are eligible for reduced rates of taxation. For both corporate

and non-corporate taxpayers,

limitations apply to the deductibility of capital losses.

To the extent a U.S. Holder pays any Canadian tax on a sale, exchange or disposition of Offered Shares or Warrants, a U.S. foreign tax credit may not be available. See

“Foreign Tax Credit Limitations”

below.

Exercise, Expiration and Disposition of Warrants

A U.S. Holder will not recognize gain or loss upon exercise of a Warrant (except with respect to any cash received in lieu of a fractional Common Share). A U.S. Holder will have a tax basis in the Common Shares received upon the exercise of a Warrant equal to the sum of its tax basis in the Warrant and the aggregate cash exercise price paid in respect of such exercise, less any amount attributable to any fractional Common Share. The holding period of the Common Shares received upon the exercise of a Warrant will commence on the day after the Warrant is exercised, except in the situation where a Warrant is exercised pursuant to a “cashless exercise” feature in which case the holding period of the Common Share may include the period in which the Warrant was held, under certain reporting positions taken by investors under the Code. If a Warrant expires without being exercised, a U.S. Holder will recognize a capital loss in an amount equal to its tax basis in the Warrant.

Upon the sale, exchange or redemption of a Warrant that is not exercised, a U.S. Holder will recognize a gain or loss equal to the difference between the amount realized on the sale, exchange or redemption of the Warrant and the U.S. Holder’s tax basis in such Warrant. Such gain or loss will be long-term capital gain or loss if, at the time of such sale, exchange, or redemption, the Warrant has been held for more than one year. Long term capital gains of individuals (as well as certain trusts and estates) are subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to significant limitations. A U.S. Holder’s gain or loss on the sale, exchange, or redemption of a Warrant will be treated as U.S. source income or loss for U.S. foreign tax credit limitation purposes.

Foreign Tax Credit Limitations

Because the Company is subject to tax both as a U.S. domestic corporation and as a Canadian corporation, a U.S. Holder may pay, through withholding, Canadian tax, as well as U.S. federal income tax, with respect to dividends paid on its securities. For U.S. federal income tax purposes, a U.S. Holder may elect for any taxable year to receive either a credit or a deduction for all foreign income taxes paid by the holder during the year. Complex limitations apply to the foreign tax credit, including a general limitation that the credit cannot exceed the proportionate share of a taxpayer’s U.S. federal income tax that the taxpayer’s foreign source taxable income bears to the taxpayer’s worldwide taxable income. In applying this limitation, items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source.

The status of the Company as a U.S. domestic corporation for U.S. federal income tax purposes will cause dividends paid by the Company to be treated as U.S. source rather than foreign source income for this purpose. As a result, a foreign tax credit may be unavailable for any Canadian tax paid on dividends received from the Company. Similarly, to the extent a sale or disposition securities by a U.S. Holder results in Canadian tax payable by the U.S. Holder (for example, because the Series A Preferred Shares and Warrants constitute taxable Canadian property within the meaning of the Canadian Tax Act), a U.S. foreign tax credit may be unavailable to the U.S. Holder for such Canadian tax. In each case, however, the U.S. Holder may be able to take a deduction for the U.S. Holder’s Canadian tax paid, provided that the U.S. Holder has not elected to credit other foreign taxes during the same taxable year. The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax advisor regarding these rules.

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Information Reporting and Backup Withholding

Dividends on and proceeds from the sale or other disposition of securities may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if (1) the U.S. holder fails to provide an accurate taxpayer identification number or otherwise establish a basis for exemption, (2) the U.S. Holder is notified by the IRS that backup withholding applies, or (3) the payment is described in certain other categories of persons.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.

The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. U.S. Holders should consult with their own tax advisors regarding their reporting obligations, if any, as a result of their acquisition, ownership, or disposition of our Series A Preferred Shares and Warrants.

THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL INFORMATION ONLY. EACH U.S. HOLDER OF OFFERED SHARES OR WARRANTS SHOULD CONSULT ITS TAX ADVISOR AS TO THE CONSEQUENCES OF AN INVESTMENT IN THE COMPANY IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES.

ENFORCEABILITY OF CIVIL

LIABILITIES

DETERMINATION OF OFFERING PRICE

The public offering price for our Series A Preferred Shares and Warrants will be determined through negotiations between us and the representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. We offer no assurances that the initial public offering price will correspond to the price at which our securities will trade in the public market subsequent to this offering or that an active trading market for our securities will develop and continue after this offering.

UNDERWRITING

Maxim Group LLC is acting as the lead managing underwriter and sole book running manager in connection with this offering. Maxim Group and any other underwriter listed in the table below are referred to in this “Underwriting” section collectively as the “Underwriter.” Under the terms and subject to the conditions in the Underwriting Agreement, the Company has agreed to issue and sell and the Underwriter has agreed to purchase, on a firm commitment basis, on the Closing Date, or such other date as the Company and the Underwriter may agree, the number of Series A Preferred Shares and Warrants indicated below at the public offering price per Unit less the underwriting discounts set forth on the cover page of this Prospectus.


Underwriter	Series A Preferred Shares	Warrants
Maxim Group LLC
American Trust Investment Services Inc.

Total

The Underwriting Agreement provides that the underwriter is obligated to purchase all the Series A Preferred Shares and Warrants in the offering if any are purchased, other than those covered by the over-allotment option described below. The Underwriting Agreement also provides that if the underwriter defaults, the offering may be terminated.

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The Offering is being made only in the United States. The Offered Shares will be offered in the United States by the Underwriter either directly or through its duly registered U.S. broker dealer affiliates or agents. Any securities sold by the Underwriter to securities dealers will be sold at the public offering price less a selling concession not in excess of $[ ] per Series A Preferred Share. No securities will be offered or sold to Canadian purchasers, and there will be no solicitations or advertising activities undertaken in Canada in connection with the Offering.

The Units are offered subject to a number of conditions, including:

•

receipt and acceptance of the Units by the Underwriter;

•

the Underwriter’s right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part; and

•

other conditions contained in the Underwriting Agreement, such as the receipt by the Underwriter of officers’ certificates and legal opinions.

Over-Allotment Option

The Company has granted an option to the Underwriter to purchase up to an additional Series A Preferred Shares and/or Warrants to purchase an additional Series A Preferred Shares at the public offering price, less the underwriting discount. The Underwriter may exercise the Over-Allotment Option for 45 days from the Closing Date. If any of these additional Series A Preferred Shares or Warrants are purchased, the Underwriter will offer the additional Series A Preferred Shares or Warrants on the same terms as those on which the securities are being offered.

Underwriting Discounts and Commissions

Series A Preferred Shares and Warrants sold by the Underwriter to the public will initially be offered at the offering price set forth on the cover of this prospectus. Any securities sold by the Underwriter to securities dealers may be sold at a discount of up to 8%, or per Series A Preferred Share, from the public offering price. If all of the securities are not sold at the public offering price, the Underwriter may change the offering price and the other selling terms. Upon execution of the Underwriting Agreement, the Underwriter will be obligated to purchase the securities at the prices and upon the terms stated therein and, as a result, will thereafter bear any risk associated with changing the offering price to the public or other selling terms.

The following table shows the per Series A Preferred Share or Warrant and total underwriting discount the Company will pay to the Underwriter:

Underwriter

Per Series A

Preferred Share

Per

Warrant

Without

Over-

Allotment

Option

With

Over-

Allotment

Option

Public offering price:

Underwriting discounts and commissions payable by us:

Proceeds, before expenses, to us:

Total

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We estimate that the total expenses of the Offering payable by us, not including the underwriting discount, will be approximately USD$[ ]. We have agreed to be responsible and pay for all expenses related to the offering including all filing fees, legal fees and communication expenses relating to the registration of the securities to be sold in the offering (including the over-allotment securities). Upon Maxim’s request, we will provide funds to pay all fees, expenses and disbursements in excess of the USD$25,000 advance provided to Maxim upon execution of the engagement letter for

reasonable out-of-pocket expenses.

The maximum amount of legal fees, costs and expenses incurred by Maxim that we shall be responsible for shall not exceed USD$125,000. The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriter will be returned to the extent that offering expenses are not actually incurred in accordance with Financial Industry Regulatory Authority (“FINRA”) Rule 5110(f)(2)(C).

Discretionary Accounts

The Underwriter does not intend to confirm sales of the securities to any accounts over which it has discretionary authority.

Lock-Up Agreements

Our officers, directors and holders or 3% or more of our outstanding common shares have entered into customary “lock up” agreements in favor of Maxim pursuant to which such persons and entities have agreed, for a period of six months after the offering is completed, that they shall neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any our securities without Maxim’s prior written consent.

Indemnification

We have agreed to indemnify Maxim against certain liabilities, including liabilities under Securities Act, and liabilities arising from breaches of representations and warranties contained in the underwriting agreement and to contribute to payments that the underwriter may be required to make for these liabilities.

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Price Stabilization, Short Positions and Penalty Bids

In connection with this offering, the underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our securities. Specifically, the underwriter may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our shares for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. To close out a short position, the underwriter may elect to exercise all or part of the over-allotment option. The underwriter may also elect to stabilize the price of our shares or reduce any short position by bidding for, and purchasing, shares in the open market.

The underwriter may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing a security in this offering because the underwriter repurchases that security in stabilizing or short covering transactions.

Finally, the underwriter may bid for, and purchase, shares in market making transactions, including “passive” market making transactions as described below.

These activities may stabilize or maintain the market price of our shares at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriter is not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the Nasdaq Capital Market, in

the over-the-counter market, or

otherwise.

In connection with this offering, the underwriter and selling group members, if any, or their affiliates may engage in passive market making transactions in our shares immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:

•

a passive market maker may not effect transactions or display bids for our shares in excess of the highest independent bid price by persons who are not passive market makers;

•

net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker’s average daily trading volume in our shares during a

specified two-month prior period

or 200 shares, whichever is greater, and must be discontinued when that limit is reached; and

•

passive market making bids must be identified as such.

Right of First Refusal

Subject to the closing of this offering and certain conditions set forth in the underwriting agreement, for a period of nine (9) months after the closing of the offering, Maxim shall have a right of first refusal to act as lead managing underwriter and book-runner or minimally as a

co-lead

manager and

co-book-runner

and/or

co-lead

placement agent for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by us, or any of our successors or subsidiaries.

Tail Financing Payments

If we terminate our engagement agreement with Maxim, other than for cause, and we subsequently complete any public or private financing any time during the twelve (12) months after such termination with any investors contacted by Maxim in connection with this offering, then Maxim shall be entitled to receive the same compensation for such offering as it would have been entitled to in connection with this offering.

Other Relationships

From time to time, the Underwriter and/or its affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us for which they would expect to receive customary fees and commissions.

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In addition, in the ordinary course of its business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The Underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

International Selling Restrictions

Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Electronic Distribution

A prospectus in electronic format may be made available on the web sites maintained by the underwriter, or selling group members, if any, participating in this offering and the underwriter may distribute prospectuses electronically. The underwriter may agree to allocate a number of shares to selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriter and selling group members that will make internet distributions on the same basis as other allocations.

Copies of this prospectus in electronic format may be made available on the websites maintained by the Underwriter. In addition, securities may be sold by the Underwriter to securities dealers who resell shares to online brokerage account holders.

Item 13. Other Expenses of Issuance and Distribution

The estimated expenses payable by us in connection with the offering described in this registration statement (other than the placement discounts and commissions) will be as follows. With the exception of the filing fees for the U.S. Securities Exchange Commission, FINRA and Nasdaq, all amounts are estimates.


U.S. Securities and Exchange Commission registration fee	$	5,829.97
FINRA filing fee		9,933.59
Nasdaq listing fee		5,000
Legal fees and expenses		264,000
Accounting fees and expenses		150,000
Transfer agent fees and expenses		5,000
Printing fees and expenses		70,000
Miscellaneous		50,000

Total	$	553,933.59

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LEGAL MATTERS

The validity of the Series A Preferred Shares and certain legal matters relating to the offering as to Canadian law will be passed upon for us by Morton Law LLP. Certain matters as to U.S. federal law in connection with this offering will be passed upon for us by Sichenzia Ross Ference LLP, New York, New York. Fox Rothschild LLP, Minneapolis, Minnesota has acted as counsel for the underwriters with respect to this offering.

EXPERTS

The consolidated financial statements of mCloud Technologies Corp. as of December 31, 2021 and 2020, and for each of the years in the three-year period ended December 31, 2021, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The audit report covering the December 31, 2021 consolidated financial statements contains an explanatory paragraph that states that the Company’s recurring losses from operations and net working capital deficiency raise substantial doubt about the entity’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the Series A Preferred Shares and Warrants offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the Series A Preferred Shares and Warrants offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance, we refer you to the copy of such contract or other document filed as an exhibit to the registration statement.

We are subject to the information and periodic reporting requirements of the Exchange Act, and we file periodic reports, proxy statements and other information with the SEC. These periodic reports, and other information are available for inspection and copying at the website of the SEC referred to above. You may access our annual reports on Form

20-F,

reports on Form

6-K

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at

1-800-SEC-0330

for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is

www.sec.gov.

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mCloud Technologies Corp.

INDEX TO FINANCIAL STATEMENTS

TABLE OF CONTENTS


	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Financial Position as of December 31, 2021 and 2020		F-4
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021 and 2020		F-5
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021 and 2020		F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020		F-9
Notes to the Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019		F-10
Consolidated Statements of Financial Position as of March 31, 2022 and December 31, 2021		F-64
Consolidated Statements of Comprehensive Income for the Periods Ended March 31, 2022 and 2021		F-65
Consolidated Statements of Changes in Equity for the Periods Ended March 31, 2022 and 2021		F-66
Statements of Cash Flows for the Periods Ended March 31, 2022 and 2021		F-67
Notes to the Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2022 and 2021		F-68

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Table of Contents

KPMG LLP

205 5th Avenue SW

Suite 3100

Calgary AB T2P 4B9

Tel (403) 691-8000

Fax (403) 691-8008

www.kpmg.ca

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of mCloud Technologies Corp.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of mCloud Technologies Corp., (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2021 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the each of the years in the three-year period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has had recurring net losses and cash used in operating activities, covenant violations and a net working capital deficiency as of December 31, 2021 that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

/s/ KPMG LLP

Chartered Professional Accountants

Calgary, Canada

April 29, 2022

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Table of Contents

mCloud Technologies Corp.

Consolidated Statements of Financial Position

Expressed in Canadian Dollars



	Notes		December 31, 2021			December 31, 2020

ASSETS

Current assets

Cash and cash equivalents			$	4,588,057		$	1,110,889

Trade and other receivables		6		14,566,975			12,312,814

Current portion of prepaid expenses and other assets		7		2,355,350			1,326,319

Current portion of long-term receivables		6		397,060			445,213

Total current assets			$	21,907,442		$	15,195,235

Non-current assets

Prepaid expenses and other assets		7		622,577			1,011,847

Long-term receivables		6		343,371			2,091,059

Right-of-use assets		8		916,028			3,660,717

Property and equipment		9		649,403			506,387

Intangible assets		10		20,585,833			27,766,839

Goodwill		10		27,081,795			27,086,727

Total non-current assets			$	50,199,007		$	62,123,576

Total assets			$	72,106,449		$	77,318,811

LIABILITIES

Current liabilities

Bank indebtedness		13	$	3,460,109		$	976,779

Trade payables and accrued liabilities		11		12,421,309			12,924,256

Deferred revenue		5		2,811,408			1,771,120

Current portion of loans and borrowings		12		12,447,939			3,431,251

Current portion of convertible debentures		14		22,185,170			–

Warrant liabilities		15		8,880,038			710,924

Current portion of lease liabilities		8		410,674			835,472

Current portion of other liabilities		16		–			6,003,838

Current portion of business acquisition payable		18		1,398,972			1,594,297

Total current liabilities			$	64,015,619		$	28,247,937

Non-current liabilities

Convertible debentures		14		110,540			19,534,988

Lease liabilities		8		634,798			3,109,604

Loans and borrowings		12		767,662			9,721,049

Deferred income tax liabilities		25		2,291,057			4,168,905

Other liabilities		16		–			232,577

Business acquisition payable		18		–			845,232

Total liabilities			$	67,819,676		$	65,860,292

EQUITY

Share capital		19		118,195,363			83,120,611

Contributed surplus				11,040,751			8,518,476

Accumulative other comprehensive income				1,571,998			1,669,596

Deficit				(130,016,073	)		(85,686,366	)

Total shareholders’ equity			$	792,039		$	7,622,317

Non-controlling interest		21		3,494,734			3,836,202

Total equity			$	4,286,773		$	11,458,519

Total liabilities and equity			$	72,106,449		$	77,318,811

Going concern (Note 2); Events after the reporting period (Note 31); Commitments and contingencies (Note 29)

The accompanying notes are an integral part of these consolidated financial statements.

Approved on behalf of the Board of Directors on April

, 2022


“Russ McMeekin”				“Michael Allman”
Director				Director

| Consolidated Financial Statements

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mCloud Technologies Corp.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian dollars except number of shares)



		Year ended December 31,

	Notes	2021			2020			2019

Revenue	4, 5	$	25,596,972		$	26,928,439		$	18,340,249

Cost of sales			(9,683,748	)		(10,281,922	)		(7,583,127	)

Gross profit		$	15,913,224		$	16,646,517		$	10,757,122

Expenses

Salaries, wages and benefits			21,691,774			20,885,044			10,313,803

Sales and marketing			1,377,255			1,536,420			3,166,788

Research and development			3,179,353			1,078,164			498,099

General and administration			8,538,854			5,741,872			3,294,550

Professional and consulting fees			9,085,436			8,886,341			4,351,812

Share-based compensation	20		1,867,915			1,454,235			1,468,361

Depreciation and amortization	8-10		8,924,812			6,778,100			4,044,143

Total expenses		$	54,665,399		$	46,360,176		$	27,137,556
Operating loss		$	38,752,175		$	29,713,659		$	16,380,434

Other expenses (income)

Finance costs	22		8,618,794			6,033,510			3,217,500

Foreign exchange loss (gain)			(267,294	)		1,198,372			494,404

Business acquisition costs and other expenses	17		346,420			1,811,682			9,880,170

Impairment	9,10(a)		–			–			600,657

Fair value loss on derivatives	23		6,040,121			–			–

Other income	24		(7,126,097	)		(2,932,342	)		(167,913	)

Loss before tax		$	46,364,119		$	35,824,881		$	30,405,252

Current tax expense (recovery)	25		157,303			(295,709	)		181,895

Deferred tax (recovery) expense	25		(1,822,109	)		(668,209	)		(2,692,313	)

Net loss for the year		$	44,699,313		$	34,860,963		$	27,894,834

Other comprehensive (income) loss

Foreign subsidiary translation differences			69,460			(1,209,006	)		(607,302	)

Comprehensive loss for the year		$	44,768,773		$	33,651,957		$	27,287,532

Net loss (income) for the year attributable to:

mCloud Technologies Corp. shareholders			44,329,707			36,870,267			29,839,342

Non-controlling interest			369,606			(2,009,304	)		(1,944,508	)

		$	44,699,313		$	34,860,963		$	27,894,834

Comprehensive loss (income) for the year attributable to:

mCloud Technologies Corp. shareholders			44,427,305			35,563,921			29,431,628

Non-controlling interest			341,468			(1,911,964	)		(2,144,096	)

		$	44,768,773		$	33,651,957		$	27,287,532

Loss per share attributable to mCloud shareholders – basic and diluted		$	3.73		$	5.07		$	7.30

Weighted average number of common shares outstanding - basic and diluted			11,898,183			7,272,464			4,085,322

The accompanying notes are an integral part of these consolidated financial statements.

| Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2021 and 2020

(Expressed in Canadian Dollars except number of shares)


	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				9,168,416	$	83,120,611	$	8,518,476		$	1,669,596		$	(85,686,366	)	$	7,622,317		$	3,836,202	$	11,458,519

Share-based payments		20		–		–		1,867,915			–			–			1,867,915			–		1,867,915

RSUs exercised		20		71,190		337,104		(423,277	)		–			–			(86,173	)		–		(86,173)

Broker warrants issued		19(b)		–		–		294,894			–			–			294,894			–		294,894

Shares issued in public offering, net of costs		19(a)		2,300,000		12,395,918		–			–			–			12,395,918			–		12,395,918

Warrants issued in public offering, net of costs		19(a)		–		–		619,796			–			–			619,796			–		619,796

Shares issued in private placement		19(a)		75,676		420,000		–			–			–			420,000			–		420,000

Shares issued on 2021 Debentures conversion, net		19(a)		2,107,787		14,436,728		–			–			–			14,436,728			–		14,436,728

Shares issued in USD public offering, net of costs		19(a)		2,415,000		7,485,002		–			–			–			7,485,002			–		7,485,002

Underwriter warrants issued in USD public offering		19(a)		–		–		162,947			–			–			162,947			–		162,947

Net loss for the year				–		–		–			–			(44,329,707	)		(44,329,707	)		(369,606)		(44,699,313)

Other comprehensive (loss) income for the year				–		–		–			(97,598	)		–			(97,598	)		28,138		(69,460)

Balance, December 31, 2021				16,138,069	$	118,195,363	$	11,040,751		$	1,571,998		$	(130,016,073	)	$	792,039		$	3,494,734	$	4,286,773

| Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2021 and 2020

(Expressed in Canadian Dollars except number of shares)


	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				5,282,904	$	45,368,745	$	7,278,119		$	363,250	$	(48,816,099	)	$	4,194,015		$	1,924,238		$	6,118,253

Share-based payments		20		–		–		1,454,235			–		–			1,454,235			–			1,454,235

RSUs exercised		20(b)		35,877		384,613		(529,006	)		–		–			(144,393	)		–			(144,393)

Stock options exercised		20(a)		7,639		166,400		(96,400	)		–		–			70,000			–			70,000

Warrants exercised				117,977		1,923,118		(427,426	)		–		–			1,495,692			–			1,495,692

Shares issued in business combination - CSA		17(d)		126,737		2,304,073		–			–		–			2,304,073			–			2,304,073

Shares issued in business combination - kanepi		17(e)		867,631		5,882,547		–			–		–			5,882,547			–			5,882,547

Shares issued for transaction costs - kanepi		17(e)		22,064		149,596		–			–		–			149,596			–			149,596

Shares issued for asset acquisition - AirFusion				66,667		820,000		–			–		–			820,000			–			820,000

Shares issued on conversion of 2019 debentures		19(b)		3,333		50,000		24,000			–		–			74,000			–			74,000

Issue of special warrants, net				–		–		12,217,171			–		–			12,217,171			–			12,217,171

Conversion of special warrants				1,222,063		12,217,171		(12,217,171	)		–		–			–			–			–

Settlement of debt with RSUs				–		–		143,002			–		–			143,002			–			143,002

Shares issued in public offering, net of costs				1,415,526		13,854,348		671,952			–		–			14,526,300			–			14,526,300

Net (loss) income for the year				–		–		–			–		(36,870,267	)		(36,870,267	)		2,009,304			(34,860,963)

Other comprehensive (loss) income for the year				–		–		–			1,306,346		–			1,306,346			(97,340	)		1,209,006

Balance, December 31, 2020				9,168,416	$	83,120,611	$	8,518,476		$	1,669,596	$	(85,686,366	)	$	7,622,317		$	3,836,202		$	11,458,519

| Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2021 and 2020

(Expressed in Canadian Dollars except number of shares)


	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				3,030,021	$	19,815,174		$	1,759,217			$ (44,464	)		$ (18,976,757	)	$	2,553,170		$	–		$	2,553,170

Share-based payments		20		–		–			1,468,361			–			–			1,468,361			–			1,468,361

RSUs exercised		20(b)		11,905		142,277			(142,277	)		–			–			–			–			–

Stock options exercised		20(a)		50,838		658,074			(114,825	)		–			–			543,249			–			543,249

Share purchase warrants exercised		18(b)		133,176		1,865,773			(138,571	)		–			–			1,727,202			–			1,727,202

Shares issued on business combination		17(c)		1,200,000		13,320,000			–			–			–			13,320,000			–			13,320,000

Transaction costs on business combination		17(c)		800,000		8,880,000			–			–			–			8,880,000			–			8,880,000

Shares issued to extinguish the loan from Flow Capital		17(a)		50,000		606,495			–			–			–			606,495			–			606,495

Shares issued to settle liabilities		19(a)		6,964		84,252			–			–			–			84,252			–			84,252

Share issuance costs				–		(3,300	)					–			–			(3,300	)		–			(3,300)

Warrants issued				–		–			61,000			–			–			61,000			–			61,000

Equity component of convertible debentures				–		–			3,673,214			–			–			3,673,214			–			3,673,214

Contingent shares issuable to Flow Capital		17(a)		–		–			712,000			–			–			712,000			–			712,000

Non-controlling interest recognized in business combination				–		–			–			–			–			–			(219,858	)		(219,858)

Net (loss) income for the year				–		–			–			–			(29,839,342	)		(29,839,342	)		1,944,508			(27,894,834)

Other comprehensive income for the year				–		–			–			407,714			–			407,714			199,588			607,302

Balance, December 31, 2019				5,282,904	$	45,368,745		$	7,278,119			$ 363,250			$ (48,816,099)		$	4,194,015		$	1,924,238		$	6,118,253

| Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)


			Year ended December 31,

	Notes		2021			2020			2019

Operating activities

Net loss			$	(44,699,313	)	$	(34,860,963	)	$	(27,894,834	)

Items not affecting cash:

Depreciation and amortization		8-10		8,924,812			6,778,100			4,044,143

Share-based compensation		20		1,867,915			1,454,235			1,468,361

Finance costs		22		8,618,794			6,020,636			3,217,500

Fair value loss on derivatives		23		6,040,121			–			–

Impairment				–			–			600,657

Other income		24		(2,675,671	)		(92,535	)		(167,913	)

Provision for expected credit loss		26		1,159,742			223,129			432,073

Unrealized foreign currency exchange gain				(534,993	)		1,034,501			542,016

Business acquisition costs				–			149,596			8,880,000

Current tax expense (recovery)		25		157,303			(295,709	)		181,895

Deferred income tax recovery		25		(1,822,109	)		(668,209	)		(2,692,313	)

Gain on settlement of lease liability				–			–			(99,979	)

Decrease in working capital		30		(1,988,521	)		(904,212	)		(2,131,240	)

Interest paid				(3,377,851	)		(3,535,805	)		(1,992,496	)

Taxes paid				–			(158,564	)		(376,093	)

Net cash used in operating activities			$	(28,329,771	)	$	(24,855,800	)	$	(15,988,223	)

Investing activities

Acquisition of property and equipment		9	$	(625,202	)	$	(127,688	)	$	(138,123	)

Acquisition of and expenditure on intangible assets		10		(438,725	)		(809,764	)		–

Acquisition of royalty agreement		17(a)		–			–			(204,604	)

Acquisition of assets of AirFusion				–			(835,302	)		–

Acquisition of business, net of cash acquired		17		–			(4,622,400	)		(20,389,426	)

Net cash used in investing activities			$	(1,063,927	)	$	(6,395,154	)	$	(20,732,153	)

Financing activities

Payment of lease liabilities		8	$	(1,095,327	)	$	(814,072	)	$	(422,783	)

Repayment of loans		12		(9,781,554	)		(9,011,638	)		(6,787,528	)

Proceeds from loans and bank indebtedness, net of transaction costs		12, 13		13,752,698			8,726,766			16,539,700

Net (repayments) advances of bank indebtedness		13		(1,004,211	)		(495,026	)		1,471,805

Proceeds from issuance of shares, net of issuance costs		19(a)		20,300,920			14,526,300			–

Proceeds from issuance of convertible debentures, net of costs		14		5,424,661			5,285,997			22,865,049

Proceeds from issuance of warrants, net of issuance costs		19(a)		5,415,864			12,217,171			1,727,202

Proceeds from the exercise of stock options, net of issuance costs				–			70,000			543,249

Proceeds from exercise of warrants, net				–			1,495,692			–

Income tax withholding on RSUs				(86,173	)		(144,393	)		–

Net cash provided by financing activities			$	32,926,878		$	31,856,797		$	35,936,694

Increase in cash and cash equivalents			$	3,533,180		$	605,843		$	(783,682	)

Effect of exchange rate fluctuations on cash held				(56,012	)		(24,144	)		(12,922	)

Cash and cash equivalents, beginning of year				1,110,889			529,190			1,325,794

Cash and cash equivalents, end of year			$	4,588,057		$	1,110,889		$	529,190

Supplemental cash flow information (Note 30)

The accompanying notes are an integral part of these consolidated financial statements.

| Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 1 – NATURE OF OPERATIONS

mCloud Technologies Corp. (“mCloud” or the “Company”), is a provider of proprietary technology solutions, AssetCare. Customers use AssetCare software-as-a-service (“SaaS”) and data solutions to ensure assets continuously operate at peak performance. AssetCare is an asset management platform combining IoT, AI and the cloud to drive next-level performance and efficiency. mCloud offers foundational enterprise technology solutions enabling capabilities such as secure communications, connected work, and remote monitoring.

The Company is domiciled in Vancouver, Canada with its head office in Calgary, Alberta and its registered offices located at 550-510 Burrard Street, Vancouver, British Columbia, V6C 3A8.

The Company met the listing requirements of the Nasdaq Stock Market LLC (“NASDAQ”) and received approval to be listed on November 23, 2021. On November 24, 2021, the Company’s shares began trading on the NASDAQ under the stock symbol MCLD in U.S. dollars (Note 31). The Company’s shares also trade on the TSX.V trading in Canadian dollars under the symbol MCLD and on the OTCQB Venture Market under the symbol MCLDF.

NOTE 2 – BASIS OF ACCOUNTING

The consolidated financial statements include the accounts of mCloud, the ultimate parent of the consolidated group, and its subsidiaries and are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), effective as of December 31, 2021.

These consolidated financial statements of the Company were approved by the Company’s Board of Directors and authorized for issue on April 29, 2022.

Basis of preparation

These consolidated financial statements were prepared on a going-concern basis, under the historical cost convention except for derivative financial instruments classified as at fair value through profit or loss. The Company’s accounting policies are described in Note 32 and these policies are consistently applied to all the periods presented.

The Company’s presentation currency is Canadian dollars, and all amounts are presented in Canadian dollars unless otherwise stated. The consolidated financial statements include the accounts of the Company and those of its subsidiaries which are entities over which the Company has control (Note 32(A)).

The Company has reclassified certain comparative figures in the consolidated financial statements to conform to the current year presentation. In addition to the Canadian dollar presentation, certain disclosures include the use of U.S. Dollars (“USD” or “US$”) in describing certain financing transactions.

Share consolidation

On November 19, 2021, the Company initiated a 3-to-1 consolidation of the Company’s issued and outstanding common shares which took effect at market opening on November 24, 2021. This share consolidation was approved by the Company’s shareholders in connection with the Company’s NASDAQ listing. The Company’s issued and outstanding convertible debentures, stock options, warrants and restricted share units were also subject to this share consolidation. The par value of the common shares was not adjusted as a result of this share consolidation. Accordingly, all share and per share amounts for the periods presented in these consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this share consolidation.

Going Concern

The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate the pandemic’s spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the in-person nature of these activities and delay the start of certain projects for a duration of the year. This negatively impacted the Company’s financial performance and liquidity position.

During the year ended December 31, 2021, the Company generated a net loss of $44,699,313 and negative cash flows from operating activities of $28,329,771. At December 31, 2021, the Company had a working capital deficiency of $42,108,177. Working capital deficiency is a non-IFRS measure which is calculated as current assets less current liabilities.

Current liquidity levels and available sources of capital are not adequate to fund the working capital deficiency.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 2 – BASIS OF ACCOUNTING (continued)

Going Concern (continued)

The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of

$23,457,500

if not converted on or before May 31, 2022 (Note 14(a)); loans and borrowings of

$11,763,697

including principal and interest payments; payment of trade and other payables of

$12,421,309

; and payments associated with leases of approximately $1,000,000.

While restrictions started to ease in the three months ended December 31, 2021, there is still uncertainly over how COVID-19 will impact the Company’s business and the timing of future revenues. Based on the Company’s liquidity position at the date of authorization of these consolidated financial statements and considering the uncertainty surrounding the impact of the pandemic, management estimates that it will need additional financing to meet its financial obligations. The Company is currently working with stakeholders and others to address the working capital deficiency. In the long-term, the ability of the Company to operate as a going concern is dependent on its ability to achieve and maintain profitable operations and positive cash flow from operations, and, as necessary, to obtain the necessary equity or debt financing to continue with operations. To date, the Company has funded its operations through debt and equity financing. While the Company has been successful in raising capital in the past and anticipates the lenders will not accelerate repayment of loans with covenant breaches as of December 31, 2021, March 31, 2022 and potential breaches forecasted over the coming year, there is no assurance that it will be successful in closing further financings in the future or obtaining waivers of the covenant breaches.

In making their assessment, management considered all available information, together with forecasts and other mitigating strategies, about the future which is at least, but not limited to, twelve months from the end of the reporting period. Management has considered in its assessment its plans for the repayment of the 2019 Convertible Debentures, the likelihood of repayment of the term loan which has been classified as current (Note 12), the likelihood that undrawn funds under the operating facility will be available (Note 13), the required cash principal and interest payments on indebtedness, and the likelihood of payments required under contingent consideration arrangements. Management also considered available funding under a US$15,000,000 promissory note executed on March 28, 2022, which includes a $5,000,000 loan which was funded on April 1, 2022 but for which its use is restricted (Note 31).

Management also considered cash inflows from current operations, expected government assistance in the form of wage and rent subsidies, and expected increases in revenues and cash flows resulting from new revenue contracts expected over the next 12 months due to the anticipated reduction of COVID-19 related restrictions. Future debt and equity raises have been considered in determining that the going concern assumption remains appropriate.

These consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. These consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In the preparation of the consolidated financial statements and the application of the Company’s accounting policies, management is required to make judgements, estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during each reporting period. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized in the period in which the estimates are revised and in any future period.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

Beginning in March 2020, the COVID-19 pandemic has had a substantial impact on economies around the world. As a result of the uncertainty associated with the unprecedented nature of the pandemic, certain of the Company’s significant assumptions may be impacted. Uncertain environments make estimating several items in the consolidated financial statements more challenging and are likely to result in more frequent changes in management’s expectations about the future. The long-term impact on the Company’s financial results and cash flows is unknown at this time. The Company has received government assistance in Canada, the United States and Australia to help temper the financial impact of COVID-19 (Note 24).

(a)	Critical judgements in applying accounting policies

Judgement is used in situations when there is a choice and/or assessment required by management. Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements, are as follows:

Determination of control of subsidiaries

Judgement is required to determine when the Company has control of subsidiaries. This requires an assessment of the relevant activities of the investee, being those activities that significantly affect the investee’s returns. Despite owning no shares, or having any voting rights, the Company determined that it exercises control over Agnity Global, Inc. (“Agnity”) as the Company has the right to nominate a majority of the members of 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. The Company has the right to receive royalty payments from Agnity on a monthly basis in perpetuity and the Company has credit risk with respect to the collectability of these royalty payments.

Assessment of indicators of impairment of goodwill, long-lived assets and intangible assets

Management reviews goodwill, depreciable long-lived assets and intangible assets for impairment triggers to determine if any events or changes in circumstances exist that would indicate that the carrying amount of an asset may not be recoverable over time. If impairment indicators exist, impairment assessments are conducted as the asset level or level of cash generating units (“CGUs”) as appropriate.

Leases

In measuring the Company’s leases judgement is required to determine the lease term of the contract including whether the Company is reasonably certain to exercise extension options where it is the lessee. A longer lease term results in a larger lease liability and right-of-use asset to be recognized by the Company and future changes in this lease term will result in modifications. In addition, estimates and assumptions are required to determine the incremental borrowing rate used to measure lease liabilities at inception of a lease.

Contingent consideration

Management uses judgement to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. At initial recognition at the date of a business combination and at the end of each reporting period, management also uses judgement to assess the likelihood of the occurrence of one or more future events which impacts the fair value of the contingent consideration.

Determination of CGUs

For the purposes of assessing impairment of goodwill and non-financial assets, the Company must identify CGUs. Assets and liabilities are grouped into CGUs at the lowest level of separately identified cash flows. Determination of what constitutes a CGU is subject to management judgment. The composition of a CGU can directly impact the recoverability of non-financial assets included within the CGU. Management has determined that the Company has two CGUs: Agnity and the rest of mCloud.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

(b)	Key sources of estimation uncertainty

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities and results of operations where a different estimate or assumption is used, are as follows:

Value of components for convertible debt and equity offerings

Determination of stand-alone selling price

The total transaction price of certain revenue contacts is

allocated to each performance obligation on a relative stand-alone selling price (“SSP”) basis, representing the selling price as if it was sold separately. This is a formal process involving judgement which could impact the timing of recognized revenue. In most cases, the SSP is based on observable data. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for perpetual software licenses is highly variable and therefore the Company applies the residual approach (Note 32(C)).

Expected credit loss allowance and provision

The Company recognizes an amount equal to the lifetime expected credit loss (“ECL”) on trade and long-term receivables, other receivables, unbilled revenue and amounts due from related parties for which there has been a significant increase in credit risk since initial recognition. Loss allowances are measured based on historical experience and forecasted economic conditions. The amount of ECL is sensitive to changes in circumstances of forecast economic conditions.

Impairment of goodwill and other non-financial assets

Goodwill is reviewed annually on December 31 or more frequently if changes in circumstances indicate that the carrying value may be impaired. The Company completed its annual impairment testing at December 31, 2021 and determined there was no impairment. Determining whether an impairment has occurred requires the valuation of the recoverable amount of the CGUs as described in Note 10(b).

Share-based payment arrangements

The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to determine the fair value of stock options and other equity instruments where the goods and services cannot be valued. In estimating the fair value, management is required to make certain assumptions and estimates such as the expected life of options, volatility of the Company’s future share price, risk-free rate, future dividend yields and estimated forfeitures at the initial measurement date. Changes in assumptions used to estimate fair value could result in different outcomes.

Business combinations - purchase price allocation

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 3 – CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)

(b)	Key sources of estimation uncertainty (continued)

Taxation

NOTE 4 – SEGMENT REPORTING

The Company’s revenue by location of the ultimate customer or consumer of product solution are as follows:



	Year ended December 31,

	2021		2020		2019

Canada	$	10,733,922	$	13,832,691	$	10,889,542

United States		6,564,271		5,691,202		7,450,707

Japan		5,849,967		6,446,939		–

Australia		993,933		152,301		–

Other		1,454,879		805,306		–

Total revenue	$	25,596,972	$	26,928,439	$	18,340,249

The table below presents significant customers who accounted for greater than 10% of total revenues.



For the years ended December 31,	2021	2020	2019

Customer A	Less than 10%	14 %	n/a

Customer B	Less than 10%	13 %	11 %

Customer C	11 %	Less than 10%	20 %

Customer D	11 %	Less than 10%	n/a

The Company’s non-current assets by country are as follows:



	December 31, 2021		December 31, 2020

Canada	$	30,812,581	$	37,966,772

Australia		10,372,410		11,731,960

United States		9,014,016		12,424,844

Total non-current assets	$	50,199,007	$	62,123,576

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 5 - REVENUE

The Company’s operations and main revenue streams are those described in Note 32(C). All of the Company’s revenue is derived from contracts with customers.

In the following tables, revenue is disaggregated by major service line and timing of revenue recognition.



	Year ended December 31,

	2021		2020		2019

AssetCare initialization 1	$	1,250,181	$	7,689,232	$	5,964,663

AssetCare over time 2		23,461,748		12,809,054		2,939,582

Engineering services 3		885,043		6,430,153		9,436,004

	$	25,596,972	$	26,928,439	$	18,340,249

Revenues from initial implementation and activation of AssetCare projects, including the sale of hardware.

Revenues include sales of subscriptions to AssetCare, other subscriptions, post contract support and maintenance, perpetual software licenses, and installation and engineering services.

Revenues includes consulting, implementation and integration services entered into on a time and materials basis or fixed fee basis without the use of AssetCare.

	Year ended December 31,

Timing of revenue recognition	2021		2020		2019

Over time	$	24,422,749	$	18,551,736	$	12,375,586

At a point in time upon completion		1,174,223		8,376,703		5,964,663

	$	25,596,972	$	26,928,439	$	18,340,249

Significant changes in unbilled revenue and deferred revenue balances are as follows:



	Unbilled revenue			Deferred revenue

Balance at January 1, 2019	$	—		$	133,678

Acquired in business combination (Note 17(c))		2,347,207			133,556

Acquired in business combination (Note 17(b))		—			457,259

Additions		9,595,535			5,309,436

Less: transferred to trade and other receivables		(11,278,312	)		—

Less: recognized in revenue		—			(4,878,419	)

Less: Loss allowance		(5,499	)		—

Effect of movement in exchange rates		—			(17,229	)

Balance at December 31, 2019	$	658,931		$	1,138,281

Acquired in business combination		117,686			–

Additions		11,478,436			6,316,586

Less: transferred to trade and other receivables		(11,557,665	)		–

Less: write-offs		(146,489	)		–

Less: recognized in revenue		–			(5,612,896	)

Less: applied to outstanding trade receivables		–			(30,586	)

Effect of movement in exchange rates		3,841			(40,265	)

Balance at December 31, 2020	$	554,740		$	1,771,120

Additions		7,470,881			10,616,893

Less: transferred to trade and other receivables		(7,269,579	)		–

Less: recognized in revenue		–			(9,585,211	)

Effect of movement in exchange rates		–			8,606

Balance at December 31, 2021 1	$	756,042		$	2,811,408

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.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 6 - TRADE AND OTHER RECEIVABLES AND LONG-TERM RECEIVABLES



	December 31, 2021			December 31, 2020

Trade receivables from contracts with customers	$	14,204,320		$	10,182,229

Unbilled revenue (Note 5)		756,042			554,740

Indirect taxes receivable		148,200			341,583

Income taxes receivable		2,217			594,036

Other receivables		919,954			961,714

Contract asset 1		86,777			153,178

Loss allowance (Note 26(b))		(1,550,535	)		(474,666	)

Total trade and other receivables - current	$	14,566,975		$	12,312,814

At December 31, 2021, the total contract assets were $90,200 with the non-current portion of $3,423 included in other assets (December 31, 2020 - $314,894 total and $161,716 non-current). No new contract assets were recognized and amortization to cost of sales over the life of the contract assets continues to occur until June 30, 2023.

Long-term receivables

Long-term receivables represent receivables associated with revenue contracts whereby certain customers make fixed monthly installment payments over a period of time, ranging from one to three years, for performance obligations delivered upfront. For contracts where all performance obligations were completed except for monthly post contract and support maintenance, amounts due are included in trade receivables from contracts with customers.



	December 31, 2021		December 31, 2020

Current portion of long-term receivables 1	$	397,060	$	445,213

Non-current portion of long-term receivables 2		343,371		2,091,059

Total long-term receivables	$	740,431	$	2,536,272

Net of expected credit loss allowance of $95,064 at December 31, 2021 and

131,364 at December 31, 2020 (Note 26(b)).

Net of expected credit loss allowance of $61,619 at December 31, 2021 and nil at December 31, 2020 (Note 26(b)).

NOTE 7 - PREPAID EXPENSES AND OTHER ASSETS



	December 31, 2021		December 31, 2020

Prepaid insurance	$	348,063	$	122,893

Advances		121,806		38,593

Deposits		862,338		189,734

Prepaid licenses		938,887		1,075,797

Prepaid services		505,448		292,552

Other prepaid costs		197,962		325,481

Other assets		3,423		293,116

Prepaid expenses and other assets	$	2,977,927	$	2,338,166

Current portion	$	2,355,350	$	1,326,319

Non-current portion		622,577		1,011,847

	$	2,977,927	$	2,338,166

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 8 - LEASES

The Company leases buildings for its office space, vehicles and other office equipment. The length of a lease depends on the location of the office, with leases generally ranging from three to five years with an option to renew the lease after that date. The majority of office leases require the payment of variable rent for operating costs and taxes which are not based on an index or rate and are recognized as rent expense. Lease payments for short-term leases and low-value assets are recognized as rent expense on a straight-line basis over the lease term. The maturity analysis of the undiscounted cash flows for lease liabilities is included in Note 26(a).

a) Right-of-use assets

The following table presents the change in carrying amount of the Company’s right-of-use assets:



	Office			Equipment and Vehicles			Total

Balance at January 1, 2019	$	285,086		$	–		$	285,086

Acquired right-of-use assets (Note 17)		4,207,837			95,378			4,303,215

Additions to right-of-use assets		–			183,617			183,617

Depreciation charge for the year		(433,617	)		(48,360	)		(481,977	)

Impairment charge for the year		(78,764	)		–			(78,764	)

Effect of movement in exchange rates		(4,369	)		–			(4,369	)

Balance at January 1, 2020	$	3,976,173		$	230,635		$	4,206,808

Acquired right-of-use assets (Note 17)		509,290			–			509,290

Additions to right-of-use assets		84,413			6,158			90,571

Depreciation charge for the year		(780,767	)		(145,661	)		(926,429	)

Impact of lease modification		(221,590	)		–			(221,590	)

Effect of movement in exchange rates		2,648			(582	)		2,067

Balance at December 31, 2020	$	3,570,167		$	90,550		$	3,660,717

Depreciation charge for the year		(748,058	)		(80,198	)		(828,256	)

Impact of lease modification		(1,924,504	)		–			(1,924,504	)

Effect of movement in exchange rates		8,122			(51	)		8,071

Balance at December 31, 2021	$	905,727		$	10,301		$	916,028

b) Amounts recognized in consolidated statements of loss and comprehensive loss


	Year ended December 31,
	2021		2020		2019

Accretion of lease liabilities included in finance costs	$	137,272	$	350,792	$	168,571

Depreciation of right-of-use assets 1		828,256		926,429		481,977

Expense related to variable lease payments 2		825,212		824,062		–

Expense related to short-term leases 2		4,550		–		–

	$	1,795,290	$	2,101,283	$	650,548

Included in depreciation and amortization expense.

Included in rent expense within general and administrative expense.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 8 - LEASES (continued)

c) Amounts recognized in consolidated statements of cash flows



	Year ended December 31,

	2021		2020		2019

Total cash outflows included in operating activities	$	137,272	$	350,792	$	168,571

Total cash outflows included in financing activities	$	1,095,327	$	814,072	$	422,783

NOTE 9 - PROPERTY AND EQUIPMENT



	Office Furniture and Equipment			Leasehold Improvements			Computer Equipment			Total

Cost:

At January 1, 2019	$	10,117		$	239,555		$	52,966		$	302,638

Additions		30,529			74,641			32,952			138,122

Acquisitions		253,057			64,366			232,175			549,598

Impairment		–			–			(14,460	)		(14,460	)

Effect of movement in exchange rates		(1,339	)		(1,973	)		(6,990	)		(10,302	)

At December 31, 2019	$	292,364		$	376,589		$	296,643		$	965,596

Additions		30,543			–			97,145			127,688

Effect of movement in exchange rates		(917	)		(1,351	)		(6,964	)		(9,232	)

Balance at December 31, 2020	$	321,990		$	375,238		$	386,824		$	1,084,052

Additions		–			–			626,841			626,841

Disposals		(29,459	)		(43,409	)		(124,544	)		(197,412	)

Effect of movement in exchange rates		(504	)		(744	)		(4,588	)		(5,836	)

Balance at December 31, 2021	$	292,027		$	331,085		$	884,533		$	1,507,645

Accumulated depreciation:

At January 1, 2019	$	410		$	13,433		$	13,318		$	27,161

Depreciation		44,729			71,143			123,272			239,144

Effect of movement in exchange rates		(1,321	)		(1,577	)		(8,363	)		(11,261	)

At December 31, 2019	$	43,818		$	82,999		$	128,227		$	255,044

Depreciation		78,289			77,906			175,027			331,222

Effect of movement in exchange rates		(923	)		(1,436	)		(6,242	)		(8,601	)

Balance at December 31, 2020	$	121,184		$	159,469		$	297,012		$	577,665

Depreciation		75,117			73,864			336,765			485,746

Disposals		(29,458	)		(43,409	)		(123,240	)		(196,107	)

Other movements		6,746			–			(6,746	)		–

Effect of movement in exchange rates		(505	)		(744	)		(7,813	)		(9,062	)

Balance at December 31, 2021	$	173,084		$	189,180		$	495,978		$	858,242

Carrying amounts:

Balance at December 31, 2020	$	200,806		$	215,769		$	89,812		$	506,387

Balance at December 31, 2021	$	118,943		$	141,905		$	388,555		$	649,403

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 10 - INTANGIBLE ASSETS AND GOODWILL

a) Intangible assets



	Patents and trademarks			Customer relationships			Technology			Total

Cost:

At January 1, 2019	$	192,032		$	2,118,739		$	1,590,958		$	3,901,729

Additions		–			–			–			–

Acquisitions		–			14,168,830			10,212,390			24,381,220

Effect of movements in exchange rates		(9,374	)		(46,579	)		(47,366	)		(103,319	)

Balance at December 31, 2019	$	182,658		$	16,240,990		$	11,755,982		$	28,179,630

Additions		–			–			2,333,666			2,333,666

Acquisitions		–			3,434,334			3,846,189			7,280,523

Effect of movements in exchange rates		(2,957	)		(38,494	)		(32,016	)		(73,467	)

Balance at December 31, 2020	$	179,701		$	19,636,830		$	17,903,821		$	37,720,352

Additions		–			–			440,965			440,965

Effect of movement in exchange rates		(343	)		(3,217	)		1,556			(2,004	)

Balance at December 31, 2021	$	179,358		$	19,633,613		$	18,346,342		$	38,159,313

Accumulated amortization and impairments:

At January 1, 2019	$	51,238		$	333,430		$	349,188		$	733,856

Amortization 1		36,564			1,668,090			1,618,368			3,323,022

Impairment		–			–			507,433			507,433

Effect of movements in exchange rates		(3,219	)		(23,895	)		(28,656	)		(55,770	)

Balance at December 31, 2019	$	84,583		$	1,977,625		$	2,446,333		$	4,508,541

Amortization 1		35,243			2,696,767			2,753,602			5,485,612

Effect of movements in exchange rates		(3,078	)		(19,774	)		(17,788	)		(40,640	)

Balance at December 31, 2020	$	116,748		$	4,654,618		$	5,182,147		$	9,953,513

Amortization 1		32,073			3,099,234			4,479,503			7,610,810

Effect of movement in exchange rates		85			3,820			5,252			9,157

Balance at December 31, 2021	$	148,906		$	7,757,672		$	9,666,902		$	17,573,480

Carrying amounts:

Balance at December 31, 2020	$	62,953		$	14,982,212		$	12,721,674		$	27,766,839

Balance at December 31, 2021	$	30,452		$	11,875,941		$	8,679,440		$	20,585,833

Amortization charges are included in depreciation and amortization in the consolidated statements of loss and comprehensive loss.

b) Goodwill

Goodwill is tested for impairment on an annual basis at December 31, and when there are indicators the carrying amount may be impaired. In reviewing indicators of impairment, the Company considers the relationship between its market capitalization and its book value, among other qualitative and quantitative factors. At December 31, 2021, the Company had two CGUs, mCloud Technologies Corp. and Agnity (December 31, 2020 - two CGUs). Goodwill is all allocated to mCloud Technologies Corp. as this CGU benefits from prior business combinations. Furthermore, the Company has no ownership of the Agnity CGU but instead 100% non-controlling interest and this CGU does not include goodwill. The carrying amount of goodwill is as follows:

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 10 - INTANGIBLE ASSETS AND GOODWILL - (continued)



	December 31, 2021		December 31, 2020

Opening balance	$	27,086,727	$	18,758,975

Acquisitions, business combinations (Note 18)		–		8,405,341

Effect of movements in exchange rates		(4,932)		(77,589)

Total goodwill	$	27,081,795	$	27,086,727

The recoverable amount of the mCloud CGU was determined using fair value less costs of disposal (“FVLCD”) with reference to the market capitalization of the Company. The impairment test of goodwill at December 31, 2021, concluded that the recoverable amount exceeded the carrying amount of the CGU, including goodwill, and as such no goodwill impairment existed. At December 31, 2021, the enterprise value implied by market capitalization of the Company was $146,500,000 compared to a net asset carrying value of $36,160,000.

NOTE 11 - TRADE PAYABLES AND ACCRUED LIABILITIES



	December 31, 2021		December 31, 2020

Trade payables	$	5,591,316	$	5,903,789

Accrued liabilities		5,398,389		4,795,742

Interest payable		233,854		425,054

Mastercard facility (Note 13)		296,669		600,590

Due to related parties (Note 28)		265,074		846,228

Income taxes payable		266,753		21,752

Indirect taxes payable		150,577		242,703

Other		218,677		88,398

Total trade payables and accrued liabilities	$	12,421,309	$	12,924,256

NOTE 12 - LOANS AND BORROWINGS

The carrying value of loans and borrowings by entities controlled by the Company are as follows:



	December 31, 2021		December 31, 2020

Term loan	$	9,275,683	$	10,928,055

Nations Interbanc facility		2,639,143		1,137,360

Debenture payable to Industry Canada		26,412		76,227

Loan payable to related party 1		335,860		318,428

Oracle financing 2		826,418		427,250

Other loans and financing		112,085		264,980

Total 3	$	13,215,601	$	13,152,300

Current		12,447,939		3,431,251

Non-current		767,662		9,721,049

	$	13,215,601	$	13,152,300

Loan assumed as part of CSA Acquisition (Note 17(d)) which bears interest at 6% and matures in January 2023. Interest is payable annually and accrued interest is included in trade payables and accrued liabilities.

Financing arrangements provided by Oracle Credit Corporation (“Oracle”) bearing interest between 6.2% and 6.6%. Interest is due in quarterly installments with loans maturing in May 2023 and February 2024. During the year ended December 31, 2021, proceeds from additional funding received was $577,378 (December 31, 2020 - $495,944)

Note 30(b) includes the reconciliation of movements of liabilities to cash flows arising from financing activities.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 12 - LOANS AND BORROWINGS (continued)

Term loan

In 2019, a subsidiary of the Company, mCloud Technology Services Inc. (“MTS”), entered into a term loan facility with Fiera Private Debt Fund VI LP (“Fiera”, formerly Integrated Private Debt Fund VI LP) in the amount of $13,000,000. The term loan payments are blended payments of principal and interest until maturity in August 2026 and the loan is secured against the assets of MTS. The Company and certain subsidiaries are guarantors.

On November 9, 2021, the Company amended its term loan and amended the associated intercreditor agreement between Fiera, ATB Financial (“ATB”) and the Company. The intercreditor agreement determines the priority of security interests in the case of default, with Fiera having first priority on all assets other than accounts receivable (Note 13). The amendments to the term loan include: increase in interest rate from 6.85% to 7.5% per annum; certain changes to financial covenants which are applicable for the period from July 1, 2021 to December 31, 2022; and, the addition of two mCloud subsidiaries as additional guarantors.

The principal amount of the loan and the maturity date of August 7, 2026 remained the same. During the year ended December 31, 2021 there were $2,343,036 of principal and interest payments made. A modification loss associated with this change in terms of $138,908 is included in finance costs in the consolidated statement of loss for the year ended December 31, 2021 with an offsetting increase in the carrying value of the term loan. Transaction costs of $191,310 were incurred and are netted against the carrying value of the term loan.

Breach of loan covenants

The term loan contains covenants with quarterly and quarter end metrics. For the quarter ended December 31, 2021, the Company did not meet certain minimum covenants and therefore the term loan is due on demand and has been classified as current until such time as the covenants are in compliance. For the quarter ended March 31, 2022, the Company continued not to meet certain minimum covenants and did not receive a waiver from the lender.

Nations Interbanc facility

Under a factoring and security agreement with Nations Interbanc (“Nations”), Agnity, an entity controlled by the Company, receives advances up to a maximum of US$2,000,000 at any one time from Nations for providing them the right to collect cash flows from factored accounts receivable and charges a fee for this service. This is a financing agreement and the accounts receivables factored still carry credit risk, are not sold, and are not derecognized from Agnity’s statement of financial position. Nations advances funds up to a value of 85% of the accounts receivables factored. Nations charges a factoring fee of 1.5% of the gross face invoice amount for the first 30 days and a daily proration of 0.06% per day thereafter. The amount of funds advanced varies and is dependent on the cash requirements of Agnity. During the year ended December 31, 2021, Nations advanced $9,246,693 and Agnity repaid $7,954,698 of this balance.

NOTE 13 – BANK INDEBTEDNESS



	December 31, 2021		December 31, 2020

ATB Financial revolving operating facility	$	3,460,109	$	–

Operating loan facility 1		–		923,461

Bank overdraft 1		–		53,318

Total	$	3,460,109	$	976,779

At December 31, 2020, the Company had access to an operating loan facility and Mastercard facility. On April 15, 2021, the operating loan facility was repaid and closed. The Mastercard facility remains in place and at December 31, 2021, $296,669 was drawn (December 31, 2020 - $600,590) and this amount is included in trade payables and accrued liabilities on the consolidated statements of financial position. The bank overdraft at December 31, 2020 was repaid in October 2021.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 13 – BANK INDEBTEDNESS (continued)

ATB Financial Facility

On May 17, 2021, one of the Company’s subsidiaries executed a commitment letter for a $5,000,000 secured revolving operating facility with ATB which is a financial institution wholly owned by the Province of Alberta. The facility is available by way of a variety of instruments. On June 24, 2021, $2,500,000 was drawn which was the maximum amount under the intercreditor agreement with Fiera at that time. The facility is due on demand, bears interest at the prime rate plus 2% per annum with interest and fees due at the end of each month and may be prepaid without penalty.

On November 8, 2021, the Company and ATB amended the commitment letter between the parties governing the revolving operating facility. The amendment added an accordion feature which allows the Company to request ATB to increase the maximum principal amount of the facility from $5,000,000 to $10,000,000, funded in increments of $1,250,000, subject to certain requirements and approval from Fiera and ATB under an intercreditor agreement.

The facility is subject to certain reporting and financial covenants. The Company was in compliance with these covenants at December 31, 2021. The facility is secured against certain assets of the Company and its principal subsidiaries. In addition, the Company and certain of its subsidiaries have provided an unlimited guarantee for repayment of all amounts due under the facility. As part of the commitment letter amendment, the Company agreed to issue warrants to ATB (Note 15).

On November 9, 2021, Fiera, ATB and the Company amended the intercreditor agreement which allows the Company to draw the full $5,000,000 of the facility subject to a limit which is equal to the lesser of $5,000,000 and the aggregate of eligible accounts receivable less priority payables as defined in the agreement. An additional $950,000 was drawn under the facility on November 12, 2021. At December 31, 2021, as a result of the Fiera covenant breach ATB has the ability to restrict further advances under the ATB facility.

NOTE 14 – CONVERTIBLE DEBENTURES



	December 31, 2021		December 31, 2020

2019 Convertible debentures liability (a)	$	22,185,170	$	19,534,988

2021 Convertible debentures liability (b)		69,034		–

2021 Convertible debentures embedded derivative (b)		41,506		–

Total	$	22,295,710	$	19,534,988



Current debentures	$	22,185,170	$	–

Non-current debentures		110,540		19,534,988

	$	22,295,710	$	19,534,988

a)	2019 Convertible debentures



	December 31, 2021		December 31, 2020

Opening balance	$	19,767,472	$	17,753,016

Conversion of debentures into common shares		–		(50,000)

Interest paid		(2,345,750)		(2,345,750)

Accreted interest at effective interest rate		4,958,927		4,410,206

Carrying amount of liability component	$	22,380,649	$	19,767,472

Less: interest payable		(195,479)		(232,484)

Total	$	22,185,170	$	19,534,988

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 14 – CONVERTIBLE DEBENTURES (continued)

a)	2019 Convertible debentures (continued)

In July 2019, the Company completed a private placement offering of convertible unsecured subordinated debentures (the “2019 Debentures”) for total aggregate gross proceeds of $23,507,500

and net cash proceeds of $22,865,049.

The 2019 Debentures bear interest at a rate of 10% per annum, paid quarterly, and mature on May 31, 2022, at which time the outstanding principal amount of $23,457,500 and any unpaid interest is repayable in cash if the 2019 Debentures have not been converted at the option of the holder or otherwise extinguished.

The principal amount of the 2019 Debentures is convertible into 1,563,833 units of the Company at the option of the holder at any time prior to maturity at a conversion price of $15.00 per unit. Each unit is comprised of one common share and one share purchase warrant. Each warrant is exercisable to acquire one common share at an exercise price of $22.50 until June 2024.

b)	2021 Convertible debentures

Issuance of Convertible Debentures

On December 7, 2020, the Company commenced efforts to raise an aggregate of US$10,000,000 through a private placement offering (the “Offering”) of convertible unsecured subordinated debentures (the “2021 Debentures”) at a price of US$100 per debenture. At December 31, 2020, total proceeds of $5,285,997 (US$4,146,825) had been received associated with two tranches of the Offering; however, as the debenture certificates were not yet issued the proceeds were recorded as other liabilities in the consolidated statement of financial position at December 31, 2020 (Note 16).

The Offering closed in six tranches between December 7, 2020 and May 25, 2021 with total gross proceeds of $11,328,870 (US$8,884,000). Each tranche had a specific maturity date and USD conversion price which was set at the date of close. The conversion prices ranged between $4.11 (US$3.42) and $8.28 (US$6.60) depending on the tranche.

Up until the date of conversion as described below under

Conversion of Convertible Debentures

, the maturity date of the 2021 Debentures was 36 months following the closing date of the applicable tranche. The principal amounts of the 2021 Debentures were convertible into common shares at the option of the holder at any time prior to maturity at the calculated conversion price stated in the debenture. The 2021 Debentures bore interest at 8% per annum, payable, at the option of the Company, in cash or common shares of the Company calculated in accordance with the debenture agreement which considered such factors as the price of the common stock on the TSX.V converted into USD at the date of record. The Company elected to pay all accrued interest in common shares which were issued on the conversion date.

On initial recognition, the 2021 Debentures included a host liability and embedded derivative conversion option. The fair value of the embedded derivative was determined first, with the residual amount of the total fair value of the convertible debentures allocated to the host liability. The host liability was classified as a financial liability recognized at amortized cost and the embedded derivative conversion option was an embedded derivative classified as fair value through profit or loss (“FVTPL”). The fair value measurement is further described in Note 26(b) - Financial Instruments under

Valuation methodologies used in the measurement of fair value for Level 3 financial liabilities.

Conversion of Convertible Debentures

On July 12, 2021, the Company announced that it had entered into Debt Conversion and Exchange Agreements (“Conversion Agreements”) with holders of more than 99.2% of the outstanding principal amount of the 2021 Debentures subject to a number of conditions including TSX.V approval. The Conversion Agreements provided for certain changes in terms including a reduced conversion price on certain tranches of the 2021 Debentures and the addition of a common share purchase warrant for each common share to be issued upon conversion.

On August 13, 2021, the Company received TSX.V approval and issued an aggregate of 2,107,787 common shares and 2,107,787 common share purchase warrants (Note 19(a)) to extinguish 99.2% of the principal and accrued interest thereon to the date of the Conversion Agreements.

The following reconciliation includes: (a) the original issuance of and accounting for the convertible debentures up to July 12, 2021; (b) the derecognition of the host liability and embedded derivative on July 12, 2021 as the change in terms of the agreement was determined to be a substantial modification and resulted in recognition of a new financial liability at this date; (c) the extinguishment of the amount due under the 2021 Debentures on August 13, 2021 in exchange for common shares and warrants; and (d) the accounting for the remaining debenture which was not converted. The warrants issued continue to be financial liabilities of the Company as further described in Note 15.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 14 – CONVERTIBLE DEBENTURES (continued)

b)	2021 Convertible debentures (continued)



	December 31, 2021

Proceeds from issue of convertible debentures	$	11,328,870

Fair value adjustments (Note 23)		1,615,102

Total fair value of convertible debentures		12,943,972

Less: fair value of embedded derivative		(5,060,776	)

Less: transaction costs 1		(660,604	)

Carrying value of liability at inception		7,222,592

Interest expense associated with liability		813,615

Debt extinguishment, including interest payable		(7,735,230	)

Foreign exchange adjustments		(224,286	)

		76,691

Less: accrued interest included in accrued liabilities		(7,657	)

Carrying value of liability at end of period 2	$	69,034

Total transaction costs were $1,061,854 which include cash compensation paid to brokers and the value of 115,760 broker warrants issued. Transaction costs of $401,250 allocated to the embedded derivative portion of the convertible debentures were expensed in finance costs in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021.

Convertible debt in the principal amount of US$75,000 which matures January 2024, bears interest at 8% per annum and is convertible to the Company’s shares at a conversion price of $5.84 (US$4.59).



	December 31, 2021

Fair value of embedded derivative at inception	$	5,060,776

Fair value decrease 1		(784,261	)

Derecognition of embedded derivative on conversion		(4,214,198	)

Foreign exchange adjustments		(20,811	)

Balance, embedded derivative	$	41,506

The fair value of the embedded derivative is remeasured at the end of each reporting period and on conversion and recognized in fair value (gain) loss on derivatives in the consolidated statements of loss and comprehensive loss (Note 23).

NOTE 15 - WARRANT LIABILITIES



	December 31, 2021		December 31, 2020

Derivative warrant liabilities - 2021 Debentures (a)	$	1,868,541	$	–

Derivative warrant liabilities - USD equity financing (b)		6,106,596		–

Warrant liability related to business acquisition (c)		709,835		710,924

Other warrant liability (c)		195,066		–

Total, all current	$	8,880,038	$	710,924

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 15 - WARRANT LIABILITIES (continued)

Derivative

warrant liabilities

The Company issued warrants in conjunction with debt and equity transactions. Certain of these warrants are classified as derivatives which are recognized as financial liabilities. The estimated fair value of the derivative warrant liabilities has been calculated using the Black-Scholes model. At the issuance date and each reporting date until warrants are exercised, the fair value of the liability is remeasured, with changes in the fair value recorded as gains or losses in the consolidated statements of loss and comprehensive loss.

In conjunction with the USD equity offering described at (b) below, the Company agreed to list the warrants issued as part of the unit offering on the NASDAQ. On February 15, 2022, these warrants commenced trading under the symbol MCLDW (Note 31).

Derivative warrant liabilities are classified as a Level 3 fair value measurement as further described in Note 26. There were no exercises of the warrants described below since issuance.

a) Warrants associated with 2021 Debentures

On August 13, 2021, the Company issued 2,107,787 common share purchase warrants in conjunction with the conversion and extinguishment of the 2021 Debentures (Note 14(b); 19(b)). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$6.87 and mature in August 2024. The fair value of the warrants at August 13, 2021 was $5,947,689.

At December 31, 2021, the warrants were remeasured at a fair value of $1,868,541 and the Company recorded a gain on remeasurement since initial recognition of $4,177,825. The Black-Scholes model inputs and assumptions include:



	December 31, 2021		August 13, 2021

Share price at date of valuation	$	6.18	$	6.90

Exercise price	$	8.74	$	8.74

Risk free rate		0.88 %		0.43 %

Expected life (years)		2.62		3.00

Expected volatility 1		45.0 %		71.5 %

Fair value per warrant 2	$	0.89	$	2.82

Expected volatility at December 31, 2021 measured at implied volatility of traded warrants.

Considers a liquidity discount of 20% in determining the fair value per warrant as these warrants are not publicly traded.

b) Warrants associated with USD equity financing

On November 29, 2021, the Company issued 2,415,000 common share purchase warrants in conjunction with the November 2021 USD unit offering (Note 19). The common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$4.75 and mature five years after issuance. The fair value of the warrants at issuance was $5,302,004 (US4,158,396) and at December 31, 2021, the remeasured fair value was $6,106,596. The Black-Scholes model inputs and assumptions include:



	December 31, 2021		November 29, 2021

Share price at date of valuation	$	6.18	$	5.70

Exercise price	$	6.04	$	6.05

Risk free rate		1.25 %		1.18 %

Expected life (years)		4.92		5.00

Expected volatility 1		45.0 %		45.0 %

Fair value per warrant	$	2.53	$	2.19

Expected volatility at represents implied volatility of the Company’s traded warrants.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 15 - WARRANT LIABILITIES (continued)

c)	Other warrant liabilities

Warrant liability related to business acquisition

- Associated with the acquisition of Agnity, the Company assumed a warrant liability whereby the holder of the warrant has the option to convert the warrant into shares of Agnity, not the Company, by April 15, 2022, or receive a cash payment of US$552,250 at any time before the expiry of the warrant. The liability is measured at the Canadian dollar equivalent to its cash redemption amount which varies as a function of movements in exchange rates.

Warrant liability related to ATB Financial

- At December 31, 2021, the Company had an obligation to issue warrants to ATB (Note 13). The fair value of the warrants was measured at the date the services were received in the amount of $195,066. On January 17, 2022, the Company issued 183,486 share purchase warrants to ATB to purchase an equivalent number of common shares of the Company at an exercise price of $5.45 per share, maturing one year from date of issuance (Note 31).

NOTE 16 - OTHER LIABILITIES



	December 31, 2021		December 31, 2020

US Government loans	$	–	$	950,418

2021 Debentures subscriptions payable (Note 14(b))		–		5,285,997

Total	$	–	$	6,236,415

Current portion 1	$	–		6,003,838

Non-current portion		–		232,577

	$	–	$	6,236,415

Includes US Government loans of $717,841 at December 31, 2020. These forgivable loans are considered to be government grants when there is reasonable assurance that they will be forgiven.

During the year ended December 31, 2021, the Company received two additional US Government loans as part of the Paycheck Protection Program (“PPP”) totaling $840,845 (US$668,689), each bearing interest at 1% per annum with maturity dates in February and May 2026. During the year ended December 31, 2020, the Company received four PPP US Government loans totaling $1,120,139 (US$805,246). A portion or the entirety of the amounts funded may be forgiven if all the funds are used for qualifying expenses which include payroll costs, rent and utility costs, and employment and compensation levels are maintained. The Company has used the entire loan amounts for qualifying expenses and as such expects these loans will be forgiven and no principal or interest payments will be made. During the year ended December 31, 2021, five government loans were forgiven resulting in $1,825,237 being included in other income (Note 24).

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS

a)	Acquisition of Royalty interests

On January 22, 2019, the Company executed a Purchase Agreement with Flow Capital Corp. (“Flow”) pursuant to which the Company acquired Flow’s interest in a Royalty Purchase Agreement (“Royalty Agreement”) with Agnity Global, Inc. (“Agnity”). According to the Purchase Agreement, the Company assumed the Royalty agreement and acquired an interest in a financial asset with the following characteristics:

a receivable owing by Agnity to Flow of USD $2,834,750;

ii.

a monthly royalty payment stream until October 31, 2020 equal to the greater of:

•

A monthly amount of USD $41,667; or

•

4.25% of Agnity’s revenue for each calendar month; and

iii.

commencing November 1, 2020, a monthly royalty payment stream equal to 4.25% of Agnity’s revenue for each calendar month in perpetuity.

The Royalty Agreement includes a formula by which the royalty percentage is proportionately adjusted for any subsequent further advances to or repayments from Agnity.

As consideration for acquiring the interest in the Royalty Agreement, the Company paid $204,604 (USD $153,227) in cash at the closing date and entered into the following agreements with Flow:

(i)

A secured loan agreement for USD $2,000,000. The loan bears interest at 25% per annum and is due on demand. The Company had the option to repay 100% of the loan, at any time, by paying an amount equal to the principal of the loan and any unpaid interest. Upon prepayment of the loan, the Company, at the option of Flow (the “Flow’s option”), was obligated to pay either:

•

Cash of USD $525,000; or

•

Issue 50,000 common shares of the Company (“repayment shares”)

The fair value of the loan was initially determined to be $2,670,600 (USD $2,000,000) which is equivalent to its face value as it is due on demand. It is classified as other financial liabilities and subsequently measured at amortized cost. The fair value of Flow’s option to receive either USD $525,000 in cash or repayment shares upon prepayment of the loan by the Company was determined to be USD $606,495 on initial recognition. The option was accounted for as a compound instrument which includes a liability component of USD $525,000 and an equity conversion option of USD $81,495. The liability component was classified as other financial liabilities and subsequently measured at the amortized cost while the equity component was accounted for as an equity instrument in contribute surplus. The Company used the Black-Scholes option model to determine the fair value of the option using the following inputs at January 22, 2019:


Share price		$10.50
Risk free rate		1.90%
Expected life		0.5 years
Expected volatility		60.00%
Expected dividends		Nil

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

a)	Acquisition of Royalty interests (continued)

On July 26, 2019, the Company settled the USD $2,000,000 loan and Flow’s option in cash of $2,703,148 and the issuance of 50,000 common shares. The value attributable to the option of USD $606,495 was reclassified from liabilities and contributed surplus to share capital (note 19a)).

(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:

•

$30.00, 50,000 common shares will be issued;

•

$60.00, 33,333 common shares will be issued;

•

$90.00, 33,333 common shares will be issued.

The fair value of these shares issuable to Flow was determined to be $712,000 on initial recognition. They are accounted for as equity instruments and recorded in contributed surplus. The Company used Black-Scholes option model to determine the fair value of these shares using the following inputs at January 22, 2019:


Barrier share price		$30 - $90
Risk free rate		1.90%
Expected life		6 years
Expected volatility		80.00%
Expected dividends		Nil

As of December 31, 2021, 2020 and 2019, none of the share trading price thresholds noted above have been met.

b)	Acquisition of Agnity

On April 22, 2019, the Company executed an amending agreement with Agnity to modify the terms of the Royalty Agreement acquired. Pursuant to the amending agreement, both parties agreed to establish an Operations Committee for which at all times the Company has the right to nominate a majority of the members. As consideration for the amendment, the Company agreed to fix the royalty payment at US$10,000 per month commencing March 2019 and to assume $43,050 of Agnity’s liabilities payable to a third party.

Pursuant to the amending agreement the Company determined that it had obtained control over Agnity and its subsidiaries pursuant to IFRS 10

Consolidated Financial Statements

. The Company considered several factors in determining if and when it gained control over Agnity including, if it had the right and ability to direct the relevant activities of the entity, the ability to significantly affect its returns through the use of its rights, and whether it had exposure to variable returns.

Factors evaluated included, but were not limited to, delegation of power by Agnity’s Board for the Company to direct Agnity’s relevant activities through the formation and activities of the Operations Committee controlled by the Company. Determination of whether the Company has obtained control over Agnity involves judgement based on interpretation of the amending agreement with Agnity and identification and analysis of the relevant facts. In addition, judgement was required to determine if the acquisition represented a business combination or an asset purchase. The Company determined that Agnity and its related subsidiaries represented a business as the assets were an integrated set of activities with inputs, processes and outputs.

Accordingly, the acquisition of Agnity is accounted as a business combination effective on April 22, 2019 using the acquisition method in accordance with IFRS 3

Business Combinations

. Given the Company owns nil voting interests in Agnity, the non-controlling interest is measured at the 100% of the acquired net identifiable assets of Agnity.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

b)	Acquisition of Agnity (continued)

Agnity develops and sells software applications and technology services that enable telecommunication service providers, network equipment manufacturers and enterprises to design, develop, and deploy communication-centric application solutions on a world-wide basis. Taking control of Agnity has enabled the Company to gain access to Agnity’s patented technology and its customer base. In addition, Agnity’s communication platform ensures that AssetCare™ deployments around the globe are assured of connectivity, supported by Agnity telecommunication solutions.

The following table summarizes the acquisition-date fair value of each major class of consideration transferred, the recognized amounts of the identifiable assets acquired, and liabilities assumed, and the resulting measurement of 100% NCI recorded by the Company at the date of acquisition:



Consideration transferred:		Final

Change in fair-value of interest in Royalty Agreement (i)	$	167,488

Assumption of Agnity’s liabilities		43,050

Total consideration transferred	$	210,538

(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 16%.



Fair value of assets and liabilities recognized:		Final

Cash and cash equivalents	$	33,524

Trade and other receivables		1,387,723

Prepaid expenses and deposits		46,483

Long term receivable		–

Property and equipment		1,281

Intangible Asset – Technology		8,412,390

Intangible Asset – Customer Relationship		1,468,830

Accounts payable and accrued liabilities		(3,232,910	)

Deferred revenue		(457,259	)

Loans and borrowings		(5,556,587	)

Warrant liability (i)		(737,419	)

Due to related party		(930,608	)

Deferred income tax liability		(444,768	)

Net identifiable assets acquired (liabilities assumed)		(9,320	)

Allocation to non-controlling interest	$	219,858

(i)

A warrant was issued by Agnity in 2015 which entitles the warrant holder to acquire 6,324,660 common shares of Agnity at the exercise price of $0.000036 per share at any time until April 15, 2022. The exercise price of the warrant is subject to certain anti-dilution adjustment provisions in the event of certain capital or business transactions. The warrant holder has the option to demand a cash settlement of the warrant for US$552,250 at any time prior to its expiry date if the warrant is not exercised. It is classified as other financial liabilities and measured at its redemption amount of US$552,250 or $737,419 in Canadian dollars on acquisition date, which is equivalent to its assessed acquisition date fair value. The fair value in Canadian dollar equivalent as at December 31, 2021 was $709,835 (December 31, 2020 - $710,924; December 31, 2019 - $725,086).

There have been no adjustments to the preliminary purchase price allocation recognized at December 31, 2019 in the period ended December 31, 2020.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

b)	Acquisition of Agnity (continued)

There are

acquisition costs associated with this transaction as the business combination with Agnity was effected by way of assessed control in accordance with IFRS

and

c)	Acquisition of mCloud Technologies Services Inc.

On July 10, 2019, the Company closed a series of merger and acquisition transactions resulting in the acquisition of 100% control of mCloud Technologies Services Inc. (“MTS”), formerly known as Autopro Automation Consultants Ltd. (“Autopro”). The acquisition was completed by way of an amalgamation between 2199027 Alberta Ltd., a subsidiary of the Company, and Fulcrum Automated Technologies Ltd. (“Fulcrum”), an entity established to facilitate the acquisition, with the amalgamated entity being a wholly owned subsidiary of the Company, named Autopro Automation Ltd. Immediately prior to the amalgamation, Fulcrum acquired MTS. The consideration transferred to the original shareholders of MTS included cash, issuance of promissory notes and 1,200,000 common shares of the Company.

MTS is a professional engineering and integration firm that specializes in design and implementation of industrial automation solutions, focusing on Canadian oil and gas companies. The acquisition has provided the Company with an increased share of the market through access to MTS’ customer base in the Canadian oil and gas industry, petrochemical, and process manufacturing markets.



Consideration transferred:		Final

Cash consideration	$	4,650,689

Fair value of demand promissory notes issued (1)		18,000,000

Fair value of common shares transferred (2)		13,320,000

Total consideration transferred	$	35,970,689

(1)

Comprised of two promissory notes with fair-value of $6,000,000 and $12,000,000 which were fully repaid and settled on July 10 and August 8, 2019 respectively; there was no gain or loss on settlement.

(2)

The fair value of shares transferred as consideration is based on the quoted share price on the date of acquisition

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

c)	Acquisition of mCloud Technologies Services Inc. (continued)



Fair value of assets and liabilities recognized:		Final

Cash and cash equivalents	$	2,227,739

Trade and other receivables (includes Unbilled revenue of $2,347,207)		5,120,830

Prepaid expenses and deposits		611,104

Right-of-use assets		4,303,215

Property and equipment		548,317

Intangible asset – Customer relationships		12,700,000

Intangible asset – Technology		1,800,000

Accounts payable and accrued liabilities		(2,030,470)

Deferred revenue		(133,556	)

Lease liabilities		(4,303,215	)

Deferred income tax liability		(3,632,250	)

Fair value of net assets acquired		17,211,714

Goodwill	$	18,758,975

	$	35,970,689

There have been no adjustments to the preliminary purchase price allocation recognized at December 31, 2019 or in the periods ended December 31, 2020.

Goodwill arising from the acquisition is attributable mainly to the skills and technical talent of MTS’ work force and the synergies expected to be achieved from integrating MTS into the Company’s existing business. The talent and domain expertise of MTS’ workforce has enabled the Company to establish credibility in the oil and gas, petrochemical, and process manufacturing markets, and accelerate the development of artificial intelligence applications geared toward process industries. None of the goodwill recognized is expected to be deductible for tax purposes.

Transaction costs of $

9,869,589

were incurred in connection with the acquisition including consulting fees of $

750,000

, legal and professional fees of $

239,589

and fair value of $

8,880,000

for

800,000

common shares issued to the original shareholders of Fulcrum for brokering and due diligence services and were recognized in the consolidated statement of loss and comprehensive loss.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

d)	Acquisition of Construction Systems Associates, Inc. USA

On January 24, 2020, the Company completed its acquisition of all the outstanding and issued common shares of Construction Systems Associates, Inc. USA (“CSA”). The acquisition was accounted for as a business combination using the acquisition method whereby the assets acquired, and the liabilities assumed were recorded at fair value. At acquisition date the fair values assigned to intangible assets, goodwill and the deferred tax liabilities were measured on a provisional basis and were revised by the Company as additional information was received.

On January 24, 2021, the measurement period for the acquisition ended and there were no further measurement period adjustments during the year ended December 31, 2021. The following table summarizes the final balances of each major class of consideration transferred, the recognized amounts of the identifiable assets acquired and liabilities assumed, and the resulting value of goodwill.



	Final

Consideration transferred:

Cash consideration	$	703,212

Fair value of common share consideration		2,304,073

Fair value of contingent consideration payable		879,066

Total consideration	$	3,886,351


Fair value of assets and liabilities recognized:
Cash	$	181,408
Trade and other receivables		262,846
Prepaid expenses and other deposits		13,863
Property and equipment		2,098
Right of use assets		242,894
Intangible - technology		551,880
Intangible - customer relationships		801,540
Accounts payable and accrued liabilities		(168,542	)
Short-term loan		(371,610	)
Lease liabilities		(242,894	)

Deferred tax liabilities		—

Fair value of net assets acquired	$	1,273,483

Goodwill	$	2,612,868

The fair value of common shares transferred as consideration is based on the quoted share price on the date of acquisition, which is at $18.18

per common share.

The fair value of the contingent consideration payable was based on an estimated weighted probability of certain revenue and EBITDA targets being met in the 2-year period following the acquisition date. At December 31, 2021, the Company assessed the fair value of the contingent consideration to be nil as these targets were not

expected to be

met and as such $838,932 was recognized in other income in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021 (Note

The Company is required during the measurement period to retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period adjustments from acquisition date to the end of the measurement period are reflected above with the cumulative changes increasing goodwill. The impact on net income (loss) of recognizing these adjustments to the provisional amounts as if the accounting had been completed at the acquisition date are limited to a decrease in amortization of intangibles and related foreign currency translation differences.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 17 - BUSINESS ACQUISITIONS (continued)

e)	Acquisition of kanepi

On October 8, 2020, the Company completed its acquisition of all the outstanding and issued common shares of kanepi. kanepi provides advanced visual analytics solutions designed to deliver an immediate and positive impact on the industrial operations of asset intensive industries. The acquisition was accounted for as a business combination using the acquisition method whereby the net assets acquired, and the liabilities assumed were recorded at fair value. At acquisition date the fair values assigned to intangible assets, goodwill and the deferred tax liabilities were measured on a provisional basis.

The Company is required during the measurement period to retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. On October 8, 2021, the measurement period for the acquisition ended and the following table summarizes the acquisition-date fair value and the final balances of each major class of consideration transferred, the recognized amounts of the identifiable assets acquired and liabilities assumed, and the resulting value of goodwill. The preliminary balances were reported in the consolidated financial statements for the year ended December 31, 2020 and there were no measurement period adjustments.



	Final

Consideration transferred:

Cash consideration	$	4,657,512

Fair value of common share consideration		5,882,547

Fair value of contingent consideration payable		568,638

Total consideration	$	11,108,697


Fair value of assets and liabilities recognized:
Cash	$	556,880
Trade and other receivables		598,059
Other current assets		13,149
Property and equipment		1,224
Right of use assets		266,396
Intangible - technology		3,294,309
Intangible - customer relationships		2,632,794
Accounts payable and accrued liabilities		(643,385	)
Lease liabilities		(266,396	)

Deferred tax liabilities		(1,136,806	)

Fair value of net assets acquired	$	5,316,224

Goodwill	$	5,792,473

The fair value of the contingent consideration payable is based on an estimated weighted probability of certain revenue or customer acquisition targets being met in a two-year period from the acquisition date. At acquisition date and December 31, 2020, the fair value of the contingent consideration was determined to be $568,638 based on estimates of achievement of targets. The fair value of the contingent consideration is determined using a discounted cash flow model at a discount rate of 27%. At December 31, 2021, the Company assessed the likelihood of achievement of the targets and determined the fair value of the contingent consideration decreased by $171,092 and this amount was recognized in other income in the consolidated statements of loss and comprehensive loss for the year ended December 31, 2021 (Note

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 18 - BUSINESS ACQUISITION PAYABLE



	December 31, 2021			December 31, 2020

Opening balance	$	2,439,529		$	1,043,314

Contingent consideration changes related to CSA (Note 17)		(853,308	)		879,066

Contingent consideration changes related to kanepi (Note 17)		(171,092	)		568,638

Effect of foreign exchange differences		(16,157	)		(51,489	)

		1,398,972			2,439,529

Current portion		1,398,972			1,594,297

Non-current portion		—			845,232

	$	1,398,972		$	2,439,529

During the year ended December 31, 2021, the Company determined that the amount of the contingent consideration recognized at the date of acquisition of Construction Systems Associates, Inc. USA (“CSA”) would not be payable as the operational performance metrics were not expected to be achieved. In addition, the fair value of the contingent consideration recognized at the date of acquisition for kanepi Group Pty Ltd. and its subsidiaries (“kanepi”) was remeasured based on 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.

At December 31, 2021, $383,368 of contingent consideration payable remains associated with the kanepi acquisition. The remaining balance of $1,015,604 relates to the acquisition consideration payable associated with the Field Diagnostic Services, Inc. (“FDSI”) acquisition completed in 2017.

NOTE 19 - SHARE CAPITAL

a)	Common shares

The Company has an unlimited number of authorized voting shares with no par value. The following is a summary of shares issued during the year ended December 31, 2021. The Company issued 71,190 common shares on exercise of Restricted Share Units (“RSUs”) (Note 20(b)).

Brokered public offering

On April 15, 2021, the Company closed a public offering of 2,300,000 units of the Company at a price of $6.30 per unit for aggregate gross proceeds of $14,490,000. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at an exercise price of $8.55 for 36 months following closing subject to adjustment in certain events.

The public offering was brokered, and the underwriting agent received cash commissions of $1,014,300 or 7% of the gross proceeds under the offering. In addition, the Company also incurred $459,986 of share issuance costs in connection with the offering, for total net proceeds of $13,015,714. Net proceeds were allocated $12,395,918 to share capital with the residual of $619,796 allocated to warrants which is included in contributed surplus in the consolidated statement of changes in equity for the year ended December 31, 2021.

Non-brokered private placement offering

On August 13, 2021, the Company completed a non-brokered private placement, pursuant to a subscription agreement dated July 12, 2021, of 75,676 units of the Company at a unit price of $5.55 for gross proceeds of $420,000. Each unit consists of one common share and one share purchase warrant at an exercise price of $8.55 per common share with warrants expiring April 2024. Net proceeds of $420,000 were allocated fully to the common shares.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 19 - SHARE CAPITAL (continued)

Conversion of 2021 Convertible Debentures

On August 13, 2021, the Company extinguished 99.2% of the principal and accrued interest of the 2021 Debentures (Note 14(b)). The principal and interest payable balance of converted debentures was settled by issuing an aggregate of 2,107,787 common shares and 2,107,787 common share purchase warrants. The value of the common shares at August 13, 2021, net of transaction costs was $14,436,728. See Note 15 for description of warrants issued.

USD Brokered public offering

On November 29, 2021, the Company closed a public offering of 2,100,000 units of the Company at US$4.50 per unit for aggregate gross proceeds of $12,040,198 (US$9,450,000) and net proceeds of $10,912,251 after underwriting discounts and commissions payable. On December 3, 2021, an additional 315,000 units, representing the over-allotment option under the offering, were issued for aggregate gross proceeds of $1,820,070 (US$1,417,450) and net proceeds of $1,674,464. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder to purchase one common share, a warrant share, at an exercise price of US$4.75 per warrant share for five years following closing subject to adjustment in certain circumstances. The common shares and the share purchase warrants were issued separately.

Gross proceeds were allocated $5,302,004 to the warrants with the residual of $8,558,264 allocated to share capital. Transaction costs of $1,738,087 associated with the issuance of the units were allocated proportionately with the allocation of gross proceeds with $1,073,262 net against share capital and $664,825 allocated to finance costs (Note 22).

The Company also issued warrants to the underwriter of the offering to purchase 126,000 common shares at an exercise price of US$4.95 which are exercisable to May 22, 2025. The fair value of these warrants of $162,947 were recorded to contributed surplus and are considered transaction costs of which a portion is expensed in the consolidated statements of loss and comprehensive loss.

In addition to the transaction costs associated with the issuance of the units, the Company incurred additional expenses related to the registration process and listing of its common shares on the NASDAQ which are included in general and administrative costs in the consolidated statements of loss and comprehensive loss.

Common shares in escrow

At December 31, 2021, the Company has 681,024 (December 31, 2020 - 1,674,284; December 31, 2019 - 2,381,826) common shares subject to escrow conditions resulting from business combinations and asset acquisitions in prior years. There were no additional common shares subject to escrow conditions added during the year ended December 31, 2021. Escrow restrictions will be released on 458,599 shares in the year ending December 31, 2022, and the remaining 222,425 shares in the year ending December 31, 2023.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 19 - SHARE CAPITAL (continued)

Shares issued for debt settlement

During February and September 2019, the Company issued 1,964 and 5,000 common shares respectively for settlement of outstanding debt to vendors for services provided. The Company valued these common shares based on the trading price of the Company’s shares on the date of issuance.

b) Warrants

The Company’s warrants outstanding at December 31, 2021, 2020 and 2019 are as follows and includes warrants classified as equity-settled and warrants classified as financial liabilities (Note 15):



	Number of Warrants	Weighted Average Exercise Price $

December 31, 2018	1,104,378	$ 13.50

Issued	19,957	$ 14.46

Exercised	(133,176)	$ 12.96

Expired	(209,899)	13.50

December 31, 2019	781,260	$ 13.80

Issued	2,433,081	13.72

Exercised	(1,228,935)	12.06

Expired	(53,880)	13.31

December 31, 2020	1,931,526	$ 14.82

Issued	7,140,223	7.64

Expired	(589,820)	13.97

December 31, 2021	8,481,929	$ 8.83

During the year ended December 31, 2021, the Company issued share purchase warrants in conjunction with the following transactions:

Equity classified warrants

•

115,760 warrants to brokers in connection with the issuance of the 2021 Debentures (Note 14(b)). Warrants issued to brokers are denominated in USD with exercise prices that range between $4.12 (US$3.42) and $8.28 (US$6.60) and are exercisable for 24 months with maturity dates ranging from December 2022 to May 2023.

The total fair value of warrants issued to brokers of $294,894 was calculated using the Black-Scholes model with the following weighted average inputs and assumptions: issue date share price of $6.39; exercise price of $5.85; risk-free rate of 0.26%; expected life of 1.88 years; expected volatility of 69%; and no expected dividends.

•

2,300,000 warrants in connection with the April 15, 2021 public offering (Note 19(a));

•

75,676 warrants in connection with the non-brokered private placement offering (Note 19(a)); and

•

126,000 warrants issued to the underwriter of the November 2021 USD public offering (Note 19(a)). The total fair value of warrants of $162,947 was calculated using the Black-Scholes model with the following inputs and assumptions: issue date share price of $5.70; exercise price of $6.31; risk-free rate of 1.04%; expected life of 3.48 years; expected volatility of 45%; and no expected dividends.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 19 - SHARE CAPITAL (continued)

Derivative liability warrants

•

2,107,787 warrants in connection with the August 13, 2021, conversion and interest settlement of the majority of the 2021 Debentures (Note 14(b)); and

•

2,415,000 warrants in connection with the November 2021 USD public offering (Note 19(a); Note 15).

Warrants outstanding at December 31, 2021 were as follows:



Expiry Date	Exercise Price $	Outstanding Warrants

June 2022	15.00	19,584

July 2022	14.25	525,114

December 2022	5.63	1,000

January 2023	5.72	37,400

January 2023	6.97	25,400

February 2023	7.80	8,000

March 2023	8.28	9,000

May 2023	4.12	34,960

April 2024	8.55	2,375,676

June 2024	22.50	3,333

August 2024	8.60	2,107,787

January 2025	16.20	611,027

May 2025	6.31	126,000

July 2025	14.25	182,648

November 2026	6.05	2,415,000

	$ 8.83	8,481,929

The weighted average remaining contractual life of outstanding warrants was 3.09 years at December 31, 2021 (December 31, 2020 - 2.29 years; December 31, 2019 - 1.37 years). Exercise prices for warrants denominated in USD as presented above were converted to the C$ equivalent exercise prices on the date of the applicable transaction.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 20 – SHARE-BASED PAYMENT ARRANGEMENTS

The Company has an equity incentive plan (the “Plan”) which allows management to grant incentive stock options, non-statutory stock options, share appreciation rights, restricted share awards, restricted share unit awards, and other share awards to selected directors, employees, and consultants. A maximum of 10% of the issued and outstanding common shares of the Company may be reserved for issuance under the Plan.

The Company recorded share-based compensation as follows.


	Year Ended December 31,
	2021		2020		2019
Stock options (a)	$	908,293	$	677,452	$	820,613
Restricted share units (b)		959,622		776,783		647,748
Total	$	1,867,915	$	1,454,235	$	1,468,361

a)	Stock Options

The board of directors or designated committee set the terms of the share-based payment arrangements under the Plan; however, the general terms of stock options are as follows. The options have a maximum term of 10 years and vest as to 33% on each anniversary date of the date of grant over three years. In limited cases, options vest immediately. For the majority of grants, the exercise price is equal to the closing price of the Company’s common shares on the grant date. On the date the option holder ceases to be employed, vested options are exercisable for a period of three months following that date, and unvested options are forfeited. Compensation is recognized on a graded vesting basis over the vesting period.

Movement in the number of stock options outstanding and their related weighted-average exercise prices were as follows:


	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		423,303		$	11.01		349,657		$	11.48		95,000		$	11.70
Granted		487,775			7.10		153,828			9.99		323,278			11.20
Exercised		–			–		(7,639	)		10.50		(50,838	)		10.62
Forfeited		(40,088	)		9.87		(32,777	)		11.52		(17,783	)		10.35
Expired		(4,201	)		11.03		(6,433	)		10.67		–			–
Cancelled		–			–		(33,333	)		10.50		–			–
Outstanding at December 31		866,789		$	8.81		423,303		$	11.01		349,657		$	11.48
Exercisable at December 31		275,473		$	11.10		161,244		$	11.70		17,014		$	12.87

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 20 – SHARE-BASED PAYMENT ARRANGEMENTS (continued)

a)	Stock Options (continued)

The following summarizes information about the Company’s stock options outstanding at December 31, 2021:


	Options Outstanding						Options exercisable
Range of prices	Number		Weighted average exercise price		Weighted average life (years)		Number		Weighted average exercise price

$5.67 - $8.70		506,502	$	6.88		9.0		25,389	$	6.56

$8.71 - $10.95		200,706	$	10.67		4.9		138,622	$	10.57

$10.96 - $12.59		104,303	$	11.78		6.1		71,461	$	11.78

$12.60 - $18.02		55,278	$	14.11		6.4		40,001	$	14.59

		866,789	$	8.81		7.5		275,473	$	11.10

At December 31, 2021, if all exercisable options were exercised total cash received would be $3,057,750 (December 31, 2020 - $1,886,555; December 31, 2019 - $1,206,687). Unrecognized share-based compensation expense related to unvested stock options granted was $1,824,812 at December 31, 2021 (December 31, 2020 - $710,934; December 31, 2019 - $1,061,013).

Measurement of fair values for equity-settled arrangements

The weighted average fair value of stock options granted during the year ended December 31, 2021 of $4.25 per option, or $2,061,007 (December 31, 2020 - $4.54 per option or $698,949; December 31, 2019 - $4.91 per option or $1,597,043) was calculated at the grant date using the Black-Scholes model with the following weighted average assumptions and inputs.


	2021	2020	2019

Grant date share price	$ 7.00	$ 8.93	$ 10.88

Exercise price	$ 7.10	$ 9.74	$ 11.13

Risk-free rate	1.32 %	0.36 %	1.57 %

Expected life, years	6.2 years	5.0 years	3.9 years

Expected volatility	75 %	66 %	54 %

Expected dividends	– %	– %	– %

Forfeiture rate	7 %	– %	10 %

Expected volatility is based on an evaluation of the historical volatility of the Company’s share prices since the Company commenced trading which is a reasonable approximation of the volatility over the expected term of the stock option. The expected term of the options has been based on historical experience and general option holder behavior. The forfeiture rate reflects the anticipated level of forfeitures of options in the future.

b)	Restricted Share Units (“RSUs”)

RSUs are granted to directors, employees and consultants and each RSU entitles the holder to one common share at the end of the vesting period. RSUs have various terms ranging from immediate vesting to vesting on either the first, second or third anniversary of the grant date, or as to 33% on each anniversary date of the grant over three years. Compensation is recognized on a graded vesting basis over the vesting period. The Company issues common shares to the RSU holder equal to the number of vested RSUs at the RSU holders’ request.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 20 – SHARE-BASED PAYMENT ARRANGEMENTS (continued)

b)	Restricted Share Units (“RSUs”) (continued)

The Company’s obligation to issue shares on the vesting of RSUs is an unfunded and unsecured obligation of the Company. A continuity of RSUs is as follows:



Number of RSUs	2021	2020	2019

Outstanding at January 1	222,222	151,790	101,778

Granted	73,164	123,797	71,640

Exercised 1	(71,190)	(35,877)	(11,905)

Forfeited	(7,074)	(3,332)	(9,723)

Withheld 1	(8,448)	(14,156)	–

Outstanding at December 31	208,674	222,222	151,790

Exercisable at December 31	115,468	33,516	32,036

1	71,190 common shares issued on exercise of 79,638 RSUs at a weighted average grant date exercise price of $8.87. Certain RSU holders elected for RSUs exercised to be settled net of any tax withholding obligations.

The fair value of each RSU is based on the market price of the Company’s common shares on the date of grant and the total fair value of RSUs granted in the year ended December 31, 2021 was $528,028 (December 31, 2020 - $1,069,042; December 31, 2019 - $829,976). Unrecognized share-based compensation expense related to unvested RSUs was $277,686 at December 31, 2021 (December 31, 2020 - $807,830; December 31, 2019 - $702,373).

NOTE 21 – NON-CONTROLLING INTEREST

In April 2019, the Company obtained control over Agnity and its subsidiaries via a business combination and the non-controlling interest (“NCI”) was measured at 100% of the acquired net identifiable assets of Agnity at the date of acquisition. Agnity develops and sells software applications and technology services that enable telecommunication service providers, network equipment manufacturers and enterprises to design, develop, and deploy communication-centric application solutions on a world-wide basis. Having control of Agnity has enabled the Company to gain access to Agnity’s patented technology and its customer base. In addition, Agnity’s communication platform ensures that AssetCare deployments around the globe are assured of connectivity, supported by Agnity telecommunication solutions.

The movement in the equity attributable to the non-controlling interest in the Company is detailed in the consolidated statements of changes in equity. There was no change to the non-controlling interest percentage in the years ended December 31, 2021, 2020 or 2019.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 21 – NON-CONTROLLING INTEREST (continued)

The following table summarizes the information relating to Agnity, before any intercompany eliminations.



				December 31, 2021		December 31, 2020

NCI percentage				100%		100%

Current assets			$	11,906,502	$	7,778,252

Non-current assets				10,320,732		11,362,870

Current liabilities				(7,341,257)		(5,318,366)

Non-current liabilities				(226,583)		(820,848)

Net assets attributable to NCI			$	14,659,394	$	13,001,908


For the years ended		December 31, 2021		December 31, 2020		December 31, 20 19

Revenue	$	11,192,716	$	11,215,876	$	6,010,753

Income (loss) allocated to NCI		(369,606)		2,009,304		1,944,508

Other comprehensive income allocated to NCI		28,138		(97,340)		199,588

Total comprehensive (loss) income attributable to NCI	$	(341,468)	$	1,911,964	$	2,144,096


Cash flows (used in) provided by operating activities	$	(1,859,900)		(405,548)		483,245

Cash flows used in investing activities		(578,483)		–		(3,731)

Cash flows (used in) provided by financing activities		2,081,137		655,347		(417,068)

Foreign exchange impact on cash held in USD		(6,383)		155,274		5,976

Net (decrease) increase in cash and cash equivalents	$	(363,629)	$	405,073	$	68,422

NOTE 22 - FINANCE COSTS



	Year Ended December 31,

	2021		2020		2019

Interest on loans and borrowings (Note 12)	$	1,179,234	$	1,272,512	$	918,682

Interest on convertible debentures (Note 14)		5,740,346		4,410,206		2,130,247

Interest on lease liabilities (Note 8)		137,245		350,792		168,571

Transaction costs expensed 1		1,471,219		–		–

Other finance costs		90,750		–		–

Total finance costs	$	8,618,794	$	6,033,510	$	3,217,500

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).

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 23 - FAIR VALUE LOSS (GAIN ) ON DERIVATIVES



		Year Ended December 31,



	2021

Gain on embedded derivatives 1	$	(784,261	)

Deferred charge loss 1		1,615,102

Loss on substantial modification and conversion 1		8,571,881

Gain on warrant liability remeasurement (Note 15) 2		(3,362,601	)

Total	$	6,040,121

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).

NOTE 24 - OTHER INCOME



	Year Ended December 31,

	2021		2020		2019

Government assistance 1	$	(4,201,822)	$	(2,775,677)	$	–

US Government loan forgiveness 2 (Note 16)		(1,825,237)		(124,507)		–

Derecognition of contingent consideration (Note 18)		(1,010,024)		–		–

Other		(89,014)		(32,158)		(167,913)

Total other income	$	(7,126,097)	$	(2,932,342)	$	(167,913)

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.

NOTE 25 - INCOME TAXES

a) Amounts recognized in net loss



	Year Ended December 31,

	2021			2020			2019

Current tax expense

Current year		157,303			(295,709	)		181,895

Changes in estimates related to prior years		–			–			–

		157,303			(295,709)			181,895

Deferred tax expense (recovery)

Origination and reversal of temporary differences		(13,161,689	)		(10,744,803	)		(6,261,674	)

Change in unrecognized deferred income tax assets		11,339,580			10,076,594			3,569,361

		(1,822,109)			(668,209)			(2,692,313)

Tax expense (recovery)	$	(1,664,806)		$	(963,918)		$	(2,510,418)

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 25 - INCOME TAXES (continued)

b) Reconciliation of effective tax rate

The following table is a reconciliation of income tax expense (recovery), at the Canadian income tax rate and the amount of reported income tax recovery in the consolidated statements of loss and comprehensive loss. The Company’s operations are subject to income taxes primarily in Canada and the United States.



	Year Ended December 31,

	2021			2020			2019

Loss before taxes	$	(46,364,119)		$	(35,824,882)		$	(30,405,252)

Statutory income tax rate 1		27	%		27	%		27	%

Income tax recovery at statutory rate		(12,518,312)			(9,672,718)			(8,209,418)

Increase (decrease) in taxes resulting from:

Change in deferred tax assets not recognized		11,339,580			10,076,594			3,569,361

Foreign tax rate and other foreign tax differences		(2,089,761)			(2,293,503)			(1,015,536)

Change in enacted rates		608,064			(58,050)			–

Share issuance costs and other		(828,082)			126,247			49,210

Non-deductible transaction costs		38,776			424,828			2,664,789

Other non-deductible items		1,784,929			432,684			431,176

Tax expense (recovery)	$	(1,664,806)		$	(963,918)		$	(2,510,418)

1	Comprised of the Canadian Federal effective corporate tax rate of 15.0% and blended provincial tax rates.

c) Movement in deferred tax balances

The significant components of the Company’s deferred income tax asset (liabilities) are as follows:



	At December 31, 2020		Recovery/ (expense) through earnings		Recovery/ (expense) through equity		Recovery/ (expense) through OCI		At December 31, 2021

Property and equipment	$	261,661	$	(195,977)	$	–	$	2,575	$	68,259

Intangible assets		(5,012,355)		1,415,370		–		73,801		(3,523,184)

Loans and accrued liabilities		(1,714,850)		1,471,654		–		(1,816)		(245,012)

Share issuance costs		27,453		25,467		–		–		52,920

Foreign exchange		–		(6,765)		–		24		(6,741)

Non-capital losses/net operating losses		2,269,186		(887,640)		–		(18,845)		1,362,701

Total	$	(4,168,905)	$	1,822,109	$	–	$	55,739	$	(2,291,057)



	At December 31, 2019		Acquired in business combinations		Recovery/ (expense) through earnings		Recovery/ (expense) through equity		Recovery/ (expense) through OCI		At December 31, 2020

Property and equipment	$	–	$	(376)	$	263,436	$	–	$	(1,399)	$	261,661

Intangible assets		(5,321,008)		(1,136,429)		1,280,692		–		164,390		(5,012,355)

Loans and accrued liabilities		(1,696,435)		–		(41,233)		24,000		(1,182)		(1,714,850)

Share issuance costs		–		–		27,453		–		–		27,453

Foreign exchange		(39,533)		–		39,533		–		–		0

Non-capital losses/net operating losses		3,202,361		–		(901,672)		–		(31,503)		2,269,186

Total	$	(3,854,615)	$	(1,136,805)	$	668,209	$	24,000	$	130,306	$	(4,168,905)

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 25 - INCOME TAXES (continued)

d)	Deferred tax assets not recognized and tax losses carried forward

The Company recognizes deferred tax assets to the extent that it is probable that future taxable profit will be available against which the Company can utilize the benefits of the deductible temporary differences and unused tax losses. Deductible temporary differences and unused tax losses for which a future benefit has not been recognized as a deferred tax asset include the following:


	Year Ended December 31,

	2021		2020

Net operating losses - United States	$	77,415,498	$	55,395,751

Non-capital losses - Canada		68,018,286		45,619,846

Foreign tax losses		157,602		865,599

Investment tax credits and research and development expenditures		6,603,163		6,603,287

Property and equipment		948,765		753,467

Share issuance costs		6,510,677		1,282,965

Other		2,046,890		1,922,194

	$	161,700,881	$	112,443,109

The Company has net operating losses of approximately US$60,837,326 and non-capital losses of approximately $70,204,681 (2020: US$44.1 million and $49.6 million) which are available to reduce future year’s taxable income in the United States and Canada, respectively. The net operating losses will start expiring in 2029 while the non-capital losses will start expiring in 2027 if not utilized.

The Company has foreign tax losses in various jurisdictions of approximately $2,307,882 (2020 - $1.2 million) which are available to reduce future year’s taxable income in their respective countries. The losses have expiry dates ranging from five years to indefinite life. The investment tax credit balance is $500,000 (2020 - $500,000) which is available to reduce future year’s taxes payable in Canada. The investment tax credits begin to expire in 2022 if not utilized.

Management estimates future income using forecasts based on the best available current information. No deferred tax liability has been recognized at December 31, 2021 or December 31, 2020 on temporary differences associated with earnings retained in the Company’s investments in foreign subsidiaries in which it has an equity percentage. The Company is able to control the timing of the reversal of these differences and currently has no plans in the foreseeable future to repatriate any funds in excess of its foreign investment.

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 26 - FINANCIAL INSTRUMENTS

a)	Classification and measurement of financial assets and liabilities by category

The following represents the carrying values of the financial assets and liabilities of the Company and the associated measurement basis for each balance.



Financial assets	Measurement basis	December 31, 2021		December 31, 2020

Cash and cash equivalents	Amortized cost	$	4,588,057	$	1,110,889

Trade and other receivables 1	Amortized cost		14,329,781		11,224,017

Long-term receivables	Amortized cost		740,431		2,536,272

Derivative asset	FVTPL		—		131,400

		$	19,658,269	$	15,002,578

Financial liabilities

Bank indebtedness	Amortized cost	$	3,460,109	$	976,779

Trade payables and accrued liabilities 1	Amortized cost		12,003,979		12,693,256

Loans and borrowings	Amortized cost		13,215,601		13,152,300

Lease liabilities 2	Amortized cost		1,045,472		3,945,076

2019 Debentures - host liability 3	Amortized cost		22,185,170		19,534,988

2021 Debentures - host liability 3	Amortized cost		69,034		—

2021 Debentures embedded derivative	FVTPL		41,506		—

Warrant liability - business acquisition	FVTPL		709,835		710,924

Warrant liabilities - derivatives (Note 15)	FVTPL		7,975,137		—

Business acquisition payable	Amortized cost		1,398,972		2,439,529

Other liabilities	Amortized cost		—		6,236,415

		$	62,104,815	$	59,689,267

Excludes amounts for indirect taxes, income taxes and contract asset, where applicable. Note 27 describes credit risk associated with trade receivables including reconciliation of expected credit loss allowance.

Lease liabilities are not subject to classification in the fair value hierarchy.

2019 Debentures (Note 14(a)) and 2021 Debentures host liability (Note 14(b)).

Financial instruments not measured at fair value

The carrying values of the financial assets and liabilities where the measurement basis is other than FVTPL approximate their fair values due to the immediate or short-term nature of these instruments considering there have been no significant changes in credit and market interest rates since origination date.

b)	Measurement of fair value

The fair value hierarchy establishes three levels to classify the significance of inputs to valuation techniques used in making fair value measurements of all financial assets and liabilities (Note 32(L)). At December 31, 2021 and 2020, there were no financial assets or financial liabilities measured and recognized at fair value on a non-recurring basis subsequent to initial recognition.

The Company’s policy for determining when a transfer between levels of the fair value hierarchy occurs is to assess the impact at the date of the event or change in circumstance that could result in the transfer. During the year ended December 31, 2021, subscriptions payable included in other liabilities of $5,285,997 were transferred from Level 2 to Level 3 on issuance of the 2021 Debentures, of which only $110,540 remain at December 31, 2021 (Note 14(b)). There were no other transfers between levels during the year ended December 31, 2021.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 26 - FINANCIAL INSTRUMENTS (continued)

b)	Measurement of fair value (continued)

Valuation methodologies used in the measurement of fair value for Level 2 financial assets and financial liabilities

The measurement of Level 2 financial assets and liabilities is made by reference to the inputs used to determine the fair value of each instrument using an appropriate valuation method. The fair value of long-term receivables is based on the present value considering the expected time of collection of the long-term contracts.

The fair value of loans and borrowings approximates their carrying value and has been determined by discounting the contractual cash flows using implied yields of obligations with similar credit risk and maturities. The fair value of the host liability for the 2019 Debentures approximates the carrying value and the fair value was initially calculated using a discount rate of 25% for an equivalent, non-convertible loan at the date of issue. The warrant liability associated with a previous business combination is measured based on the amount of cash that is payable in certain circumstances. A portion of other liabilities at December 31, 2020, represent subscriptions payable and the carrying amount of these balances approximates fair value.

Valuation methodologies used in the measurement of fair value for Level 3 financial liabilities

2021 Debentures

The fair value of the entire financial instrument associated with the 2021 Debentures was determined using a partial differential equation model for convertible debt which considered that the convertible debt consists of two components, each having different default risks. The model calculates the value based on key inputs, which impact the value of the convertible debt including: yield to maturity, principal and coupon payments, share price, exercise price, volatility, term, risk free rates and dividends. The risk adjusted discount rate was applied in determining yield to maturity and this is the most significant unobservable input, and the estimated fair value would increase (decrease) if the risk-adjusted discount rate were lower (higher).

The 2021 Debentures include an embedded derivative for the conversion option. The fair value of the embedded derivative was determined using the same methodology as above adjusted for the nature of the instrument. The embedded derivative includes a foreign currency component which reflects the foreign exchange exposure to convert a USD denominated liability to common shares which are denominated in Canadian dollars. The fair value of the embedded derivative was determined first with the residual of the total fair value of the instrument allocated to the host debt. The embedded derivative will be remeasured at each period end with changes in the fair value recognized in the consolidated statements of loss and comprehensive loss.

The Company determined that at the initial recognition date, which was the date of issuance of the debentures, that the fair value of the financial instruments was in excess of the transaction price for tranches one through five (i.e., the fair value of the proceeds received) and the fair value of the tranche six financial instrument was equal to the proceeds received. There were fluctuations in the fair value inputs that arose in the period between the closing of tranches one through five of the Offering and the date of the actual issuance of the debenture certificates. As such the difference between the fair value and transaction price was deferred at initial recognition and the deferred difference was recognized as a loss as factors including the passage of time were met which required recognition. The reconciliation of the opening to closing balances associated with the 2021 Debentures is presented in Note 14(b) including fair value changes.

The 2021 Debentures were derecognized at July 12, 2021 (with the exception of the US$75,000 principal balance which did not convert) as the instruments were substantially modified, and a new financial liability measured at FVTPL was recognized. The fair value was based on the price of common shares at July 12, 2021 and the warrant value was determined using the Black-Scholes model. These instruments were remeasured directly before conversion to equity. The remaining instruments are warrant liabilities as described following.

Warrant liabilities

With the exception of the warrant liability associated with a previous acquisition, the fair value of warrant liabilities is measured on a recurring basis using the Black-Scholes model based on the quoted price of the Company’s common stock in an active market, expected volatility, expected life and risk-free rate (Note 15).

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 26 - FINANCIAL INSTRUMENTS (continued)

b)	Measurement of fair value (continued)

Business acquisition payable

The business acquisition payable consists of contingent consideration payable, the values of which were determined using a discounted cash flow model based on the present value of probability weighted average amount of expected payments discounted at an appropriate discount rate. The reconciliation of the opening to closing balances for Level 3 fair values are presented in Note 18.

NOTE 27 – CAPITAL AND RISK MANAGEMENT

Capital and Risk Management

The Company is exposed to a variety of financial risks by virtue of its activities: liquidity risk, credit risk, interest rate risk and currency risk. The Board of Directors has overall responsibility for the determination of the Company’s capital and risk management objectives and policies while retaining ultimate responsibility for them. The Company’s overall capital and risk management program has not changed throughout the year. It focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the finance department under policies approved by the Board of Directors. The finance department identifies and evaluates financial risks in close cooperation with management.

The Company’s risks related to financial instruments and the Company’s strategy to manage risks, are described below.

a) Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal course of business. The Company generally relies on funds generated from operations and external financing to provide sufficient liquidity to meet expected operating requirements. The Company manages its liquidity risk by monitoring its operating requirements, reducing costs where possible and applying for any available government COVID-19 support to support its business. The Company also engaged in fundraising activities throughout the year. Cash and cash equivalents as at December 31, 2021 were $4,588,057 (December 31, 2020 - $1,110,889).

Total working capital deficit increased to $42,108,177 at December 31, 2021 from $13,052,702 at December 31, 2020. Current assets increased by $6,712,207 at December 31, 2021 from December 31, 2020, the majority of which are increases in cash and cash equivalents and trade and other receivables. Current liabilities increased by $35,767,682 at December 31, 2021 from December 31, 2020; however, management anticipates a portion of this amount will not be paid in cash due to the nature of the instruments as detailed in the table following. Liquidity risk has increased during the year ended December 31, 2021, and current liquidity levels are not adequate to fund the working capital deficiency at December 31, 2021. The Company anticipates it will need additional financing to meet its current and future demands and the Company is in the process of securing additional financing; however, a material uncertainty exists that may cast doubt on the Company’s ability to continue as a going concern (Note 2).

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 27 – CAPITAL AND RISK MANAGEMENT (continued)

a)	Liquidity risk (continued)

Maturities of financial liabilities

The Company’s carrying values of financial liabilities and the contractual undiscounted cash flows associated with these liabilities broken into relevant maturity grouping based on their contractual maturities are as follows:


At December 31, 2021			Undiscounted Contractual Cash Flows
	Carrying Amount		< 1 year		1 – 2 years		> 2 years		Total

Bank indebtedness 1	$	3,460,109	$	3,460,109	$	–	$	–	$	3,460,109

Trade payables and accrued liabilities		12,421,309		12,421,309		–		–		12,421,309

Loans and borrowings 2		13,215,601		11,763,697		786,123		–		12,549,820

Lease liabilities 3		1,045,472		521,506		534,241		179,281		1,235,028

2019 Debentures		22,185,170		24,630,375		–		–		24,630,375

2021 Debentures		110,540		7,635		103,073		–		110,708

Warrant liabilities 4		8,880,038		709,835		–		–		709,835

Business acquisition payable		1,398,972		1,398,972		–		–		1,398,972

	$	62,717,211	$	54,913,438	$	1,423,437	$	179,281	$	56,516,156

No contractual maturity. Excludes interest charged on facility as detailed in Note 13.

Includes term loan with a carrying value of $9,275,683 classified as current due to covenant breach. Assuming term loan is repaid in accordance with agreement to maturity, the undiscounted contractual cash flows for loans and borrowings would be $2,933,739, $5,472,193, and $4,143,888 , respectively for the periods presented above.

Variable costs due under leases not included in this amount. Minimum payment related to leases which have not yet commenced are not included in this amount. See Note 29.

Majority of liability will be settled by issuing common shares of the Company when warrants are exercised during the year. The remaining amount may be settled in cash or common shares of Agnity (Note 15).


As at December 31, 2020			Undiscounted Contractual Cash Flows
	Carrying Amount		< 1 year		1 – 2 years		> 2 years		Total

Bank indebtedness	$	976,779	$	976,779	$	–	$	–	$	976,779

Trade payables and accrued liabilities		12,924,256		12,924,256		–		–		12,924,256

Loans and borrowings		13,152,300		4,248,351		2,617,443		8,796,757		15,662,551

Lease liabilities		3,945,076		1,131,528		939,108		2,815,695		4,886,331

2019 Debentures		19,534,988		2,350,750		24,629,655		–		26,980,405

Warrant liabilities		710,924		710,924		–		–		710,924

Business acquisition payable		2,439,529		1,594,297		845,232		–		2,439,529

Other liabilities		6,236,415		6,003,838		232,577		–		6,236,415

	$	59,920,267	$	29,940,723	$	29,264,015	$	11,612,452	$	70,817,190

b)	Credit risk

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 27 – CAPITAL AND RISK MANAGEMENT (continued)

b)	Credit risk (continued)

Provisions for outstanding balances are established based on forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as well as the frequency of payments received. Accounts receivable amounts are completely written off once management determines the probability of collection to be remote.

Trade and other receivables, unbilled revenue and long-term receivables are from individual customers and are not assessed based on external credit rating agencies. The Company uses a provision matrix to measure the lifetime expected credit loss (“ECL”) of these balances. Receivables are grouped based on similar credit risk profiles and days past due. Loss rates are based on actual credit loss experience and reflect the forward looking conditions over the expected life of the receivable. As of December 31, 2021, substantially all of the Company’s trade receivables were outstanding for less than 60 days and a loss rate of 1% was applied in determining the ECL. The majority of the ECL is based on specific provisions related to specific customers.

The movement in the ECL allowance related to trade receivables and long-term receivables was as follows (Note 6):



	December 31, 2021			December 31, 2020

Beginning balance	$	606,030		$	382,901

Increase in loss allowance		1,162,537			443,961

Amounts written off during the year as uncollectible		(65,930	)		(220,832	)

Effects of movement in exchange rates		4,581			–

Total	$	1,707,218		$	606,030

c)	Market risk

Market risk is the risk that changes in market prices such as interest rates or foreign exchange rates will affect the Company’s results or value as a result of holding these financial instruments. The object of market risk management is to manage and control market risk exposures within acceptable parameters given the nature of the business.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its credit facility and as this instrument is subject to variable rate interest. Management does not believe interest rate risk is currently material to its business.

Foreign currency risk

Currency risk is the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because of changes in foreign currency rates and the degree of volatility of these rates. The Company conducts its business in the regions of Canada, Asia-Pacific, the United States and Europe, the Middle East and Africa, which gives rise to exposure to markets from changes in foreign currency rates. Currently, the Company does not use derivative instruments or other measures to reduce its exposure to foreign currency risk.

At December 31, 2021, the C$ equivalent carrying amount of the Company’s USD denominated monetary assets and liabilities was $14,554,193 (December 31, 2020 - $8,291,005) and $11,685,160 (December 31, 2020 - $16,398,521), respectively. Assuming all other variables remain constant, a fluctuation of +/- 5.0% in the exchange rate between C$ and USD would impact the net loss for the period by approximately $143,452 (December 31, 2020 - $405,376).

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 28 – RELATED PARTY TRANSACTIONS

The Company’s related parties includes its subsidiaries and key management personnel. During its normal course of operations, the Company enters into transactions with its related parties for goods and services that are measured at the amount exchanged.

Key management personnel compensation



For the years ended December 31,	2021		2020		2019

Salaries, management and directors’ fees	$	1,613,502	$	1,683,015	$	1,460,296

Share-based payments		432,098		628,019		388,398

Total	$	2,045,600	$	2,311,034	$	1,848,694

Other related party balances and transactions


	December 31, 2021		December 31, 2020

Due to principal owner of Agnity 2	$	234,278	$	813,023

Due to officer of Company for working capital loan 2		30,796		33,205

Due to key management personnel 2		121,852		116,091

Due to Agnity Communications Private Ltd. 3		1,111,521		1,138,630

Loan due to former shareholder of CSA 4		335,860		318,428
Amount due to related parties	$	1,834,307	$	2,419,377

Unless otherwise noted, all amounts due are unsecured, non-interest bearing and due on demand.

Included in trade accounts payable and accrued liabilities on the consolidated statements of financial position.

Associated with consulting services paid to a company partially owned by the principal owner of Agnity. Consulting services were $3,765,201 for the year ended December 31, 2021 (December 31, 2020 - $2,532,550

; December 31, 2019 - $1,630,119).

Balance due included in trade accounts payable and accrued liabilities on the consolidated statements of financial position.

Included in loans and borrowings (Note 12) on the consolidated statements of financial position.

NOTE 29 – COMMITMENTS AND CONTINGENCIES

Commitments

The Company has the following minimum payments for contractual commitments that are not recognized as liabilities at December 31, 2021, which are disclosed in Note 27(a) -

Risk Management, Liquidity Risk


	Undiscounted Contractual Cash Flows
	< 1 year		2 - 3 years		4 - 5 years		More than 5 years		Total

Variable lease payments 1	$	396,719	$	477,562	$	125,275	$	12,999	$	1,012,555

Lease payments related to leases which have not yet commenced 2		104,702		2,589,330		2,762,597		12,636,454		18,093,083
	$	501,421	$	3,066,892	$	2,887,872	$	12,649,453	$	19,105,638

Variable lease payments associated lease liabilities (Note 8).

In October 2021, the Company executed a 12-year lease for office space in Calgary, Alberta. Basic rent and estimated common expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. The Company will receive a tenant improvement allowance which is expected to cover the majority of the costs.

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 29 – COMMITMENTS AND CONTINGENCIES (continued)

Contingencies

The Company may be party to legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. The Company analyzes all legal proceedings and the allegations therein. The outcome of any proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

NOTE 30 – SUPPLEMENTAL CASH FLOW INFORMATION

a) Changes in non-cash working capital



	2021		2020		2019

Trade and other receivables ( increase )		$ (3,342,737)		$ (2,006,780)		$ (169,896)

Long-term receivables decrease (increase)		1,682,646		(924,625)		(3,662,207)

Prepaid expenses and other assets decrease ( increase )		(591,737)		(1,119,123)		150,991

Trade payables and accrued liabilities (decrease) increase		(782,561)		2,513,477		1,102,361

Deferred revenue increase		1,045,868		632,839		447,511

Decrease in working capital		$ (1,988,521)		$ (904,212)		$ (2,131,240)

b) Changes in liabilities arising from financing activities



	2021		2020		2019

Balance of loans, borrowings and PPP loans, beginning of year		$ 14,102,718		$ 13,973,055		$ 78,285

New advances		10,664,916		8,726,766		16,539,700

Repayments of principal		(9,781,554)		(9,011,638)		(6,787,528)

Repayments of interest		(757,950)		(642,809)		(500,413)

Liability assumed		–		–		2,904,355

Liability related items

Assumption of loans in business combination		–		371,609		1,339,546

Forgiveness of PPP Loans		(1,835,237)		(124,507)		–

Finance fees paid		(191,310)		–

Non-cash related items

Accretion of interest and debt issuance costs		869,567		959,058		445,762

Loss on debt modification		138,908		–		–

Foreign exchange and other		5,543		(148,816)		(46,652)

Balance of loans, borrowings and PPP loans, end of year		$ 13,215,601		$ 14,102,718		$ 13,973,055

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 30 – SUPPLEMENTAL CASH FLOW INFORMATION (continued)

c) Non-cash investing and financing activities


For the years ended December 31,		2021		2020		2019

Value of shares issued in business combination		$	–	$	8,186,620	$	13,320,000

Value of shares issued on conversion of 2021 Debentures	14(b)	$	14,436,728	$	–	$	–

Value of share issued on conversion of 2019 Debentures		$	–	$	50,000	$	–

Value of shares issued on AirFusion asset acquisition		$	–	$	820,000	$	–

Settlement of liabilities through issuance of common shares or RSUs		$	–	$	143,002	$	84,252

Non-cash accretion of interest included in finance cost		$	3,015,294	$	2,145,706	$	909,158

Non-cash broker warrants compensation	19 (b)	$	294,894	$	–	$	–

Non-cash underwriter warrants compensation	1 9 (b)	$	162,947	$	–	$	–

Non-cash warrants consideration associated with credit facility		$	195,066	$	–	$	–

Shares issued to extinguish the loan from Flow Capital		$	–	$	–	$	606,495

Addition to right-of-use assets		$	–	$	599,861	$	468,703

Addition to lease liabilities		$	–	$	599,861	$	586,000

NOTE 31 – EVENTS AFTER THE REPORTING PERIOD

Financing of Electric Vehicle Development Projects

Initially US$5,000,000 is available to be funded with the remainder available only after certain corporate tax reorganization work is completed by the Company. The initial principal amount of US$5,000,000 (the “Loan”) was funded on April 1, 2022. The Loan matures on March 31, 2025, with 10% per annum interest payable monthly in arrears in USD. The Loan may not be prepaid unless authorized by the lender and is unsecured until certain conditions are met. The Loan contains representations, warranties and covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst other implications.

The use of proceeds of is solely for the development of the Company’s EV dealership projects. In addition to the Loan, the Note requires certain income based payments, including sharing on a 50/50% basis, all EV, solar and carbon reduction related tax credits and incentives, be made from the borrower to the lender based on income resulting from this project over the term of the 20-year EV dealership projects. The Note is subject to change of control provisions and right of first refusal provisions for additional financing related to the EV projects.

Warrant activity

On February 15, 2022, the Company’s warrants associated with the USD equity offering described in Note 15(b), commenced trading under the symbol MCLDW (Notes 1 and 15).

On January 17, 2022, the Company issued warrants to ATB to purchase an equivalent number of common shares of the Company and the warrant liability of $195,066 described in Note 15(c) was derecognized with an offsetting credit to contributed surplus for the value assigned to the warrants.

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES

The Company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.

A. Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries as at December 31, 2021. Control exists over an investee when the Company is exposed, or has rights, to variable returns from its investee and has the ability to affect those returns through its power over the investee. Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition up to the effective date of disposition or loss of control. Unless otherwise stated, the subsidiaries have share capital consisting solely of ordinary shares and the proportion of ownership interests held equals the voting rights held by the entity.

Subsidiaries

The Company’s principal subsidiaries include the following entities many of which have 100% ownership in other entities. The Company directly and indirectly owns 100% of all subsidiaries except for the Agnity group of companies. While the Company does not have an ownership interest in the Agnity entities, the Company controls them and as such the financial results are consolidated into the Company’s consolidated financial statements.



	Principle activity	Place of business and operations	Functional currency

mCloud Technologies Corp.	Parent company	Canada		CDN $

mCloud Technologies (USA) Inc.	Operations	United States		USD $

mCloud Technologies (Canada) Inc.	Operations	Canada		CDN $

Field Diagnostic Services, Inc. (“FDSI”)	Operations	United States		USD $

Construction Systems Associates, Inc. (“CSA”)	Operations	United States		USD $

mCloud Technologies Services Inc. (“MTS”)	Operations	Canada		CDN $

NGRAIN (Canada) Corporation (“NGRAIN”)	Operations	Canada		CDN $

kanepi Group Pty. Ltd.	Operations	Australia		AUD $

kanepi Services Pty. Ltd.	Operations	Australia		AUD $

mCloud Technologies Singapore Pte. Ltd.	Operations	Singapore		SGD $

mCloud Corp (HK) Ltd.	Operations	China		RMB ¥

mCloud Technologies (Saudi Arabia)	Operations	Saudi Arabia		SAR $

Agnity Global, Inc. (“Agnity”)	Operations	United States		USD $

Agnity Communications, Inc. (“ACI”)	Operations	United Stated		USD $

Agnity Healthcare, Inc. (“AHI”)	Operations	United States		USD $

When the Company loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognized in net income (loss). Any interest retained by the former subsidiary is measured at fair value when control is lost.

All intercompany transactions, balances, revenues and expenses have been eliminated on consolidation. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Company. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognized from the effective date of acquisition, or up to the effective date of disposal, as applicable.

| Notes to the Consolidated Financial Statements

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

A.	Basis of Consolidation (continued)

Non-controlling interests

Non-controlling interests arise from business combinations in which the Company acquires less than 100% ownership interest. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not attributable to the common shareholders of the Company. The entire portion of the Agnity operations is a non-controlling interest. The interests of the non-controlling shareholders are initially measured at either fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. Any subsequent income/loss, dividends and foreign translation adjustments attributable to the non-controlling interests is recognized as part of the non-controlling interests’ income or equity. When changes in ownership interests are disproportionate to cumulative contributions, distributions and income (loss) allocations, non-controlling interest are adjusted through direct charges to equity. The Company attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Changes in the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Business combinations

Acquisitions of subsidiaries and assets that meet the definition of a business under IFRS are accounted for using the acquisition method. The consideration transferred in the acquisition is measured at acquisition date fair value. The identifiable assets acquired and liabilities assumed that meet the conditions for recognition under IFRS 3

Business Combinations

are recognized at their fair values at the acquisition date. Any excess consideration over the fair value of the identifiable net assets is recognized as goodwill. Acquisition-related costs, other than those associated with the issuance of debt or equity, are recognized in profit or loss as incurred.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date. The measurement period is the period from the date of acquisition to the date the Company obtains complete information about facts and circumstances that existed as of the acquisition date up to a maximum of one year.

Any contingent consideration is measured at fair value at the acquisition date. If contingent consideration that meets the definition of a financial instrument is classified as equity, it is not remeasured and its subsequent settlement is accounted for within equity. Other contingent consideration is remeasured at fair value at each reporting date with changes in fair value recognized in profit or loss.

B.	Foreign currency

Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency of the parent company and its material subsidiaries are presented in the table in Note 32(A). These consolidated financial statements are presented in Canadian dollars.

Foreign currency transactions

In preparing the financial statements of each individual subsidiary, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the dates those fair values are determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

Presentation currency translations

. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income (loss) and accumulated in equity (attributed to non-controlling interests as appropriate).

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

C.	Revenue recognition

The Company’s revenues are derived from the sales of perpetual software licenses, subscriptions to AssetCare, installation and engineering services, hardware and post contract support and maintenance (“PCS”).

Revenue from the sale of hardware and perpetual software licenses is recognized at the point in time when control is transferred to the customer, generally upon delivery at the customer’s location.

Installation services involve the installation and implementation of energy efficient hardware, perpetual software licenses and IoT connections which feed information to the AssetCare platform. Engineering services include consulting, implementation and integration services entered into either on a time and materials basis or fixed fee basis. Revenue from installation and engineering services is recognized overtime, using an input method based on direct labour hours to measure progress towards complete satisfaction of the service.

Revenues from PCS and subscriptions to the AssetCare platform are recognized ratably overtime over the term of the PCS or subscription. Any amounts received for which performance obligations have not been completed are recognized as deferred revenue.

The Company’s contracts often include a number of promised goods or services, which are typically distinct from other performance obligations, and are therefore accounted for separately. A good or service is distinct if the customer can benefit from it on its own or together with other readily available resources, and the Company’s promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer.

In determining the transaction price of a contract with a customer, the Company considers the effects of variable consideration, existence of a significant financing component, non-cash consideration, and any consideration payable to the customer. The total transaction price is allocated to each performance obligation on a relative stand-alone selling price (“SSP”) basis, representing the selling price as if it was sold separately. This is a formal process involving judgement which could impact the timing of recognized revenue.

In most cases, the SSP is based on observable data. Where possible, a narrow SSP range for each product and service is established and this range is assessed on a periodic basis or when material changes in facts and circumstances warrant a review. If the SSP is not directly observable, the amount is estimated using either the expected cost plus a margin or residual approach. The SSP for perpetual software licenses is highly variable and therefore the Company applies the residual approach, which determines the SSP by subtracting the SSP of hardware, installation and other services in the contract from the total transaction price.

Long-term contracts

The Company enters into multi-year contracts with some customers for goods and services. Under the terms of these contracts, the customer is billed an equal monthly amount over the term of the contract. Revenue is recognized as performance obligations are completed, generally with a significant portion of the transaction price being recognized at the beginning of the contract based on the calculated SSP for performance obligations that are satisfied at the point in time at which goods are delivered to customers. The remainder of the revenue is recognized over the life of the contract over time or as services are completed.

D.	Financial Instruments

i.	Recognition and initial measurement

On initial recognition, all financial assets and liabilities are classified and recorded at fair value, net of attributable transaction costs, except for financial assets and liabilities classified as at fair value through profit or loss (“FVTPL”).

Cash and bank indebtedness

Cash is held in bank accounts. The Company considers only those investments that are highly liquid, readily convertible to cash with original maturities of three months or less at date of purchase as cash equivalents.

Bank indebtedness consists of bank overdrafts and draws from the credit facility account repayable on demand for cash management purposes.

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

ii.	Classification and subsequent measurement

Financial Assets

On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other comprehensive income; or fair value through profit or loss, depending on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial assets that do not meet the below classifications are classified as fair value through profit or loss.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL:

•

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

•

its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated as at FVTPL:

•

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

•

its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial Liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative, or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in net income (loss).

When a financial liability is non-substantially modified, a gain or loss is recognized into net income (loss). The gain or loss is calculated at the date of modification as the difference between the remaining original contractual cash flows and the modified cash flows both discounted at the original effective interest rate. Any costs associated with the modified loan is added to the loan carrying amount and amortized over the remaining modified loan term. The carrying amount of the loan is revised to reflect the new cash outflows at the date of modification.

iii.	Derecognition of financial assets and liabilities

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or the Company transfers the rights to receive the contractual cash flow in a transaction in which substantially all the risks and rewards of ownership have been transferred.

A financial liability is derecognized when its contractual obligations are discharged, cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non- cash assets transferred or liabilities assumed) is recognized in net income (loss).

iv.	Impairment of non-derivative financial assets

The Company applies an expected credit loss (“ECL”) impairment model, which applies to financial assets measured at amortized cost, contract assets, lease receivables, and financial guarantee contracts. The ECL model results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual loss event. Except for trade receivables, the ECL model requires the recognition of credit losses based on 12 months of expected losses for financial assets and the recognition of lifetime expected losses on financial assets that have experienced a significant increase in credit risk since origination or which are considered credit impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. ECL’s are probability-weighted estimates of credit losses. Credit losses are measured as the present value of all cash shortfalls representing the difference between the cash flows due to the entity in accordance with the contract and the cash flow an entity expects to receive. The Company has elected to measure loss allowances for trade receivables at an amount equal to lifetime ECL’s.

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

iv.	Impairment of non-derivative financial assets (continued)

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the Company’s historical experience and including forward looking information. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a portion or the full amount. The Company assesses the timing of write-offs based on whether there is a reasonable expectation of recovery. Impairment losses related to trade and other receivables are presented within general and administrative expenses.

E.	Property and equipment

Property and equipment are recorded at cost, less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are directly attributable to the acquisition of the asset. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:


		Life
Computer equipment		2 -5 years
Office furniture and equipment		7 years
Leasehold improvements		lesser of useful lives or lease term

The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. Repairs and maintenance costs that do not improve or extend productive life are recognized in profit or loss in the period in which the costs are incurred.

F.	Intangible assets and goodwill

Intangible assets

Intangible assets acquired separately

Intangible assets patents and trademarks, customer relationships and technology, all of which have a finite life. Intangible assets acquired separately are measured on initial recognition at cost and intangible assets acquired in a business combination are recognized at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and intangible assets are recognized in profit or loss as incurred.

Intangible assets are amortized over their estimated useful lives, on a straight-line basis, as follows:


		Life
Patents and trademarks		5 - 15 years
Customer relationships		5 - 20 years
Technology		5 years

Amortization methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if required on a prospective basis.

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mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

F.	Intangible assets and goodwill (continued)

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

Internally generated intangible assets

Expenditures on research activities are recog

nized as an expense in the period in which they were incurred.

Internally-generated intangible assets arising from development or from the development phase of an internal project are recognized if all of the following factors have been demonstrated:

•

Technical feasibility of completing the intangible asset results in the intangible asset being available for use or sale;

•

There is an intention to complete the intangible asset and use or sell it;

•

There is an ability to use or sell the intangible asset;

•

Evidence to suggest how the intangible asset will generate probable future economic benefits;

•

There is availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and,

•

An ability to reliably measure the expenditure(s) attributable to the intangible asset during its development exists.

The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Where no internally-generated intangible asset can be recognized, development expenditures are recognized in profit or loss in the period in which it is incurred.

Goodwill

Goodwill, representing the excess of the consideration paid for entities acquired over the fair values of the assets acquired and liabilities assumed, is initially measured at cost and is not amortized. After initial recognition, goodwill is measured at cost less any accumulated impairment losses and is tested annually for impairment.

For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units that are expected to benefit from the synergies of the business combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the cash generating unit. The recoverable amount is the greater of an asset’s fair value less costs of disposal or its value in use. In determining fair value less costs of disposal, recent market transactions are considered or an appropriate valuation model is used. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated statements of loss on comprehensive loss. Goodwill impairments are not reversed. Management evaluates goodwill for impairment annually as of December 31 unless impairment indicators exist at another reporting date. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

G.	Impairment of non-financial assets

The carrying amount of property and equipment and intangible assets with a finite life are reviewed each reporting period to determine whether events or changes in circumstances indicate that their carrying amounts may not be recoverable. Intangible assets with an indefinite life are reviewed and tested on an annual basis or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal or its value in use. To assess value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are considered or an appropriate valuation model is used.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

G.	Impairment of non-financial assets (continued)

To assess impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Leases

i.	Recognition and initial measurement as a lessee

At the commencement date of a lease, the Company recognizes a right-of-use asset and a lease liability for all leases except leases of low-value assets and leases with a duration of 12 months or less.

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A lease is defined as a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company determines whether, throughout the period of use, it has the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset. The Company reassesses whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed.

Lease liabilities are initially measured at the present value of unpaid lease payments at the commencement date of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

•

fixed payments (including in-substance fixed payments), less any lease incentives receivable;

•

variable lease payments that depend on an index or a rate (such as CPI), initially measured using the index or rate as at the commencement date;

•

amounts expected to be payable by the Company under residual value guarantees;

•

exercise price of a purchase option if the Company is reasonably certain to exercise that option; and

•

payments of penalties for terminating the lease, if the lease term reflects the Company exercising an option to terminate the lease.

Variable rent payments that are not based on an index or rate, including additional rent for operating costs and taxes and non-recoverable goods and services tax, are recognized as rent expense, within general and administrative expense or direct costs, as incurred. Lease payments for short-term leases and leases of low-value assets are recognized as rent expense on a straight-line basis over the lease term.

Right-of-use assets are initially measured at cost comprised of the initial lease liability adjusted for any lease payments made at or before commencement of the lease, plus initial direct costs incurred less lease incentives received.

ii.	Classification and subsequent measurement as a lessee

Subsequent to the commencement date of the lease, the lease liability is measured at amortized cost using the effective interest method. The lease liability is remeasured by discounting the revised lease payments using a revised discount rate when there is a change in the lease term or there is a change in the assessment of an option to purchase the underlying asset. The lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate when there is a change in the amounts expected to be payable under a residual value guarantee or there is a change in future lease payments resulting from a change in an index or a rate used to determine variable payments. Upon remeasurement of a lease liability, a corresponding adjustment to the right-of-use asset is recognized.

Subsequent to the commencement date of the lease, the Company measures the right-of-use asset at cost, less accumulated depreciation, and any accumulated impairment losses, and adjusted for any remeasurement of the lease liability.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

H.	Leases (continued)

The right-of-use asset is depreciated using the straight-line method from the commencement date of the lease to the earlier of the end of the useful life of the underlying asset and the end of the lease term. The Company assesses its right-of-use assets for impairment and accounts for identified impairment losses similar to its assessment of impairment on other property and equipment.

Refundable security deposits are classified as financial assets measured at amortized cost and included in current other receivables or other non-current assets. Tenant improvement allowances are recognized as a reduction in the costs of the associated leasehold improvement assets.

The Company has taken the practical expedient not to assess whether rent concessions arising as a result of COVID-19 are lease modifications. These rent concessions are in the form of rent deferrals and there is no change to the amount recognized in profit or loss as a result of these changes.

I.	Government grants

Government grants are assistance by government agencies in the form of transfers of resources to an entity in return for past or future compliance with certain conditions related to the operating activities of the entity. Government grants are recognized where there is reasonable assurance that the grant will be received, and the Company will comply with all attached conditions. Government grants related to costs are deferred, if applicable, and recognized gross in profit or loss on a systematic basis in the periods in which the expenses are recognized. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset. Government loans are analyzed to determine whether they qualify as grants or are required to be treated as financial liabilities.

J.	Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the liability. Provisions are measured using managements best estimate as to the outcomes, based on known facts, risks and uncertainties at the reporting date.

Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Company. Contingent liabilities are not recognized in the consolidated financial statements but are disclosed unless the possibility of an outflow of economic resources is considered remote.

K.	Share related items

Stock options

The Company grants stock options to employees, directors, officers, and consultants. The fair value of options granted is recognized as a share-based payment expense with a corresponding increase in equity. The fair value is measured for each tranche at grant date and is recognized on a graded-vesting basis over the period during which the options vest. Stock options granted to non-employees are measured at the fair value of the goods or services received except where the fair value cannot be estimated, in which case it is measured at the fair value of the equity instrument granted. The fair value of the share-based compensation to non-employees is periodically re-measured until counterparty performance is complete, and any change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with stock options.

The fair value of options is determined using the Black-Scholes option pricing model which incorporates all the market vesting conditions. The number of options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. The impact of the revision of the original estimate is recognized in net loss such that the cumulative expense reflects the revised estimate. Upon exercise of stock options, consideration received on exercise of these equity instruments is recorded as share capital and the related share-based payment reserve is transferred to share capital.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

K.	Share related items (continued)

Restricted share units

The Company grants RSU’s to directors, employees and consultants which are measured at fair value based on the closing price of the Company’s common shares for the day preceding the date of the grant. The fair value of the grant is recognized as a share-based payment expense over the vesting period with a corresponding charge to contributed surplus. Common shares of the Company are issued on exercise by the holder of vested RSU’s.

Warrants issued as consideration for services

In certain circumstances, the Company issues warrants as consideration for services provided generally in conjunction with debt or equity financings. Where identifiable services are not reliability measured the services are measured with reference to the fair value of the equity instruments issued using the Black-Scholes model. The measurement date is when the entity obtains the goods or is provided the services and the warrants are not remeasured thereafter.

Loss per share

Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Company by the weighted average number of common shares outstanding during the respective reporting periods. Where a loss is reported, diluted loss per share is the same as basic loss per shares as all potential equity instruments are anti-dilutive and not included in the calculation.

L.	Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date or, in its absence, the most advantageous market to which the group has access at that date. Several of the company’s accounting policies and disclosures require the measurement of fair values for both financial and non-financial assets and liabilities. The Company uses the fair value hierarchy to classify the significance of inputs to valuation techniques used in making fair value measurements of financial assets and liabilities. The categories are:

•

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date;

•

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

•

Level 3 inputs are unobservable inputs for the asset or liability.

When one level one input is available the Company measures the fair value of the instrument using the quoted price in an active market for that instrument (Level 1). A market is regarded as active if transactions for the asset or a liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the group uses valuation techniques that maximize the use of relevant observable inputs and minimizes the use of unobservable inputs (Level 2 or Level 3). The chosen valuation technique incorporates all the factors that market participants would consider in pricing a transaction.

M.	Convertible debentures

Convertible debentures are accounted for depending on the terms of the contract. The fair value of the debentures are allocated into components parts, which may include separate host debt, embedded derivative(s) and/or equity components based on the terms of the contract. Where the fair value of the financial instrument is different than the transaction price then the measurement is dependent on whether the fair value was determined based on a valuation technique that only uses data from observable markets (Level 1 input) or otherwise. For compound financial instruments such as the 2019 Debentures where there is a liability and equity component, on issuance of the convertible debentures, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument.

The proceeds are allocated to the liability component first with the remainder of the proceeds allocated to the conversion option that is recognized and included in equity. The liability component (net of transaction costs) is subsequently measured at amortized cost using the effective interest rate method until it is extinguished on conversion or redemption. The carrying amount of the conversion option is not remeasured in subsequent periods.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

M.	Convertible debentures (continued)

For the majority of the 2021 Debentures, the fair value of the financial instruments was greater than the transaction price. The residual is treated as a deferred amount and recognized similar to fair value adjustments on derivatives. For hybrid financial instruments such as the 2021 Debentures where there is a liability and embedded derivative component, the fair value of the embedded derivative is determined first with the residual of the total fair value for the instrument allocated to the host debt. The host debt (liability), net of transaction costs, is subsequently measured at amortized cost using the effective interest rate method until it is extinguished on conversion or redemption.

Transaction costs are apportioned between each component of the convertible debentures based on a percentage of proceeds when the instruments are initially recognized. Transaction costs attributable to the liability and equity components are offset against the respective balances with transaction costs attributable to embedded derivatives directly expensed.

N.	Warrant liabilities

Warrants issued where the number of common shares to be issued or the value of the common shares varies as they are denominated in a foreign currency are classified as derivative financial liabilities. The derivative warrant liability is measured at fair value with changes in fair value recognized in the consolidated statements of loss at the end of each reporting period.

O.	Income taxes and deferred taxation

Income tax expense of the Company represents current tax and deferred tax.

The Company records current tax based on the taxable profits for the period which is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Taxable profit differs from profit as reported in the consolidated statements of loss and comprehensive loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

Deferred income taxes are accounted for using the liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and measured using the substantively enacted tax rates and laws in effect when the differences are expected to reverse. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as unused tax losses, income tax reductions, and certain items that have a tax basis but cannot be identified with an asset or liability on the statement of financial position, are recognized to the extent it is probable that taxable profit will be available against which the difference can be utilized. Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current assets and liabilities. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

When there is uncertainty concerning the Company’s filing position regarding the tax bases of assets or liabilities, the taxability of certain transactions or other tax-related assumptions, then the Company: (a) considers whether uncertain tax treatments should be considered separately, or as a group, based on which approach provides better predictions of the resolution; (b) determines if it is probable that the tax authorities will accept the uncertain tax treatment; and (c) if it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainly based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. Companies are to assume in making this measurement that a taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when making those examinations.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies Corp.

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2021, 2020 and 2019

(Expressed in Canadian Dollars except otherwise noted)

NOTE 32 – SIGNIFICANT ACCOUNTING POLICIES (continued)

P.	Accounting standards development

(a) Application of new and revised IFRSs

The Company did not apply any new standards or amendments for the year ended December 31, 2021.

(b) New accounting standards, interpretations and amendments not yet effective

There are a number of new accounting standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that are not expected to have a material impact on the Company in the year of adoption and as such are not included here.

In February 2021, the IASB issued amendments to two existing accounting standards regarding accounting estimates and accounting policies. The amendments issued were

Disclosure of Accounting Policies

(

Amendments to IAS 1 and IFRS Practice Statement 2

), which helps preparers determine which accounting policies to disclose in their financial statements, and

Definition of Accounting Estimates

(

Amendment to IAS 8

) which helps entities to distinguish between accounting policies and accounting estimates. These amendments are applicable starting January 1, 2023 with early adoption permitted and are not expected to have a material impact on the Company.

| Notes to the Consolidated Financial Statements

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Table of Contents

mCloud Technologies

Corp.

Condensed Consolidated Interim Statements of Financial

Position

Unaudited - Expressed in Canadian Dollars

	Notes			March 31, 2022			December 31, 2021
ASSETS
Current assets
Cash and cash equivalents			$	1,873,021		$	4,588,057
Trade and other receivables	5			13,736,106			14,566,975
Current portion of prepaid expenses and other assets				2,287,443			2,355,350
Current portion of long-term receivables	5			471,909			397,060
Total current assets			$	18,368,479		$	21,907,442
Non-current assets
Prepaid expenses and other assets			$	165,698		$	622,577
Long-term receivables	5			992,732			343,371
Right-of-use assets	6			7,033,377			916,028
Property and equipment				564,253			649,403
Intangible assets				18,923,489			20,585,833
Goodwill				27,042,823			27,081,795
Total non-current assets			$	54,722,372		$	50,199,007
Total assets			$	73,090,851		$	72,106,449
LIABILITIES
Current liabilities
Bank indebtedness	9		$	4,710,549		$	3,460,109
Trade payables and accrued liabilities	7			17,079,919			12,421,309
Deferred revenue	4			4,694,450			2,811,408
Current portion of loans and borrowings	8			12,480,038			12,447,939
Current portion of convertible debentures	10	(a)		22,922,383			22,185,170
Warrant liabilities	11			6,060,782			8,880,038
Current portion of lease liabilities	6			453,855			410,674
Business acquisition payable				1,389,094			1,398,972
Total current liabilities			$	69,791,070		$	64,015,619
Non-current liabilities
Convertible debentures	10	(b)	$	111,411		$	110,540
Lease liabilities	6			6,773,990			634,798
Loans and borrowings	8			646,137			767,662
Deferred income tax liabilities				1,407,503			2,291,057
Total liabilities			$	78,730,111		$	67,819,676
EQUITY (DEFICIT)
Share capital				118,275,850			118,195,363
Contributed surplus				11,408,263			11,040,751
Accumulative other comprehensive income				2,202,000			1,571,998
Deficit				(139,793,643	)		(130,016,073	)
Total shareholders’ equity (deficit)			$	(7,907,530	)	$	792,039
Non-controlling interest				2,268,270			3,494,734
Total equity (deficit)			$	(5,639,260	)	$	4,286,773
Total liabilities and equity			$	73,090,851		$	72,106,449

Going concern (Note 2); Events after the reporting period (Note 8, 9,

17)

The accompanying notes are an integral part of these condensed consolidated interim financial

statements.

Approved on behalf of the Board of Directors on May 16,

2022


“Russ McMeekin”		“Michael Allman”
Director		Director

1 | Condensed Consolidated Interim Financial Statements

F-64

mCloud Technologies

Corp.

Condensed Consolidated Interim Statements of Loss and Comprehensive

Loss

(Unaudited

Expressed in Canadian dollars except number of shares)

				Three months ended March 31,
	Notes			2022			2021
							Recast (Note 2)
Revenue		4		4,429,603		$	7,435,566
Cost of sales				(1,932,356	)		(3,258,730	)
Gross profit			$	2,497,247		$	4,176,836
Expenses
Salaries, wages and benefits				5,314,330			4,870,395
Sales and marketing				762,231			184,699
Research and development				531,950			749,164
General and administration				2,552,013			1,337,361
Professional and consulting fees				3,176,043			1,739,421
Share-based compensation		13		252,933			375,274
Depreciation and amortization				1,943,213			1,970,950
Total expenses			$	14,532,713		$	11,227,264
Operating loss			$	12,035,466		$	7,050,428
Other expenses (income)
Finance costs		15(a)	$	1,858,637		$	2,235,927
Foreign exchange loss				622,509			367,428
Business acquisition costs and other expenses				—			324,410
Fair value (gain) loss on derivatives		15(b)		(2,493,270	)		1,564,149
Other income		15(c)		(398,268	)		(1,910,306	)
Loss before tax			$	11,625,074		$	9,632,036
Current tax expense				288,863			238,797
Deferred tax recovery				(890,816	)		(119,224	)
Net loss for the period			$	11,023,121		$	9,751,609
Other comprehensive (income) loss Foreign subsidiary translation differences				(649,089	)		(385,347	)
Comprehensive loss for the period			$	10,374,032		$	9,366,262


Net loss (income) for the period attributable to:
mCloud Technologies Corp. shareholders	$	9,777,570	$	10,270,725
Non-controlling interest		1,245,551		(519,116	)
	$	11,023,121	$	9,751,609

Comprehensive loss (income) for the period attributable to:
mCloud Technologies Corp. shareholders	$	9,147,568	$	9,923,174
Non-controlling interest		1,226,464		(556,912	)
	$	10,374,032	$	9,366,262


Loss per share attributable to mCloud shareholders - basic and diluted	$	0.61	$	1.12
Weighted average number of common shares outstanding - basic and diluted		16,147,560		9,171,378

The accompanying notes are an integral part of these condensed consolidated interim financial

statements.

2 | Condensed Consolidated Interim Financial Statements

F-65

mCloud Technologies

Corp.

Condensed Consolidated Interim Statements of Changes in Equity

(Deficit)

For the Three Months Ended March 31, 2022 and

2021

(Unaudited

Expressed in Canadian Dollars except number of

shares)

	Notes		Number of Shares		Share Capital		Contributed Surplus			Accumulated Other Comprehensive Income (loss)		Deficit			Total Shareholders’ Equity (Deficit)			Non- controlling Interest			Total Equity (Deficit)
Balance, December 31, 2021				16,138,069	$	118,195,363	$	11,040,751		$	1,571,998	$	(130,016,073	)	$	792,039		$	3,494,734		$	4,286,773
Share-based payments		13		—		—		252,933			—		—			252,933			—			252,933
RSUs exercised		12(a)		12,031		80,487		(80,487	)		—		—			—			—			—
Warrants issued in financing		12(b)		—		—		195,066			—		—			195,066			—			195,066
Net loss for the period				—		—		—			—		(9,777,570	)		(9,777,570	)		(1,245,551	)		(11,023,121	)
Other comprehensive income for the perio d				—		—		—			630,002		—			630,002			19,087			649,089
Balance, March 31, 2022				16,150,100	$	118,275,850	$	11,408,263		$	2,202,000	$	(139,793,643	)	$	(7,907,530	)	$	2,268,270		$	(5,639,260	)

Balance, December 31, 2020				9,168,416	$	83,120,611	$	8,518,476		$	1,669,596	$	(85,686,366	)	$	7,622,317		$	3,836,202		$	11,458,519
Share-based payments				—		—		375,274			—		—			375,274			—			375,274
RSUs exercised				4,278		53,429		(53,429	)		—		—			—			—			—
Broker warrants issued				—		—		360,108			—		—			360,108			—			360,108
Net (loss) income for the period				—		—		—			—		(10,270,725	)		(10,270,725	)		519,116			(9,751,609	)
Other comprehensive income for the period				—		—		—			347,551		—			347,551			37,796			385,347
Balance, March 31, 2021 - Recast (Note 2)				9,172,694	$	83,174,040	$	9,200,429		$	2,017,147	$	(95,957,091	)	$	(1,565,475	)	$	4,393,114		$	2,827,639

The accompanying notes are an integral part of these condensed consolidated interim financial

statements.

3 | Condensed Consolidated Interim Financial Statements

F-66

mCloud Technologies

Corp.

Condensed Consolidated Interim Statements of Cash

Flows

(Unaudited - Expressed in Canadian Dollars)

			Three months ended March 31,
	Notes		2022			2021
Operating activities						Recast (Note 2)
Net loss for the period		$	(11,023,121	)	$	(9,751,609	)
Items not affecting cash:
Depreciation and amortization			1,943,213			1,970,950
Share-based compensation	13		252,933			375,274
Finance costs	15(a)		1,858,637			2,235,927
Fair value (gain) loss on derivatives	15(b)		(2,493,270	)		1,564,149
Other income	15(c)		(2,841	)		(697,237	)
Recovery of expected credit loss			(54,782	)		—
Unrealized foreign currency exchange (gain) loss			(26,400	)		71,956
Current tax expense			288,863			238,797
Deferred income tax recovery			(890,816	)		(119,224	)
Increase (decrease) in working capital	16(a)		7,353,522			(41,509	)
Interest paid			(976,459	)		(777,149	)
Net cash used in operating activities		$	(3,770,521	)	$	(4,929,675	)
Investing activities
Acquisition of property and equipment		$	(11,040	)	$	(20,486	)
Expenditure on intangible assets			—			(440,965	)
Net cash used in investing activities		$	(11,040	)	$	(461,451	)
Financing activities
Payment of lease liabilities		$	(121,068	)	$	(297,637	)
Repayment of loans			(3,273,055	)		(2,641,604	)
Proceeds from loans and bank indebtedness, net of transaction costs			4,310,588			2,151,212
Net change in bank overdraft			173,102			66,153
Proceeds from issuance of convertible debentures, net of costs			—			5,329,835
Net cash provided by financing activities		$	1,089,567		$	4,607,959
Net decrease in cash and cash equivalents		$	(2,691,994	)	$	(783,167	)
Effect of exchange rate fluctuations on cash held			(23,042	)		(18,297	)
Cash and cash equivalents, beginning of period			4,588,057			1,110,889
Cash and cash equivalents, end of period		$	1,873,021		$	309,425

Supplemental cash flow information (Note

16)

The accompanying notes are an integral part of these condensed consolidated interim financial

statements.

4 | Condensed Consolidated Interim Financial Statements

F-67

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 1

NATURE OF

OPERATIONS

The Company is domiciled in Vancouver, Canada with its head office in Calgary, Alberta and its registered offices located at 550-510 Burrard Street, Vancouver, British Columbia, V6C 3A8.

The Company’s common shares trade on the TSX.V trading in Canadian dollars under the symbol MCLD, on the Nasdaq Stock Market LLC (“NASDAQ”) in U.S. dollars under the symbol MCLD, and on the OTCQB Venture Market under the symbol MCLDF.

NOTE 2

BASIS OF

ACCOUNTING

Basis of

preparation

These condensed consolidated interim financial statements of the Company include the accounts of the Company, the ultimate parent company of its consolidated group, and its subsidiaries, and are prepared in accordance with International Accounting Standard 34 -

Interim Financial Reporting

(“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). Certain disclosures included in the annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the IASB have been condensed or omitted as they are not required for interim financial statements. Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated annual financial statements and notes thereto for the year ended December 31, 2021 (the “2021 Annual Financial Statements”), which are available on SEDAR at www.sedar.com. Selected explanatory notes are included in the interim financial statements to explain events and transactions that are significant to the understanding of changes in the Company’s financial position and performance since the last annual financial statements.

The Company’s presentation currency is Canadian dollars, and all amounts are presented in Canadian dollars unless otherwise stated. Certain disclosures include the use of U.S. Dollars (“USD” or “US$”) in describing certain financing transactions. These condensed consolidated interim financial statements have been prepared on a going-concern basis, under the historical cost convention except for certain financial instruments that have been measured at fair value. There were no changes in the entities contained in the consolidated results or the equity percentage held by the Company from December 31, 2021, as presented in Note 33(A) to the 2021 Annual Financial Statements.

The Company has reclassified certain comparative figures in the condensed consolidated interim financial statements to conform to the current year presentation. Total revenues recognized in the consolidated statement of loss and comprehensive loss during the year ended December 31, 2021, have been corrected between the four quarters ended March 31, 2021, June 30, 2021, September 30, 2021 and December 31, 2021. The adjustment to the previously reported amounts for the three months ended March 31, 2021, resulted in a decrease to revenue and a corresponding increase to net loss and net loss attributable to mCloud shareholders of $945,470. Net loss per share increased to a net loss of

$1.12 per share from $1.02 per share

basic and

diluted.

The accounting policies applied in the preparation of these condensed consolidated interim financial statements are consistent with those applied and disclosed in Note 33 to the 2021 Annual Financial Statements.

These condensed consolidated interim financial statements were authorized for issue by the Audit Committee, on behalf of the Board of Directors, on May 16, 2022.

Going

Concern

The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate

the pandemic’s spread have impacted the Company. These measures required the Company to restrict deployment of technical services due to the in-person nature of these activities and delayed the start of certain projects throughout 2021 and into 2022. This negatively impacted the Company’s financial performance and liquidity position. While restrictions continue to ease there have been increased cases of COVID-19 and there is still uncertainty over how COVID-19 will impact the Company’s business and the timing of future revenues.

5 | Condensed Consolidated Interim Financial Statements

F-68

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 2

BASIS OF ACCOUNTING

(continued)

Going concern

(continued)

During the three months ended March 31, 2022, the Company generated a net loss of $11,023,121 and negative cash flows from operating activities of $3,770,521. At March 31, 2022, the Company had a working capital deficiency of $51,422,591. Working capital deficiency is a non-IFRS measure which is calculated as current assets less current liabilities.

Current liquidity levels and available sources of capital are not adequate to fund the working capital

deficiency.

The most significant cash outflows included in current liabilities include the repayment of the 2019 Convertible Debentures of $24,043,938 if not converted on or before June 30, 2022 (Note 10(a)); loans and borrowings of $14,087,476 including principal and interest payments; payment of trade and other payables of $17,079,919; and payments associated with leases of approximately $1,350,000.

breaches.

he reporting period. Management has considered the following in its assessment that the going concern assumption remains

appropriate:

•

the plan for the repayment of the 2019 Convertible

Debentures;

•

the repayment of a portion of the term loan on May 6, 2022 and the agreement executed whereby the term loan will be repaid in full on or before October 31, 2022 (Note 8);

•

the likelihood that undrawn funds under the revolving operating facility will be available and will not be required to be repaid (Note 9);

•

the required cash principal and interest payments on

indebtedness;

•

the likelihood of payments required under contingent consideration

arrangements;

•

the available funding of US$15,000,000 under a promissory note executed on March 28, 2022 (Note

8);

•

future debt and equity

raises.

These condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. These condensed consolidated interim financial statements do not include any adjustments to the carrying amounts and classifications of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.

6 | Condensed Consolidated Interim Financial Statements

F-69

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 3

CRITICAL ACCOUNTING ESTIMATES AND

JUDGEMENT

The Company applied critical judgements and estimates, including significant areas of estimation uncertainty in applying policies, in preparing these condensed consolidated interim financial statements, as described in Note 3 to the 2021 Annual Financial Statements.

NOTE 4

REVENUE

The Company’s operations and main revenue streams are those described in Note 33(C) to the 2021 Annual Financial Statements. All of the Company’s revenue is derived from contracts with customers.

In the following tables, revenue is disaggregated by major service line and timing of revenue recognition.

		Three months ended March 31,
		2022		2021
AssetCare initialization 1	$	414,491	$	515,243
AssetCare over time 2		3,989,128		6,434,509
Engineering services 3		25,984		485,814
	$	4,429,603	$	7,435,566

Revenues from initial implementation and activation of AssetCare projects, including the sale of

hardware.

Revenues include sales of subscriptions to AssetCare, other subscriptions, post contract support and maintenance, perpetual software licenses, and installation and engineering services.

Revenues includes consulting, implementation and integration services entered into on a time and materials basis or fixed fee basis without the use of AssetCare.

		Three months ended March 31,
Revenue recognized		2022		2021
Over time	$	3,862,204	$	5,448,710
At a point in time upon completion		567,399		1,986,856
	$	4,429,603	$	7,435,566

The Company’s revenue by location of the ultimate customer or consumer of product solution are as

follows:

		Three months ended March 31,
		2022		2021
Canada	$	2,038,976	$	4,411,599
Americas		1,520,075		1,249,604
Asia Pacific		677,868		1,718,738
Other		192,684		55,625
Total revenue	$	4,429,603	$	7,435,566

7 | Condensed Consolidated Interim Financial Statements

F-70

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 4

REVENUE

(continued)

Significant changes in unbilled revenue and deferred revenue balances are as

follows:

		Unbilled revenue			Deferred revenue
Balance at December 31, 2021	$	756,042		$	2,811,408
Additions		701,415			3,878,164
Less: transferred to trade and other receivables		(365,250	)		—
Less: recognized in revenue		—			(2,008,935	)
Effect of movements in exchange rates		—			13,813
Balance at March 31, 2022	$	1,092,207		$	4,694,450

NOTE 5

TRADE AND OTHER RECEIVABLES AND LONG-TERM

RECEIVABLES

		March 31, 2022			December 31, 2021
Trade receivables from contracts with customers	$	13,228,784		$	14,204,320
Unbilled revenue (Note 4)		1,092,207			756,042
Indirect taxes receivable		201,567			148,200
Income taxes receivable		4,027			2,217
Other receivables		660,041			919,954
Contract asset		66,794			86,777
Loss allowance		(1,517,314	)		(1,550,535	)
Total trade and other receivables - current	$	13,736,106		$	14,566,975

Long-term

receivables

		March 31, 2022		December 31, 2021
Current portion of long-term receivables 1	$	471,909	$	397,060
Non-current portion of long-term receivables 2		992,732		343,371
Total long-term receivables	$	1,464,641	$	740,431

Net of expected credit loss allowance of $94,590 at March 31, 2022 (December 31, 2021

$95,064).

Net of expected credit loss allowance of $61,619 at March 31, 2022 (December 31, 2021

$61,619).

NOTE 6

LEASES

Information about the Company’s leases are presented in Note 8, Note 26(a) and Note 30 to the Company’s 2021 Annual Financial Statements. In October 2021, the Company executed a 12-year lease for office space in Calgary, Alberta. Basic rent and estimated common area expense payments commence in December 2022, preceded by a fixturing period which the Company will use to build out the space. Effective Jan

y 2022, the Company recognized a right-of-use asset associated with this office space of $6,322,509 and a related lease liability of $6,221,749.

The carrying value of all right-of-use assets at March 31, 2022 was $7,033,377 (December 31, 2021 - $916,028). Total lease liabilities were $7,227,845 at March 31, 2022 (December 31, 2021 - $1,045,472). The change in undiscounted contractual cash flows associated with this new lease are described in Note 14(c).

8 | Condensed Consolidated Interim Financial Statements

F-71

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 7

TRADE PAYABLES AND ACCRUED

LIABILITIES

		March 31, 2022		December 31, 2021
Trade payables	$	9,885,772	$	5,591,316
Accrued liabilities		5,516,799		5,398,389
Interest payable		230,120		233,854
Mastercard facility		397,098		296,669
Due to related parties		205,366		265,074
Income taxes payable		521,788		266,753
Indirect taxes payable		221,651		150,577
Other		101,325		218,677
Total trade payables and accrued liabilities	$	17,079,919	$	12,421,309

NOTE 8

LOANS AND

BORROWINGS

The Company’s loans and borrowings are described in Note 12 to the 2021 Annual Financial Statements. The carrying value of loans and borrowings by entities controlled by the Company are as follows:

		March 31, 2022		December 31, 2021
Term loan (a)	$	8,878,345	$	9,275,683
Nations Interbanc facility 2		2,911,501		2,639,143
Debenture payable to Industry Canada		27,430		26,412
Loan payable to related party		335,129		335,860
Oracle financing		714,197		826,418
Other loans and financing		259,573		112,085
Total	$	13,126,175	$	13,215,601

Current	$	12,480,038	$	12,447,939
Non-current	$	646,137	$	767,662
Total 1	$	13,126,175	$	13,215,601

Note 16(b) includes the reconciliation of liabilities to cash flows arising from financing

activities.

Nations advanced $3,053,250 under the factor and security agreement and was repaid $2,907,550 in the three months ended March 31, 2022 (three months ended March 31, 2021 - $1,516,107 advances and $2,200,370 repayments).

Loan repayment terms vary depending on the nature of the debt. Total interest expense associated with loans and borrowings recognized in net loss was $396,703 for the three months ended March 31, 2022 (three months ended March 31, 2021 - $247,364) (Note

15(a)).

Term

Loan

At March 31, 2022, the term loan with Fiera Private Debt Fund VI LP (“Fiera”) matures in August 2026 and the loan is secured against the assets of the Company. Blended payments of principal and interest of $585,759 were paid for the three months ended March 31, 2022 (three months ended March 31, 2021 - $585,759). The term loan contains covenants with quarterly and quarter end metrics. For the three months ended March 31, 2022, the Company did not meet certain minimum covenants and therefore the term loan is due on demand as was the case at December 31, 2021, has been classified as current until such time as the covenants are in compliance. Subsequent to March 31, 2022, the Company entered into an agreement which impacts the terms and repayment of this loan (Note 17(a)).

9 | Condensed Consolidated Interim Financial Statements

F-72

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 8

LOANS AND BORROWINGS

(continued)

Financing of Electric Vehicle Development

Projects

In conjunction with the Company’s agreements to provide AssetCare solutions to optimize Electric Vehicle (“EV”) charging efficiency at auto dealerships in the states of New York and California (the “EV Dealership Projects”), on March 28, 2022, a subsidiary of the Company executed a promissory note in the aggregate principal amount of US$15,000,000 (the “Note”) with Carbon Royalty Corp. (“Carbon”). EV Dealership Projects are the design, installation and operation of integrated power systems consisting of solar, batteries and EV charging power stations for auto

dealerships.

interest payable monthly in arrears in USD. In addition to the interest payments, the Note requires certain income-based

payments, including tax incentives, be made from the borrower to the lender based on income resulting from the EV dealership projects over their 20-year term. The Loan may not be prepaid unless authorized by the lender. The Loans contain representations, warranties and covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst other implications. Subsequent to March 31, 2022, the Company, Carbon and Fiera executed an agreement specifying the security held by Carbon (Note 17(b)).

NOTE 9

BANK

INDEBTEDNESS

		March 31, 2022		December 31, 2021
ATB Financial revolving operating facility	$	4,543,133	$	3,460,109
Bank overdraft		167,416		—
Total	$	4,710,549	$	3,460,109

ATB Financial

Facility

The Company’s secured revolving operating facility (“ATB Facility”) with ATB Financial (“ATB”) is described in Note 13 to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, additional draws of $1,077,000 were made. Subsequent to March 31, 2022, $670,000 was repaid in accordance with the

agreement.

NOTE 10

CONVERTIBLE

DEBENTURES

a) 2019 Convertible

debentures

		March 31, 2022			December 31, 2021
Opening balance	$	22,380,649		$	19,767,472
Interest paid		(586,438	)		(2,345,750	)
Accreted interest at effective interest rate		1,323,651			4,958,927
Carrying amount of liability component	$	23,117,862		$	22,380,649
Less: interest payable		(195,479	)		(195,479	)
Total - current	$	22,922,383		$	22,185,170

10 | Condensed Consolidated Interim Financial Statements

F-73

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 10

CONVERTIBLE DEBENTURES

(continued)

2019 Convertible debentures

(continued)

The Company completed a private placement offering of convertible unsecured subordinated debentures (the “2019 Debentures”) for total aggregate gross proceeds of $23,507,500 in J

ly 2019. The 2019 Debentures bear interest at a rate of 10% per annum, paid quarterly, and mature on June 30, 2022, at which time the principal amount of $23,457,500 and any unpaid interest is repayable in cash if the 2019 Debentures have not been converted at the option of the holder or otherwise extinguished.

The principal amount of the 2019 Debentures is convertible into 1,563,833 units of the Company at the option of the holder at a conversion price of $15.00 per unit. Each unit is comprised of one common share and one share purchase warrant. If the debentures are converted, each warrant is exercisable to acquire one common share at an exercise price of $22.50 until June 2024.

2021 Convertible

debentures

		March 31, 2022		December 31, 2021
2021 Convertible debenture liability	$	70,542	$	69,034
2021 Convertible debenture embedded derivative		40,869		41,506
Total - non-current	$	111,411	$	110,540

Note 14(b) to the 2021 Annual Financial Statements describes the transactions associated with the Company’s

issuance and subsequent conversion of the majority of the 2021 Debentures. At December 31, 2021, there was only

one remaining c

onvertible debenture outstanding in the principal amount of U$75,000 which matures Jan

y 2024,

bears interest at 8% per annum and is convertible to the Company’s equity at a conversion price of $5.75 (US$4.59).

Interest is due and paid in cash on a quarterly basis.

NOTE 11

WARRANT

LIABILITIES

		March 31, 2022		December 31, 2021
Derivative warrant liabilities - 2021 Debentures (a)	$	1,183,883	$	1,868,541
Derivative warrant liabilities - USD equity financing (b)		4,175,673		6,106,596
Warrant liability related to business acquisition (c)		701,226		709,835
Other warrant liability (c)		—		195,066
Total, all current	$	6,060,782	$	8,880,038

Derivative warrant

liabilities

The Company issued warrants in conjunction with debt and equity transactions. Certain of these warrants are classified as derivatives which are recognized as financial liabilities. At the issuance date and each reporting date until warrants are exercised, the fair value of the liability is remeasured, with changes in the fair value recorded as gains or losses in the consolidated statements of loss and comprehensive loss. There were no new derivative warrants issued or warrants exercised in the three months ended March 31, 2022. A description of the warrants issued in the year ended December 31, 2021, and the valuation thereof, are disclosed in Note 15 to the 2021 Annual Financial Statements.

Warrants associated with 2021

Debentures

The 2,107,787 common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$6.87 and expire August 13, 2024. At March 31, 2022, the warrants were remeasured at a fair value of $1,183,883, resulting in a $656,001 gain on remeasurement. The fair value of derivative warrants at March 31, 2022 of $0.56 per warrant was calculated using the Black-Scholes option pricing model (“Black-Scholes model”) with the following inputs and assumptions: share price of $5.50, Canadian dollar equivalent exercise price of $8.61, risk free rate of 2.34%, expected life of 2.37 years, expected volatility of 42%, and no expected dividends. These warrants are classified as a Level 3 fair value measurement.

11 | Condensed Consolidated Interim Financial Statements

F-74

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 11 - WARRANT LIABILITIES

(continued)

Warrants associated with USD equity

financing

The 2,415,000 common share purchase warrants entitle the holder to purchase one common share of the Company at an exercise price of US$4.75 and expire November 29, 2026. On February 15, 2022, these warrants commenced trading on the NASDAQ, under the symbol MCLDW, and as a result, these warrants are classified as a Level 1 fair value measurement (previously Level 3) at March 31, 2022 (Note 14(b)). At March 31, 2022, the warrants were remeasured at a fair value of $4,175,673, resulting in a $1,837,269 gain on remeasurement. The fair value of derivative warrants at March 31, 2022 of $1.73 per warrant was based on the closing price of the warrants.

Other warrant

liabilities

Warrant liability related to business acquisition

Associated with the acquisition of Agnity, the Company assumed a warrant liability whereby the holder of the warrant has the option to convert the warrant into shares of Agnity, not the Company, by April 15, 2022, or receive a cash payment of US$552,250 at any time before the expiry of the warrant. The liability is measured at the Canadian dollar equivalent to its cash redemption amount which varies as a function of movements in exchange rates. Subsequent to March 31, 2022, the holder of the warrant provided notice to Agnity that they intend to receive a cash repayment.

Warrant liability related to ATB Financial

At December 31, 2021, the Company had an obligation to issue warrants to ATB. The fair value of the warrants was measured at the date the services were received in the amount of $195,066. On Jan

y 17, 2022, the Company issued 183,486 share purchase warrants to ATB which gives them the ability to purchase an equivalent number of common shares of the Company at an exercise price of $5.45 per share, maturing one year from date of issuance (Note 12(b)).

NOTE 12

CAPITAL

Common

The Company has an unlimited number of authorized voting shares with no par value. A summary of the shares issued during the year ended December 31, 2021 is described in Note 18(a) to the 2021 Annual Financial Statements. During the three months ended March 31, 2022, the Company issued 12,031 common shares on exercise of Restricted Share Units (Note 13(b)).

Commons shares in

escrow

At March 31, 2022, the Company has 662,868 (December 31, 2021 - 681,024) common shares subject to escrow conditions resulting from business combinations and asset acquisitions in prior years. There were no additional common shares subject to escrow conditions added during the three months ended March 31, 2022. Escrow restrictions will be released on 441,912 shares in the year ending December 31, 2022, and for the remaining 220,956 shares in the year ending December 31, 2023.

Warrants

The Company’s warrants outstanding as at March 31, 2022 and December 31, 2021 are as follows and include both warrants classified as equity-settled and warrants classified as financial liabilities (Note 11):

	Number of Warrants		Weighted Average Exercise Price
Balance, December 31, 2021		8,481,929	$	8.83
Issued		183,486		5.45
Balance, March 31, 2022		8,665,415	$	8.76

On Jan

y 17, 2022, the Company issued warrants to ATB to purchase an equivalent number of common shares of the Company and the warrant liability of $195,066 described in Note 11(c) was derecognized with an offsetting credit to contributed surplus for the value assigned to the warrants. The weighted average remaining contractual life of outstanding warrants was 2.8 years at March 31, 2022 (December 31, 2021

3.09 years). In addition to the outstanding warrants issued in the three months ended March 31, 2022 described above, Note 18(b) to the 2021 Annual Financial Statement includes a list of the outstanding warrants at December 31, 2021 by expiry date and exercise price.

12 | Condensed Consolidated Interim Financial Statements

F-75

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 13

SHARE BASED PAYMENT

ARRANGEMENTS

Share-based payment arrangements are discussed in Note 19 to the 2021 Annual Financial

Statements.

The Company recorded share-based compensation as

follows:

		Three months ended March 31,
		2022		2021
Stock options (a)	$	192,147	$	130,898
Restricted share units (b)		60,786		244,376
Total	$	252,933	$	375,274

Stock

Options

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Outstanding, December 31, 2021		866,789		$	8.81		7.5
Granted		48,199		$	5.17		9.6
Forfeited		(92,453	)	$	7.09		9.1
Expired		(15,801	)	$	10.10		8.4
Outstanding, March 31, 2022		806,734		$	8.76		7.5

At March 31, 2022, 285,295 stock options were exercisable at a weighted average exercise price of $10.94. Exercise prices of stock options range from $4.73 to $18.02 per option. As at March 31, 2022, unrecognized share-based compensation expense related to non-vested stock options granted is $1,231,192 (December 31, 2021

$1,824,812).

The weighted average fair value of stock options granted during the three months ended March 31, 2022 of $151,094, or $3.13 per option, was calculated at the date of grant using the Black-Scholes model with the following weighted average assumptions and inputs: grant date share price of $5.18, exercise price of $5.17, risk-free rate of 1.62%, expected life of 6.5 years, expected volatility of 74%, forfeiture rate of 10%, and no expected dividends. Expected volatility is estimated taking into account historical share price volatility. There were no grants of stock options during the three months ended March 31, 2021.

Restricted Share Units

(“RSUs”)

The Company’s obligation to issue shares on the vesting of RSUs is an unfunded and unsecured obligation of the Company. A continuity of RSUs is as follows:

	Number of RSUs
Outstanding, December 31, 2021	208,674
Granted	34,167
Exercised	(12,031	)
Forfeited	(17,517	)
Outstanding, March 31, 2022	213,293
Exercisable at March 31, 2022	115,257

During the three months ended March 31, 2022, 12,031 common shares were issued on the exercise of 12,031 RSUs at a weighted average share price at exercise of $6.69.

The fair value of each RSU is based on the market price of the Company’s common shares on the date of grant and the total fair value of RSUs granted in the three months ended March 31, 2022 was $174,329. As at March 31, 2022, unrecognized share-based compensation expense related to non-vested RSUs granted was $310,434 (December 31, 2021 - $277,686).

13 | Condensed Consolidated Interim Financial Statements

F-76

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 14

FINANCIAL INSTRUMENTS AND FINANCIAL RISK

MANAGEMENT

Classification and measurement of financial assets and liabilities by

category

The following represents the carrying values of the financial assets and liabilities of the Company and the associated measurement basis for each balance.

Financial assets	Measurement basis		March 31, 2022		December 31, 2021
Cash and cash equivalents	Amortized cost	$	1,873,021	$	4,588,057
Trade and other receivables 1	Amortized cost		13,463,718		14,329,781
Long-term receivables	Amortized cost		1,464,641		740,431
		$	16,801,380	$	19,658,269
Financial liabilities
Bank indebtedness	Amortized cost	$	4,710,549	$	3,460,109
Trade payables and accrued liabilities 1	Amortized cost		16,336,480		12,003,979
Loans and borrowings	Amortized cost		13,126,175		13,215,601
Lease liabilities	Amortized cost		7,227,845		1,045,472
2019 Debentures - host liability	Amortized cost		22,922,383		22,185,170
2021 Debentures - host liability	Amortized cost		70,542		69,034
2021 Debentures embedded derivative	FVTPL		40,869		41,506
Warrant liability - business acquisition	FVTPL		701,226		709,835
Warrant liabilities - derivatives (Note 11)	FVTPL		5,359,556		7,975,137
Business acquisition payable	FVTPL		1,389,094		1,398,972
		$	71,884,719	$	62,104,815

Excludes amounts for indirect taxes, income taxes and contract assets, where

applicable.

Financial instruments not measured at fair

value

The carrying values of the financial assets and liabilities where the measurement basis is other than FVTPL approximate their fair values due to the immediate or short-term nature of these instruments considering there have been no significant change in credit and market interest rates since origination date.

Measurement of fair

value

As described in Note 25 and Note 33(L) to the 2021 Annual Financial Statements, the fair value hierarchy establishes

three levels to classify the significance of inputs to valuation techniques used in making fair value measurements of all

financial assets and liabilities. At March 31, 2022 and December 31, 2021, there were no financial assets and financial liabilities measured and recognized at fair value on a non-recurring basis subsequent to initial recognition.

The Company’s policy for determining when a transfer between levels of the fair value hierarchy occurs is to assess the impact at the date of the event or change in circumstance that could result in the transfer. During the three months ended March 31, 2022, the warrant liabilities associated with the USD Equity financing were transferred from Level 3 to Level 1 as these warrants are now measured by reference to the closing price of the traded warrants (Note 11(b)). There were no other transfers between any of the levels during the three months ended March 31, 2022.

Valuation methodologies used in the measurement of fair value for Level 2 financial assets and financial

liabilities

The measurement of Level 2 financial assets and liabilities is made by reference to the inputs used to determine the fair value of each instrument using an appropriate valuation method. There were no changes in the valuation methodologies from those at December 31, 2021.

Valuation methodologies used in the measurement of fair value for Level 3 financial

liabilities

There were no changes in the valuation methodologies for Level 3 financial liabilities from those at December 31, 2021, except from the transfer between Level 3 to Level 1 described above. The Black-Scholes model remains in use for the warrants issued on conversion of the 2021 Debentures and is based on the quoted price of the Company’s common stock in an active market, expected volatility, expected life and risk-free rate.

14 | Condensed Consolidated Interim Financial Statements

F-77

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 14

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

(continued)

Financial instruments

risk

A description of the financial instruments and financial risks that the Company is exposed to and the management of these risks is included in Note 26 to the 2021 Annual Financial Statements. There were no significant changes in the Company’s exposure to those risks during the three months ended March 31, 2022, except for the additional commitments as noted below which impacts liquidity risk.

Contractual Obligations and

Commitments

During the three months ended March 31, 2022, the most significant changes in contractual obligations disclosed in Note 26(a) were: (a) the addition of a new 12-year lease obligation of $9,529,000 for Calgary office space and variable lease payments associated with the Calgary office space of approximately $8,564,000, which were previously included in Note 30 as commitments; and (b) an additional $1,077,000 drawn under the ATB Facility, a portion of which was repaid subsequent to March 31, 2022 (Note 9). Contractual obligations at December 31, 2021, have been reduced by normal course payments made during the period to March 31, 2022 and have changed as trade payables and accrued liabilities continue to fluctuate.

NOTE 15 - OTHER INCOME /

EXPENSE

Finance

Costs

	Three months ended March 31,
		2022		2021
Interest on loans and borrowings (Note 8)	$	396,703	$	247,364
Interest on convertible debentures		1,328,046		1,512,636
Interest on lease liabilities		83,049		79,675
Transaction costs expensed		18,929		367,504
Other finance costs		31,910		28,748
Total finance costs	$	1,858,637	$	2,235,927

Fair value gain (loss) on

derivatives

	Three months ended March 31,
		2022			2021
Gain on warrant liability remeasurement (Note 11) 1	$	(2,493,270	)	$	—
Gain on embedded derivatives 2		—			(56,275	)
Deferred charge loss 2		—			1,620,424
Total fair value (gain) loss on derivatives	$	(2,493,270	)	$	1,564,149

Change in fair value

unrealized.

Associated with the 2021 Debentures (Note

10(b)).

15 | Condensed Consolidated Interim Financial Statements

F-78

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 15

OTHER INCOME / EXPENSE

(continued)

Other

income

		Three months ended March 31,
		2022			2021
Government assistance 1	$	(379,646	)	$	(1,176,374	)
Government loan forgiveness		—			(117,312	)
Derecognition of contingent consideration		—			(581,117	)
Other		(18,622	)		(35,503	)
Total other income	$	(398,268	)	$	(1,910,306	)

Majority of government grants from the Canadian Government for wage and rental

subsidies.

NOTE 16

SUPPLEMENTAL CASH FLOW

INFORMATION

Changes in non-cash working

capital

For the three months ended March 31,		2022			2021
Trade and other receivables decrease (increase)	$	660,336		$	(775,128	)
Long-term receivables (increase)		(735,779	)		(3,332	)
Prepaid expenses and other assets decrease (increase)		478,464			(36,106	)
Trade payables and accrued liabilities increase		5,016,881			166,407
Deferred revenue increase		1,933,620			606,650
Increase (decrease) in working capital	$	7,353,522		$	(41,509	)

Changes in liabilities arising from financing

activities

For the three months ended March 31,		2022			2021
Balance of loans, borrowings and PPP loans, beginning of period	$	13,215,601		$	14,102,718
New advances		3,233,250			2,151,212
Repayments of principal		(3,273,055	)		(2,641,604	)
Repayments of interest		(355,085	)		(190,684	)
Liability related items
Finance fees paid		170,530			12,981
Non-cash related items
Accretion of interest and debt issuance costs		206,849			230,392
Benefit from below market interest rate		—			(117,482	)
Foreign exchange and other		(71,915	)		(86,499	)
Balance of loans, borrowings and PPP loans, end of period	$	13,126,175		$	13,461,034

Non-cash investing and financing

activities

For the three months ended March 31,		2022		2021
Non-cash accretion of interest included in finance costs 1	$	739,729	$	759,709
Addition of right-of-use assets (Note 6)	$	6,322,509	$	—
Addition to lease liabilities (Note 6)	$	6,221,749	$	—
Non-cash broker warrants compensation	$	—	$	360,108

Associated with convertible

debentures.

16 | Condensed Consolidated Interim Financial Statements

F-79

mCloud Technologies

Corp.

Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2022 and 2021

(Unaudited - Expressed in Canadian Dollars except otherwise noted)

NOTE 17

EVENTS AFTER THE REPORTING

PERIOD

Loans and Borrowings

Change to Term

Loan

On May 5, 2022, the Company and Fiera executed an Accommodation Agreement (the “Accommodation Agreement”) and the parties agreed that a portion of the outstanding principal amount under the term loan would be paid in addition to a prepayment penalty and accommodation fee. The Company paid a total of $2,044,086 on May 6, 2022. The parties also agreed that the remainder of the principal and interest due under the loan would be paid on or before October 31, 2022 (the “Repayment Date”). The term loan was amended to increase the interest rate charged from 6.85% to 9.5% effectively immediately and clarified that the Company is not required to maintain the financial covenants set out in the November 9, 2021 amending agreement. The Company may be required to repay the loan before the Repayment Date if the Company is in default or breach of the Accommodation Agreement. As part of the Accommodation Agreement, Fiera signed an agreement, whereby Fiera’s security is subordinate to the security granted to Carbon (Note 17(b)).

Loans and Borrowings

Additional funding under promissory note with

Carbon

On May 5, 2022, the Company, Carbon and Fiera executed a Subordination and Postponement Agreement (the

“Subordination Agreement”), whereby the parties agreed that the security previously held by Fiera would be subordinate

to the security to be granted to Carbon commencing on the date of the agreement. The security granted to Carbon means the EV Dealership Projects and to the extent related to the EV Dealership projects, all accounts, equipment and machinery, contracts and contract rights, including contracts with auto dealerships, inventory, cash and proceeds, rent and profits for each of the preceding. Execution of the Subordination Agreement was required for the additional funding under the Note to be released. A total of US$15,000,000 was funded subsequent to March 31, 2022 (Note 8(b)).

17 | Condensed Consolidated Interim Financial Statements

F-80

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SUBJECT TO COMPLETION, DATE [ ], 2022

1,000,000 9.0% Series A Cumulative Preferred Shares

Warrants to Purchase 9,000,000 Common Shares

PROSPECTUS

MCLOUD TECHNOLOGIES CORP.

Until [_], (25 days after commencement of our initial public offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6. Indemnification of Directors, Officers, Employees and Agents

Under the BCBCA, a company may indemnify: (i) a current or former director or officer of that company; (ii) a current or former director or officer of another corporation if, at the time such individual held such office, the corporation was an affiliate of the company, or if such individual held such office at the company’s request; or (iii) an individual who, at the request of the company, held, or holds, an equivalent position in another entity (an “indemnifiable person”) against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal, administrative or other legal proceeding or investigative action (whether current, threatened, pending or completed) in which he or she is involved because of that person’s position as an indemnifiable person, unless: (i) the individual did not act honestly and in good faith with a view to the best interests of such company or the other entity, as the case may be; or (ii) in the case of a proceeding other than a civil proceeding, the individual did not have reasonable grounds for believing that the individual’s conduct was lawful. A company cannot indemnify an indemnifiable person if it is prohibited from doing so under its articles or by applicable law. A company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an indemnifiable person in respect of that proceeding only if the indemnifiable person has provided an undertaking that, if it is ultimately determined that the payment of expenses was prohibited, the indemnifiable person will repay any amounts advanced. Subject to the aforementioned prohibitions on indemnification, a company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an indemnifiable person in respect of such eligible proceeding if such indemnifiable person has not been reimbursed for such expenses, and was wholly successful, on the merits or otherwise, in the outcome of such eligible proceeding or was substantially successful on the merits in the outcome of such eligible proceeding. On application from an indemnifiable person, a court may make any order the court considers appropriate in respect of an eligible proceeding, including the indemnification of penalties imposed or expenses incurred in any such proceedings and the enforcement of an indemnification agreement. As permitted by the BCBCA, our articles require us to indemnify our directors and former directors (and such individual’s respective heirs and legal representatives) and permit us to indemnify any person to the extent permitted by the BCBCA.

Item 7. Recent Sales of Unregistered Securities

In the prior three years, we have issued and sold the securities described below without registering the securities under the Securities Act. We believe that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S promulgated under the Securities Act regarding sales by an issuer in offshore transactions, Regulation D under the Securities Act, Rule 701 under the Securities Act or pursuant to Section 4(a)(2) of the Securities Act regarding transactions not involving a public offering.

On August 13, 2021, the Company completed a

non-brokered

Offering of Units and issued 75,676 common shares at a price of $8.55 CDN for total proceeds of $647,030

On April 14, 2021, the Company completed a Public Offering and issued 2,300,000 common shares at a price of $6.30 USD per share for total proceeds of $14,490,000 which consists of one common share and one common share purchase warrant of the Company. Each Warrant entitles the holder to acquire on Common Share at an exercise price of $8.55 per Warrant Share at any time prior to 5pm on the date that is 3 months following the closing of the Offering.

On July 16, 2020, the Company closed a

non-brokered

unit offering issuing an aggregate of 365,297 units of the Company at a price of $10.95 per unit. Each Unit consists of one common share of the Company and

one-half

of one common share purchase warrant, with each Warrant being exercisable to acquire one common share of the Company at an exercise price of $14.25 for a term of 5 years following the closing of the Offering.

On July 6, 2020, the Company closed a brokered public offering for 1,050,229 common shares at a price of $10.95 per Unit for aggregate gross proceeds to the Company of $11,500,003. Each Unit comprised on one common share and

on-half

of one common share purchase warrant of the Company exercisable to acquire one common share of the company until July 6,2022 at an exercise price of $14.25 per share.

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Item 8. Exhibits and Financial Statement Schedules

(a) Exhibits

The following exhibits are filed herewith or incorporated by reference in this prospectus:


Exhibit		Exhibit title

1.1		Form of Underwriting Agreement

3.1		Certificate of Incorporation and Articles, as amended and the Notice of Articles of the Company (incorporated by reference to Exhibit 1.1 of the Registrant’s Annual Report on Form 20-F filed with the Commission on May 2, 2022)

4.1		Rights and Restrictions for 9.0% Cumulative Series A Preferred Shares

4.2		Form of Warrant (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on July 15, 2022)

5.1		Opinion of Morton Law LLP

5.2		Opinion of Sichenzia Ross Ference LLP

10.1		Credit agreement dated August 7, 2019 between the Company and Private Debt Fund VI LP (incorporated by reference to Exhibit 4.1 of the Registrant’s 20-F filed with the Commission on May 2, 2022)

10.2		Form of Credit facility agreement dated between the Company and ATB Financial (incorporated by reference to Exhibit 4.2 of the Registrant’s 20-F filed with the Commission on May 2, 2022)

10.3		Amalgamation agreement dated July 11, 2019 among the Company, 2199027 Alberta Ltd. and Fulcrum Automation Technologies Ltd. (incorporated by reference to Exhibit 99.30 of the Registrant’s Registration Statement on Form 40-F filed with the Commission on August 16, 2021)

10.4		Amending agreement dated April 22, 2019 between the Company and Agnity Global Inc. (incorporated by reference to Exhibit 99.29 of the Registrant’s Registration Statement on Form 40-F filed with the Commission on August 16, 2021)

10.5		Warrant Indenture dated January 14, 2020 between the Company and AST Trust Company (Canada) (incorporated by reference to Exhibit 99.2 of the Registrant’s Registration Statement on Form 40-F filed with the Commission on August 16, 2021)

10.6		Loan Agreement dated January 21, 2019 between the Company and Flow Capital Corp. (incorporated by reference to Exhibit 99.27 of the Registrant’s Registration Statement on Form 40-F filed with the Commission on August 16, 2021)

10.7		Warrant Indenture dated July 6, 2020 between the Company and AST Trust Company (Canada) (incorporated by reference to Exhibit 99.103 of the Registrant’s Registration Statement on Form 40-F filed with the Commission on August 16, 2021)

10.8		Employment Agreement of Russell H. McMeekin dated May 1, 2017 (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.9		Employment Agreement of Dave Weinerth dated January 17, 2021 (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.10		Employment Agreement of Kim Clauss dated March 1, 2021 (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.11		Employment Agreement of Barry Po dated March 7, 2018 (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.12		Employment Agreement of Constantino Lanza dated May 1, 2017 (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.13		Offer Letter of Chantal Schutz dated May 24, 2019 (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.14		Offer Letter of Chantal Schutz (Revised) dated October 1, 2019 (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form F-1 filed with the Commission on June 13, 2022)

10.15		Form of Transfer Agency and Registrar Services Agreement by and between the Company and American Stock Transfer & Trust Company, LLC

10.16		Amended and Restated Royalty Purchase Agreement dated October 27, 2016 between Agnity Global, Inc., Agnity Communications, Inc., Agnity Healthcare, Inc. SPINACOM, Inc., and Grenville Strategic Royalty Corp.

21		Subsidiaries of the Company (incorporated by reference to Exhibit 8.1 of the Registrant’s Registration Statement on Form 20-F filed with the Commission on May 2, 2022)

23.1		Consent of Morton Law LLP (included in Exhibit 5.1)

23.2		Consent of Sichenzia Ross Ference LLP (included in Exhibit 5.2)

23.3		Consent of KPMG LLP

24		Power of Attorney (included on signature page of Registration Statement on Form F-1 filed with the Commission on May 11, 2022)

107		Filing Fee Table

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(b) Financial Statement Schedules

None.

Item 9. Undertakings

The undersigned registrant hereby undertakes:

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(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;

To provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial

bona fide

offering thereof.

That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(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);

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(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.

That, insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.”

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on

Form F-1

and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in City of Vancouver, Province of British Columbia, Canada on August 9, 2022.


mCloud Technologies Corp.

By:		/s/ Russell H. McMeekin
Name:		Russell H. McMeekin
Title:		Chief Executive Officer (Principal Executive Officer)

Dated:		August 9, 2022

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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ Russell H. McMeekin	Chief Executive Officer	August 9, 2022
Russell H. McMeekin	(Principal Executive Officer)

/s/ Chantal Schutz	Chief Financial Officer	August 9, 2022
Chantal Schutz	(Principal Accounting and Financial Officer)

/s/ *	Director	August 9, 2022
Michael Allman

/s/ *	Director	August 9, 2022
Constantino Lanza

/s/ *	Director	August 9, 2022
Elizabeth MacLean

/s/ *	Director	August 9, 2022
Ian C. W. Russell


*By:	/s/ Russell H. McMeekin	Attorney-in-fact	August 9, 2022
	Russell H. McMeekin

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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of the Company has signed this registration statement or amendment thereto in the United States on August 9, 2022.


Authorized U.S. Representative

By:		/s/ Russell H. McMeekin
		Name: Russell H. McMeekin
		Title: Chief Executive Officer

EX-1.1

Exhibit 1.1

[1,000,000] UNITS

EACH CONSISTING OF

ONE 9.0% SERIES A CUMULATIVE PERPETUAL PREFERRED SHARE

AND NINE WARRANTS TO PURCHASE ONE COMMON SHARE

MCLOUD TECHNOLOGIES CORP.

UNDERWRITING AGREEMENT

[•], 2022

Maxim Group LLC

Investment Banking

300 Park Avenue, 16th Floor

New York, New York 10022

As Representative of the Several Underwriters, if any, named in Schedule I hereto

Ladies and Gentlemen:

The undersigned, MCLOUD TECHNOLOGIES CORP., a company incorporated under the Business Corporations Act (British Columbia) (collectively with its subsidiaries, including, without limitation, all entities disclosed or described in the Registration Statement as being subsidiaries of MCLOUD TECHNOLOGIES CORP., the “Company”), hereby confirms its agreement (this “Agreement”) with the several underwriters (such underwriters, including the Representative (as defined below), the “Underwriters” and each an “Underwriter”) named in Schedule I hereto for which MAXIM GROUP LLC (“Maxim”) is acting as representative to the several Underwriters (in such capacity, the “Representative” and if there are no Underwriters other than the Representative, references to multiple Underwriters shall be disregarded and the term Representative as used herein shall have the same meaning as Underwriter) on the terms and conditions set forth herein.

It is understood that the several Underwriters are to make a public offering of the Securities as soon as the Representative deems it advisable to do so. The Securities are to be initially offered to the public at the public offering price set forth in the Prospectus. The Representative may from time to time thereafter change the public offering price and other selling terms. The Company understands that the Underwriters propose to make a public offering of the Units in the United States, directly and through other investment dealers and brokers in the United States upon the terms and conditions set forth in the Prospectuses (as defined below). It is acknowledged that neither the Company nor the Underwriters will market the Securities or provide marketing materials to any prospective purchasers in Canada.

It is further understood that Maxim will act as the Representative for the Underwriters in the offering and sale of the Closing Securities and, if any, the Option Securities in accordance with this Agreement.

ARTICLE 1

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:

“$” or “dollar” shall mean U.S. dollars.

“Action” shall have the meaning ascribed to such term in Section 3.1(m).

“Advance” shall have the meaning ascribed to such term in Section 4.6(d).

“Affiliate” means with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person as such terms are used in and construed under Rule 405 under the Securities Act.

“Benefit Arrangements” shall have the meaning ascribed to such term in Section 3.1(ss).

“BHCA” shall have the meaning ascribed to such term in Section 3.1(mm).

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided that banks shall not be deemed to be authorized or obligated to be closed due to a “shelter in place,” “non-essential employee” or similar closure of physical branch locations at the direction of any governmental authority if such banks’ electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.

“Canadian Securities Authorities” means the securities regulatory authorities in the province of British Columbia.

“Canadian Securities Laws” means the applicable rules and regulations under such laws, together with applicable published national, multilateral and local policy statements, instruments, notices and blanket orders of the Canadian Securities Authorities.

“Closing” means the closing of the purchase and sale of the Closing Securities pursuant to Section 2.1.

“Closing Date” means the hour and the date on the Trading Day on which all conditions precedent to (i) the Underwriters’ obligations to pay the Closing Purchase Price and (ii) the Company’s obligations to deliver the Closing Securities, in each case, have been satisfied or waived, but in no event later than 10:00 a.m. (New York City time) on the second (2nd) Trading Day following the date hereof or at such earlier time as shall be agreed upon by the Representative and the Company.

“Closing Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b), which aggregate purchase price shall be net of underwriting discounts and commissions.

“Closing Securities” shall have the meaning ascribed to such term in Section 2.1(a).

“Closing Shares” shall have the meaning ascribed to such term in Section 2.1(a).

“Closing Units” shall have the meaning ascribed to such term in Section 2.1(a).

“Closing Warrants” shall have the meaning ascribed to such term in Section 2.1(a).

“Code” shall have the meaning ascribed to such term in Section 3.1(ll).

“Commission” means the United States Securities and Exchange Commission.

“Common Shares” means the common shares of the Company, without par value, and any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Share Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.

“Company Auditor” means KPMG LLP, with offices located at Suite 3100 205 - 5 Avenue SW, Calgary, Alberta T2P 4B9.

“Company Counsel” means Sichenzia Ross Ference LLP, 1185 Avenue of Americas, 31st Floor, New York, NY 10036.

“Company Canadian Counsel” means Morton Law LLP, 1200-750 W. Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.

“Company IT Systems” shall have the meaning ascribed to such term in Section 3.1(tt).

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

“EDGAR” shall have the meaning ascribed to such term in Section 3.1(a).

“Effective Date” means the date and time as of which the Registration Statement became effective in accordance with the rules and regulations under the Securities Act.

“Environmental Laws” shall have the meaning ascribed to such term in Section 3.1(p).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Execution Date” shall mean the date on which the parties execute and enter into this Agreement.

“Exempt Issuance” means the issuance of (a) Common Shares, restricted stock, restricted stock units or options to employees, officers, consultants, other service providers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into Common Shares issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.21(a) herein, and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“FINRA” means the Financial Industry Regulatory Authority.

“General Disclosure Package” shall have the meaning ascribed to such term in Section 3.1(c).

“Federal Reserve” shall have the meaning ascribed to such term in Section 3.1(mm).

“Fox Rothschild” means Fox Rothschild LLP, counsel to the Underwriters, with offices located at 222 South Ninth Street, Suite 2000, Minneapolis, MN 55402.

“Hazardous Materials” shall have the meaning ascribed to such term in Section 3.1(p).

“IFRS” shall have the meaning ascribed to such term in Section 3.1(k).

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business); (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $25,000 due under leases required to be capitalized in accordance with IFRS.

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(s).

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Lock-Up Agreements” means the lock-up agreements that are delivered on the date hereof by each of the Company’s officers and directors and each other holder of Common Shares and Common Share Equivalents holding, on a fully diluted basis, three percent (3%) or more of the Company’s issued and outstanding Common Shares, in substantially the form of Exhibit A attached hereto.

“Marketing Materials” shall have the meaning ascribed to such term in Section 6.1.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(e).

“Material Permit” shall have the meaning ascribed to such term in Section 3.1(ii).

“Money Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(nn).

“Offering” shall have the meaning ascribed to such term in Section 2.1(c).

“Option Closing Date” shall have the meaning ascribed to such term in Section 2.2(c).

“Option Closing Purchase Price” shall have the meaning ascribed to such term in Section 2.2(b), which aggregate purchase price shall be net of the underwriting discounts and commissions.

“Option Securities” shall have the meaning ascribed to such term in Section 2.2(a).

“Option Shares” shall have the meaning ascribed to such term in Section 2.2(a).

“Option Warrants” shall have the meaning ascribed to such term in Section 2.2(a).

“Over-Allotment Option” shall have the meaning ascribed to such term in Section 2.2(a).

“Permitted Free Writing Prospectus” shall have the meaning ascribed to such term in Section 4.2(c).

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Preliminary Prospectus” shall have the meaning ascribed to such term in Section 3.1(a).

“Privacy and Data Security Laws” shall have the meaning ascribed to such term in Section 3.1(a).

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Prospectus” shall have the meaning ascribed to such term in Section 3.1(a).

“Registration Statement” shall have the meaning ascribed to such term in Section 3.1(a).

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(h).

“Right of First Refusal” shall have the meaning ascribed to such term in Section 4.20.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule. “Securities” means the Closing Securities, the Option Securities and the Warrant Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Series A Preferred Shares” shall mean the 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value.

“Share Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b).

“Shares” shall mean, collectively, the Series A Preferred Shares delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2(a).

“Subject Transaction” shall have the meaning ascribed to such term in Section 4.18.

“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the OTCQB Venture Market, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the TSX Venture Exchange (or any successors to any of the foregoing).

“Transaction Documents” means this Agreement and all exhibits and schedules hereto, the Lock-Up Agreements, the Warrants, the Warrant Agent Agreement and any other documents or agreements executed in connection with the transactions contemplated hereunder.

“Transfer Agent” means American Stock Transfer & Trust Company, LLC, with a mailing address of 6201 15th Avenue, Brooklyn, New York 11219, and any successor transfer agent of the Company.

“Underwriters’ Information” shall have the meaning ascribed to such term in Section 6.1.

“Units” shall have the meaning ascribed to such term in Section 2.1(a)(i).

“Warrant Agent” means the Transfer Agent.

“Warrant Agent Agreement” means the warrant agent agreement by and between the Company and the Transfer Agent, as warrant agent, for the purpose of administering the Warrants, in the form of Exhibit G attached hereto.

“Warrant Purchase Price” shall have the meaning ascribed to such term in Section 2.1(b).

“Warrant Shares” means the Common Shares issuable upon exercise of the Warrants.

“Warrants” means, collectively, the Common Share purchase warrants delivered to the Underwriters in accordance with Section 2.1(a)(ii) and Section 2.2, which Warrants shall be exercisable immediately and have a term of exercise equal to five (5) years, in the form of Exhibit E attached hereto.

ARTICLE 2

PURCHASE AND SALE

2.1 Closing.

(a) Upon the terms and subject to the conditions set forth herein, the Company agrees to sell in the aggregate [1,000,000] Units (the “Units”), with each Unit consisting of one Series A Preferred Share and one-half of one Warrant to purchase one Common Share, subject to the terms and conditions stated herein, and each Underwriter agrees to purchase, severally and not jointly, at the Closing, the following securities of the Company:

(i) number of Units (the “Closing Units”) set forth opposite the name of such Underwriter on Schedule I hereto;

(ii) the number of Series A Preferred Shares (the “Closing Shares”) set forth opposite the name of such Underwriter on Schedule I hereto included in the Closing Units; and

(iii) the number of Warrants (“Closing Warrants”) to purchase Common Shares set forth opposite the name of such Underwriter on Schedule I hereto included in the Closing Units, which shall have an exercise price of $4.75 per share (subject to adjustment as provided therein) (collectively with the Closing Units and the Closing Shares, the “Closing Securities”).

The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. The Common Shares and the Warrants comprising the Units are immediately separable and will be issued separately in the Offering.

(b) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Closing Units set forth opposite their respective names on Schedule I attached hereto and made a part hereof at a purchase price of $23.00 per Closing Unit (92% of the public offering price per Closing Unit)(the “Closing Purchase Price”), and the purchase price of each Closing Unit shall be allocated as follows: (i) $22.9172 per Closing Share (the “Share Purchase Price”) and (ii) $0.0092 per Closing Warrant (equal to $0.0828 per nine Warrants) (the “Warrant Purchase Price”). The Closing Units are to be offered initially to the public at the price of $25.00 per Unit ($24.91 per Series A Preferred Share and $0.01 per Warrant (equal to $0.09 per nine Warrants)), which offering price is also set forth on the cover page of the Prospectus.

(c) On the Closing Date, each Underwriter shall deliver or cause to be delivered to the Company, via wire transfer, immediately available funds equal to such Underwriter’s Closing Purchase Price and the Company shall deliver to, or as directed by, such Underwriter its respective Closing Securities and the Company shall deliver the other items required pursuant to Section 2.3 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4, the Closing shall occur at the offices of Fox Rothschild or such other location as the Company and Representative shall mutually agree (including remotely by means of electronic transmission). The Securities are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (the “Offering”).

2.2 Over-Allotment Option.

(a) For the purposes of covering any over-allotments in connection with the distribution and sale of the Closing Securities, the Representative is hereby granted an option (the “Over-Allotment Option”) to purchase up to [150,000] Series A Preferred Shares, representing fifteen percent (15%) of the Closing Shares sold as part of the Closing Units sold in the Offering (the “Option Shares”), and/or Warrants to purchase up to [1,350,000] Common Shares, representing fifteen percent (15%) of the Closing Warrants sold as part of the Closing Units sold in the Offering (the “Option Warrants” and, collectively with the Option Shares, the “Option Securities”), which may be purchased in any combination of Option Shares and/or Option Warrants at the Share Purchase Price and/or Warrant Purchase Price, respectively.

(b) In connection with an exercise of the Over-Allotment Option, (a) the purchase price to be paid for any Option Shares is equal to the product of the Share Purchase Price multiplied by the number of Option Shares to be purchased and (b) the purchase price to be paid for any Option Warrants is equal to the product of the Warrant Purchase Price multiplied by the number of Option Warrants to be purchased (the aggregate purchase price to be paid on an Option Closing Date, the “Option Closing Purchase Price”).

(c) The Over-Allotment Option granted pursuant to this Section 2.2 may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares and/or Option Warrants in any combination thereof within 45 days after the Execution Date. An Underwriter will not be under any obligation to purchase any Option Securities prior to the exercise of the Over-Allotment Option by the Representative. The Over-Allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares and/or Option Warrants to be purchased and the date and time for delivery of and payment for the Option Securities (each, an “Option Closing Date”), which will not be later than the earlier of (i) 45 days after the Execution Date and (ii) two (2) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Fox Rothschild or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Securities does not occur on the Closing Date, each Option Closing Date will be as set forth in the notice. Upon exercise of the Over-Allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Shares and/or Option Warrants specified in such notice. The Representative may cancel the Over-Allotment Option at any time prior to the expiration of the Over-Allotment Option by written notice to the Company.

2.3 Deliveries. The Company shall deliver or cause to be delivered to each Underwriter (if applicable) the following:

(a) At the Closing Date, the Closing Shares included in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Shares, which shares shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;

(b) At the Closing Date, the Closing Warrants included in the Closing Units and, as to each Option Closing Date, if any, the applicable Option Warrants, which Warrants shall be delivered via The Depository Trust Company Deposit or Withdrawal at Custodian system for the accounts of the several Underwriters;

(c) Contemporaneously herewith, evidence that the Company has filed an amendment to the Company’s articles creating the Series A Preferred Shares and setting forth the rights and restrictions thereof;

(d) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Company Counsel addressed to the Underwriters, dated as of the Closing Date and as to each Option Closing Date, if any, bring-down opinions and negative assurance letters from Company Counsel addressed to the Underwriters in form and substance satisfactory to counsel to the Underwriters;

(e) At the Closing Date and at each Option Closing Date, if any, the duly executed and delivered legal opinion and negative assurance letter of Company Canadian Counsel for the Company with respect to certain matters related to Canadian law, addressed to the Underwriters, dated as of the Closing Date and each Option Closing Date, if any, in form and substance satisfactory to counsel to the Underwriters;

(f) Contemporaneously herewith, a cold comfort letter, addressed to the Underwriters and in form and substance satisfactory in all respects to the Representative from the Company Auditor dated, respectively, as of the date of this Agreement and a bring-down letter dated as of the Closing Date and each Option Closing Date, if any;

(g) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Officer’s Certificate, substantially in the form required by Exhibit B attached hereto;

(h) On the Closing Date and on each Option Closing Date, if any, the duly executed and delivered Secretary’s Certificate, substantially in the form required by Exhibit C attached hereto;

(i) On the Closing Date and on each Option Closing Date, if any, a duly executed and delivered Chief Financial Officer’s Certificate, substantially in the form required by Exhibit D attached hereto, addressed to the Underwriters; and

(j) Such other customary certificates or documents as the Underwriters and Underwriters’ Counsel may have reasonably requested.

2.4 Closing Conditions. The respective obligations of each Underwriter hereunder in connection with the Closing and each Option Closing Date are subject to the following conditions being met:

(a) the accuracy in all material respects when made and on the date in question (other than representations and warranties of the Company already qualified by materiality, which shall be true and correct in all respects) of the representations and warranties of the Company contained herein (unless as of a specific date therein);

(b) all obligations, covenants and agreements of the Company required to be performed at or prior to the date in question shall have been performed;

(d) the Registration Statement shall be effective on the date of this Agreement and at each of the Closing Date and each Option Closing Date, if any, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representative;

(e) if required by FINRA, the Underwriters shall have received a notice of no objections from FINRA as to the amount of compensation allowable or payable to and the terms and arrangements for acting as the Underwriters as described in the Registration Statement;

(f) the (i) Series A Preferred Shares, including the Closing Shares and the Option Shares and (ii) Warrants, including the Warrant, have been approved for listing on the Nasdaq Capital Market;

(g) the Company has filed with the Commission a Form 8-A on the date hereof providing for the registration pursuant to Section 12(b) under the Exchange Act of the Series A Preferred Shares; and such Form 8-A has become effective under the Exchange Act. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares or the Warrants under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration; and

(h) prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company and its Subsidiaries taken as a whole, from the latest dates as of which such condition is set forth in the Registration Statement, the General Disclosure Package and Prospectus; (ii) no Action, at law or in equity, shall have been pending or threatened against the Company or any Affiliate of the Company before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the General Disclosure Package and Prospectus; (iii) no stop order applicable to the Company shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; (iv) the Company has not incurred any material liabilities or obligations, direct or contingent, nor has it entered into any material transactions not in the ordinary course of business, other than pursuant to this Agreement and the transactions referred to herein; (v) the Company has not paid or declared any dividends or other distributions of any kind on any class of its capital stock; (vi) the Company has not altered its method of accounting; and (vii) the Registration Statement, the General Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the rules and regulations thereunder and shall conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder, and neither the Registration Statement, the General Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

If any of the conditions specified in this Section 2.4 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to the Representative or to Representative’s counsel pursuant to this Section 2.4 shall not be reasonably satisfactory in form and substance to the Representative and to Representative’s counsel, all obligations of the Underwriters hereunder may be cancelled by the Representative at, or at any time prior to, the consummation of the applicable Closing. Notice of such cancellation shall be given to the Company in writing or orally. Any such oral notice shall be confirmed promptly thereafter in writing.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding Section of the Disclosure Schedules, the Company represents and warrants to the Underwriters as of the Execution Date, as of the Closing Date and as of each Option Closing Date, if any, as follows:

(a) Registration Statement; Prospectuses. The Company has filed with the Commission the Registration Statement, including any related Preliminary Prospectus or Prospectuses, for the registration of the Series A Preferred Shares under the Securities Act, which Registration Statement has been prepared by the Company in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act. The registration of the Common Stock under the Exchange Act has been declared effective by the Commission on the date hereof. Copies of such Registration Statement and of each amendment thereto, if any, including the related Preliminary Prospectuses, heretofore filed by the Company with the Commission have been delivered to the Underwriters. The term “Registration Statement” means such registration statement on Form F-1 (File No. 333-264859), as amended, as of the relevant Effective Date, including financial statements, all exhibits and any information deemed to be included or incorporated by reference therein, including any information deemed to be included pursuant to Rule 430A or Rule 430B of the Securities Act and the rules and regulations thereunder, as applicable. If the Company files a registration statement to register a portion of the Public Shares and relies on Rule 462(b) of the Securities Act and the rules and regulations thereunder for such registration statement to become effective upon filing with the Commission (the “Rule 462 Registration Statement”), then any reference to the “Registration Statement” shall be deemed to include the Rule 462 Registration Statement, as amended from time to time. The term “Preliminary Prospectus” as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Securities Act and the rules and regulations thereunder as included at any time as part of, or deemed to be part of or included in, the Registration Statement. The term “Prospectus” means the final prospectus in connection with this Offering as first filed with the Commission pursuant to Rule 424(b) of the Securities Act and the rules and regulations thereunder or, if no such filing is required, the form of final prospectus included in the Registration Statement at the Effective Date, except that if any revised prospectus or prospectus supplement shall be provided to the Representative by the Company for use in connection with the Public Shares which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to be filed by the Company pursuant to Rule 424(b)), the term “Prospectus” shall also refer to such revised prospectus or prospectus supplement, as the case may be, from and after the time it is first provided to the Representative for such use. Any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Exchange Act after the Effective Date, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing shall be deemed to include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). The term “General Disclosure Package” means, collectively, the Permitted Free Writing Prospectus(es) (as defined below) issued at or prior to the date hereof, the most recent preliminary prospectus related to this Offering, and the information included on Schedule I and Schedule II hereto.

(b) Effectiveness of Registration. At the time of filing the Registration Statement, the Company met, and as of the date hereof the Company meets, the general eligibility requirements for use of Form F-1 under the Securities Act. Any amendment or supplement to the Registration Statement or the Prospectuses required by this Agreement will be so prepared and filed by the Company and, as applicable, the Company will use commercially reasonable efforts to cause it to become effective as soon as reasonably practicable. No stop order suspending the effectiveness of the Registration Statement is in effect and no proceedings for such for that purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by the Commission. No order preventing or suspending the use of the Base Prospectuses, the Prospectus Supplements, the Prospectuses or any Permitted Free Writing Prospectus (as defined herein) has been issued by the Commission or any Canadian Securities Authority. The Company has delivered to the Underwriter one complete copy of the Registration Statement and a copy of each consent of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and the Prospectuses, as amended or supplemented, in such quantities and at such places as the Underwriter has reasonably requested. At the time of filing the Registration Statement and at the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Securities, the Company was not and, as of the date of this Agreement, is not, an Ineligible Issuer (as defined in Rule 405 under the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer. “Time of Sale” means [8:00 a.m.] New York City time on the date of this Agreement.

(c) Accuracy. Each part of the Registration Statement, when such part became or becomes effective, at any deemed effective date pursuant to Form F-1 and the Rules and Regulations on the date of filing thereof with the Commission and at the Time of Sale and Closing Date, and the Prospectus, on the date of filing thereof with the Commission and at the Time of Sale and Closing Date, conformed in all material respects or will conform in all material respects with the requirements of the Rules and Regulations; each part of the Registration Statement, when such part became or becomes effective, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, on the date of filing thereof with the Commission, and the Prospectus and the applicable Permitted Free Writing Prospectus(es), if any, issued at or prior to such Time of Sale, taken together (collectively, and with respect to the Securities, together with the public offering price of such Securities, the “General Disclosure Package”) and at the Time of Sale and Closing Date, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements or omissions in any such document made in reliance upon and in conformity with information relating to the Underwriter furnished in writing to the Company by the Underwriter specifically for inclusion in the Registration Statement, the Prospectus or any Permitted Free Writing Prospectus, or any amendment or supplement thereto, it being understood and agreed that the only such information furnished by the Underwriter consists of the information described as such herein.

(d) Subsidiaries. All of the Subsidiaries of the Company are set forth on Schedule 3.1(d). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

(e) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).

(f) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(g) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(h) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filing with the Commission of the Prospectus, (ii) such filings as are required to be made under applicable state securities laws and (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrants for trading thereon in the time and manner required thereby (collectively, the “Required Approvals”).

(i) Issuance of Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Warrant Shares are duly authorized and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of Common Shares issuable pursuant to this Agreement and issuable upon exercise of the Warrants. The Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. All corporate action required to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. The Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus.

(j) Capitalization. The capitalization of the Company as of the date hereof is as set forth under the heading “Capitalization” in the Prospectus. No Person other than the Representative has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents, except such rights which have been waived prior to the date hereof. Except as a result of the purchase and sale of the Securities or as set forth on Schedule 3.1(j), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Shares or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional Common Shares or Common Share Equivalents or the capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue Common Shares or other securities to any Person (other than the Underwriters). There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities and other laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. All of the securities of the Company have been duly authorized and validly issued in accordance with all requisite laws. The authorized shares of the Company conform in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus. The offers and sales of the Company’s securities were at all relevant times either registered under the Canadian Securities Laws, the Securities Act and the applicable state securities or Blue Sky laws or, based in part on the representations and warranties of the purchasers, exempt from such registration requirements. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

(k) Canadian Reporting Issuer; Financial Statements. The Company (i) is a reporting issuer (within the meaning of Canadian Securities Laws) or the equivalent in the province of British Columbia, and (ii) is not in default of any of the requirements of the Canadian Securities Laws. The financial statements of the Company included in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package, and the Prospectus comply in all material respects with applicable accounting and legal requirements with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with International Financial Reporting Standards applied on a consistent basis during the periods involved (“IFRS”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by IFRS, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. The agreements and documents described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package and the Prospectus conform in all material aspects to the descriptions thereof contained therein and there are no agreements or other documents required by the Canadian Securities Laws, the Securities Act and the rules and regulations thereunder to be described in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the General Disclosure Package or the Prospectus, or (ii) is material to the Company’s 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 Company’s 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 Company’s knowledge, any other party is in default thereunder and, to the Company’s 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 Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations. There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement, the General Disclosure Package and the Prospectus which have not been included as so required. The pro forma and pro forma as adjusted financial information, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus has been properly compiled and prepared in accordance with the applicable legal and accounting requirements and include all adjustments necessary to present fairly in accordance with IFRS the pro forma and as adjusted financial position of the respective entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods specified. The assumptions used in preparing the pro forma and pro forma as adjusted financial information, if any, included in the Registration Statement, the General Disclosure Package and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein. The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions; and the pro forma and pro forma as adjusted financial information reflect the proper application of those adjustments to the corresponding historical financial statement amounts.

(l) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the Registration Statement, except as specifically disclosed in the Registration Statement, the Preliminary Prospectus, the General Disclosure Package and the Prospectus, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to IFRS or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans and the issuance of Common Share Equivalents as disclosed in the Registration Statement. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made. Unless otherwise disclosed in the Registration Statement, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

(m) Litigation. There has not been, and to the knowledge of the Company there is not pending or contemplated, any action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company’s knowledge, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. To the knowledge of the Company, there has not been, and there is not pending or contemplated, any investigation by the Canadian Securities Authorities or the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Canadian Securities Laws, the Exchange Act or the Securities Act.

(n) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or the Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of the Subsidiaries is a party to a collective bargaining agreement, and the Company and the Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of the Subsidiaries to any liability with respect to any of the foregoing matters that would reasonably be expected to have a Material Adverse Effect. The Company and the Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(o) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

(p) Environmental Laws. The Company and the Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in the case of (i), (ii) and (iii), the failure to do so could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

(q) Privacy and Data Security Laws and Regulations. The Company and the Subsidiaries have (i) operated and currently operate their respective businesses in a manner compliant with all applicable foreign, federal, state and local laws and regulations, all contractual obligations and all Company policies (internal and posted) related to privacy and data security applicable to the Company’s and the Subsidiaries’ collection, use, handling, transfer, transmission, storage, disclosure and/or disposal of the data of their respective customers, employees and other third parties (the “Privacy and Data Security Laws”), and (ii) implemented, monitored and have been and are in compliance with, applicable administrative, technical and physical safeguards and policies and procedures designed to ensure compliance with Privacy and Data Security Laws, except as would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, or as disclosed to the Representative, there has been no loss or unauthorized access, use, modification or breach of security of customer, employee or third party data maintained by or on behalf of the Company and the Subsidiaries, and neither the Company nor any of the Subsidiaries has notified, nor has the current intention to notify, any customer, governmental entity or the media of any such event with regard to any material data breach.

(r) Title to Assets. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, the Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with IFRS and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

(s) Intellectual Property. The Company and the Subsidiaries have, or have rights to use or own or possess, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights it believes are necessary or required for use in connection with their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). To the knowledge of the Company, the Company is not now infringing, and upon further development or commercialization of any product or service described in the Registration Statement, the General Disclosure Package or the Prospectus, will not infringe on, any valid claim of any issued patents, copyrights or trademarks of others. The Company has not conducted a “freedom to operate” study. None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement, except where such action would not reasonably be expected to have a Material Adverse Effect. Other than as specifically described in the Registration Statement, the General Disclosure Package or the Prospectus, neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the Registration Statement, the General Disclosure Package or the Prospectus, a written notice of a claim or otherwise has any knowledge that the Company’s products or planned products as described in the Registration Statement, the General Disclosure Package or the Prospectus violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights either currently are or ultimately shall be enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and the Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(t) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(u) Transactions With Affiliates and Employees. Except as set forth in the Registration Statement, General Disclosure Package or Prospectus, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from, any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

(v) Sarbanes-Oxley; Internal Accounting Controls. Except as described in the Registration Statement, the General Disclosure Package or the Prospectus, the Company’s 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 management’s 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 management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act and Canadian Securities Laws) that comply with the requirements of the Exchange Act and Canadian Securities Laws; such disclosure controls and procedures have been designed to ensure that material information relating to the Company is made known to the Company’s principal executive officer and principal financial officer by others within those entities; such disclosure controls and procedures are effective.

(w) Certain Fees. Except as set forth in the Registration Statement, the General Disclosure Package and Prospectus, no brokerage or finder’s 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 Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA. Other than payments to the Underwriters for this Offering or as disclosed in the Registration Statement, the Company has not made and has no agreements, arrangements or understanding to make any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the 180-day period preceding the initial filing of the Registration Statement through the 90-day period after the Effective Date. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.

(x) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

(y) Registration Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Canadian Securities Law or the Securities Act of any securities of the Company or any Subsidiary, other than those rights that have been disclosed in the Registration Statement, General Disclosure Package, or Prospectus or that have been waived or satisfied.

(z) Compliance with Exchange Act. The Common Shares and Series A Preferred Shares are registered pursuant to Section 12(b) of the Exchange Act and the Company has filed with the Commission a Form 8-A on the date hereof providing for the registration of the Series A Preferred Shares pursuant to Section 12(b) under the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Shares or Series A Preferred Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has taken all actions necessary to register the Warrants pursuant to Section 12(b) of the Exchange Act by filing with the Commission a Form 8-A. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Shares, Series A Preferred Shares or Warrants are or have been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Shares, Series A Preferred Shares and Warrants are currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees of the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. The (i) Series A Preferred Shares, including the Closing Shares and the Option Shares, and (ii) Warrants and the Warrant Shares have been approved for listing on the Nasdaq Capital Market, subject to official notice of issuance.

(aa) Compliance with Listing Requirements. The Company has taken all necessary actions to ensure that, upon such time as the Nasdaq Capital Market shall have approved the Series A Preferred Shares and Warrants for listing, it is in compliance with all applicable corporate governance requirements set forth in the rules of the Nasdaq Capital Market that are in effect. Without limiting the generality of the foregoing: (i) all members of the Company’s board of directors who are required to be “independent” (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Company’s board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the audit committee of the Company’s Board of Directors has at least one member who is an “audit committee financial expert” (as that term is defined under applicable laws, rules and regulations).

(bb) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s articles of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable as a result of the Underwriters and the Company fulfilling their obligations or exercising their rights under the Transaction Documents.

(cc) Statistical, Industry-Related and Market-Related Data. The statistical, industry-related and market-related data included in the Registration Statement, the General Disclosure Package and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree with the sources from which they are derived.

(dd) No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this Offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable stockholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

(ee) Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

(ff) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and the Subsidiaries each (i) has made or filed all federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatsoever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

(gg) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the FCPA.

(hh) Accountants. To the knowledge and belief of the Company, the Company Auditor (i) is an independent registered public accounting firm and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s annual information form for the fiscal year ending December 31, 2022.

(ii) Regulatory; Compliance with Laws. (A) The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Registration Statement, the General Disclosure Package or the Prospectus, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (each, a “Material Permit”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. The disclosures in the Registration Statement concerning the effects of federal, state, local and all foreign regulation on the Company’s business as currently contemplated are correct in all material respects. The Company has not failed to file with the applicable regulatory authorities any filing, declaration, listing, registration, report or submission that is required to be so filed for the Company’s business operation as currently conducted. All such filings were in material compliance with applicable laws when filed and no deficiencies have been asserted in writing by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions.

(jj) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance with the terms of the Company’s 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 Company’s 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.

(kk) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

(ll) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Company shall so certify upon the Representative’s request.

(mm) Bank Holding Company Act. Neither the Company nor any of the Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of the Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of the Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

(nn) Money Laundering. The operations of the Company and the Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

(oo) D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires completed by each of the Company’s directors and officers immediately prior to the Offering is true and correct in all respects and the Company has not become aware of any information which would cause the information disclosed in such questionnaires to become inaccurate and incorrect.

(pp) FINRA Affiliation. No officer, director or any beneficial owner of five percent (5%) or more of the Company’s Common Shares or Common Share Equivalents has any direct or indirect affiliation or association with any FINRA member (as determined in accordance with the rules and regulations of FINRA) that is participating in the Offering. Except for securities purchased on the open market, no Company Affiliate is an owner of stock or other securities of any member of FINRA. No Company Affiliate has made a subordinated loan to any member of FINRA. No proceeds from the sale of the Securities (excluding underwriting compensation as disclosed in the Registration Statement and the Prospectus) will be paid to any FINRA member, any persons associated with a FINRA member or an affiliate of a FINRA member. Except as disclosed in the Prospectus, the Company has not issued any warrants or other securities or granted any options, directly or indirectly, to the Representative or any of the Underwriters named on Schedule I hereto within the 180-day period prior to the initial filing date of the Prospectus. Except as disclosed in the Registration Statement and except for securities issued to the Representative as disclosed in the Prospectus and securities sold by the Representative on behalf of the Company, no person to whom securities of the Company have been privately issued within the 180-day period prior to the initial filing date of the Prospectus is a FINRA member, is a person associated with a FINRA member or is an affiliate of a FINRA member. No FINRA member participating in the Offering has a conflict of interest with the Company. For this purpose, a “conflict of interest” exists when a FINRA member, the parent or affiliate of a FINRA member or any person associated with a FINRA member in the aggregate beneficially own five percent (5%) or more of the Company’s outstanding subordinated debt or common equity, or five percent (5%) or more of the Company’s preferred equity. “FINRA member participating in the Offering” includes any associated person of a FINRA member that is participating in the Offering, any member of such associated person’s immediate family and any affiliate of a FINRA member that is participating in the Offering. “Any person associated with a FINRA member” means (1) a natural person who is registered or has applied for registration under the rules of FINRA and (2) a sole proprietor, partner, officer, director, or branch manager of a FINRA member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a FINRA member. When used in this Section 3.1(pp) the term “affiliate of a FINRA member” or “affiliated with a FINRA member” means an entity that controls, is controlled by or is under common control with a FINRA member. The Company will advise the Representative and Fox Rothschild if it learns that any officer, director or owner of five percent (5%) or more of the Company’s outstanding Common Shares or Common Share Equivalents is or becomes an affiliate or associated person of a FINRA member firm.

(qq) Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to Fox Rothschild on behalf of the Representative shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.

(rr) Board of Directors. The qualifications of the persons serving as board members and the overall composition of the Board of Directors comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder applicable to the Company and the rules of the Trading Market. At least one member of the Board of Directors qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of the Trading Market. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent” as defined under the rules of the Trading Market.

(ss) Employee Plans. The Registration Statement, Preliminary Prospectus and the Prospectus identify each employment, severance or other similar agreement, arrangement or policy and each material plan or arrangement required to be disclosed pursuant to the rules and regulations providing for insurance coverage (including any self-insured arrangements), workers’ compensation, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits or retirement benefits, or deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation, or post-retirement insurance, compensation or benefits, which: (i) is not an Employee Plan; (ii) is entered into, maintained or contributed to, as the case may be, by the Company or any of its Subsidiaries; and (iii) covers any officer or director or former officer or director of the Company or any of its Subsidiaries. These agreements, arrangements, policies or plans are referred to collectively as “Benefit Arrangements.” Each Benefit Arrangement has been maintained in material compliance with its terms and with the requirements of applicable law. Except as disclosed in the Registration Statement, Preliminary Prospectus and the Prospectus, there is no liability in respect of post-retirement health and medical benefits for retired employees of the Company or any of its Subsidiaries, other than medical benefits required to be continued under applicable law.

(tt) IT Systems. Except as would not, individually or in the aggregate, have a Material Adverse Effect, the Company reasonably believes that (i) the Company and the Subsidiaries own or have a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and the Subsidiaries (the “Company IT Systems”), (ii) the Company IT Systems are adequate for, and operate and perform as required in connection with, the operation of the business of the Company and the Subsidiaries as currently conducted and (iii) the Company and the Subsidiaries have implemented reasonable backup, security and disaster recovery technology consistent with applicable regulatory standards.

(uu) No Relationships with Customers and Suppliers. No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of the Company’s affiliates, on the other hand, which is required to be described in the Registration Statement, the General Disclosure Package and the Prospectus or a document incorporated by reference therein and which is not so described.

(vv) No Transfer Taxes. There are no transfer taxes or other similar fees or charges under Canadian or U.S. federal law or the laws of any state, province or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Securities. No stamp duty, registration or documentary taxes, duties or similar charges are payable under the federal laws of Canada or the laws of any province in connection with: (i) the execution and delivery of this Agreement; or (ii) the enforcement or admissibility in evidence of this Agreement; or (iii) the issuance, sale and delivery to the Underwriter of the Units; or (iv) the sale of the Units through the Underwriter to U.S. residents.

ARTICLE 4

OTHER AGREEMENTS OF THE PARTIES

4.1 Amendments to Registration Statement. The Company has delivered, or will as promptly as practicable deliver, to the Underwriters complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and conformed copies of the Registration Statement (without exhibits), the Prospectus, as amended or supplemented, and the General Disclosure Package in such quantities and at such places as an Underwriter reasonably requests. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Securities other than the Prospectus, the General Disclosure Package and the Registration Statement. The Company shall not file any such amendment or supplement to which the Representative shall reasonably object in writing.

4.2 Federal Securities Laws.

(a) Compliance. During the time when a Prospectus is required to be delivered under the Securities Act, the Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities in accordance with the provisions hereof and the Prospectus. If at any time when a Prospectus relating to the Securities is required to be delivered under the Canadian Securities Laws or the Securities Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Representative, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company will notify the Underwriters promptly and prepare and file with the Commission, subject to Section 4.1 hereof, an appropriate amendment or supplement in accordance with the Securities Act.

(b) Exchange Act Registration. For a period of three years from the Execution Date, the Company will use its best efforts to maintain the registration of the Common Shares, Series A Preferred Shares and the Warrants under the Exchange Act; provided, that such provision shall not prevent a sale, merger or similar transaction involving the Company. The Company will not deregister the Common Shares, Series A Preferred Shares or the Warrants under the Exchange Act without the prior written consent of the Representative, which consent shall not be unreasonably withheld and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

(c) Free Writing Prospectuses. The Company represents and agrees that it has not made and will not make any offer relating to the Securities that would constitute an issuer free writing prospectus, as defined in Rule 433 of the rules and regulations under the Securities Act, without the prior written consent of the Representative. Any such free writing prospectus consented to by the Representative is herein referred to as a “Permitted Free Writing Prospectus.” The Company represents that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus” as defined in the rules and regulations under the Securities Act, and has complied and will comply with the applicable requirements of Rule 433 of the Securities Act, including timely Commission filing where required, legending and record keeping.

4.3 Delivery to the Underwriters of Prospectuses. The Company will deliver to the Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the the Securities Act or the Exchange Act such number of copies of each Prospectus as the Underwriters may reasonably request.

4.4 Effectiveness and Events Requiring Notice to the Underwriters. The Company will use its best efforts to cause the Registration Statement to remain effective with a current prospectus until the later of nine (9) months from the Execution Date and the date on which the Warrants are no longer outstanding and will notify the Underwriters and the holders of the Warrants promptly and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) the electronic filing with the Commission of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 4.4 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the General Disclosure Package or the Prospectus untrue or that requires the making of any changes in the Registration Statement, the General Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Canadian Securities Authorities, the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.

4.5 Review of Financial Statements. For a period of three (3) years from the Execution Date, the Company shall file with the SEC all reports required to be filed pursuant to the Exchange Act and, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements included in such reports, provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

4.6 Reports to the Underwriters; Expenses of the Offering.

(a) Periodic Reports, etc. For a period of three (3) years from the Execution Date, the Company will furnish or make available to the Underwriters copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish or make available to the Underwriters: (i) a copy of each periodic report the Company shall be required to file with the Canadian Securities Authorities or the Commission; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each registration statement filed by the Company under the Canadian Securities Laws or the Securities Act; (iv) such additional documents and information with respect to the Company and the affairs of any future Subsidiaries of the Company as the Representative may from time to time reasonably request; provided that the Underwriters shall each sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative in connection with such Underwriter’s receipt of such information. Documents filed with the SEDAR or EDGAR system shall be deemed to have been delivered to the Underwriters pursuant to this Section.

(b) Transfer Sheets. For a period of one (1) year from the Execution Date, the Company shall retain the Transfer Agent or a transfer and registrar agent acceptable to the Representative and will furnish to the Underwriters at the Company’s sole cost and expense such transfer sheets of the Company’s securities as an Underwriter may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and the Depository Trust Company, provided, however, that such requests cannot be made more than once monthly; and provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

(d) General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and each Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Securities to be sold in the Offering (including the Option Securities) with the Commission; (b) all FINRA Public Offering Filing System fees associated with the review of the Offering by FINRA; all fees and expenses relating to the listing of such Securities on the Trading Market and such other stock exchanges as the Company and the Representative together determine; (c) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, and any blue sky surveys and, if appropriate, any agreement among underwriters, any agreements with selected dealers, underwriters’ questionnaire and power of attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (d) the costs of preparing, printing and delivering the Securities; (e) fees and expenses of the Transfer Agent for the Securities (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company); (f) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (g) the fees and expenses of the Company’s accountants; (h) the fees and expenses of the Company’s legal counsel and other agents and representatives; (i) the Underwriters’ costs of mailing prospectuses to prospective investors; (j) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors; (k) the fees and expenses associated with the Underwriters’ use of i-Deal’s book-building, prospectus tracking and compliance software (or other similar software) for the Offering; (l) the fees and expenses of the Underwriter’s legal counsel and (m) the Company’s actual “road show” expenses for the Offering. The Underwriters may also deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or each Option Closing Date, if any, all out-of-pocket fees, expenses and disbursements (including legal fees and expenses) of the Underwriters incurred as a result of providing services related to the Offering to be paid by the Company to the Underwriters; provided, however, that all such costs and expenses pursuant to clauses (j), (k) and (l) of this Section 4.6(d), which are incurred by the Underwriters and for which the Company shall be responsible shall not exceed $125,000 in the aggregate in the event of a Closing of the Offering ($25,000 of which has been paid as an advance (the “Advance”) prior to the Execution Date) and a maximum of $25,000 (inclusive of the Advance) in the event there is not a Closing. In the event the offering is terminated, the Advance received against reasonable out-of-pocket expenses incurred in connection with the offering will be returned to the Company to the extent not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).

4.7 Application of Net Proceeds. The Company will apply the net proceeds from the Offering received by it in a manner consistent with the application described under the caption “Use of Proceeds” in the Prospectus.

4.8 Delivery of Earnings Statements to Security Holders. The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15^th) full calendar month following the Execution Date, an earnings statement (which need not be certified by independent public or independent certified public accountants unless required by the Securities Act or the rules and regulations under the Securities Act, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve consecutive months beginning after the Execution Date.

4.9 Stabilization. Neither the Company, nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.

4.10 Internal Controls. The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s 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 management’s 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 Accountants. For a period of three (3) years from the Effective Date, the Company shall continue to retain a nationally recognized, independent PCAOB registered public accounting firm. The Underwriters acknowledge that the Company Auditor is acceptable to the Underwriters.

4.12 FINRA. The Company shall advise the Underwriters (who shall make an appropriate filing with FINRA) if it is aware that any officer, director, five percent (5%) or greater stockholder of the Company or Person that received the Company’s unregistered equity securities in the past 180 days is or becomes an affiliate or associated person of a FINRA member firm prior to the earlier of the termination of this Agreement or the conclusion of the distribution of the Offering.

4.13 No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual and commercial in nature, based on arms-length negotiations and that neither the Underwriters nor their affiliates or any selected dealer shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement. Notwithstanding anything in this Agreement to the contrary, the Company acknowledges that the Underwriters may have financial interests in the success of the Offering that are not limited to the difference between the price to the public and the purchase price paid to the Company by the Underwriters for the Securities and the Underwriters have no obligation to disclose, or account to the Company for, any of such additional financial interests. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any breach or alleged breach of fiduciary duty by the Underwriters.

4.14 Warrant Shares. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance of the Warrant Shares, or if the Warrant is exercised via cashless exercise at a time when such Warrant Shares would be eligible for resale under Rule 144 by a non-affiliate of the Company, the Warrant Shares issued pursuant to any such exercise shall be issued free of all restrictive legends. If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise available for the sale of the Warrant Shares, the Company shall immediately notify the holders that have provided it an address of the Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any holder thereof to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).

4.15 Board Composition and Board Designations. The qualifications of the persons serving as board members of the Company and the overall composition of the Board of Directors shall comply with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and with the listing requirements of the Nasdaq Capital Market and, if applicable, at least one member of the Board of Directors must qualify as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

4.16 Securities Laws Disclosure; Publicity. At the request of the Representative, by 9:00 a.m. (New York City time) on the date hereof or, if this Agreement is executed after 9:00 a.m. (New York City time) by the time reasonably requested by the Representative, the Company shall issue a press release disclosing the material terms of the Offering. The Company and the Representative shall consult with each other in issuing any press releases with respect to the Offering, and neither the Company nor any Underwriter shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. The Company will not issue press releases or engage in any other publicity, without the Representative’s prior written consent, which consent will not be unreasonably withheld, for a period ending at 5:00 p.m. (New York City time) on the first business day following the 45th day following the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.

4.17 Stockholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Underwriter of the Securities is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Underwriter of Shares could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Shares.

4.18 Reservation of Common Shares. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times while any of the Series A Preferred Shares or Warrants are outstanding, free of preemptive rights, a sufficient number of Common Shares for the purpose of enabling the Company to issue Option Shares pursuant to the Over-Allotment Option, Common Shares upon conversion of the Series A Preferred Shares and Warrant Shares pursuant to any exercise of the Warrants.

4.19 Listing of Series A Preferred Shares and Warrants. The Series A Preferred Shares and Warrants have been approved for trading on the Nasdaq Capital Market. The Company agrees to use its best efforts to effect and maintain the trading of the Common Shares, Series A Preferred Shares and Warrants on the Nasdaq Capital Market for at least three (3) years after the Closing Date; provided that such provision shall not prevent a sale, merger or similar transaction involving the Company.

4.20 Right of First Refusal. Upon the Closing of the Offering, for a period of nine (9) months from such Closing, the Company grants Maxim the right of first refusal (the “Right of First Refusal”) to act as lead managing underwriter and book-runner for any and all future public or private equity, equity-linked or debt (excluding commercial bank debt) offerings undertaken during such period by the Company, any Subsidiary, or any successor to the Company (each, a “Subject Transaction”), at Maxim’s sole and exclusive discretion, on terms and conditions customary to Maxim for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction without the express written consent of Maxim.

The Company shall notify Maxim of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by email, registered mail or overnight courier service addressed to Maxim. If Maxim fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the delivery of such written notice, then Maxim shall have no further claim or right with respect to the Subject Transaction. Maxim may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by Maxim shall not adversely affect its Right of First Refusal with respect to any other Subject Transaction during the nine (9) month period agreed to above.

4.21 Subsequent Equity Sales.

(a) From the date hereof until ninety (90) days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any Common Shares, Series A Preferred Shares or Common Share Equivalents.

Notwithstanding the foregoing, this Section 4.21 shall not apply in respect of an Exempt Issuance.

4.22 Capital Changes. Until ninety (90) days after the Closing Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Shares without the prior written consent of Maxim.

4.23 Research Independence. The Company acknowledges that each Underwriter’s research analysts and research departments, if any, are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriter’s research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to the Company and/or the Offering that differ from the views of its investment bankers. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Underwriter with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriter’s investment banking divisions. The Company acknowledges that each Representative is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short position in debt or equity securities of the Company.

ARTICLE 5

DEFAULT BY UNDERWRITERS

If on the Closing Date or any Option Closing Date, if any, any Underwriter shall fail to purchase and pay for the portion of the Closing Securities or Option Securities, as the case may be, which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company), the Representative, or if the Representative is the defaulting Underwriter, the non-defaulting Underwriters, shall use their reasonable efforts to procure within thirty-six (36) hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company such amounts as may be agreed upon and upon the terms set forth herein, the Closing Securities or Option Securities, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such thirty-six (36) hours the Representative shall not have procured such other Underwriters, or any others, to purchase the Closing Securities or Option Securities, as the case may be, agreed to be purchased by the defaulting Underwriter or Underwriters, then (a) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur does not exceed ten percent (10%) of the Closing Securities or Option Securities, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Closing Securities or Option Securities, as the case may be, which they are obligated to purchase hereunder, to purchase the Closing Securities or Option Securities, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of Closing Securities or Option Securities, as the case may be, with respect to which such default shall occur exceeds ten percent (10%) of the Closing Securities or Option Securities, as the case may be, covered hereby, the Company or the Representative will have the right to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company except to the extent provided in Article 6 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Article 5, the applicable Closing Date may be postponed for such period, not exceeding seven days, as the Representative, or if the Representative is the defaulting Underwriter, the non-defaulting Underwriters, may determine in order that the required changes in the Prospectus or in any other documents or arrangements may be effected. The term “Underwriter” includes any person substituted for a defaulting Underwriter. Any action taken under this Article 5 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

ARTICLE 6

INDEMNIFICATION

6.1 Indemnification of the Underwriters. The Company shall indemnify and hold harmless each Underwriter, its affiliates, the directors, officers, employees and agents of such Underwriter and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), to which they, or any of them, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, as applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, any preliminary prospectus supplement, any Permitted Free Writing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) any untrue statement or alleged untrue statement of a material fact contained in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering of the Securities, including any roadshow or investor presentations made to investors by the Company (whether in person or electronically) (collectively, “Marketing Materials”) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iv) in whole or in part any inaccuracy in any material respect in the representations and warranties of the Company contained herein; provided, however, that the Company shall not be liable to the extent that such loss, claim, liability, expense or damage is based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with Underwriters’ Information. This indemnity agreement will be in addition to any liability that the Company might otherwise have. For all purposes of this Agreement, the information set forth in the Prospectus in the “Discretionary Accounts,” “Price Stabilization, Short Positions and Penalty Bids” and “Electronic Distribution” sections under the caption “Underwriting” constitutes the only information (the “Underwriters’ Information”) relating to the Underwriters furnished in writing to the Company by the Underwriters through the Representative specifically for inclusion in the preliminary prospectus, the Registration Statement or the Prospectus.

6.2 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its affiliates, the directors, officers, employees and agents of the Company and each other person or entity, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever, as incurred (including but not limited to reasonable attorneys’ fees and any and all reasonable expenses whatsoever, incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act and the rules and regulations thereunder, any Preliminary Prospectus, the Prospectus, or any amendment or supplement to any of them, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense (or action in respect thereof) arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon the Underwriters’ Information; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount and commissions applicable to the Securities purchased by such Underwriter hereunder.

6.3 Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Article 6 shall, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Article 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party under the foregoing provisions of this Article 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable out-of-pocket costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (i) the employment of counsel by the indemnified party has been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (iii) the indemnified party has reasonably concluded that a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party), (iv) the indemnifying party does not diligently defend the action after assumption of the defense, or (v) the indemnifying party has not in fact employed counsel satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel shall be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges shall be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party shall not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld or delayed). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Article 6 (whether or not any indemnified party is a party thereto), unless (x) such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, and (y) the indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment. Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Article 6 effected without its written consent if (A) such settlement is entered into more than forty-five (45) days after receipt by such indemnifying party of the aforesaid request, (B) such indemnifying party shall have received notice of the terms of such settlement at least thirty (30) days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

6.4 Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Article 6 is applicable in accordance with its terms but for any reason is held to be unavailable, the Company and the Underwriters shall contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the Underwriters, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who may also be liable for contribution), to which the Company and the Underwriter may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the Offering of the Securities pursuant to this Agreement. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the Offering (net of underwriting discount and commissions but before deducting expenses) received by the Company bears to (y) the underwriting discount and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6.4 were to be determined by pro rata allocation or by any other method of allocation (even if the Underwriters were treated as one entity for such purpose) which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6.4 shall be deemed to include, for purpose of this Section 6.4, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6.4, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by it. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6.4, any person who controls a party to this Agreement within the meaning of the Securities Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, and each director, officer, employee, counsel or agent of an Underwriter will have the same rights to contribution as such Underwriter, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6.4, will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6.4. The obligations of the Underwriters to contribute pursuant to this Section 6.4 are several in proportion to the respective number of Securities to be purchased by each of the Underwriters hereunder and not joint. No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld).

6.5 Survival. The indemnity and contribution agreements contained in this Article 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or any controlling Person thereof, (ii) acceptance of any of the Securities and payment therefor or (iii) any termination of this Agreement.

ARTICLE 7

MISCELLANEOUS

7.1 Termination.

(a) Termination Right. The Representative shall have the right to terminate this Agreement by notifying the Company at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in their opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on any Trading Market shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or an increase in major hostilities, or (iv) if a banking moratorium has been declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative’s opinion, make it inadvisable to proceed with the delivery of the Securities, or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the Offering, sale and/or delivery of the Securities or to enforce contracts made by the Underwriters for the sale of the Securities.

(b) Expenses. In the event this Agreement shall be terminated pursuant to Section 7.1(a), within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to Maxim its actual and accountable out of pocket expenses related to the transactions contemplated herein then due and payable up to $25,000 (all of which has been paid as an Advance prior to the Execution Date) (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement). Notwithstanding the foregoing, any Advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).

(c) Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Article 6 shall not be in any way effected by such election or termination or failure to carry out the terms of this Agreement or any part hereof.

7.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, any Preliminary Prospectus and the Prospectus, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. Notwithstanding anything herein to the contrary, the Engagement Agreement, dated April 27, 2022 (“Engagement Agreement”), by and between the Company and Maxim, shall continue to be effective and the terms therein, including, without limitation, Section 14 with respect to any future offerings, shall continue to survive and be enforceable by Maxim in accordance with its terms, provided that, in the event of a conflict between the terms of the Engagement Agreement and this Agreement, the terms of this Agreement shall prevail.

7.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number (if any) or e-mail attachment at the email address set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail attachment at the e-mail address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

7.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Maxim. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

7.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.

7.7 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any action, suit or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Article 6, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

7.8 Survival. The representations and warranties contained herein shall survive the Closing and the Option Closing, if any, and the delivery of the Securities.

7.9 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

7.10 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

7.11 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Underwriters and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

7.12 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

7.13 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and Common Shares in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Shares that occur after the date of this Agreement.

7.14 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE FOREVER ANY RIGHT TO TRIAL BY JURY.

7.15 No Third Party Beneficiaries. The provisions of this Agreement shall be binding upon and shall inure solely to the benefit of the parties hereto, are not intended to confer upon any Person other than the parties hereto and the Underwriters where so indicated any rights, benefits, remedies, obligations or liabilities hereunder.

(Signature Pages Follow)

If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Company and the several Underwriters in accordance with its terms.


		Very truly yours,

		MCLOUD TECHNOLOGIES CORP.

By:
Name:		Russel H. McMeekin
Title:		Chief Executive Officer

		Address for Notice: 550-510 Burrard Street Vancouver, BC V6C 3A8 Attention: Russel H. McMeekin, Chief Executive Officer

		Copy to: Sichenzia Ross Ference LLP 1185 Avenue of the Americas, 31^st Floor New York, NY 10036 E-mail: mross@srf.law Attention: Marc J. Ross Accepted by the Representative, acting for themselves and as Representative of the Underwriters named on Schedule I hereto, as of the date first above written:

		MAXIM GROUP LLC

By:
Name:		Clifford A. Teller
Title:		Executive Managing Director, Investment Banking

		Address for Notice: 300 Park Avenue, 16^th Floor New York, New York 10022 Facsimile: (212) 895-3783 E-mail: cteller@maximgrp.com Attention: Clifford A. Teller

		Copy to: Fox Rothschild LLP 222 South Ninth Street, Suite 2000 Minneapolis, MN 55402 E-mail: bhanson@foxrothschild.com Attention: Brett Hanson, Esq.

SCHEDULE I

SCHEDULE OF UNDERWRITERS


Underwriters	Closing Units	Closing Shares	Closing Warrants		Closing Purchase Price
Maxim Group LLC	[•]	[•]	[•]	$	[•]
American Trust Investment Services Inc.	[•]	[•]	[•]	$	[•]
Total	[1,000,000]	[1,000,000]	[9,000,000]	$	[23,000,000]

Schedule I-1

SCHEDULE II

Pricing Information

Number of Closing Units: [1,000,000]

Number of Closing Shares: [1,000,000]

Number of Closing Warrants: [9,000,000]

Number of Option Shares: [150,000]

Number of Option Warrants: [1,350,000]

Public Offering Price per Closing Unit: $25.00

Public Offering Price per Option Share: $24.91

Public Offering Price per Option Warrant: $0.01 (equal to $0.09 per nine Warrants)

Underwriting Discount per Closing Unit: $2.00

Underwriting Discount per Option Share: $1.9928

Underwriting Discount per Option Warrant: $0.0008 (equal to $0.0072 per nine Warrants)

Proceeds to Company per Closing Unit (before expenses): $23.00

Proceeds to Company per Option Share (before expenses): $22.9172

Proceeds to Company per Option Warrant: $0.0092 (equal to $0.0828 per nine Warrants)

Schedule II-1

EXHIBIT A

FORM OF LOCK-UP AGREEMENT

[_____________], 2022

Maxim Group LLC

300 Park Avenue, 16^th Floor

New York, New York 10022

Re:

mCloud Technologies Corp.—Public Offering

Ladies and Gentlemen:

The undersigned, a holder of common shares, without par value (the “Common Shares”), or rights to acquire Common Shares, of mCloud Technologies Corp. (the “Company”), understands that you are the representative (the “Representative”) of the several underwriters (collectively, the “Underwriters”) named or to be named in the final form of Schedule I to the underwriting agreement (the “Underwriting Agreement”) to be entered into among the Underwriters and the Company, providing for the public offering (the “Public Offering”) of 9.0% Series A Cumulative Perpetual Preferred Shares (the “Shares”) and warrants to purchase Common Shares (collectively, the “Securities”) pursuant to a registration statement filed or to be filed with the U.S. Securities and Exchange Commission (the “SEC”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth for them in the Underwriting Agreement.

In consideration of the Underwriters’ agreement to enter into the Underwriting Agreement and to proceed with the Public Offering of the Securities, and for other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned hereby agrees, for the benefit of the Company, the Representative and the other Underwriters that, without the prior written consent of the Representative, the undersigned will not, during the period specified in the following paragraph (the “Lock-Up Period”), directly or indirectly, unless otherwise provided herein, (a) offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, encumber, assign, borrow or otherwise dispose of (each a “Transfer”) any Relevant Security (as defined below) or otherwise publicly disclose the intention to do so, or (b) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” with respect to any Relevant Security (in each case within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder) with respect to any Relevant Security or otherwise enter into any swap, derivative or other transaction or arrangement that Transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security, whether or not such transaction is to be settled by the delivery of Relevant Securities, other securities, cash or other consideration, or otherwise publicly disclose the intention to do so. As used herein, the term “Relevant Security” means any Common Shares, any warrant to purchase Common Shares or any other security of the Company or any other entity that is convertible into, or exercisable or exchangeable for, Common Shares or any other equity security of the Company, in each case owned beneficially or otherwise by the undersigned on the date of closing of the Public Offering or acquired by the undersigned during the Lock-Up Period.

The restrictions in the foregoing paragraph shall not apply to any exercise (including a cashless exercise or broker-assisted exercise and payment of tax obligations) of options or warrants to purchase Common Shares; provided that any Common Shares received upon such exercise, conversion or exchange will be subject to this Lock-Up Period. The Lock-Up Period will commence on the date of this Lock-up Agreement and continue and include the date that is one-hundred and eighty (180) days after the closing of the Public Offering.

Exhibit A-1

In addition, the undersigned further agrees that, except for the registration statement filed or to be filed in connection with the Public Offering, during the Lock-Up Period the undersigned will not, without the prior written consent of the Representative: (a) file or participate in the filing with the SEC of any registration statement or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document, in each case with respect to any proposed offering or sale of a Relevant Security, or (b) exercise any rights the undersigned may have to require registration with the SEC of any proposed offering or sale of a Relevant Security.

In furtherance of the undersigned’s obligations hereunder, the undersigned hereby authorizes the Company during the Lock-Up Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Relevant Securities for which the undersigned is the record owner and the transfer of which would be a violation of this Lock-Up Agreement and, in the case of Relevant Securities for which the undersigned is the beneficial but not the record owner, agrees that during the Lock-Up Period it will cause the record owner to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities to the extent such transfer would be a violation of this Lock-Up Agreement.

Notwithstanding the foregoing, the undersigned may transfer the undersigned’s Relevant Securities:

(i) as a bona fide gift or gifts,

(ii) to any trust, partnership, limited liability company or other legal entity commonly used for estate planning purposes which is established for the direct or indirect benefit of the undersigned or a member of members of the immediate family of the undersigned,

(iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended) of the undersigned, (2) to limited partners, limited liability company members or stockholders of the undersigned, or (3) in connection with a sale, merger or transfer of all or substantially all of the assets of the undersigned or any other change of control of the undersigned, not undertaken for the purpose of avoiding the restrictions imposed by this Lock-Up Agreement,

(iv) if the undersigned is a trust, to the beneficiary of such trust,

(v) by testate or intestate succession, or

(vi) by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement,

provided, that (A) such transfer shall not involve a disposition for value, (B) the transferee agrees in writing with the Underwriters and the Company to be bound by the terms of this Lock-Up Agreement, and (C) such transfer would not require any filing under Section 16(a) of the Exchange Act and no such filing is voluntarily made.

Exhibit A-2

For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement and that this Lock-Up Agreement has been duly authorized (if the undersigned is not a natural person) and constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date of this Lock-Up Agreement.

The undersigned understands that, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Securities to be sold thereunder, the undersigned shall be released from all obligations under this Lock-Up Agreement.

The undersigned, whether or not participating in the Public Offering, understands that the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Lock-Up Agreement.

This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof. Delivery of a signed copy of this Lock-Up Agreement by facsimile or e-mail/.pdf transmission shall be effective as the delivery of the original hereof.


				Very truly yours,

		Signature:

		Name (printed):

		Title (if applicable):

		Entity (if applicable):

Exhibit A-3

EXHIBIT B

OFFICERS’ CERTIFICATE

MCLOUD TECHNOLOGIES CORP.

The undersigned, Russel H. McMeekin and Chantal Schutz, the duly elected and duly qualified Chief Executive Officer and Chief Financial Officer, respectively, of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the “Company”), hereby certify the following on behalf of the Company, in connection with the transactions contemplated by the Underwriting Agreement (the “Underwriting Agreement”), dated [•], 2022, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto:

1. The undersigned officers have carefully examined the Registration Statement, the General Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of time it became effective and as of the Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the General Disclosure Package, as of its date and as of the Closing Date, any Issuer Free Writing Prospectus as of its date and as of the Closing Date and the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading.

2. Since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the General Disclosure Package or the Prospectus.

3. To the best of their knowledge after reasonable investigation, as of the Closing Date, the representations and warranties of the Company in the Underwriting Agreement are true and correct and the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.

4. There has not been, subsequent to December 31, 2021, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a Material Adverse Effect.

5. All correspondence between the Company or its counsel and the Commission are accurate and complete in all material respects.

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Underwriting Agreement.

This certificate is to assist the Underwriters in conducting and documenting their investigation of the affairs of the Company in connection with the Offering of the Public Shares pursuant to the terms of the Underwriting Agreement and the other transactions described in the Transaction Documents, and each of the Underwriters, Fox Rothschild LLP, Sichenzia Ross & Ference LLP and Morton Law LLP is entitled to rely on this Certificate for such purpose and (if applicable) in connection with the delivery by such counsel of their respective legal opinions and negative assurance statement.

Exhibit B-1

IN WITNESS WHEREOF, the undersigned have executed this Officers’ Certificate on behalf of the Company as of this [__] day of [____], 2022.



Name:		Russel H. McMeekin
Title:		Chief Executive Officer


Name:		Chantal Schutz
Title:		Chief Financial Officer

[SIGNATURE PAGE TO OFFICERS’ CERTIFICATE]

Exhibit B-2

EXHIBIT C

SECRETARY’S CERTIFICATE

MCLOUD TECHNOLOGIES CORP.

[___], 2022

The undersigned, acting solely in his/her capacity as the duly elected, qualified and acting Secretary of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the “Company”), and not in his/her individual capacity, hereby gives this certificate pursuant to Section 2.3 of that certain underwriting agreement, dated [•], 2022, by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto (the “Underwriting Agreement”). Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.

The undersigned, [_________], Secretary of the Company, hereby certifies as of the date hereof as follows:

1. Attached hereto as Exhibit A is a true, correct and complete copy of the Company’s memorandum of articles, as amended, in effect on the date hereof (the “Articles”). The Articles are in full force and effect on the date hereof, and no further amendments or modifications to the Articles have been authorized or filed.

2. Attached hereto as Exhibit B is a true, correct and complete copies of resolutions duly adopted by the Company’s board of directors or a committee thereof at meetings held on [_____], 2022 and [____], 2022, in which the transactions contemplated by the Registration Statement, the Prospectus and the Transaction Documents were authorized and approved. Such resolutions are in full force and effect, have not been amended, modified or rescinded and are the only resolutions related to the subject matter thereof.

3. Each person who, as a director or officer of the Company, signed, and delivered by facsimile, portable document file (.pdf) or otherwise (a) the Underwriting Agreement, (b) the Transaction Documents and (c) any and all other documents or instruments executed and delivered to the Representative in connection with the transactions contemplated by the Underwriting Agreement, was duly elected or appointed, qualified and acting as such director or officer, and was duly authorized to execute and deliver such documents or other instruments at the respective times of such execution and delivery.

4. All persons who, as officers or directors of the Company or attorneys-in-fact of such officers or directors, signed, and delivered by facsimile, portable document file (.pdf) or otherwise: (a) the Registration Statement on Form F-1, as amended (File No. 333-264859), that the Company filed with the Commission on May 11, 2022, which was subsequently declared effective by the Commission on [•], 2022, and (b) any and all other documents or instruments executed and delivered to the Commission in connection with such Registration Statement were, at the respective times of such signing, delivery or filing, duly elected or appointed, qualified and acting as such director, officer or duly appointed and acting as such attorney-in-fact, and the signatures of such persons appearing on such documents are their genuine signatures or true facsimiles or portable document thereof.

5. Attached hereto as Exhibit C are true, correct and complete copies of a good standing (or equivalent) certificate as of a recent date for the Company and each Subsidiary by the relevant authority of its jurisdiction of incorporation or organization, and such certificates attached thereto have not been amended (except as attached thereto) since the date reflected thereon.

Exhibit C-1

6. Russel H. McMeekin, the Company’s Chief Executive Officer, has executed and delivered on behalf of the Company the Underwriting Agreement and the other Transaction Documents in accordance with their respective terms thereof.

This certificate may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Delivery of an executed signature page of this certificate by electronic or facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.

[Signature page follows]

Exhibit C-2

IN WITNESS WHEREOF, I have hereunder signed my name on this [__] day of [___], 2022.



Name:		[___________]
Title:		Secretary

The undersigned as Chief Executive Officer of the Company hereby certifies that [_____] is the duly elected, appointed, qualified and acting Secretary of the Company, and that the signature appearing above is his genuine signature.

______________________________________

Russel H. McMeekin, Chief Executive Officer

[Signature page to mCloud Technologies Corp. Secretary’s Certificate]

Exhibit C-3

Secretary’s Certificate

Exhibit A

Memorandum of Articles

Exhibit C-4

Secretary’s Certificate

Exhibit B

Board Resolutions

Exhibit C-5

Secretary’s Certificate

Exhibit C

Good Standing Certificates

Exhibit C-6

EXHIBIT D

CHIEF FINANCIAL OFFICER’S CERTIFICATE

MCLOUD TECHNOLOGIES CORP.

[____], 2022

I, Chantal Schutz, do hereby certify that I am the Chief Financial Officer, of mCloud Technologies Corp., a company incorporated under the Business Corporations Act (British Columbia) (the “Company”), and, in my capacity as such and not in any individual capacity, and based upon a diligent examination of the financial records of the Company, the scope and nature of such examination being designed to identify information relevant to the subjects addressed below, do hereby certify to the Representative (as defined below) that:

1. I am providing this certificate in connection with the offering (the “Offering”) by the Company of an aggregate of [_____] 9.0% Series A Cumulative Perpetual Preferred Shares of the Company, without par value (the “Series A Shares”), and warrants to purchase Common Shares, pursuant to Section 2.3 of that certain underwriting agreement, dated [•], 2022 (the “Underwriting Agreement”), by and between the Company and Maxim Group LLC, as representative of the several Underwriters named on Schedule I thereto. The Offering is being made pursuant to the registration statement on Form F-1, as amended (File No. 333-264859) (the “Registration Statement”) that was initially filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, on May 11, 2022 and that was subsequently declared effective by the SEC on [•], 2022. Unless otherwise defined herein, the capitalized terms used herein shall have the meanings ascribed to them in the Underwriting Agreement.

2. I am familiar with the accounting, operations and records systems of the Company and its subsidiaries and I have responsibility for the Company’s financial and accounting matters. I have (i) read the Registration Statement and the Prospectus; and (ii) supervised the compilation of and reviewed the financial information set forth in the Registration Statement and the Prospectus (collectively, the “Financial Information”). Such Financial Information has been derived from the applicable accounting or financial records of the Company or its subsidiaries, which I believe, to the best of my knowledge, are accurate, complete and reliable.

3. There were no significant decreases in the Company’s cash and cash equivalents, total current liabilities and operating expenses during the Company’s fiscal quarter ended June 30, 2022 as compared with amounts shown on the Company’s unaudited interim financial statements for the fiscal quarter ended December 31, 2021, except as disclosed in the Registration Statement or the Prospectus.

4. [I have prepared or reviewed the amounts and information identified in the pages of the Registration Statement and the Prospectus, attached as Annex A hereto (collectively, the “Financial and Numerical Information”). To the best of my knowledge, such Financial and Numerical Information, as of the date hereof, matches or is accurately derived from the applicable accounting or financial records of the Company or its subsidiaries.]

Exhibit D-1

IN WITNESS WHEREOF, the undersigned has executed and delivered this Chief Financial Officer Certificate on behalf of the Company as of the date first written above.


		MCLOUD TECHNOLOGIES CORP.

By:
Name:		Chantal Schutz
Title:		Chief Financial Officer

[Signature page to Chief Financial Officer Certificate – mCloud Technologies Corp.]

EXHIBIT E

FORM OF WARRANT

[Attached hereto]

Exhibit E-1

EXHIBIT F

FORM OF WARRANT AGENT AGREEMENT

[Attached hereto]

Exhibit F-1

EX-4.1

Exhibit 4.1

27.3

9.0 % Series A Cumulative Perpetual Preferred Shares

27.3.1

Designation and Number of Shares.

There shall hereby be created and established a series of preferred shares of the Company designated as “Series A Cumulative Perpetual Preferred Shares” (the “Series A Preferred Shares”). The authorized number of Series A Preferred Shares shall be 2,300,000. The Company shall have the authority to issue fractional shares of the Series A Preferred Shares. Each Series A Preferred Share shall be identical in all respects to every other Series A Preferred Share, except that Series A Preferred Shares issued after the date of the first issuance of Series A Preferred Shares (the “Original Issue Date”) shall accrue dividends from the later of the Original Issue Date and the Dividend Payment Date (as defined hereafter) immediately prior to the original issue date of such additional shares for which full cumulative dividends have been paid. As used in this Article 27.3, “accrual” (or similar terms) used with respect to a dividend or dividend period refers only to the determination of the amount of such dividend and does not imply that any right to a dividend in any dividend period that arises prior to the date on which such dividend is declared.

27.3.2

Ranking.

(1)	The Series A Preferred Shares will, as to dividend rights and rights as to the distribution of assets upon the Company’s 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 Company’s shares expressly designated as ranking on parity with the Series A Preferred Shares;

(c)

junior to any future class or series of the Company’s shares expressly designated as ranking senior to the Series A Preferred Shares; and

(d)

junior to all the Company’s 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 Company’s 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 Company’s 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 Company’s agreements, including any agreement relating to the Company’s indebtedness, prohibits such authorization, payment or setting apart for payment;

(b)

the terms and provisions of any of the Company’s agreements, including any agreement relating to the Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s affairs, the assets of the Company legally available for distribution to the Company’s 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 Company’s 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 Company’s shares other than the Series A Preferred Shares means the amount otherwise payable to such holder in such distribution (assuming no limitation on the Company’s 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 Company’s 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 Company’s 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 Company’s 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 holder’s address as it appears on the Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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) $2.75. Any declared but unpaid dividends shall be paid upon such a conversion to the holder of Series A Preferred Stock in cash. Notwithstanding the foregoing, the Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company or any other entity, except as provided for in this Article 27.3.9.

(2)

The Company will not issue fractional Common Shares upon the conversion of Series A Preferred Shares. In the event that the conversion would result in the issuance of fractional shares of Common Shares, the Company will pay the holder of Series A Preferred Shares the cash value of such fractional shares in lieu of such fractional shares based on a value per full Common Share of $2.75.

(3)	To exercise the conversion right, each holder of Series A Preferred Shares will be required to notify the Company of the number of Series A Preferred Shares to be converted and otherwise to comply with any applicable procedures required by the Transfer Agent or DTC for effecting the conversion.

(4)

Series A Preferred Shares as to which the conversion right has been properly exercised will be converted into the applicable number of Common Shares (the “Conversion Shares”). The Company will take commercially reasonable efforts to deliver the applicable Conversion Shares no later than the third business day following receipt of the conversion notice from the holder of Series A Preferred Shares.

27.3.10

Voting Rights.

(1)	Holders of Series A Preferred Shares shall not have any voting rights, except as set forth in this Article 27.3.10 or as otherwise required by law.

(2)

In any matter in which the Series A Preferred Shares may vote (as expressly provided herein or as may be required by law), each Series A Preferred Share shall be entitled to one vote per $25.00 of liquidation preference; provided that if the Series A Preferred Shares and any other Shares ranking on parity to the Series A Preferred Shares as to dividend rights and rights as to the distribution of assets upon the Company’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.

(3)

As used in this Article 27.3, “voting preferred shares” means any other class or series of the Company’s preferred shares 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.

(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 Company’s Notice of Articles, insofar as the Notice of Articles relates to the Company’s 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 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.

(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 Company’s 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 Company’s Notice of Articles, insofar as the Notice of Articles relates to the Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 holder’s 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 Company’s 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.

EX-5.1

Exhibit 5.1

LOGO

Our File No.: 4609.103

August 9, 2022

MCLOUD TECHNOLOGIES CORP.

550-510 Burrard Street

Vancouver, British Columbia Canada, V6C 3A8

Ladies and Gentlemen:

Re: MCLOUD TECHNOLOGIES CORP. - Registration Statement on Form F-1

We have acted as British Columbia counsel to mCloud Technologies Corp. (the “Company”), a British Columbia company, in connection with the registration (including in connection with an over-allotment option granted to the representative of the underwriters) by the Company of (i) $28,750,000 9.0% Series A Cumulative Perpetual Preferred Shares (the “Preferred Shares”) and accompanying (ii) warrants to purchase common shares (the “Warrants”), with each Preferred Share to be sold with nine accompanying Warrants, in connection with an underwritten public offering of the Company (the “Offering”).

In connection with this opinion, we have reviewed and relied upon originals, photocopies or copies, certified or otherwise identified to our satisfaction, of the Registration Statement on Form F-1 (Registration Statement No. 333-264859) (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission and as to which this opinion is filed as an exhibit, the exhibits to the Registration Statement including the form of Underwriting Agreement between the Company and Maxim Group LLC., as representative of the underwriters listed therein, the Company’s Notice of Articles, the Company’s Articles, records of the Company’s 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 Company’s directors approving the Offering and the creation of the Preferred Shares, both dated July 15, 2022, are true and complete copies of the proceedings of the Board related to the approval of the Offering and the creation of the Preferred Shares and that the resolutions have not been altered, amended or rescinded as at the date of this opinion. We have also obtained from officers of the Company certificates as to certain factual matters and, insofar as this opinion is based on matters of fact, we have relied on such certificates without independent investigation. With respect to the Underwriting Agreement and the Warrants, all of which are governed by and construed in accordance with the laws of the State of New York, we have assumed that these agreements comply with and do not violate the laws of the State of New York.

Our opinion is limited to laws of the Province of British Columbia. We have not considered, and have not expressed any opinion with regard to, or as to the effect of, any other law, rule, or regulation, state or federal, applicable to the Company. In particular, we express no opinion as to United States federal securities laws.

LOGO

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 Company’s 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

EX-5.2

Exhibit 5.2

LOGO

August 9, 2022

mCloud Technologies Corp.

550-510 Burrard Street

Vancouver, British Columbia

Canada, V6C 3A8

Ladies and Gentlemen:

This opinion is furnished to you in connection with a Registration Statement on Form F-1 (Registration No. 333-264859) (as amended to date, the “Registration Statement”) filed by mCloud Technologies Corp., a British Columbia company (the “Company”), with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the registration in connection with a proposed public offering (including in connection with an over-allotment option granted to the representative of the underwriters) of up to $28,750,000 9.0% Series A Cumulative Perpetual Preferred Shares, no par value per share, with a $25.00 liquidation preference per share (the “Series A Preferred Shares”) and accompanying nine 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 nine Warrants. The Company has engaged Maxim Group LLC, to act as the representative of the underwriters in connection with the proposed public offering of the Company.

We are acting as U.S. securities counsel for the Company in connection with the Registration Statement. In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates and statements of public officials, certificates of officers or representatives of the Company, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of all originals of such latter documents. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others, including those set forth in the Form of Underwriting Agreement, copy of which has been filed as Exhibit 1.1 to the Registration Statement (the “Underwriting Agreement”).

We are admitted to the Bar in the State of New York. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York.

You are separately receiving an opinion from Morton Law LLP with respect to the corporate proceedings relating to the issuance of the Securities.

Based upon the foregoing and subject to the assumptions and qualifications set forth herein, we are of the opinion that the Warrants, when issued and sold by the Company and delivered by the Company in accordance with and in the manner described in the Registration Statement and Underwriting Agreement, when executed and delivered by the Company, will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, moratorium and similar laws affecting creditors’ rights generally and equitable principles of general applicability and comply with and do not violate the laws of the State of New York.

We express no opinion as to the enforceability of any rights to indemnification or contribution provided for in the Underwriting Agreement that are violative of the public policy underlying any law, rule or regulation.

We consent to the filing of this opinion as an exhibit to the Registration Statement and we further consent to the use of our name under the caption “Legal Matters” in the Registration Statement and the prospectus that forms a part thereof. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. This opinion letter is given as of the date hereof and we do not undertake any liability or responsibility to inform you of any change in circumstances occurring, or additional information becoming available to us, after the date hereof which might alter the opinions contained herein.

Very truly yours,

/s/ Sichenzia Ross Ference LLP

Sichenzia Ross Ference LLP

LOGO

EX-10.16

Exhibit 10.16

AMENDED AND RESTATED ROYALTY PURCHASE AGREEMENT

TIDS AGREEMENT is made October 27, 2016,

BETWEEN:

AGNITY GLOBAL, INC.

(the “Corporation”)

- and-

AGNITY COMMUNICATIONS, INC.

(“Communications”)

- and-

AGNITY HEALTHCARE, INC.

(“Healthcare”)

- and -

SPINACOM, INC. (former Agnity, Inc.)

(“Spinacom”)

- and-

GRENVILLE STRATEGIC ROYALTY CORP.

(the “Purchaser”)

WHEREAS the Parties entered into a royalty purchase agreement dated October 30, 2015 (the “Initial Agreement”);

WHEREAS subsequent to the date of the Initial Agreement, the Purchaser advanced the sum of $750,000 to the Corporation in consideration for the issuance to the Purchaser of an unsecured convertible promissory note in such principal amount (the “Note”);

WHEREAS effective as of the date of this Agreement the Purchaser elected to convert the principal amount of $750,000 owing under the Note (the “Principal Amount”), and all accrued but unpaid interest thereon, being $84,750 (the “Interest”), into an Additional Royalty Interest, such that upon such conversion the aggregate of the Principal Amount and the Interest, being $834,750 (the “Aggregate Note Amount”), shall be deemed to be a Subsequent Installment in such amount; and

WHEREAS the Parties wish to amend and restate the Initial Agreement in accordance with the terms and conditions contained herein.

THE PARTIES agree as follows:

ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1

Definitions

Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to such terms in Schedule “A” attached hereto.

1.2

Certain Rules of interpretation

In this Agreement:

(a)

Currency - Unless otherwise specified, all references to money amounts are to the lawful currency of the United States of America.

(b)

Governing Law - This Agreement is a contract made under, governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable in the Province of Ontario.

(c)

Headings - Headings of Articles and Sections are inserted for convenience of reference only and do not affect the construction or interpretation of this Agreement.

(d)

Including - Where the word “including” or “includes” is used in this Agreement, it means “including (or includes) without limitation”.

(e)

Number and Gender - Unless the context requires otherwise, words importing the singular include the plural and vice versa and words importing gender include all genders.

(f)

Statutory References - A reference to a statute includes all regulations made pursuant to the statute and, unless otherwise specified, the provisions of any statute or regulation that amends, supplements or supersedes the statute or the regulation.

(g)

Schedules - The schedules attached to this Agreement (as the same may be amended from time to time, whether by way of an amendment to this Agreement or otherwise) are incorporated into, and form an integral part of, this Agreement.

1.3

Knowledge

Unless otherwise stated herein, any reference to the knowledge of the Corporation means the actual knowledge of the officers and directors of each member of the Agnity Group, after reasonable inquiry and investigation in the normal exercise of such individual’s duties.

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1.4

Entire Agreement; Waiver

This Agreement constitutes the entire agreement among the Parties and sets out all the covenants, promises, warranties, representations, conditions, understandings and agreements among the Parties concerning the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, including those contained in any term sheet or letter of intent between the Corporation and the Purchaser. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, oral or written, express, implied or collateral between or among the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement. o waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

1.5

Disclosure Letter

Any disclosure made in a section of the Disclosure Letter shall be deemed to be disclosed for one or more sections of the Disclosure Letter to the extent that such disclosure sets forth facts in sufficient detail so that its application to such other section of the Disclosure Letter is reasonably clear.

ARTICLE 2

INSTALLMENTS AND ROYALTIES

2.1

Payment of lnstallments

(a)

The Corporation acknowledges and agrees that:

(i)

$2,000,000, plus all applicable Taxes thereon (the “Initial Installment”), was previously advanced to or for the benefit of the Corporation pursuant to the terms of the Initial Agreement and shall be deemed for all purposes of this Agreement to have been paid by the Purchaser under this Agreement; and

(ii)

the Aggregate Note Amount shall be deemed to be a Subsequent Installment for all purposes of, and shall be subject in all respects to the terms of, this Agreement, and the Note is deemed to be paid in full and terminated effective as of the date of this Agreement.

(b)

Upon mutual written agreement of the Purchaser and the Corporation, and subject to the satisfactions of all conditions contained herein, the Purchaser may (but shall have no obligation to) purchase and the Corporation may (but shall have no obligation to) sell one or more additional royalties from the Corporation in such amount as may be agreed upon by the Corporation and the Purchaser (each additional payment by the Purchaser to the Corporation being a “Subsequent Installment”).

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2.2

Gross Sales Royalty

As consideration for, and conditional on, the payment by the Purchaser of all Installments, and subject to the terms hereof, the Corporation covenants and agrees to pay to the Purchaser, at such times and in such manner as required by Sections 2.4 and 2.5, subject to termination or reduction as set forth in this Agreement, a royalty (each, a “Royalty Payment”) determined in accordance with the following (the “Gross Sales Royalty”):

(a)

for and in respect of the period that commenced on October 30, 2015 and ending on (and including) December 31, 2015, the Parties acknowledge and agree that the Corporation was obligated to pay and did pay to the Purchaser the Minimum Monthly Amount on a monthly basis, pro-rated for any partial month;

(b)

for and in respect of the period that commenced on January 1, 2016 and ended on (and including) October 31, 2016, the Parties acknowledge that the Corporation was obligated to pay and did pay to the Purchaser a monthly Royalty Payment (pro-rated for any partial month) equal to the greater of (x) the Minimum Monthly Amount, and (y) the amount equal to 3.00% of Revenue of the Agnity Group during each such calendar month;

(c)

commencing on (and including) November 1, 2016 and ending on (and including) October 31, 2020, the Corporation shall pay to the Purchaser a monthly Royalty Payment (pro-rated for any partial month) equal to the greater of (x) the Minimum Monthly Amount, and (y) the amount equal to 4.25% of Revenue of the Agnity Group during each such calendar month (it being understood that: (i) the first payment to be made under this Section 2.2(c) shall be made by the Corporation on November 30, 2016, which amount shall represent the Royalty Payment attributable to the month of November, 2016; and (ii) the last payment to be made under this Section 2.2(c) shall be made by the Corporation on October 31, 2020, which amount shall represent the Royalty Payment attributable to the month of October, 2020); and

(d)

effective as of November 1, 2020, the Corporation shall pay to the Purchaser a monthly Royalty Payment (pro-rated for any partial month) equal to 4.25% of Revenue of the Agnity Group during each such calendar month (it being understood that the first payment to be made under this Section 2.2(c) shall be made by the Corporation November 30, 2020, which amount shall represent the Royalty Payment attributable to the month of November, 2020).

(e)

If the Purchaser advances a Subsequent Installment to the Corporation (subsequent and in addition to the Aggregate Note Amount), the applicable Gross Sales Royalty will be adjusted proportionately based on the actual amount of the Subsequent Installment that is advanced to the Corporation. For illustrative purposes only, assuming that only the Initial Installment and the Aggregate Note Amount has been advanced to the Corporation, if the Purchaser advances a Subsequent Installment of $100,000 to the Corporation, the Gross Sales Royalty will, effective as of the date on which the Subsequent Installment is advanced to the Corporation, automatically and without any further action or formality of any Party, increase from 4.25% to 4.40% (being 4.25 + (l00,000/2,834,750 x 4.25)).

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(f)

The applicable Gross Sales Royalty will be reduced proportionately contemporaneously with the exercise of the Note Principal Buyout Option. As such, if the Corporation makes a Note Principal Buyout Payment, the applicable Gross Sales Royalty will be reduced proportionately based on the actual amount of the Note Principal Buyout Payment that is made to the Purchaser. For illustrative purposes only, assuming that the Corporation makes a Note Principal Buyout Payment of $750,000 to the Corporation, the Gross Sales Royalty will, effective as of the date on which the Note Principal Buyout Payment is made to the Purchaser, automatically and without any further action or formality of any Party, decrease from 4.25% to 3.13% (being 4.25—(750,00012,834,750 x 4.25)).

2.3

Minimum Monthly Amount

(a)

Notwithstanding the Gross Sales Royalty rate in effect from time to time, but subject to Sections 2.3(b) and 2.3(c), if only the Initial Installment and the Aggregate Note Amount are paid to or otherwise received by the Corporation, no Royalty Payment in respect of a calendar month during the period commencing on the date of the Initial Agreement and ending on October 31, 2020 will be less than $41,667 (pro-rated for any partial month), it being understood that if the actual calculation of a Royalty Payment to be paid in such circumstance is less than such amount, the Gross Sales Royalty then in effect will be deemed to be amended (in respect of such Royalty Payment only) to be such percentage as would result in such Royalty Payment being $41,667 (pro-rated for any partial month) (the “Minimum Monthly Amount”).

(b)

If the Purchaser advances a Subsequent Installment to the Corporation (not taking into account the Aggregate Note Amount), the then applicable Minimum Monthly Amount will be adjusted proportionately based on the actual amount of each Subsequent Installment that is advanced to the Corporation. For illustrative purposes only, if only the Initial Installment is paid to or otherwise received by the Corporation (not taking into account the Aggregate Note Amount) and the Purchaser advances a Subsequent Installment in the amount of $100,000 prior to October 31, 2020, the Minimum Monthly Amount will be deemed to be amended to be $43,750.35 (pro-rated for any partial month) (being 41,667 + (100,000/2,000,000 X 41,667)).

(c)

The applicable Minimum Monthly Amount will be: (i) reduced by 75% contemporaneously with the completion of the Buy-down Option; and (ii) extinguished pursuant to the completion of the Change of Control Buyout Option.

2.4

Payment Mechanism, Adjustments and Delinquent Royalty Payments

(a)

In accordance with the payment procedures specified in Section 2.5:

(i)

on the last Business Day of each calendar month until October 31, 2020, the Corporation shall pay to the Purchaser the amount determined in accordance with Section 2.2(c) in respect of such calendar month (which amount shall, for the month of November, 2016, be determined based on Revenue of the Agnity Group for and in respect of the month of October, 2016), subject to reconciliation pursuant to Sections 2.4(b), 2.4(c) and 2.4(d);

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(ii)

on the last Business Day of each calendar month commencing with and following November 30, 2020, the Corporation shall pay to the Purchaser the amount determined in accordance with Section 2.2(d) in respect of such calendar month (which amount shall, for the month of November, 2020, be determined based on Revenue of the Agnity Group for and in respect of the month of October, 2020), subject to reconciliation pursuant to Sections 2.4(b), 2.4(c) and 2.4(d); and

(iii)

the final payment to be made under Section 2.4(a)(i) shall be made by the Corporation on October 31, 2020, which amount shall represent the Royalty Payment attributable to the month of October, 2020. The first payment to be made under Section 2.4(a)(ii) shall be made by the Corporation on November 30, 2020, which amount shall represent the Royalty Payment attributable to the month of November, 2020.

(b)

Within 55 days following the end of the first, second and third fiscal quarters of the Corporation during each fiscal year of the Corporation, and within 100 days following the end of the fourth fiscal quarter of the Corporation of each fiscal year of the Corporation (the last day of each such 55 day and 75 day period being the “Quarterly Determination Date”), the Parties will determine:

(i)

the aggregate royalties in respect of such fiscal quarter that would have been payable based on an application of the applicable Gross Sales Royalty to Revenue of the Agnity Group (without regard to any Minimum Monthly Amounts) for such fiscal quarter (or prorated for any partial fiscal quarter) using the financial statements of the Agnity Group in respect of such fiscal quarter (which in the case of the fourth fiscal quarter of the Corporation shall be the Annual Financial Statements) (the “Pre-Adjusted Quarterly Royalties”); and

(ii)

whether the aggregate Minimum Monthly Amounts in respect of such fiscal quarter (if applicable) were greater than or less than the Pre-Adjusted Quarterly Royalties for such fiscal quarter (the greater of such amounts being the “Confirmed Quarterly Royalties”).

(c)

If the actual Royalty Payments paid to the Purchaser in respect of a fiscal quarter were, in the aggregate, greater than the Confirmed Quarterly Royalties for such fiscal quarter, the Purchaser will pay to the Corporation the amount by which such actual Royalty Payments exceeded the Confirmed Quarterly Royalties within 20 Business Days following the Quarterly Determination Date.

(d)

If the actual Royalty Payments paid to the Purchaser in respect of a fiscal quarter were, in the aggregate, less than the Confirmed Quarterly Royalties for such fiscal quarter, the Corporation will pay to the Purchaser the amount by which the Confirmed Quarterly Royalties exceeded such actual Royalty Payments within 20 Business Days following the Quarterly Determination Date;

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(e)

Notwithstanding anything else contained herein, the Parties may at any time elect to pay any amounts referenced in Sections 2.4(c) or 2.4(d) in such other manner as the Parties may agree.

(f)

Any payment required to be made under this Agreement that is not paid within 30 days following the date on which it was originally due shall bear interest at a rate of 1.0% per month, compounded monthly.

2.5

Payment of Royalty Payments and Buyout Amounts

All Royalty Payments and other amounts payable by the Corporation under or pursuant to this Agreement, including under Section 2.9 (“Buyout Payments”), plus all applicable Taxes thereon, if any, that the Purchaser is required by Law to collect from the Corporation in connection therewith, shall be made by wire transfer of immediately available funds to the Purchaser to an account designated in writing by the Purchaser on the date on which each such payment is due. The Corporation shall withhold from any Royalty Payment and Buyout Payment, and remit to the appropriate Governmental Authority, all Taxes that it is required to withhold that are levied thereon by any Governmental Authority, and the payment in each case of the applicable Royalty Payment or Buyout Payment net of any such withheld amount shall be deemed to satisfy the Corporation’s payment obligations hereunder, provided that the Corporation shall deliver to the Purchaser copies of the filed tax return reporting such payments and official receipts (or such other evidence of payment reasonably acceptable to the Purchaser) evidencing that such payments were in fact paid to the applicable Governmental Authority. Notwithstanding anything to the contrary, the Parties agree that any Taxes paid by the Corporation to any Governmental Authority on behalf of (or for the benefit of) the Purchaser will be deducted from any applicable Royalty Payment or Buyout Payment.

2.6

Royalty Payments Following Termination

The termination of this Agreement or the royalties payable hereunder shall not terminate the obligation of the Corporation to pay any Royalty Payment accrued prior to the date of termination. Upon termination of this Agreement or the royalties payable hereunder, the Parties will determine the aggregate royalties in respect of the portion of the fiscal year of the Corporation in which the termination occurs, and will make such adjustments to the amount of royalties paid or to be paid during such period, as may be necessary, in accordance with the terms of Section 2.4.

2.7	Audit Right

(a)

Upon not less than 10 days’ written notice to the Corporation, the Purchaser shall have the right to audit all books and records including all financial records) of the members of the Agnity Group (including those obtained from third parties). Any such audit shall be conducted during normal business hours by an accounting firm selected by the Purchaser at its cost. The members of the Agnity Group shall provide such accounting firm and the Purchaser with access to all pertinent books and records, subject to any confidentiality obligations owed to any third parties, and shall reasonably cooperate with such accounting firm’s efforts to conduct such audits.

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(b)

If any such audit reveals that there has been an underpayment of Royalty Payments due for the fiscal period being audited of more than I 0% of the amount of Royalty Payments which were actually due in respect of such fiscal period, the Corporation shall reimburse the Purchaser for the reasonable costs and expenses (including accountants’ fees) incurred by the Purchaser in connection with such audit. If the Purchaser claims that any such audit reveals an underpayment of Royalty Payments, the Purchaser will make the audit papers for the relevant period available to the Corporation. For greater certainty, if an audit reveals that there has been an underpayment of Royalty Payments, an Event of Default in respect of any such underpayment shall be deemed to occur only if such underpayment is not satisfied by the Corporation within 5 Business Days following the date on which the Corporation has been given written notice of such underpayment.

2.8

Dispute Mechanism

If the Parties dispute the amount of one or more Royalty Payments or Buyout Payments (including: (i) the determination of such amounts following an audit conducted pursuant to Section 2.7; and (ii) the manner in which “net equity value” and “net purchase price” are determined pursuant to Section 2.9(a)(iv)(A)(2)C) (a “Dispute”), they shall each use commercially reasonable efforts to reach a negotiated resolution of the Dispute and shall exchange reasonable information with one another concerning the Dispute. If the Parties are unable to reach a negotiated resolution within 30 days from the commencement of negotiations to resolve the Dispute, then either Party may elect for the Dispute to be determined by an independent public accounting firm (the “Independent Accountant”) licensed to practice accounting in the United States of America selected by mutual agreement of the Parties, or in the absence of such agreement, KPMG LLP, and the Parties shall provide to the Independent Accountant their respective final figures in respect of the disputed amounts along with supporting documentation to substantiate their positions. one of the Parties will disclose to the Independent Accountant, and the Independent Accountant will not consider, for any purpose, any settlement offer made by a Party to the other. The determination of the Independent Accountant shall be final and binding upon the Parties, absent manifest error. Costs of the Independent Accountant shall be paid as determined by the Independent Accountant, and in the absence of such determination, each Party shall pay 50% of the Independent Accountant’s costs; provided, however, that each Party shall bear its own costs in presenting its arguments to the Independent Accountant. The Independent Accountant shall be deemed to act as an expert and not as an arbitrator. For greater certainty, in the event of a Dispute, and until such time as such Dispute is finally resolved in accordance with the terms of this Section 2.8, the Parties shall continue to be bound by all of the provisions of this Agreement in accordance with their terms (including the Gross Sales Royalty and Minimum Monthly Amount then in effect) notwithstanding the subject-matter of the Dispute.

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2.9

Buy-down Option and Change of Control Buyout Option

(a)

Subject to Section 2.9(b):

(i)

subject to Section 2.9(b), and in addition to the right granted under Section 2.9(a)(ii), at any time and from time to time during the period commencing on the date of this Agreement and ending on September 30, 2017, including without limitation concurrently with the completion of a Sale, the Corporation may by delivery of notice in writing to the Purchaser (a “Note Principal Buyout Notice”) purchase and extinguish up to $750,000 of the Aggregate Installment Amount (the “Note Principal Buyout Option”), upon payment to the Purchaser by wire transfer of immediately available funds of the amount of the Aggregate Installment Amount that the Corporation proposes to purchase (each a “Note Principal Buyout Payment”), and the applicable Gross Sales Royalty will be reduced proportionately contemporaneously with each Note Principal Buyout Payment as provided in Section 2.2(f) hereof;

(ii) subject to Section 2.9(b), and in addition to the right granted under Section 2.9(a)(i), at any time following the date on which the Purchaser has received Royalty Payments under this Agreement that are, in the aggregate, equal to two times the then applicable Aggregate Installment Amount, the Corporation may by delivery of notice in writing to the Purchaser (a “Buy-down Notice”) purchase and extinguish 75% (but no more or less) of all amounts owing or to become owing to the Purchaser hereunder (but excluding any amounts which are or which may become owing under Section 2.12(c)), including the Aggregate Installment Amount, the Minimum Monthly Amount and the Gross Sales Royalty applicable thereto (such that, for greater certainty, the applicable Gross Sales Royalty and the applicable Minimum Monthly Amount will thereafter each be reduced by 75%, so that if the then applicable Gross Sales Royalty is 4.25%, it would become 1.0625%, and if the then applicable Minimum Monthly Amount is $41,667 it would become $10,416.75) (the “Buy-down Option”), upon payment to the Purchaser by wire transfer of immediately available funds on a date that is no later than the third Business Day following the date of the Buy-down Notice of an amount equal to the then applicable Aggregate Installment Amount multiplied by 0.75 (the “Buy-down Payment”);

(iii)

for greater certainty, the Corporation shall be entitled to exercise and complete the Note Principal Buyout Option and the Buy-down Option on multiple occasions, provided that, in the case of the Note Principal Buyout Option, the aggregate of all such exercises shall not exceed the $750,000 maximum referenced in Section 2.9(a)(i) and, in the case of the Buy-down Option, the aggregate of all such exercises shall not exceed the 75% threshold referenced in Section 2.9(a)(ii); and

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(iv)

subject to compliance with Sections 2.10(m) and 2.10(q), and in addition to the rights granted under Section 2.9(a)(i) and Section 2.9(a)(ii), if pursuant to a proposed Change of Control the acquirer under such transaction requires as a condition to the completion of such transaction that the Corporation purchase and extinguish all or some portion of the amounts owing or to become owing to the Purchaser hereunder (excluding any amounts which are or which may become owing under Section 2.12(c)), then contemporaneously with the completion of such proposed Change of Control, the Corporation may, by delivery of a written notice (a “Change of Control Buyout Notice”) to the Purchaser (which Change of Control Buyout Notice will contain a representation and warranty of the Corporation that the exercise and completion of the Change of Control Buyout Option is a condition precedent to the completion of the proposed Change of Control in favour of the acquirer), purchase and extinguish (effective as of the date of completion of the proposed Change of Control) such portion of the Gross Sales Royalty as is equal to the percentage of Revenue of the Agnity Group contributed by the member or members of the Agnity Group that are the subject of the Change of Control relative to the total Revenue of the Agnity Group, in each case based on the then most recent Interim Financial Statements (the “Change of Control Buyout Option”) upon payment to the Purchaser by wire transfer of immediately available funds within IO Business Days following the date of completion of the proposed Change of Control of an amount equal to:

(A)

in the case of a Change of Control involving the sale of the members of the Agnity Group on a consolidated basis (such that following such sale the acquirer will own all or substantially all of the Business as carried on by the Agnity Group immediately prior to such sale), the greater of the following:

(l)

an amount equal to two times the Aggregate Installment Amount as at the date of the Change of Control Buyout Notice; and

(2)

an amount equal to A multiplied by B multiplied by C, where:

A is equal to the Aggregate Installment Amount as at the date of the Change of Control Buyout Notice divided by $20,000,000;

B is equal to 0.8; and

C is equal to the net equity value of the Agnity Group, or in the case of a proposed asset sale, the proposed net purchase price (expressed in United States dollars) of all or substantially all of the assets of the Business, in each case as determined based on the terms of the proposed Change of Control transaction or asset sale; or

(B)

In the case of a Change of Control involving one or more members of the Agnity Group on a non-consolidated basis (such that following such sale the acquirer will own a distinct and severable division of the Business rather than all or substantially all of the Business), an amount equal to the result obtained from the following formula

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(DS/EV) X (AX B X EV)

Where:

DS =

the net equity value of the members of the Agnity Group that are subject to the Change of Control, or in the case of a proposed asset sale, the proposed net purchase price (expressed in United States dollars) of all or substantially all of the assets of the members of the Agnity Group that are subject to the Change of Control, in each case as determined based on the terms of the proposed Change of Control transaction or asset sale

EV =

the net equity value of the Agnity Group on a consolidated basis as at the date of the Change of Control Buyout Notice (determined using the same principles used to determine DS)

A =

the Aggregate Installment Amount as at the date of the Change of Control Buyout Notice divided by $20,000,000;

B =

0.8

If the proposed Change of Control is not completed within 10 Business Days following the date of the Change of Control Buyout Notice, the exercise by the Corporation of the Change of Control Buyout Option shall be deemed to be null and void and of no force or effect and this Section 2.9(a)(iv) shall thereafter continue to apply in accordance with its terms.

In the event that: (i) the Buy-down Option has previously been exercised and completed in accordance with the terms of this Agreement, then the payment under this Section 2.9(a)(iv) shall be reduced by 75%; or (ii) the Note Principal Buyout Option is exercised and completed concurrently or in connection with the exercise and completion of the Change of Control Buyout Option, the amount of the then total Note Principal Buyout Payments will be deemed to not form part of the Aggregate Installment Amount for the purposes of calculating the amount payable by the Corporation under this Section 2.9(a)(iv).

(b)

Notwithstanding anything else contained herein, the Corporation’s right to exercise the Note Principal Buyout Option, the Option Buy-down Option or the Change of Control Buyout Option shall immediately and forever cease effective as of the occurrence of an Event of Default or a Bankruptcy Occurrence that in each case is not cured to the satisfaction of the Purchaser, acting reasonably, within 21 days following the date of occurrence of the Event of Default or Bankruptcy Occurrence, as the case may be (which period shall, if the applicable Event of Default is the subject of dispute resolution under Section 2.8, be deemed to be stayed until such time as, and will only re-commence once, such dispute is finally resolved in accordance with Section 2.8). If an Event of Default has occurred, the Corporation shall not be permitted to exercise the Note Principal Buyout Option, the Option Buy-down Option or the Change of Control Buyout Option until such time as the Event of Default has been cured in accordance with the terms hereof; provided that if the applicable Event of Default is the subject of dispute resolution under Section 2.8, the applicable time period to exercise the Note Principal Buyout Option, the Option Buy-down Option or the Change of Control Buyout Option, as the case may be, shall be deemed to be stayed until such time as, and will re-commence once, such dispute is finally resolved in accordance with Section 2.8.

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2.10

Acknowledgments and Obligations

The Corporation acknowledges, covenants and agrees that at all times on and following the date hereof it will (and will cause the applicable members of the Agnity Group to):

(a)

operate the Business in good faith and in the ordinary course consistent with past practices, industry standards and best practices, and will use commercially reasonable efforts to operate the Business so as to maximize Revenue of the Agnity Group;

(b)

not take any steps or actions, or omit or fail to take any steps or actions or enforce any right, the intent of which is to directly or indirectly reduce the calculation of or improperly characterize or account for, or which would reasonably result in or does result in any direct or indirect reduction in the calculation of or improper characterization or accounting for of, Revenue of the Agnity Group or any Royalty Payment;

(c)

keep and maintain complete, true and materially accurate books and records of all transactions involving Revenue of the Agnity Group;

(d)

not, without the prior written consent of the Purchaser (which consent will not be unreasonably withheld): (i) change the fiscal year end of any member of the Agnity Group; or (ii) in any way modify, amend or change the accounting practices of any member of the Agnity Group where the effect of such change in any way reduces, or would potentially have the effect of reducing, whether alone or in combination with or as a result of any other factor, the amount payable to the Purchaser hereunder, except for changes required under GAAP;

(e)

provide to the Purchaser: (i) a monthly unaudited summary of Revenue of the Agnity Group; and (ii) a monthly unaudited management-prepared income statement and balance sheet of each member of the Agnity Group, in each case within 21 days after the last day of each calendar month. For greater certainty, all such information shall be printed directly from the Corporation’s accounting software with date and time stamps marked thereon;

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(f)

provide to the Purchaser unaudited management-prepared quarterly financial statements of each member of the Agnity Group within 45 days after the last day of each fiscal quarter of each such entity;

(g)

provide to the Purchaser audited annual financial statements of each member of the Agnity Group within 90 days after the last day of each fiscal year of each such entity (which audit shall be performed by a firm of chartered accountants approved by the Purchaser in its sole discretion, acting reasonably), together with a written confirmation from the Corporation’s auditors (in a form acceptable to the Purchaser, in its sole discretion acting reasonably) regarding the authenticity of its audit report;

(h)

provide to the Purchaser, contemporaneously with the reports provided pursuant to Sections 2.10(e), 2.10 (f) and 2.10(g), a certificate of a senior officer of the Corporation, dated as of the date of delivery of each such report, certifying, based on the knowledge of such officer having exercised reasonable diligence, that such reports: (i) are accurate and complete and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the applicable report; and (ii) the financial information included in the reports fairly present in all material respects the financial condition, financial performance and cash flows of the members of the Agnity Group as of the date of and for the periods covered by the reports;

(i)

provide to the Purchaser copies of all tax returns filed by each member of the Agnity Group promptly following the date on which such returns are filed;

(j)

use the proceeds of each Installment in a manner that is consistent with an operating plan provided by the Corporation to the Purchaser, subject to the reasonable discretion of the members of the Agnity Group to use and allocate any portion of an Installment in a manner which is otherwise consistent with the proper exercise of the fiduciary duties of the directors of the applicable member of the Agnity Group;

(k)

make all necessary filings required of the members of the Agnity Group under Law, obtain all necessary regulatory consents and approvals (if any) required of the members of the Agnity Group under Law and pay all filing fees required to be paid by the members of the Agnity Group under Law in connection with the Transaction;

(l)

do all things necessary to maintain the corporate existence of each member of the Agnity Group, provided, however that this Section 2.10(1) shall not prevent the amalgamation, merger or wind-up of any member of the Agnity Group with or into another member of the Agnity Group;

(m)

other than in connection with a transaction in respect of which the Corporation has exercised the Change of Control Buyout Option, not consolidate, amalgamate with, or merge with or into, or reorganize, reincorporate or reconstitute into or as another entity, or continue to any other jurisdiction, unless, at the time of such consolidation, amalgamation, merger, reorganization, reincorporation, reconstitution or continuance, the resulting, surviving or transferee entity in writing assumes in favour of the Purchaser all of the obligations of the Corporation and the Guarantors under this Agreement or as otherwise agreed by the Purchaser in writing;

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(n)

advise the Purchaser promptly of any material default or breach committed by any member of the Agnity Group under any agreement, document or instrument relating to any indebtedness for borrowed money owing to any Person (including any payment default), which breach or default continues for more than the applicable cure period, if any, with respect thereto;

(o)

(i) maintain insurance upon the assets of each member of the Agnity Group comparable in amount, scope and coverage to that in effect on the date of this Agreement, subject to such changes as may be determined by the applicable member of the Agnity Group, having regard to normal commercial practices and market standards; (ii) not at any time do or omit to do anything, or cause anything to be done or omitted to be done, whereby any such insurance would, or would be likely to, be rendered void or voidable or suspended, impaired or defeated in whole or in part; (iii) notify the Purchaser of any termination, lapse or loss of any material coverage under such insurance no later than 10 days following the occurrence thereof; and (iv) rectify or otherwise cure any such termination, lapse or loss of coverage no later than 10 days following the occurrence thereof (with notice of such rectification or cure provided to the Purchaser within a reasonable period of time thereafter);

(p)

not, without the prior written consent of the Purchaser, which consent will not be unreasonably withheld, in any way encumber or allow a security interest to attach to any material asset of any member of the Agnity Group where such encumbrance would, in the reasonable opinion of the Purchaser, directly or indirectly reduce the calculation of, or result in any direct or indirect reduction in the calculation of, Revenue of the Agnity Group or any Royalty Payment;

(q)

not sell, transfer or otherwise dispose (whether to an arm’s length party or otherwise) of any material property or assets of any member of the Agnity Group (including, in the case of the Corporation, any Agnity Subsidiary) without the prior written consent of the Purchaser, which consent will not be unreasonably withheld; provided, in addition, that the Purchaser agrees that it will provide such consent if (A) contemporaneously with a sale, transfer or disposition of property or assets to an arm’s length third party buyer, the buyer enters into an agreement with the Purchaser in respect of such property or assets in a form and on terms similar to this Agreement or as is otherwise acceptable to the Purchaser in its sole discretion, acting reasonably, or (B) the Corporation has delivered a Change of Control Buy-out Notice in respect of such sale (including in the case of a Change of Control Buy-out involving only one member of the Agnity Group);

(r)

be fully responsible for the full amount of any success fee, broker’s fee, commission or similar fees which any Person claims is owing or payable to such Person (whether by any member of the Agnity Group or the Purchaser) in connection with the initiation, negotiation or consummation of the Transaction;

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(s)

advise the Purchaser promptly of any material adverse event or Material Adverse Effect that has occurred, or is reasonably likely to occur, in respect of any member of the Agnity Group, including any change to the board of directors or management of any member of the Agnity Group, any material adverse change to customer or client relationships of any member of the Agnity Group, or any material concern raised by the Corporation’s auditor or accountant in writing delivered to the Corporation regarding any member of the Agnity Group;

(t)

on or before December 1, 2016, use reasonable efforts to reduce general and administrative expenses of the Agnity Group by at least $300,000 on an annualized basis in a manner satisfactory to the Purchaser, acting reasonably;

(u)

on or before December 1, 2016, complete a Change of Control, financing, liquidation or other transaction involving Agnity Healthcare pursuant to which the Corporation either disposes of all of its interest in Agnity Healthcare or otherwise deals with its existing interest in Agnity Healthcare; provided, that, such date shall be extended to January 1, 2017 in the event that the Corporation has procured a term sheet with respect such Change of Control on or before December 1, 2016, and such term sheet is satisfactory to the Purchaser, acting reasonably;

(v)

not, without the prior written consent of the Purchaser, which consent will not be unreasonably withheld, in any way increase the costs or expenses incurred, or obligations owing (including non-economic obligations), by any member of the Agnity Group to AGNITY India Technologies PVT Ltd. or any successor thereto or Affiliate thereof; and

(w)

not, without the prior written consent of the Purchaser, which consent will not be unreasonably withheld, make any debt (whether convertible or otherwise) or equity investment in, loan, advance or contribute any funds to, subsidize or satisfy the debts or liabilities of, or use any funds or other assets of the Corporation (including any portion of any Installment) for the benefit or use of, any Insider (or any entity in which an Insider has an equity, debt or other form of economic interest), except for payments made to Insiders who are directors, officers, employees or contractors of a member of the Agnity Group in respect of bona fide services and/or in the ordinary course of business.

2.11

Conditions to Payment of Installments

The Purchaser shall not pay any Installment to the Corporation unless and until each of the following conditions has been fulfilled, satisfied and performed in a manner completely satisfactory to the Purchaser in all respects (in the sole discretion of the Purchaser) on or before the date specified herein for each payment of an Installment:

(a)

the Disclosure Letter shall have been delivered to the Purchaser (and updated as necessary in connection with the payment of any Subsequent Installment);

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(b)

the Corporation shall have executed and delivered to the Purchaser each of the following documents:

(i)

a certificate of status or good standing (or other applicable certificate of like form) issued by the applicable Governmental Authority dated on or about the date of payment of each Installment with respect to the legal existence and good standing of each member of the Agnity Group under the laws of the jurisdiction of incorporation or formation of each such entity;

(ii)

a certificate of a senior officer of the Corporation, dated as of the date of payment of each Installment, certifying:

(A)

the accuracy of an attached copy of the constating documents of each member of the Agnity Group, in each case together with all amendments thereto;

(B)

the accuracy of an attached copy of the resolutions of the board of directors of the Corporation and the Guarantors with respect to the Transaction;

(C)

that no Material Adverse Effect has occurred as of the date of payment of each Installment;

(D)

that no Event of Default has occurred and is continuing and that no event or circumstance has occurred, and no condition exists, which would result, either immediately, or with the lapse of time or giving of notice or both, in the occurrence or existence of an Event of Default; and

(iii)

an invoice of the Corporation in respect of the applicable Installment, and any applicable Taxes thereon, addressed to the Purchaser;

(c)

the Purchaser shall have received such financial and other information in respect of the Business as may be reasonably required by the Purchaser (including the financial and other information specified in this Agreement);

(d)

the Corporation and the Guarantors shall have received all third party consents, approvals or waivers required to be obtained pursuant to any Contract by which any member of the Agnity Group is bound and under which consent, approval or waiver from a third party is required as a result of the Corporation and the Guarantors entering into this Agreement or in connection with the completion of the Transaction;

(e)

the Corporation and the Guarantors shall have, as applicable, executed and delivered such other documents, agreements, instruments, undertakings and assurances as the Purchaser or the Purchaser’s counsel (in each case, acting reasonably) may deem necessary or advisable in connection with, relating to or arising from, or to give effect to or support, this Agreement;

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(f)

the Corporation shall have delivered to the Purchaser all other materials and information reasonably requested by the Purchaser; and

(g)

payment of the Installment shall have been approved by the Purchaser’s investment committee.

Each of the conditions set forth in this Section 2.11 is for the exclusive benefit of the Purchaser and, unless waived in writing by the Purchaser, shall be fulfilled, satisfied and performed by the Corporation and the Guarantors.

2.12

Event of Default and Bankruptcy Occurrence

(a)

Upon the occurrence of: (i) an Event of Default; or (ii) a Bankruptcy Occurrence that in each case is not cured to the satisfaction of the Purchaser, acting reasonably, within 21 days following the date of occurrence of the Event of Default or Bankruptcy Occurrence, as the case may be (which period shall, if the applicable Event of Default is the subject of dispute resolution under Section 2.8, be deemed to be stayed until such time as, and will only re-commence once, such dispute is finally resolved in accordance with Section 2.8), the Aggregate Installment Amount will, at the Purchaser’s option and without notice to any member of the Agnity Group, be deemed to become immediately due and payable in a manner determined by the Purchaser, and in connection therewith the Purchaser may exercise any or all of the rights and remedies contained in this Agreement or otherwise afforded by law, in equity or otherwise in connection therewith.

(b)

The Purchaser may waive default or any breach by the Corporation of any of the provisions contained in this Agreement. No waiver extends to a subsequent breach or default, whether or not the same as or similar to the breach or default waived, and no act or omission of the Purchaser extends to or is to be taken in any manner to affect any subsequent breach or default of the Corporation or the rights of the Purchaser resulting therefrom. Any such waiver must be in writing and signed by the Purchaser to be effective.

(c)

The Corporation will pay or reimburse the Purchaser for any reasonable costs or expenses incurred by the Purchaser in collecting amounts owed to it by the Corporation hereunder.

(d)

For greater certainty, this Agreement, and all covenants and obligations of the Corporation and the Guarantors hereunder, including the obligation to pay Royalty Payments, will continue in full force and effect, and will not be impaired in any way by, the occurrence of an Event of Default or a Bankruptcy Occurrence or the election by the Purchaser to have the Aggregate Installment Amount become immediately due and payable to the Purchaser, and all Royalty Payments due and owing hereunder shall continue to be paid to the Purchaser following the occurrence of an Event of Default or a Bankruptcy Occurrence in accordance with the terms of this Agreement in addition to, and not in substitution for, the repayment of the Aggregate Installment Amount.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

The Corporation (on its own behalf and on behalf of each member of the Agnity Group) represents and warrants to the Purchaser as of the date of this Agreement (and confirmed as to accuracy by the execution and delivery by the Corporation on the date of payment of any Subsequent Installment of a bring-down certificate, which may contain updates and supplements to representations and warranties, in a form agreed upon by the Parties, each acting reasonably) as follows, and acknowledges that the Purchaser is entering into this Agreement and completing the Transaction in reliance upon such representations and warranties:

3.1

Incorporation and Organization

Each member of the Agnity Group is an entity incorporated, formed or established and validly subsisting under the laws of its jurisdiction of incorporation, formation or establishment, and is in good standing under such laws. Each member of the Agnity Group has the full power, authority and capacity:

(a)

to own or lease and operate its properties and assets; and

(b)

to carry on its business as presently conducted.

3.2

Corporate Records

The minute books of the members of the Agnity Group have been made available to the Purchaser or counsel to the Purchaser and contain all constating documents and resolutions, and such minute books contain, in all material respects, a complete and accurate record of all meetings and actions of directors (and committees of directors) and shareholders of, each such entity since the date of incorporation or formation thereof, and in all material respects accurately reflect all transactions referred to in such proceedings. The share ledgers and registers of each such entity are, in all material respects, complete and reflect all issuances, transfers, repurchases and cancellations of shares in the capital of each such entity.

3.3

Subsidiaries

Except as set out in Section 3.3 of the Disclosure Letter, no member of the Agnity Group owns or otherwise holds any legal or beneficial interest in any other Person. The Corporation confirms that a complete and accurate corporate organization chart showing all existing Agnity Subsidiaries has been provided to the Purchaser.

3.4

Qualification in Foreign Jurisdictions

either the nature of the Business nor the location or character of the assets owned or leased by the members of the Agnity Group requires any such entity to be registered, licensed or otherwise qualified as a foreign corporation in any jurisdiction other than any jurisdiction in which any such entity is duly registered, licensed or otherwise qualified for this purpose and other than any jurisdiction where the failure to be so registered, licensed or otherwise qualified would not have a Material Adverse Effect.

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3.5

Authorized and Issued Outstanding Capital

(a)

The authorized and outstanding shares in the capital of each member of the Agnity Group are as set out in Section 3.5 of the Disclosure Letter.

(b)

Other than as contemplated in this Agreement or the constating documents of any member of the Agnity Group or as set out in Section 3.5 of the Disclosure Letter, there are no outstanding options, warrants or other rights to subscribe for purchase or otherwise acquire from any member of the Agnity Group any:

(i)

shares or any other equity securities of such entity; or

(ii)

equity securities convertible into, exchangeable for, or representing the right to subscribe for, purchase or otherwise acquire, directly or indirectly, any shares or any other equity securities of such entity.

(c)

Other than as contemplated in this Agreement or the constating documents of any member of the Agnity Group or as set out in Section 3.5 of the Disclosure Letter, no member of the Agnity Group:

(i)

has any outstanding obligations, contractual or otherwise, to repurchase, redeem or otherwise acquire any shares or other equity securities in its capital;

(ii)

is a party to or bound by, or has any knowledge of, any agreement or instrument relating to the voting of any of its securities.

(d)

No Person has any pre-emptive rights in respect of any of the matters relating to the Transaction.

3.6

Corporate Authorization

(a)

The execution and delivery of this Agreement and the consummation of the Transaction have been duly authorized by all necessary corporate action on the part of the Corporation and the Guarantors.

(b)

This Agreement constitutes a valid and binding obligation of the Corporation and the Guarantors enforceable against each of them in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought and except as rights to indemnity and contribution may be limited by Law.

(c)

The execution of, or the performance of obligations under, this Agreement by the Corporation and the Guarantors will not result in a breach or violation of a Contract to which any member of the Agnity Group is party, a breach of the charter or by-laws of the Corporation, a breach of Law or authorization by a Governmental Authority to which any member of the Agnity Group is bound, in any case that would with the notice or passage of time result in a Material Adverse Effect or would create a Lien on any material asset of any member of the Agnity Group.

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3.7

No Governmental or Third Party Consents

Other than those which have already been obtained, no consent, approval, authorization or declaration of and no filing or registration with, any Governmental Authority or other party is required to be made or obtained by the Corporation which, if not made or obtained, would with the notice or passage of time result in a Material Adverse Effect in connection with:

(a)

the execution and delivery of this Agreement; or

(b)

the performance by the Corporation and the Guarantors of their respective obligations under this Agreement.

3.8

Financial Statements

The Financial Statements have been prepared in accordance with GAAP, consistent with past practice, and the Financial Statements present fairly the assets, liabilities (whether secured, absolute, contingent or otherwise) and the financial condition of the members of the Agnity Group for the periods covered by the Financial Statements except that the Interim Financial Statements do not contain footnotes and are subject to normal year-end audit adjustments in accordance with GAAP and past practice.

3.9

Absence of Certain Changes

Except as otherwise described in this Agreement or as set out in Section 3.9 of the Disclosure Letter, since the date of the most recent Interim Financial Statements the Business has been carried on in the ordinary course of business and no Material Adverse Effect has occurred.

3.10

Properties, Leases, Etc.

(a)

o member of the Agnity Group owns any real property.

(b)

Each member of the Agnity Group has:

(i)

good and marketable title to all of the assets and properties owned by it;

(ii)

title to the lessee interest in all assets and properties leased by it as lessee; and

(iii)

full right to hold and use all of the assets used in or necessary to the Business subject to the terms of any agreement relating to those assets,

in each case free and clear of Liens except Liens incurred in the ordinary course of the Business or as otherwise disclosed in Section 3.10 of the Disclosure Letter.

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3.11

Indebtedness

Section 3.11 of the Disclosure Letter sets out all accounts payable of the Agnity Group as of September 30, 2016, including amounts payable to Insiders (except for amounts owing to Insiders who are employees in respect of salary for current pay periods). Except as set out in Section 3.11 of the Disclosure Letter, no member of the Agnity Group is in default with respect to any outstanding material indebtedness or any Contract relating to outstanding material indebtedness. Except as set out in Section 3.11 of the Disclosure Letter, no indebtedness or any Contract relating to indebtedness purports to limit the issuance of any securities by the Corporation or the payment of any royalty or other distribution by any member of the Agnity Group. The Corporation confirms that complete and accurate copies of all Contracts (including all amendments, supplements, waivers, and consents) relating to any material indebtedness of the members of the Agnity Group have been provided to the Purchaser.

3.12

Absence of Undisclosed Liabilities

Except as set out in Section 3.12 of the Disclosure Letter or the Financial Statements, none of the members of the Agnity Group have any material liabilities, guarantees, pledges or obligations, whether accrued, absolute, contingent or otherwise (including liabilities as guarantor or otherwise with respect to obligations of others) and whether due or to become due, except those accruing in the ordinary course of the Business or those which, individually or in the aggregate, would not have a Material Adverse Effect.

3.13

Tax Matters

Except as set out in Section 3.13 of the Disclosure Letter:

(a)

no member of the Agnity Group has any liability, obligation or commitment, actual or contingent, for the payment of any Tax, except such as have arisen in the usual and ordinary course of the Business;

(b)

no member of the Agnity Group is in any arrears with respect to any required withholdings or instalment payments of any Tax nor has it filed any waiver for a taxation year under any legislation imposing Tax on it;

(c)

each member of the Agnity Group has filed within the times and within the manner prescribed by law, all federal, provincial, state, local and foreign Tax Returns and reports that are required to be filed by or with respect to it, all such Tax Returns are true, correct and complete in all material respects, and do not, in any material respect, understate the taxable income or liability for Taxes of such entity for the periods covered by such returns, no Tax Return has been amended, and the tax liability of such entity for previous taxation periods is as indicated in its Tax Returns;

(d)

each member of the Agnity Group has withheld from payments made to its officers, directors, employees, debtholders and shareholders the amount of all Taxes, including income tax, federal or provincial pension and medical plan contributions, unemployment insurance contributions and other deductions required to be withheld from such payments, and has paid them to the proper receiving officers or authorities (or made adequate reserves or provisions for the payment thereof);

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(e)

there is no unresolved assessment, reassessment, action, suit, proceeding, audit, investigation or claim in progress, pending or, to the knowledge of the Corporation, threatened with respect to Taxes of any member of the Agnity Group and, in particular, there are no currently outstanding reassessment or written enquiries that have been issued to, or raised in respect of, any member of the Agnity Group relating to any Taxes; and

(t)

no member of the Agnity Group is a party to, is bound by, or has any obligation under, any tax sharing agreement, tax indemnification agreement or similar Contract.

3.14

Litigation

Except as set out in Section 3.14 of the Disclosure Letter, no litigation, arbitration, action, suit, proceeding or investigation (whether conducted by or before any judicial or regulatory body, arbitrator or other Person) is pending or, to the knowledge of the Corporation, threatened or contemplated, against any member of the Agnity Group or, to the knowledge of the Corporation, any Insider, nor is there any basis therefor known to the Corporation in which a claimant would have a reasonable likelihood of success as against any member of the Agnity Group or any Insider.

3.15

Employment Contracts

(a)

There are currently no material disagreements or other difficulties with any member of the Agnity Group’s senior employees or senior independent contractors. To the knowledge of the Corporation, no officer or key employee of any member of the Agnity Group or key independent contractor of any member of the Agnity Group has any present intention of terminating his or her employment with or services to such entity, nor does any member of the Agnity Group have any present intention of terminating the employment or engagement of any such Person.

(b)

There are no complaints against any member of the Agnity Group before any government employment standards branch, tribunal or human rights tribunal, and no member of the Agnity Group has received notice of any such complaint. There are no outstanding decisions or settlements or pending settlements under any employment standards legislation that place any obligation upon any member of the Agnity Group to do or to refrain from doing any act.

(c)

o member of the Agnity Group is delinquent in payments to any of its employees, consultants or independent contractors for any wages, salaries, commissions, bonuses or other direct compensation for any service performed for it to the date of this Agreement or amounts required to be reimbursed to such employees, consultants or independent contractors, and all such amounts have been properly accrued in the books and records of the members of the Agnity Group.

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(d)

Each member of the Agnity Group has complied with all Laws related to employment, including those related to wages, hours, worker classification, collective bargaining, and the payment and withholding of Taxes and other sums as required by law, except where non-compliance would not result in a Material Adverse Effect.

(e)

Except as set out in Section 3.15 of the Disclosure Letter, no member of the Agnity Group has, since the date of the Interim Financial Statements, terminated the employment of any senior officer or senior employee.

3.16

Material Contracts

The Corporation has made available to the Purchaser for inspection correct and complete copies (or written summaries of the material terms of oral agreements or understandings) of each material Contract of each member of the Agnity Group. Each such Contract is a valid, binding and enforceable obligation of the applicable member of the Agnity Group and, to the knowledge of the Corporation, of the other party or parties thereto, and is in full force and effect. No member of the Agnity Group nor, to the knowledge of the Corporation, any other party, is, or is considered by any other party to be, in breach of any term of any such Contract (nor, to the knowledge of the Corporation, is there any basis for any claim of breach, including as a result of the execution and delivery of this Agreement or the completion of the Transaction), except for any breaches that individually or in the aggregate would not have a Material Adverse Effect.

3.17

Insiders

Except as set forth in Section 3.17 of the Disclosure Letter, there are no Contracts between any member of the Agnity Group and any Insider or with any Person in which an Insider has an interest, other than Contracts of employment and employment-related agreements and covenants entered into in the ordinary course of the Business and the Employee IP Agreements. Except as set out in Section 3.17 of the Disclosure Letter, no member of the Agnity Group has made any payment or loan to, or borrowed any money from or is otherwise indebted to, any Insider, except for payments made to Insiders who are directors, officers, employees or contractors of a member of the Agnity Group in respect of bona fide services.

3.18

Business Intellectual Property

(a)

Section 3.18 of the Disclosure Letter contains a complete and accurate list of all Business IP existing as of the date hereof, except for Commercial Software Licenses, and specifies, for each item, whether the Business IP is Owned IP or Licensed IP, and in the case of Licensed IP, sets forth all contracts entered into in connection with the Licensed IP (except for Commercial Software Licenses).

(b)

The Business IP, together with Commercial Software Licences, constitutes substantially all of the Intellectual Property necessary to conduct fully the Business as it is currently conducted.

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3.19

Intellectual Property Rights

(a)

Except as set out in Section 3.19(a) of the Disclosure Letter, the Agnity Group owns all right, title and interest in and to the Owned IP existing as of the date hereof free and clear of any Liens and, except for any non-exclusive end user licenses granted to customers of the Business in the ordinary course of Business, and has exclusive rights (and is not contractually obligated to pay any compensation to any other Person in respect of the exercise of such rights) to the use of such Owned IP or the material covered by such Owned IP. The Owned IP existing as of the date hereof does not contain, embody or use, or require for its full and proper operation, any Intellectual Property or Technology, except the Licensed IP and any Commercial Software Licenses, owned by any other Person.

(b)

Each Contract entered into in connection with the Licensed IP existing as of the date hereof is valid, subsisting and in good standing, and there is no material default by any member of the Agnity Group under any such Contract nor is there, to the knowledge of the Corporation, any material default by the other parties to such Contract. The applicable member of the Agnity Group has the right to sub-license, or to re-sell sub-licences, for the use of the Licensed IP existing as of the date hereof that is currently incorporated in or distributed with, or that the applicable member of the Agnity Group has contemplated incorporating in or distributing with, the Agnity Group’s products to distributors, resellers and end-users of such products.

(c)

To the knowledge of the Corporation, none of the Owned IP existing as of the date hereof nor any service rendered by the Agnity Group, nor any product currently or proposed to be developed, manufactured, produced or used by the Agnity Group, infringes upon any of the Intellectual Property, Technology or moral rights owned or held by any other Person, and no member of the Agnity Group or any of its directors, officers or employees has ever received any charge, complaint, claim, demand or notice alleging any interference, infringement, misappropriation or violation with respect to any Business IP existing as of the date hereof (including any claim that any member of the Agnity Group or such other Persons must license or refrain from using any Intellectual Property or Technology of a third party), nor does the Corporation have knowledge of any valid grounds for any bona fide claims.

(d)

To the knowledge of the Corporation, there is no unauthorized use, infringement or misappropriation of any Owned IP existing as of the date hereof by any other Person. No member of the Agnity Group has agreed with any Person not to sue or otherwise enforce any legal rights with respect to any of such Owned IP.

(e)

Each member of the Agnity Group has taken all commercially reasonable steps (including measures to protect secrecy and confidentiality and obtaining waivers of moral rights) to protect the Agnity Group’s right, title and interest in and to all Owned IP existing as of the date hereof. All agents and representatives of the members of the Agnity Group who have or have had access to confidential or proprietary information of the Agnity Group relating to the Business IP existing as of the date hereof have a legal obligation of confidentiality to the Agnity Group with respect to such information, except where the absence of which would not have a Material Adverse Effect.

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(f)

All of the Owned IP existing as of the date hereof was developed by full-time employees and contractors of one or more members of the Agnity Group during the time they were employed or engaged with such entity as software, information technology or hardware developers (the “Developers”). All of the Developers and other employees and contractors who have or have had access to confidential or proprietary information relating to such Owned IP have duly executed and delivered Employee IP Agreements in substantially the same form as set forth in Section 3.l 9(f) of the Disclosure Letter to the applicable member of the Agnity Group on or before the date of commencement of his or her employment with such entity in the form provided to the Purchaser. o member of the Agnity Group has any knowledge of any material breach of any of the Employee IP Agreements.

(g)

Except as set out in Section 3.19(g) of the Disclosure Letter, no royalty or other amounts are required to be paid by any member of the Agnity Group in connection with the continued use or exploitation by the Agnity Group of any Intellectual Property used in the operation of the Business.

3.20

Insurance

Section 3.20 of the Disclosure Letter lists the policies of insurance owned or held by the members of the Agnity Group. All such policies:

(a)

are, and at all times since the respective start dates of such policies have been, in full force and effect;

(b)

are sufficient for compliance in all material respects by the members of the Agnity Group with all agreements to which any such entity is a party;

(c)

provide that they will remain in full force and effect through the respective expiry dates thereof; and

(d)

will not terminate or lapse or otherwise be affected in any way by reason of the completion of the Transaction.

3.21

Brokers

Except as disclosed in Section 3.21 of the Disclosure Letter: (a) no finder, broker, agent or other intermediary has acted for or on behalf of any member of the Agnity Group in connection with the initiation, negotiation or consummation of the Transaction; and (b) no success fee, broker’s fee, commission or similar fees will be payable by any member of the Agnity Group to any Person in connection with the initiation, negotiation or consummation of the Transaction.

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3.22

No Sale Agreements

Except as disclosed in Section 3.22 of the Disclosure Letter, there are no Contracts, or any right or privilege capable of becoming a Contract, for the purchase of the Business or any of the material assets of any member of the Agnity Group. Except as disclosed in Section 3.22 of the Disclosure Letter, no member of the Agnity Group currently maintains any discussions, conditions or proceedings with respect to the sale, merger, consolidation, liquidation or reorganization of any such entity.

3.23

Compliance with Other Instruments, Laws, Etc.

Each member of the Agnity Group has complied, and is in compliance, with:

(a)

all Laws applicable to it and the Business, except for any non-compliance that, individually or in the aggregate, has not had and could not reasonably be expected to have a Material Adverse Effect; and

(b)

its constating documents.

3.24

Agreements Restricting Business

Except as disclosed in Section 3.24 of the Disclosure Letter, no member of the Agnity Group is a party to any agreement or arrangement that restricts the freedom of such entity to carry on the Business, including any Contract that contains covenants by any member of the Agnity Group not to compete in any line of business competitive with or similar to the Business with any other Person.

3.25

Absence of Questionable Payments

To the knowledge of the Corporation, no member of the Agnity Group or, to the knowledge of the Corporation, any director, officer, agent or employee of any of the foregoing or any other Person acting on behalf of any of the foregoing, has used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds in connection with the Business. No member of the Agnity Group or, to the knowledge of the Corporation, any director, officer, agent or employee of any of the foregoing or any other Person acting on behalf of any of the foregoing, has accepted or received any unlawful contributions, payments, gifts or expenditures in connection with the Business.

3.26

Change of Control

Except as disclosed in Section 3.26 of the Disclosure Letter, no member of the Agnity Group has approved, is contemplating, considering or has held discussions in respect of, has entered into any Contract in respect of, or has any knowledge of:

(a)

a proposed Change of Control or similar transaction involving such entity; or

(b)

any Contract, or any right or privilege capable of becoming a Contract, for the purchase, sale, transfer or other disposition of any material property or assets or any interest therein owned directly or indirectly by such entity (including any of the outstanding shares of any Agnity Subsidiary).

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3.27

Disclosure

(a)

No representation or warranty by the Corporation in this Agreement or in the Disclosure Letter contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated in this Agreement or necessary to make the statements contained in this Agreement not false or misleading.

(b)

To the knowledge of the Corporation, there is no fact or circumstance relating specifically to the Business or the members of the Agnity Group that could reasonably be expected to result in a Material Adverse Effect and that is not disclosed in the Disclosure Letter.

The Corporation has made available to the Purchaser or its counsel all information reasonably available to the Corporation and the Guarantors that the Purchaser (or its counsel) has requested.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Corporation as of the date of this Agreement as follows, and acknowledges that the representations and warranties contained in this Agreement are made by it with the intent that they may be relied upon by the Corporation.

4.1

Incorporation and Organization

The Purchaser is a corporation incorporated and validly subsisting under the laws of the Province of British Columbia, and is in good standing under such laws.

4.2

Corporate Authorization

(a)

The execution and delivery of this Agreement and the consummation of the Transaction have been duly authorized by all necessary corporate action on the part of the Purchaser.

(b)

This Agreement constitutes, a valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and except as limited by the application of equitable principles when equitable remedies are sought and except as rights to indemnity and contribution may be limited by Law.

(c)

The execution of, or the performance of obligations under, this Agreement by the Purchaser will not result in a breach or violation of a Contract to which the Purchaser is party, a breach of the Purchaser’s charter or by-laws, a breach of Law or authorization by a Governmental Authority to which the Purchaser is bound, in either case that would with the notice or passage of time result in a Material Adverse Effect or would create a Lien on any material asset of the Purchaser.

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4.3

Purchasing for Investment Purposes

The Purchaser is acquiring the interest granted to it herein for investment purposes only and not with a view to the resale or distribution of any portion of such interest.

4.4

Capital Resources

The Purchaser has sufficient liquid capital resources to pay the Aggregate Investment Amount and to consummate the Transaction.

4.5

Purchase as Principal

The Purchaser is acquiring the interest granted to it herein as principal for its own account, and not on behalf of or for the benefit of any other Person.

ARTICLES

SURVIVAL AND INDEMNIFICATION

5.1

Survival

Subject to the limitations contained in this Agreement, all representations and warranties contained in this Agreement on the part of each of the Parties will survive the date hereof for a period of two (2) years following the date of this Agreement.

5.2

Indemnification Obligations

(a)

All covenants, representations and warranties made in this Agreement by the Corporation and the Guarantors are deemed to have been relied on by the Purchaser, notwithstanding any investigation made by or on behalf of the Purchaser. Subject to the limitations set forth in Section 5.2(b) and subject to Section 5.2(c), the members of the Agnity Group (the “Indemnitors”), for each of which the Corporation acts as agent hereunder, will jointly and severally indemnify, defend and hold harmless the Purchaser, and each of the Purchaser’s officers, directors, employees, agents, advisors, representatives and affiliates, and the respective successors, assigns, heirs, executors, administrators and legal and personal representatives of each of the foregoing (each, an “lndemnitee”), from and against all Direct Damages incurred or suffered by any of them in any capacity and resulting from or relating to the occurrence of a Non-Monetary Event of Default.

(b)

The obligations of the Indemnitors under Section 5.2(a) are subject to the following limitations:

(i)

except for the matters referred to in paragraphs (ii) and (iii) hereof, the obligations of the Indemnitors under Section 5.2(a) will terminate on the date that is 2 years following the date of this Agreement, except with respect to bona fide claims by any Indemnitee set forth in written notices given by them to the Corporation prior to such date;

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(ii)

the obligations of the lndemnitors in respect of any claim relating to Tax matters, including any claim arising out of Section 3.12, will terminate on the date that is 90 days after the relevant Governmental Authorities are no longer entitled to assess or reassess liability for Taxes (other than interest, penalties, fines, additions to Tax or other additional amounts) against the applicable member of the Agnity Group, having regard to any waivers given by any such entity in respect of any taxation year, except with respect to bona fide claims by any Indemnitee set forth in written notices given by them to the Corporation prior to such date;

(iii)

the obligations of the Indemnitors in respect of any claim based upon fraud or intentional misrepresentation shall survive indefinitely; and

(iv)

the liability of the Indemnitors under Section 5.2(a), whether alone or in the aggregate, shall be limited to an amount equal to the Aggregate Installment Amount.

(c)

The Indemnitors, for each of which the Corporation acts as agent hereunder, will jointly and severally indemnify, defend and hold harmless the Indemnitees from and against all Direct Damages incurred or suffered by any of them in any capacity and resulting from or relating to:

(i)

an Event of Default;

(ii)

a Bankruptcy Occurrence; or

(iii)

a breach by the Corporation or any of the Guarantors of Section 6.2 or Section 6.8.

The rights of indemnity under this Section 5.2(c) shall not be subject to any monetary limitation and shall be in addition to, and not in substitution for, all of the rights and remedies of the Indemnitees otherwise afforded to the Indemnitees by law, equity or otherwise in respect of the occurrence of an Event of Default, a Bankruptcy Occurrence or a breach by the Corporation or any of the Guarantors of Section 6.2 or Section 6.8, including all rights and remedies of the Purchaser under Section 2.12.

ARTICLE 6

GENERAL

6.1

Notices

Any notice given in connection with this Agreement must be in writing and is sufficiently given if delivered (whether in person, by courier service or other personal method of delivery), or if transmitted by electronic means:

(a)

in the case of a notice to the Corporation or any of the Guarantors at:

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42808 Christy Street, Suite 201

Fremont, CA 94538 USA

Attention: Sanjeev Chawla

Email: sanjeev.chawla@agnity.com

(b)

in the case of a notice to the Purchaser at:

220 Bay Street, Suite 5000

Toronto, Ontario MSJ 2W4

Attention: William R. Tharp

Email: bill@GrenvilleSRC.com

Any notice delivered or transmitted to a Party in accordance with the foregoing is deemed given and received on the day it is delivered or transmitted if it is delivered or transmitted on a Business Day prior to 5:00 p.m. local time in the place of delivery or receipt. If the notice is delivered or transmitted after 5:00 p.m. local time or if such day is not a Business Day, then the notice is deemed to have been given and received on the next Business Day. Any Party may, from time to time, change its physical address or email address by giving notice to the other Parties in accordance with the provisions of this Section 6.1.

6.2

Announcements

Except as otherwise required by Law (including in order to comply with continuous disclosure or other requirements under securities Laws), following the date hereof, the Corporation may make reasonable disclosure of the completion and nature of the Transaction only with the prior written consent of the Purchaser, such consent not to be unreasonably withheld or delayed, and, except as otherwise required by Law (including in order to comply with continuous disclosure or other requirements under securities Laws), the Purchaser may make reasonable disclosure of the completion and nature of the Transaction only with the prior written consent of the Corporation, such consent not to be unreasonably withheld or delayed. The Corporation and the Guarantors hereby consent to the reasonable disclosure by the Purchaser of the completion and nature of the Transaction to Governmental Authorities, the Purchaser’s shareholders and to any other Person in connection with any financing, offering, business combination or similar transaction proposed to be undertaken by the Purchaser. The Corporation and the Guarantors acknowledge that the Purchaser may be required, in accordance with applicable securities laws, to publicly disclose the Transaction and to file a copy of this Agreement on SEDAR, and the Purchaser agrees that in such case it shall make such redactions to this Agreement as are permitted under Section 12.2(3) of National Instrument 51-102 (“NI 51-102”) (subject to compliance by the Purchaser with the remaining provisions of Section 12.2 of NI 51-102) with the prior consultation of the Corporation. The Purchaser hereby consents to the reasonable disclosure by the Corporation and the Guarantors of the completion and nature of the Transaction to Governmental Authorities, the respective shareholders of the Corporation and the Guarantors and to any other Person in connection with any financing, offering, franchising, business combination or similar transaction proposed to be undertaken by any member of the Agnity Group.

6.3

Facsimile/Adobe Acrobat and Counterparts

This Agreement may be executed via facsimile or scanned Adobe Acrobat (Portable Document Format or PDF) or TIFF document and in any number of counterparts each of which shall be deemed to be an original and all of which when taken together shall be deemed to constitute one and the same instrument and it shall not be necessary in making proof of this Agreement to produce more than one counterpart.

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6.4

Further Assurances

The Parties shall with reasonable diligence do all such things and provide all such assurances as may be required or desirable to consummate the Transaction and each Party shall provide such further documents or instruments as may be required or be desired by any other Party to effect the purpose of this Agreement and to carry out the provisions of this Agreement, whether before or after Closing.

6.5

Severability

In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

6.6

Delays or Omissions

No delay or omission to exercise any right, power, or remedy accruing to any Party under this Agreement upon any breach or default of any other Party under this Agreement shall impair any such right, power, or remedy of such non-breaching or non-defaulting Party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any Party, shall be cumulative and not alternative.

6.7

Acknowledgment re Drafting

Each Party acknowledges and agrees that the Parties have participated jointly in the negotiation and drafting of this Agreement and, therefore, in the event that any ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favouring or disfavouring any Party by virtue of the authorship of any provision hereof.

6.8

Confidentiality

Each Party acknowledges that it has had access to and will in the future receive confidential and proprietary information concerning the other Parties (the “Confidential Information”), the disclosure of which would be detrimental to the interests of the other Parties. Accordingly, each Party covenants and agrees, subject to Section 6.2, to keep the Confidential Information in strict confidence and not disclose any of such Confidential Information to any Person or use or attempt to use such Confidential Information. Notwithstanding the foregoing, no Party will have liability for any Confidential Information that is:

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(a)

already in the public domain or comes into the public domain without any breach of this Agreement;

(b)

required to be disclosed pursuant to Law or pursuant to any regulatory or judicial authority having jurisdiction over such Party; or

(c)

made to a professional advisor of such Party, in which event such party shall ensure that the recipient is aware of and agrees to comply with the terms of this Section 6.8 as if a party to this Agreement.

6.9

Assignment

This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns; provided, however, that:

(a)

the Purchaser may, without the consent of the Corporation or the Guarantors, assign its rights and obligations or encumber its interest (including by way of security for any indebtedness of the Purchaser and its Affiliates) under this Agreement, in whole or in part, to any Person; and

(b)

none of the Corporation or the Guarantors may assign any of its rights under this Agreement without the prior written consent of the Purchaser (such consent not to be unreasonably withheld by the Purchaser), and any such purported assignment without such prior written consent is void.

For greater certainty, unless terminated, reduced or extinguished pursuant to the terms of this Agreement, the Gross Sales Royalty shall survive, and shall not in any way be extinguished or impaired by, any: (i) Change of Control of any member of the Agnity Group; or (ii) any transfer by operation of Law or otherwise of this Agreement by the Corporation or any of the Guarantors.

6.10

Payment of Purchaser Expenses

The Corporation will pay all of the reasonable legal fees and other reasonable out-of-pocket expenses incurred by the Purchaser in connection with the Transaction and the various agreements and documents referred to in this Agreement, up to a maximum amount of $15,000 (plus all disbursements incurred by counsel to the Purchaser and all applicable Taxes on any of the foregoing amounts), which amounts will, if applicable, be deducted from any Installment advanced to the Corporation.

6.11

Force Majeure

o Party shall be liable for the failure to comply with any of its obligations under this Agreement to the extent, and for the period, that such failure results from Force Majeure. The Party claiming a Force Majeure shall make all reasonable efforts, including all reasonable expenditures, necessary to cure, mitigate or remedy the effects of a Force Majeure.

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6.12

Tax Cooperation

The Parties shall (and, if requested to do so, shall cause their respective Affiliates to): (i) use commercially reasonable efforts to assist the other Parties in preparing for or defending against any audit, investigation, claim, dispute or controversy relating to Taxes regarding the Gross Sales Royalty or the Transaction; and (ii) make available to the other Parties and to any taxing authority as reasonably requested all information, records and documents relating to the Gross Sales Royalty or the Transaction; (iii) furnish the other Parties with timely notice of, and copies of all correspondence received from any taxing authority in connection with, any audit, investigation, claim, dispute or controversy relating to Taxes regarding the Gross Sales Royalty or the Transaction; and (iv) use commercially reasonable efforts to assist the other Parties in the proper compliance with its Tax filing and reporting obligations relating to the Gross Sales Royalty or the Transaction.

6.13

Maximum Permitted Rate

Under no circumstances shall the Purchaser be entitled to receive nor shall it in fact receive a payment or partial payment (whether in the form of Royalty Payments, Buyout Payments or otherwise) under or in relation to this Agreement at a rate that is prohibited under Laws. Accordingly, notwithstanding anything herein or elsewhere contained, if and to the extent that under any circumstances the amounts received or to be received by the Purchaser pursuant to this Agreement or any agreement or arrangement collateral hereto entered into in consequence or implementation hereof would, but for this Section 6.13, be a rate that is prohibited under Laws, then the effective annual rate, as so determined, received or to be received by the Purchaser shall be and be deemed to be adjusted to a rate that is one whole percentage point less than the lowest effective annual rate that is so prohibited (the “Adjusted Rate”); and, if the Purchaser has received a payment or partial payment which would, but for this Section 6.13, be so prohibited then any amount or amounts so received by the Purchaser in excess of the lowest effective annual rate that is so prohibited shall and shall be deemed to have comprised a credit to be applied to subsequent payments on account of other amounts due to the Purchaser at the adjusted rate.

6.14

Guarantee

The Guarantors jointly and severally unconditionally and irrevocably guarantee in favour of the Purchaser the punctual performance by the Corporation of each and every covenant and agreement of the Corporation pursuant to this Agreement, including all payment obligations of the Corporation. The Guarantors jointly and severally covenant in favour of the Purchaser to pay any amount when due under or in connection with this Agreement immediately on demand by the Purchaser as if the Guarantors were principal obligors. The obligations of the Guarantors under this Section 6.14 will not be affected by any act, omission or thing which, but for this Section 6.14, would reduce, release or prejudice any of their obligations under this Section 6.14, whether or not known to any Guarantor, including any amendment or waiver of any provision of this Agreement.

[Signature Page Follows]

Grenvil/e/Agnity Royalty Agreement Signature Page

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IN WITNESS WHEREOF, each party has duly executed this Agreement

Agnity Global, Inc.

\s\ Sanjeen Chawla

Name: Sanjeen Chawla

Title: CEO

Agnity Communications, Inc.

\s\ Sanjeen Chawla

Name: Sanjeen Chawla

Title: CEO

Agnity Healthcare, Inc.

\s\ Sanjeen Chawla

Name: Sanjeen Chawla

Title: CEO

SPINACOM, Inc.

\s\ Sanjeen Chawla

Name: Sanjeen Chawla

Title: CEO

Grenville Strategic Royalty Corp.

\s\ Steve Parry

Name: Steve Parry

Title: CEO

SCHEDULE “A”

DEFINED TERMS

Whenever used in this Agreement, the following words and terms have the following meanings:

“Additional Royalty Interest” has the meaning given to it in the ate.

“Adjusted Rate” has the meaning given to it in Section 6.13.

“Affiliate” has the meaning given to it in National Instrument 45-106 - Prospectus and Registration Exemptions.

“Aggregate Installment Amount” means, as of a specified date, the aggregate of all Installments actually paid to the Corporation as of such date.

“Aggregate Note Amount” has the meaning given to it in the recitals to this Agreement.

“Agnity Group” means, collectively, the Corporation and each of the Agnity Subsidiaries.

“Agnity Subsidiaries” means collectively: (a) each Guarantor; and (b) each direct or indirect subsidiary, affiliate or investee of the Corporation or any Guarantor (whether wholly, partially or not at all owned, directly or indirectly, by the Corporation or any Guarantor and whether or not controlled by the Corporation or any Guarantor, as the case may be) incorporated, acquired or established after the date hereof (including any direct or indirect interest held by any member of the Agnity Group in any joint venture, partnership or similar entity or structure), and “Agnity Subsidiary” means any one of the aforementioned entities.

“Agreement” means this amended and restated royalty purchase agreement, including all schedules and all amendments or restatements, and references to “Article” or “Section” mean the specified Article or Section of this Agreement.

“Annual Financial Statements” means, as at any given date, the financial statements of the Corporation and each other applicable member of the Agnity Group for the then most recently completed financial year of each such entity.

“Bankruptcy Occurrence” means the occurrence of any of the following:

(a)

if an order is made or an effective resolution passed for the winding-up or liquidation of any member of the Agnity Group, or if a petition is filed for the winding-up of any member of the Agnity Group;

(b)

if any member of the Agnity Group commits an act of bankruptcy, makes a general assignment for the benefit of its creditors, ceases to carry on the Business or becomes insolvent within the meaning of applicable legislation of any applicable jurisdiction;

(c)

if a bankruptcy petition is filed or presented against any member of the Agnity Group, or if any proceedings with respect to any member of the Agnity Group are commenced under any applicable legislation of any applicable jurisdiction providing protection for the benefit of the applicable member of the Agnity Group; or if an execution, sequestration, or any other process of any court becomes enforceable against any member of the Agnity Group or if a distress or analogous process is levied upon any part of the property of any member of the Agnity Group; or

(d)

any trustee in bankruptcy, interim receiver, receiver, receiver and manager, custodian, sequestrator, administrator, monitor or liquidator of any other Person with similar powers is appointed in respect of any member of the Agnity Group or any of the assets or property of any member of the Agnity Group.

“Business” means the business currently carried on by the Agnity Group or as carried on at any relevant time.

“Business Day” means a day, other than a Saturday or Sunday, on which the principal commercial banks located in Fremont, California and Toronto, Ontario are open for business during normal banking hours.

“Business IP” means the Owned IP and the Licensed IP.

“Buy-down Notice” has the meaning given to it in Section 2.9(a)(ii).

“Buy-down Option” has the meaning given to it in Section 2.9(a)(ii).

“Buy-down Payment” has the meaning given to it in Section 2.9(a)(ii).

“Buyout Payments” has the meaning given to it in Section 2.5.

“Change of Control” means, unless otherwise determined by the Purchaser to be a transaction that would violate Section 2.10(b), any of the following: (a) a sale or other transfer of all or substantially all of the assets of a member of the Agnity Group; or (b) the acquisition of a member of the Agnity Group by another entity by means of merger, arrangement, share purchase (whether from the relevant member of the Agnity Group or from the holders of shares in the capital of member of the Agnity Group, as the case may be), share exchange, consolidation, reorganization, amalgamation, arrangement, take-over bid, reverse take-over or other business combination or transaction or series of related transactions; provided that a Change of Control shall not include (i) a merger effected exclusively for the purpose of changing the domicile of any member of the Agnity Group, or (ii) any transaction in which one or more of the Insiders or Affiliates of the Corporation immediately prior to the transaction own 50% or more of the voting power of the surviving entity or the acquirer of the assets of the Corporation following the transaction.

“Change of Control Buyout Notice” has the meaning given to it in Section 2.9(a)(iv).

“Change of Control Buyout Option” has the meaning given to it in Section 2.9(a)(iv).

“Closing” means the completion of the Transaction, which shall be deemed to occur on the date on which the last Installment is fully paid to the Corporation.

“Commercial Software Licenses” means “shrink-wrap”, “web-wrap”, “click-wrap” or other similar generic licenses for commercially available software available to the public.

“Confidential Information” has the meaning given to it in Section 6.8.

“Confirmed Quarterly Royalties” has the meaning given to it in Section 2.4(b)(ii).

“Contract” means any written or oral agreement, contract, understanding, arrangement, instrument, note, guarantee, indemnity, warranty, deed, assignment, power of attorney, commitment, covenant or undertaking of any nature.

“Corporation” means Agnity Global, Inc., and includes any assignee thereof pursuant to an assignment made in accordance with Section 6.9(b).

“Communications” means Agnity Communications, Inc., and includes any assignee thereof pursuant to an assignment made in accordance with Section 6.9(b).

‘‘Developers” has the meaning given to it in Section 3.19(f).

“Direct Damages” means all damages and losses of any kind excluding Indirect Damages.

“Disclosure Letter” means the Disclosure Letter delivered by the Corporation to the Purchaser on the date hereof, as the same may be updated as of the date on which any Subsequent Installment is paid to the Corporation.

“Dispute” has the meaning given to it in Section 2.8.

“Employee IP Agreements” means agreements relating to proprietary information and assignment of inventions to a member of the Agnity Group by employees and consultants of such entity.

“Event of Default” means the occurrence of any of the following:

(a)

any failure by the Corporation to pay in full when due any Royalty Payment, Buyout Payment or any other amount owing under this Agreement or arising in as a result of or relating to the Transaction, including any amount owing under Section 2.12(c);

(b)

any failure by a Guarantor to satisfy any of its obligations under Section 6.14; or

(c)

any default by any member of the Agnity Group in the observance or performance of any of the Specified Covenants.

“Financial Statements” means, collectively, the Annual Financial Statements and the Interim Financial Statements.

“Force Majeure” means any event or circumstance that prevents the affected Party from performing its obligations under this Agreement and is beyond the reasonable control of the affected Party, but:

(a)

is not due to the fault or negligence of the affected Party or those for whom it is responsible at law;

(b)

does not arise by reason of any act or omission by the Party (or those for whom it is responsible at law) claiming Force Majeure in breach of the provisions of this Agreement; and

(c)

does not arise by reason of the lack or insufficiency of funds or failure to make payment of monies.

“GAAP” means generally accepted accounting principles, as promulgated by the United States Financial Accounting Standards Board, or the equivalent thereof for and in respect of any other applicable jurisdiction.

“Governmental Authority” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal, governmental or administrative dispute settlement panel or body or other law, rule or regulation-making entity:

(a)

having or purporting to have jurisdiction on behalf of any nation, province, territory, state or other geographic or political subdivision thereof; or

(b)

exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

“Gross Sales Royalty” has the meaning given to it in Section 2.2.

“Guarantors” means Communications, Healthcare, and Agnity, and “Guarantor” means any one of them.

“Healthcare” means Agnity Healthcare, Inc., and includes any assignee thereof pursuant to an assignment made in accordance with Section 6.9(b).

“Independent Accountant” has the meaning given to it in Section 2.8.

“lndemnitee” has the meaning given to it in Section 5.2.(a).

“Indemnitors” has the meaning given to it in Section 5.2(a).

“Indirect Damages” means all indirect, consequential, special, incidental, punitive and aggravated damages and losses, loss of profits and diminution of value.

“Initial Agreement” has the meaning given to it in the recitals to this Agreement.

“Initial Installment” has the meaning given to it in Section 2.1(a)(i).

“Insiders” means:

(a)

directors, officers, shareholders, members, security holders or employees of a member of the Agnity Group; and

(b)

any other Person not dealing at arm’s length with any member of the Agnity Group or any Affiliate or related party of any member of the Agnity Group or of any Person referred to in paragraph (a) hereof.

“Installments” means, collectively, the Initial Installment and all Subsequent Installments, and individually means any one of them.

“Intellectual Property” means any or all of the following and all proprietary intellectual property and other rights in, arising out of or associated with:

(a)

all patents and utility models and applications therefore and all provisionals, re-issuances, continuations, continuations-in-part, divisions, rev1s1ons, supplementary protection certificates, extensions and re-examinations thereof and all equivalent or similar rights anywhere in the world in inventions and discoveries, including invention disclosures;

(b)

all registered and unregistered trade-marks, service marks, trade names, trade dress, logos, business, corporate and product names and slogans and registrations, and applications for registration thereof;

(c)

all copyrights in copyrightable works, and all other rights of authorship, worldwide, and all applications, registrations and renewals in connection therewith;

(d)

all maskworks, maskwork registrations and applications therefor, and any equivalent or similar rights in semiconductor masks, layouts, architectures or topologies; and

(e)

all World Wide Web addresses, domain names and sites and applications and registrations therefor.

“Interest” has the meaning given to it in the recitals to this Agreement.

“Interim Financial Statements” means, as at any given date, the unaudited management-prepared financial statements of the Corporation and each other applicable member of the Agnity Group for the then most recently completed fiscal quarter of each such entity.

“Laws” means applicable laws (including common law), statutes, codes, by-laws, rules, regulations, orders, ordinances, protocols, codes, guidelines, treaties, policies, notices, directions, decrees, judgments, awards or requirements, in each case of any Governmental Authority.

“Licensed IP” means all Intellectual Property and Technology that any member of the Agnity Group uses or has a right to use, including all Intellectual Property and Technology that any member of the Agnity Group uses or has a right to use at any time after the date hereof, in the conduct of the Business under a Contract with another Person.

“Liens” means any lien, hypothec, mortgage, security interest, charge, encumbrance, pledge, option, pre-emptive right, or transfer restriction other than, in the case of references to securities, any transfer restriction arising under applicable securities Laws solely by reason of the fact that such securities were issued pursuant to exemptions from registration or prospectus requirements under such securities Laws.

“Material Adverse Effect” means any effect, change, event, occurrence or development with respect to the Agnity Group or the Business, taken as a whole and as a going concern, that is or is reasonably likely to be materially adverse to the results of the Business or the Agnity Group’s affairs, properties, assets, liabilities or condition (financial or otherwise), operations or capital, or that is materially adverse to the completion of the Transaction.

“Minimum Monthly Amount” has the meaning given to it in Section 2.3(a).

“NI 51-102” has the meaning given to it in Section 6.2.

“Non-Monetary Event of Default” means the breach by the Corporation or any of the Guarantors of any of the representations, warranties or covenants of any such Party under this Agreement other than the Specified Covenants.

“Note” has the meaning given to it in the recitals to this Agreement.

“Note Principal Buyout Notice” has the meaning given to it in Section 2.9(a)(i).

“Note Principal Buyout Option” has the meaning given to it in Section 2.9(a)(i).

“Note Principal Buyout Payment” has the meaning given to it in Section 2.9(a)(i).

“Owned IP” means all Intellectual Property and Technology that any member of the Agnity Group owns, including all Intellectual Property and Technology owned by any member of the Agnity Group at any time after the date hereof.

“Parties” means the Corporation, the Guarantors and the Purchaser, and “Party” means either one of them.

“Person” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate or Governmental Authority, and where the context requires, any of the foregoing when they are acting as trustee, executor, administrator or other legal representative.

“Pre-Adjusted Quarterly Royalties” has the meaning given to it in Section 2.4(b)(i).

“Principal Amount” has the meaning given to it in the recitals to this Agreement.

“Purchaser” means Grenville Strategic Royalty Corp., and any assignee thereof pursuant to an assignment made in accordance with Section 6.9(a).

“Quarterly Determination Date” has the meaning given to it in Section 2.4(a).

“Revenue of the Agnity Group” means, in respect of any period commencing on or after the date hereof and without duplication, all revenue of any kind directly or indirectly actually received by the members of the Agnity Group (which, in respect of any non-wholly owned Agnity Subsidiary, shall be the percentage of such Agnity Subsidiary’s revenue actually received during such period that is equal to the direct or indirect ownership percentage of the Corporation of such Agnity Subsidiary) during such period on account of or in connection with all products and services sold or otherwise provided by the members of the Agnity Group, including all royalties, license fees, lease fees, service fees, subscription fees and other forms of compensation actually invoiced and received by a member of the Agnity Group (including amounts received in connection with the settlement of disputes or the proceeds of litigation and amounts received in connection with the sale of any assets of any member of the Agnity Group, including any sale of securities of any Agnity Subsidiary held by another member of the Agnity Group, that in each case does not otherwise result in the exercise of, and the completion of the transaction contemplated by, the Change of Control Buyout Option); but excludes:

(a)

any amount received by a member of the Agnity Group in the form of a grant or other form of funding (including funding for research purposes), incentive, loan, advance, exemption, tax reduction, tax credit, subsidy or similar benefit from any Governmental Authority, institution or organization;

(b)

any amount received by a member of the Agnity Group which is required by contract or Law to be paid by such entity: (i) to agents or resellers of such entity; or (ii) to third parties on account of shipping, duties or customs charges;

(c)

any amount received by a member of the Agnity Group from another member of the Agnity Group; and

(d)

any amount received by a member of the Agnity Group which constitutes Taxes payable by a Person in connection with goods or services provided by the member of the Agnity Group to such Person.

“Royalty Payment” has the meaning given to it in Section 2.2 (and, for greater certainty, includes all Minimum Monthly Amounts).

“Sale” means the completion by Agnity Communications, or the stockholders thereof, on or before September 30, 2017 of a Change of Control of Agnity Communications where Novacap TMT IV, L.P. or Constellation Software Inc., or in each case an Affiliate thereof, is the acquirer of Agnity Communications.

“Specified Covenants” means those covenants set out m Sections 2.10(a), 2.10(b), 2.10(c), 2.l0(d), 2.l0(e), 2.10(f), 2.10(g), 2.10(h), 2.10(i), 2.10(1), 2.10(m), 2.10(o), 2. 10(p), 2.10(q), 2.10(r), 2.10(s), 2.10(t), 2.10(u), 2.10(v) and 2.10(w).

“Spinacom” means Spinacom, Inc. (formerly Agnity. Inc.), and includes any assignee thereof pursuant to an assignment made in accordance with Section 6.9(b).

“Subsequent Installment” has the meaning given to it in Section 2.1(a)(i).

“subsidiary” has the meaning given to it in National Instrument 45-106—Prospectus and Registration Exemptions.

“Tax” or “Taxes” means all taxes, assessments, charges, duties, fees, levies, or other governmental charges, including all federal, provincial, state, local, foreign and other income, corporation, franchise, profits, capital gains, estimated, sales (including HST), use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, environmental, customs, duties, imposts, immovable property, personal property, capital stock, unemployment, disability, payroll, license, employee, deficiency assessments, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and any interest, penalties, or additions to tax in respect of the foregoing and includes any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any Person or other entity.

“Tax Return” means any return, declaration, report, claim for refund, information return or other document (including any related or supporting estimates, elections, schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax.

“Technology” means:

(a)

works of authorship including computer programs, source code and executable code, whether embodied in software, firmware or otherwise, documentation, designs, methods, techniques, processes, files, industrial models, schematics, specifications, net lists, build lists, records and data;

(b)

inventions (whether or not patentable), improvements, enhancements and modifications;

(c)

proprietary and confidential business and technical information, including technical data, trade secrets, ideas, research and development and know how; and

(d)

databases, data compilations and collections and technical data.

“Transaction” means the transactions contemplated in this Agreement.

EX-23.3

Exhibit 23.3

KPMG LLP

205 5th Avenue SW

Suite 3100

Calgary AB T2P 4B9

Tel (403) 691-8000

Fax (403) 691-8008

www.kpmg.ca

Consent of Independent Registered Public Accounting Firm

The Board of Directorsof mCloud Technologies Corp.

We consent to the use of our report dated April 29, 2022, on the consolidated financial statements of mCloud Technologies Corp., which comprise the consolidated statements of financial position as of December 31, 2021 and December 31, 2020, the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes, which is included herein and to the reference to our firm under the heading “Experts” in the prospectusincluded in the registration statement on Amendment No. 5 to Form F-1 dated August 9, 2022 of mCloud Technologies Corp.

/s/ KPMG LLP

Chartered Professional Accountants

August 9, 2022

Calgary, Canada

EX-FILING FEES

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 Calculation or Carry Forward Rule	Amount Registered	Proposed Maximum Offering Price Per Unit	Maximum Aggregate Offering Price (1)	Fee Rate	Amount of Registration Fee

Newly Registered Securities

Fees to Be Paid	Equity	Series A Preferred Shares, no par value per share (2)	Rule 457(o)	—	$28,750,000	$0.0000927	$2,665.13

	Equity	Warrants to purchase Common Shares (3)	Rule 457(g)	—	—	—	—

	Equity	Common Shares, no par value per share, underlying the Series A Preferred Shares (4) (5)	Rule 457(i)	—	—	—	—

	Equity	Common Shares, no par value per share, underlying the Warrants (5)(6)	Rule 457(i)	—	$49,162,500	$0.0000927	$4,557.36

	Total Offering Amount:				$77,912,500		$7,222.49

	Total Fees Previously Paid						$5,829.97

	Total Fee Offsets						—

	Net Fees Due:						$1,392.52

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)

Includes additional Series A Preferred Shares and/or Warrants to purchase Common Shares (and the Common Shares issuable thereunder) representing 15% of the number of Series A Preferred Shares and the number of Warrants to purchase Common Shares which may be offered to the public, that the underwriter has the option to purchase.

(3)	No fee required in accordance with Rule 457(g) under the Securities Act.

(4)	No registration fee required pursuant to Rule 457(i) under the Securities Act.

(5)	Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.

(6)

Estimated solely for purpose of calculating the registration fee pursuant to Rule 457(i) under the Securities Act. There will be issued 9.00 Warrants to purchase one Common Share for every one Series A Preferred Share offered. The Warrants are exercisable at a per-share price equal to $4.75. Includes 15% of the Warrants to purchase Common Shares which may be offered to the public, that the underwriter has the option to purchase.

mcld-20211231.xsd
Attachment: XBRL TAXONOMY EXTENSION SCHEMA

mcld-20211231_cal.xml
Attachment: XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

mcld-20211231_def.xml
Attachment: XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

mcld-20211231_lab.xml
Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE

mcld-20211231_pre.xml
Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE