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
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For the years ended December 31, |
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2021 |
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2020 |
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2019 |
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Value of shares issued in business combination |
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$ |
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$ |
8,186,620 |
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$ |
13,320,000 |
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Value of shares issued on conversion of 2021 Debentures |
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14(b) |
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$ |
14,436,728 |
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$ |
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$ |
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Value of share issued on conversion of 2019 Debentures |
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$ |
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$ |
50,000 |
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$ |
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Value of shares issued on AirFusion asset acquisition |
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$ |
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$ |
820,000 |
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$ |
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Settlement of liabilities through issuance of common shares or RSUs |
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$ |
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$ |
143,002 |
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$ |
84,252 |
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Non-cash accretion of interest included in finance cost |
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$ |
3,015,294 |
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$ |
2,145,706 |
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$ |
909,158 |
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Non-cash broker warrants compensation |
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19(b) |
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$ |
294,894 |
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$ |
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$ |
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Non-cash underwriter warrants compensation |
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19(b) |
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$ |
162,947 |
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$ |
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$ |
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Non-cash warrants consideration associated with credit facility |
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$ |
195,066 |
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$ |
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$ |
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Shares issued to extinguish the loan from Flow Capital |
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$ |
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$ |
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$ |
606,495 |
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Addition to right-of-use assets |
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$ |
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$ |
599,861 |
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$ |
468,703 |
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Addition to lease liabilities |
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$ |
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$ |
599,861 |
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$ |
586,000 |
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NOTE 31 EVENTS AFTER THE REPORTING PERIOD
a) Financing of Electric Vehicle Development Projects
In conjunction with the Companys agreements to provide AssetCare solutions to
optimize Electric Vehicle (EV) charging efficiency at auto dealerships in the states of New York and California, on March 28, 2022, a subsidiary of the Company executed a promissory note with the Noteholder in the aggregate
principal amount of US$15,000,000 (the Note).
The initial principal amount of US$5,000,000 (the Loan) was funded on April 1, 2022 and an additional US$10,000,000 was funded on May 5, 2022. The Loan matures on
March 31, 2025, with 10% per annum interest payable monthly in arrears in USD. The Loan may not be prepaid unless authorized by the lender and is unsecured until certain conditions are met. The Loan contains representations, warranties and
covenants which must be complied with to avoid an event of default which will allow the lender to demand repayment and increase the interest rate to 18%, amongst other implications.
The use of proceeds of is solely for the development of the Companys EV dealership
projects. In addition to the Loan, the Note requires certain income based payments, including sharing on a 50/50% basis, all EV, solar and carbon reduction related tax credits and incentives, be made from the borrower to the lender based on income
resulting from this project over the term of the 20-year EV dealership projects. The Note is subject to change of control provisions and right of first refusal provisions for additional financing related to the EV projects.
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.
b) 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 Fieras security is subordinate to the security granted to Carbon.
There are no financial covenants under the Accommodation Agreement and the Company is no longer required to maintain the previous financial covenants.
c) Warrant activity
On February 15, 2022, the Companys warrants associated with the USD equity offering described in Note 15(b), commenced trading under the symbol MCLDW (Notes 1 and 15).
On January 17, 2022, the Company issued
warrants to ATB to purchase an equivalent number of common shares of the Company and the warrant liability of $195,066 described in Note 15(c) was derecognized with an offsetting credit to contributed surplus for the value assigned to the
warrants.
d) Loss of control of subsidiary
On July 29, 2022, the Company entered into a Technology Continuation Agreement (the Technology Continuation Agreement) with Agnity,
which replaced the Royalty Agreement, as amended, executed between the parties in April 2019. Under the terms of the Technology Continuation Agreement, the Company received a payment on July 29, 2022 of approximately US$6.0 million which
includes amounts to settle the net receivable due from Agnity for advances, net of services received. Concurrent with the signing of the Technology Continuation Agreement, a third party acquired all of the outstanding shares in Agnity from its
shareholder. As a result of these events, the Company no longer has the right to nominate the majority of the members of the Operations Committee and no longer has control of Agnity. As a result of the loss of control, effective as of July 29,
2022, the Company will no longer include any of Agnitys operating results in mClouds financial statements and Agnity will no longer be consolidated.
e) Contract modification revenue reversal
In April, 2022, the Company agreed to cancel a multi-year customer contract
for which services had been performed in prior periods, resulting in a contract modification. As a result, revenue totalling $2,571,676 which was recorded in prior periods was reversed during the six months ended June 30, 2022. Of this amount,
$2,037,014 is associated with the AssetCare Initialization service line and $534,662 is associated with the AssetCare Solutions service line.
f) Share capital and equity awards
On June 30, 2022, 19,318 warrants with an exercise price of $15.00 expired unexercised. On July 6, 2022, 525,114 warrants with an exercise
price of $14.25 expired unexercised. On July 29, 2022, the Company granted an aggregate amount of 161,300 stock options and 151,550 RSUs under the Companys equity incentive plan.
49 | Notes to the Consolidated Financial Statements
F-52